Bristol-Myers Squibb Company (BMY) Q1 2008 Earnings Report, Transcript and Summary

Good morning. My name is Sandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amylin Pharmaceuticals, Incorporated Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. And now, I would like to turn the call over to Michael York, Senior Director of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Amylin Pharmaceuticals' 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 Amylin’s management team here today. Daniel Bradbury, President and Chief Executive Officer; Mark Foletta, Senior Vice President, Finance and Chief Financial Officer; Orville Kolterman, Senior Vice President, Development. I will now turn the call over to Dan Bradbury.

Thanks, Michael. Good morning, and thank you for joining us today. We have made steady progress in the first quarter of 2008 across near, mid and long-term opportunities, executing against the strategy that we detailed earlier this year to build Amylin's diabetes portfolio and establish our presence in the obesity field. However, this quarter's BYETTA sales were lower than planned and we know we need to improve our execution. Although BYETTA has not met our expectations this quarter, the other aspects of our business showed strong results. We are pleased to announce that we completed the regulatory submission for the use of BYETTA as monotherapy in the first quarter, with a target for approval in the second half of the year. We are also excited by the rapid uptake of SymlinPen, which was launched in January. 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 as soon as possible. We are now manufacturing exenatide once-weekly at commercial scale at our facility in Ohio, an important step in completing this facility. We plan to have this material in ongoing and planned clinical trials by the third quarter of this year. For the long-term, we have made prudent investment decisions based on strong clinical data to advance our obesity program and continue supporting discovery research. As we make our investment decisions, we will continue to manage our expenses appropriately, leveraging our assets and assessing financing or partnership alternatives to offset expenses. Having completed these summary comments, I'll now turn things over to Mark Foletta to review our financial results.

Thank you, Dan, and good morning. Earlier this morning, we announced our financial results for the quarter ended March 31st, 2008. We reported total revenue of $197.2 million for the first quarter, which includes net product sales of $178.7 million. That is made up of $158.5 million for BYETTA and $20.2 million for SYMLIN, resulting in first quarter growth in net product sales of 10% compared to the first quarter of 2007 and a decline of 10% from the fourth quarter of 2007. We believe that the decline in BYETTA sales from the last quarter, despite comparable prescription demand, primarily reflects the reversal of wholesaler stocking that occurred in the fourth quarter. You may recall that on our 2007 year-end call, I noted that BYETTA sales growth exceeded prescription growth, primarily due to wholesaler year-end buying patterns. As a result, sales that would have occurred in the first quarter of 2008 occurred in the fourth quarter of 2007 instead. In addition, first quarter 2008 sales were further reduced by wholesaler draw-down of the additional inventory purchased at the end of the year to levels comparable to those prior to the fourth quarter stocking. We believe this impact was approximately $20 million to $25 million in the first quarter. This impact was partially offset by a price increase for BYETTA in early January. First quarter sales for BYETTA were also impacted by a slight increase in discounting, as we increased our managed care Tier 2 access over 2007 levels while maintaining prescription demand from the prior quarter. Our revenue under collaborative agreements was $18.5 million compared to $10 million for the same period in 2007. The increase primarily reflects higher cost-sharing payments from Eli Lilly and Company to equalize development expenses for the exenatide products portfolio. Cost of goods sold was $22 million, reflecting a gross margin of approximately 88%. This compares to cost of goods sold of $15.2 million for the first quarter of 2007, and a gross margin of approximately 91%. Gross-margin decreased year-over-year primarily because of increased discounting, higher production costs for BYETTA, and our product mix including the introduction of the SymlinPen, which has the higher cost of goods sold in the vial presentation. Selling, general and administrative expenses for the first quarter of 2008 increased to $98.2 million compared to $87.8 million for the same period in 2007. The increase primarily reflects higher promotional expenses for BYETTA and SYMLIN and increased business infrastructure to support our growth. Research and development expenses increased to $77.2 million for the first quarter of 2008 compared to $59.6 million for the same period in 2007. The increase primarily reflects higher expenses for exenatide once-weekly, growth in the company's research capabilities, and continued investment in the company's early-stage obesity programs. Research and development expenses net of cost-sharing payments from Lilly on the exenatide program also increased with a lower rate than the reported research and development expenses. Net research and development expenses increased to $59.8 million for the quarter-ended March 31st, 2008 compared to $50.7 million for the same period in 2007. As a reminder, we are reimbursed by Lilly to equalize exenatide development costs, and we believe that this net R&D number is a better indicator of the true growth in R&D activities at Amylin. Lilly's share of the gross margin for BYETTA, which we will refer to as collaborative profit sharing [ph], was $69.9 million for the first quarter of 2008 compared to $66.9 million for the same period in 2007. We reported a net loss of $68.8 million or $0.51 per share for the quarter-ended March 31st, 2008, compared to a net loss of $49.4 million or $0.38 per share for the same period in 2007. And at the end of the first quarter, we held over $1 billion of cash, cash equivalents, and short-term investments. I would now like to highlight some information regarding key trends and assumptions for the remainder of 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 stock options and our employee stock ownership plan. Based on our assessment of recent trends, we are narrowing our previous guidance for total revenues in 2008 to a range of $900 million to $950 million from $900 million to $1 billion. Our total revenue guidance includes collaborative revenue of $100 million to $125 million. Planned collaborative revenues for 2008 consist primarily of cost-sharing payments from Lilly to equalize development expenses for the exenatide portfolio. Collaborative revenue will increase throughout the year as additional activities for exenatide once-weekly begin. 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 Lilly. I will 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 also be higher. With regard to our operating expenses, we are adjusting our previous guidance downward slightly to be more in line with expected revenues. We expect that our selling, general, and administrative expenses for 2008 will be toward the lower end of our previous range of $425 million to $475 million. This range is slightly above our first quarter exit rate and reflects costs associated with the continued investment in commercial activities for BYETTA and SYMLIN, investments in pre-launch activities... pre-launch education activities for exenatide once-weekly, and appropriate investments in infrastructure to support our growing business. Our SG&A expense guidance also includes approximately $50 million to $55 million of stock-based compensation expense. We expect that our research and development expenses for 2008 will be towards the mid-point of our previous range of $325 million to $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 the level of investment in our obesity programs. I would also like to comment that we are actively pursuing options to offset the R&D expense associated with our obesity programs through potential partnerships. Finally, I'd like to adjust net interest income guidance to approximately $5 million in 2008 from the previous guidance of $5 million to $10 million. This is due to lower expected interest rates since our previous guidance. I will be available at the end of the call to answer any questions. I will now turn you back to Dan for an update on our recent business activities.

