Bristol-Myers Squibb Company (BMY) Q4 2007 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Q4 2007 Amylin Pharmaceuticals Incorporated Earnings Conference Call. My name is Antwain and I'll be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to Mr. Michael York, Senior Director of Investor Relations. Please proceed, sir.

Thank you, and good afternoon. Welcome to Amylin's quarterly update conference call. Today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release 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, Finance, and Chief Financial Officer; Alain Baron, Senior Vice President, Research. I will now turn the call over to Dan Bradbury.

Thanks Michael. Good afternoon and thank you for joining us today. The New Year is off to a very busy start. Today we'll briefly recap progress with the business in 2007 as that success provides a platform for our 2008 work. The majority of our time will focus on the company's plans for the coming year. 2007 was a year of significant growth at Amylin. BYETTA and SYMLIN continued to experience growth in physician adoption and prescriptions, generating net product sales of over $700 million, a 48% increase over 2006. We were pleased to announce earlier this month additions to the SYMLIN portfolio, SymlinPen 120 and SymlinPen 60 pen injector devices. In addition, we announced positive clinical data from our key development programs, including exenatide once-weekly, BYETTA monotherapy, and our pramlintide-metreleptin obesity program. We did all this in the phase of significant challenges in the diabetes market. As a result, we are entering 2008 with momentum and are well prepared to grow in an increasingly complex marketplace. This marketplace is large and growing. In fact, the American Diabetes Association just published a study showing the direct cost of diabetes in 2007 with a staggering $116 billion, an increase of 26% from just five years earlier. The largest segment of these costs is related to complications from this pandemic. Clearly this situation is not sustainable. Now when we look at our investments in 2008, we are in balancing them across opportunities in the near, mid and long term. In the near term, we remain confident in opportunities for the continued growth of BYETTA and SYMLIN, as we have seen early signs of progress with our refined commercial strategies. Our mid-term plans focus on the exenatide once weekly program, which includes completing our Ohio manufacturing facility initiating a strong clinical program to position exenatide once-weekly for market dominance and working aggressively towards submitting an NDA. In the long term, we've made prudent investment decisions based on strong clinical data to advance our obesity program and continue supporting discovery research. Before we go into more detail about recent business activities, I'll turn the call over to Mark Foletta to review our financial results.

Yes thank you, Dan. Good afternoon. Earlier this afternoon, we announced our financial results for the quarter and the year ended December 31st, 2007. I'll start by reviewing the results for the fourth quarter. We reported total revenue of $222 million, including net product sales of $194.7 million. That is made up of $176.3 million for BYETTA and $18.4 million for SYMLIN resulting in fourth quarter growth in net product sales of 29%, compared to the fourth quarter of 2006 and growth of approximately 10% over the third quarter of 2007. We believe that the sequential growth rate in product sales above the sequential prescription growth rate, which was approximately 4%, primarily reflects wholesaler stocking due to year-end buying patterns. Our revenue under collaborative agreements was $27.3 million compared to $12.8 million for the same period in 2006. The increase reflects higher cost-sharing payments from Eli Lilly and Company to equalize development expenses for the exenatide portfolio, including BYETTA and exenatide once-weekly. Cost of goods sold was $22.1 million reflecting a gross margin of approximately 89%, This compares to cost of goods sold of $11.1 million for the fourth quarter of 2006 and a gross margin of approximately 93%. Gross margin decreased year-over-year primarily because of increased discounting to improve access for our products. Our results for the fourth quarter included a $17 million non-cash expense associated with the adoption of an employee stock ownership plan, also referred to as an ESOP. Of this amount, $10 million was recorded to selling, general and administrative expenses and $7 million was recorded to research and development expenses. This reflects the full annual impact of the plan for accounting purposes... for accounting purposes, ESOP charges are recorded annually, for the full amount to be contributed. This differs from accounting for stock options which are amortized to expense over the vesting period. An ESOP reflects the implementation of a strategy to change the composition of our equity compensation. We believe an ESOP enhances our ability to continue to retain and attract talent and aligns our employees with shareholders in the shared goal of creating long-term value. Selling, general and administrative expenses for the fourth quarter of 2007 increased to $122.4 million compared to $89.6 million for the same period in 2006. The increase primarily reflects increased promotional expenses for BYETTA and SYMLIN and increased business infrastructure to support our growth. Research and development expenses increased to $83.9 million for the fourth quarter of 2007 compared to $66.2 million for the same period in 2006. The increase primarily reflects costs associated with the development of exenatide once-weekly, including manufacturing scale-up expenses. Eli Lilly share of the gross margin for BYETTA, which we refer to as collaborative profit sharing, was $78.6 million for the fourth quarter of 2007 compared to $63.8 million for the fourth quarter of 2006. We reported a net loss of $76.9 million, or $0.57 per share for the quarter ended December 31st, 2007, compared to a net loss of $58.4 million, or $0.45 per share for the same period in 2006. At the end of the fourth quarter, we held over $1.1 billion of cash, cash equivalents, and short-term investments. I'll now quickly review top and bottom-line results for the full year. Total revenue for the year was $781 million, including net product sales of $701.5 million resulting in growth in net product sales of 48% over 2006. BYETTA revenue for 2007 was $636 million, and SYMLIN revenue was $65.5 million. This compares to total revenue of $510.9 million for 2006, including net product sales of $474 million consisting of $430.2 million for BYETTA and $43.8 million for SYMLIN. Revenues under collaborative agreements were $79.5 million for 2007 compared to $36.8 million for 2006. The increase reflects higher cost-sharing payments to equalize development expenses for BYETTA and exenatide once-weekly and $15 million in milestones associated primarily with the launch of BYETTA in the European Union during the second quarter of 2007. Our net loss for 2007 was $211.1 million, or $1.59 per share compared to $218.9 million, or $1.78 per share for the same period in 2006. I'd now like to highlight some information regarding key trends and assumptions for 2008. We've included in these numbers the estimates for non-cash stock-based compensation expense of $80 million to $90 million in aggregate. This includes expenses for both FAS 123R and our recently adopted employee stock ownership plan. We believe that total revenues will be between $900 million and $1 billion in 2008, including collaborative revenue of $100 million to $125 million. Our planned collaborative revenues for 2008 consist primarily of cost-sharing payments from Eli Lilly to equalize development expenses for the exenatide portfolio. No milestone payments are expected in 2008. Where we fall within the collaborative revenue range will depend on the amount of development expenses we incur and the mix of spending between Amylin and Eli Lilly. I'll talk about research and development expense guidance in a moment. But you should think of collaborative revenues moving in tandem with exenatide development expenses in 2008 such that if we incur higher development expenses, our collaborative revenue will be higher. We expect our gross margins to be at least 90% in 2008. With regard to expenses, we expect that our selling, general and administrative expenses for 2008 will be between $425 million and $475 million. This range is below the fourth quarter exit rate which included the costs associated with a pilot direct-to-consumer advertising program for BYETTA as well as the full annual impact of the ESOP plan I mentioned a moment ago. Our SG&A expense guidance includes approximately $50 million to $55 million of stock-based compensation expense and reflects continued investment in the promotional activities for BYETTA and SYMLIN, investments in pre-launched education activities for exenatide once-weekly and further investments in infrastructure to support our growing business. We expect that our research and development expenses for 2008 will be between $325 million and $375 million. This includes approximately $30 million to $35 million of stock-based compensation expense. Where we fall within this range of development expenses will depend primarily upon our level of spending on the exenatide portfolio and to a lesser degree, the level of investment in our obesity programs. Finally, in 2008, we expect net interest income to be between $5 million and $10 million. The decrease from 2007 reflects increased interest expense following our June 2007 convertible note issuance and our December 2007 term loan as well as decreased interest income due to lower expected interest rates and a lower average cash balances we fund our operations and continue to invest in our manufacturing facility in Ohio. I'll be available at the end of the call to answer any questions. And I will now turn the call back to Dan for an update on recent business activities.

