Simmering proxy wars at Amylin will reach their climax in a May 27 shareholder vote that could land dissident shareholders in the driver's seat.

Shareholder Carl Icahn is pushing to get two directors on the 12-person board of the San Diego, Calif.-based biotech, while Eastbourne Capital has separately proposed three nominees. The vote, to be held at the company's annual shareholder meeting, will determine the future course of type 2 diabetes drug GLP-1 injectable Byetta (exenatide) and just-filed Byetta LAR (once-weekly exenatide).

On the eve of the vote, it was difficult to predict the outcome. Judging by the "tit for tat," exchanges in a flurry of recent SEC filings by Icahn, Eastbourne and Amylin, it could be very close, commented Steve Yoo, Leerink Swann analyst.

"It's not an obvious win or lose for Icahn and Eastbourne," Yoo commented in an interview.

Dissident shareholders scored a pre-Memorial Day victory when shareholder Peter Schoenfeld reportedly said that he planned to support all five proposed nominees. And three proxy advisors are backing new blood on the board: RiskMetrics, Glass Lewis and Proxy Governance.

Another member of the dissidents' camp is Amylin co-founder Howard Greene, who supports all five nominees. Greene, who helped build the technology platform that spawned Byetta and Symlin (pramlintide), had resigned in early April, a wartime casualty (¹ Also see "Proxy War-Front Latest: Amylin, Vanda Rocked By Dissident Shareholders" - Pink Sheet, 10 April, 2009.).

Icahn holds better cards at Amylin

Icahn is not invincible though. He did after all fail in his bid to get nominees on the board of Biogen Idec last year and many believe he doesn't stand a chance in his latest bid for control there (² Also see "Why Carl Icahn May Not Get His Way At Biogen Idec" - Pink Sheet, 13 May, 2009.).

But the Biogen Idec situation differs from the Amylin experience in important ways. Worth $16 billion, Biogen Idec is a much larger company, and some have raised serious questions about Icahn's ability to manage an enterprise of that scale. Also, frustration with management at Biogen is not running high as is the case at Amylin.

Icahn holds only about a 5 percent stake in Biogen Idec and is waging a battle largely on his own. In contrast, at Amylin, Icahn and Eastbourne together represent a quarter of outstanding shares. Both have issued detailed presentations attacking Amylin's management decisions, mistakes they say have caused the stock price to plunge by more than 75 percent since it peaked at $51 in 2007.

Eastbourne points out in a presentation for investors that Amylin missed its own 2007 and 2008 initial revenue estimates and "elected" not to provide revenue guidance for 2009.

In six out of the last nine quarters, Byetta prescriptions dropped, while both older and newer branded diabetes drugs were gaining ground. Furthermore, Byetta's growth slowed significantly long before safety alerts about a potential link with pancreatitis emerged, Eastbourne points out. Total prescriptions and revenue for Symlin have also been sliding.

Compared to other companies, Amylin's expenses are too high, Eastbourne charges. For the first quarter of 2009, Amylin reported about $87 million on its SG&A books.

Decision to build sales force was a mistake, Icahn charges

A value-destroying partnership with Eli Lilly on Byetta and a botched Byetta launch resulted in a "bloated cost structure," charges Carl Icahn in his own presentation to investors. Amylin's decision to build a sales force was a mistake to begin with, considering that it would be competing with Big Pharma competitors with much greater resources.

"Amylin should not be in primary sales at this time," Icahn asserted.

On May 4, Amylin announced it was merging its primary care and specialty sales forces into a single group focused on high-volume prescribers in diabetes and endocrinology. In the process, it would cut 200 jobs, equivalent to 35 percent of the workforce, winding up with a total of 325 (³ Also see "Amylin Submits Once-Weekly Byetta After Shedding 200 Sales Reps" - Pink Sheet, 5 May, 2009.). Last November, Amylin had already cut 340 employees and reduced 2009 cash expenses by more than $80 million.

But some investors think Amylin should not have a primary care sales force at all and that it would be better off leaving this responsibility to partner Lilly and simply collecting royalty revenues.

Amylin urges investors to ignore dissidents

In a May 11 letter, Amylin urged shareholders to vote for the company's own board nominees and to ignore the Eastbourne and Icahn bids. A "premature sale of the company - before Amylin's shareholders fully realize the value of exenatide once weekly - is simply not the right or responsible strategy," the company said.

The letter stressed the potential value of the recent sales force changes and Byetta LAR's blockbuster potential.

"With no similar drug on the market, we believe it has the potential to transform the treatment of diabetes through its efficacy and convenient once-weekly administration," the company wrote.

However, potential opportunities must be weighed against threats. New safety concerns about risk of thyroid cancer for the entire GLP-1 class surfaced at a recent advisory committee meeting on Novo Nordisk's Victoza (liraglutide) (⁴ Also see "Liraglutide Cancer Signal Puts Agency In Uncharted Review Territory" - Pink Sheet, 13 April, 2009. p. 19). A black box warning is now a possibility for GLP-1s. Following that meeting, some investors see Byetta LAR as a high-risk asset as opposed to a potential Byetta savior deserving of a primary care sales force investment.

Based on the May 5 submission of LAR by Amylin and partners Lilly and Alkermes, a user fee date is expected in March 2010.

- Emily Hayes (e.hayes@elsevier.com)

High Noon At Amylin: Dissident Shareholders Face Ballot Test

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