Merck – Schering Plough Deal Implications
With Merck’s (NYSE:MRK) offer to buy Schering Plough (NYSE:SGP), Roche’s decision to increase their bid for the remaining shares of Genentech (NYSE:DNA) and Pfizer’s (NYSE:PFE) acquiring Wyeth (NYSE:WYE) M&A activity in the drug sector is picking up. Watching all this activity with great delight are the shareholders of Amylin (NASDAQ:AMLN). Already benefiting from Carl Icahn’s interest in the company, Amylin shareholders are sitting in the catbirds seat.
While it may not seem like it, Amylin shareholders should have even bigger smiles when they look at the FDA’s decision on Takeda’s DPP-4 alogliptin. Although the company has not publicly stated on how they plan to respond to the FDA one thing is certain, Januvia from Merck continues to be the luckiest drug in the world. Already a blockbuster, sales of Januvia will likely maintain their momentum making it even more difficult for any competing DPP-4, when or should we say if, they ever come to market.
Should the FDA ask for even more study data on alogliptin this would put the drug even further behind Januvia. Takeda also knows that liraglutide from Novo Nordisk already at the FDA and the long-acting once-a-week version of Byetta soon to be at the FDA, are coming. This makes Takeda’s decision even more difficult. Perhaps Takeda believes as Diabetic Investor does that the FDA is using alogliptin as a test case for their new guidelines for approving diabetes drugs. Since no one, not even the FDA, seems to know where this is going Takeda just might decide it’s not worth the time and money to pursue alogliptin here in the US and do as Novartis (NYSE:NVS) did with their DPP-4 Galvus and withdraw its US application.
Additionally the company must be concerned that with a new administration bent on controlling health care costs, an administration that has yet to name a new commissioner for the FDA. Without a leader to provide direction the FDA appears to be a ship without a rudder, going somewhere, anywhere without a clue where it will eventually drop anchor. As Diabetic Investor pointed out earlier in the New Year this appointment will have a major impact on the entire drug industry. