Welcome to the Amylin Pharmaceuticals Q2 2011 Earnings Call. [Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time. I would like to introduce your host, Michael York, Senior Director, Investor Relations. Sir, you may begin.

[Audio Gap] Provides additional background on the quarter. This morning's discussion will contain forward-looking statement that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release, the website presentation and in our recent filings with the Securities and Exchange Commission. Our actual results could differ materially from what is discussed during today's call. The reconciliation of all non-GAAP financial measures can be found at the end of the website presentation. Let me introduce the other members of the Amylin management team for today. Daniel Bradbury, President and Chief Executive Officer; Mark Foletta, Senior Vice President, Finance and Chief Financial Officer; and Vince Mihalik, Senior Vice President, Sales and Marketing and Chief Commercial Officer. I will now turn the call over to Dan Bradbury

Thanks, Michael. Before I begin with our prepared remarks, I'd like to say that we were very pleased to note that during the quarter, BYDUREON received marketing authorization from the European regulatory authorities. And our partner, Eli Lilly and Company, recently launched the product in the United Kingdom. The availability of the first weekly-dosed diabetes therapy in Europe marks a milestone for patients, physicians and the healthcare system. With just one dose per week, BYDUREON has consistently demonstrated in patients with type 2 diabetes powerful glucose control, the potential for weight loss and a favorable safety and tolerability profile. The opportunity to monitor the early stages of the launch in the United Kingdom and in other European countries gives us the opportunity to apply the insights we gained for the planned U.S. launch. Now shifting back to our second quarter results, our comments this morning will build on the press release issued earlier today. In a few moments, Mark will provide additional details on the quarter's underlying financial results and comment on our outlook for 2011. Vince will then review our commercial activity during the second quarter of this year. Over the last quarter, we continued our focused execution against our business plan, and I will take a moment to highlight our substantial progress. At the end of the quarter, we completed the thorough QT or tQT study for exenatide to address questions raised by the FDA in the complete response letter that was issued in October 2010 regarding our BYDUREON new drug application. The results, which we announced earlier this month, indicated that when using multiple heart rate correction methodologies, the study met the pre-specified primary endpoint demonstrating that exenatide, at and above therapeutic levels, did not prolong the corrective QT interval in healthy individuals. Additionally, the study found…

Thanks, Dan, and good morning. Today, we announced our financial results for the quarter ended June 30, 2011. As Dan mentioned, and we have discussed in prior calls, we are managing the business with operational discipline and are focused on generating sustainable, positive operating cash flow and maintaining a strong cash position. Our measure of operating cash flow is non-GAAP operating loss, which approximates our cash flow from operations before working capital changes. Non-GAAP operating loss is defined as our GAAP operating loss, adjusted for non-cash items, including equity compensation, depreciation and amortization, and any other unusual items such as restructuring charges. In the second quarter, non-GAAP operating loss was $1.7 million, an improvement from a loss of $7.4 million in the second quarter of 2010. Total revenues in the second quarter were $158.1 million, a 3.8% decrease compared to $164.4 million in the second quarter of 2010. Our gross margins remained strong at 92%. Our operating expenses were $110.3 million in the second quarter, consisting of $65.2 million of selling, general and administrative expenses and $45.1 million of research and development expenses. This represents an overall $9.9 million or 8% reduction from $120.2 million in the same quarter of last year. This decrease reflects our continued focus on driving efficiencies across our business. For further details regarding our financial results reported today, please refer to the presentation available in the Investors section at our company website. I'd like to make a few additional comments comparing the second quarter of 2011 sequentially to the first quarter of 2011. BYETTA sales were up $1 million sequentially or 0.8%, reflecting pricing actions during the quarter, partially offset by a 3.1% decline in prescription volume. SYMLIN sales were up $3 million or 13.2% sequentially. The revenue growth seen with SYMLIN was driven by…

Thank you, Mark. The Amylin sales and marketing organization continues to remain focused on our day-to-day business, driving revenue for our currently marketed products, BYETTA and SYMLIN, and preparing for the launch of BYDUREON in the United States. From a clinical standpoint, we had a strong presence at this year's ADA conference, with new data supporting the safety and efficacy profiles of BYETTA, SYMLIN and BYDUREON. Notably, we presented long-term data from the BYDUREON clinical program, demonstrating that the benefits of BYDUREON therapy are sustained in patients out to 3 years. Results like these add to the growing body of data that supports the value proposition that BYDUREON could deliver to the healthcare system if approved. Specifically for patients, BYDUREON provides continuous glucose control with a single weekly injection and no dose adjustments or multi-step titration schedules. These attributes, along with an improved GI tolerability profile relative to BYETTA, could help BYDUREON fit conveniently into patients' lives. For providers, BYDUREON carries the safety and efficacy heritage of the exenatide molecule, along with consistent A1C reduction across patient types. For payers, real-world data from their extensive claims database where their members are taking BYETTA, along with head-to-head comparative efficacy data from the DURATION program, both highlight the potential benefits of exenatide therapy. With BYDUREON now available in the United Kingdom, we're excited to have the opportunity to monitor the early stages of the launch there and in other European countries as it becomes available, and apply those insights we gained to the planned U.S. launch. Now let's move on to discuss our results in the second quarter, starting with BYETTA. BYETTA sales increased approximately 1% quarter-over-quarter. The increase in sales were generally in line with pricing actions during the quarter, offset by a 3.1% decline in prescription volume. We continue to…

