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The ABC's of Lilly: Amylin, Byetta & Carl

Byetta Needle
CNBC.com
Byetta Needle

Shortly after Eli Lilly reported way better than expected earnings this morning, Amylin Pharmaceuticalsfired a new salvo in its escalating proxy battlewith billionaire activist investor Carl Icahn.

LLY and AMLN are partners on the twice-a-day injectable diabetes drug Byetta. And they're working with Alkermes to bring a first-ever once-a-week version of the drug to market. Icahn has a stake in Amylin. Everyone knows his M-O, especially in biotech. He invested in MedImmune, which AstraZeneca took out. He invested in ImClone Systems, which Lilly took out. Now he wants to do the same with AMLN and Biogen Idec, too.

According to the SEC filing, Icahn talked on the phone last week with AMLN's lead independent director James Wilson and Chairman Joe Cook. Wilson says Icahn made it clear he wants to "promptly" sell AMLN to LLY.

But Amylin's board and management say, "Cool your jets, Carl."

Wilson claims to put out the for sale sign now, before once-a-week Byetta potentially comes to market, would "dramatically undervalue" the company. Some analysts believe once-a-week Byetta could be a mega-blockbuster product. But recently its fate, or at least the timeline for possible launch of the drug, has come into question. That's because AMLN and LLY are still waiting for the FDA to decide whether to put a warning on the Byetta label over rare cases of pancreatitis. And if the agency does decide to do it, will it be a basic warning or a so-called "Black Box" severe safety warning? Plus, within the past few weeks fresh concerns surfaced over whether this new class of drugs might carry a risk of thyroid tumors.

So, what does Lilly have to say? Well, same ol', same ol'. In a "First on CNBC" interview with LLY's Chief Financial Officer Derica Rice on "Squawk Box" this morning, he repeated the mantra I've heard so many times before from his boss, Chairman and CEO John Lechleiter. "We're happy with our relationship with Amylin, blah blah blah." I almost always ask the question because it's out there. But the second that a Lilly exec publicly acknowledges that the company might be interested in an Amylin buyout, AMLN shares are gonna rally and the price tag for LLY will go up.

David Kliff, who writes "The Diabetic Investor" newsletter, has been insisting for the longest time that it's not a matter of if, but when Lilly buys Amylin. But for now it looks like we've got a standoff.

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Questions? Comments? Pharma@cnbc.com and follow me on Twitter at mhuckman

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