Thanks, Mark. First of, 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. In the first quarter, we maintained a steady level of BYETTA prescriptions over the fourth quarter. The first quarter has historically been the lowest quarter of the year and the total diabetes market declined approximately 1% over the fourth quarter. We saw a 2% growth in new prescriptions of the 10-microgram dose quarter-over-quarter, an indicator of continued product adoption. Despite maintaining prescription levels in a challenging market, we are not satisfied with these results. Growth is not happening as quickly as we'd planned. We need to improve our execution to achieve the full potential of BYETTA in an increasingly competitive marketplace adversely impacted by safety concerns. Indeed, we are finding the primary-care market especially a greater challenge than we anticipated. Our growth in late adopters, who are predominantly primary care physicians, has slowed. Meanwhile early adopters, who are primarily specialists, continue to maintain a steady level of prescriptions. We and our partner, Lilly, believe in our strategy of leveraging the unique dual benefits of BYETTA, glucose control and weight loss. We are taking action and are extremely focused on executing our commercial strategy to improve BYETTA performance. To drive broader and deeper primary care adoption, we are expanding and better aligning our sales forces. To that end, we are increasing our field force by approximately 15% during this quarter, which broadens our reach into the primary-care market and expands our physician targets to 75,000. These physicians account for over 80% of diabetes prescriptions. This expansion will also enable us to coordinate our call plans to a greater degree with Lilly to better target high-prescribing physicians. We believe this optimization will allow the Amylin and Lilly sales forces to more effectively act as one organization and to improve the reach and frequency of customer contact. We know we are on the right track, as we've already seen individual territories where strong execution in the field produces results. Accordingly, we will be closely monitoring the metrics driving sales force effectiveness and we'll continue evaluating ways to optimize both the size and the deployment of the sales force. Additionally, new programs are being launched emphasizing peer-to-peer interaction and glycemic control efficacy. And as we discussed at the beginning of the year, we initiated patient support programs to facilitate the successful initiation of therapy by primary-care physicians. With these programs, we strive to maximize the clinical benefit for new patients and ensure patient adherence to therapy. We have received positive feedback on our efforts and will continue expanding these support programs. We also continued to educate physicians on the board Tier 2 access for BYETTA with over 85% access among commercial managed-care providers. Now, despite of this broad access, some physicians continued to have the perception that BYETTA as a newer innovative product has limited reimbursement. As a result, both the Amylin and Lilly sales forces are proactively informing physicians of specific access for BYETTA in their local plans. To summarize, BYETTA prescription growth is lower than planned. We are not pleased with this, but we are confident in the overall commercial strategy. We have identified in our addressing key issues and we're taking action to improve execution. Both Amylin and Lilly are placing significant resources behind this first-in-class product. Moving on to BYETTA expansion opportunities, we are pleased to announce the submission of our regulatory application for the use of BYETTA as monotherapy in the first quarter of 2008, with a target for approval in the second half of this year. When approved, healthcare professionals will have the freedom to expand BYETTA usage along with treatment continuum as either standalone or combination therapy. The monotherapy indication will also allow broader payer coverage in some plans, increasing patient access to BYETTA beyond the already wide availability. In addition to the monotherapy indication, there is potential for significant BYETTA market penetration worldwide. So far in 2008, Lilly has launched BYETTA in six countries including Italy, Belgium, Brazil and the United Arab Emirates, and France began reimbursing for BYETTA in April. We anticipate that BYETTA will be in 60 countries by the end of 2008. Now let's move on to SYMLIN, a synthetic analog of human amylin, a naturally-occurring hormone that is made in the beta cells of the pancreas, the same cells that make insulin. SYMLIN is the first and only amylin mimetic. Its key benefits are that it provides mealtime glucose control and weight loss for patients who use mealtime insulin. In January, we launched SymlinPen, which offers patients the ability to get SYMLIN in a convenient, transportable, fixed-dose pen injector system. The easy-to-use pen is particularly helpful for patients taking multiple injections. We are excited by the rapid uptake of SymlinPen, which now accounts for 39% of new SYMLIN prescriptions and 21% of total SYMLIN prescriptions. Total prescriptions for SYMLIN grew 6% for the first quarter over the fourth quarter, demonstrating that SymlinPen growth is not all coming at the expense of the vial/syringe format. The SYMLIN brand is growing. Total sales of SYMLIN grew 14% over the same period. These results verify our market research, showing that SymlinPen would be viewed very favorably by patients due to improved convenience. Efforts to drive current and new patients to SymlinPen are paying off. These efforts include pen-only sampling, an entirely new patient starter kit, and a revamped website for patients and healthcare providers. Early feedback on the new healthcare provider campaign shows that the powerful new messaging and imagery is resonating with MDs. In the same vein, as efforts to improve the BYETTA patient experience, we've launched the SYMLIN support program, offering live telephone support for medical professionals to aid new SYMLIN patients in the first few weeks of therapy and beyond. Early feedback from this program is very positive. We are also pleased to report that within three months of the SymlinPen launch, we already have 85% open access for SymlinPen, with approximately 65% of covered lives at Tier 2. We continue to further develop the brand and create market expansion opportunities in the near and mid-term. With that, I will now turn the call over to Orville for an update on our upcoming research and development milestones. Orville?