Thanks Mark. First off, I would like to give you a commercial update on BYETTA, the first and only FDA approved incretin mimetic, a new class of drugs that mimics the action of the human hormone glucagon-like peptide 1. BYETTA is indicated for patients with type 2 diabetes using oral medication and provides sustained glucose control, a low incidence of hypoglycemia and progressive weight loss. Physicians are increasingly recognizing that this unique combination of attributes of its unmatched clinical and quality of life benefits. Because of this, BYETTA increased market share among branded oral diabetes therapies in 2007. Total prescriptions for BYETTA grew 31% for the full year 2007 over 2006, and 4% for the fourth quarter over the third quarter. Total sales for BYETTA grew 48% in 2007 over 2006. When we look precisely at the dynamic in BYETTA prescription volume, we see two important functions at work. First, BYETTA used by earlier doctors who are predominantly specialists was remarkably stronger product launch. Use in this segment declined in 2007 but we believe stabilized towards the end of the year. More importantly, we're seeing a substantial and steady increase of BYETTA adoption from the later adopting, but much larger sector of BYETTA prescribers predominantly primary care physicians. We are encouraged to see the increased uptake from this group of physicians as these later adopters represent approximately 80% of diabetes prescriptions. Currently, almost three out of every four BYETTA prescriptions are written by physicians who are not specialists. This change in business mix from specialist focus to primary care is an important milestone in the evolution of BYETTA, and one we believe sets us up well for 2008. The increased adoption by primary care physicians was enabled by... in part by refinement in BYETTA commercial strategy that we undertook in concert with our partner, Eli Lilly. We believe these efforts provide the basis for continued growth and expansion through 2008 and beyond. So I'll take a moment to list them and then I'll talk through each. Number one, we implemented a campaign to doctors emphasizing BYETTA's unique benefits of glucose control with weight loss. This campaign gained momentum with the announcement of new important clinical findings that enhanced BYETTA's positioning in the market with powerful new messaging targeted at driving primary care adoption. This message was supported by our expanded and redeployed field force. Number two, we secured significant additional access for BYETTA with payers nationwide. And number three, we implemented and then optimized our patient support initiatives to align with our increasing focus on bringing BYETTA to the primary care market. Now let's delve into each of these. First off is our refined product messaging to physicians. As we've been discussing, BYETTA offers the dual benefits of glucose control with weight loss. From product launch through early 2007 physician used... seemed to focus on the product's most unique differentiator weight loss, even as an increasing body of clinical evidence underscored the strength of BYETTA's glucose lowering properties. So a key component of the brand strategy in 2007 and continuing for 2008 is to educate the medical community that BYETTA delivers effective and sustained glucose lowering. This focus was initiated in the beginning of 2007 and was substantially enhanced mid year, when we introduced head-to-head data versus the current gold standard in glucose controlled insulin. We focus on communicating three key messages; one, BYETTA offers powerful and sustained glycemic control which is comparable to insulin. Two, there is an important relationship between sustained glucose control and weight management in patients with type 2 diabetes. And three, there is a decrease risk of hypoglycemia with BYETTA compared with insulin. Now we have seen some positive signs, as a result of the campaign adopters detailing by this unique dual benefits of glucose control with weight loss. Recent sales force message tracking data has shown glucose control to have the highest unaided message recall among target physicians. What this means is that physicians are prescribing BYETTA for the right reason, while recognizing the unique dual benefits of glucose control and weight loss. We are encouraged that we are on the right track and are continuing to execute this messaging strategy. Now moving onto number two, access. As we entered 2008 we have increased tier 2 access for BYETTA to over 85% among managed care providers. We signed multiple agreements with large managed care providers in the fourth quarter. These plans came online on the first of this year and our field force along with Eli Lilly is actively communicating introduction of these new plans to ensure up-to-date information on the broaden access to our products. Now I'd like to talk about our third area of focus which is our recently initiated patient support efforts to enhance our patients' experience with BYETTA. As I mentioned, we piloted a direct-to-consumer advertising campaign in the fourth quarter. While the campaign increased patient awareness of BYETTA, we now believe our efforts are best focused on supporting physicians and patients starting BYETTA therapy. To do this in December, we launched the patient support initiative to facilitate the successful initiation of therapy by primary care physicians. With this program, we strive to maximize the clinical benefit for new patients and ensure a patient adherence to therapy. This multi-prong effort aimed at driving primary care adoption, includes increased patient educational material for healthcare providers to distribute in their offices, and network of approximately 600 diabetes educated to work with physicians and their patients within their local communities to increase successful new starts and continuation of BYETTA therapy; direct support to patients through the BYETTA easy start line which is a 1800 number, that allows patients to contact trained medical professionals to better understand the benefits of BYETTA therapy, and to get assistance starting and using the BYETTA Pen; a pharmacy support component partnering with managed care plans designed specifically to increase patients refills, and then finally an enhanced BYETTA website. We believe this support will prove helpful to patients who may be on their first injectable therapy as well as to primary care providers who may be less accustomed to treating patients with an injectable product earlier in the disease cycle, and who have pure resources in their offices. So in conclusion, BYETTA continued to grow through 2007. However, the rate of growth declined, and we are not satisfied with this. We are confident, however, that we have established the foundation for further growth in 2008. The mix of physicians prescribing BYETTA has evolved so that the largest segment of the market who are predominantly primary care physicians have been steadily increasing their prescription activity. We have seen positive signs as a result of detailing BYETTA's unique dual benefits of glucose control with weight loss. The managed care access to BYETTA has increased over 85% at tier 2 coverage and our sales force who will continue to communicate this broaden access with our key customers. Now whilst BYETTA is enjoying increased adoption in the larger segment of the market, we are also seeing more and more physicians deploying it across a continuum of care. Over half of product usage is after diet and exercise and after just one oral agent. We are encouraged that physician utilization of the product continues to be supported by new clinical studies. Results from a study examining BYETTA as a standalone therapy support the earliest possible use of the medicine in patients with type 2 diabetes. These study findings were significant. When BYETTA is used alone in drug naïve patients, more than 60% of patients at study end were at the goal of an A1C of 7% or less. This study is powerful proof point to physicians about why they should choose to deploy BYETTA early for their patients. We expect to file our regulatory submission for use of BYETTA as a monotherapy in the first half of 2008 with the target for approval in the second half. Now in addition to the U.S. there is a potential for significant BYETTA market penetration worldwide. In 2007, our partner, Eli Lilly, launched BYETTA in 24 countries. We anticipate that BYETTA will be in 60 countries by the end of 2008, and we're very excited to bring the benefits of BYETTA to patients on a global scale. Now let's move on to SYMLIN, a synthetic analog of human amylin, a naturally occurring hormone that is mainly in the beta cells of the pancreas, the same cells that make insulin. SYMLIN is the first and only amylin mimetic. Its key benefits of that... it provides mealtime glucose control and weight loss for patients who use mealtime insulin. I'll focus my remarks on impressive year-over-year sales for SYMLIN and discuss the recent launch of SymlinPen 120 and SymlinPen 60 pen injector devices. Total prescriptions for SYMLIN grew 22% for the full year 2007 over 2006 and 1% for the fourth quarter over the third quarter. Total sales for SYMLIN grew 50% in 2007 over 2006. In 2008, we have a major opportunity to advance SYMLIN in the marketplace. In the fourth quarter of 2007, we prepared the marketplace by educating key opinion leaders and payers on the benefits of SYMLIN Pen while completing the final manufacturing process. We started shipping pens in early January and have already begun to see prescriptions for the pen in the latest weekly data. We're pleased to report that within one month of the SYMLIN Pen launch, we already have approximately 60% open access for SYMLIN Pen from payers. SYMLIN Pen offers patients the flexibility to get SYMLIN in a convenient transportable fixed dose pen injector system, the easy to use pull, push pen is particularly helpful for patients... diabetes patients taking multiple injections. And indeed, market research supports our belief that this more convenient form of SYMLIN will encourage many of the 1.3 million patients in the United States taking mealtime insulin to now consider adding SYMLIN to their insulin regimen. Certainly that was what the message was that, that I heard recently when I was out in the field visiting with physicians. With that, I'll now turn the call over to Alain for an update on our upcoming research and development activities.

