Amylin's One-Drug Wonder

The best way for a biopharmaceutical company to rapidly grow is to develop a drug that treats one of the large chronic conditions affecting millions of Americans. Amylin Pharmaceuticals (NASDAQ:AMLN) has done just that with its diabetes drug, Byetta, as its third-quarter results (announced yesterday) exhibit so well.

For the quarter, Amylin lost $46 million on revenues of $147 million. Since most sales came from Byetta, any investment in shares of Amylin is a bet that Byetta will be able to keep growing sales, even in the face of current or future competing diabetes drugs from the likes of GlaxoSmithKline (NYSE:GSK), Novo Nordisk (NYSE:NVO), and Merck (NYSE:MRK).

Since Byetta is early in its launch, only having entered the market in April of 2005, investors should watch closely for any signs of slowing growth or superior clinical trial results from the opposition's drugs. Sales gains have been robust thus far:

Last month, Byetta received a positive medical review opinion from the EMEA (the drug regulatory authority in Europe), so final approval of the drug will come by the end of the year, since the EMEA always follows the recommendation of its medical committees. Once Lilly and Amylin can work out reimbursement issues with the individual EU countries, Byetta sales in Europe should start picking up by the middle of next year.

Amylin's management estimated sales greater than $500 million for all of 2006. With $324 million in sales for the first nine months of 2006, Q4 sales will come in at more than $175 million. This represents sales growth of at least 173% over the $64 million in total revenues the company recorded in the same quarter last year.

Unfortunately, with research and development costs growing to $54 million from $33 million last year, Amylin is still a few quarters away from profitability. But it does have more $800 million in cash on the balance sheet, so it shouldn't need to do any sort of financing any time soon, if ever.

With the rest of Amylin's drug pipeline in phase 2 or earlier trials, Amylin is dependent on Eli Lilly's (NYSE:LLY) marketing prowess to drive Byetta sales. For the sake of Amylin's investors, I hope Eli Lilly will rapidly grow sales overseas, because Amylin needs some positive earnings to support its nearly $6 billion market capitalization.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.