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The Food and Drug Administration (FDA) was scheduled to reveal last Friday, March 12th, the fate for a once-weekly form of the popular diabetes drug Byetta. Eli Lilly (NYSE:LLY), Amylin Pharmaceuticals (AMLN) and Alkermes (NASDAQ:ALKS) are collectively developing the drug, named Byetta LARS. LARS stands for long acting release formula. In clinical trials, patients treated with the once-weekly formulation showed a statistically superior reduction in blood sugar than those taking standard Byetta. Byetta is currently approved as a twice daily injection option for Type 2 diabetics and has annual sales of about $700 million.

In January, the FDA approved the new diabetes drug Victoza, developed by Novo Nordisk (NYSE:NVO). Victoza is in the same class as Byetta, called GLP-1 receptor agonist. These drugs are designed to slow glucose absorption in the gut. This allows a Type-2 diabetic’s slow insulin response to catch up. The GLP-1 agonist class also attaches to an appetite receptor in the brain and decreases hunger, leading to weight loss in patients. However, there have been reports of other side effects for GLP-1 that are far less appealing than lower blood sugar levels and weight loss.

The New Class of Type 2 Diabetes Drugs: Treating One Disease by Causing Another?

Byetta has been publicly linked to cases of severe pancreatitis since mid-2008. Some Byetta patients that developed pancreatitis died, and currently there are close to 40 separate liability cases that have had a negative effect on sales. Eli Lilly and Amylin have defended Byetta's safety track record, but that has become more difficult since the FDA has also now warned health care professionals that Byetta had been causing kidney problems, including renal failure. The long-acting version of Byetta has been feared to cause the same problems, and perhaps more so since it will be in a patient’s system for a full week.

The recent FDA's approval of Victoza, administered as a once-daily injection, has led to speculation that Byetta LARS will clear its last major regulatory hurdle. In clinical trials, pancreatitis occurred more often in patients who took Victoza than in patients taking other diabetes medicines. That does not sound like a clinical trial endpoint that the FDA should find appealing. In animal studies, Victoza caused tumors of the thyroid gland in rats. The FDA approval of Victoza came with a Black Box warning regarding the drug's thyroid tumor risk. Of course, that wouldn't comfort a diabetic who gets his blood sugar under control only to find out he has thyroid cancer. If these drugs present risks that are unknown, then the FDA should require longer testing.

The FDA and Analysis Paralysis

The safety risks associated with Type 2 diabetes drugs have confounded the FDA recently. In late February, the Senate Finance Committee issued a 334 page report which concluded the findings of a two-year investigation after a 2007 study published in the New England Journal of Medicine reported a link between GlaxoSmithKline's (NYSE:GSK) Avandia and heart attacks. The 334-page report by the Senate Finance Committee criticized the FDA, stating that agency overlooked or overrode safety concerns found by its staff. According to the Senate report, FDA scientists estimated in July 2007 that Avandia was associated with approximately 83,000 heart attacks since the drug came to market.

The report highlighted other damning decisions by the FDA. In 2007, an FDA panel recommended by a vote of 22-1 that Avandia should remain on the market despite an analysis showing links to increased risk of heart attack. The vote was not binding, but a suggestion to FDA regulators. At the same meeting, the panel also voted 20-3 in support of data that showed Avandia increased the risk of cardiac ischemia in patients with the most common type of diabetes. However, even in 2010 the decision making process of the FDA with regard to Avandia continues to bewilder.

Just after the senate report was made public, the FDA stated that patients should not stop taking the diabetes drug. Janet Woodcock, director of the FDA's Center for Drug Evaluation and Research, said during a teleconference with diabetes doctors that the FDA feels "it is time for a thorough evaluation of all the cardiovascular risks with that drug". They apparently are in no rush, since they planned an advisory panel meeting for July while the drug remains on the market.

Calling for Sunshine, Followed by Severe Thunderstorms

Considering all of the above, I expect the FDA decision to be a positive for Eli Lilly, Alkermes, (and mainly) Amylin, but feel it will only serve as the precursor to a much larger story that has been brewing in recent years. Approval for Byetta LARS, with the expected Black Box warnings seen for Byetta twice daily, may harm the market share of the aforementioned drugs from Novo Nordisk and GlaxoSmithKline. The label may contain warnings, but the unfortunate aspect of many of these new Type 2 diabetes drugs is that a Black Box has become common. Any approval, even with warnings, may have significant positive effect for Amylin, however this smaller firm's reliance on the Byetta program may have consequential results if safety concerns persist or grow.

Currently, analysts will debate which of these Type 2 drugs will gain the most market share, and later they all will act as if they share in the opinion that the real question lays in how long the FDA will allow these potentially dangerous drugs to remain on the market. The recent comments by the FDA's Janet Woodcock regarding Avandia, are more comforting than the actual actions. The problem is that the FDA's Black Box warnings do not always protect a Type 2 diabetic's body from developing a more serious disease than the one the medication intended to treat. We should find out today if the market for Type 2 diabetes drugs grows more crowded with drugs that not only treat their disease, but potentially cause another.

Disclosure: The author holds no positions in the mentioned stocks.

Source: Byetta LARS: How the FDA's Analysis Paralysis May Aid Amylin