Alkermes shares fall on FDA’s Bydureon rejection
Shares of Alkermes Inc. fell in afternoon trading after federal regulators declined to OK a diabetes drug candidate that Waltham-based Alkermes is collaborating on with other drug companies.
Shares of Amylin Pharmaceuticals Inc. plummeted and partners Eli Lilly & Co. and Alkermes also suffered after the Food and Drug Administration declined to approve the diabetes drug candidate Bydureon.
Wall Street had been viewing the drug as a potential revenue reviver for Amylin, which has seen weak sales of the diabetes treatment Byetta since it was linked to cases of acute pancreatitis in 2008.
Byetta is an injectable treatment taken twice daily, while Bydureon, or exenatide LAR, would be taken once weekly. The FDA move is negatively compounded for Amylin because of the highly competitive market for new diabetes drugs.
Amylin shares fell $10.33, or 50 percent, to $10.16 in midday trading. The stock traded at $9.51 earlier in the session, its lowest point since April 2009. Meanwhile, shares of Eli Lilly fell $1.66, or 4.4 percent, to $35.79. Shares of Alkermes, which is working on the long-acting technology for Bydureon, were down $3.79, or 26 percent, to $10.71 in afternoon trading. Elsewhere, the broader markets rose, rebounding from a down day Tuesday.
The move marks a major setback for the companies as competitors pull ahead in the regulatory and marketing race for diabetes treatments.
The FDA approved Novo Nordisk's once-daily diabetes drug Victoza in January. That drug had been under review for two years as safety concerns slowed down the regulatory process. The FDA approved it with a warning over the risk of thyroid cancer.
At issue for Bydureon is the potential for heart-related side effects. The FDA wants more testing done, focusing on the drug's effect on patients' heart rates. Amylin and its partners hope to respond to the FDA's request by the end of next year.
The FDA had previously extended its review of the application after asking for more information on manufacturing and a risk mitigation plan for Bydureon.
The diabetes treatment market already includes Merck & Co.'s Januvia and Bristol-Myers Squibb Co. and AstraZeneca's Onglyza. Those drugs are technically in a different class from Bydureon and Victoza, but work with the same goal of controlling blood sugar levels.
Wall Street analysts took a cautious to negative view on Amylin shares, citing the competitive disadvantage the FDA decision creates.
Credit Suisse analyst Catherine Arnold downgraded Amylin shares to "Neutral" from "Outperform", saying the FDA decision reduces the company's peak potential and cash flow outlook. She slashed the stock's target price to $16 from $30.
"In the near term, Amylin shares are likely to drop below our base case value of $16, as the market seeks to assess the downside risk of no Bydureon and awaits cash flow guidance to solidify risk/reward on the stock," she said in a note to investors.
She added that partnership renegotiation or a potential acquisition is more likely for the San Diego company.
Meanwhile, she reaffirmed a "Neutral" rating for Eli Lilly and cut the price target to $34 from $35, saying the delay will limit the potential contribution to the company's earnings. The Indianapolis company is scheduled to report its quarterly results Thursday.
"Given Eli Lilly's need for new products and its interest in the diabetes and GLP-1 space, we believe they will continue to invest in current Byetta to help foster market growth," she said. GLP-1 is a class of diabetes treatment that works by controlling blood sugar levels.
Meanwhile, Eli Lilly could possibly obtain a stake in Amylin to help the company manage its way through a potentially cash-strapped period, the analyst wrote.