One Big Disbelief of an Amylin Buyout... Worth Only $12 Per Share? (AMLN, BMY, MRK, AZN, SNY, PFE, NVO)

Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) is supposed to be acquired by a larger drug company.  It is one of the biggest public merger rumors out there. At least that is the belief of Wall Street.  Canaccord Genuity is out with a report which may minimize this effort or at least may take out some of the fervent beliefs that this company is all but already sold.

Canaccord’s Salveen Richter has maintained a SELL rating with a price target down at $12.00 per share.  This is important because Amylin closed at $25.73 and the 52-week trading range is $8.03 to $26.87.  The report is based in part on the notion that Bydureon sales are off to a slow start that was disclosed in the company’s earnings report yesterday.  The report was called a weak earnings report with Bydureon revenue of only $6.9 million versus $10.4 million expected.

The report may be very much of a standout because some of the companies which have been named as likely and/or potential bidders are Bristol-Myers Squibb Company (NYSE: BMY), Merck & Co. Inc. (NYSE: MRK), AstraZeneca PLC (NYSE: AZN), Sanofi (NYSE: SNY), and Takeda.  We have also wondered perhaps whether or not Pfizer Inc. (NYSE: PFE) or Novo Nordisk A/S (NYSE: NVO) could be among the possible buyers, but these two seem to be dismissed elsewhere as likely buyers.

The report does caution about a floor from the buyout speculation: “That said, continued speculation on the company’s takeout potential will likely set a floor on Amylin shares at current levels, barring a potential E.U. partnership.”   Other notes as follows: Bydureon captured 5.9% of the GLP–1 market… Bydureon is being impacted by competition, healthcare reform and reimbursement/access… AMLN Q1/12 total revenue of $153.7 million was under consensus of $162.1 million… it is lowering FY12 Bydureon revenue estimate to $133.9 million from $209.5 million… firm is increasing its non-GAAP SG&A expense to $395.5 million from $356.3 million… firm is lowering FY12 GAAP EPS estimate to -$1.68 EPS from -$1.09 EPS.

Canaccord Genuity’s valuation puts its 12-month price target at $12.00 and it is based upon 20-times the firm’s fully taxed and fully diluted GAAP earnings estimate for 2016 of $1.55 EPS that is then discounted back to 2012 at a rate of 28%.

What is interesting is that the Thomson Reuters consensus target is only $18.10, so there is quite a takeover premium built into the stock.  Amylin may get acquired or it may not.  This is a bold call considering that the company even recently announced that Carl Icahn voluntarily dismissed his suit against the company.  It would seem that Carl Icahn believes that a premium buyout is headed Amylin’s way.

JON C. OGG