Confusing Cross-Currents With Amylin's Data

by: Stephen Simpson, CFA

Biotech investing is known for having more than its fair share of equivocal, confusing, or hard-to-interupt data. That's just really the price for sitting down at the table. The case of Amylin Pharmaceuticals (AMLN) seems to be taking that to a new level, though, and investors can be forgiven for not knowing quite what to do with this one.

Bad News First – DURATION-6

Amylin, along with partners Lilly (NYSE:LLY) and Alkermes (NASDAQ:ALKS) dropped a bombshell on investors last week when they announced disappointing results from the companies' DURATION-6 study of Bydureon, a once-weekly version of Amylin's successful Byetta GLP-1 analog for Type 2 diabetes. The study, designed as a marketing study and not a pivotal clinical trial, was destined to show similar efficacy to Novo Nordisk's (NYSE:NVO) once-daily Victoza; the idea being that similar efficacy from Bydureon along with a more convenient dosing schedule and softer side-effect profile would establish Bydureon as the market leader if and when it gets approval.

Unfortunately for the AMLN-LLY-ALKS triumverate, it didn't work out that way. This study showed the lowest-ever seen efficacy rate for Bydureon (as measured by HbA1c) at 1.3%, lower than the 1.5% seen for Victoza. While the side-effect profile did look better for Bydureon (less than half as much nausea, vomiting, and diarrhea), the drop-out rates were similar.

That news could easily take hundreds of millions of dollars out of the sales potential of Bydureon, assuming the current QT safety study is positive and the FDA even approves the drug for marketing.

Not surprisingly, Amylin got crushed and Alkermes was off significantly as well.

Good News – Encouraging Monthly Data

Amylin shareholders badly needed some good news and they got a little bit on Thursday. Amylin, Lilly, and Alkermes announced top-line results from a Phase 2 study of a monthly-formulation of exenatide (the drug that underlies Byetta and Bydureon), and the results were encouraging.

In a 20-week study of 121 patients, the monthly formulation of exenatide showed HbA1c reductions ranging from 1.3% to 1.5% across low, medium, and high-dose groups. By comparison, the Bydureon (once per week) arm showed a 1.5% reduction.

Not only is that 1.5% reduction (presumably in the high-dose group) encouraging in terms of its approvability and marketability, this study also at least partially reestablishes Bydureon's efficacy at 1.5% and makes DURATION-6 seem more anomalous. Given all of the ups and downs of Amylin's long corporate history, it really would be par for the course if an early-stage study of a monthly formulation reestablished the efficacy credibility of its weekly drug.

Although the company did go into the specifics of side-effects, they did report that headaches were the most common issue (and that is normal for GLP-1 drugs). Interestingly, the company reported nausea as the second most common issue in the monthly group, while diarrhea was #2 in the Bydureon group. Not only is that relatively encouraging (the nausea often goes away after a few weeks with Bydureon), the completion rate for the study was 90% - suggesting the side-effects were not enough to lead people to quit.

This could ultimately be a very big deal for the company. If it sounded easy to market a once-weekly injected GLP-1 analog against a drug requiring a daily injection, once a month should be better still. And while it is actually true that patients do get over their needle fear and get used to the injections, once per month is still more convenient and a possibly better side-effect profile would just be a cherry atop the sundae.

Where Now?

Given the similarities in pharmacokinetics between the weekly and monthly formulations, the ongoing QT study for Bydureon is absolutely vital. If the companies cannot convince the FDA of the safety of the drug, it is extremely unlikely that the agency will grant approval.

Even beyond that, though, the picture is still very cloudy. It seems a safe bet that Novo Nordisk will market the heck out of that failed DURATION-6 study and really accentuate the fact that Victoza administration is easier and more comfortable. That, and Novo Nordisk is also working on its own weekly formulation.

Apart from that, the attractiveness of the diabetes market is such that a lot of companies have well-developed clinical pipelines in this area. Bristol-Myers Squibb (NYSE:BMY), AstraZeneca (NYSE:AZN), Roche (OTCQX:RHHBY) and Lexion Pharmaceuticals (NASDAQ:LXRX) are all developing a new class of diabetes drugs called SGLT2 inhibitors that appear to offer very solid efficacy (about 1% HbA1c reduction) with a very clean safety profile. While the mechanism of action for SGLT2 inhibitors suggests that they can be safely combined with other diabetes drugs and may not be an "either/or" choice for prospective Bydureon patients, many other companies are working on drugs that would be straight-up competitors.

What A Strange Trip It Will Be

Of course, there is no reason to think that things are about to get any smoother for Amylin or Alkermes (Bydureon matters much less to Lilly's long-term future). The company has to successfully complete the QT study on Bydureon, resubmit the drug (assuming the safety data is good enough), and wait for FDA approval. Along the way will be the ups and downs of data from the monthly formulation, Amylin's obesity drug efforts, and preclinical programs.

While there is still a solid chance that Amylin has one or more $1B-plus drugs in its bag, the road is not going to smooth or short and investors need to have a lot of patience to take on this stock.

Disclosure: I am long AMLN, LXRX, RHHBY.PK.

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