Thank you, Dan. I want to share with you the latest about exenatide once-weekly, the next planned medicine in our pipeline. This product candidate brings unparalleled efficacy, tolerability and convenience in the treatment of type 2 diabetes. In regards to efficacy, the facts about exenatide once-weekly are impressive. 30-week treatment with exenatide once-weekly produced the best glycemic control and best weight loss observed in a pivotal study for any diabetes drug ever. The pivotal study found a breakthrough A1C reduction of approximately 1.9% from a baseline typical for the U.S. type 2 diabetes population. An unprecedented number of approximately 3 out of 4 study participants achieved an A1C of 7% or below. This powerful glucose efficacy was complemented with striking weight loss. In regards to tolerability, minor hypoglycemia was observed to only in patients receiving sulfonylurea, agents already known to cause hypoglycemia. Exenatide once-weekly is a very convenient form of therapy as it will be in a fixed dose and not required titration to patients. That means they can treat and manage their disease with just 52 doses per year compared to at least 365 doses per year with any other current therapies. Additionally, patients using exenatide once-weekly will not require additional glucose monitoring or dietary changes. We believe this unparalleled combination of efficacy, tolerability and convenience will lead to improved patient compliance and better health outcomes. Now that we have concluded our registration study, what is next for exenatide once-weekly. We believe the data generated by our pivotal study met the primary clinical efficacy endpoint and safety profile requirements for an NDA. We will submit based on these clinical data. We continue to work diligently on demonstrating comparability of product manufactured at development scale and product manufactured at commercial scale at the new site we are building in Ohio. We are on track to finalize the commercial scale manufacturing process at our new Ohio facility during the second half of 2008 and have plan to submit an NDA before the end of the first half of 2009. We wish to underscore that Amylin and our partners are working with determined focus to move the submission date forward. In addition, we have put in place an aggressive clinically relevant program that fits exenatide once-weekly against competing products to determine superiority. We believe our clinical program for exenatide once-weekly will provide powerful data that will demonstrate the value of the medicine to physicians, patients and payers. We anticipate this superiority strategy will favorably position exenatide once-weekly for market dominance. Here are some details on the clinical program. The first of these superiority studies is a blinded controlled trial comparing exenatide once-weekly with a TZD pioglitazone, and a DPP-4 inhibitor saxagliptin in patients on metformin background therapy. This study is currently enrolling patients, and we are on track to report results in the first half of 2009. We also plan to undertake an open label superiority trial comparing exenatide one-weekly insulin glargine where it will be added on the background of oral agent therapy. This study is anticipated to start in the first half of this year and results are also expected in the first half of 2009. We will follow with a newly expanded blinded superiority study in which exenatide one-weekly will be compared to either metformin or TZD pioglitazone or a DPP 4 inhibitor saxagliptin as standalone therapies for patients with type 2 diabetes. The first two studies are planned to enroll approximately 400 to 500 patients with the third study now amended with the expansion to enroll approximately 800 patients. Now, I will move on to describing our significant opportunities in obesity. We believe peptide hormones provide an unparalleled opportunity to create a meaningful product that produces clinically important weight loss and patient safety. In November of 2007, we announced our commitment to pursuing an obesity medicine that is the combination of pramlintide, an analog of human amylin, and metreleptin, an analog of human leptin. Those molecules are well known to us and have a well characterized safety profile. This commitment is based on impressive study results that we reported in November, namely 12.7% reduction in body weight over 24 weeks, when pramlintide and metreleptin were used together. This represents an average reduction of 25 pounds in body weight and 70% reduction in excess body weight from the study start. To place these data into context, a recent paper published in the Journal of the American Medical Association reported a reduction of approximately 60% of the excess body weight at 2 years after laparoscopic adjustable gastric banding, a surgical procedure. In 2008, we are continuing our development of a delivery system that will provide both pramlintide and leptin together in a single injection. Further, we are initiating a Phase II study to evaluate different dosing combinations of pramlintide and metreleptin. This is a six month multi-arm study that will enroll approximately 600 patients and will take about a year to complete. We believe this product candidate has the promise to meet the unmet medical need for highly effective safe weight loss therapies. Such a medicine will be a breakthrough for patients, physicians and payers, the latter of which has repeatedly signaled the need for both clinical and health economic outcome benefits in order to reimburse in obesity therapy. And now I would like to pass it back to Dan to conclude the call.

