Summary Of Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2011

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

Basis of Presentation

The information contained herein has been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X. The information as of September 30, 2011, and for the three and nine months ended September 30, 2011 and 2010, is unaudited. In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. The balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at that date, but does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For more complete financial information, these financial statements should be read in conjunction with the audited consolidated financial statements included in Amylin Pharmaceuticals, Inc.'s (referred to as we, us or Amylin) Annual Report on Form 10-K for the year ended December 31, 2010.

The accompanying consolidated financial statements for the three and nine months ended September 30, 2010 contain a reclassification of certain infrastructure costs from selling, general and administrative expense to research and development expense to conform to the current year presentation.

Revenue Recognition

Revenue Recognition

Net Product Sales

We sell BYETTA^® (exenatide) injection for the treatment of type 2 diabetes and SYMLIN^® (pramlintide acetate) injection for the treatment of type 1 and type 2 diabetes primarily to wholesale distributors, who, in turn, sell to retail pharmacies and government entities. Product sales are recognized when delivery of the products has occurred, title has passed to the customer, the selling price is fixed or determinable, collectability is reasonably assured and we have no further obligations. We record product sales net of allowances for product returns, rebates, wholesaler chargebacks, wholesaler discounts and prescription vouchers at the time of sale and report product sales net of such allowances. We must make significant judgments in determining these allowances. If actual results differ from our estimates, we will be required to make adjustments to these allowances in the future.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA) as amended by the Health Care and Education Reconciliation Act. There are a number of provisions in the new legislation that will impact the pharmaceutical industry through increased discounts and an expansion of government funded insurance programs. Beginning in January 2011, drug manufacturers provide a discount of 50 percent of the patient's cost of branded prescription drugs for Medicare Part D participants who are in the "donut hole" (the coverage gap in Medicare prescription drug coverage). Our rebate allowance includes an accrual for our estimated share of the donut hole costs associated with product sales made through September 30, 2011 and was calculated using historical Part D utilization information provided by the Center for Medicare and Medicaid Services and third party market research data. The rebate allowance provided each quarter will vary depending upon estimated utilization rates.

We record all United States BYETTA and SYMLIN product sales. With respect to BYETTA, we have determined that we are qualified as a principal based on our responsibilities under our contracts with Eli Lilly and Company, or Lilly, which include manufacture of product for sale in the United States, responsibility for establishing pricing in the United States, distribution, ownership of product inventory and credit risk from customers.

Revenues Under Collaborative Agreements

Revenues under collaborative agreements consist of the amortization of product and technology license fees, milestone payments and royalties earned. Upfront product and technology license fees under multiple-element arrangements are deferred and recognized over the period of such services or performance if such arrangements require on-going services or performance. Non-refundable amounts received for substantive milestones are recognized upon achievement of the milestone. Any amounts received prior to satisfying these revenue recognition criteria are recorded as deferred revenue. Royalty revenue is earned on annual gross margins for all exenatide products sold outside of the United States and is recorded based upon gross margins for such sales.

Collaborative Profit-Sharing

Collaborative Profit-Sharing

Collaborative profit-sharing represents Lilly's 50% share of the gross margin for BYETTA sales in the United States (see Note 6).

Accounts Receivable

Accounts Receivable

Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, product returns and chargebacks. Allowances for rebate discounts and distribution fees are included in other current liabilities in the accompanying consolidated balance sheets. Estimates for allowances for doubtful accounts are determined based on existing contractual obligations, historical payment patterns and individual customer circumstances. The allowance for doubtful accounts was $1.6 million and $1.0 million at September 30, 2011 and December 31, 2010, respectively.

Fair Value Measurements

Fair Value Measurements

In January 2010, we adopted a newly issued accounting standard which requires additional disclosure about the amounts of and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements. In addition, effective for interim and annual periods beginning after December 15, 2010, this standard requires additional disclosure and requires an entity to present disaggregated information about activity in Level 3 fair value measurements on a gross basis, rather than as one net amount. As this accounting standard only requires enhanced disclosure, and because we do not have any Level 3 fair value measurements, the adoption of this standard did not impact our financial position or results of operations.

