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Amylin's Bydureon Facing Final Stretch

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Shares are rebounding but Bydureon has a long way to go before it can be sold in US. Market success is questionable.

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Beware of optimistic phrases from biotech executives like "clear path forward" or "final hurdles" in the race to get a new drug approved for sale.

Shares of Amylin Pharmaceuticals (AMLN) and Alkermes (ALKS) rebounded in recent months from the October surprise rejection of the experimental diabetes drug, Bydureon. Amylin rose as much as 8% today after the company said US officials laid out guidelines for a study required for approval of what many investors consider a potential blockbuster drug.

Bydureon, which is being developed with larger drug maker Eli Lilly (LLY), still has a number of believers. In fact, the companies' efforts to get approval for the product will be one of the most closely watched new drug events over the next year or so. The drug is important for all three companies.

Let's not uncork the champagne just yet. If successful, this drug is still unlikely to get approved until sometime in 2012. By that point, a rival drug, Novo Nordisk's Victoza, probably dominates the market.

Victoza was approved a year ago. Novo expects the drug to have annual sales of $1 billion by next year. Some analysts say the drug's yearly revenue will eventually top $2 billion.

"Our checks already suggested that the once-daily Victoza would be a more worthy competitor to Bydureon than investors had been expecting, and now it could have an almost three-year head start," Robert W. Baird analyst Thomas Russo says. He has a hold rating on Amylin's stock.

Amylin hasn't fully recovered from its October plunge when the company lost half its market value. Don't expect the stock to fully come back until additional data is available to show the company can satisfy the Food and Drug Administration. The agency rejected the drug for the second time last fall because of concerns over cardiovascular risk. To state the obvious: The FDA is very cautious about approving drugs with any safety issues. Bydureon is actually a long-acting version of Amylin's approved treatment Byetta. That drug had sales of $559 million last year, down 16% from 2009.

Amylin is going forward with additional studies to satisfy the FDA's concerns and convince the agency that Bydureon should be approved for sale. With the agency's guidance on what's expected in additional safety studies, the company hopes to resubmit its application in the second half of this year and begin selling the drug in 2012.

Amylin CEO Daniel Bradbury told investors on a conference call that his company is trying to "clear the final hurdles" for getting approval. Sales and marketing chief Vince Mihalik added, "we now have a clear path forward to potential approval and for launch preparation."

Shares of Amylin rose to $16.30 in early afternoon trading today following the company's update on Bydureon and release of fourth-quarter results late Wednesday. (Amylin lost $152 million last year.) Today's price is a rebound from the $11.03 following the FDA rejection but still below the $23.82 peak last year. Alkermes, which developed the fast-acting technology for Bydureon, rose 3% to $13.35 this afternoon. Lilly gained 1% to $35.33.

But investors should be wary, the bears warn.

"New regulatory requirements and additional uncertainties point to a delayed and smaller opportunity for Bydureon," Russo says.
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No positions in stocks mentioned.
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