Thanks Alain. We're looking forward to sharing results of those important programs. I'll just add a few more comments before we close. We made an important management addition in January. Phil Ranker has joined us as Vice President of Finance. Phil brings over 20 years of financial experience in the health care industry and will work closely with Mark Foletta. In summary, we're pleased with how 2007 has put us in a favorable position in 2008, a year in which we're taking a balanced approach to our investments for near, mid and long-term growth. It is an exciting time here at Amylin as we execute to position the company for sustained value creation and growth. And I want to make it clear that in 2008 we are laser focused on one, driving further BYETTA and SYMLIN growth through our refined commercial strategies, including enhanced messaging, expanded access and supported patient and physician education programs; and two, accelerating the NDA submission for exenatide once-weekly. Now with that, I'll conclude the formal portion of today's call and turn things back over to the operator for your questions. Question And Answer

[Operator Instructions]. Your first question comes from the line of CoryKasimov with JPMorgan. Please proceed with your question.

Great. Good afternoon thanks for taking the question. First of all on exenatide once-weekly and regulatory situation there. What exactly would you need to demonstrate, approve to the FDA in order for the agency to not require bioequivalency studies you had, accelerated timeline as you mentioned?

All right, fair enough. And then turning to BYETTA, based on your market research and perhaps some feedback from your sales force, how much awareness is building in the medical community about the results generated by BYETTA arm in the Phase III study with exenatide once-weekly. By that I mean the impressive 1.5% drop in A1C. And I realize your sale force can't be detailing this at time but as physician awareness growing here and is that beginning to impact utilization?

, actually Cory, that data in particular of course isn't being used by our field force. But actually data that is being used by our field force is the comparative data that we generated in the open label study which compared BYETTA by either to insulin glargine. In that study the delta A1C from baseline to the end of the study was 1.4%. So actually that magnitude of benefit is already being communicated by our field force, but more importantly in comparison to insulin glargine, so we're able to emphasize not only the benefit of very significant glucose control, but also the benefits of low incidence of hypoglycemia, in fact, six times less hypoglycemia seen in that study than insulin glargine and of course progressive weight loss as opposed to weight gain in terms of insulin glargine therapy. So one of the key messages is coming out that our field force is using is the fact that there is a possibility to improve therapy over and above insulin glargine today by using BYETTA.

