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Executives

Mark G. Foletta - Chief Financial Officer, Principal Accounting Officer and Senior Vice President of Finance

Vincent P. Mihalik - Chief Commercial Officer and Senior Vice President of Sales & Marketing

Michael York - Senior Director of IR

Dan Bradbury - Chief Executive Officer, President, Director and Member of Risk Management & Finance Committee

Analysts

David Friedman - Morgan Stanley, Research Division

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Salim Syed

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Thomas Wei - Jefferies & Company, Inc., Research Division

Unknown Analyst -

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Kumaraguru Raja

Catherine J. Arnold - Crédit Suisse AG, Research Division

Amylin Pharmaceuticals (AMLN) Q3 2011 Earnings Call October 19, 2011 5:00 PM ET

Operator

Welcome to the Amylin Pharmaceuticals Q3 2011 Earnings Call. [Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time. I would like to introduce your host, Michael York, Senior Director, Investor Relations. Sir, you may begin.

Michael York

Good afternoon, and welcome to Amylin Pharmaceuticals Quarterly Update Conference Call. We've uploaded a presentation to accompany this conference call that provides additional background on the quarter.

This afternoon's discussion will contain forward-looking statements that involve risk and uncertainties. These risks and uncertainties are outlined in today's press release, the website presentation and in our recent filings with the Securities and Exchange Commission. Our actual results could differ materially from what is discussed during today's call. A reconciliation of all non-GAAP financial measures can be found at the end of the website presentation.

Let me introduce the other members of the Amylin management team here today: Daniel Bradbury, President and Chief Executive Officer; Mark Foletta, Senior Vice President, Finance, and Chief Financial Officer; and Vince Mihalik, Senior Vice President, Sales and Marketing, and Chief Commercial Officer.

I will now turn the call over to Dan Bradbury.

Dan Bradbury

Thanks, Michael. And welcome to our third quarter call for 2011. This afternoon's call regarding our third quarter results will build on the earnings press release issued earlier today. In a few moments, Mark will provide additional details on the quarter's underlying financial results and comment on our outlook for the remainder of 2011. Vince will then review our commercial activities during the third quarter of this year.

Over the last quarter, we continued to execute our business plan and have made substantial progress against our objectives for the year.

Revenues from our marketed products, BYETTA and SYMLIN, remained steady quarter-over-quarter and our focus on managing expenses and maintaining financial discipline enabled us to continue running our business close to breakeven. In fact, we earned non-GAAP operating income of $13 million during the third quarter.

Earlier in the quarter, we announced that we responded to the second BYDUREON complete response letter. And based on ongoing interactions with the FDA, we continue to expect that their review will be completed by January 28 PDUFA date. We are continuing pre-launch activities and we'll be in position to have BYDUREON available to patients shortly after approval.

The anticipation of launching BYDUREON here in the United States has us and the broader diabetes community buzzing with excitement. With BYDUREON now available in the U.K. and more recently Germany, this sense of excitement continues to grow, with early feedback from patients and healthcare practitioners in both markets being overwhelmingly positive. Though it's still too early in both launches to have solid data regarding prescription volume, demand in wholesale channels has been very strong, particularly in Germany.

We also continue to make excellent progress on several important pipeline and life cycle initiatives. We continue to look forward to the FDA's anticipated decision within the next week on an expanded label for BYETTA for use with insulin glargine, which would result in an important new treatment option for patients. The development of a pen device for BYDUREON remains on track, with an expected launch by the end of 2012 or in early 2013.

Regarding the exenatide suspension program, we expect regulatory interactions by the end of the year that will inform the design of pivotal studies for both the weekly and monthly exenatide formulations. And we will provide you with an update about our plans for this important initiative following those interactions.

We also continue to add centers and enroll patients for our ongoing EXSCEL cardiovascular outcome study, which is investigating the potential for BYDUREON to reduce cardiovascular events relative to the standard of care in patients with type 2 diabetes.

In addition to the exciting progress we're making with our exenatide franchise, we continue to make progress with metreleptin for rare forms of lipodystrophy. At the end of last year, we submitted the clinical and nonclinical sections of a Biologics License Application or BLA for the use of metreleptin to treat diabetes and/or hypertriglyceridemia in pediatric and adult patients with inherited or acquired lipodystrophy. Our plan at the start of this year was to submit the chemistry, manufacturing and control sections and complete the BLA by the end of this year.

We have successfully completed the drug substance validation runs and are now in the process of generating stability data in support of our planned submission. However, capacity issues with our contract manufacturer and complexities encountered during the validation runs have caused us to move our target date for the BLA completion into the first half of 2012.

We remain committed to bringing this new therapy to market as soon as possible and we'll be providing an update regarding the commercial outlook for the lipodystrophy opportunity at the beginning of next year.

