Cash Burn a Problem for Amylin

Amylin Pharmaceuticals, Inc.’s (AMLN - Analyst Report) investment story is tied to the success or failure of phase III potential blockbuster, exenatide LAR. We classified the data on LAR from DURATION-1 presented at American Diabetes Association as good, but not great. Additional data from the DURATION program is expected in 2009. In the meantime, there are few catalysts and operating expenses are soaring. Valuation and mounting competition keep us at a Sell rating for Amylin.

We are surprised with the lack of expense control at Amylin. Byetta will probably be a billion-dollar product in 2010 and the company will still will not be profitable. High expenses, along with the continued disappointing sales of Byetta make the stock unattractive in our view. Byetta sales are closely tied to marketing and promotions, and given the tough competition in the type-2 diabetes market, we are unsure on whether Amylin will even get a change to ratchet down expenses and reap the full rewards of Byetta’s sales.

Amylin currently trades at 21x our 2012 EPS estimate of $1.31. The 2012 multiple is a 100 percent premium to the large-cap pharma / biotechnology peer-group average of 10x 2012 EPS. We believe this premium is not warranted given significant questions that surround the future growth of Byetta. We are still at level where we believe the name is substantially over-valued. We see far better and cheaper opportunities in biotech today. Our target is $25.

Read the full analyst report on AMLN