Amylin's Sales Top Estimates

The latest quarter reflects the launch of two diabetes drugs.
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Amylin Pharmaceuticals

(AMLN)

said Thursday that second-quarter sales were higher than Wall Street expected, while it lost less money than analysts had estimated.

The results were issued after markets had closed. Amylin's stock closed down in regular trading thanks to a downgrade earlier in the day from Citigroup Smith Barney. Amylin's stock fell $1.42, or 6.6%, to $20.03 in regular trading. After hours, the stock gained 2 cents.

Amylin lost $26.6 million, or 26 cents a share, on revenue of $46.8 million for the three months ended June 30. Analysts surveyed by Thomson First Call predicted a loss of $34.2 million, or 32 cents a share, on revenue of $34.1 million.

For the same period last year, Amylin lost $39.4 million, or 42 cents a share, on revenue of $7.6 million.

The latest quarter reflects the launch of two diabetes drugs, Symlin and Byetta, as well as revenue from the San Diego-based company's collaboration with

Eli Lilly

(LLY) - Get Report

to develop and market Byetta.

Although Byetta was the subject of some favorable research at

a recent scientific conference sponsored by the American Diabetes Association, some analysts question how fast, and how far, this drug can grow.

"We believe that

Wall Street estimates are becoming less optimistic," says Merrill Lynch's Thomas McGahren in a research report released before the earnings announcement. "Penetrating a market with a twice-daily injectable

product where patients are accustomed to taking oral drugs will be challenging." He's neutral on the stock. He doesn't own shares, but his firm is a market maker in Amylin, and Merrill says it seeks to do business with companies mentioned in research reports.

A stronger view comes from Yaron Werber of Citigroup Smith Barney, who dropped his rating to sell from buy. In a report issued late Wednesday, Werber told clients that his survey of diabetes specialists indicates Byetta "will be a smaller-than-expected seller." He adds that expectations for rapidly accelerating sales growth next year "appear unfounded."

Werber says competition from a host of other drugs -- now before the Food and Drug Administration or in late-stage clinical trials -- will help depress Byetta's sales growth. He doesn't own shares, but his firm is a market maker in the stock.

If Byetta's sales growth and volume fall short of expectations, they'll represent another blow to Eli Lilly's efforts to expand its diabetes franchise.

On Tuesday, Lilly said the results of a recent clinical trial for the experimental drug ruboxistaurin showed a reduction in the occurrence of vision loss in patients with diabetic retinopathy. This is a condition that leads to damage in small blood vessels in the eye and can cause vision loss and blindness. Lilly said it would file an application with the FDA by the end of the year. That's the good news.

The bad news is that Lilly also was hoping to get FDA approval for the drug to treat diabetic peripheral neuropathy, a nerve ailment associated with diabetes that produces numbness, tingling and pain. However, two late-stage clinical trials showed that patients taking the drug didn't experience a statistically significant benefit vs. patients taking a placebo.

On Thursday, Lilly's stock lost $1.04, or 1.9%, to $53.90.