Amylin Pharmaceuticals' CEO Discusses Q1 2012 Results - Earnings Call Transcript

 |  About: Bristol-Myers Squibb Company (BMY)
by: SA Transcripts

Amylin Pharmaceuticals (AMLN) Q1 2012 Earnings Call April 26, 2012 8:30 AM ET


Welcome to the Amylin Pharmaceuticals Q1 2012 Earnings Call. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would like to introduce your host, Christine Everett-Zedelmayer, Senior Director, Investor Relations.

Christine Everett-Zedelmayer

Good morning, and welcome to Amylin Pharmaceuticals' quarterly update conference call. We have uploaded a presentation to the Investor Relations section of our corporate website at to accompany this conference call that provides additional background on the quarter.

Today's discussion will contain forward-looking statements that involve risks 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 on today's call.

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 of 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.

Daniel M. Bradbury

Thanks, Christine, and welcome to our first quarter call for 2012. This morning, our comments will build on the press release issued earlier today. In a few moments, Mark will provide additional details on the quarter's financial results and comment on our outlook and guidance for the remainder of 2012. Vince will then review our commercial activity and progress during the first quarter, including an overview of the U.S. BYDUREON launch.

2012 has been a truly exciting year for us so far. We've made substantial progress against many of our key corporate priorities for the year and look forward to continued momentum as we forge ahead.

I would like to take a moment to reflect upon the numerous developments during the course of the first quarter. First and foremost, we accomplished a long-held goal of ours, bringing the first and only, once-weekly therapy, BYDUREON, to type 2 diabetes patients in the United States. This therapy is now approved in 35 markets around the world and has launched in 15 to date. With this game-changing therapy, we are providing patients with an opportunity to control their diabetes instead of letting their diabetes control them.

With BYDUREON, we have set a new bar for the treatment options that we believe will start further innovation and advancements that will continue to revolutionize the development of future therapies for people with diabetes.

Having gained approval for BYDUREON in the United States in late January, we immediately began executing our comprehensive launch plan. With the hard work of the Amylin organization and all our suppliers, BYDUREON was available to patients within 12 business days of approval. We were able to fulfill the immediate orders from wholesalers and enabled dispensing of prescriptions from physicians interested in offering this innovative treatment option for their patients.

We are extremely pleased with the performance of BYDUREON thus far, and are highly encouraged with the uptick in demand as BYDUREON continues to gain market share and expand the GLP-1 class.

Specifically, we're encouraged by the response from the high-prescribing, highly-influential physicians, that we have initially targeted.

By following this approach, we are building a strong foundation of long-term growth and adoption within the medical community. We are now 10 weeks into the launch of BYDUREON in the U.S. and it has gained more than 5% of the GLP-1 market. This growth is an addition to BYETTA maintaining 38% market share, establishing its new position in the short-acting GLP-1 receptor agonist class as the only product indicated to be added to the world's best-selling basal insulin.

With prescriptions for GLP-1 receptor agonists having grown by nearly 60% since February 2010 and the class now approaching 2 billion in global sales, we believe that awareness of the benefits of GLP-1 therapy is at an all-time high. Our focus is on continuing to grow the GLP-1 receptor agonist class through the promotion of our Exenatide franchise.

With BYDUREON, we have the unique opportunity to grow and shape the long-acting GLP-1 market and with BYETTA, the only GLP-1 receptor agonist indicated to be added to the world's best-selling basal insulin, we have the opportunity to establish a new market with short-acting GLP-1 receptor agonists.

We believe our early success is the result of our 2 recently created dedicated commercial units, the Exenatide commercial unit and the specialty and orphan disease commercial units, each with its own focused sales force, enabling us to devote sufficient attention to our entire product portfolio.

We now have a total of 650 reps hired, trained and in the field, supporting Exenatide, and an additional 65 reps trained and in the field detailing SYMLIN and BYETTA. Vince will provide more detail on commercial activities and the BYDUREON U.S. launch specifics later in the call.

Additionally, the European commission recently granted marketing authorization to BYETTA as adjunctive therapy to basal insulin, with or without metformin and/or pioglitazone, for the treatment of type 2 diabetes in adults who have not achieved adequate glycemic control using these agents. This indication gives patients and physicians an important new treatment option providing improved glycemic control with the potential for weight loss and without an increased risk of hypoglycemia. We are pleased with this expansion to the BYETTA label in the EU market.

During the quarter, we also continue to make important progress in advancing our development pipeline. This quarter, we completed the Biologics license application or BLA in the U.S. for the use of metreleptin to treat diabetes and/or high levels of triglycerides in patients with rare forms of lipodystrophy. This important milestone brings us one step closer to delivering this novel therapy to patients living with this serious and potentially life-threatening ultra-orphan disease who currently have limited treatment options. We anticipate hearing the response to our request for priority review this quarter.

If designated as a priority review, metreleptin could be commercially available to patients by the end of this year. We are also continuing our progress of Exenatide lifecycle options that provide patients with additional choices in delivery devices. The development of a pen device for BYDUREON remains on track, with an expected launch by the end of 2012 or in early 2013.