Thanks, Vince. Before the close of our prepared remarks, I'd like to thank the employees of Amylin for their hard work and dedication through the first half of this year. Their efforts and commitment to the organization have enabled us to respond to the FDA ahead of our own expectations while delivering strong financial results. And for that, they deserve to be commended. In closing, I'd like to reiterate that I, along with the Amylin leadership team, remain committed to creating value for our shareholders, our employees and most importantly, the millions of diabetes patients we're focused on serving. I will now ask the operator to open the line for questions.

[Operator Instructions] The first question comes from Cory Kasimov of JPMC. Cory Kasimov - JP Morgan Chase & Co: First question for you is on the recent launch of BYDUREON in the U.K. Can you comment on the pricing over there, especially as it relates to Victoza and BYETTA? And then I have one follow up after that.

It's Dan here. Thanks for your question. Actually, I can't comment on it. The responsibility for pricing outside the United States is the responsibility of Lilly. And their strategy that is being employed. Obviously, in the United States, the responsibility for pricing for BYDUREON is the responsibility of Amylin. And at the point that we launch BYDUREON, I will make that available to people. So sorry, I can't comment on Lilly's strategy. Cory Kasimov - JP Morgan Chase & Co: Okay. Fair enough. Then recognizing you haven't yet met with the FDA regarding exenatide once monthly, can you offer up any sort of additional thoughts on what the Phase III program might look like for that program? And this -- should we assume something that is roughly comparable to the DURATION program?

Sure. So obviously, we want to agree with the FDA the specifics of the program going forward. However, I think it's fair to say that our expectation is that the program would be one that would be consistent with the BYDUREON program in that it would be a line extension development program, and we would expect that the reference to that program would be BYETTA as the initial product that was registered with the exenatide molecule.

Your next question comes from Ian Somaiya, Piper Jaffray.

Great. Matthew Luchini, actually, covering for Ian this morning. Just one quick question. I was wondering if you could comment. Obviously, there was much with regards to the thorough QT study, the results that you guys presented earlier in the month. And I was just wondering if you could comment at all on -- if you are expecting, or you have any feeling that you might have to do something similar for the once-monthly exenatide formulation? And if so, would that then mean that you would be thinking of more of a 2-fold development plan, or continue along the line extension path as you were just describing.

Yes. Thanks, Matthew. Thanks for the question. I guess our expectation would be, and to be clear, that the tQT study that was just completed was conducted with exenatide and helped the individuals at therapeutic and higher-than-therapeutic levels, levels certainly that would be greater than those, which would be expected with exenatide once monthly. So our expectation would be that the tQT study that we just completed would be referenceable for the exenatide once-monthly program going forward.

Your next question comes from Catherine Arnold, Credit Suisse. Catherine Arnold - Crédit Suisse AG: I wanted to ask you about your launch plan. So assuming a 6-month review for BYDUREON and given what you said about the filing next week, I would assume you'd be solidly in the first quarter of 2012. So I'm wondering, are you thinking about the ability to launch in days or weeks after approval? And when should we start building an uptick in SG&A expenses to account for that? And then, I just wanted to ask you another follow-up, which is on the pen, could you just talk about what are the sort of touch points or levers that will determine whether the pen actually is launched at the end of '12 or '13 or into '13? Is that something that you can control, or is that something that's in the hands of regulators?

Yes. What I'll do is maybe I could talk initially about -- pass over to Vince to talk about launch plans, and then ask Mark to talk about SG&A. And I'll come back and talk to you about the pen. So maybe, Vince, do you want to talk about launch plans and then Mark, about SG&A?

Sure. So, Catherine, obviously, much depends on the label you get from the FDA and how different it may be from the proposed label because you can print at risk to try to shorten down the launch timeframes, but if there's major differences in the final label, then obviously, we have to throw all that away and start over. So I would say, in terms of planning, you're probably thinking in weeks rather not -- rather than days, just to be on the safe side. And of course, we'll try to launch as quickly after approval as we can. But keeping in mind that, obviously, with the second complete response letter, we did slow down the manufacturing folks and actually put the line into a mothball, so to speak. We'll have to dust that off a little bit, and we already are in the process of doing it in anticipation of, as you pointed out, likely a first quarter launch.