All right, great, Dan. Thanks again for taking the question.

Thanks Cory.

Your next question comes from the line of Meg Malloy with Goldman Sachs. Please proceed with your question. Margaret (Meg) Malloy, CFA - Goldman Sachs Research: Hi thanks very much. Couple of quick ones. First, I guess, Dan, could you discuss the plans in terms of your commercial strategy, why not continue with DTC? And given the time it's held on the market, can you give us a flavor of your sense of for every 100 patients that start BYETTA therapy, how many drop out, how many are on six months, how many are on in a year? Some sort of quantitative measure of what the acceptance rate is. And then secondly for Mark, could you quantify the inventory change in Q4? And you had good gross margins, does that mean the discounting came down?

Okay, Meg. Let's take that one, two, three, so DTC and then you are looking at patients how long they stay on the product and then looking at your comment on inventory. Well let's first talk about DTC. As I said in the formal part of the call we actually think the pilot program... the DTC program that we did was actually very successful in terms of increasing patient awareness of BYETTA. However, to convert patient awareness into prescriptions as we move into the primary care market we think that there is increased need to provide more support to physicians and particularly to patients directly on initiating therapy with BYETTA as it's an injectable therapy. As you are aware primary care physicians have a lot less support in their offices than specialists. And so we are now moving the expense that we had on the DTC area into more directly to supporting patients in initiation of therapy. With respect to your question about how long patients stay on BYETTA, it's very similar to other injectable treatments in diabetes. What we are saying is that approximately if you looked at for instance say insulin glargine, you would expect to see at the end of around six months it would be approximately 50% patients would be still on that therapy. That is generally the case and it's very similar for BYETTA. The diabetes market is a market which is actually generally characterized by a lot of churn, and patients do switch back and forth between different therapies. So, the third part of your question I believe was regarding inventory, and I'll pass that over to Mark to answer that to answer that question.

Hi Meg, how are you? Margaret (Meg) Malloy, CFA - Goldman Sachs Research: Good, thanks.

The inventory channel of course we always caveat this with the limited visibility we have to the entire channel. But of course based upon the information we get from wholesalers, our belief is there was some channel... some stocking that occurred in the fourth quarter. What we said it... what I characterized in the opening remarks was that the revenue growth of 10% quarter-over-quarter versus a scrip growth of approximately 4%, that we think the primary reason for that excess of revenue over scrip growth is attributed to whole stocking in the channel. With respect to your question on margins, we did have improved gross margins 2007 over 2006, 91% versus 89%. We did message that we did... we have 85% managed tier 2 access for BYETTA as we entered 2008. Certainly that comes at a price and that we have continued to discount. We guided in the guidance section of the script that we expect margins to be at 90% or better in 2008. Margaret (Meg) Malloy, CFA - Goldman Sachs Research: Thanks. Can I follow-up on the 50% rate?

Sure, Meg. You can ask anything you would like. Margaret (Meg) Malloy, CFA - Goldman Sachs Research: Okay, thanks. I am just kind of curious so, is that in line with your expectations? And what the patients switch to, why would you switch if you've got sustained weight loss? And why would you... what are your options just to start BYETTA, when people do switch, what's the reason?

Patients I would just say... you do get variable response to the product as we know, and not everybody gets significant immediate glucose lowering and weight loss. So, the various reasons for changing vary from patient to patient. But I think it's fair to say that one of the reasons why we have been continuing to drive home the message particularly with primary care physicians of the importance of glucose control is setting up appropriate expectations for the patient. Clearly if somebody is going on to BYETTA just for weight loss that increases the opportunity for disappointment with regards to their expectations of the product. If they understand that they are taking BYETTA with the reason for controlling their blood glucose and they may have the benefit of weight loss as well then the opportunity for acceptance and satisfaction is greater. And that's certainly one of the... so that's one of the basis of our current positioning messaging. The other thing I would say is that that's another key component of why we have added an increased expense at the end of the year with our new and additional patient support programs is to ensure that when patients do start on these programs that they do have the extra support to maintain them on the program. I mentioned in the script one of the important aspects of this program is we have undertaken with a couple of major managed care plans, additional support and... sorry... and pharmacies we have undertaken a support program whereby patients supported where they call back to ensure that they get... increase the potential for refill of their prescriptions. So, overall we think that patient support programs are going to really help us with regards to maintaining consistency of use of the product going forward. But I would also stress to you that I don't think that BYETTA is much different than any other therapy in the diabetes marketplace in that regard. Margaret (Meg) Malloy, CFA - Goldman Sachs Research: Thanks very much.

Okay, thanks Meg.

Your next question comes from the line of Steve Harr with Morgan Stanley. Please proceed with your question.

I have a couple of questions. First off on the first BYETTA LAR head-to-head study which is I guess for the DPP 4 and TZB. Given the really significant and undisputed [ph] efficacy that we have seen from those few classes in trials to date. Why did you choose to include them in the same study? And is this trial powered to see differences versus both classes or how is it set up?

Hi, Steve, I'll pass that over to Alain. He is more familiar with the powering and everything in these studies.

