October 21, 2014 / 7:42 PM / 5 years ago

UPDATE 3-Third Point's Loeb urges breakup of biotech company Amgen

(Adds link to Breakingviews)

By Svea Herbst-Bayliss

BOSTON, Oct 21 (Reuters) - Hedge fund manager Daniel Loeb told investors on Tuesday he urged U.S. biotechnology company Amgen Inc to split into two separate businesses, a move he said could boost its share price by more than 80 percent.

“Our own extensive diligence suggests that a breakup of Amgen is feasible and that purported constraints such as tax strategy and supply chain management can be managed,” he said in a quarterly letter sent to investors by his Third Point hedge fund.

Loeb, who ranks among the industry’s most closely followed investors - returning an average 17.5 percent per year since 1996 - also said Third Point made new bets on eBay Inc and Alibaba Group Holding Ltd, while exiting other holdings such as Sony Corp.

The letter said Amgen, in which Third Point is an investor, has “all the hallmarks of a hidden value situation.”

It added that investors would likely welcome a split into what Third Point calls MatureCo and GrowthCo.

Loeb, who has been making more activist bets and is known to lob sharply worded directives at underperforming chief executives, called Amgen CEO Bob Bradway open-minded and receptive to the idea of a split.

Amgen, the world’s largest biotech company by sales, needs to improve its research and development evaluation, Third Point said, adding that recent cost cuts did not even scratch the surface.

Amgen said it appreciates the perspectives of all of its shareholders, including Third Point.

“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,” the company said.

Amgen has scheduled a business update for investors and analysts on Oct. 28 at which it will provide details on the restructuring plans it announced in July.

Third Point recently created a Scientific and Medical Advisory Board led by oncologist Dr. David Agus, the former doctor of Apple CEO Steve Jobs. The board will help evaluate therapeutic companies and their clinical assets.

The letter also touched on this month’s wild equity market swings, which have been partly blamed on hedge funds.

Third Point said it still likes investing in the United States and is betting that “large-cap opportunities with a constructivist angle will become more promising.”

The hedge fund had cut its exposures over the last week, but has now taken new positions and returned to stocks it still likes but sold earlier at much higher prices.

Amgen shares rose $6.58, or 4.8 percent, to close at $144.09 on Nasdaq.

Reporting by Svea Herbst-Bayliss; Additional reporting by Bill Berkrot in New York; Editing by Diane Craft, Andre Grenon and Lisa Shumaker

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