Additionally, we are advancing the Exenatide suspension programs, including weekly and monthly formulations that do not require new suspension. These product candidates represent an important component of the Exenatide franchise and the next leg in the evolution of the GLP-1 market.

Based on end of Phase II discussions with the U.S. FDA at the end of 2011, we remain on track to start the Phase III program of the once-weekly suspension in the middle of 2012. We are actively engaged with global regulatory agencies for input into the Phase III design for the once-monthly suspension and plan to start the global program in early 2013.

We are also continuing to add census 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.

Our efforts to secure a partner outside the United States with Exenatide are ongoing, and interests from both global and regional companies remains very high.

Finally, we continue to maintain our focused financial discipline. As Mark will highlight momentarily, our first quarter financial results reflect our commitment to executing our plans towards BYDUREON. Our expenses in 2012 are front loaded to maximize the opportunity for success. As reflected by the full year guidance Mark will provide, we remain committed to controlling our spending and driving operational efficiencies within the business.

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

Mark G. Foletta

Thanks, Dan and good morning. Today, we announced our financial results for the quarter ended March 31, 2012. I'll begin my comments by discussing our quarterly performance, including comparing quarter-over-quarter changes in revenues, I will then close out my comments with an update regarding the guidance we provided during our 2011 year-end call in February.

As we continue to make progress with the launch of BYDUREON, we remain focused on managing the business with operational discipline and optimizing our use of cash. The key metric to track our financial progress continues to be non-GAAP operating results, which approximates our cash flow from operations before working capital changes.

Our non-GAAP operating results are defined as our GAAP operating results, excluding restructuring charges and noncash items comprised of stock-based compensation, depreciation and amortization, amortization of acquired intangible assets and fair value adjustments.

Additionally, we now include in this metric the 15% obligation on Exenatide global sales, also known as our revenue sharing obligation or RSO. In the first quarter of 2012, our non-GAAP operating loss was $30.1 million.

Total revenues declined $11.3 million or 7% from the fourth quarter to up $153.7 million. The change in total revenues reflects declines in BYETTA and SYMLIN revenues of 9% and 18%, respectively, offset by the addition of BYDUREON to our product mix.

The 9% sequential decline in BYETTA revenue reflects the 4% decline in prescription volume and variations in gross to net adjustments and wholesale inventory levels that were within normal ranges and our expectations.

The 18% sequential decline in SYMLIN revenue reflects a 10% decrease in prescription volume and variations in gross net adjustments and wholesale inventory levels that also were within normal ranges and our expectations.

BYDUREON, which we launched in mid-February in the United States, generated $6.9 million of revenue in the first quarter. These early results include the initial stocking of wholesale distribution channel. I'd like to note that the initial channel fill, following approval, was the only shipment of BYDUREON during the first quarter and we began receiving reorders very early in the second quarter as demand for BYDUREON increased.

This was consistent with our pull strategy, not to overstock the distribution channel while meeting patient demand and ensuring sequential, quarterly growth of BYDUREON revenue.

Gross margins during the quarter were 77%, down from 92% in the fourth quarter of 2011. As expected, the main driver of our lower gross margin during the quarter was the launch of BYDUREON.

As we have guided previously, BYDUREON will initially have margins significantly below our target of 75%, mainly due to approximately $100 million of annual fixed operating expenses to run our Ohio manufacturing facility. As expected, cost of goods sold for BYDUREON exceeded revenue in the first quarter. But we expect BYDUREON gross profit and margins to improve as production volume increases and we realize economies of scale.

Our operating expenses were $161.5 million in the first quarter, consisting of $110.3 million of selling, general and administrative expenses, and $51.2 million of research and development expenses. Due to recent significant changes in our operating model, we are not comparing operating expenses to prior periods.

We ended the first quarter with $315 million in cash, restricted cash and investments, which includes proceeds of $207 million from the sale of approximately 13.5 million common shares in the secondary offering last month. Following the offering, our outstanding share count stands at approximately 163 million shares as of March 31, 2012.

Now let me move to our expectations for the remainder of 2012. While our non-GAAP operating loss in the first quarter was $30.1 million, driven largely by investments to support the launch of BYDUREON, we still expect to finish the year with accumulated non-GAAP operating loss of between $20 million and $40 million. We continue to maintain our 2012 combined operating expense guidance of $600 million to $625 million. Operating expenses in the first quarter of $161.5 million is slightly above the rate of planned spending for the remainder of the year as a result of nonrecurring cost associated with the launch of BYDUREON.

I will now provide some further quantitative and qualitative guidance to assist you in understanding our expectations for 2012.

Collaborative revenues, consisting of the amortization of the upfront payment we received from Takeda as part of our obesity collaboration will be $7.5 million. We expect royalties on Exenatide gross margin outside of the United States to be less than $5 million.

We expect combined gross margins for BYETTA, BYDUREON and SYMLIN of approximately 80%. We expect net interest expense to be $165 million to $175 million, approximately $140 million of which is associated with the RSO. Noncash adjustments, including depreciation, amortization and stock-based compensation are expected to be between $105 million and $115 million. Additionally, we will incur approximately $30 million of amortization of intangible assets that will also be excluded from our non-GAAP operating results.