To round up my comments regarding our progress thus far this year, I'd like to reinforce the fact that while we continue to drive revenue from our marketed products and advance our key pipeline assets, we will continue to aggressively manage our expenses in line with our expected revenues. As Mark will highlight momentarily, our strong third quarter and year-to-date financial results reflect the continued emphasis we are placing on controlling our spending and driving efficiencies across our business.

I'll now turn things over to Mark to review our financial results released earlier today.

Mark G. Foletta

Thanks, Dan, and good afternoon. Today, we announced our financial results for the quarter ended September 30, 2011. As Dan mentioned and we have discussed in previous calls, we are managing the business with operational discipline and are focused on generating sustainable, positive operating cash flow and maintaining a strong cash position.

Our measure of operating cash flow is reported as non-GAAP operating results, which approximates our cash flow from operations before working capital changes. Non-GAAP operating results is defined as our GAAP operating results adjusted for noncash items including equity compensation, depreciation and amortization and any other unusual items such as restructuring charges.

In the third quarter, we generated non-GAAP operating income of $13 million, an improvement from a loss of $16.2 million in the third quarter of 2010. Total revenues in the third quarter were $175 million, a 12.1% increase compared to $156.1 million in the third quarter of 2010. The increase primarily reflects the $15 million milestone we earned upon the European launch of BYDUREON in July. Net product sales in the third quarter were $155.1 million, a slight increase from $154 million in the third quarter of 2010.

Our gross margins remained strong at 92%. Our operating expenses were $109.6 million in the third quarter, consisting of $63 million of selling, general and administrative expenses and $46.6 million of research and development expenses. This represents an overall $11.6 million or 9.6% reduction from $121.2 million in the same quarter of last year. This decrease reflects our continued focus on driving efficiencies across our business.

For further details regarding our financial results reported today, please refer to the presentation available in the Investors section of our company website.

I'd like to make a few additional comments comparing the third quarter of 2011 sequentially to the second quarter of 2011. BYETTA sales were down $0.9 million sequentially or 0.7%. The slight decrease in revenue was driven by a 4.5% decline in prescription volume, largely offset by the full quarterly impact of pricing actions during the second quarter.

SYMLIN sales were up $1.2 million or 4.7% sequentially. The revenue growth seen with SYMLIN was driven by the full quarterly impact of second quarter pricing actions partially offset by a slight decline in pen prescription volume of 0.2%. Vince will discuss BYETTA and SYMLIN prescription trends in more detail later in the call.

Wholesaler inventories of September 30 were comparable to those of June 30 and we believe are consistent with patient demand.

Our non-GAAP operating income was $13 million for the third quarter compared to a non-GAAP operating loss of $1.7 million in the second quarter.

I'll now quickly review top and bottom line results for the first 9 months of 2011. Total revenues for the first 9 months of the year were $485.7 million, a 1.8% decrease from $494.6 million in the same period of 2010. Non-GAAP operating results improved the income of $8.2 million from a loss of $27.3 million for same period last year.

In late 2008, we established a plan to manage expenses in line with revenues, and we continue to deliver results that reflect the operational discipline. In fact, since the beginning of 2010, we have essentially been running slightly above operating cash flow breakeven with accumulative non-GAAP operating income of approximately $5 million during those 7 quarters.

Our plans for managing expenses have also placed substantial emphasis on cash preservation, and we ended September in a strong financial position with $461 million in cash, short-term investments and restricted cash. Net of financing activities in the second quarter related to the $200 million convertible note maturity and the $165 million drawdown of a loan from Eli Lilly and Company, our cash balance has increased by approximately $38 million year-to-date.

As we progress towards the end of the year, our focus remains on managing our business close to cash flow neutral and conserving our cash balance.

For full details of our financial results, please refer to the press release we issued earlier today.

I'd now like to provide an update regarding key trends and assumptions for the remainder of 2011. Entering 2011, we guided that the normalized run rate for our quarterly GAAP operating expenses was between $110 million and $115 million and that this level will decline during the year. Year-to-date, our spending has been at or below the low end of this range, and we expect comparable expense levels in the fourth quarter.

Non-GAAP operating results continue to be the key metric we use to measure our financial performance. We expect our non-GAAP operating results to be close to breakeven for the year. Strong product revenues and gross margins and our continued focus on expense management have enabled us to improve from our original guidance of a $25 million to $40 million loss.

We continue to expect that exenatide royalties, which are tiered and based on exenatide gross profits outside the U.S. will be less than $5 million for the year. We remain confident that we will be able to maintain strong combined gross margins from BYETTA and SYMLIN of over 90%. We will also continue to expect net interest expense to be $25 million to $30 million.

Consistent with our most recent guidance, we expect noncash adjustments, including depreciation, amortization and stock-based compensation, to be approximately $85 million to $90 million for 2011.

To summarize, our third quarter results are a direct result of our ongoing efforts to achieve additional efficiencies in our business and preserve cash. As we look to the future, we will opportunistically manage our financial risk with a focus on maximizing shareholder value.

