) --Diabetes drug maker

Amylin Pharmaceuticals


turned down a $3.5 billion takeout offer from

Bristol-Myers Squibb

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, according to


, which cited two people with knowledge of the deal.

Nice scoop. Well done, guys. Amylin shares are up 47% to $22.65. Some additional thoughts:

Bristol's rumored $3.5 billion (that excludes debt) offer values Amylin at $22 per share, or a 46% premium to the company's closing stock price of $15.39 on Monday. That's a nice bump in value, which begs the question: How can Amylin's board justify turning down an offer like that?

Answer: Amylin's board obviously believes its diabetes drug franchise, most notably the newly launched once-weekly drug Bydureon, is worth more.

Deutsche Bank biotech analyst Robyn Karnauskas (a longtime Amylin bull) says Amylin is worth $31 per share, assuming cost synergies (whack SG&A expenses by 80% and R&D costs by 40%) and Bydureon generating peak U.S. sales of around $1.5 billion.

A counter argument: "If the deal is predicated on Bydureon sales of $1.5 billion, I don't think it makes sense because sales won't get there," says healthcare investor (and


contributor) Nathan Sadeghi-Nejad.

The Bydureon commercial launch is still early, but scripts to date show the

drug lagging behind its chief competitor

, Novo Nordisk's Victoza.

Bristol's interest in Amylin make sense to

Diabetics Investor's

David Kliff because the pharma giant wants a bigger presence in the diabetes treatment market.

"Bristol came to the market with Onglyza way too late, it has no chance," he says, referring to the Type 2 diabetes drug that is essentially a me-too version of


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Bristol was a big player in the diabetes market with its metformin drug Glucophage, but that business was lost to generics, Kliff adds.

"With the way Bydureon is right now, a mid-$20s bid for Amylin seems fair to me," said Kliff, although believes Bydureon's true potential won't be realized until a more convenient pen-injector version of the drug is launched at the end of the year.

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Amylin rejecting a $3.5 billion offer today likely means that the company and its board believes a slow Bydureon launch understates the value of the drug which will ramp higher once the pen version is available.

If not Bristol, other potential Amylin acquirers might include




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, says Kliff.

Don't forget about Carl Icahn, who owns about 10% of Amylin and controls two board seats.

--Written by Adam Feuerstein in Boston.

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