Amylin Shares Gain Ground on Outlook for Byetta

I've been stating for a while now that this market has changed character - even as the bear market hit us in the winter we were still able to find pockets of strength where buying breakouts were rewarded. However, at this time, instead of buying breakouts, the course of action appears to be (mostly) to buy the broken down stocks and wait for the rebound. Unfortunately you have to sell the rebound as well, since if it lasts too long it turns into a breakout. Which means it's doomed to fail.

There are exceptions of course - no rule is hard and fast in any market. But we've gone from a time when you can make money 75% of the time buying breakouts to 25%... if that. One of our stocks in the green yesterday in a bad tape was Amylin Pharmaceuticals (AMLN).

Now the problem with buying the crumbling stocks is the entry points are much much much harder than buying breakouts. If you are a few days early you can be down 7-15% before the bounce even has a chance to get going. We literally were one day early in our Amylin purchase and it still cost us a quick 5-6%. Looking at the chart, the stock bottomed out in the upper $25s and will face resistance at $29s. We'll see how it handles it there - unfortunately as stated above, most of these bounces need to be sold.

My game plan is to cut back the position there (if it gets there), assuming it will fail, and fall back. If incorrect and it shows movement through that resistance that's something we'd point to as very bullish and get our stake back. But for now let's see if the stock can continue its mini-roll.

Amylin seems to simply be doing an oversold bounce, but the AP is out with a breathless story trying to find a "reason".

• Shares of drug developer Amylin Pharmaceuticals gained ground Monday following a sharp drop last week after the Food and Drug Administration said it is working on a stronger label for the diabetes drug Byetta.
• Wall Street continued to maintain a positive outlook for Byetta sales and for the next-generation formula of the drug. Amylin makes the drug with Indianapolis-based Eli Lilly & Co. (LLY) and both companies are partners on the developing once-weekly formula, called exenatide LAR.
• "We believe that the Street has overreacted to the headline of mortality associated with pancreatitis, as our analysis suggests that the severity and mortality rate reported with Byetta pancreatitis cases is not significantly increased relative to the overall AERS (patient) database," Piper Jaffray analyst Thomas Wei said in a note to investors.
• He reaffirmed a "Buy" rating and said the FDA has not made any demands for additional safety data on exenatide LAR, which has a superior risk-benefit profile to Byetta in studies.
• Leerink Swann & Co. analyst Jonas V. Alaenas, meanwhile, reaffirmed a "Outperform" rating, calling the pancreatitis concern "overblown."
• Last week, Goldman Sachs analyst Meg Malloy reaffirmed a "Buy" rating with a similar comment.

It continues to be a grind to make money from the long side...

[Aug 20: Bookkeeping: Beginning Amylin Pharmaceuticals]

Disclosure: Long Amylin Pharamceuticals in fund and personal account.

Comments

[turd furgeson:]

You people just don't get it. This company is absolutely terrible.

2008 Aug 26 06:29 PM

[turd furgeson:]

By the way, nice timing on the article.

2008 Aug 26 06:55 PM

[turd furgeson:]

And here we are at 19 and change, and on the way down.

2008 Sep 11 07:21 AM

[turd furgeson:]

14 and change. Ouch.

2008 Oct 06 02:52 PM

[mizzoufan:]

Nice timing since stock is down 24% today. That is why I stay away from this type of stock until some bad news comes out and the market overreacts. Now is probably a great time for a short term trade. Similiar to SGP several months back when market overreacted and sent it to around 14. It went back to 20 in about a month and is now in a trading range around 20. You could have made a quick 30-40% in a short timeframe. Probably same scenio here for AMLN

2008 Dec 10 03:47 PM