Full of News, but Worth a 15% Gain?

Amylin Pharmaceuticals (Nasdaq: AMLN) investors sure are excited about the combination of an earnings report and an expanded label for the company's diabetes drug Byetta. Shares were up almost 13% yesterday and they're still going, ending Friday slightly up a little more.

I don't get it.

Let's start with the expanded label for Byetta, which the Food and Drug Administration has approved for use in combination with Sanofi's (NYSE: SNY) long-acting insulin Lantus. Amylin and marketing partner Eli Lilly (NYSE: LLY) have been attacking both ends of the spectrum of diabetes progression; Byetta was approved as a monotherapy a few years ago, and now it's approved for patients who have progressed so far that they need to take insulin to regulate their blood-sugar level.

The expansion into patients early in their disease progression made a lot of sense. Most doctors aren't going to prescribe Byetta, which has to be injected twice a day, over oral medications such as Takeda's Actos, Merck's (NYSE: MRK) Januvia, or Onglyza from Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca (NYSE: AZN). But Amylin and Lilly have a once-weekly version of Byetta called Bydureon, which will hopefully be on the market in the U.S. next year. One injection a week -- thanks to technology developed by Alkermes -- should make it more appealing for patients who might want to avoid injections.

Fewer injections won't be as important for the other end of the spectrum, since Lantus has to be injected anyway. By the time diabetics have to take daily insulin, they've gotten over their needle phobia or at least accepted it.

Management thinks Byetta might have staying power in insulin-requiring diabetics even after Bydureon is launched, but the sales data would say otherwise. Sales of Byetta have been dropping since Novo Nordisk (NYSE: NVO) launched its once-daily Victoza, which is in the same class of medications as the active ingredient in Byetta and Bydureon. In the third quarter, sales of Byetta dropped another 3% from the year-ago quarter. Victoza seems to be declaring victory.

That leaves the earnings report to be excited about. Perhaps investors were thrilled that Byetta sales dropped only 3%. Amylin's other drug, Symlin, is growing, but it's a relatively small fraction of Amylin's revenue, which will hopefully be even smaller after it launches Bydureon stateside. Amylin did narrow its loss down to just $13 million from more than $50 million a year ago, but the company got a $15 million milestone payment from Lilly this quarter, so it's not all that close to being profitable on a GAAP basis.

There's plenty to be excited about with Amylin: the launch of Bydureon in the U.S. finally and perhaps a resolution of its fight with Lilly. But this week's news seems more like an appetizer than the main course. Don't fill up just yet.