Hedge fund Third Point calls for splitting Amgen into two firms
Activist investor Daniel Loeb’s Third Point hedge fund is calling for a major shake-up at Amgen Inc., the Thousand Oaks biotechnology company.
In a letter to its investors Tuesday, Third Point suggested that Amgen could benefit by splitting into two companies: a “mature” brand that focuses on established drugs and a “growth” company that targets drugs in development.
“A separation of Amgen into MatureCo and GrowthCo would likely be very well received by investors,” Third Point said.
Amgen said in a statement that it “has always appreciated the perspectives of all of its shareholders, including Third Point, and welcomes constructive input toward our common goal of enhancing shareholder value.”
“Amgen’s board of directors frequently receives input from shareholders, including ideas like those offered by Third Point,” the company said. “The board and management continually assess Amgen’s strategic priorities – and, when appropriate, take action – to set the best path forward to increase shareholder value.”
Third Point has reason to care about Amgen: The hedge fund said it has become one of Amgen’s largest shareholders.
In July, Amgen announced that it would eliminate up to 2,900 jobs – nearly 15% of its 20,000 employees – in an attempt to reduce costs and focus on new drugs.
Third Point said those cuts “do not even scratch the potential opportunity” to reduce spending and improve profits.
Founded in 1980, Amgen became the world’s largest independent biotech company by developing drugs to treat anemia, arthritis, kidney disease and bone disease.
It is one of the largest publicly traded companies in Southern California, with $18.7 billion in revenue in 2013 and a market capitalization of nearly $110 billion.
In recent years, the company has looked to expand into new sectors, including a wider variety of treatments for cancer.
Last year, as Amgen struggled with slower sales growth, the company bought Onyx Pharmaceuticals Inc. for more than $10 billion.
The deal gave Amgen control of a rare blood cancer drug, Kyprolis, which is expected to become highly popular in the next few years.
Third Point faulted the company’s decision to halt its share repurchase program after the Onyx deal. That’s probably one reason that investors have turned away from Amgen, the hedge fund said.
“Using nearly any valuation metric, the company trades at a substantial discount to peers,” Third Point said.
That’s why it might be time to consider “a more radical option” than cost-cutting, and consider splitting the company in two, Third Point said.
Third Point had other news for investors, announcing that it had sold its investment in Sony Corp. The hedge fund had owned about 7% of Sony, whose entertainment arm, Sony Entertainment Inc., includes film and television studio Sony Pictures Entertainment, Sony/ATV Music Publishing and Sony Music Entertainment.
The sell-off caps a 17-month stretch that saw Loeb put Sony Pictures under a microscope and the studio respond by enacting major changes. Third Point said it generated nearly a 20% return on its Sony investment before exiting.
Amgen’s shares Tuesday rose $6.58, or 4.8%, to $144.09.