With respect to our cash flow, we offer the following additional comments: We intend to continue to focus on tightly managing our cash in 2012 while investing to support the launch of BYDUREON. Additionally, our first RSO payment for 2012 will not be made until the fourth quarter.

Excluding the $207 million proceeds from our equity offering, we used approximately $107 million of cash in the first quarter. This was driven primarily by working capital usages, including the building of BYDUREON inventories and the payment of year-end accrual. Additionally, the quarter included the final gross margin sharing payment to Lilly for October and November of 2011. As a reminder, the new economic relationship commenced on December 1, 2011.

Quarterly, our cash usage was front loaded in the first quarter of 2012 and we expect to use less than $30 million of cash for the remainder of 2012, including the fourth quarter RSO payment I mentioned a moment ago.

We expect our capital expenditures to be less than $50 million for 2012.

To summarize, we are pleased with our financial performance in the first quarter of 2012, which reflects our focused discipline to manage expenses closely in line with expected revenues while fully investing to support the BYDUREON launch in the United States.

Now, I will turn the call over to Vince to provide some information regarding our commercial performance during the quarter.

Vincent P. Mihalik

Thank you, Mark. As Dan mentioned previously, we are very excited and pleased with the launch of BYDUREON in the U.S. With the power of continuous glycemic control, in just one weekly dose, we firmly believe that BYDUREON is a product that represents an opportunity to revolutionize the ways patients and physicians manage type 2 diabetes. We are also very encouraged by the early feedback we are getting from physicians, health care professionals and our field organization. The willingness of physicians, diabetes educators and an office staff to learn about BYDUREON, as a new treatment option in type 2 diabetes, has been encouraging and an early sign of product interest and adoption.

Our plan upon approval for BYDUREON in the U.S. was to launch the product as quickly as possible. We are pleased that we had a product available to patients in only 12 business days.

To achieve this goal, we planned for a progressive ramp up of our field teams and a rollout of support tools in the weeks following approval. This ramp up included recruiting, hiring and providing comprehensive training to 325 reps new to Amylin and placing them in the field in less than 90 days, providing intensive product training for all 650 sales reps promoting BYDUREON, working with our suppliers to ensure that adequate levels of trade products were quickly available in the pharmacies at launch and shipping BYDUREON samples to the sales teams as soon as possible.

We are very pleased with the quality of our newly hired 325 sales team members, most of these reps have former diabetes sales experience and on average, have 10-plus years of pharmaceutical or biotech sales experience.

Given that this team is new to their target physicians, territory routing and/or products, we expect we will not see the full impact of their activity for another 3 months or more.

Consistent with our strategy to build a blockbuster brand by focusing on specialty first, our analysis of early BYDUREON scripts demonstrates to us that our physician-targeting approach is working. Our field team has been actively calling on endocrinologists and key primary physicians who drive and influence others to write. We are pleased with the adoption and increasing productivity of BYDUREON by these key high decile, highly-influential physicians.

Early shifts in NRx share for BYDUREON in the GLP-1 class indicate that demand is building nicely and bodes well for greater adoption of this class and the Exenatide franchise. The majority of scripts are new to the class as opposed to patients switching from an existing GLP-1 option.

Since the launch of BYDUREON in the U.S., 4 weeks [ph] just indicate that the total weekly prescriptions for the GLP-1 class have grown by approximately 7%. We believe that the steady GLP-1 class growth in U.S. is an indicator that the market is willing to adopt new entrants to this important class of therapies and especially BYDUREON, which provides improved efficacy, better tolerability in just one weekly dose.

Indeed, today, we are seeing new prescriptions for GLP-1 that are approaching the level of DPP-IVs among endocrinologists. This is an important lead indicator of the trends that we expect to see across the market.

We've also been able to identify spontaneous writing from primary care physicians we haven't targeted yet and who are already adopting BYDUREON in their practice, either from participating in a speaker program, peer recommendations or from their own interest in the molecule. Clearly, we are seeing a broadening of writers earlier in the launch than we anticipated. Feedback from health care professionals in this early launch also suggests strong patient acceptance of BYDUREON. As an example, our customers telling us that they are experiencing very few BYDUREON patients calling back to their offices with questions either on the use of the single-dose tray or the medicine itself.

We are pleased to see the medical community is very supportive of BYDUREON and the value it can provide with patients with type 2 diabetes.

Our sampling program includes primarily live samples. These are specifically packaged in one single-dosing tray, which equates to one week of therapy. We began distributing these samples to physicians' offices in late February to support new patient starts. In many cases, these samples enabled patients to have their first dose of BYDUREON in the physician's office with the assistance of a health care professional. We believe this is a really good way to introduce BYDUREON to patients.

Additionally, we are providing vouchers to some physicians who do not have samples in their offices. These vouchers can be exchanged for a prescription of BYDUREON at the local pharmacy. Unlike samples, prescriptions filled using these coupons will be counted in prescription tallies, which will not be accounted for in revenue.

