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Steven Cohen Reduces Holdings in Amylin Pharmaceuticals

July 19, 2011 | About:

Dubbed by the Wall Street Journal as "the hedge fund king," Steven Cohen manages nearly $14 billion as the founder and manager of the hedge fund SAC Capital Advisors. In 1987, he shrewdly shorted the market heading into the crash, resulting in a large gain for his firm. Cohen began his investing as an active trader, but later developed a more fundamental focus. However, he always considers technical analysis, consulting charts for entry points into a position. He believes in having confidence in one's best ideas and holding concentrated shares that make large portions of a portfolio. Cohen is also an advocate of playing to one's strengths, believing that it affords a trader to take risks and earn larger profits. According to his latest 13G filings, Cohen reduced 10.74% in his position in Amylin Pharmaceuticals Inc. (AMLN).

Holding History

Cohen has had a history of buying Amylin Pharmaceuticals and selling out shortly after. In 2007, he bought more than 500,000 shares of the company over multiple quarters at more than $40 per share, then later added another 450,000 shares when prices dipped to an average of $29.94. However, he would ultimately sell those shares for an average price of $29.11, losing more than 25% on his initial holdings. In 2009, he bought and sold out the company for an average profit of $.02 per share on 276,684 shares. He bought and sold again in 2010, earning a 41% gain. Late in 2010, he began adding once again to his position in Amylin Pharmaceuticals, increasing his position to roughly 4.6 million shares after prices dropped from $20 to under $15. Earlier in July, he added 53.95% to his holdings at a price of $13.54 per share, giving him more than 7 million shares. His most recent activity was a 10.74% reduction in the company at a price of $12.83, giving him 6,327,861 total shares.

Amylin Pharmaceuticals Inc. (AMLN)

Amylin Pharmaceuticals is a biopharmaceutical company committed to improving lives through the discovery, development and commercialization of innovative medicines. Amylin has developed and gained approval for two first-in-class medicines for diabetes, SYMLIN injection and BYETTA injection. Amylin's research and development activities leverage the company's expertise in metabolism to develop potential therapies to treat diabetes and obesity.

According to their latest quarterly reports for the period ending March 31, Amylin's revenue decreased by 12% year-over-year and quarter-over-quarter to $153 million. It reported a net operating loss of $29 million, worse than last quarter's $10.3 million loss but better than last year's $32.8 million loss. Selling, general, and administrative expenses decreased 12% to $64.6 million as a result of lower business infrastructure spending resulting from "continued efforts to drive efficiencies in our business." Net income was a loss of $37.3 million, again worse than last quarter's $19.2 million loss but better than last year's $38.2 million loss. Annual net income has been a loss in each of the past nine years as well as each of the past five quarters now.

Free cash flow was a gain of $13.3 million, an improvement on last year's $69.2 million loss due to both increased operating cash flow as well as decreased capital expenditures. This is the first time in the past five quarters that Amylin has reported positive free cash flow, though annual free cash flow has been a loss in each of the past nine years too. According to Mark G. Foletta, senior vice president of finance and CFO of Amylin, "We remain focused on our longer-term target of generating sustainable positive operating cash flow and, we believe, that the significant cost-savings we have realized over the past two years reflect our ability to efficiently manage our business and achieve this goal."

The stock is currently trading with a P/S ratio of 2.7, in line with its three-year historical average and below its ten-year historical average. Quarterly sales per share have declined over the past three years after expanding between 2005 and 2008. The stock also has a P/B ratio of 5.4, in line with its four-year historical average. Quarterly book value per share has been steadily decreasing since 2007.

Other Headlines

On 5/16/2011, Amylin Pharmaceuticals announced that it has filed a lawsuit against Eli Lilly and Company, alleging that Lilly is engaging in anticompetitive activity and breaching its strategic alliance agreements with Amylin to maximize commercialization of exenatide. In 2002, Amylin entered an alliance with Lilly for the global development and commercialization of exenatide, a medicine indicated as a first line treatment for type 2 diabetes that is currently marketed as BYETTA® (exenatide) injection. Amylin alleges that Lilly is engaging in improper, unlawful and anticompetitive behavior in the manner in which it plans to implement its recently announced global alliance agreement with Boehringer Ingelheim GmbH ("BI") to jointly develop and commercialize BI's linagliptin product, which will compete directly with Amylin's exenatide products.

On 6/21/2011, Amylin announced that the European Commission has granted marketing authorization to BYDUREON, the first once-weekly treatment for type 2 diabetes.

As of 3/31/2011, Carl Icahn owns 14,381,925 shares, representing a 9.86% stake in the company.

This is part of GuruFocus Real Time Picks report, which reports the stock trades of Gurus within the last few days. For more information, go to Real Time Picks.

Rating: 2.5/5 (4 votes)


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