Now I will turn the call over to Vince to review our commercial activities.

Vincent P. Mihalik

Thank you, Mark. The Amylin sales and marketing organization continues to remain focused on our day-to-day business, driving revenue for our currently marketed products BYETTA and SYMLIN, and preparing for the launch of BYDUREON in the United States.

With BYDUREON available in the United Kingdom and now in Germany, we are leveraging the opportunity to monitor the early stages of these launches. While it's still too early to get a clear read on the prescribing trends and other market dynamics, initial demand in the wholesale channels has been very encouraging and we look forward to providing additional updates on these and other launches outside the United States as they occur.

In addition to being encouraged by the progress of the ongoing launches in Europe, we were pleased to see on Monday evening that the National Institute of Clinical Health and Excellence or NICE, the government agency in the United Kingdom that overseas reimbursement of medications, issued a preliminary recommendation to reimburse BYDUREON when used in combination with metformin and either a TZD or a sulfonylurea. We believe that this preliminary recommendation reflects the value delivered to the health care system by BYDUREON and look forward to the final recommendation from NICE probably in February of next year.

Moving on to the third quarter performance for BYETTA. Sales decreased approximately 1% quarter-over-quarter. The decrease in sales was generally in line with a 4.5% decline in prescription volume partially offset by pricing actions during the second quarter.

Since the launch of the second daily-dose GLP-1 receptor agonist in February of last year, 4-week moving averages indicate that the total weekly prescriptions for GLP-1 receptor agonist have grown by approximately 38%. In terms of sales, the class is on a run rate of greater than $1 billion in the United States this year.

As BYETTA continues to effectively compete in the market, our managed markets team has been working to drive broader access with managed care plans. We continue to maintain greater-than-80% Tier 2 coverage for BYETTA, a key strategic advantage in today's value-focused healthcare industry.

These 2 indicators point to the growing recognition of the benefits delivered by GLP-1 therapy, and we are extremely enthusiastic about having the opportunity to launch BYDUREON into a growing class supported by a growing body of clinical and real-world data.

While we are encouraged by the fact that the GLP-1 class in the United States continues to grow and believe this is a clear sign that the market is willing to adopt new entrants, we also believe the class has enormous potential to continue its growth. As such, one of the key areas of focus of our sales and marketing organization has been on driving additional adoption of BYETTA by both patients and physicians who have not yet experienced the benefits of GLP-1 therapy. In support of these efforts, we are fully prepared to begin promoting BYETTA for use in combination with insulin glargine if we receive regulatory approval by our PDUFA date, which is October 22.

Based on the data we've seen to date, we are very excited to have the opportunity to make BYETTA available to millions of insulin glargine users here in the United States, with the potential to provide outstanding post-meal glucose and help insulin glargine-using patients achieve a lower fasting plasma glucose levels and improve their hemoglobin A1C percent relative to patients using insulin glargine alone. We believe this potential new indication for BYETTA could provide a compelling addition to the choices available to both patients and physicians. Indeed, the pairing of insulin glargine with BYETTA would seem to be almost the perfect synergistic partnership, with clinical studies demonstrating a low risk for hypoglycemia and the potential for weight loss in addition to powerful glucose control.

At Amylin, we believe the GLP-1 class has the potential to evolve in a manner that it almost mirrors the evolution of the insulin market with short-acting mealtime agents and longer-acting basal agents. As the role of GLP-1 therapy in the treatment of type 2 diabetes expands, we are uniquely positioned to deliver value to a broad segment of type 2 patients with the exenatide franchise.

From uses of monotherapy to the potential use in patients using the most popular basal insulin, BYETTA is placed to have the broadest label in the GLP-1 class and set the standard for short-acting mealtime GLP-1 therapy. The unique short-acting pharmacokinetic, pharmacodynamic profile of BYETTA makes it the most suitable GLP-1 receptor agonist for use as a postprandial glucose management therapy.

At the longer-acting end of the spectrum of GLP-1 therapy, BYDUREON and the exenatide suspension programs offer the potential for the first weekly and monthly dose to GLP-1 agents and the exceptional convenience to reduce dosing frequency the market research data suggest type 2 diabetes patients and healthcare providers prefer.

Now let's move on to SYMLIN, the first and only FDA-approved Amylin analog. With regard to SYMLIN, as Mark mentioned earlier, SYMLIN revenues increased by approximately 4.6% during the quarter. The revenue growth seen with SYMLIN was driven by pricing actions during the second quarter, partially offset by a modest decrease in prescriptions of 0.2%. We expect to continue to convert our vial business to pens as we execute on our overall SYMLIN plans.

Let me close my portion of the remarks by saying that we are pleased with the resiliency BYETTA has demonstrated in the face of competition. With its well-established safety profile, efficacy and favorable market access, we continue to be confident that BYETTA remains a competitive choice.

