Cost Control Helps Amylin Cut Loss - Analyst Blog

Amylin Pharmaceuticals (AMLN) reported a net loss of 8 cents per share in the fourth quarter of 2010, well below the Zacks Consensus Estimate and the year-ago loss of 32 cents. Full year 2010 loss came in at 94 cents, significantly below the Zacks Consensus Estimate of a loss of $1.26 and the year-ago loss of $1.20. Despite a decline in revenues, Amylin posted better-than-expected results due to lower expenses.

Fourth quarter revenues declined 6.1% to $174.2 million. Revenues were, however, higher than the Zacks Consensus Estimate of $158 million. Full year revenues came in at $668.8 million, down 11.8%. Full year revenues exceeded the Zacks Consensus Estimate of $652 million.

Quarterly Details

Total revenues for the quarter declined 6.1% mainly due to lower net product sales. Quarterly revenues consisted of $162.3 million in product sales (down 11.9%) and $11.9 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.

Product revenues comprised $136.4 million in sales of Byetta (exenatide) and $25.9 million in sales of Symlin. While Byetta revenues declined 16.7% from the year-ago period, Symlin increased 25.7% from the year-ago period. Byetta sales, however, increased $4 million sequentially mainly due to a price increase taken in the fourth quarter. This was partially offset by a 5.9% decline in prescription volume during this period. Symlin sales also benefited from a price increase.

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 submitted a supplemental New Drug Application (sNDA) with the FDA for the label expansion.

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, Symlin revenues could be affected in 2011 as Amylin stops marketing Symlin vials, which accounted for 30% of Symlin revenues in 2010. Symlin will be available in the pen-only version.

Selling, general and administrative (SG&A) expenses for the quarter declined to $64.0 million from $84.2 million in the year-earlier period. The decrease was mainly due to efficiencies driven by the company's reduced cost structure and lower incentive compensation costs. Amylin decided against paying a corporate bonus in 2010 mainly due to the delay in Bydureon's approval.

Research and development (R&D) expenses declined to $35.0 million in the reported quarter from $50.2 million reported in the prior-year period. The decline primarily reflects lower incentive compensation costs and lower expenses associated with the Bydureon pre-launch activities.

2011 Guidance Reflects Tight Cost Control

For 2011, Amylin expects an operating loss of $25 - $40 million. The Zacks Consensus Estimate for 2011 currently indicates a loss of $1.11 per share. With the company working on controlling costs, we expect the Zacks loss estimate to come down.

Amylin expects Bydureon to launch in the US in the first half of 2012, which means that the $40 million milestone payment will be received from Eli Lilly at that time. However, the company expects Bydureon to launch in the EU in 2011 itself and expects to earn a $15 million milestone for the same.

Amylin also expects to start receiving tiered royalties (amounting to less than $5 million) on ex-US sales of exenatide in the first half of 2011.

Update on Bydureon

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.

In its CRL, the FDA had 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 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 the fourth quarter call, Amylin announced that the FDA has approved the design for the tQT study. Amylin expects to commence the study in Feb. A response to the CRL will be submitted in the second half of the year.

Meanwhile, Amylin continues with its efforts to expand Bydureon's life cycle. The company said that it will report results from the DURATION-6 study in the first half of 2011. The study is examining the efficacy, safety and tolerability of Bydureon head-to-head with Novo Nordisk's (NVO) Victoza (liraglutide), a GLP-1 analogue which was launched last year.

Amylin also expects to present data from a phase II dose finding study that is being conducted with a once-monthly formulation of Bydureon. The pen device for Bydureon remains under development with a launch expected by late 2012/early 2013.

As far as other pipeline candidates are concerned, Amylin initiated the submission of a rolling Biologics License Application (BLA) for the use of metreleptin for the treatment of diabetes and/or hypertriglyceridemia in patients suffering from rare forms of lipodystrophy. The chemistry, manufacturing and controls (CMC) section of the BLA will be filed by year end.

The candidate enjoys fast track status and a successful regulatory process could lead to the product launch by mid 2012.

Neutral on Amylin

We currently have a 'Neutral' recommendation on Amylin, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Going forward, we expect investor focus to remain on Byetta's performance and updates on the approval process for Bydureon. Longer-term, we are optimistic about the mid-stage obesity pipeline. We view Amylin's deal with Takeda for the obesity pipeline as a major positive. We are also pleased with the company's efforts to control costs.

 
ALKERMES INC (ALKS): Free Stock Analysis Report
 
AMYLIN PHARMA (AMLN): Free Stock Analysis Report
 
LILLY ELI & CO (LLY): Free Stock Analysis Report
 
NOVO-NORDISK AS (NVO): Free Stock Analysis Report
 
Zacks Investment Research