These Idiots Are Throwing Away Millions
Rob Fannon, editor, Phase 1 Investor
June 12, 2009
In April 2007, David Mott cashed a $286 million check. He had one man to thank for his good fortune...
Billionaire Carl Icahn is the world's most notorious activist investor. Don't like where management is taking a company? Stage a proxy fight and vote 'em out. The trick for an activist investor, of course, is being rich enough to own a meaningful chunk of the company... and persuading other shareholders to vote with you.
Back in 2007, Icahn took on David Mott, then-CEO of Maryland biotech company MedImmune. Fresh off buying a 1.1% stake in the company, Icahn waged a battle for board seats. He demanded the MedImmune board put the company up for sale or prepare for all-out war.
Just months earlier, Icahn had wrestled his way onto the board of biotech company ImClone. Within minutes of taking over the boardroom, Icahn told ImClone's CEO to take a hike (officially, he resigned).
Faced with the prospect of unemployment and an unceremonious kick in the pants, CEO David Mott and the board caved. Weeks later, British drug company AstraZeneca paid $15.6 billion for the biotech, a 60% premium over the share price when Icahn started barking.
Today, Icahn is at it again. He's eyeing up two more underachieving biotech stocks – Biogen Idec (BIIB) and Amylin Pharmaceuticals (AMLN).
Just like MedImmune, Biogen is good at developing and selling biologic drugs. Tysabri, its multiple sclerosis drug, fetched $800 million last year. It also co-owns a successful cancer drug, Rituxan, with Genentech.
But the company hasn't been able to translate its scientific prowess into shareholder returns over the last decade. Since 2000, Biogen's stock has stagnated around $50. And Icahn has been knocking on Biogen's door, urging that it sell itself, for about two years now. According to management, no suitors have offered a big enough dowry. According to Icahn, Biogen management has sabotaged the bidding process in order to stay employed.
In the meantime, CEO Mullen has sucked out more than $62 million in compensation while shareholders have watched 25% of their investment melt away. Mullen's supersized ego is actually hurting his wallet, preventing him from earning tens of millions in payout when a buyout happens. But not for much longer...
At the latest shareholder meeting, after several days and several recounts, Biogen finally conceded two board seats to Icahn's team. Now, with a foot in the door, Icahn will look toward restructuring and possibly selling off the company.
A similar story played out at San Diego-based Amylin. The biotech company recently forfeited two board seats to Icahn, who now owns 21% of the company's shares along with other dissident shareholders. The chairman got the boot. And you can bet a buyout proposal is in the cards here, too.
No activist shareholder has had more success in biotech than Carl Icahn. Unfortunately, right now – after the huge market runup of the last few months – both stocks look too frothy for my taste. But if the market makes a sharp pullback soon, I'll be eyeing these companies as solid biotech investments.
If history is any measure, Icahn will eventually prevail. And all parties – activist, management, shareholders – will walk away a lot richer.
Good investing,
Rob Fannon |
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The U.S. consumer still has a pulse... retail sales increase for the first time in three months, retail fund inching toward a new high. |
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Indian stocks keep up huge post-election rally... new high for India Fund. |
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Mortgage rates rising fast... up near 5.6% after hitting record low of 4.78% in April. |
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"Cheap stuff" retailer Family Dollar sits out rally... nearing three-month low. |
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Last |
Change |
52-Wk |
| S&P 500 |
952.30 |
+1.40% |
-28.69% |
| Oil (USO) |
39.90 |
+2.39% |
-64.05% |
| Gold (GLD) |
94.30 |
+0.47% |
+8.37% |
| Silver (SLV) |
15.23 |
+1.47% |
-8.80% |
| U.S. Dollar |
80.83 |
+0.18% |
+11.72% |
| Euro |
1.41 |
+1.15% |
-9.10% |
| VIX |
27.16 |
-4.57% |
+12.60% |
| HUI |
365.09 |
+0.78% |
-10.21% |
| 10-Year Yield |
3.84% |
-0.10 |
-0.22 |
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| Company |
Sym |
Industry |
Universal Travel |
UTA |
travel agency |
Atlantic Tele-Net |
ATNI |
telecom |
China Fire |
CFSG |
industrial equip |
Cray |
CRAY |
mainframes |
Mac-Gray |
TUC |
laundry services |
Synaptics |
SYNA |
software |
Semtech |
SMTC |
semiconductor |
Tasty Baking |
TSTY |
food products |
Domtar |
UFS |
paper products |
ICU Medical |
ICUI |
medical devices |
Riverbed Tech |
RVBD |
networks |
Aruba Networks |
ARUN |
networks |
Labopharm |
DDSS |
medical research |
American Dairy |
ADY |
dairy products |
Teva |
TEVA |
Big Pharma |
VNUS Medical |
VNUS |
medical devices |
Wonder Auto |
WATG |
auto parts |
Celsion |
CLSN |
medical devices |
Metavante |
MV |
bank services |
Changyou |
CYOU |
online games |
Applied Signal |
APSG |
telecom |
Hampden Bancorp |
HBNK |
bank |
Clarient |
CLRT |
medical research |
HDFC Bank |
HDB |
bank |
Rubicon Minerals |
RBY |
metals |
Citrix Systems |
CTXS |
software |
Spartan Motors |
SPAR |
trucks |
Orthovita |
VITA |
medical devices |
Tower Hill Mines |
THM |
mining |
Orrstown |
ORRF |
bank |
TiVo |
TIVO |
electronics |
NeurogesX |
NGSX |
biotech |
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| Company |
Sym |
Industry |
No lows of note... |
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