Thanks, Dan. I want to share with you the latest developments regarding exenatide once-weekly, the next planned medicine in our pipeline. This product candidate has the potential to bring unprecedented efficacy, improved tolerability, and enhanced convenience in the treatment of type 2 diabetes, as it would be the first once-a-week medicine for this significant and growing patient population. I'm pleased to say that we are on track to finalize the commercial-scale manufacturing process at our new Ohio facility during the second half of 2008 and plan to submit in 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 this submission date forward. In this update, I will address the status of the manufacturing facility and the regulatory filing milestones that are intertwined. In general, we cannot characterize the remaining risk associated with the development of exenatide once-weekly as manufacturing and regulatory. Turning first to manufacturing, given the scale and site change for exenatide once-weekly manufacturing there are certain regulatory conditions that must be satisfied. With regards to scale, we are very pleased to report that we have manufactured material at commercial scale at our manufacturing facility in Ohio. Furthermore, and importantly the process has performed consistently and met our expectations, and we plan to have this material in ongoing and planned clinical trials by the third quarter. In regards to site change, we continued gathering data to support a planned submission, which includes moving forward with a range of options and a continuous dialog with the FDA on the most appropriate path forward. On the chemistry, manufacturing and control front, stability lots have been manufactured and are in [ph] place and are not rate limiting to the submission of exenatide once-weekly. Thus, the risk profile for the development of exenatide once-weekly is improving as we continue to achieve the manufacturing milestones. Now, turning to the regulatory front, today we are announcing that the exenatide once-weekly clinical trial program has been named DURATION. The data generated by our 30-week pivotal study now called DURATION - 1 met the primary clinical efficacy endpoint and safety profile requirements for the study. We continue to believe this meets the agency requirement and we intend to submit the NDA based on these clinical data. As a reminder, exenatide once weekly is a line extension product and the DURATION - 1 study was designed in consultation with the FDA. Our regulatory strategy is based on leveraging the existing safety database for exenatide. And existing… in addition, we have now put in place an aggressive clinically relevant program that pits exenatide once-weekly against competing products to demonstrate superiority. The objective of these studies is to support the launch and demonstrate the transformational nature of exenatide once-weekly therapy. I would like to point out that most products are compared on a non-inferiority basis, meaning that studies are designed to demonstrate that the product is the same in terms of efficacy of the product to which they are being compared. In the DURATION program, we are striving to demonstrate superiority. Superiority studies are designed to demonstrate that the product is superior to the comparison product. 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 allow exenatide once-weekly to stand out and favorably position the product for market success. Here are some details on the clinical program. The first of these superiority studies, named DURATION - 2, is a blinded, controlled trial comparing exenatide once-weekly with a TZD, pioglitazone, and a DPP-4 inhibitor, sitagliptin, in approximately 400 to 500 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. DURATION - 3 is an open-label superiority trial comparing exenatide once weekly with insulin glargine where it will be added on the background of oral agent therapy in approximately 400 to 500 patients. This study is anticipated to start in the first half of this year and results are expected the first half of 2009. DURATION - 4 is a blinded superiority study in which exenatide once-weekly will be compared to either metformin, TZD, pioglitazone or a DPP-4 inhibitor, sitagliptin, as standalone therapies for approximately 800 patients with type 2 diabetes. Now, I will move on to describe our significant opportunities in obesity. We believe peptide hormones provide a unique opportunity to create a meaningful product that produces clinically important weight loss and patient safety. In November of 2007, we announced our commitment to pursue a medicine for obesity that is a combination of pramlintide, an analog of human amylin, and metreleptin, an analogue of human leptin. Both 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, a 12.7% reduction in body weight over 24 weeks when pramlintide and metroleptin were used together. In 2008, we are continuing our development of a delivery system that will provide both pramlintide and metroleptin in a single injection. Further, we are initiating a Phase IIb study to evaluate different dosing combinations of pramlintide and metroleptin. This is a six-month multi-arm study that will enroll approximately 600 patients and will take approximately a year to complete. We believe this product candidate has a promise to meet the unmet medical need for a highly effective and safe weight loss therapy. Such a medicine would be a breakthrough for patients, physicians, and payers, the latter of which has repeatedly signaled the need for clinically-meaningful, double-digit percentage weight loss from baseline, which is a threshold targeted by this product. At our R&D Day last November, we also shared with you that we continue to explore new delivery methods for our peptide hormones. As a result of this exploration, we are pleased to have finalized a license agreement with Pacira to develop sustained-release injectable products based on the Depo [ph] technology platform. Given that not all peptides and proteins are compatible with a single delivery technology, we believe that it is important to explore an array of alternative delivery technologies to optimize the delivery of all of our product candidates. And now, I would like to pass you back to Dan to conclude the call.