Yes. Hey Steve. The study is set up for superiority... the superiority trial is for TZB to be inferior to once-weekly and for DPP 4 to be inferior to once weekly, not comparability between the two. Okay, so that answers part of your question. So the reason why we went after these two compounds is they are increasingly used as you know as second line agents after patients have failed metformin. And what we are trying to show here is that this once-weekly therapy after the single oral agent failure such as metformin is going to be not only superior but also durable and associated with unparalleled efficacy namely patients getting to go but also with weight loss. And with the attendant cardiovascular risk factor improvements that we would expect and we have seen in our data set up till now, these trials will have extension phases as well. And so we will be able to nail that even further.

It's like two separate trials rather than one study. So I am just trying to figure out why you would have them in the same trial, just a very different therapies in population?

If the timing is right.

Okay. And second of all, just I want to get a little better grasp of kind of where you are... where you see your OpEx went over time? At what point do you think is... you think will be able to allow a little more than incremental revenues that you are seeing fall the bottom line? And how should we think about this spending rate at the time of an LAR launch? Are we going to see significant acceleration or the decrease and pre-launch of manufacturing investments are going to lead to a stabilization?

Hey Steve, it's Mark. It's a good question, a fair question. I think I will talk... take it this way. If you heard the guidance that we gave for R&D it's an increase from R&D certainly from 2007. We find ourselves in this opportunity obviously with once-weekly. You just asked a question about those superiority studies. We did talk in the prepared remarks about the expansion of one of those superiority studies that will start in the second-half of the year. Also talked in the prepared remarks, Alain did about the obesity study 600 patient study. So obviously there is a lot of R&D activity going on in 2008 across what we call, I guess the mid, in the long term of our portfolio. It's hard to guide out beyond that. I think it's largely going to depend on R&D upon on data and then how we decide to move forward in obesity. But I would say it's a very heavy year for the exenatide franchise when you think about all of these once-weekly studies that we discussed. For SG&A the guidance that we gave, while it was an increase over '07, when you look at the fourth quarter exit rate, it was actually slightly below. I think we have to continue to rationalize that as we move forward, make sure we optimize our sales and marketing expenses as well as our infrastructure to support the growth of the business. But we have to be certainly mindful that we can't continue to increase as we move forward at significant rates. I think that down the road we'll certainly have to address on the sales and marketing front whether we need additional help in the field, I think offer once-weekly or even for BYETTA. But I think right now our view is that as we said in the prepared remarks that we have an adequate support in the field. So the business model will evolve. Steve it's a very good question. I just want to emphasize that we are mindful of that as we move forward. 2008 is set up as somewhat of an investment year as we've discussed but continued focus if you will on how the business model matures as we continue to drive these unique products forward.

Think Mark, the frustrations that investors have dealt with, is there doesn't seem to be any effort or any articulation of how you are marking the market of the efficiency of the increased SG&A spend over the last few years. And every year is an investment year. I mean you guys have one of the highest burn rates in industry and how you plan on exiting yourself from that and creating a profitable business?

Yes, hi Steve, let me add on to what Mark was saying. Just to say that clearly we are actually in... while you compare us with the rest of the industry we are actually in a pretty unique position relative to some of the other companies in the industry. And that we are competing in very large chronic disease markets. And also we have the opportunity which many people don't have of having a very significant follow on products going forward. If we look at the market opportunity for once weekly exenatide it's truly exceptional I think in terms of if you compare across the industry in terms of potential. And obviously we continue to be mindful of investment that will drive the increased value to shareholders over time. That's our goal. So, whilst I do recognize the need, in fact I would say it's very important that we continue to be mindful of burn rate. And that we also continue to have a focus towards generating a profitable business. Given the length of time that it takes to develop these products there is sometime that it will take us to get to a point where we are in a sustainable earnings growth trajectory. So, at this point though what we believe that the shareholders going forward that are best opportunities to increase investments to create the best competition... competitive position with regards to exenatide once weekly whilst continuing to drive BYETTA and SYMLIN as best we can so that we can maximize the opportunity for launching towards that product in the near term.

Okay, thanks.

Thanks very much Steve.

Your next question comes from the line of Jim Birchenough with Lehman Brothers. Please proceed with your question.

Hi, guys I have a couple of questions. Just to start with, just wondering what prompted the increased sizing of that third superiority trial for the LAR?

Hi, Jim. It's Dan here. I think... Alain can answer this question just as easily. But the opportunity really is that as we look to the situation it comes down to similarly the answer that we gave previously to the question about the design of the first study which is on the background of metformin. It's just an opportunity to be more efficient in generating data that enables us to establish superiority to the two existing products in the market. And of course what that means is when this study... because it's on the no background therapy, it really enable us to move exenatide once-weekly earlier in the continuum of care relative to two products which have been increasingly promoted as first line therapy.

And Dan, just on those superiority studies with the LAR. Can you speak to what manufacturing scale you'll be using in those studies and whether you'll be using any materials from the West Chester, Ohio facility?

Hi, Jim. Yes. Definitely the plan is to use in the studies, actually, material from the West Chester facility. We'll be switching material into all three studies from the West Chester facility, as that facility comes online.

And just to follow-up to that. So given that you're going to be switching material over the course of the study, do you think FDA would want to see that data as part of an NDA filing?

We don't believe at this time that the data from these studies Jim as required for us to complete our NDA submission. We believe we've generated the required efficacy data that would be required for a submission as a result of completing the pivotal study that we announced the results from last year.

And just I want to follow-up just on the point around the additional resources you are giving to help primary care physicians with BYETTA. Have you done any market research on whether you would need more resourcing of physicians with LAR? Or is LAR going to be easier for primary care physicians to position with their patients?

Yes, great question Jim. That's something that we are actually doing a lot of work on at the moment. And so rather than answer you directly I would just say that of course during the course of 2008 we are going to further determine that. But it's certainly given the uniqueness of the product we think that there will be an opportunity actually for primary care physicians to... it should be most straightforward indeed for primary care physicians. But I will caution my remark by saying that that's work that's ongoing by our marketing departments both here and at Eli Lilly and Company at the moment.