Also, as we eagerly await a regulatory decision on BYETTA plus insulin glargine indication, we continue to build enthusiasm for the GLP-1 class and the potential it has to change the way diabetes is treated. With BYETTA being the only 2 short-acting GLP-1 therapy available in the market and with BYDUREON having the potential to be the first weekly dose therapy for type 2 diabetes, we believe that Amylin is in excellent position to drive the continued evolution of the GLP-1 market.

I'll now turn the call back over to Dan for a few additional thoughts.

Dan Bradbury

Thanks, Vince. Before the close of our prepared remarks, I'd like to reinforce some of the comments made by Mark and Vince by noting that with BYETTA continuing to perform well in the market and our business running at cash flow breakeven, we have the resources necessary to successfully launch and drive adoption of BYDUREON in the United States.

In closing, I'd like to reiterate that I, along with the Amylin leadership team, remain committed to creating value for our shareholders, our employees and, most importantly, the millions of diabetes patients we're focused on serving.

I will now ask the operator to open the lines for questions.

Operator

[Operator Instructions]

Dan Bradbury

Actually, before we start on the questions, before we open the lines for questions, I wanted to share some exciting late breaking news. We just received word that the FDA has approved BYETTA for use with insulin glargine in the U.S. That means that BYETTA is now approved as an add-on therapy to insulin glargine with or without metformin and/or a thiazolidinedione in conjunction with diet and exercise for adults with type 2 diabetes who are not achieving adequate glycemic control on insulin glargine alone. We believe this complementary approach to glycemic control will be a smart partnership that could result in an important new treatment option for patients.

We will be issuing a press release with our partner Lilly later this afternoon that will provide you with more information.

And now, I think we're ready to take some questions.

Question-and-Answer Session

Operator

Our first question will come from Ian Somaiya of Piper Jaffray.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

I had a couple of questions. So given the late breaking news, why don't we start there? Can you just give us a sense of how promiscuous the U.S. is with BYETTA in combination with insulin glargine and how you can take advantage of the label claim? And the second question I had was on BYDUREON, just the early experience in Europe, if you could share with us the rate of early dropouts? And this is obviously quite common with BYETTA, whether it's associated with the lack of weight loss or because of the GI intolerance, I was just wondering if you can share with us the experience with BYDUREON in Europe.

Dan Bradbury

Okay, well thanks for your question, Ian. With regard to the late breaking news regarding the approval of BYETTA for use with insulin glargine in the United States, I'll ask Vince to comment on that in a second. With regards to BYDUREON early experience in Europe, I think it's too early for us to provide much guidance with regards to persistency data there. What we do know, of course, is that in the clinical program that's been done with BYDUREON, there was a very much reduced rate of people dropping out of the studies, particularly dropping out as associated with GI events. So we expect that to translate into the marketplace. But maybe, Vince, you could comment on the new late breaking news regarding on new label claim for BYETTA?

Vincent P. Mihalik

Thanks, Dan. And in fact, Ian, thanks very much for the question. Obviously, this was all part of our life cycle plan to broaden the applications for the exenatide molecule by having both short-acting and long-acting GLP-1s. And for this expanded use, BYETTA does provide a complementary addition to glargine, the most popular basal insulin therapy. To the first part of your question, how much usage, actually, estimates we've been able to make are probably less than 20% of BYETTA use is on top of basal insulin of any kind. So we think there's a real nice opportunity for BYETTA to demonstrate the power of short-acting GLP-1s on postprandials as a mealtime treatment option instead of rapid-acting insulin or as many physicians do increase the dosage of glargine. And keep in mind, it's only taken twice a day and doesn't require any dosing titration at all for the mealtime component. And as Dan commented, it's a very smart partnership that does provide realtime postprandial control to improve the overall blood sugars with little potential for weight gain or hypoglycemia. So if you think about the opportunity as the number of patients that are on glargine today that aren't adequately controlled on basal insulin, keep in mind that roughly about 60% of type 2 patients don't meet target. There's a really nice opportunity out there for us to have this new indication and be able to promote it as for use with the most popular basal insulin, which is glargine.

Dan Bradbury

Thanks, Vince.

Operator

Our next question will come from Mark Schoenebaum of ISI Group.

Salim Syed

This is Salim, stepping in for Mark. A couple of questions. You mentioned that you have a good feeling from the EU in terms of BYDUREON. But in terms of talks with the FDA and BYDUREON, how is that impacting your thinking around launch after approval? I know you said "short," but exactly what does that mean? And then in terms of inventory, how much are you planning to build BYDUREON? And the second question is around revenue guidance. Obviously you now have BYETTA plus insulin, are you contemplating giving revenue guidance at some point in time?

