Is the worst over and it’s time to buy or will declines continue?
Given the pathetic state of the market some investors see this as a buying opportunity. While others believe that the worst is still to come and more selling lies ahead. Looking at the landscape of diabetes related companies Diabetic Investor sees both opportunity and problems ahead.
The biggest opportunity just happens to be the area where there is the biggest risk, namely the future of GLP-1 therapy. Four companies are heavily invested here, Alkermes (NASDAQ:ALKS), Amylin (NASDAQ:AMLN), Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO). As you can see by the table all four companies are trading well below their 52 week highs with Amylin suffering the most as their entire future rests on GLP-1 therapy.
While Diabetic Investor is optimistic on the future for GLP-1 therapy we’re not yet ready to recommend buying this group. The key here is one of timing. The FDA has scheduled an advisory panel to review Novo’s GLP-1 Liraglutide on March 2, 2009. Prior to this meeting the agency will release the agenda for the meeting and will reveal the questions they are looking to answer. This agenda and set of questions will be the first clue investors get as to how serious the FDA sees the pancreatitis issue. Diabetic Investor suspects that the FDA will wait for the panel’s recommendation before completing the likely label changes to Byetta.
Company | Symbol | Current Share Price | 52 Week High | % Decline | Rating |
Alkermes | ALKS | $ 13.23 | $ 18.78 | 29.55% | HOLD |
Amylin | AMLN | $ 19.36 | $ 51.10 | 62.11% | HOLD |
Dexcom | DXCM | $ 6.41 | $ 10.91 | 41.25% | BUY |
Lilly | LLY | $ 46.41 | $ 59.82 | 22.42% | HOLD |
MannKind | MNKD | $ 3.09 | $ 12.14 | 74.55% | AVOID |
Merck | MRK | $ 33.87 | $ 61.62 | 45.03% | BUY |
Novo Nordisk | NVO | $ 52.94 | $ 73.73 | 28.20% | HOLD |
Insulet | PODD | $ 16.06 | $ 27.85 | 42.33% | HOLD |
Between now and then look for investors to focus on the weekly prescription numbers for Byetta. Already we have a slight decline in new prescriptions which should come as no surprise. The question investors is this a temporary or long term trend. Will Byetta suffer a fate similar to Avandia and see prescriptions fall into the abyss or can Amylin and Lilly contain the damage.
Our instincts and all available data point towards Byetta getting a label change but NOT a Black Box warning. Unless there is something we don’t know about Liraglutide its difficult imagining the FDA not approving the drug. This would clear the way for Amylin to submit the long acting once a week version of Byetta to the agency sometime before the end of the second quarter of 2009. Should this scenario play out as predicted Amylin stands to be the big winner here with Alkermes, Lilly and Novo riding on its coattails.
One company that should experience an immediate and positive impact from the GLP-1 issues is Merck (NYSE:MRK) as sales of their type 2 medication Januvia should see further prescription gains. As readers know Diabetic Investor is not overly impressed with Januvia but there is no denying that the drug will gain share over concerns with Byetta and pancreatitis. In what can only be termed the luckiest steak ever Januvia if nothing else has been the beneficiary of three major diabetes drug controversies. First there was Avandia and concerns over adverse cardiovascular events. Galvus, their closest competitor from Novartis (NYSE:NVS) is bogged down at the FDA and unlikely ever to see the light of day in America. And now there are concerns with Byetta. Januvia may not be the most powerful drug but so far it hasn’t been tainted by any major adverse events.
One company to avoid is MannKind (NASDAQ:MNKD). Try as they might to claim otherwise MannKind’s future went down the tubes when Pfizer (NYSE:PFE) pulled Exubera from the market and Novo and Lilly shut down their inhaled insulin projects. The company is currently trying to reconfigure itself however without a major partner Diabetic Investor sees more trouble ahead.
Turing our attention to the device side, Dexcom (NASDAQ:DXCM) looks worthy as they should announce a partnership for their hospital based system. With the Navigator from Abbott (NYSE:ABT) failing in the market, there only serious competitor in the diabetes market is Medtronic (NYSE:MDT). While Medtronic has done an admirable job with continuous monitoring Dexcom has relationships with Animas and Insulet (NASDAQ:PODD) and will soon have an integrated systems for both pumps.
Finally we come to Insulet who has run into some growing pains. As we have pointed out before this isn’t all that uncommon for a company like Insulet and we suspect the situation will soon be under control. Diabetic Investor sees an opportunity here but believes we need to see them execute before making a move here. Longer term our outlook remains unchanged it’s only a matter of time before a bigger player swallows Insulet and makes investors very happy.
