Amylin readies for proxy fight; Exelon should offer NRG more to save face, analyst says

By Cristal Cody

Tupelo, Miss., May 1 - Amylin Pharmaceuticals, Inc. on Friday mailed letters to shareholders urging them to vote for its own two director nominees and reject activist shareholder nominees on fears of a lowball sale, but market sources told Prospect News an immediate buyout is unlikely.

Also on Friday, Princeton, N.J.-based energy utility NRG Energy, Inc. said it completed its $287.5 million acquisition of Reliant Energy, Inc.'s electric retail business in Houston. At the same time, NRG is fighting a hostile takeover attempt by Exelon Corp.

An analyst said in an interview that Exelon should extend an olive branch to NRG to close the deal.

Meanwhile, investors shrugged off a week's worth of bad news, from swine flu to Chrysler LLC's bankruptcy, and sent stocks up Friday.

The Dow Jones Industrial Average rose 44.29 points, or 0.54%, to 8,212.41.

The Standard & Poor's 500 index added 4.71 points, or 0.54%, to close at 877.52, and the Nasdaq Composite index closed up 1.90 points, or 0.11%, at 1,719.20.

Amylin proxy fight

San Diego-based Amylin Pharmaceuticals is fighting a proxy battle against activist investor Carl Icahn and shareholder Eastbourne Capital Management, LLC.

"Mr. Icahn and Eastbourne are each advancing an agenda that we believe undermines Amylin's strategy," Daniel Bradbury, Amylin's president and chief executive officer, and James Wilson, lead independent director, said in the shareholder letter sent Friday.

"In short, their agenda is to drastically cut costs well beyond our already significant cost-reduction initiatives and push for a sale of the company at a time when it is seriously undervalued."

Icahn and Eastbourne each want to replace five of Amylin's 12 board members at the annual shareholders meeting on May 27.

On Thursday, Amylin said it will allow Icahn and Eastbourne to speak to each other to settle on a single slate of nominees.

Earlier this month, Icahn denied statements that he wants to sell the company immediately to Eli Lilly & Co. but did say he would not sell Amylin for less than $30.00 a share, according to a letter he sent to Amylin executives that was filed with the Securities and Exchange Commission.

Icahn engineered a takeover of the board of ImClone Systems Inc. and its sale last year to Indianapolis-based Eli Lilly.

Amylin produces the diabetes drug Byetta in an equal partnership with Eli Lilly. The company plans to submit an updated version of the drug that is used once a week for approval to the Food and Drug Administration later this year.

"If approved by the FDA, Amylin's [drug] will be the first once-a-week treatment for type 2 diabetes," Amylin said in the investors' letter. "With no similar drug on the market, we believe it has the potential to transform the treatment of diabetes."

Adam Cutler, a senior biotechnology analyst with Canaccord Adams Inc., told Prospect News on Friday that a buyer willing to pay a significant premium in the immediate future for Amylin is doubtful.

"The company's lead product, Byetta, is experiencing little, if any, growth in sales," Cutler said. "The prospects of the company are tied in large part to a follow-on product, which Amylin intends to file this quarter and approval is, at best, a year away."

Eli Lilly remains the most obvious buyer because of the Byetta partnership, which is for the life of the product, Cutler said.

"Another large company that could afford to buy Amylin at a significant premium would probably want control over the finished product and [they can't] as long as the Lilly partnership is in place," Cutler said.

Amylin shares rose 7 cents, or 0.64%, to $11.01 on Friday. The stock has traded from $5.50 to $35.00 over the past year.

Shares of Eli Lilly added 57 cents, or 1.73%, to close $33.49.

Exelon gesture needed

Exelon has proposed expanding NRG's board by five members for a total of 19 directors.

The Chicago-based energy company has offered 0.485 of an Exelon share for each share of NRG in a deal valued at about $5.15 billion, and at least 51% of shares already have been tendered. The offer expires June 26.

But the company could do more for NRG, an analyst told Prospect News.

"Exelon needs to make a political move more than a financial move right now by offering more," the analyst said. "A little bit more doesn't mean it's the best valuation, but it's a means to save face for everybody. It's the kind of gesture needed to clinch the deal."

NRG shares climbed $1.00, or 5.56%, to close at $18.98 on Friday.

Exelon's stock rose 85 cents, or 1.84%, to $46.98.

Mentioned in this article:

Amylin Pharmaceuticals, Inc. Nasdaq: AMLN

Eli Lilly & Co. NYSE: LLY

Exelon Corp. NYSE: EXC

NRG Energy, Inc. NYSE: NRG

Reliant Energy, Inc. NYSE: RRI

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