Shareholder Showdown at Amylin Headquarters

A battle for control of Amylin Pharmaceuticals (NASDAQ: AMLN)  that began last year will come to a final showdown tomorrow at the company’s annual shareholder meeting. Challenging Amylin’s leadership in the proxy fight is Carl Icahn, the billionaire New York investor, who owns approximately 10.5 percent of Amylin’s stock, and Eastbourne Capital Management, a hedge fund based in San Rafael, CA, that owns a 12.5 percent stake in Amylin.

Carl Icahn has called for Amylin’s chairman Joseph Cook’s resignation, and in recent days the two dissident shareholder groups have gained notable support. The most significant endorsement came from Howard “Ted” Greene, an Amylin co-founder and the company’s first CEO, who urged shareholders to vote for the board candidates proposed by Icahn and Eastbourne. Icahn and Eastbourne also gained the backing of three proxy advisory firms—RiskMetrics, Proxy Governance, and Glass Lewis & Co. On Friday, P. Schoenfeld and Associates, which owns approximately 1.5% of Amylin stocks, added their support to the rebel cause.

In the weeks leading up to the annual meeting, Amylin and the dissident groups have been sending almost daily pleas for support and memos to shareholders in a “slideshow war.”
Amylin has been urging them to vote for its slate of candidates, who are listed on a blue proxy card. Icahn’s nominees are on a gold proxy card and Eastbourne’s proxy card is white.
Here are five points of disagreement as the sides see them.
Amylin’s arguments are:

—Amylin is poised to revolutionize the treatment of diabetes. The company is successfully executing its business strategy and achieving key milestones.
—Amylin says half of its board already has changed since 2005, with six new directors joining.
—Current board members have the necessary diabetes knowledge to enhance stockholder value. Icahn and Eastbourne “suffer from a fundamental misunderstanding of Amylin’s business” and would replace existing directors with individuals with no relevant diabetes experience.
—The board has repeatedly tried to avoid a proxy contest. Icahn and Eastbourne want to sell the company at a time when it is seriously undervalued.
—Of the nine companies in which Icahn has gained board representation since 2000, ImClone is the only one that showed positive price performance.

Carl Icahn’s arguments are:
—Amylin’s board has diminished the company’s value and directors have put their interests before shareholder interests.
—The Current board can not be trusted to achieve full potential of the new diabetes drug Byetta LAR.
—Amylin’s partnership with Eli Lilly was destructive to the value of the company. A faulty partnership and launch strategy led to a bloated cost structure at Amylin.
—Of the 43 pharmaceutical companies selling the top 150 products in 2007, Amylin is the only company without operating profits in 2007 and 2008.
—Amylin’s CEO has been paid well despite poor performance.

Eastbourne Capital Management’s arguments are:
—“We have been patient investors in Amylin, but Amylin’s shares have fallen more than 75 percent from 2007, a loss of approximately $5 billion of shareholder value.”
—“We are also struck by the timing of the apparent realization by Amylin’s management… that the company’s cost structure needs to be addressed, coming as it does less than a year after moving to increase the company’s sales force by 15 percent.”
—“We have lost confidence in Amylin’s leadership to take this rich product portfolio… Byetta was a break-through therapy and the company failed to capitalize on it!”
–Shareholders should judge the incumbent board by the results it has produced. The incumbent board should be held accountable for management’s lack of success.
—Eastbourne’s nominees are committed to maximizing the commercial potential of Amylin’s products.

Xconomy plans to follow Amylin annual shareholders meeting. We’ll keep you updated.

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