Thanks, Orville. We're looking forward to sharing results of those important programs in the future. I will add just a few more comments before we close. The American Diabetes Association's Scientific Meeting is coming up in June of this year in San Francisco. And once again, we are planning to have a significant scientific and commercial presence at that meeting. We have had more than 30 abstracts accepted at the meeting. These studies reflect the breadth and depth of our scientific and clinical programs and the trem1us interest among the medical community for our novel approach to developing first-in-class medicines to address diabetes and obesity. We have provided educational grants to support two medical education symposia, and we will have a commercial exhibit where attendees can learn about Amylin and our two first-in-class products. Of particularly note, please mark your calendars for a webcast of our Annual Investor Reception on Sunday, June 8th, at 7:45 PM Pacific Time to review meeting highlights. We look forward to seeing many of you in San Francisco. A preliminary list of abstracts and other activities of ADA will be posted shortly on our corporate website. In addition, I would like to remind you that our annual meeting of stockholders will take place on Friday, May 30th, at 11:00 AM Pacific Time at our corporate headquarters in San Diego. It is an exciting time here at Amylin as we execute to position the company for sustained value creation and growth. I want to make it clear that this year we are laser-focused on, one, driving BYETTA and SYMLIN growth; and two, accelerating the NDA submission for exenatide once-weekly. 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 Tom Russo with Baird. Thomas Russo - Robert W. Baird & Co.: First, can you give us a sense of any new discussions with the FDA on bioequivalence or any new scientific or clinical data to let you know what you will need in order to meet that requirement?

Hi, tom. Thanks for your question. Just to say that we have discussions ongoing with the FDA with regards to the requirements to demonstrate comparability of the material that we are manufacturing in our facility... in our new facility and on Ohio. And as those… those discussions are data driven, so as we generate more data, we are able to move the discussions forward. As Orville indicated in his remarks, we're very pleased at the moment that having now completed the scale-up at that facility and are now manufacturing material at commercial scale, we are able to now be in the position to generate more data that will help us in those discussions with the agency. Thomas Russo - Robert W. Baird & Co.: And would you be able to say, relative on your last update three months ago, if you are anymore or less likely to be able to do an accelerated filing?

As Orville indicated, we believe that we have significantly reduced the risk associated with the filing [inaudible] forward with the commercial manufacturing process, so that that continues to give us the opportunity to pursue ways of accelerating the filing. Thomas Russo - Robert W. Baird & Co.: Okay, and just last question. On the SG&A, the guidance narrowed there. Can you comment on anything that you are not going to be doing relative to three months ago?

Yes. I will hand that over to Mark, maybe he want to comment on SG&A.

Yes. Hi, Tom. Of course, we started the year with a relatively wide range, we're now three months into the year. As we look at our activities, we believe we can operate at the lower end of the range, obviously focusing on two things as Dan said, driving BYETTA and SYMLIN growth, and the mix of our marketing and sales activities to make that happen, and then of course preparing for the support of exenatide once-weekly with… focused on appropriate investments in our infrastructure to make that happen. So really, it's just a narrowing to a range that we think is adequate to drive those initiatives this year. Thomas Russo - Robert W. Baird & Co.: Okay, thanks.

Thanks, Tom.

Your next question comes from the line of Mark Schoenebaum with Bear Stearns. Mark Schoenebaum - Bear Stearns & Company: Hi, guys, thanks a lot. Two questions, number one, I want to be very clear about something, when you file the NDA whenever that is, will you have received a decision from the FDA with regarding… regarding the waiver for the human bioequivalence trial or will that request for the waiver be contained within the NDA?

So Mark, just to be very clear in the answer, that will depend upon the ongoing discussions that we have with the agency, and we will make the determination about the request for bioequivalence waiver at the time that we submit our NDA. It's not a decision that has been made at this time. Mark Schoenebaum - Bear Stearns & Company: If you need… thank you very much, Dan. If you need a bioequivalence trial, when would that be completed?

