Earnings Round Up
Here is Diabetic Investor’s review of the earnings reports issued so far this week.
Given the reaction by the Street one might suspect that the company was headed for disaster. On Monday the company announced a fourth quarter loss of 57 cents a share while the street was expecting a loss of just 44 cents a share. The company also stated they were terminating their direct-to-consumer advertising campaign for Byetta. Although revenue for the quarter $222 million was higher than expectations, the street seemed annoyed with 2008 guidance.
While Diabetic Investor can understand the street’s frustration with the loss or guidance, the fact is they have created one of the best buying opportunities for long term investors. Here’s why:
1. 1. Byetta is headed for blockbuster status, in 2007 sales of Byetta achieved $636 million.
2. 2. Primary care physicians are embracing Byetta.
3. 3. LAR remains on track.
4. 4. Strong Pipeline.
It’s also worth noting the last time the stock traded below $30 per share was late August 2005. The bottom line is long term holders of Amylin will be amply rewarded. Almost forgot to mention that at current levels the company becomes an even more attractive target.
The good news for Lilly is they been able to stabilize their insulin franchise and sales of Byetta accelerating. The bad news is now that insulin sales have stabilized what can they do to regain share lost to Novo Nordisk (NYSE:NVO). As previously reported the company has introduced several new insulin pens as they have finally found religion and realize that delivery systems do make a difference. However, the introduction of these new pens merely levels the playing field for new patient starts. It’s unlikely that patients who have switched to Novo’s insulin will return to Lilly.
Based on comments made by the company’s during their conference call it would not surprise Diabetic Investor if the company went back on the acquisition trail to reinvigorate their diabetes unit. Nor would we be surprised if while searching for acquisition candidates the company looks beyond the drug arena and expands their search to include device companies as well.
Just as Abbott (NYSE:ABT) tried to put the best light on poor results, Roche is doing their best to sell the future instead of the present. While the company continues to be number one worldwide in glucose monitoring sales grew just 5% in 2007 compared to 2006’s rather lackluster results. Just how they plan on reinvigorating this unit remains a mystery as the new management team cannot seem to decide on which direction to go.
The fact is LifeScan and Bayer are gaining share with their easy to use monitors, while Roche and Abbott continue to lose share. Domestically LifeScan is the unquestioned number one while Bayer has taken over third place and is coming on strong. Although Diabetic Investor does not see Bayer overtaking Roche for the number two spot, if they don’t do something soon this once unthinkable thought becomes a greater possibility.
In a strange twist Roche primarily known for their blood glucose monitoring products has several interesting drugs under development. In the first half of 2008 the company plans on making a decision on their GLP-1 currently in phase II trials. More data on this product will be published this year and sources tell Diabetic Investor the drug has potential.
Finally a quick side note here. Another reason we like Amylin is that everyone else is trying to come out with their own version of Byetta and yet we have to see any of these products match the effectiveness and weight loss capabilities of Byetta. Liraglutide from Novo has proven effective at lowering A1c, yet does not appear to have the added benefit of weight loss. It will be interesting to see the data from Roche to see if their GLP-1 matches Byetta is just another Byetta wannabe.
Diabetic Investor can’t help but be just a little amused at all the interest in GLP-1’s from the street, a drug they all thought wouldn’t be used because it needed to be injected. Guess when Byetta crosses the $1 billion mark in sales they might realize that just because a drug is taken via injection does not necessarily limit its commercial potential.