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May 4, 2005 

Update

Amylin Pharmaceutical's conference call this afternoon went a long way to clarifying investors' misperceptions surrounding Byetta and the FDA's labeling of the drug. The company also reinforced the market potential of the drug. And the market potential for Byetta is big.

There are 6 million patients in the US suffering from Type II diabetes that are being treated with one or both of the currently available oral therapies. Yet only 60 percent of these patients are achieving the recommended blood sugar levels. Of those, approximately half have demonstrated a willingness to change their treatment regimen in an attempt to achieve proper blood sugar levels. 

Byetta offers a significant leg up over currently available treatments in that it essentially allows the body to self-regulate blood sugar levels and it has demonstrated significant weight loss among those taking it. Weight gain is a common side effect with other existing treatments. The side effects from Byetta are mild nausea and in rare cases hypoglycemia. Moreover, the drug's trials showed very low dropout rates of only 3 percent attributed to these side effects. 

Annual revenue per patient using Byetta should exceed $2,000 a year. So capturing just a small percentage of the market in the next few years will result in annual revenue in excess of $1 billion. And if Byetta is approved as a stand-alone therapy for Type II diabetes, the market could be even bigger. 

Nothing in the conference call could lead us to believe that the market is acting rationally here with respect to Amylin's share price. Fortunately, since we're not holding call options we don't have to worry about time value wasting away on us while we wait for investors to come around to our way of thinking on Amylin. The upside on this trade remains considerable. And with the approval of two first-in-class diabetes drugs under its belt, this trade is less risky now than when we first recommended it.