We're also pleased that the growing rate of acceptance of mail order delivery. Already, 12% of our BYDUREON scripts are coming through mail order channels. Obviously, the value of an individual prescription will depend on the mixture of distribution to various channels.

Another very important element that we are addressing, as we launch BYDUREON as the third GLP-1 in the market, is managed care coverage. We're working with payor organizations to provide BYDUREON to as many patients as possible that can benefit from this novel therapy at the lowest branded copay.

To support patients in the near term while we work to achieve this goal, we are utilizing tools such as a copaid card assistance program for patients that may initially have higher copays. The copay card program helps to ensure a low out-of-pocket cost for the patients in the interim.

We've had some early wins, several insurance plans and military facilities have made BYDUREON available to their beneficiaries. Over 50% of commercial lives are already covered without restrictions, some at the lowest out-of-pocket expense possible or as a preferred branded drug for diabetes.

However, we recognize that this is a highly competitive environment and will require us to maintain our focus to gain broad access for BYDUREON as we have done for BYETTA.

Now let's move on to BYETTA. BYETTA prescriptions decreased by 4.3% in line with our expectations. BYETTA script share will continue to be very dynamic, as some patients switch their GLP-1 therapies. Although BYETTA total prescriptions declined quarter-over-quarter in TRx, they'll continue to observe stabilization in new prescriptions throughout the first quarter. Early feedback from our field team indicates increasing usage of BYETTA as a mealtime GLP-1 with insulin glargine therapy.

Overall, we're pleased to see, not only an increase in the Exenatide total prescription share of the GLP-1 class, but also an increase in GLP-1 share of the branded type 2 diabetes market in the first quarter.

Moving on to SYMLIN. SYMLIN prescriptions declined by 10%. This decrease is attributable to our focus on the U.S. BYDUREON launch and the restructuring of our field sales force. In the middle of the first quarter, we completed the hiring, training and launch of our new 65-person specialty sales team. We expect to continue to see some variability in prescription trends for SYMLIN while the new sales team gets familiar with their products, physician targets and routing.

I'll close my portion of the remarks by saying that we are very pleased with the early performance of the BYDUREON launch in the U.S. and early indications of strong growth and adoption in the GLP-1 market as a proportion of the branded diabetes market. We are executing against our commercial launch plans for BYDUREON as well into continue to drive BYETTA and SYMLIN product sales.

Now I'll turn the call back over to Dan for a few additional comments.

Daniel M. Bradbury

Thanks, Vince. Before the close of our prepared remarks, I'll just add a few more comments. As we enter the second quarter of 2012, I would like to quickly preview our presence at 2 upcoming conferences. We will be at the American Diabetes Association Scientific Meeting that will be held June 8 through June 11 in Philadelphia. Once again, we are planning to have a significant scientific and commercial presence at that meeting. A preliminary list of our abstracts and other activities at ADA will be posted to our corporate website when available.

Additionally, the webcast of our annual investor reception at the ADA will take place on Sunday, June 10, at 7:30 p.m. Eastern Time. We look forward to seeing many of you in Philadelphia as we will review meeting highlights and take questions.

In addition, we will be presenting data from our metreleptin program at the Endo 2012 annual meeting, June 23 to June 26 in Houston.

I'm also pleased to note that we'll be holding our 2012 annual meeting of stockholders on Tuesday, May 15 at 9:00 a.m. Pacific Time in San Diego. For those stockholders who are unable to attend the meeting in person, we invite you to listen to the webcasts of the meeting followed by a corporate overview. We look forward to this opportunity to provide additional updates about Amylin and meet with our stockholders in person.

In closing, I'd like to reiterate that I, along with the Amylin board of directors and leadership team, remain committed to creating value for our shareholders, our employees and the millions of diabetes patients we're focused on serving. Additionally, I'd like to take a moment to acknowledge and thank the employees of Amylin whose hard work and diligent efforts enabled several key achievements in the first quarter, including the approval and launch of BYDUREON and quickly bringing this revolutionary medicine to physicians and patients across the country.

Before we turn to the Q&A, I want to address the recent rumors and market speculation regarding Amylin.

Amylin's Board of Directors is fully aware of its fiduciary duties and is committed to always acting in the best interest of stockholders. The board continually considers all options available and is relentlessly focused on creating the greatest value for our stockholders. Furthermore, we are pleased that Carlisle Kent has withdrawn his lawsuit seeking to extend the direct to nomination deadline for our upcoming annual meeting.

With that said, the purpose of today's call is to discuss first quarter results and we can ask you to limit your questions to these results. We will not be commenting further on recent market rumors or matters involving Carlisle Kent.

I will now turn the call over to the operator to open the lines for questions. Thank you.

Question-and-Answer Session


[Operator Instructions] And our first question comes from Robyn Karnauskas with Deutsche Bank.

Alethia Young

It's Alethia Young in for Robyn Karnauskas. Just a quick question on, just wanted to get some more color on how your ex-U.S. partner conversations are going? And just if you can give us a little bit more characterization on those?

Daniel M. Bradbury

Sure, thanks for the question, I appreciate it. They're going well. We continue to have high level of interest in an o U.S. partnership and remain confident that we will be able to get one in place going forward.