Dan Bradbury

Thanks for the questions, I appreciate it. Just regarding where we are with BYDUREON, well as I commented in the remarks, so we obviously, we submitted the response with regards to the second complete response in July this year. And we've got -- received from the FDA in August a confirmation that they had filed that response and they issued a PDUFA date of the 28th of January for next year. We continue to have interactions with the agency, and I guess the best thing that I could say to you at this point is that we're not aware of any other additional issues that have been raised by the agency and that the review remains on track. Regarding how quickly, post-approval, we'd be able to launch, I think I'll stick with "shortly" as regards to guidance at this point. That's highly dependent upon what information we get from the agency when. The critical component for us to learn early is regards to agreement on the label and, in particular, also the medication guide. Once we have those, we can actually start building a finished-product inventory immediately. That doesn't take that long and hence the comment "shortly." That having said, your question with regards to ability to build inventory, obviously we have the facility that we completed in Ohio, that's now manufacturing for Europe for commercial product. And I would just say that we have plenty of adequate material in terms of pre-finished product that can become finished product very quickly upon approval. Your second question is relating to revenue guidance: It has not been our standard practice to provide revenue guidance, and we don't intend to change that practice at this point.

Operator

Our next question will come from Catherine Arnold of Crédit Suisse.

Catherine J. Arnold - Crédit Suisse AG, Research Division

I wanted to ask you guys if you can just give me an update in terms of the dual-chamber pen filing and where that stands. And then also, is -- are there any milestones in your legal dispute with Lilly that come before the FDA action date for BYDUREON?

Dan Bradbury

Catherine, Dan here. I guess I'll take both of those questions. Thanks very much. The -- with regards to the first question, we are continuing to guide that we expect that the dual-chamber pen for BYDUREON will be available at the end of 2012, beginning of 2013, subject to regulatory review time. With regard to update on our litigation with Lilly, that litigation -- I guess just a couple of points I'd want to make. First and foremost, I think it's important that everybody is aware of the fact that we do have in place with Lilly a business-as-usual arrangement while the litigation is continuing. That enables both companies to continue to focus on maximizing the value of exenatide. Secondly, it is fairly complicated, there's a number of things that are occurring. And if I could request, Catherine, rather than me going into all the detail on this call, that if you wouldn't mind calling our investor relations group. They can give you an update of the -- of all the dates and everything with regards to the ongoing litigation with precision.

Catherine J. Arnold - Crédit Suisse AG, Research Division

Sure. Dan, could you just -- going back to the filing for the dual-chamber pen, I don't know if you specified exactly what you'd expect the time line you said directionally when you expect it to be available, but you must be getting close, I would think, to preparing that filing.

Dan Bradbury

Yes, we are. We haven't provided precise guidance with regards to exactly when we are going to submit. But obviously if I'm guiding towards -- I'm guiding at the end of next year and beginning of 2013, you would expect that our submission would occur in the early part of 2012.

Catherine J. Arnold - Crédit Suisse AG, Research Division

And then can I ask you one more follow-up? Which is, in your experience in your -- as you're rolling out, I know Lilly is managing the launches in Europe, but you had made a comment that you'll be taking insights from that progress. What markets in Europe are you watching most carefully?

Dan Bradbury

Well what I'll do there, Catherine, is I'll ask Vince to give you some details with regards to our activities there. Vince, do you want to provide some insight there?

Vincent P. Mihalik

Sure, Dan. Catherine, first and foremost, we have launched in the U.K. in July, and towards the end of August, beginning of September, we launched into Germany and only mentioned the big 5. Obviously, still have -- ahead of Spain, France and Italy launches to go. BYDUREON is off to a great start in Germany. We've seen a very nicely weekly share of market increases in the GLP-1 space with uptake for BYDUREON being very good with minimal erosion of BYETTA, so a net growth for exenatide in share of market. In the U.K., we're seeing -- we're getting access pretty quickly from some of the public trusts. They're clearing about twice as fast as they did for Victoza, so we're seeing a nice uptake there. And of course, you probably saw earlier this week that in the U.K. we did get a preliminary recommendation from NICE, which is of course subject to public comment and final view, but it's an important step towards reimbursement in the U.K. So we're pretty pleased with what's happening so far. It's a relief. And obviously, data takes a little bit longer to come from Europe than it does in the United States. But overall, we're monitoring the major countries in the EU for what happens with launch uptake and we're going to apply those learnings we pick up to fine-tune our U.S. launch. We're very pleased with our plans so far, but it's a great opportunity to fine-tune.

Operator

Our next question will come from Thomas Wei of Jefferies.

Thomas Wei - Jefferies & Company, Inc., Research Division

Just wanted to ask a little bit more on the European launch, actually just to follow up on the last answer. Do you think that, that same trend of not seeing very much BYETTA share erosion after the BYDUREON launch is indicative of your expectations of how things will go in the U.S.?

Dan Bradbury

Vince, you want to comment?