So Mark, again just to be crystal clear on that, the guidance that we have provided with regards to the submission timing on the exenatide once-weekly NDA includes the requirement for undertaking a study, which would meet the requirement for comparability. As I… as Orville indicated in his prepared remarks, one of the key things that we want to highlight to you on this call is that as a result of the work that's been going on in our Ohio facility and that enables us now to say that we have completed the… finalized the commercial manufacturing process and that we will be shipping… able to ship material into ongoing and planned clinical trials in the third quarter, that gives us opportunity to accelerate the start of any study if it would be required. Mark Schoenebaum - Bear Stearns & Company: I just want to be really clear about this, [inaudible] questions about this daily and so I just want to be sure. Is it legally possible to get a waiver for the bio… human bioequivalence trial granted prior to submission of your NDA or is that something that with a statutory [ph] you need to request that within the NDA?

Great question. It is possible to actually get it granted prior to the submission. As I said to you earlier, the decision to apply for that has not been made at this time. Mark Schoenebaum - Bear Stearns & Company: Okay. That's great. I'll pop back in the queue. I appreciate it, guys.

Thank you, Mark.

Your next question comes from the line of Jim Reddoch with FBR. Jim Reddoch - Friedman, Billings, Ramsey & Co.: Thank you. A question about… first question about the trials that you say that you could put to commercial scale into as really as 3Q, can you just remind me, which of this has started, and secondly, if you would be able to have determined bioequivalence or equivalence by that point? And if not, are you not taking a risk by running the commercial scale in those trials since the FDA would not have ruled on that as being equivalent towards the final material? Thanks.

Hi, Jim. Yes, I'll take that question head on and then ask Orville if he has got any additional comments. So, the studies that… so DURATION - 2 was started, it started in the first quarter. DURATION - 3, that is the study versus insulin glargine, is due to start this quarter. Regarding your final question about the risk associated with the NDA, as Orville reiterated in his prepared remarks, we believe and we continue to believe that the study that we have completed, that is DURATION - 1, it's a completed study, but of course the line extension... the extension of that section of that study is ongoing and we'll provide more information going forward with regards to safety and efficacy. So we believe that DURATION - 1 would... forms basis of the submission for the once-weekly exenatide application. And the reason for that is because as Orville said in his prepared remarks, this is a line extension product, one that enables us to leverage the very extensive safety database that we now have on exenatide. Jim Reddoch - Friedman, Billings, Ramsey & Co.: Yes. My question is actually about the usability of the marketing trials versus glargine, for example, if you're using material that hasn't been deemed to be bioequivalent at that point?

So, this… this is Orville. That issue is not really any different than what happens in most development programs as your manufacturing process changes as you go through the development program. The way that it is handled is if there is an IND amendment filed to the agency describing the material, which you are going to take into your clinical trial, and so the agency has an opportunity to review that data, and if they have any concerns they provide you feedback before you actually take it into the clinical trial. So that's totally independent of whether or not we have demonstrated bioequivalence or have addressed the comparability issues. Jim Reddoch - Friedman, Billings, Ramsey & Co.: Okay. All right, I will get back into queue. Thanks.

Thanks, Jim.

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

Just on the quarter sales, the math, I need a little bit of clarification. Just last quarter you'd mentioned the access sales growth was largely related to inventory stocking that turned out to be about $10 million. And now you are saying there is $20 million to $25 million of draw-down to get back to the pre-fourth quarter levels, but it seems as though maybe the inventory levels here are less than what you would have normally seen in the channel.

Hi, Thomas. I will ask Mark to address that.

Hi, Thomas. Thanks for the question, let me clarify for you. We did talk at the end of the fourth quarter about stocking being slightly less than a week and quantified that to be $10 million to $12 million. So, essentially some of the sales that would have occurred in the first quarter occurred in the fourth quarter. Then you had in the first quarter draw-down of those inventories as well, demand was flat. So essentially, when you're doing a sequential comparison fourth quarter to first quarter, you have to double that, you had to stock-in in the fourth quarter and then the draw-down in the first quarter to get to the $20 million to $25 million, with scripts being the same level or maintained if you will from the fourth quarter to first quarter. Now, of course what that means is inventory levels now are back to levels that we believe are appropriate and in fact we believe going forward you would expect scripts to be more predictive of revenue in the second quarter.

And on the bioequivalence study, it sounds like you could start that in the third quarter. Can you help us understand why it would take up to nine months to run a bioequivalence study and put that in the filing?

Hi, Thomas. It's Dan here, yes. So certainly, as we indicated we are excited about being in a position to ship material from our Ohio facility in the third quarter. The guidance for the submission at the NDA takes into account a range of different potential requirements that may result from our conversations with the agency. And as at this time, that is not clarified. We have been conservative in our estimate in terms of how long that may take and what the requirements may be. So, I would just say to you that that guidance is predicated on further discussion with the agency. I would also reiterate at this [ph] time, our guidance on the timing of this submission is by the end of the first half of 2009.

And just to clarify, the bioequivalence study, are we looking at a single dose study that would be a parallel design or do you need to do a cross-over design and follow patients out for some period of time? Is that why it might be a long trial?