Alethia Young

Okay, great. And then just one quick other one. On the new patients versus switches, have you guys given the like kind of an exact breakout? I know you characterized a fair amount of new patients.

Daniel M. Bradbury

Yes, what I'm going to do is ask Vince to comment on that. Vince?

Vincent P. Mihalik

Yes. Thanks, Robyn, for the question -- sorry, not Robyn. But thank you for the question. We have said, from based on our internal data, that we're looking at it. We see that the majority of patients are coming from patients naive to GLP-1 therapy as opposed to products, which is, there's some dynamics, of course, as patients are switching between GLP-1 therapies. But the majority of BYDUREON scripts are coming from patients naive to GLP-1 therapy.

Daniel M. Bradbury

I think I'd refer you to Slide 7 in the deck that accompanied the webcast and what you can see there is the change in share in the GLP-1 market since the launch of BYDUREON in February.


Thomas Wei with Jefferies.

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

I wanted to ask a little bit more on maybe these ex-U.S. partner negotiations that are underway right now. Can you just remind us, where are you exactly in terms of -- where was Lilly in obtaining reimbursement approval in France, Italy and Spain? And if they were in the process of that, when was that expected or when would that expected to be completed?

Daniel M. Bradbury

Hi Thomas, good morning. I'm going to ask Vince to get back to you on that one.

Vincent P. Mihalik

So Thomas, first, as Dan mentioned in his comments, we were approved in 35 countries, launched in 15. We have put in dossiers to the Italian, Spanish authorities for pricing and reimbursement. So those dossiers are underway. We haven't yet approached France, relative to a dossier for pricing in France. We'll probably do that with our o U.S. partner.

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

And for Italy and Spain, when would that be expected to yield a decision?

Vincent P. Mihalik

Yes, I don't know, Thomas. Obviously, when you submit a dossier, it takes a period of time for them to review it. Given some of the issues going on in Europe, it may take longer than the usual process. We'll have to see.

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

Can you say when those were put in?

Vincent P. Mihalik

Off the top of my head, I don't know, Thomas, but we could get you that information.

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

I guess, part of the reason why I'm asking all of this is, I'm trying to get a sense of when you might actually be in a position to actually have pricing approval in some of these countries, yet not have a partner for launch. Is the goal to have a partnership signed so that you can smoothly transition from obtaining reimbursement approval to a product launch? Or does that not really matter, that you're happy to kind of wait and sit on an actual approved and reimbursed product without a partner for some period of time?

Daniel M. Bradbury

So, Thomas, that's a great question. And absolutely, one of the things we're trying to do is minimize disruption in the launch of BYDUREON and to ensure that we'll have the most effective launch. And obviously, one of the key things there is timing of partnership discussions with regards to also the planned reimbursement periods for new launches in various different countries. So absolutely, one of the things that we're working on there is how do you minimize disruption and maximize the effectiveness of launches.


Tom Russo with Baird.

Thomas J. Russo - Robert W. Baird & Co. Incorporated, Research Division

Dan, I know you can't comment on speculation, but maybe along the lines of Thomas' last question. Can we just get the company's latest thoughts on the importance of an o U.S. partnership sooner than later to optimize the launch versus the strategic value of keeping the asset totally unencumbered economically?

Daniel M. Bradbury

So I'll just comment on the first part of your question there. Because, otherwise, I think I'm providing comments that would be responding to speculation, which I said at the beginning of the call, I would not do. But with respect to the o U.S. partnership, clearly, it's important, going forward, to get that in place as soon as possible. We said that last year, at the time we announced the settlement agreement with Eli Lilly and Company. And so we are working towards that in a manner to ensure that we can make that happen as soon as possible and as efficiently as possible.

Thomas J. Russo - Robert W. Baird & Co. Incorporated, Research Division

Okay. And the second question on the launch itself in the U.S. Vince made comments about nonrevenue-generating scripts that would be showing up in third-party databases. And I know that the revenues that were reported only reflected initial stocking. So I guess I'm just curious, can you give us a sense of what proportion of RXs that have been seen so far are revenue-generating?

Daniel M. Bradbury

So, I guess, I'll just make a couple of comments now and hand over to Vince. So I think one of the most important statements in Mark's comments was that, what you're seeing in terms of the revenues for BYDUREON to had been reported for the first quarter, they literally represent just the initial stocking. And one of the things that we've been pleased to see has been, since the early part of the second quarter, we're now seeing repeat orders coming in from wholesalers and distributors on a regular basis and we're starting to see those shipments build as we've moved into the second quarter. So maybe I'll ask Vince to comment about his comment regarding prescriptions.

Vincent P. Mihalik

Yes, so specifically what I was commenting on is vouchers. And vouchers come through the system, obviously, they don't contribute to revenue initially until it turns into an NRx or a TRx at some point. So the key point here was that vouchers actually go through the system but don't add to revenue, that's a very, very small proportion of our overall, I'll say, NRxs that are going through the system at any point in time. I don't want to give you a ratio for competitive reasons. But let's say, the vast majority of what we do is samples versus vouchers.