Vincent P. Mihalik

Okay. Thanks, Thomas. Yes actually, given the fact that Victoza launched in Europe first, and obviously the people are interested in more longer-acting GLP-1s who weren't looking for so much the postprandial effects. We did see the acceptance of, I'll say, the more convenient dosing. I do expect that when BYDUREON launches, that there will be more of an impact on Victoza share that on the BYETTA share. We expect some erosion, of course, from BYETTA but most of it, I think, will be remains since a lot of it, I think, is on the postprandial effect that BYETTA has.

Thomas Wei - Jefferies & Company, Inc., Research Division

And when you say that demand in the wholesaler channel so far looks robust in Europe, can you give us a relative comparison about how that wholesaler demand looks relative to a comparable time point when BYETTA was launched in those same markets? Is it tracking ahead of how BYETTA was doing?

Vincent P. Mihalik

So Thomas, just a follow-up. I haven't actually gone back and made the comparison, but I would expect it to be very similar if not better. And the only reason I make that comment is, of course, uptake in Europe for wholesalers is a bit different than in the United States. The pharmacies tend to do -- order when they have a script as opposed to stocking. But I would expect that the uptake is pretty similar.

Thomas Wei - Jefferies & Company, Inc., Research Division

And then just lastly, when you talked about metreleptin and the complexities that you ran into in the manufacturing runs, can you just give us a little bit more elaboration and some comfort that those issues are behind you?

Dan Bradbury

Yes, Thomas, I'll take that one. So Thomas, I mean, just to say that this is a fairly typical -- it's fairly typical issue that we dealt with that is often found when manufacturing large macromolecules such as metreleptin. And it was something that we encountered during the first validation run. It was -- clearly, it was a process tweak that needed to be undertaken. That process tweak was undertaken and we then subsequently have now completed the validation runs. And as you know, you have to do 3 validation runs, and the product is on stability. So we've solved the technical issue and so we remain confident moving forward with regards to the submission of the CMC section for metreleptin and, I think, just to say that we remain very committed to making sure that happens, given the higher medical need in the patient population that we're hoping to serve.

Operator

Our next question will come from Robyn Karnauskas of Deutsche Bank.

Unknown Analyst -

It's Alethea [ph] for Robyn. But I just wanted to get a little bit more color on the market opportunity in EU, maybe particularly into emerging Europe. Do you have any plans to expand there? And what happens once you get post the big 5?

Vincent P. Mihalik

Yes [indiscernible] you or me in terms of the [indiscernible]. So yes, in the emerging markets, we do have plans to launch in a lot of the countries in the emerging markets and of course in Eastern Europe as well. In fact, we've already launched in Romania, just as an example. So yes, that's part of our plans. We didn't disclose any of our launch dates, but we clearly have plans to do that.

Unknown Analyst -

And do you think the uptick for doctors will be the same in that part of -- in the emerging countries as in the big 5 developed markets?

Vincent P. Mihalik

Well in volume, probably not, obviously. But I do expect that we are seeing very nice GLP-1 growth all across Europe. In fact, if you look at, I'll take the big 5, just the ones we keep track of more closely, we're seeing about a 67% growth for GLP-1s in that space. And in fact, as I speak, we're trending towards probably $1.5 billion to $2 billion globally for GLP-1. So it's a robust market, it's growing. You're seeing additional growth in adoption by physicians. And I think, since the entrance of the second GLP-1 agonist, I think doctors are really beginning to see the unique benefits of GLP-1 therapy against other classes. They're looking at the convenience, the better tolerability, and I think all of that bodes very well for BYDUREON.

Operator

Our next question will come from Cory Kasimov of JPMorgan.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

I have 2 of them for you. First of all, for your BYETTA plus Lantus or glargine indication, can you discuss how this market opportunity might potentially change if and when Lantus is ultimately combined with Sanofi's proprietary GLP-1? And then my second question is relates to BYDUREON and post-EASD and now with BYDUREON available in Europe, are you able to comment on the impact DURATION-6 has had on physician sentiment, if it has had any impact at all?

Dan Bradbury

Cory, maybe I'll take the first question and then I'll ask Vince to comment with regards to D-6. So I think it's a little bit premature to comment about what may or may not happen with regards to lixisenatide in combination with glargine. My read on that situation has been that, that program has remained in early stage development and continues to be there. So until such time as we really know what the product is that we would be competing against, I think it's premature for us to comment about what may or may not be the impact of it. Perhaps, Vince, you could talk about the situation in Europe? You were at the EASD meeting, so perhaps you could comment about your impressions.