Well, Thomas, as I just said, the design of any study is subject to discussion with the agency and those discussions are ongoing at this time, and they're data driven based on information that we're generating. Our material and the material that is being manufactured at the facility that we have in Ohio as well as other analytical work that we're doing on the formulation of the once-weekly exenatide.

Okay, thank you.

Thank you.

Your next question comes from the line of Meg Malloy with Goldman Sachs.

Thanks very much. Dan, I'm hoping you could drill down a little bit more on what you think is wrong in the commercial end of things, why demand isn't growing. I know in the past you've talked about facilitating education on the part of docs, making it easier for patients to use or providing access to educational efforts there. Today, you kind of alluded to confusion about reimbursement. I’m just holding you can sort of clarify what the issues are and why, for example, a 15% increase in sales force, is that happening at both you and Lilly, and what kind of comfort can we get that whatever the issues are understood and are being appropriately addressed? Thanks.

Yes. Thanks, Margaret. Terrific question, give me an answer… gives me an opportunity to I think… provide I think some confidence to people that we're doing the right things. One of the things I mentioned on the call is that we have seen and we are seeing in certain territories really good growth. And when we look into those territories, there are some reasons why we’re seeing good growth. And it really comes down to execution of a marketing strategy that we believe is actually very appropriate and will be successful in the marketplace. Key issues that we're facing is really the adoption in the primary-care market. The adoption in the primary-care market we believe will be enhanced by better reach and frequency of calling. And to that end, the expansion of our field force lost is modest in terms of the total number of additional reps that are being added. It's... the… one of the key aspects of that is that the increase in our field force enables us to map more closely to… and align better to the field force that Lilly has in the field. What that enables us to do is have even tighter alignment with regards to co-plan and therefore enables us to adjust very dynamically our reach and frequency with physicians. It also does actually increase the total number of physicians that we will be targeting as well. We increased from 65,000 to over 75,000 physicians and taking our total number... the total percentage of physicians who prescribed our diabetes cover to over 80%. So just to say that I believe that at the end of the day we do have in place… we’re confident in the marketing strategies that we have in place. We do think that the better alignment as well as the greater number of representatives that we have in the field will increase our opportunity to expand in the primary-care market. But I do think that… I would emphasize that the programs that are effective that we've seen are the patient support programs that we initiated, the pilot work that we did there and then now are expanding that out further has been showing strong support. We are seeing that very specific information is given to physicians with regards to access to their local plans. That actually does… it's very, very helpful, and we're now able to roll out across both the Amylin and Lilly field forces that information. So there is a number of things that we are seeing in terms of tactics. Bottom line though the positioning that we have for the product of that… of emphasizing the dual benefits of the product in terms of glucose control and weight control does resonate well with physicians. And we are seeing increased benefits, increased positive perception of the product relative to competition on key prescribing parameters. And at the end of the day, the number one is efficacy with regards to effect on A1C and that is improving as we've… as we’re seeing going forward. So I do believe that we will be able to continue… we will be able to drive BYETTA growth going forward. I think what we're doing is putting in place tactics now, which will enable us to better execute against the strategy that we've had in place.

Thanks, and can I follow-up on that, Dan. Can you talk about patient retention? Has there been any change there? And what did you mean about little confusion on the reimbursement front?

Yes. So on the… so two questions there. So just regarding patient retention, well, I did mention about the patient support programs that we put in place. What we are seeing with the patient support programs is where we do get patients who are signing up for those programs, we are able to improve patient adherence. And so, that's one of the reasons why I mentioned on the call that we will be expanding those programs going forward. The... regarding the confusion about access, it's just the fact that BYETTA is viewed as a very innovative product and as such, for reasons which are not entirely obvious, physicians’ perception is that because it is so innovative and novel... and particularly in the... this is particularly in primary-care physicians. Their view is that... therefore it won't be available as freely as other products. And that's just not the case. In fact our access is extremely good. We have over 85% access with commercial managed-care providers. So that's what's driving us to actually ensure that in every call that every member of the field makes to a physician that they emphasize the availability of the product through the local plans and we've actually initiated in this quarter very specific information relating to local plans for each representative to share with their doctors and to enable them to change this perception.

Okay. Thank you.

Thanks, Meg.

Your next question comes from the line of William Ho with Banc of America Securities.

Hi, guys. Thanks for taking my question. Can you... I Just want you to elaborate a little bit on Meg’s question I guess on what specifically is slowing the adoption or demand of BYETTA in that primary-care market? Are patients not comply… dropping off? Is it only the reimbursement? Why would additional salespeople help when you couldn't drive additional sales with your direct-to-consumer campaign late last year? And do you think this product is specific to BYETTA or will it impact LAR on any potential future launch as well? Thanks.