Mark G. Foletta

And Tom this is Mark. The only thing -- Tom, I'm sorry, it's Mark. The only thing I'll add is, of course, that is accounted for when we, in our gross and net adjustments. So the net number that you see reflects what is truly the new revenue-generating scripts, if you will.


Karen Jay with JMPC.

Karen E. Jay - JP Morgan Chase & Co, Research Division

This is Karen Jay in for Cory Kasimov at JPMorgan. I'm just wondering if you could give us a sense of early feedback from Europe and the interest level or reception to BYDUREON in endocrinology practices versus CVD?

Daniel M. Bradbury

Yes, sure, Karen. Thanks very much for the question, I appreciate it. So firstly, I'd say, we're actually feeling very good about the feedback that we're getting from the field force but also, most importantly, from physicians. One of the things that we found is that firstly, the training that we gave our reps at the time of the launch has been very effective, that their ability to initiate BYDUREON has been very well executed. And as a result of that, and as a result of the improved tolerability, that we've seen with BYDUREON in the clinical trials, that's now manifesting, those 2 things, the training, the enablement of the initiation of therapy and improved tolerability. The way that, that's feeding back to us, is actually, literally, when we go out, when we visit with physicians, what they say is, I literally get no call backs. And that's actually very good news going forward, because that means sustainability with respect to patients staying on the product going forward is likely to be improved relative to the introduction of other GLP-1 receptor agonists. And maybe in terms of endocrinologists versus primary care physicians, again, one of the things I'll do is maybe refer you to Slide 8 in the deck that accompanied the webcast this morning, and Slide 9. One of the things that we're very pleased to see in terms of -- if you look at Slide 9, what you'll see is that the growth in the GLP-1 class has been 18% in just a few weeks since BYDUREON has launched. And what you're seeing is a very big swing towards GLP-1s in those physicians that we targeted at launch. And so as we roll out the launch further and expand the scope of the physician base that we target, we expect to see that growth continue across a wider range of physicians. I don't know, Vince, whether you want to add any additional comments.

Vincent P. Mihalik

I just want to clarify one point that, Karen, were you asking also about Europe or just about the U.S.?

Karen E. Jay - JP Morgan Chase & Co, Research Division

I mean, both would be great.

Vincent P. Mihalik

Yes. Actually, Dan's comments relative to the U.S. about no callbacks are also true for Europe. We're hearing from our Lilly colleagues that physicians in Europe are also not seeing as many callbacks on BYDUREON as they do other GLP-1s. And as a result, we're seeing, I think the whole GLP-1 class, for instance, in Germany. Above 30% in new patient starts are going to BYDUREON and relative to the U.K., although we didn't get final mice published for the late February, beginning of March. Already about approximately 100 of the 180 public trusts have already added BYDUREON and we're seeing very nice growth. And based on therapy, the GLP-1 class is up to about 25% of our prior year, even in the U.K. So I think we're seeing very nice growth and adoption in Europe and as Dan already commented on our launch here in the United States, we were very focused on hyper frequency on those high-decile, highly-influential endocrinologists, as well as primary care physicians that can influence other primary care physicians, and we're seeing very nice growth in adoption and productivity in that group.


Mark Schoenebaum with ISI group.

Unknown Analyst

This is [indiscernible] sitting in for Mark. I wanted to touch a little bit more on partnership negotiations. In light of rumors, I guess, just sort of understanding the partnership negotiations from the perspective of how partnership versus sale, how one might make that decision and whether those might be mutually exclusive.

Daniel M. Bradbury

So I'll just go back to the comments that I made at the end of the call and that is to say that we are continually considering all options available. And obviously, we're focused on creating the greatest value for our stockholders. We are continuing o U.S. partnering negotiations, and those negotiations are going well. And I think it would be inappropriate for me to comment on the specifics of those negotiations until such negotiations are concluded.


Yaron Werber with Citi.

Christopher Mortko

This is Chris sitting in for Yaron. Could you give us a little bit more color about what type of docs are using BYDUREON, general practitioners versus endocrinologists? And is most of the use in previous GLP-1 writers or new docs?

Daniel M. Bradbury

Thanks for the question, Chris. I'm going to ask Vince to comment on that. But just to say that one of the things that is very important about our launch was that, as I think Vince said in response to an earlier question, we were very targeted in the initial part of our launch and we'll continue to be for a while yet, until we expand out. And Vince, maybe you want to add color to that?

Vincent P. Mihalik

Yes. First of all, Chris, thanks for the question. And yes, the doctors were seeing writing are both of endocrinologists and primary care physicians. In fact, on a prescriber number basis, there are more primary care physicians writing BYDUREON than endocrinologists as, of course, you would expect the endocrinologists write more scripts. But we're also seeing a lot of spontaneous writers as well. In fact, as we look through our target list, we see doctors coming up pretty regularly who we have not yet called on. They may be on our target list, but we haven't yet called on them and/or they're not even in our launch model of the 51,000 we targeted who are writing BYDUREON either from peer recommendation, having attended a program or simply their interest in the molecule. So we're seeing a lot of usage in primary care even at this early stage, although as Dan commented, we were focused on hyper frequency on those high decile, highly-influential writers this early in the launch.


