Fallout from FDA Bydureon Decision - Winners and Losers

10/20/2010

Fallout from FDA Bydureon Decision - Winners and Losers

By now, you know that the FDA issued a complete respnse letter to Amylin, Lilly and Alkermes late yesterday that refused to approve their application for Bydureon and asked for a full tQT study. The impact is the the firms will not only NOT get their approval now, but will need to collect more data that will delay its next filing until at least the end of 2011 - with approval at least 6 months later in mid-2012. Let's examine the fallout.

The biggest loser is Amylin. The company was depending on the approval of Bydureon to bolster its revenues. As a result of the FDA decision, its stock plummeted nearly 50% today reducing its market capitalization by half - or approximately $1.5 B if you are counting. This could make Amylin a takeover target by Lilly.

Alkermes also stood to earn significant royalties on sales post approval of Bydureon. Its deal calls for it to get 8% royalties on the first 40 million units soldand then slides down to 5.5% It gets 0% on $0 in sales -- at least for now. Alkermes stock dropped 29% today on the FDA news.

By comparison, the third partner in crime, Eli Lilly's shares fell only 4.8% today. However, the failure was the second late stage disappointment in the past couple of months - coming close on the heels of its failed Alzheimers drug this summer. Lilly's CEO, John Lechleiter has been touting the strength of Lilly's pipeline all year as a justification for the company not becoming involved in large merger activity and also depending on its in-house R&D prowess to create new products. Now, he is facing the largest patent cliff in the industry and the cupboard is starting to look bare. One would expect more scrutiny and questions coming his way on the Lilly development strategy. All he has to do is come up with answers.

According to the Pharmalot blog, analysts are saying that Lilly will need to look at cutting more costs, will face increasing pressure to "do a deal", or will need to partner some of its pipeline products. The pressure on Lilly will only continue to mount. Lilly may need to look at acquiring Amylin, Alkermes or both to shore up its investment.

The Winner? Well, it looks like Novo Nordisk benefits from the Bydureon turn down. Just yesterday, Novo's stock took a nearly 5% hit on the news Pfizer was teaming up with Biocon to enter the diabetes market with insulin and insulin analogs. What a difference a day makes? Today, Novo's stock leapt by more than 8% on the Bydureon news - its biggest gain in more than 2 years. Novo's competitive product, Victoza is now seen to have clear sailing in terms of competition for an extended period while the Amylin, Lilly, Alkermes triumverate comes up with recovery plan.