Icahn Lashes Amylin Pharmaceuticals, Inc. Board, Urges Sale of Company
CARL C. ICAHN
767 Fifth Avenue, 47th Floor
New York, New York 10153
April 4, 2012
Amylin Pharmaceuticals, Inc.
9360 Towne Centre Drive
San Diego, California 92121
Attention: Board of Directors
Re: The reports of your rejection of a $3.5 billion offer from Bristol-Myers Squibb
Ladies and Gentlemen:
As one of Amylin's largest shareholders, I find it reprehensible that the Board of Directors has still not acknowledged or denied the media reports regarding its rejection of a $22 per share takeover offer from Bristol-Myers Squibb. To this day, shareholders would not have known about this opportunity had the story not been leaked to the press. Still more egregious is the fact that, in the face of this reported $22 offer, the Board approved both (i) the public offering of 10% of the company at an assumed price of $15.62 per share on March 8th, without disclosing the Bristol-Myers offer in the registration statement that Amylin filed with the SEC (in this regard, we find it notable that not all members of the Board signed this registration statement), and (ii) the granting of options to the company's executive officers with an exercise price of $16.02 per share (approximately 27% below the reported $22 bid price from Bristol-Myers) on March 6th. These actions make absolutely no sense to me in light of a Bristol-Myers bid and have served to substantially dilute shareholders who owned the stock when these actions were taken. I believe any decision not to pursue a sale of the company at this time is a huge mistake.
We have been involved with Amylin for several years. In 2009, I believed the Board was dysfunctional. At that time I, along with another large investor, succeeded in having two shareholder-backed nominees added to the Board in a proxy contest in which Amylin's chairman, Joseph Cook, and lead independent director, James Wilson, were replaced. I believe these nominees have been a positive force for change, but apparently their influence has not been enough to keep this Board from mishandling a Bristol-Myers proposal. In light of the failings mentioned above, it seems to me that the current Board is still dysfunctional and is not operating in a manner that enhances shareholder value.
I and many industry analysts believe that the Board of Directors should pursue a sale of the company now. I believe there are more than a few potential acquirers for the company that could achieve significant synergies from an acquisition. If the Board is willing to commit to conduct an open and fair auction process, I anticipate that the company can be sold at a significant premium. I believe Bydureon has great potential and would be extremely attractive to potential suitors due to significant synergies that can be obtained from eliminating redundant SG&A and from revenue synergies attributable to a significantly larger sales force. In my opinion, Amylin does not have sufficient scale to achieve the optimal benefit from its products.
It appears to me that there are significant risks in Amylin continuing as a stand-alone venture. Chief among our concerns is the company's weak financial position, which is exacerbated by a debt load that is far in excess of the average for the company's peers. Amylin has experienced significant losses since its inception in 1987, including losses of $543.4 million in 2011, $152.3 million in 2010 and $186.3 million in 2009. By your own admission, the extent of the company's future losses and the timing of potential profitability are uncertain, and Amylin may never achieve profitable operations. The company's future is highly dependent on its three commercial products, Bydureon, Byetta and Symlin, which may not be as commercially successful as the Board hopes in the company's hands because of its lack of scale. Furthermore, now that Amylin has finally succeeded in terminating its relationship with Eli Lilly, we think that pursuing an international partnership would be an egregious error because it would make it more difficult for the company to be sold to a third party that would not want to be saddled with that relationship.
A number of analysts in the investment community agree that the company faces daunting prospects in fully realizing the value of its products as an independent firm. "AMLN will face challenges on a standalone basis," noted Goldman Sachs in a March 28, 2012 report which also stated that the company will face "commercial challenges including gaining traction with primary care physicians." Credit Suisse, in a February 16, 2012 report stating that at least 9 pharma companies could pay at least $33 per share for Amylin, said: "Based on our M&A analysis, many large U.S. pharma companies could theoretically pay very high prices for AMLN," with the best fit being with Takeda, AstraZeneca and Merck.(1)
We have long maintained that entrepreneurial biotech companies are great at developing innovative products to meet unmet medical needs. But after those products are developed, larger drugmakers, with their large sales forces and marketing capacity, are much better able to maximize the value and achieve worldwide reach for these products.
In my view, a proxy contest at this time would be a costly distraction but I would not shy away from that possibility if I felt that the Board was not pursuing seriously the opportunity to sell the company. While I am hopeful that the Board is cognizant of doing the right thing for shareholders and that all strategic alternatives will be considered, in light of the reported Bristol-Myers Squibb offer, I am (and I believe other shareholders should be) unwilling to sit idly by with the mere wish that the Board will fulfill its fiduciary duties.
We are well aware that the deadline under Amylin's bylaws for shareholders to provide notice to the company of their intention to nominate directors and make other proposals at the 2012 annual meeting has passed. However, the revelation of the Bristol-Myers bid, as well as your failure to disclose it and your subsequent stock issuances at prices well below the reported $22 offer price, which occurred after that deadline, constitutes a dramatic change in circumstances requiring the Board to permit shareholders another opportunity to nominate directors and make proposals at the annual meeting. Therefore, I hereby demand that the Board announce, not later than 5:00 p.m., New York City time, on Thursday, that shareholders will be provided a new 10-day period (beginning upon such announcement and ending on April 16th)within which to provide such notice to Amylin. This would allow shareholders who believe, as do I, that you are not serious about selling the company, to nominate directors and make other proposals at the meeting. I also hereby request that the Board provide us immediately with copies of any questionnaires or other documents that the company's bylaws require nominating shareholders to deliver to Amylin along with a notice of nomination.
If the Board fails to make this announcement by 5:00 p.m., New York City time, on Thursday, we will have no choice but to seek in court an extension of the nomination deadline as well as other avenues of redress.
Further, we delivered to Amylin on Tuesday a demand under Section 220 of the Delaware General Corporation Law for copies of Amylin's books and records, so that we may examine the circumstances surrounding the reported Bristol-Myers Squibb proposal and the stock offering and option grants following the date of the reported bid. These are matters that, in my opinion, shareholders are entitled to fully understand.
The relationship between the Board and shareholders throughout this process does not need to be and should not be adversarial. The power to act in shareholders' interests lies in your hands.
Sincerely yours,
Carl C. Icahn
(1) Permission to quote from these reports was neither sought nor obtained.
SOURCE Icahn & Co.