Icahn, Byetta Sales Boost Amylin (Update)

Shares of San Diego, Calif.-based Amylin have fallen more than 75% in the past three months to around $6.50. The company's enterprise value today is just over $1 billion, or about 2 times Amylin's share of sales from Byetta, the diabetes drug co-marketed with Eli Lilly (LLY Quote).

Amylin's slide started Food and Drug Administration concerns regarding instances of pancreatitis, a sudden inflammation of the pancreas that can cause severe complications and possibly death, in diabetes patients who took Byetta. There is no known link between the drug and the incidence of pancreatitis, and the incidence is still in line with the broader diabetes population. But the emergence of a possible safety risk with Byetta had pinched prescriptions, leading to a wider third-quarter loss for the company.

In a move aimed at sparking a turnaround, Amylin last week announced a corporate retooling that will involve the dismissal of 340 of the company's 2,140 employees. The goal is to reduce 2009 spending by more than $80 million without sacrificing Byetta's commercial operations and get the company to cash flow-positive by the end of 2010.

"The company was burning a lot of money -- it would have been hard to see how they were funded through profitability without making these cuts," says Cowen and Co. analyst Phil Nadeau. "But it's not the type of move that's going to get people excited about the stock."

If there's an upside to Amylin's bottomed-out valuation, it's that investors now appear to have priced in a further deceleration of Byetta's prescription growth. With expectations low, any upside to Byetta sales could work in Amylin's favor -- as evidenced by the stock's move today.