Third Point Wants Amgen to Explore Separation

Activist investor Dan Loeb revealed his Third Point LLC has built a stake in biotechnology company Amgen Inc. and is calling on the company to explore breaking into two separate businesses, according to a letter he sent to Third Point's investors, a common refrain among activists lately.

Mr. Loeb said at a conference Tuesday that he was a top 15 holder in the company.

In a letter to investors Tuesday, Third Point wrote that Amgen "has all the hallmarks of a hidden value situation, one of our favorite investment themes." The biotechnology pioneer has a "compelling mix" of both established and new products, the letter said, but trades at a significant discount to peers.

Third Point said the company has several options to unlock value but is urging Amgen's board to consider "a more radical" option: breaking up, according to the letter. The investor suggested splitting the company into a cash-generating mature business and a faster-growing R&D focused business.

Third Point also suggested value in Amgen "can be easily unlocked" by making its research and development process more efficient, making deeper cuts in its "bloated cost structure" and addressing its deal making. Third Point said it believed most of Amgen's recent deals would produce "mediocre returns."

A spokeswoman for Amgen didn't immediately respond to a request for comment.

The letter said Amgen's stock could get to $189 a share by the end of 2016 and $218 a share by the end of 2017 if the company completed the work on costs and R&D. But if the company went forward with a split, Third Point believes the stock could be worth $249 a share in two years.

Amgen shares jumped 4.2% to $143.27 in recent trading after The Wall Street Journal reported on the position.

Write to David Benoit at [e-mail] and Juliet Chung at [e-mail]

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