Yes. Hi, William. Thanks for your questions. I think there is multiple factors that play here, and as always you're looking for the sweet spot in combination when you're looking at your marketing strategy and your sales force execution. So there is a number of factors that play and we have been doing very extensive analysis to truly understand what all those factors are. The sales force expansion we believe is appropriate at this time. We do believe that we do need greater reach, but we also need to adjust frequency, the call plan, adjust the frequency appropriately based on prescriber potential. And we've done very extensive research looking into individual physician potential, and that's something that we intend to take advantage of. I would reemphasize as well the point that I was making, the expansion also enables that call plan to be more effectively executed due to greater alignment with our partner, Eli Lilly and Company. And so, that's also an important part, and when it comes to execution coordination in the field is really critical. The last part of your question was relating to once-weekly. I don't believe that at the end of the day what's going on with BYETTA will specifically be… can be correlated to what would happen with once-weekly. Once-weekly is such a transformational product. We believe it will be perceived very differently going forward than BYETTA. The work that we are doing though on the filed force expansion and as well as the alignment… greater alignment with Lilly, and I do believe that will drive growth for BYETTA going forward. I think it will set us up well for exenatide once-weekly going forward.

So just to clarify, what you are saying… are you saying what's driving sales is the more pressure [ph] points you have and the more often your salespeople are contacting those doctors, that is the only thing pretty much driving sales up right now?

We think touch points is important, but it's also who those touch points are… where are those touch points are I should say and who, but that's that is a component, as I said it’s multi-factorial. So it's not just the touch points, but it's also the execution of the overall marketing strategy that we have in place, which we know. When we do look at specific territories when executed well is very successful.

All right, thank you.

Thank you, William.

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

Hi, guys. I just want to follow-up with that theme on what's going on at the primary-care level. You talked about 80% of prescriptions going through the primary-care physicians, but just wondering if you drill down to Lantus, what percent of Lantus’ prescriptions are initiated by primary-care physicians? Are those physicians who initiate Lantus less willing to initiate BYETTA and what are you doing about it? Because it strikes me that you're not getting any traction against Lantus and I'm just wondering what's the incremental data point that's going to give you that traction, and where do you need to be targeting that?

Yes, great question, Jim. I appreciate it. Thank you. Yes, it's about the same actually with regards to Lantus initiation in terms of the percentage of scripts that are initiated relative to primary care and specialty. And your number of 80% is slightly… it is slightly greater actually than 80%, but it's good enough for purposes of discussion. At the end of a day, in terms of gaining traction against Lantus, one of the key things, and I it mentioned it earlier that it’s improving, is perception of efficacy and particularly efficacy with regards to glucose control. One of the key benefits of course… the key benefit that we have with BYETTA that is not possible to achieve with Lantus is that we have the benefit of being able to show that you can actually improve glucose control to the same extent that you can with Lantus, but with less weight gain and of course less hypoglycemia. And the publication that came out in the third quarter of last year is now… which is the [inaudible] publication is now being used extensively by our sales teams. I would say that one of the key things that we are stressing when we talk about the dual benefits of glycemic control and weight benefit is to emphasize the importance of weight management. This is very much a new paradigm for primary-care physicians with regards to glucose control, they’re very insulin centric [ph] currently in the way they think of managing these patients. And so… and don't actually, I don't think, realize what they... what opportunity they have with BYETTA. And so, it's important for us going forward to continue to emphasize the equivalent glucose control benefit that we have with Lantus, but also the additional benefit of weight loss.

Just given that issue of trying to convince physicians that exenatide or BYETTA is at least as good if not better than Lantus. Don't you think the DURATION - 3 study is going to be critical to really gaining traction with the once-weekly, and why rush forward with the 300-patient study when DURATION - 3 might be the most impactful in terms of adoption?

So you’re kind of switching there between BYETTA and once-weekly. I'm not quite tracking what you're trying to get at, Jim, in terms of why rush forward?

Well, I guess what I’m saying is --?

[inaudible] DURATION - 3 is going to be very important, but… in terms of demonstrating superiority to insulin glargine, but where are you going on that one, Jim?

I guess what I'm wondering about is that if you're not getting traction right now against Lantus with the datas that you have already showing comparability of BYETTA to Lantus, perhaps what physicians want to see superiority, which you are seeking to prove in DURATION - 3. And if that's going to be a critical study for you, why rush the filing on a smaller 300-patient study that really doesn't address that question?

Smaller 300… well, it will address the question… that study is powered to demonstrate superiority versus insulin glargine. DURATION - 3 is powered to demonstrate superiority. Let’s be really clear. The number of patients is not what's required from a power standpoint. Just given the efficacy that we've seen in DURATION - 1 with once-weekly exenatide, we are confident that we will be able to demonstrate superiority. Are you suggesting that it is necessary for us to wait to complete that study before we put a submission in?

I am just wondering why not, if you're not traction right now against Lantus and that study may be critical to gaining that traction, why not wait?

Well, Jim, we certainly intend to have the data for DURATION - 3 around the time of the launch of exenatide once-weekly. I wouldn't by the way necessarily agree with you in terms of not gaining traction. I think it's fair to say that when we look at the perception data that.... market research data that we're collecting regularly, what we are seeing is that we are gaining traction versus Lantus. I would point to you that Lantus actually is a very successful product. It is continuing to grow in its own right in the insulin market. But in fact, the overall population is growing. So we're gaining traction with regards to that perception.

Just so if I can ask one quick question, just a follow-up on the manufacturing timeline. Just so if can understand in terms of demonstrating comparability of product, what data have you shown FDA so far? What's the next set of data that could support a waiver for bioequivalence? And then what would be the... what would a final study look like to show bioequivalence? Just trying to understand where you are at with FDA right now, what's the next bonus [ph] of data in terms of giving you potential for a waiver, and what would a final bioequivalence study look like?