Nicholas Bishop with Cowen & Company.

Nicholas Bishop - Cowen and Company, LLC, Research Division

I had a question, actually, around general patterns of distributor stocking. And the reason I'm curious is that with the launch of the last GLP-1 product in early 2010, we saw very substantial distributor stocking in the first quarter of launch and then very little in the next quarter as a result of a bit heavy inventory build. So has that patterned among distributors? Is that different for BYDUREON? What kind of inventory carry should we expect and would there be any unusual dynamics as a result in the next quarter?

Daniel M. Bradbury

Thanks, Nicholas. Yes, I'm going to ask Vince to initially comment and also Mark to comment on that with respect to financial results.

Vincent P. Mihalik

Hi Nicholas, so obviously there are various ways you can launch a drug into the marketplace. You can provide incentives to distributors for them to stock up and then it becomes a push strategy. Or the other way you can do it is to give them an initial stocking level and then based on demand, they'd do a pull strategy. We actually followed the pull strategy. And as you know, distributors look at demand, they calculate based on their demand, what the safety stock they would be based on that demand, an economic order quantity that makes sense for them, and then they actually issue orders based on that. What we wanted to do is to have a consistent revenue from the launch of BYDUREON. We didn't want to have the situation where we had a spectacular quarter and then a week or next quarter. So our whole strategy was the pull strategy as we went into the launch of BYDUREON. Which is why you can see each week, the revenue from shipments continue to increase, it gives us the opportunity to see what demand actually is rather than following a push strategy.

Mark G. Foletta

And the only thing I'll add to that Nicholas, is that in the prepared comments, we did say that we saw reorders commence very early in the second quarter in the month of the April. In fact, we've seen 4 consecutive weeks now of accelerating orders. So I think that, that signaled it. And I put it in the prepared remarks, that we do expect sequential increase in BYDUREON from the first quarter to the second quarter.


Terence Flynn with Goldman Sachs.

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

Just was -- first, wondering if you can give us any insight into the 1Q SG&A expense? Was wondering if there were any one-time launch expenses or if that's a reasonable run rate to assume for the rest of the year?

Daniel M. Bradbury

Hi, Terence. Yes, I'm going to ask Mark to get back to you on that one.

Mark G. Foletta

Yes, Terence, thanks for the question. Clearly, the first quarter did include one-time launch expenses. I think it's fair to say, those will continue into the second quarter, just given where we are in the launch. In the prepared remarks, we did say that our combined operating expenses of $161 million for the first quarter, that's combined SG&A and R&D expenses, were above -- that run rate is above the guidance for the year. So the way you should think about that is that in the second half of the year, those expenses will drop off and we continue to believe that it will be in the $600 million to $625 million range of GAAP operating expenses. So the types of costs that those would include, of course, would be the training of the sales force, the launch meetings and then the frontloading of your spend on the marketing.


Mike King with Rodman & Renshaw.

Michael G. King - Rodman & Renshaw, LLC, Research Division

I have 2 related very strategic questions about BYDUREON. Number one, by our view of the scripts, the launch is trailing that of Victoza. So I just would love your views on how we should think about that. And number two, I also wanted to have you address the issue of your competitors in the GLP-1 space having in-house insulin products that could combine with their proprietary GLP-1s and as far as I know, Amylin doesn't have any access to anything like that. So do you feel you have any competitive disadvantage relative to Sanofi and Novo on that respect?

Daniel M. Bradbury

So, Mike, thanks for the questions. Vince, you want to comment with regards to the launch?

Vincent P. Mihalik

Yes. Mike, thanks for the question. First and foremost, looking at comparators to BYDUREON in the launch, the comparisons you made were to BYETTA and to Victoza. And I would first say that taking a drug that launched 5 years ago or even a drug as simple as 2 years ago and making the comparison here is difficult given the changes in health care reform competition, and I would say, even reimbursement and access in today's marketplace. Also I would like to make a comment, we are the third GLP-1 into the market. You would also expect that, that would have some impact on the uptake curve. Having said all of that, actually, we're very pleased with where we are, the week-on-week difference is actually quite small in TRxs, and our focus has been on those endocrinologists to build a very solid base. We know that endocrinologists and these primary care, we call them endo-mimetics, doctors who prescribe a lot of diabetes drugs are the ones that you really want to get. As I've talked about in the past, the sweet spot in this market is roughly about 50,000 to 70,000 doctors, although the number of doctors writing insulin, for instance, is well over 300,000. We know that the vast majority of scripts are written by a handful of doctors. It's a very concentrated market and that has been our focus, to build our volume and our acceptability and more importantly, our productivity in that base. As it relates to having in-house insulins and whether that's going to matter for GLP-1s, I would simply say that the marketplace has yet to speak to that. Because quite frankly, if you look at the insulin business, premixes do not do well. Doctors like to have the availability to vary dosage for different drugs as opposed to having fixed combinations. So I'm not necessarily convinced yet based on what we see in market research that not having an insulin franchise will be critical to the acceptance of a GLP-1 on a standalone basis.