Yes. Thanks, Vince. This is Mark. Catherine, I'll comment on your question about the SG&A expenses. First and foremost, we'll be watching the activities with the regulators very carefully, and clearly, be ready to launch, as Vince said, when the regulators approve the product. In terms of upticks, the guidance that we gave -- I gave a few moments ago really contemplates that we will begin preparation activities in the second half of the year. And I do want to remind you though that while there is going to be incremental non-recurring cost to support the launch of BYDUREON that our current operating model and the sales footprint that we have and the infrastructure that we put in place will support the launch of BYDUREON, and also remind you that we will earn a $40 million milestone on the U.S. launch. Of course, that is anticipated based upon our filing very soon here that would be earned in the first quarter. But that would certainly offset expenses associated with the launch. And just to emphasize that we've also been focused on our operating model and don't see significant incremental expenses across the business to enable the launch of BYDUREON.

Well, Catherine, Dan here. I'll just get back to you regarding your question regarding the BYDUREON pen. What we've guided is that we expect to be able to launch the BYDUREON pen by the end of 2012 or the beginning of 2013. Obviously, we've given ourselves a fair window there largely due to regulatory uncertainty. So I think the answer to your question is yes and yes, in that there is work that we still need to complete for the BYDUREON pen, but we have also built in some flexibility with respect to the timing of expected regulatory approval.

Your next question comes from Robyn Karnauskas, Deutsche Bank.

This is Alethia Young for Robyn Karnauskas. And I just had a question about the Amylin-Lilly lawsuit. Just kind of walk me through the next steps that you guys are thinking about as far as the appeal process and what the timing could look like though on that?

So the lawsuit is ongoing. I really can't comment too much on the specifics of the lawsuit but just to say that we do have an appeal with respect to the preliminary injunction, which is being reviewed currently by -- in the appellate court. However, the main lawsuit is continuing and will continue for some time. I would also add that we intend to work with our partner, Eli Lilly, in the meantime to ensure that we successfully launch BYDUREON together.

Your next question comes from Yaron Werber, Citigroup.

This is Kumaraguru Raja stepping in for Yaron Werber. Can you give us an update on how the litigation is going to impact the launch of BYDUREON together?

Yes. So just to reiterate what I've just said into the previous caller, our expectation is that both Lilly and ourselves will work together to ensure that BYDUREON is successfully launched. It's in both companies' interest to ensure that, that is the case, and both companies have committed to that end.

Your next question comes from Terence Flynn, Goldman Sachs.

I just wanted to follow up on an earlier one, regarding manufacturing of BYDUREON. Just wondering if you're planning to start building inventory and -- manufacturing inventory and building it in advance of an FDA decision in the first quarter, or if you're going to wait until that decision comes until you start to actually building the inventory? I know you said you dusted off some of the equipment but just wondering the actual production, when that's going to start?

So, Dan here. It's a great question. Terence, the -- so the BYDUREON manufacturing process has multiple components to it. So the manufacturing of both microspheres and the filling of vials has already begun and is continuing as part of the manufacturing for the European launches that are occurring. The key aspect that needs to be undertaken here in the United States is actually the -- that Vince referred to is related to the packaging line. The work for that is ongoing now at this point. We implemented that just at the completion of the tQT study. And so our expectations are that we will build inventory coming into the launch, but the final packaging, as Vince mentioned earlier, is somewhat -- is dependent upon the approval, and therefore, we have to wait until that's printed before we fully package the products for launch. But that is a very short timeframe, by the way. Once we know what that is, it's a very short timeframe for the completion of that process.

Your next question comes from Mark Schoenebaum, ISI Group.

This is Omar filling in for Mark. A couple of quick follow-ups. First one is, how many patients in the QT study actually touched around 1,000 kilograms per millimeter plasma concentration? And secondly, on the QT press release, I know it stated that the 95% comps interval for the mean QT chain was less than 10 milliseconds. Just to clarify, was this for the largest time mean QT change or not?

It's Dan here. With regards to the specifics of the study, we'll be releasing those as part of our presentation at the scientific forum going forward. And I actually don't have to -- my fingertips here the specifics with regards the number of patients who went above 1,000 kilograms per ml. Regarding -- and again, the details with regards to the 95% competence [ph], I'll refer to one of our scientists, who will get back to you after the call. Okay?

Your next question comes from Tom Russo of Baird. Thomas Russo - Robert W. Baird & Co. Incorporated: Maybe for Vince, can you give us some additional color on the GLP-1 growth? Maybe how much is being driven by and those who already like this class, but are prescribing it more versus how much is being driven by new adoption in the PCP group? And then do you expect any differences in that dynamic once BYDUREON comes to market?

