Wider Loss at Amylin - Analyst Blog

Amylin Pharmaceuticals (AMLN) reported a net loss of 31 cents per share in the third quarter of 2010, three cents below the Zacks Consensus Estimate but well above the year-earlier loss of 19 cents. Lower revenues resulted in the wider loss. Revenues of $156.1 million missed the Zacks Consensus Estimate of $159 million.

Quarterly Details

Total revenues for the quarter declined 19.5% mainly due to lower net product sales. Quarterly revenues consisted of $154.0 million in product sales and $2.1 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.

Product revenues comprised $132.4 million in sales of Byetta (exenatide) and $21.6 million in sales of Symlin. Both Byetta and Symlin revenues declined on a sequential as well as year-over-year basis. While Byetta revenues declined 10% from the year-earlier period, Symlin declined 0.9% from the year-earlier period. On a sequential basis, Byetta and Symlin declined 5.9% and 0.9%, respectively.

Byetta revenues have been under pressure over the past few quarters due to pancreatitis fears associated with the use of the drug. Amylin is looking to return Byetta to growth now that it is armed with a US Food and Drug Administration (FDA) approval for the use of the drug as a first-line monotherapy for type II diabetes patients. Amylin also intends to expand the label so that Byetta can be used in combination with basal insulin. The company intends to seek approval for the label expansion by year-end.

However, we believe the next few quarters will remain challenging from a growth standpoint. Fears of pancreatitis and new-found fears of glucagon-like peptide-1 (GLP-1) molecules like exenatide potentially causing C-cell malignant carcinoma of the thyroid could keep a lid on growth.

Meanwhile, Amylin's increased promotional effort behind Symlin should help prescription growth for the candidate to rebound. The company could also strike a partnership deal for Symlin in non-US territories later this year.

Selling, general and administrative (SG&A) expenses for the quarter declined to $72.7 million from $80.1 million in the year-earlier period. The decrease was mainly due to efficiencies driven by the company's reduced cost structure and lower sales force expenses.

Research and development (R&D) expenses increased to $48.4 million in the reported quarter from $35.3 million reported in the prior-year period. The increase primarily reflects higher expenses incurred on Bydureon.

Update on Bydureon

On the third quarter call, Amylin provided an update on its lead pipeline candidate, Bydureon (a once-weekly version of Byetta), which received a second complete response letter (CRL) from the FDA. Amylin and its partners, Eli Lilly and Alkermes, Inc. (ALKS), were looking to get Bydureon approved for the treatment of type II diabetes.

The latest CRL, which came a few days ahead of the FDA action date, was a complete surprise. At the time of issuing the first CRL, the FDA had not asked the companies to conduct additional studies. At that time, the FDA had only asked for additional information that was subsequently submitted by the companies.

However, in its latest CRL, the FDA has asked the companies to conduct a thorough QT (tQT) study. We believe the FDA may have asked for this study based on the recent concerns regarding the cardiovascular safety profile of diabetes drugs.

The agency has also asked Amylin and its partners to submit data from the DURATION-5 study, which was conducted to compare the safety and efficacy of Bydureon versus Byetta.

On its earnings call, Amylin said that data from the DURATION program shows that there is no increased risk of cardiovascular complications due to QT prolongation, arrhythmias or conduction disorders associated with the use of Bydureon. Amylin intends to meet with the FDA as early as possible so as to fix the design of the required tQT study.

The company is looking to file a response to the CRL by the end of 2011. At that time, Amylin expects the response to be treated as a Class II resubmission which means that a final response from the FDA could be out in six months. Bydureon is currently under review in the EU; a response could come in the first half of 2011.

In the meantime, Amylin is working on a once-monthly formulation of Bydureon. The candidate is currently in a phase II dose-finding study. The company is also developing a pen device for Bydureon.

As far as other pipeline candidates are concerned, Amylin intends to submit the clinical and non-clinical sections of a new drug application for the use of metreleptin for the treatment of severe lipodystrophy by year end.

Neutral on Amylin

We currently have a Neutral recommendation on Amylin, which is supported by a Zacks #3 Rank (short-term “Hold” rating). The delay in the approval of Bydureon is a major jolt for Amylin. With currently marketed products, Byetta and Symlin, lagging expectations, Amylin had a lot riding on the timely approval of Bydureon.

Currently, we do not expect Bydureon to hit the market before the second half of 2012. Once launched, Bydureon will face stiff competition from Novo Nordisk's (NVO) Victoza.

 
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