Amylin says Icahn trying to sell company to Lilly

BOSTON (Reuters) - Billionaire investor Carl Icahn wants to engineer a prompt sale of biotechnology company Amylin Pharmaceuticals Inc (AMLN.O) to its diabetes drug partner, Eli Lilly and Co (LLY.N), Amylin said on Monday.

In a letter to Icahn made public in a filing with the Securities and Exchange Commission, Amylin's lead independent director, James Wilson, said Amylin believes a sale right now would "dramatically undervalue" the company.

Icahn is one of two shareholders who have launched proxy battles aimed at shaking up the company's board. The other is Eastbourne Capital Management.

"You informed us that you intend to leverage your relationship with our partner Lilly to promptly attempt to sell Amylin to Lilly," Wilson said in his letter. "We believe that your desire to sell Amylin is inconsistent with what you have said previously and we continue to believe that this is not the time to consider such an action."

Icahn said in a brief statement that Wilson's letter "completely misstated and mischaracterized" conversations that took place over the weekend with Wilson and Joseph Cook, Amylin's chairman. He said he will release further details of the conversations shortly.

Eli Lilly spokesman Mark Taylor said it would be inappropriate to comment on discussions between Amylin and its shareholders. Lilly is "very satisfied with our relationship with Amylin and its management team," Taylor said.

Icahn's run at Amylin bears similarities to his strategy at ImClone Systems. After a bitter tussle, Icahn overthrew the board, turned the biotechnology company around, and sold it to Lilly last year for $6.5 billion.

Amylin and Lilly make the diabetes drug Byetta in a 50-50 partnership. Amylin's shares have dropped some 70 percent over the past eight months amid concern Byetta, Amylin's most important product, may increase the risk of pancreatitis -- an inflammation of the pancreas that can be deadly.

Still, Amylin is hoping to file for regulatory approval of a once-weekly version of Byetta, known as Byetta LAR or exenatide once weekly, by the end of the second quarter.

Byetta LAR has not so far been associated with pancreatitis, but earlier this month Amylin's shares fell after a U.S. advisory panel split on whether a drug in the same class made by Novo Nordisk (NOVOb.CO) could pose a danger in humans after being shown to cause thyroid cancer in rats and mice.

"While we hesitate to write an obituary for the class, investors may want to adopt more conservative regulatory timelines," said Cory Kasimov, an analyst at JP Morgan, at the time.

Byetta is a member of the GLP-1 class of drugs designed to stimulate the release of insulin in diabetics when glucose levels become to high.

Lilly said on its first-quarter earnings call on Monday that it does not believe concerns surrounding Novo Nordisk's drug, liraglutide, will hurt the U.S. approvability of long-acting Byetta.

Icahn has also proposed Amylin cut costs by 30 percent in areas such as insurance and logistics, Wilson said. Amylin believes cutting that amount would "undermine our efforts to develop, prepare for and launch exenatide once weekly."

Last week Icahn called for Cook's resignation.

Amylin's shares rose 1.2 percent to $10.29 in late trading on Nasdaq.

(Additional reporting by Lewis Krauskopf)

(Reporting by Toni Clarke, editing by Dave Zimmerman and Steve Orlofsky)