Billionaire investor Carl Icahn has heavily criticised the board at Amylin Pharmaceuticals, saying it should be pursuing a sale.

Mr Icahn's comments come a week after shares in Amylin soared on reports the company has recently turned down a $3.50 billion unsolicited takeover offer from Bristol-Myers Squibb. In a letter to management, he says that "as one of Amylin's largest shareholders [he has an 8.9% stake], I find it reprehensible that the board of directors has still not acknowledged or denied the media reports" regarding its rejection of the supposed $22 per share B-MS bid.

Mr Icahn says that "still more egregious" is the fact that the board approved both the public offering of 10% of the company at $15.62 per share on March 8, without disclosing a B-MS offer in the registration statement  filed with anti-trust officials. He also notes the granting of options to executive officers with an exercise price of $16.02 per share (27% below the $22 bid) on March 6.

The high-profile investor goes on to recall that in 2009, "I believed the board was dysfunctional", and along with another large investor, he succeeded in getting two shareholder-backed nominees added to the management. However, while they "have been a positive force for change…apparently their influence has not been enough to keep this board from mishandling a B-MS proposal".

Mr Icahn goes on to say "I believe there are more than a few potential acquirers" and "if the board is willing to commit to conduct an open and fair auction process, I anticipate that the company can be sold at a significant premium". He is concerned about Amylin's "weak financial position, which is exacerbated by a debt load that is far in excess of the average for the company's peers" and what he perceives to be a lack of scale.

Amylin is in the process of ending its long-time collaboration with Eli Lilly for the diabetes drug Byetta (exenatide) and its once-weekly successor Bydureon and Mr Icahn says that "pursuing an international partnership would be an egregious error because it would make it more difficult for the company to be sold to a third party that would not want to be saddled with that relationship".

He goes on to argue that "entrepreneurial biotech companies are great at developing innovative products" but larger drugmakers, "with their large sales forces and marketing capacity, are much better able to maximise the value and achieve worldwide reach for these products".

Another proxy contest?

He adds that "a proxy contest at this time would be a costly distraction but I would not shy away from that possibility if I felt that the board was not pursuing seriously the opportunity to sell the company" and "I am (and I believe other shareholders should be) unwilling to sit idly by with the mere wish that the board will fulfill its fiduciary duties".

The deadline for shareholders to nominate directors and make other proposals at the 2012 annual meeting has passed, but Mr Icahn says recent events "constitute a dramatic change in circumstances". He is demanding an extension that would allow shareholders to voice any unhappiness and is prepared to go to court to get it.

No merit to Icahn claims - Amylin

In response, Amylin issued a statement saying that “we disagree with Mr Icahn’s characterisations and strongly believe his allegations are without merit”. The company went on to say “Amylin’s board is fully aware of its fiduciary duties, and is committed to always acting in the best interests of all stockholders. The board continually considers all options available and is relentlessly focused on creating the greatest value for our stockholders".