Yes, Jim. We have actually done… shown the agency quite a lot of data already with regards to the... with regards to exenatide once-weekly formulation and had discussions with regards to comparability. As I said previously, the data is actually going to be continuously supplied to the agency in a way that we can then finalize what would be required to demonstrate comparability and determine whether or not the bioequivalency would be required for submission. At this time, I don't believe it would be useful for me to describe to you specific information that we've shared with the agency as that information… as a result of the fact that we have continuous ongoing discussions and of course so it will change on a very regular basis.

Okay, thanks.

Thanks, Jim.

And your next question comes from the line of Mike King with Rodman & Renshaw. Michael King - Rodman & Renshaw, Inc.: Thanks for taking my question. Can you hear me okay?

Yes. Hi, Mike. Good morning. Michael King - Rodman & Renshaw, Inc.: Hi. Good morning, everyone. I just wanted to follow-up… you answered many of my questions about the commercial aspects of BYETTA, but I'm just wondering if we could get a little bit more color. I don't know if you can drill-down as far as what proportion of... it seems to me that you've got… if you've got 80% or so scripts being written by PCPs, the high riders should be almost as important as some of the Endos. So I am just wondering why that hasn't had a bigger impact in your view?

Yes. So Mike, just to clarify, 80% of the potential prescriptions are written by the physicians who we’ll be targeting, which is about 75%… 75,000 physicians. Currently, for BYETTA prescriptions, a lot greater proportion are currently being written by specialists than 20%, although the majority of prescriptions are still being… are now being written by primary-care physicians. Michael King - Rodman & Renshaw, Inc.: Do you have a more accurate number, Dan?

I actually don't have it off the top of my head here on the call, Mike. Just say though that your comment with regards to the high potential general practitioners is absolutely correct, and one of the things that I was stressing in response to a previous caller's question was the importance of our call plan and adjusting that call plan in terms of reach and frequency to maximize the efficiency of our field force with regards to leveraging the potential of those high prescribing general practitioners. Michael King - Rodman & Renshaw, Inc.: Okay. And can you just comment about what's the recent sampling pattern been like?

Well, we never give you specific numbers with regards to sampling, but just to say that our sampling has been pretty consistent over the last quarter. We haven't made major changes in our strategy over the last three months, although I would say to you that that is something that we look at on a regular basis and adjust depending upon demand. Michael King - Rodman & Renshaw, Inc.: Yes, I [inaudible] like, if you could somehow redirect from Endos and specialists to PCPs?

I would say that when it comes to Endos to PCP, that's a decision was that’s being made by the territory managers in their territories as they look at the potential for new prescriptions. Michael King - Rodman & Renshaw, Inc.: Okay. And then on I’m not sure of your answer to Meg's question about the 15% increase in the sales force, if that's going to be spread equally amongst you and… between you and Lilly or if there is... where that cost falls more heavily?

Okay. So just be clear, it's our sales force that is increasing by 15%, but remember that all commercialization costs in the United States are split 50-50 between ourselves and Lilly. So that cost is part of… it's a collaboration expense and would be split accordingly. Mark or Dan [ph], if you want to add anything to that?

No, I think you covered it well. Michael King - Rodman & Renshaw, Inc.: Okay. Thanks very much.

Thanks, Mike.

Your next question comes from the line of Matt Osborne with Lazard.

Could you just highlight or specify when you plan to initiate the DURATION - 4?

Hi, Matt. We haven't given any guidance yet on when we are planning to initiate DURATION - 4. I think we’ll probably… we said in the second half of this year, but we haven't given any specifics with regard to it… any more specific than that.

Okay. And then just a question quickly, can you remind us what the price increase for BYETTA was in January? And then, Mark, I know you mentioned... if we could switch over to ex-US BYETTA, I know you mentioned as a part of the updated arrangement that you would record ex-US BYETTA sales upon a certain sales threshold, now that we’re six countries into the launch and anticipate 60 by the end of the year. Is there any kind of update in terms of timeline when you plan to report ex-US BYETTA sales? Thank you.

Hi, Matt. Well, I’d just say, firstly the price increase was 6%…

6% in mid-January.

And one point of clarification, there’s this considerably more than six countries this year so far that have been launched and the total number I think so far is in the mid-20s. So just be clear on that. Mark, do you want to comment about the...

At this time, we are not updating the guidance. I think as we get further into the year, Matt, we'll certainly continue to watch that. We've said by the end of 2009 we need to get through the gross-margin threshold that we talked about before we start recognizing royalties on gross margin.

Okay, great. Thank you.

There are no further questions at this time. Are there any closing remarks?

Yes, absolutely. So just a few final remarks to say thank you to everybody for being on the call today. We appreciate your time and your interest in our company. I would reiterate that at Amylin we are focused on driving further BYETTA and SYMLIN growth and accelerating the NDA submission for exenatide once-weekly. Thank you.

Thank you, ladies and gentlemen. This does conclude today's Amylin Pharmaceuticals Incorporated Q1 earnings conference call. You may now disconnect.