Amylin Facing Crisis of Confidence

The plunge in Amylin’s (AMLN) valuation over the last few months indicates a serious collapse in confidence in the group as a whole, and with a focus on diabetes and obesity, two of the most challenging areas of drug development at the moment, it is not hard to see why.

In August, before Byetta was associated with pancreatitis, which raised concerns about the whole class of GLP-1 agonists, the company was valued at $4.83bn. Wednesday’s share price decline left it with a market value of $1.09bn. Those Amylin investors which earlier this week said they want to find ways to “improve shareholder value”, including looking for potential buyers, have their work cut out.

Wednesday’s news that the FDA has questioned whether batches of exantide LAR made by both Amylin and partner Alkermes (ALKS) are equal dealt the stock another body blow. Shares in the US company, which have already lost 71% this year, dropped a further 26% to close at $7.94, a seven-year low.

Until the FDA decides whether it wants further trials, which could significantly delay approval, shares in the company are unlikely to recover, and investors pushing for change at the company have their hands tied.

Improving Value

Only on Monday, Eastbourne Capital, which owns a 12.5% stake in Amylin, said it wanted to explore ways to improve shareholder value at the company. The group is in famous company; Carl Icahn raised his stake in Amylin to 7.33% in September.

Eastbourne did not say how it intended to improve value. However, any attempts to sell off the Byetta revenue stream would be tricky. Not only is the impact of the association with pancreatitis not fully known, but also the competition the drug might or might not face, and when.

Finding a buyer for the company would probably prove even harder. A look at Amylin’s pipeline reveals six clinical-stage compounds, and several earlier projects, none of which are in particularly attractive or promising areas at the moment.

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With the withdrawal of Sanofi-Aventis’ (SNY) obesity pill Acomplia by European regulators last month, the outlook for so-called “lifestyle” drugs is gloomy. Safety hurdles are likely to be so high now, that even the big drug makers with big pockets are thinking twice about pursuing research.

Similar safety concerns exist for diabetes, and hurdles for approval could still go higher following a vote in early July by an FDA advisory committee, in favour of recommending that all new anti-diabetic agents be scrutinised for long term cardiovascular risk factors. How, and to what extent, the regulator will decide to implement those recommendations remains to be seen.

The first clue is likely to come with the advisory committee meeting on March 2 next year for Novo Nordisk’s liraglutide, now called Victoza. The review of the once-daily GLP-1 agonist, viewed as fierce potential competition for Byetta, will be the first significant review of a new diabetes drug by the FDA following the GLP-1 agonist pancreatitis scare in August and the FDA panel on diabetes drugs in June.

With a standstill clause blocking a takeover of the company by Eli Lilly (LLY), key partner on Byetta, and the future of both Byetta and Byetta LAR unclear, it is hard to see what options for improving value Eastbourne has in mind. Fellow shareholder Carl Icahn has in the past managed to extract much higher value from assets than anticipated, the $6.5bn he sold ImClone for being an obvious example. It will be interesting and perhaps telling whether Mr Icahn decides to rise to the challenge this time, or chooses to cut his losses.

Disclosure: no positions

Comments

[Daniel Haszard:]

Eli Lilly's # 1 cash cow Zyprexa has been overprescribed and linked to a ten times greater risk of causing type #2 diabetes.
Byetta is treatment for the diabetes caused by the first drug.
WOW! Daniel Haszard Zyprexa patient who got the diabetes from it. zyprexa-victims.com

2008 Nov 14 11:56 AM

[nova:]

They most serious problem with Amylin is it management.

The most unexplained issue with Amylin is Eli Lilly (LLY), the key partner on Byetta. LLY has done nothing regarding to Byetta development clinical trials and its marketing or assisting Amylin in dealing with the FDA.

Since there is no possibility to substantially improve and/or change Amylin's Board and the management, the only one possibility left is to sell Amylin. The only potential buyer for Amylin is LLY. But it will not happen soon since LLY presently has no cash (following the purchasing of ImClone) or Amylin's Board desire to sell the company at this juncture.

It is pity to see what Amylin's Board and the management have done destroying the company value.

2008 Nov 14 10:58 PM