Amylin Gets a Boost From Its Diabetes Drug Approval

by Barry Cohen | January 31, 2012 8:56 am

Amylin Gets a Boost From Its Diabetes Drug Approval

After a long and rocky road, Amylin Pharmaceuticals (NASDAQ:AMLN[1]) finally has Food & Drug Administration approval of its once-a-week treatment for the most common form of diabetes. The OK for Bydureon is a milestone that may just make the San Diego-based biopharma company an attractive partner for members of Big Pharma eager to grab a share of the growing diabetes treatment market. Potential buyers include Roche (PINK:RHHBY[2]), Novartis (NYSE:NVS[3]), Johnson & Johnson (NYSE:JNJ[4]) and Takeda.

Amylin investors certainly welcomed the news. Whether it was the takeover talk or Bydureon’s market potential, the company’s shares have climbed more than 17% since Friday’s approval. However, the boost in share price to $14.26 is of little consolation to shareholders who were unfortunate enough to have bought the stock in the 2006-2008 period. At that time, it was trading at or about $50.

Unless a prospective acquirer is willing to pay an outrageous premium, Amylin’s stock price is unlikely to return to that $50 range in the near future. But Bydureon does give the 25-year-old company and its shareholders hope that it could finally turn a profit. After all, analysts say the drug could become a billion-dollar seller[5].

As reported on InvestorPlace.com[6] in November, more than 275 million people suffer from diabetes across the globe, and this population is expected to exceed 350 million by 2030. The global market for diabetes management, including drugs, accounted for $41.9 billion in 2010 and is likely to grow to $114.3 billion in 2016, according to a new report published by Transparency Market Research[7],  titled “Global Diabetes Market: Drugs & Devices (2011-2016).”

Bydureon has struggled to get FDA approval since the drug was first submitted to the agency in 2009. Amylin was finally able to get it over the finish line by showing Bydureon didn’t cause suspected heart problems. European marketing approval came last June.

Bydureon is an injectable, extended-release version[8] of an older Amylin diabetes drug, Byetta, which is administered twice daily. The new edition is designed to work by helping the body make more insulin, which can reduce high blood-sugar levels.

Bydureon will go head-to-head with the Novartis‘ (NYSE:NVS[3]) Victoza, which is another of the so-called called GLP-1 receptor agonists. Long-acting drugs in the same class are currently being developed by both GlaxoSmithKline (NYSE:GSK[9]) and Lilly (NYSE:LLY[10]). As reported on InvestorPlace.com[11] in early November, Lilly recently severed a nine-year partnership with Amylin after the two companies argued over Lilly establishing a diabetes drug relationship with Germany’s Boehringer Ingelheim. Despite the breakup, Amylin will have to pay Lilly $1.2 billion over time from sales of Bydureon.

What could hurt Amylin even more is losing the marketing muscle Lilly could have put behind Bydureon in the U.S. and in Europe.  The company will need all the firepower it can muster to go head-to-head with powerful Novartis and its Novo Nordisk unit. The latter recently demonstrated its commitment to protecting the Victoza franchise by hiring celebrity chef Paula Deen to promote the drug.

That move, however, may backfire and actually help Amylin. Critics have pounced on Deen for suddenly reversing course — funded by a diabetes drug maker — after years of promoting recipes in fat and sugar.

As of this writing, Barry Cohen is long NVS, JNJ, LLY and GSK.

Endnotes:
  1. AMLN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMLN
  2. RHHBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=RHHBY
  3. NVS: http://studio-5.financialcontent.com/investplace/quote?Symbol=NVS
  4. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ
  5. a billion-dollar seller: http://www.nytimes.com/2012/01/28/health/bydureon-a-diabetes-drug-from-amylin-wins-fda-approval.html
  6. InvestorPlace.com: http://investorplace.com/2011/11/bristol-myers-bmy-astrazeneca-azn-diabetes-drug-dapagliflozin/
  7. Transparency Market Research: http://www.transparencymarketresearch.com/
  8. extended-release version: http://online.wsj.com/article/SB10001424052970204573704577187600650286634.html
  9. GSK: http://studio-5.financialcontent.com/investplace/quote?Symbol=GSK
  10. LLY: http://studio-5.financialcontent.com/investplace/quote?Symbol=LLY
  11. InvestorPlace.com: http://investorplace.com/2011/11/amylin-stumbles-after-lilly-pulls-partnership-plug/

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