Byetta may be approaching blockbuster status for Amylin Pharmaceuticals (Nasdaq: AMLN ) , but bulging costs associated with helping the company reach that level have kept it from moving into the black.
Sales of its diabetes drug Byetta which it markets with Eli Lilly (NYSE: LLY ) , rose 29% year over year in the fourth quarter. Its other diabetes drug, Symlin, also saw robust sales increases of 35%; however, sales of Symlin are only about one-tenth that of Byetta's, so Amylin's success is essentially tied to Byetta.
Stellar as they are, the increased sales came at a price. Selling, general, and administrative costs were 63% of product sales this quarter. That's even higher than the 59% the company posted in the fourth quarter of 2006.
Amylin is ditching its direct-to-consumer advertisements and instead spending money on patients already using its drug. That approach is a roundabout way to increase sales, but it makes sense. Supporting its customers means that patients are more likely to stick with their medicine, especially since Byetta is often a diabetic's first injectable drug. The increased compliance results in having more patients stick with the drug for the long term. Increased compliance, leading to better results, also has the side benefit of encouraging the patients' doctors to prescribe Byetta to other patients.
With gross margins hovering around 90%, Amylin could show a profit, but research-and-development costs are also weighing it down. A good chunk of those expenses are supporting its once-weekly formulation of Byetta that it developed with Alkermes' (Nasdaq: ALKS ) microsphere technology. The extended-release version has already been shown to work well, but Amylin won't be submitting its marketing application until the first half of next year, because it's still in the process of building its manufacturing plant for the once-weekly drug.
While it's waiting for the plant to be finished, Amylin is making an aggressive move to prove that once-weekly Byetta is not only more convenient -- one shot per week versus 14 -- but also that it works better than its competitors. To that end, Amylin is setting up multiple clinical trials to compare the once-weekly Byetta to drugs such as Takeda's Actos and Merck's (NYSE: MRK ) Januvia, as well as to metformin, available as a generic and as Glucophage from Bristol-Myers Squibb (NYSE: BMY ) .
The good news is that, even with the $211 million loss last year, Amylin still has more than $1.1 billion of cash and short-term investments. Even if all of those clinical trials result in a loss in 2008, Amylin won't have to go to the market for further financing.
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