Vincent P. Mihalik

Yes. Thanks, Dan. So yes, being at the EASD was really a very nice experience for me because I did get to see physicians and healthcare providers react to BYDUREON at the Lilly booth. It was great to see the reactions that they had both to the efficacy and safety data as well as to the custom dosing kit. First and foremost, on the efficacy and safety, DURATION-6 is actually probably one of the lower hemoglobin A1C reductions we saw across the continuum. And when you show the doctors the full, I'd say, composite of all of the different studies and all of the different reductions in hemoglobin A1C, you see the very positive effect it has on hemoglobin A1C and the efficacy. Doctors were very pleased with the better tolerability you see with BYDUREON versus BYETTA or Victoza. And I would also say that they were very pleased with the custom dosing kit. In fact, several -- I watched several different doctors go through the experience, and many of them said it was easy and very straightforward and their patients can do this. Even if it takes 10 minutes, they could do it for once a week. So it was a really good, positive experience. It fits with what we were trying to achieve with the -- many of those strategies that they use in Europe actually were the beginnings of work that was done here for the U.S. launch so it reinforced what we were hoping to see and the expectations we had around the full complement of studies that we have on BYDUREON with the DURATION series.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Okay, that's helpful. And Vince, just a follow-up for you, if I might. When -- using a couple of comments you made earlier with regard to expectations for more switching once BYDUREON is available in the U.S., more switching from Victoza than from BYETTA, but can you talk about your expectations for switching from patients who are on existing GLP-1s versus just new GLP-1 starts? That would -- do you expect more of the patients to come from just new starts overall that would grow the overall market? Or is it, at least initially, more switching?

Vincent P. Mihalik

So Cory, I am expecting more, I'll say, new patient starts. I think the profile that BYDUREON has is much more attractive, given that it's delivered once a week. It's a first in class, once-a-week medicine we've never seen before in terms of treating diabetes. I think it's a real opportunity to really make a difference for patients with diabetes. And so some of the ones struggling today on orals that have in the past not been comfortable necessarily going to an injection, I think once a week's going to make a big difference for them. We will see some switching from GLP-1s, don't get me wrong, but I do believe the greatest opportunity is for new patient starts.

Operator

Our next question will come from Kumar Raja of Citigroup.

Kumaraguru Raja

I'm stepping in for Yaron Werber. We have been seeing that the scripts have been going down for BYETTA. How can we see the sales going forward? And also for BYDUREON, how can we look in terms of expenses?

Dan Bradbury

Kumar, it's Dan. So maybe I could just take the first question with regards to prescriptions for BYETTA. Yes, they have declined. However, I don't think the decline is certainly to the extent that, perhaps maybe many were expecting. And as you saw from sales, you are seeing actually consistent sales quarter-on-quarter over the last 3 quarters. So I think we're continuing to see good sales of BYETTA, and we don't expect to see dramatic reductions in sales of BYETTA in the near term. With respect to your second question, with regards to BYDUREON launch cost, perhaps, Mark, you could comment with regards to our expectation there?

Mark G. Foletta

Sure, Dan, thanks for the question. I think we've been speaking consistently about our plans for this. And really, it's important to understand that the operating model that we've put in place really worked hard over the last few years, is really the model that was prepared to launch BYDUREON. And that's both our sales and marketing efforts and of course our R&D efforts. So while we do expect incremental monitoring cost to support the launch of BYDUREON, we do not anticipate significant other increases in expenses. Of course as we monitor the launch, and we will look to make investments that we believe can drive growth. We will not under-support this launch, I want to make that clear, but we do not anticipate significant changes in our operating model to enable that launch.

Kumaraguru Raja

If I may ask, does this take into consideration the litigation with Lilly?

Mark G. Foletta

I'm sorry, could you repeat that?

Kumaraguru Raja

Does these plans take into consideration the litigation with Lilly?

Mark G. Foletta

Yes, yes. I mean, I'll just refer back to Dan's earlier comment about the business-as-usual agreement. And certainly, we believe that, between Amylin and Lilly, that we have adequate support for this launch. I'd -- one additional comment that I'd like to make is that I will remind you that we do earn a $40 million milestone on the approval of BYDUREON in the United States or the launch of BYDUREON in the United States and so obviously, that can support some of the incremental launch costs that we've referred to.

Operator

Our next question will come from Terence Flynn of Goldman Sachs.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Just first in terms of Germany, I wanted to understand the trends you're seeing. Are you seeing mostly new patient starts, or are you seeing any switching from Victoza? And then, a follow-up on pricing.

Dan Bradbury

Terence, I'm going to toss that to Vince to answer that.

Vincent P. Mihalik

Thanks. I think it was Aaron?

Dan Bradbury

Terrence.

Vincent P. Mihalik

Terrence, sorry. Terrence, thank you for the question. Actually, we are seeing some erosion of Victoza and we are getting new patient starts, so it's a mixture. It's a very early data, though, so it's hard to say where that's actually going to end up. We're pleased with what we see so far and the fact that, as I commented, we're seeing very nice -- we're off to a nice weekly share of market start in Germany. And it's been a net growth for exenatide in terms of share of market. So overall, we're pleased with the start.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

And then on the pricing front, can you give us any sense where -- how pricing has come in, in the U.K. and Germany relative to BYETTA and Victoza? And then the payments that the patients have to make out-of-pocket, particularly in Germany, are those comparable across all 3 drugs, or are there any differences there?

