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For Big Pharma, Diabetes Means Big Business


Treating the disease is 12% of the world's health-care expenditure.

Seeing shades of blue? On November 14, the whole globe will be seeing them, too. The International Diabetes Federation (IDF) is hosting World Diabetes Day and asking that monuments around the globe be lit blue as a way to shed light on the diabetes epidemic.

"The world cannot afford to lose the battle against diabetes. We need to stop people before they start the diabetes journey," said Professor Jean Claude Mbanya, President of the IDF. "For those already living with diabetes, we need to ensure that they receive effective diabetes care and education to help them manage their disease."

The IDF has hosted the day since 1991 and it was chosen because it marks the birthday of Sir Frederick Banting, the first to discover insulin. The event aims to educate people around the globe about the spread of the disease and how it can be prevented.

Diabetes is a disease that affects 285 million, or 7%, of the adult population in the world, according to the IDF. The disease commonly comes in two types -- type 1 is an autoimmune disease that cannot be prevented and typically begins early in life, whereas type 2 diabetes is a preventable condition that tends to affect older, overweight patients. It's a leading cause of blindness, amputation, kidney failure, and stroke. Type 2 diabetes can be prevented through a rigorous diet and exercise program. Yet, many people never learn to control their diabetes and require management of the disease through insulin and other drugs.

The care of the disease will cost the world economy $376 billion in 2010 -- about 12% of the world's total health-care expenditure, says the IDF. That number is expected to jump to $490 billion by 2030.

Denmark's Novo Nordisk (NVO) is one of the leading companies in diabetes treatment. It makes several different iterations of insulin that can be used to control glucose, the body's natural sugar, for either short or extended periods of time depending on a patient's need. The company's diabetes care unit pulled $5.6 billion in the first nine months of this year.

Novo Nordisk is currently working on newer generations of insulin treatments that will be safer for patients and less likely to push their glucose levels to unsafe lows. These next-generation insulins are currently in phase-three clinical studies and the company expects to present them to the FDA for regulatory approval in 2011.

Despite the Danish company's dominance of the insulin market, it's still trying to find its footing in other areas of diabetes care. A class of drugs called GLP-1 that control the rate of insulin secretion is rapidly becoming one to watch for Big Pharma and its investors. This class of drugs provides patients with an added bonus: weight loss.

Novo Nordisk's GLP-1, Victoza, has been approved in Germany, England, and Denmark. The once-daily injectible has yet to get approval in the US due to the development of thyroid tumors during the animal-testing phase of the product. The company says it's done extensive research to show that this wouldn't be a problem that would translate to humans.

The only GLP-1 currently on the market is Eli Lilly (LLY) and Amylin Pharmaceuticals' (AMLN) Byetta. While the twice-daily injectible has been a blessing for the millions of patients who currently take the drug, Byetta came under fire in August 2008 when the FDA announced that six patients who had been taking the drug had developed severe pancreatitis. The condition can release toxins into the bloodstream and has been known to develop in patients with diabetes. Each of the six patients required hospitalization; two died. Several other cases linking pancreatitis to Byetta cropped up in the months following. The companies are currently tied up in 39 separate liability cases concerning the drug.

But Byetta has since recovered and now has an updated label that includes a warning about pancreatitis. Other additions to the drug's label include an indication for monotherapy, which will increase patient eligibility and expand the market for Lilly and Amylin.

Lilly and Amylin split the revenues of Byetta 50/50 in the US, with Lilly getting 100% of the sales in the rest of the world. The drug pulled in $171.1 million in US sales in the third quarter of this year, down 4.9% from the year prior. In a recent SEC filing, Amylin said the drop reflects a slow in prescriptions after the pancreatitis announcement by the FDA.

Amylin didn't reply to requests for comment.

Tom Russo, an analyst with Robert W. Baird, says the sales of the drug have stabilized, but that he doesn't expect them to get back to pre-pancreatitis levels.

Investors eagerly await March 2010, when Amylin's latest iteration of Byetta -- exenatide once weekly -- faces FDA consideration for approval. This will be a major driver for the stock and could have repercussions on how diabetes is treated in the future.

Editor's Note: See also, Big Pharma Scrambles for a Piece of the Vaccine Pie.

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