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Volume 3, Number 18 

May 3, 2006 

Amylin's shares are off sharply from their recent highs because demand for its diabetes drug Byetta is outpacing the company's production capabilities. More specifically, if growth continues at its current month-over-month pace of 20 to 25 percent for 10 mg pens and in excess of 40 percent for 5 mg pens, the company would experience some delays in filling prescriptions sometime this summer.

Amylin's management is showing good foresight to address this issue now and we expect that stock will rebound strongly once investors re-access the situation. Our recommended option is a buy at current prices. 

Crude oil prices are backing off today in the wake of the government's inventory data, which showed a further build in the nation's commercial crude stocks to just shy of 345 million barrels. The headline figure from this data is that inventories stand at their highest level since 1998. Of course in the context of U.S. consumption running above 20.7 million barrels a day and some 5 percent above where it was in 1998 that figure isn't all that important. 

Geopolitics are certainly adding to the energy market's concerns, but simple supply and demand continue to drive the markets. On the demand side, for instance, China's crude oil imports in March climbed 11 percent from a year earlier to a near record high. Shipments of crude into the world's number-two oil consumer reached 3 million barrels per day according to Chinese officials. 

On the supply side of the equation, OPEC's output has been sliding since last September. In February, for instance, the latest month for which we have data, the cartel produced some 736,000 barrels a day less than 5 months prior. While unrest in Nigeria deserves some of the blame, production out of the Persian Gulf countries was also off considerably during that same time frame. And Saudi Arabia, the world's swing producer, is producing no more now than it did in June, 2004. The fact that the Saudis, or any other OPEC country for that matter, have been unable to increase output to offset Nigeria's declining production is worrisome to say the least. 

We're seeing signs that others are beginning to wake up to the energy crisis. For instance, we now have U.S. Energy Secretary Bodman warning that high oil prices will be around for the next two to three years before suppliers are going to be in a position to meet demand. Energy prices will no doubt remain high for much longer than that. And in the short run, the bulls remain firmly in control in the energy pits, despite today's retreat.