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.
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 about 25 percent, Kasimov estimates.
—Second, the FDA may approve the drug but slap on a severe Black Box warning on the prescribing information that tells doctors about a risk that patients might get thyroid cancer. A similar warning is on the label for Novo Nordisk’s liraglutide (Victoza). If this happens, Kasimov says the stocks will still go up, but investors may fret about whether large numbers of primary care doctors will be willing to prescribe it. He estimates there’s about a one in four chance this will happen.
—Third, and the most likely, the FDA delays the exenatide once-weekly application. This will come in what the agency calls a “complete response” letter, but it only asks for “minor” data from clinical trials that have already been completed. As long as the agency’s request is minor, such as asking for some additional data from a study known as Duration-5, then the companies can probably re-submit their application again by the end of June, and still win clearance for the U.S. market by the end of 2010. There’s a 50 percent chance this will happen, Kasimov says.
—Fourth, the FDA could issue a painful “complete response” letter that says the drug needs additional data from an ongoing clinical trial, or that it will need to wait for long-term follow up to prove that exenatide has a beneficial effect on cardiovascular health of diabetes patients. Amylin stock would probably dive 50 percent on this kind of nastygram, and Alkermes would drop 33 percent, Kasimov says. There’s maybe a 10 percent chance of that happening.
Pops wasn’t about to get into this sort of handicapping about what the FDA may or may not do on the eve of decision day for this product. But he did remind me of a state-by-state graphic produced by the Centers for Disease Control and Prevention which I’ve seen before but is still shocking every time I see it. It visually depicts how obesity rates have shot up since 1985.
It would obviously be better if people exercised more, ate less, and came down with fewer cases of diabetes. But barring that, the country is cruising toward staggering health bills for all the heart attacks, strokes, blindness, and limb amputations that stem from chronic diabetes. The drugmakers’ argument is a pretty familiar one—spend a couple billion on our drug, and save a few billion more over time on all the downstream effects of untreated diabetes.
“It’s an amazingly big problem,” Pops says. To borrow a phrase from some lawmakers who talk about “bending the curve” as a reference to curbing the ever-increasing U.S. healthcare bill, Pops says, “if more people keep getting Type 2 diabetes, you can’t bend the curve.”
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