Amylin, Alkermes Sit in Suspense For FDA Verdict on Once-Weekly Diabetes Drug

3/10/10Follow @xconomy

It’s pins-and-needles time for employees and investors at San Diego-based Amylin Pharmaceuticals and Waltham, MA-based Alkermes. The FDA has a deadline of Friday, March 12, to say whether it has approved a new drug from Amylin and Alkermes (oh yeah, and Eli Lilly too) which seeks to transform diabetes treatment with the first once-weekly injectable drug to control blood sugar.

Amylin (NASDAQ: AMLN) has the most riding on the FDA’s decision of whether to approve exenatide once-weekly, because this product with billion-dollar potential will likely be its biggest sales driver for years to come. Alkermes (NASDAQ: ALKS) developed the technology to make the drug last an entire week in the bloodstream, and it stands to collect a 7.5 percent royalty on worldwide sales, without spending a nickel on manufacturing or marketing. Lilly, Amylin’s marketing partner is a huge company that needs a stream of hits to keep earnings up.

For those in need of a refresher, here goes. This diabetes drug is a first-of-its kind treatment that takes a key ingredient in Amylin’s top-selling drug, exenatide (Byetta), and packages it with a biodegradable polymer from Alkermes to make it last longer in the blood. The drug has shown in clinical trials it can control blood sugar more effectively with just one shot a week, compared with the existing drug, which requires two shots a day. The new convenience also means patients shouldn’t have to worry as much about the peaks and valleys of drug concentration in their bloodstream that leads to a lot annoying monitoring through pinpricks.

If the drug is approved by the FDA, it catches on in the marketplace, and more patients stick with their prescribed regimens, it could have an impact on the diabetes epidemic. An estimated 25 million people in the U.S. have diabetes, and as the obesity epidemic rages on, the incidence of diabetes is expected to double over the next 25 years, Amylin CEO Dan Bradbury told me back in January.

Richard Pops

Richard Pops

The drug has about an 85 percent chance of winning regulatory approval sooner or later, and could generate worldwide peak sales of $2 billion by 2017, JP Morgan analyst Cory Kasimov, in a note to clients March 8.

“This is every bit as meaningful for us as a company as it relevant to patients,” says Richard Pops, the CEO of Alkermes. “Exenatide once-weekly really has the potential to affect many, many, many patients with this disease in this country, and around the world.”

Investors in both Amylin and Alkermes have been bidding up those stocks to near 52-week highs this week in anticipation of good news from the FDA. But there could be wrinkles in how this plays out.

There are four possible scenarios that Kasimov mapped out earlier this week, which I’ll sum up here.

—First, the FDA could approve the drug with some standard boilerplate warning about risk of patients getting pancreatitis, but not a more severe Black Box warning about risk of getting thyroid cancer. The odds aren’t great (15 percent probability), but that would drive Amylin and Alkermes stock up … Next Page »

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