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. The guidance prioritizes the inputs used in measuring fair value into the following hierarchy:

Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2	Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3	Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about considerations that market participants would use in pricing.

There have been no transfers of assets or liabilities between the fair value measurement classifications.

The following table summarizes the assets and liabilities measured at fair value on a recurring basis (in thousands):

	Fair value measurements as of September 30, 2011
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	107,397	$	107,397	$	0	$	0
Short-term investments		338,429		338,429		0		0
Restricted cash		15,000		15,000		0		0
Deferred compensation plan assets		7,393		7,393		0		0
	$	468,219	$	468,219	$	0	$	0
Liabilities:
Deferred compensation plan liabilities	$	7,393	$	7,393	$	0	$	0
	$	7,393	$	7,393	$	0	$	0

Research And Development Expenses

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries and bonuses, benefits, non-cash stock-based compensation, license fees, milestone payments due under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials and develop drug materials and delivery devices and associated overhead expenses and facilities costs. Reimbursements for research and development costs under collaborative arrangements are recorded as a reduction to research and development expenses and are recognized in the period in which the related costs are incurred. Clinical trial costs, including costs associated with third-party contractors, are a significant component of research and development expenses. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with such activities based on our estimate of management fees, site management and monitoring costs and data management costs. Actual clinical trial costs may differ from estimates and are adjusted in the period in which they become known.

Per Share Data

Per Share Data

Basic and diluted net loss applicable to common stock per share is computed using the weighted average number of common shares outstanding during the period. Shares used in calculating basic and diluted net loss per common share exclude the following common share equivalents (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Antidilutive options and awards to purchase common stock		331		1,798		429		1,656
Antidilutive shares underlying convertible senior notes		9,416		15,238		11,655		15,238
		9,747		17,036		12,084		16,894

In future periods, if we report net income and the common share equivalents for our convertible senior notes are dilutive, the common stock equivalents will be included in the weighted average shares computation and interest expense related to the notes will be added back to net income to calculate diluted earnings per share.

Accounting For Stock-Based Compensation

Accounting for Stock-Based Compensation

We utilize the fair value method of accounting for stock-based compensation arrangements. Accordingly, we expense the estimated fair value of non-cash stock-based awards granted to our employees over the requisite employee service period, which is generally the vesting period.

Total estimated stock-based compensation was as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Selling, general and administrative expenses	$	4,983	$	4,606	$	15,762	$	18,027
Research and development expenses		2,427		2,424		7,515		9,207
	$	7,410	$	7,030	$	23,277	$	27,234

Non-cash stock-based compensation expense during the three and nine month periods ended September 30, 2011 and 2010 related to stock-based awards consisting of stock options, time and performance based restricted stock units and employee stock purchase rights. At September 30, 2011, total unrecognized estimated compensation cost related to non-vested stock-based awards granted prior to that date was $44.2 million, which is expected to be recognized over a weighted-average period of 2.1 years. We issued 0.3 million shares upon the exercise of stock options in the nine months ended September 30, 2011.

In addition to the stock-based compensation discussed above, we also recorded expense associated with our Employee Stock Ownership Plan, or ESOP, and our 401(k) plan. The breakdown of non-cash ESOP and 401(k) expense by operating statement classification is presented below (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Selling, general and administrative expenses	$	2,569	$	2,403	$	7,633	$	8,860
Research and development expenses		1,764		1,618		5,282		6,771
	$	4,333	$	4,021	$	12,915	$	15,631

Consolidation

Consolidation

The consolidated financial statements include our accounts and those of our wholly owned subsidiaries, Amylin Ohio, LLC, and Amylin Investments, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.