Calling Shenanigans on Amylin Pharma
NEW YORK ( TheStreet) -- Strange times at Amylin Pharmaceuticals (AMLN) . The diabetes drug company announced a $200 million secondary last month, only a few weeks before management reportedly rejected an offer from Bristol-Myers Squibb (BMY) to acquire the company for $22 a share, or a 43% premium to the stock price at that time, according to Bloomberg. Amylin reportedly considered Bristol's bid as too cheap. Now, Amylin's third largest shareholder, Carl Icahn, is suing the company to force the board to initiate a formal sale process.
Meantime, Bydureon -- a once-weekly reformulation of Amylin's Byetta and the company's most important diabetes asset -- continues to flounder commercially. Bydureon is underperforming noticeably the competing launches of Novo Nordisk's (NVO) once-daily Victoza and twice-daily Byetta itself.
Perhaps most strange, unsettling (and frankly, unacceptable) Amylin CEO Dan Bradbury and the rest of his management team have said nothing publicly about Byudreon, the stock offering, Bristol's bid or Icahn's legal provocations.
In theory, I can understand why a large pharmaceutical company, especially one with an existing diabetes sales force like Bristol, might be interested in buying Amylin. Obvious synergies exist, especially if most of Amylin's 1,300 employees could be fired, and near-zero interest rates make it attractive for companies to "swap balance sheet for P&L."
But any pharmaceutical company that wants to buy Amylin has to be believe in Bydureon's path to commercial success. How likely is that? Not very, and the disappointing prescription data reported to date support my skepticism.
Bulls might argue that the deal for Amylin makes sense even if Bydureon disappoints, or that Bristol-Myers' more experienced salespeople can change the drug's fortunes. I doubt it, but it certainly wouldn't be the first time a pharmaceutical company has vastly overestimated its marketing prowess.
The key question: Given Amylin's recently struggling share price, former partner Eli Lilly's late-2011 abdication, and lackluster Bydureon scripts, how an offer valuing the company at a 43% premium be rejected by the company's board and executive team?
Before we dig deeper into this mystery, I want to stress that my views are based on experience and interpretation of publicly available information. I don't have any anonymous sources here. I'm not even convinced there's an investable thesis -- long or short -- in Amylin today. But the dynamics of this story are surely intriguing.
Let's look at the facts:
First, Amylin has said publicly that it plans to secure a new marketing partnership for ex-U.S. rights to Bydureon. Carl Icahn, whose Icahn Capital owns nearly 9% of the company, has repeatedly objected to this plan, expressed faith in Bydureon, and indicated that he wants the company sold. I think Bydureon will miss Wall Street's sales expectations, but I agree that an acquisition would be better for shareholders than another partnership. Unless current prescription trends change dramatically, Bydureon is going to look like a far less attractive asset one year from now. If a suitor does exist, I would sell the company now.