I am going to ask the final question and I'll jump back in the queue. But just I want to make sure I understand your guidance for the year. If I look at collaborative revenues and the current run rate for SYMLIN and back that out we've got a guidance range for BYETTA of essentially $700 million to $720 million, up to $800 million. So it's essentially guidance for flat to 15% increase from BYETTA. Is that fair and why such wide range if that's the case?

Jim I'll take that. It's Mark Foletta here. I actually wouldn't agree with that. Obviously we gave ranges, and we will stay with those ranges. I think it's important that there was as we said some... when you are thinking about how to calculate that and of course where you land within that range, there was some stocking that happened in the fourth quarter. We talked about that earlier. So when you are annualizing the fourth quarter you probably need to take into play. But we certainly believe within that range if there is meaningful growth for BYETTA and of course dependent upon where you lie within that range, it will be more significant as we get further end of the range. So, we certainly expect growth from BYETTA in 2008.

Okay, thanks for taking the question.

Thank you, Jim.

Your next question comes from the line of Thomas Wei with Piper Jaffray. Please proceed with your question.

Thanks very much. I wanted to ask on a pre-NDA meeting for exenatide once-weekly. What's the rate limiting stuff there to arranging that meeting with the FDA? You have the data for a little while. So is it something on manufacturing? Do you have to actually have the data for this in-vitro and vivo correlation work anything preclinical that's outstanding?

Hi, Thomas, I'll ask Alain to answer that question for you.

So Thomas, thanks for the question. Dan indicated that in his terms we are using a belts and braces approach. And what he meant by that I believe is that we're working on multiple fronts to address this issue of comparability. And we are not taking any chances on any one approach. So as we develop more data on each of these approaches we then have more precise, if you will conversations with the FDA that will lead us to the pre-NDA meeting. And we will not go to the pre-NDA meeting without having some clear idea of what we will put in our package and what the agency wants to see. So by then we should really be looking at dotting the i's and crossing the t's. So it's an iterative process. We're not going to get into all the details, but the timing of the pre-NDA meeting will be dependent on this iterative process and then winnowing down all these variables to a neat package. And I think it's fair to say and dovetailing in some of the previous questions, we will have a large package of data, not just in vitro and in vivo correlations, but also a number of data points in the clinic of the various trials that we have ongoing, not the least which is the pivotal trial that we conducted which is now in the open label condition. In which case we will employ the Ohio material from our plant whenever it is available in that trial for further comparability work. So we will have a package of information that we will be bringing forth to the agency, and it is in that totality of the package that we will have that conversation.

On that, I had a couple of questions. One just on re-circling back to this whole topic of SG&A. One of your competitors has described how they will be reevaluating whether or not their 1900 large sales force in U.S. is large enough for competing GLP-1 launch. Would love to hear your perspectives on how that two of you are ending up on very different ends of this spectrum on the SG&A question? And then on the PCPs and why you've maybe not seen as much growth of BYETTA there. I guess I am a little bit confused listening to the commentary here, should I take away from this that, that physicians have tried it but have had a negative initial experience due to perceiving it as a weight loss drug? I am still little bit confused about what you think the primary hurdle has been for PCPs to adopt this product?

Okay. Thomas I think it's okay. I'll take the first question which was related to field force sizing. And then the second question I'll answer but I do think that actually your question was actually confusing an answer to a completely different question. So let me start with the field force sizing. So I thought it was pretty interesting that... in fact after we came out with the data for the pivotal data for the once weekly exenatide that they actually announced that they were probably looking at resizing their field force. So I think it probably says quite a lot. But just to say that we are of course continuing with our partner Eli Lilly and Company to evaluate exactly the optimum field force size that we'll adopt at the time we launched the once-weekly product. I would just say that that's something that we are keeping to ourselves at the moment and we are also continuing to further evaluate. Now the question that I answered earlier was a question relating to persistency of use of the product, and was really referring to that the fact that if the expectations for the patient need to be set appropriately when the patient is introduced to the product, the question that you were asking was a lot broader which is, what is the barrier for the adoption of BYETTA by primary care physicians? So there is... which is different than a question regarding persistency. So there is a number of challenges in introducing BYETTA to primary care physicians, and that I think what my formal part of my presentation I really talked to was the initiatives that we have taken... undertaken. So, first and foremost is setting an appropriate expectations for the product, for primary care support... couple of things, firstly understanding the physiology and the science behind BYETTA. We don't have as much access and as much time, so it takes longer to get people educated on the uniqueness and the unique benefits of BYETTA. Secondly, for primary care physicians access is extremely important. And so the efforts that we have been making with regards to access have been I think very important in the latter half of last year. Now, in primary care physicians are a lot less likely to write for prior authorizations than the specialists are. And then I'd say thirdly, with regards to primary care physicians, one of the biggest challenges is educational time with the patient about how to use the product. And in the case of an injectable product, they're clearly more complicated to introduce than an overall medication. Most people know how to swallow not necessarily how to give themselves an injection. So introducing the patient support program is something that we've initiated, which we believe enhances our opportunity to surprise support for primary care physicians and so ensure that we can get continued growth in that area. Did I adequately answer your question? I want to make sure I did.

Yes, thanks.

Thanks very much Thomas.

