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Summary

  • AstraZeneca’s diabetes drug Symlin may one day enter the $6 billion Alzheimer’s drug market.
  • There are over 5 million Americans suffering from Alzheimer’s.
  • AstraZeneca is in need of a blockbuster drug to offset its patent cliff.
  • AstraZeneca offers one of the best dividends on the market.

A relatively new diabetes drug, Symlin (pramlintide), developed by AstraZeneca's (NYSE:AZN) Amylin Pharmaceuticals has been found to combat a major component of Alzheimer's disease (AD) and may offer a new treatment option for the millions of Americans with the memory-robbing condition. AD is a degenerative brain disease that slowly destroys memory and thinking skills and eventually destroys the ability to carry out the simplest tasks. Today there are 5 million suffers in the U.S. with AD and there is no effective treatment, and the cost of caring for AD patients is over $100 billion per year, $6 billion of those dollar are on drugs that only treat the symptoms. According to the National Institute on Aging the disease is expected to grow to 14-16 million by the year 2050. It is also estimated that if a drug can both treat the symptoms and prevent the onset of the disease it could reach sales of $14 billion by 2020.

Symlin, taken as an injection at mealtime, was approved in 2005 by the FDA for Type 1 and Type 2 Diabetics who use insulin. It is an antihyperglycemic agent which mimics the activity of amylin, a naturally occurring hormone which is secreted together with insulin and is involved in post-prandial glucose control. Symlin allows patients to use less insulin, lowers average blood sugar levels, and substantially reduces what otherwise would be a large unhealthy rise in blood sugar that occurs in diabetics right after eating. Other than insulin analogs, Symlin is the only drug approved by the FDA to lower blood sugar in type 1 diabetics.

AstraZeneca is developing the BACE inhibitor drug AZD3293 for AD, however researchers from Boston University School of Medicine found that Symlin reduces amyloid-beta peptides in the brain that contribute to AD and can improve learning and memory. The study, published online in the journal Molecular Psychiatry, also found AD patients have a lower level of amylin in their blood compared to people who do not have AD, which suggested Symlin may provide a new avenue for treatment and for early diagnosis of AD. Lead research Wendy Qiu, M.D., associate professor of psychiatry and pharmacology at BU commented on the findings. "Surprisingly, injections of amylin or pramlintide into the AD models reduced the amyloid burden as well as lowered the concentrations of amyloid-beta peptides (Aβ), a major component of AD in the brain." Pramlintide is an analog of a natural occurring peptide, amylin, produced by the pancreas."

Given the encouraging findings on the study, AstraZeneca may have two drugs in the future to battle AD. However, if Symlin continues to show to be effective in combating AD the drug may find regulatory approval quicker than other drugs currently being tested. Dr. Qui pointed out that drugs already approved for other diseases which penetrate into brain, and may be effective against AD, like Symlin, could quickly bypass years of regulatory hurdles required for new medications.

While the diabetes market is enormous and expected to reach over $55 billion in 2017, it is also one of the most competitive. Over 25 million Americans suffer from the disease, and 350 people million suffer worldwide. Large and small pharmaceutical companies such as MannKind (NASDAQ:MNKD) with its inhalable insulin powder Afrezza or the Israeli company Orman (NASDAQ:ORMP) with its oral insulin ORMD-0801 are racing to develop novel diabetes treatments.

Amylin was acquired in what was technically a joint purchase by Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca for $5.3 billion in 2012, for its diabetes line of drugs. In Dec. 2013 AstraZeneca then bought out Bristol's portion for an upfront price of $2.7 billion and up to $1.4 billion in regulatory, launch and sales-related payments. With the purchase AstraZeneca will extend its pipeline of drugs and own intellectual property and global rights for the development, manufacture and commercialization of diabetes drugs, including Symlin, Forxiga, Onglyza, Kombiglyze, Byetta and Bydureon

Symlin for the most part has been looked at as a niche diabetes drug as it is only used for those taking insulin, and requires an injection at mealtime. In 2013 Symlin had sale of $84 million, more than doubling its sales for 2012, but hardly a blockbuster drug. Therefore if AstraZeneca can find other indications for the drug it could raise Symlin's sales revenue substantially.

An earlier study, to extend the indication of Symlin as an obesity treatment, was halted in 2011. Amylin was working with the Japanese giant Takeda Pharmaceutical Co (OTCPK:TKPYY) to develop the drug in combination with metreleptin, an analog of the natural hormone leptin, but due to commercial developments and the evolving dynamics the obesity drug market both companies decided to end the study while in phase 2.

AstraZeneca has a market cap of $81.18 billion. Its stock has risen almost 10% YTD, closing on March 25th at $64.38 per share. It offers one of the best dividends available at $1.90 per share and has a yield of 4.33%. The company recently received the Japanese Ministry of Health, Labor and Welfare approval on Forxiga, as a once-daily oral treatment for type 2 diabetes. AstraZeneca hopes Forxiga will one day be a blockbuster competing against such drugs as Johnson & Johnson's (NYSE:JNJ) Invokana. Forxiga was approved by the FDA's in February and is sold under the name Farxiga in the U.S.

As like many other large drug companies AstraZeneca has been hit with a number of successful drugs falling off patent. The company could use another large revenue producing drug as it is soon to lose its patent on Nexium, its acid reflux medicine which brought in revenue of $3.9 billion in 2013. AstraZeneca is not taking the patent loss lightly, but has become proactive in developing a new sales strategy to maintain as much of Nexium's revenue as possible by developing Nexium Direct, a mail order service giving customers a 30 to 90 day supply at a discounted rate of roughly $25 per month, similar to the cost of many generics.

Conclusion

AstraZeneca has not performed as well in the past few years compared to some of its competitors, and is still reeling from the patent cliff. However, the company looks stronger as it is developing a solid pipeline with a number of drugs the company expects approval in the next few years, including the Alzheimer's drug AZD3293. The company currently has 11 drugs in late-stage clinical trials and 19 more product candidates in studies.

I do see that if more tests show that Symlin can fight Alzheimer's, AstraZeneca may well have a future blockbuster in its profile. That being said, I would look at the company today more as an excellent long term hold as a dividend stock as the company forecasts revenue in 2017 to be similar to that of 2013. However if Symlin does indeed combat AD, AstraZeneca may have a sleeping blockbuster of a product in the future, as earlier noted the AD drug market is at $6 billion and growing.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: AstraZeneca's New Diabetes Drug May Also Combat Alzheimer's Disease