Amylin Reports and more problems for Abbott
Yesterday afternoon Amylin Pharmaceuticals (NASDAQ:AMLN) announced their 2006 second quarter results. According to the company revenues hit $118.1 million in the quarter, with net product sales of $108.8 million. Byetta hit $98.6 million in sales while Symlin achieved $10.2 million in sales, both numbers beating Street estimates.
As much as Diabetic Investor would like to gloat over these results and Amylin’s continued march towards $50 per share and beyond, we can only say we told you so.
With Byetta and Symlin sales accelerating and one of the strongest pipelines in the industry Amylin is well positioned for continued success. For some time Diabetic Investor believed that Amylin’s partner with Byetta, Eli Lilly (NYSE:LLY) would eventually make a play for the company. As Lilly’s second quarter results point out Byetta sales are one of the few bright prospects in an otherwise dismal diabetes revenue report. At this point we believe that Amylin is more valuable than Lilly and any takeover would be a huge mistake. For reasons that no one can understand Lilly continues to ignore their free fall in diabetes. Without their relationship with Amylin, Lilly really has nothing new to offer in the diabetes space. Frankly Lilly has proved their ineptitude by not aggressively pursuing Amylin.
Speaking of ineptitude Abbott (NYSE:ABT) issued an update to a prior notification reminding users of its FreeStyle® and FreeStyle Flash® blood glucose meters in the United States to check to make sure their meter is displaying the correct unit of measure and strip calibration code each time they test. According to a press release issued by the company on July 20, 2006, “More recently, it has been reported that in rare instances, the meter may become inoperable or may revert to reset condition.”
Abbott isn’t the only blood glucose monitoring company to experience this problem or have other problems with their monitors. At one time or another all of the Big Four monitoring companies have made a similar announcement. Diabetic Investor sees a bigger problem here that reveals more about the BGM market as a whole. As the BGM has consolidated into the hands of four players controlling over 85% of the market competition for market share has become intense. At the same time margins are being squeezed as companies use aggressive pricing to gain share. Throw in the fact that market growth has fallen below double digit rates and average strip usage has barley budged over the years and you have a serious problem. Finally, although not a threat today continuous glucose monitoring systems have the potential to hurt BGM companies by taking way their most coveted patients; insulin using patients.
To deal with this environment where controlling costs has taken on greater importance BGM companies have made the decision to use one test strip in multiple meter formats. Abbott has the FreeStyle, FreeStyle Flash and now the FreeStyle Freedom™ all using the same test strip. At LifeScan OneTouch Ultra Test Strips work with three different OneTouch® meters, OneTouch® Ultra®2, OneTouch® Ultra® and the OneTouch® UltraSmart®. Bucking this trend is Roche and Bayer, although it would not surprise Diabetic Investor if both companies joined the party.
Since meters are given away for free and the real money is in the test strip, meter manufacturing has become an extreme effort to control cost. Does it really surprise anyone that recalls and meter problems have increased dramatically since the BGM market has become the domain of the Big Four. Sadly consumers have little choice but to deal with the problems as third party payors are also more concerned over costs and care little about quality. Diabetic Investor wonders if someone has to die before something is done here. All it would take is an insulin using patient administering too much insulin as a result of an inaccurate meter reading. Patients with diabetes have enough to worry about already; the quality of their meter shouldn’t be among them.
David Kliff
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