Daniel M. Bradbury

I guess, I'd add to that, Mike, is at this point, it's kind of too early to comment on these potential products going forward relative to our portfolio. Firstly, there is no data yet available on the profile of what these products will look like in late-stage studies. And I think, there's a question about what's really going to be the value, as Vince talked about, of premixing going forward versus dosing individually. One comment I would also make is that if you look at the Exenatide franchise and our plans for the franchise going forward, one of the things that we're doing is that we're increasing the convenience of the use of Exenatide going forward with our future product, planned product launches. The BYDUREON 10, as you know, will be available at the end of this year, beginning of next year. We're also commencing our work on the weekly suspension. The Phase III program will start the middle of this year for that. And the monthly suspension program, talk about a massive increase in convenience to patients going forward will be starting Phase III in the beginning of next year. So I think it's fair to say that we feel very confident about the competitive profile of the Exenatide franchise relative to potential future competition coming forward.


Our final question comes from David Friedman with Morgan Stanley.

David Friedman - Morgan Stanley, Research Division

Just in terms of the growth dynamics, you have talked about and you quoted sort of a mid-to-high double -- or a mid-to-high teens growth for GLP sequentially pre-imposed launch of BYDUREON. But it seems like Exenatide has been relatively flat with most of the growth going to Victoza. So I guess I'm wondering, how do you expect to shift the growth to Exenatide and does this involve needing to take share specifically from Victoza?

Daniel M. Bradbury

So, David, thanks for the questions. I guess a couple of comments. First and foremost, we've seen pretty dramatic increase in terms of the size of the GLP-1 market since the launch of BYDUREON. And I refer you to Slide 8 in the pack that we have -- sorry, Slide 6 in the pack that we have that comes with the webcast. Also, if you look at Slide 7, what you'll see is the increasing share of new prescriptions, which will of course predict future TRxs that we've seen since the launch of BYDUREON. And an important comment I'd make there is that you see that from the time of the launch of BYDUREON to date, which is less than 10 weeks, you'll see a 3.6% increase in market share of NRxs, so that BYDUREON -- sorry, Exenatide to move from 41.9% to 45.5% of the GLP-1 class, which has grown over that period as well. So it's not just the fact that we are increasing share, it's that actually the whole market is growing. The other thing I'd point to when you commented about our double-digit growth, I think you were referring to a comment I made earlier with regards to growth in the physicians that we've spent the most time targeting since the launch of BYDUREON, and that's endocrinologists. And if you look at Slide 9 in the pack, what you'll see is that the GLP-1 class has grown from 14.3% to 16.9% of the branded type new diabetes prescriptions. And that's an 18% growth since the launch of BYDUREON. And the thing that's most important about that is, that's in the group of physicians that we've been really targeting since the launch of BYDUREON. But even if you look at primary care, you're seeing an 8% growth in the class since the time of the launch of BYDUREON as well. So, as Vince said earlier, we continue to be very pleased about the launch. Specifically, because we know exactly where we're putting our promotional effort at the moment and we're seeing very good response in terms of increased physician productivity and the physicians that we're targeting. So as we change that going forward, we can predict to see a greater growth across the entire physician population.

David Friedman - Morgan Stanley, Research Division

Great. And just one last question. Can you comment on the comparative profitability of a BYETTA patient versus a BYDUREON patient given the price differential, as well as the cost of goods differential?

Daniel M. Bradbury

Sure. So I guess, there's a couple of components to that. Well, certainly, as you've seen, BYDUREON is priced higher than BYETTA. But that having been said, because BYETTA has been in the market for a while now, we have extremely low cost of goods associated with BYETTA. And so we're seeing margins in the 90s on BYETTA. As Mark has guided previously, we don't expect to be getting close to the optimum margins for BYDUREON for some time. And as a result of the fact that BYDUREON is a somewhat more complicated product and also there is a royalty payable to Alkermies on BYDUREON, we don't expect longer term to be seeing such high-level margins on BYDUREON going forward. That having been said, we do -- BYDUREON will be a very profitable product for us over the long term.

Mark G. Foletta

One additional data point on your GLP-1 dynamics, Dave, that I'll comment on, this is Mark Foletta, is that BYETTA scripts sequentially, was in the prepared remarks, were down just over 4%. I mean, that's actually fairly consistent with the erosion that you saw before BYDUREON came to the market. So that's it. Now, there's another data point and actually the NRxs, were up modestly from Q4 to Q1 that is well, which is really the first time we saw that for a number of quarters.

Daniel M. Bradbury

Thank you very much, David. Okay. I think that's all the questions to today. And, again, I'd like to thank you for your interest and your questions. We have a huge opportunity to continue to advance our mission of discovering, developing and commercializing medicines to improve the lives of patients with diabetes. Additionally, I'd like to reiterate that our leadership team and the many dedicated employees of Amylin remain focused on building the business today and laying the necessary foundation for success tomorrow. If you have any additional questions, please call Kristine or Jeff, the members of our Investor Relations team. Thank you for your interest today.


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