UPDATE: FDA Seeks More Info In Rejecting Amylin Diabetes Drug

The Food and Drug Administration denied approval of a long-acting version of diabetes drug Byetta, sold by Amylin Pharmaceuticals Inc. (AMLN) and Eli Lilly & Co. (LLY), because the agency needs more information about the drug's product label and risk-management plan.

Amylin said it aims to submit its reponse to the FDA "in the next few weeks." Despite the delay in approval, the FDA letter was seen as good news by the market because the agency didn't request additional clinical trials, which would have cost time and money.

The drug, injected once a week as opposed to the twice-daily version on the market, faces heavy competition in the diabetes market and the timing of its launch is seen as crucial to its eventual success. It was developed using technology from Alkermes Inc. (ALKS).

The treatment--commonly referred to as Byetta LAR, even though its brand name is Bydureon--is vital for Amylin's future growth and hopes for a profit. It also is important for Lilly as it tries to offset a massive patent cliff for many of its major drugs.

Shares of Amylin recently rose 14% to $23.09, a new year high. Alkermes also hit a new 52-week high, rising 18% to $14.38, while Lilly added 0.2% to $36.

Amylin's stock is up more than 42% this year, but it remains well below its all-time high of $50.81 from 2007. Short interest has almost doubled since November, with 11.5% of shares outstanding being bet that the stock will drop, which could add volatility to trading.

"The complete response letter looks fairly benign," analyst Yaron Werber with Citigroup wrote in a note to clients.

Werber recommended that clients buy the stock on any weakness related to the news, with the assumption that there are no unexpected details revealed on an 8:30 a.m. ET conference call.

The FDA letter also seeks "clarification" related to the manufacturing process but does not contain requests related to a December inspection of its Ohio manufacturing facility by the agency. All the concerns raised by the FDA from that visit have been addressed, the company said.

On Friday, the FDA posted documents related to that inspection, briefly sending Amylin's shares down as investors feared that they were a sign of manufacturing issues.

Expectations for the drug are high. Credit Suisse analyst Catherine Arnold recently projected $2.1 billion in sales for the drug in 2015, and Barclays analyst Jim Birchenough sees sales eventually exceeding $3 billion in the U.S. alone.

There was once high hopes for the sales trajectory of Byetta, which proved to be disappointing following its 2005 launch, and investors have been looking forward to the new version ever since. Amylin has never turned a profit and is unlikely to do so until the launch of Byetta LAR.

Byetta had sales of $797 million in 2009. For both versions of Byetta, profits are split for the U.S., and Lilly pays a royalty for sales overseas. Alkermes collects about a 7% royalty on sales.

The drug's prospects were boosted by January's FDA approval of Novo Nordisk A/S's (NVO) Victoza after a 20-month review.

Both Victoza and Byetta are similar to a human hormone in the digestive tract known as GLP-1, which boosts insulin production in order to regulate blood-sugar levels. Byetta was the first such drug in the class, but others are developing drugs in the class, including Roche Holding AG (RHHBY), GlaxoSmithKline Plc (GSK) and even Eli Lilly.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com

Amylin Pharmaceuticals, Inc. (MM) (NASDAQ:AMLN)
Historical Stock Chart
From Jun 2024 to Jul 2024