Vincent P. Mihalik

So Dan, I'll take this question, if it's okay with you. I do have the German information. Obviously, really there's the pricing in the U.K. and Germany. I can't comment on out-of-pocket cost. I don't know that off the top of my head, Terrence, so we'll have to get that for you. But in Germany, the price for BYDUREON was set pretty much at the -- at a premium, a slight premium to BYETTA but equivalent to the Victoza, I would say, the 1.2-milligram dose. Between the 1.2-milligram dose and the 1.8, the 1.2 in Germany is about the same price as BYETTA, so there's a slight premium to that but less than the 1.8-milligram dose. And in the U.K., it's a very similar pricing arrangement.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Okay. And then if I may, just one quick question on BYDUREON in the U.S. In terms of your conversations with FDA, have they mentioned at all you guys contributing to this MTC registry that Novo has to set up for or is running currently for Victoza in terms of tracking patients over 15 years? And if you do get approval, do you expect that's something that you will have to do as well?

Dan Bradbury

Terence, it's Dan here. Yes, Terence, I mean I think we expect, just like anybody else developing a long-acting GLP-1 receptor agonist, that we would need to participate in a runs [ph] program, which would encompass tracking in the same way that Novo has to with definitely regards that issue.

Terence C. Flynn - Goldman Sachs Group Inc., Research Division

Okay, so you have talked to them about this?

Dan Bradbury

Yes. I mean by the way, we had -- before we had the second complete response letter, we'd had extensive discussions with the agency. And we have, I think, consistently said we expect to be treated in a similar manner at this time. Obviously, this is all subject to final discussions with the agency and the final label and approval.

Operator

Our next question will come from David Friedman of Morgan Stanley.

David Friedman - Morgan Stanley, Research Division

Just in relation to the U.S., your pricing strategy across your products and your formulary status. Given that you've taken a couple larger price increases for BYETTA than historically and your price delta is getting closer to Victoza and given that you've consistently wanted to maintain a good Tier 2 formulary status, how do you view sort of your price increase strategy and how you're thinking of BYETTA with regards to how you're going to try to maintain good Tier 2 formulary access? Or is one of those variables going to take a backseat?

Dan Bradbury

Well, let -- maybe I should comment on that, David. So let me just say that fundamentally, we believe that it's really important to maximize access to as many patients as possible for our products, and we continue to be committed to that. I think there is -- perhaps one thing I would like to say is that what your comment there with regards to the delta with Victoza, I think that's actually been maintained pretty consistent as a result of also price increases that have occurred to Victoza as well. Going forward, at this point, we're not in a position to guide with regards to our pricing strategy to BYDUREON, but I would reiterate comments that I've made previously that we are committed to ensuring that BYDUREON is available and there is good access to patients with -- at a low tier for BYDUREON going forward.

David Friedman - Morgan Stanley, Research Division

And then just a quick follow-up, if I could. Has there been any change in the formulary status of BYETTA with the recent price changes? Or has that been stable?

Dan Bradbury

It's been very stable.

Operator

Our next question will come from Richard Resnick [ph] of William Blair.

Unknown Analyst -

This is Rich Resnick [ph] for John Sonnier. Regarding the pipeline, I have 2 questions. The first is for the EXSCEL trial. I know it doesn't read out for a couple of years, but is there any interim date that you guys might have? And if so, could you say what would be and when it might read out? And then the second question is about AC165198. I just wanted to see if the IND and Phase I is still on track for year end and if you had anything more than you wanted to say about that?

Dan Bradbury

Yes, sure, thanks for both those questions. Certainly with regards to EXSCEL, at this time there are no plans to do an interim analysis. That's always an option for at some point in the future. But at this time, there are no plans to do an interim analysis of that. With regards to AC165198, yes, it remains on track to file an IND by the end of this year.

Operator

Our next question will come from Ian Somaiya of Piper Jaffray.

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Sorry, one quick follow-up for you. Have you been able to track the patients who are getting BYDUREON in Europe? Just some sense that do they have any prior experience with BYETTA? I think you mentioned there's some cannibalization of Victoza, so I'm just curious whether these patients ever tried BYETTA.

Dan Bradbury

Ian, yes, it's a good question. I don't believe we have that kind of granularity of nature at this time and so it's too early for us to comment on that.

Operator

We have no further questions at this time.

Dan Bradbury

Okay. Well thanks, everybody. Thanks for your interest and for your questions. I appreciate them. Here at Amylin, we know we have a huge opportunity to continue to advance our mission of discovering, developing and commercializing medicines to improve the lives of patients. And our leadership team and the many dedicated employees of Amylin remain focused on building the business today and laying the necessary foundation for our success in the future.

If you have any additional questions regarding the call today or any other aspect of our business, please call Michael or Jeff on our -- at our IR team. And we look forward to continuing our dialogue with you. Thank you.

Operator

Take you for your participation on the conference call today. At this time, all parties may disconnect.

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