The first half of this year, Amylin Pharmaceuticals CEO Dan Bradbury was absorbed in the closest thing corporate America has to political warfare—a boardroom challenge from billionaire Carl Icahn and another unhappy shareholder, Eastbourne Capital. The second half has been more about doing the basics Amylin (NASDAQ: AMLN) must do if the San Diego diabetes specialist is ever going to enter the top tier of big, profitable biotech companies.
Now that the dust appears to finally have settled on the proxy fight—new director Paulo Costa was elected the chairman last month—Bradbury has been back hammering away at the company’s need to make sure it nails the potential blockbuster diabetes drug in its pipeline. Yesterday, he was happy to talk about it by phone while he visited Amylin’s new biotech drug factory in West Chester, OH.
The importance of Amylin’s new factory to its future is hard to overstate, so there’s good reason for the CEO to drop in and make sure the troops keep their collective eye on the ball. Amylin and its partner Eli Lilly have made a $500 million investment in the factory, dating back to December 2005, in order to meet market demand for what they hope will be the next big thing for diabetes, exenatide once-weekly. This plant, which now has 250 employees, is getting ready to undergo an FDA inspection in the next six months as Amylin and Lilly seek clearance to start selling the drug in the U.S. It’s the only place in the world with the expertise, and capacity, to meet the first three years of market demand for exenatide once-weekly, which will seek to grab big market share among the 25 million people in the U.S. with diabetes.
To hear Bradbury tell the story, this is the time to execute on the fundamental game plan with things like manufacturing, and not for Monday morning quarterbacking about whether the coach is calling the right plays.
“Certainly in the first half of the year there were a lot of distractions for me. I have more time now to focus on actually running the business as opposed to board issues,” Bradbury says, during a break from meetings with Amylin’s Ohio staff. “It’s all about execution at the moment.” He adds,”We need to make sure everyone is fully on board with where we are as a company. The launch of exenatide once-weekly next year is critical to the future of the company.”
Why does getting this new drug right matter so much? Amylin generates almost 90 percent of its revenue from exenatide (Byetta), a novel peptide drug that was first approved by the FDA in April 2005 for patients who weren’t able to control their blood sugar with existing meds. The drug has gone on to become a commercial success, generating $678.5 million in sales last year, just its third full year on the market.
But the existing product has its limits, partly because it must be injected twice-daily. So Amylin and Lilly have sought to make this drug a lot more appealing to millions of patients by obtaining a license to drug delivery technology from Cambridge, MA-based Alkermes (NASDAQ: ALKS). That technology encapsulates the same peptide in a polymer microsphere that slowly dissolves in the bloodstream, so patients only need to get stuck with a needle once a week, not twice a day.
This new-and-improved drug has generated clinical trial data so far that Bradbury says are good enough to beat the biggest selling drugs in the diabetes market—Merck’s sitagliptin (Januvia), Takeda Pharmaceutical’s pioglitazone (Actos), and Sanofi-Aventis’ insulin glargine (Lantus). Amylin and Lilly have completed their clinical trials, and turned in their application to the FDA during the heat of the proxy battle in May. The company now expects to hear a decision on whether they can start selling the product by the first week of March, Bradbury says.
“We think we have a unique value proposition for physicians and patients,” Bradbury says.
Investors are clearly focused on this exenatide once-weekly program, but they aren’t showing a lot of confidence that Amylin will maximize this opportunity. The stock has lost about a third of its value over the past year, closing yesterday at $13.13. It has burned through a breathtaking $1.87 billion of investment since it was founded in September 1987, according to its most recent quarterly report. Even though Amylin sells two drugs for diabetes, exenatide and pramlintide (Symlin), it has never been profitable.
Even in biotech, where it takes decades and sometimes hundreds of millions to develop a new drug, the bleeding is supposed to stop at some point, especially when a company has more than one product on the market. Last November, Amylin cut 340 jobs in an effort to curb operating expenses. The company eliminated another 200 sales rep jobs in May, with an eye toward becoming cash-flow positive by the end of 2010.
Entering this year, Bradbury says, Amylin laid out five strategic goals to get things going in the right direction, and he says he’s been repeating the mantra to every department of the company lately.
Here are the five goals, and some comments on what Bradbury had to say about each of them during our conversation:
—No. 1. To boost revenue from its existing product, exenatide, for diabetes. Amylin shares tumbled last fall after the FDA warned physicians about the risk of pancreatitis in patients taking exenatide. The company has been gathering data on adverse events since then and sharing it with the FDA, and hopes to answer the questions about pancreatitis through an update to the drug’s FDA-approved prescribing information, Bradbury says. Obviously, the company will push to make sure the tone of the update doesn’t freak out the average doc.
—No. 2. Bringing exenatide once-weekly to patients as quickly as possible. This means no screw-ups in the drug application, responding to FDA questions, or in the manufacturing process, where a lot of biotech companies stumble. If this factory isn’t ready to pass FDA scrutiny, then investors are going to ask some really hard questions about what the company spent the $500 million on. “It wouldn’t be useful for much else” besides making exenatide once-weekly, Bradbury says.
—No. 3. Growing revenue from the company’s second marketed diabetes drug, pramlintide (Symlin). This drug only generates a little more than 10 percent of Amylin’s sales, and its performance was flat in the second quarter compared with a year ago. I didn’t really bother to ask about it, and Bradbury didn’t say much about this.
—No. 4. Continuing development of potentially breakthrough therapies for obesity. This is one area that’s been overlooked by investors. Amylin has high hopes for its experimental combination of pramlintide and a genetically modified form of leptin, for obesity. This drug has the drawback of being injectable, competing against an emerging field of oral pills, although the Amylin treatment showed impressive clinical trial results in July, and just might be a dark horse to keep an eye on for the treatment of obesity.
—No. 5. Lowering expenses to shorten the path to profitability. Amylin made a big round of cuts in May when it eliminated 200 sales jobs with an eye toward saving $45 million a year starting in 2010. Amylin has also reworked its partnership will Eli Lilly so that Amylin’s small force of 325 reps calls on endocrinology specialists and other frequent prescribers of diabetes meds, while Lilly casts a wider net by focusing on primary care docs as well as endocrinologists.
To keep these partners on the same page, Amylin and Lilly have set up a shared business unit in San Diego called ExenatideOne. This attempt at more seamless partner relations was something dissident shareholders demanded from Amylin during their proxy challenge, although Bradbury, sounding a little irritated, pointed out that Amylin was already doing this in April, before the dissidents started making their demands. Regardless of who’s idea it was, he says having Lilly and Amylin people working together in a San Diego office will help with communication.
“I personally believe this will result in more effective and efficient decision making between Lilly and Amylin,” Bradbury says.
If Amylin can execute on even two or three of those five initiatives—or even just get the one big thing right with exenatide once-weekly—then shareholders will probably have pretty short memories about all the nasty things said during last spring’s proxy fight. Bradbury sure sounds like he wants to forget it. He repeated the company’s five-point plan to me not once, but twice yesterday, to drive home the point that he’s focused on operations instead of defending against palace coups.
“The five things that we have to do comes off the top of my head very quickly, because I’ve been saying it all year,” Bradbury says. “This is a mantra I’m driving through the organization. It’s crystal clear for everybody here what they need to do to make Amylin successful.”
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