There are few things in the investment world more entertaining to read than letters from Carl Icahn. Be it fights with management at Yahoo! (NASDAQ:YHOO) and Biogen Idec (NASDAQ:BIIB) or a public debate with Bristol-Myers Squibb (NYSE:BMY) over the value of ImClone Systems, the insults he throws are a welcome relief from stodgy SEC filings.
Icahn's latest victim is Amylin Pharmaceuticals (NASDAQ:AMLN) Chairman Joseph Cook. He called on the "imperial chairman" to resign and compared Cook's management to that of dictators. That's no way to make friends, but that's not really Icahn's mode of operation.
The billionaire investor wants to get his slate of five directors onto the board and says it's "ludicrous and arrogant" for Cook to fight him. Look in the mirror, buddy; it seems a little ludicrous and arrogant to think that Cook wouldn't fight the nominations.
Granted, it's not like Cook has a great track record of bringing in shareholder value -- shares have fallen by as much as 88% over the last year and a half -- but not all of that is Cook's fault. Reports of pancreatitis linked to Amylin's diabetes drug Byetta took the wind out of the stock's sails.
Icahn's main complaint seems to be that Amylin is spending too much money marketing the drug, but that seems shortsighted on Icahn's part. The value of Amylin is wrapped up in once-weekly Byetta, which Amylin and marketing partner Eli Lilly (NYSE:LLY) plan to submit to the Food and Drug Administration this quarter. Getting as many customers onto the current twice-daily formula is the best way to ensure a quick uptake of the once-weekly drug when it becomes available. The marketing expenses are an investment in the future.
Icahn's plan to renegotiate Amylin's marketing deal with Eli Lilly could help the company become cash flow positive at this point, but at what cost? Any paltry royalty that Eli Lilly would be willing to give Amylin to take on all the marketing expenses now will be carried forward into the future when once-weekly Byetta could become a blockbuster. Potentially giving away the farm seems like a bad long-term strategy, especially since Amylin has enough cash to get through the FDA approval of once-weekly Byetta.
Icahn certainly has company in his desire to shake things up. Another major shareholder, Eastbourne Capital, also nominated a slate of five directors to the board, and co-founder Howard Greene has called for the ouster of Cook.
The annual meeting sure is going to be an interesting one. Shareholders need to make their own decision, and maybe a shake-up is what Amylin needs, but they should vote in board members who can look out for Amylin's long-term potential. The company isn't likely to be an overnight turnaround story.
