Cautious on Alkermes’ Surge

Highlights include Novo Nordisk (NVO - Snapshot Report), Alkermes, Inc. (ALKS - Analyst Report), Eli Lilly & Co. (LLY - Analyst Report) and Amylin Pharmaceuticals, Inc. (AMLN - Analyst Report).  

Early this morning, Amylin Pharmaceuticals, Inc. (AMLN - Analyst Report), Eli Lilly (LLY - Analyst Report) and Alkermes (ALKS - Analyst Report) announced that a New Drug Application (NDA) for Exenatide once weekly for type II diabetes has been submitted to the US FDA.

Exenatide once weekly is an investigational sustained release medication for type II diabetes that is injected subcutaneously and administered only once a week. Exenatide is the active ingredient in Byetta injection, which is currently available on the market for people with type II diabetes who are unable to achieve good glycemic control with common oral therapies. Exenatide once weekly is co-developed by Amylin, Eli Lilly and Alkermes.

Following the news, shares of the three companies all shot up, with Alkermes shares up the most at about 18%. But we are cautious on the straight approval of exenatide by the FDA. We have couple of concerns about Exenatide once-weekly prospects.

Our major concern about the Exenatide once-weekly program is the pancreatic inflammation reported for Byetta. Some patients developed hemorrhagic or necrotizing pancreatitis while on Byetta therapy. As a result, the Byetta label was added warning and precautionary language.  Physicians are also urged to remove patients for the drug upon the first signs of disease.

Recently, an FDA panel reviewing Novo Nordisk's (NVO - Snapshot Report) Liraglutide application for type II diabetes expressed concern over a study that indicated it might trigger thyroid cancer tumors in rodents. Both liraglutide and exenatide belong to the same class of drugs called GLP-1s. So far, according to data from both preclinical and clinical studies, we think Exenatide once weekly may have a better safety profile than liraglutide, but we are not sure if the FDA will exert tough rule on the safety concerns of Exenatide.

With these in mind, we tend to think the FDA may delay the Exenatide once-weekly approval. It is likely that the Duration-1 data may not be sufficient, and that the FDA may want to see data from other Duration (2, 3, 4) trials. Even with the Duration-2 data, the approval will be delayed at least by six months. Also, the FDA may require greater safety testing.

A meta-analysis across controlled clinical studies of three months or greater from the Byetta database showed no increased risk of cardiovascular events associated with exenatide use. This is good news for the companies. This analysis applied principles outlined in the FDA's guidance for evaluating cardiovascular risk in type II diabetes agents following the Avandia issues of 2007.

We downgraded Alkermes shares to Sell in early February 2009 based on bleak outlook of the company in the next few quarters. We maintain our Sell rating on ALKS even with the submission of NDA.