AMLN Amylin Pharmaceuticals, Inc. (MM)

Amylin Pharmaceuticals (AMLN) reported a net loss of 7 cents per share in the third quarter of 2011, well below the Zacks Consensus Estimate of a loss of 15 cents and the year-ago loss of 31 cents. Higher revenues and lower expenses led to the lower year-over-year loss.

Third quarter revenues, which included a $15 million milestone payment, increased 12.1% to $175 million. Revenues exceeded the Zacks Consensus Estimate of $166 million.

Quarterly Details

Quarterly revenues consisted of $155.1 million in product sales (up 0.7%) and $19.9 million in collaborative revenues, which consist of the amortization of upfront fees received under the company's collaboration agreements with Eli Lilly (LLY) and Takeda. Collaborative revenues included a $15 million milestone payment from Lilly on the launch of Bydureon in the EU. Collaborative revenues were $2.1 million in the year-ago quarter.

Product revenues comprised $128.1 million in sales of Byetta (exenatide) and $27.0 million in sales of Symlin. While Byetta revenues declined 3.2% from the year-ago period, Symlin increased 25% from the year-ago period.

We note that Byetta revenues declined 0.7% sequentially. The slight decrease in revenue was due to a 4.5% decline in prescription volume that was partially offset by price increases. Byetta revenues have been under pressure over the past few quarters due to pancreatitis fears associated with the use of the drug.

Competition has also increased with the entry of Novo Nordisk’s (NVO) Victoza. Amylin is looking to return Byetta to growth now that it is armed with FDA approval for the use of the drug as a first-line monotherapy for type II diabetes patients.

Byetta should also benefit from the recent FDA approval under which Byetta can be used in combination with Sanofi-Aventis’ (SNY) Lantus (insulin glargine), with or without metformin and/or a TZD, for the treatment of type II diabetes in patients who are not achieving adequate glycemic control on Lantus alone.

Selling, general and administrative (SG&A) expenses for the quarter declined to $63.1 million from $70.0 million in the year-earlier period. The decrease was mainly due to efficiencies driven by the company's reduced cost structure and lower costs associated with pre-Bydureon launch activities.

Research and development (R&D) expenses declined to $46.6 million in the reported quarter from $51.2 million reported in the prior-year period. The decline primarily reflects lower Bydureon pre-launch stock manufacturing which was partially offset by higher spending on the metreleptin program.

2011 Guidance Reflects Tight Cost Control

For 2011, Amylin now expects non-GAAP operating results to be close to breakeven. Earlier, Amylin was expecting an operating loss of $15 million to $25 million.

Amylin expects to receive tiered royalties of less than $5 million on ex-US sales of exenatide in 2011.

Bydureon Update

Amylin provided an update on Bydureon (a once-weekly version of Byetta), which gained EU approval in June 2011. Amylin and its partners, Eli Lilly and Alkermes, Inc. (ALKS), are looking to get Bydureon approved in the US for the treatment of type II diabetes.

Bydureon, which has already received two complete response letters from the FDA, is currently under FDA review with a final response expected by January 28, 2012. Amylin is working on pre-launch activities for Bydureon.

Bydureon is currently available in the UK and Germany. Although it’s early days for the Bydureon EU launch, Amylin reported that initial demand in the wholesale channels is encouraging so far.

Moreover, the National Institute of Clinical Health and Excellence (NICE) which oversees the reimbursement of medications in the UK, issued a preliminary recommendation to reimburse Bydureon when used in combination with metformin and/or a thiazolidinedione (TZD) or a sulfonylurea. The final recommendation will be out in February 2012. This could help boost adoption of Bydureon.

As far as the suspension formulation of Bydureon is concerned, Amylin intends to meet with regulatory authorities by the end of the year to decide on the design of pivotal studies for both the weekly and monthly exenatide formulations. The pen device for Bydureon remains under development with a launch expected in late 2012/early 2013.

However, we were disappointed to hear about the delay in the completion of the submission of a rolling Biologics License Application (BLA) obesity candidate, metreleptin. Amylin is looking to get metreleptin approved for the treatment of diabetes and/or hypertriglyceridemia in patients suffering from rare forms of lipodystrophy. The company, which was aiming to finish filing the BLA by the end of 2011, now expects to complete the same in the first half of 2012. The company attributed the delay to capacity issues with its contract manufacturer and complexities encountered during the validation runs.

Neutral on Amylin

We currently have a Neutral recommendation on Amylin. Going forward, we expect investor focus to remain on Byetta’s performance and updates on the US approval process for Bydureon.

 
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