So Tom, thanks for the question. Let me first say that as you know, type 2 diabetes continues to grow at about 6% to 7% annually. And we are seeing some really nice growth in adoption in the GLP-1 market. The U.S. GLP-1 market was about $260 million in the first quarter. So it's trending to be about greater than $1 billion, I'd say, in 2011. And given current growth rates, I think, it could be $2 billion in 2012. And we're seeing substantial growth in both the U.S. and Europe. I think that does reflect greater interest and understanding of the needs and benefits of GLP-1 given the number of people not making a goal. I'd also say, that to your question, endos write the vast majority of scripts in percentages. But if you look at the number of writers, PCPs dominate. Therefore, more PCP writers than endos. And we're seeing greater adoption among even more PCPs. This is not surprising. I've always talked about the fact that the size of the diabetes market, if you look at where the vast majority of scripts are, 80% of all scripts come from about 45,000 to 50,000 writers, and they are a combination of endos and PCPs. And those are the most active group, as you would expect, with GLP-1s. So we do see physicians embracing GLP-1s more. We're seeing that with the second entrance in the GLP-1 market that they're embracing it for not only its benefits, but also convenient dosing. And I think all of that bodes very well for BYDUREON. Thomas Russo - Robert W. Baird & Co. Incorporated: Okay. And then, just a quick check-in, maybe for Mark. Is there a point in time where you would contemplate guiding revenues again? And if so, is that levered to BYDUREON approval or some period of time after that where you have some experience on the market? That's it.

Mark, go ahead.

Yes. Thanks, Tom. Certainly, that's something we will consider. I think we want to get through the regulatory process, kind of assess the market, and we'll consider that at a future time. We have guided revenues in the past. I think I'd just want to emphasize that we think the most important thing that -- for us to manage over the last few several quarters has been our cash use and our non-GAAP operating loss. And that's, obviously, where our focus has been. And as you know, we've performed really on our guidance there. But we'll contemplate further guidance on our income statement following the launch of BYDUREON. But thanks for the question.

[Operator Instructions] The next question comes from Phil Nadeau, Cowen and Company

My question is actually on metreleptin. I appreciate that you're going to give us more commercial guidance towards the end of this year, but just curious what your commercial team is doing to prepare for the launch today. Are you identifying patients or talking about leaders, kind of what type of activities are underway?

Yes. Thanks for the question. Yes, actually, we've got a lot of activities underway at the moment. We're specifically working with key thought leaders in the area. We're identifying patients at this time. And part of our commercial assessment that we're completing at the moment is really to understand better the epidemiology relating to these rare forms of lipodystrophy. And we're undertaking a lot of work in that respect. We're also working through working with multiple different commercial vendors, who would be providing specialty services that would be associated with the launch of metreleptin. As you, I'm sure, appreciate, this is a very rare disease, or rare diseases, I should say. They are very rare diseases. And as a result, they require a very specialized commercial approach. So there's actually a very large number of activities underway at the moment. I don't know, Vince, maybe you'd like to add more to my comments?

Actually, Dan, I think you've covered it pretty well. Obviously, at this stage, a lot of market research, a lot of advisory panels with KOLs, clearly trying to understand the different rare forms and also understanding how reimbursement might play into this and how we would actually register patients potentially as a way to identify even greater numbers and making sure we understand the different rare types of this disease and how that all plays out. So I think you covered it pretty well.

Could you give us a sense of your updated thoughts on the epidemiology? How many patients are out there, or how many patients would be appropriate for treatment?

Yes. So we've guided that our thoughts today are that the covering the spectrum of the rare forms of lipodystrophy, for which we've applied for is around 1,200 patients here in the United States, around 3,000 globally. We're trying to get, as I mentioned earlier, greater specificity in that regard. And also within that estimate, also trying to get greater specificity with respect to each of the different rare forms of lipodystrophy that are being covered as part of our application. One of the key things for us to work out is the range of patients with regards to this variety of disease, and therefore, the likelihood with respect to the use of metreleptin and of course, the dosing of metreleptin that would be used. And that impacts our pricing decisions.

At this time, I would now like to turn the call to Dan Bradbury for closing comments.

Well, again, thank you, this morning, for your interest and for your questions. We have a huge opportunity to continue to advance our mission of discovering, developing and commercializing medicines to improve the lives of patients, particularly those patients with diabetes. We continue to be excited about the prospects for BYDUREON in the near term, and I would like to also take this point to say, once again, thank you to our leadership team and to the dedicated employees of Amylin, who remain focused on building the business today, as well as laying the necessary foundation to success for tomorrow. If you have any further questions regarding today's call, please call Michael York or Jeff Erickson in our IR team. Thank you.

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