Activist investor Carl Icahn lashed out at the board of Amylin Pharmaceuticals Inc (AMLN.O) on Wednesday, urging it to put the company up for sale, or potentially face a proxy fight.
Icahn, the company's third-largest shareholder with an 8.9 percent stake, criticized Amylin for failing to confirm or deny media reports that it had rejected a $22-a-share takeover offer from Bristol-Myers Squibb Co (BMY.N). Bristol has also declined to comment on the reports.
The Bristol offer would have valued Amylin at about $3.5 billion, excluding debt. Amylin's shares have risen 55 percent since news of the offer was reported by Bloomberg News on March 28, giving the company a current market value of nearly $3.9 billion.
In an open letter to Amylin, Icahn also criticized the board for approving a public offering of 10 percent of the company at an assumed price of $15.62 a share on March 8, without disclosing any Bristol offer in the registration statement, and for granting options to the company's executive officers with an exercise price of $16.02 a share on March 6.
"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," Icahn wrote.
A spokesman for Amylin, which makes the diabetes drugs Byetta and Bydureon, said: "We disagree with Mr. Icahn's characterizations and strongly believe his allegations are without merit. Amylin's Board is fully aware of its fiduciary duties, and is committed to always acting in the best interests of all stockholders."
Icahn said a proxy contest right now 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."
In 2009, Icahn and the hedge fund Eastbourne Capital Management succeeded in placing two nominees on the Amylin board: Alexander Denner, who was nominated by Icahn and previously worked for him, and Kathleen Behrens, a former managing director of RS Investments, who was nominated by Eastbourne.
Icahn said in his letter that Denner and Behrens 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 November Amylin ended a nearly decade-long partnership with Eli Lilly and Co (LLY.N), sending Amylin shares down 11 percent amid concern the company might not be able to market its products on its own. The company has been seeking a partner to help market its products outside the United States.
"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," Icahn wrote.
Several drug companies have been suggested by investment analysts as potential buyers for Amylin, including AstraZeneca Plc (AZN.L), Merck & Co (MRK.N) and Takeda Pharmaceutical Co Ltd (4502.T).
In his letter, Icahn said that while the deadline has passed for shareholders to notify Amylin of their intent to nominate directors at the company's annual meeting, the revelation of the Bristol-Myers bid and stock issuances at prices well below the $22 offer price constitute a "dramatic change in circumstances" and require the board to permit shareholders another opportunity to nominate directors.
"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" within which to provide notice to Amylin, Icahn wrote.
The diabetes market is one of the fastest-growing due to rising rates of obesity. The disease affects more than 300 million people worldwide, including nearly 26 million Americans. Diabetics run a high risk of heart disease, stroke, kidney failure, blindness and limb loss.
Analysts have said that now the Bristol offer is in the open, management will have a difficult time justifying the search for a partner, given the run-up in the shares due to acquisition hopes. Any deal with a partner outside the United States would almost certainly lead to a sell-off said Tim Anderson, an analyst at Sanford Bernstein, in a recent report.
Icahn said he believes Amylin can be sold at "a significant premium" and that the company does not have sufficient scale to achieve the most from its products
Amylin shares fell 1.2 percent to $23.82 in afternoon trading on Nasdaq.