March 10, 2010 / 11:11 PM / 9 years ago

PREVIEW-UPDATE 1-Will FDA approve Amylin, Lilly diabetes drug?

* FDA decision on once-weekly Byetta expected Friday

* Taspoglutide pivotal data coming in June

* Amylin shares rise 6.5 percent (Recasts; adds analyst comment, background; updates share price)

By Deena Beasley

LOS ANGELES, March 10 (Reuters) - Investors are betting on a positive U.S. regulatory outcome this week for Amylin Pharmaceuticals Inc’s AMLN.O new diabetes drug, sending shares in the biotech company up as much as 7 percent on Wednesday.

The U.S. Food and Drug Administration is slated to decide on Friday whether to approve the long-acting diabetes drug, called Byetta LAR, being developed by Amylin and partner Eli Lilly and Co (LLY.N).

“The recent moves that we’ve seen in Amylin and Alkermes are being driven mostly by the upcoming (approval) date for Byetta LAR,” said Robert W. Baird & Co analyst Thomas Russo.

LAR is a more convenient once-weekly version of Amylin and Lilly’s Byetta, a twice-daily injection that had sales last year of $797 million. The new drug, also known as exenatide LAR, was developed with technology from Alkermes Inc (ALKS.O) that releases the drug at a controlled rate.

“I think the FDA will approve it,” said Summer Street Research analyst Carol Werther. “I think the question that people are wondering about is the timing. ... I expect it to be approved this year.”

Outright FDA approvals have become rarer as the agency grapples with the fallout from safety scares like the 2004 recall of arthritis drug Vioxx.

Byetta, used for patients with type 2 diabetes, has been associated with a risk of pancreatitis, a potentially fatal inflammation of the pancreas, and kidney function problems.

Amylin investors were cheered by the FDA’s approval in January of a similar drug — Novo Nordisk A/S’s (NOVOb.CO) Victoza. Both exenatide and Victoza belong to the GLP-1 class of drugs that stimulate insulin production in order to regulate blood sugar levels.

But the FDA approval of Victoza, a once-daily injection, included a boxed warning for the risk of thyroid cancer.

JPMorgan put the chance of a similar approval and warning for once-weekly Byetta on Friday at 25 percent, and said there is a 50 percent chance that the agency will ask for additional information, but no further clinical trials, before a final approval.

“In this scenario, we’d anticipate a second-quarter resubmission and a fourth-quarter approval,” JPMorgan’s Cory Kasimov said in a research note.

But BMO Capital Markets last week downgraded Amylin shares to “underperform” from “market perform,” citing a probable delay in approval of the drug because the FDA is likely to request additional clinical and pre-clinical data.

“A delay in LAR’s approval would significantly affect peak sales because it would give Victoza more time to establish itself in the market and take Byetta share, making fewer patients available for LAR,” BMO Capital Markets analyst Jason Zhang said in a research note.

He also said a delay would shorten the lead LAR has over another competitor, taspoglutide, “a drug that is probably as effective as LAR but seemingly more convenient.”

Taspoglutide, under development by Roche Holding AG ROG.VX and Ipsen SA (IPN.PA), is another experimental once-weekly GLP-1 drug for Type 2 diabetes.

Data from several pivotal-stage trials of taspoglutide are expected at the American Diabetes Association’s annual meeting in June.

In clinical trials, patients treated with once-weekly Byetta showed a statistically superior reduction in blood sugar than those taking standard Byetta.

Byetta is also widely used because it leads to weight reduction, in contrast to many other diabetes treatments that tend to cause weight gain.

Zhang estimates peak annual sales for once-weekly Byetta of around $1 billon, while Credit Suisse analyst Catherine Arnold recently forecast sales of more than $2 billion by 2015.

Shares of Amylin hit a new 52-week high of $21.00 on Wednesday, before closing at $20.90 with a gain of 6.5 percent. Shares of Alkermes hit a year high of $13.42 on Tuesday, but fell 2.8 percent to close at $12.56 on Wednesday. (Editing by Gerald E. McCormick and Richard Chang)

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