Your next question comes from the line of Yaron Werber with Citi. Please proceed with your question. Yaron Werber, MD - Citigroup/Smith Barney: Yes, hi. Thanks for taking my question. I have a follow-on to some of the previous questions. Just to understand maybe a little bit, can you give us a sense at which point do you think you will be ready to have all the data that you need to go to the FDA and conduct your end of Phase II meeting? And can you give us a little bit of a sense of if you do need to conduct a bioequivalent study, give us a little bit a sense of what kind of a study are we talking about, how many patients and how many weeks? I mean, from our work it suggests that it could be about a 12-week study. So if it's so short, why would the agency decide not to... that the study might not be needed? I mean, just given the size of the market here and there, and just their inherent conservatism these days, why would they decide that this is not a good thing to do?

Well, hi Yaron. I certainly agree with you with regard to the conservatism of the FDA these days. I just say we haven't changed our guidance with regard to the timing of submission of an NDA for once weekly exenatide. We are still guiding that we expect to complete the submission by the end of the first half of 2009. With regards to specific information as to what information we require to submit to the FDA, I would just say that there are a number of ways to demonstrate comparability of material produced at our facility in West Chester, Ohio, versus that which is produced at the Wilmington facility that Alkermes has in Ohio. Bioequivalency is one method. However, it is not a method that has been required most recently within the FDA for long-acting injectable products. And so what is important for us, as Alain indicated in his response earlier, is to generate data and continue the iterative discussions that we have with the agency in that regard to ensure that we are able to demonstrate comparability and in a way that is scientifically acceptable to the agency. Remember, bioequivalence is per se and I can't comment on your statement with regard to study design. Bioequivalence though was as part of the qualification for a new site was actually... that is in guidance was actually written for oral medications. There is no guidance per se for injectable medications and certainly not for sustained release injectable medications. So I don't want you to be confused about what would be an FDA guidance in this regard. What is important is that the agency is able to show themselves that the material that is produced in a new manufacturing facility is comparable to the material that was used in the pivotal study that is used for the basis for approval. Yaron Werber, MD - Citigroup/Smith Barney: And you believe that you can do that based on in vivo studies alone or would you -- ?

I think there's a number of deferent opportunities, as Alain mentioned, for us to do that, including, as he pointed out, there will be switching patients from the ongoing open-label extension from our pivotal study, patients to the material that will be generated at our West Chester facility. So we will have a range of different data points from different studies that will give us both in vitro and in vivo, both animal and human data that will enable us to be able demonstrate comparability. As I said, it's belt and suspenders approach to ensuring that we are successful in this regard. Yaron Werber, MD - Citigroup/Smith Barney: And then just finally, if you were to file, let's say, in the first half of '09 and you are not able to, let's say, bring it up forward, by which point you were mentioning you will probably have data from two out of the big Phase III studies, within that timeline, are you assuming that you are going to go ahead and file that data as well if the agency requested or if they request that data, would that be potentially something you'll have to do in parallel after the application is already filed?

Yaron, I think we will make an assessment at the time we make the submission what is most appropriate informant that we can put in. Of course, one thing we will absolutely have to do at the time we submit our application is complete it with the total safety dataset that we have from all of our completed and ongoing studies, and indeed during the time of review there'll be an update... safety update in that regard as well. So let me just say that I think there is too much conjecture in your question because it's kind of if this happens and if that happens then would you do this and that's I think too difficult for us to guide to at the moment. Yaron Werber, MD - Citigroup/Smith Barney: Okay, great, thank you.

Thank you, Yaron.

Your next question comes from the line of Salveen Kochnover with Jefferies & Company. Please proceed with your question.

Hi guys, actually this is Brent Kelly [ph] in for Salveen. As the West Chester plant nears completion, can you give us a sense of where things stand today and what still needs to be done before commercial batches start to come out of that plant? And also how would you potentially handicap A1C reduction beyond 1.9% for any periods longer than 30 weeks with LAR?

Hi, Brent. So, a great question. So firstly, in terms on where the West Chester facility is, it's going actually extremely well. I mean, I would say that the team there is continuing to, I think, make great progress towards our timeline of finalizing the commercial process in the second half of this year. The work that needs to be completed at the moment is we are continuing to do additional process development work and in particular the most important thing at this time is the many hundreds of standard operating procedure that have to be put into place, finalize, signed off for a new facility to be able to produce commercial material. That's ongoing at this time. Your question with regards to, so what will the data look like after 30 weeks, well, I think that would be pure conjecture on my behalf at this point. I do expect that once we get to the American Diabetes Association meeting in the middle of this year that we will have longer exposure data that we'll be able to share with everybody. But I would say the data that we've got at the moment with 75% of patients getting to 7% or less or two third of them, if they start above 9%, it's pretty darn good. And it's... I think it's pretty... it's a lot harder to get better than that. So I am feeling pretty good about the 30-week data and look forward to seeing what the long term data is. Of course we know with BYETTA what we saw was sustained glucose control over long period of time. Actually data that we've shown is over 3.5 years. So that's something that we don't have any theoretical reasons why we shouldn't continue to see sustained glucose control with the once weekly version.

Does the LAR trend line give you any indication?

Does the LAR, sorry?

The A1C trend line?

I think that would be inappropriate for me to comment on at this time seeing that it's data that's being submitted for publication.

Thank you.

Thank you very much. So with that having being said, I'd now like to take a few moments just to make a few final remarks to say thank you to everybody today for being on the call. We appreciate your time and your interest in our company. I am pleased to report to you a strong year of growth here at Amylin in 2007, in adoption of our two first-in-class products, advancement of our pipeline programs, and progress on our pathway to transform into a full instigated biopharmaceutical company. As I said earlier, at Amylin, our path is very clear in 2008. We are focused on driving further BYETTA and SYMLIN growth and accelerating the NDA submission for exenatide once-weekly. And with said, I would like to say thank you for being on the call today.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.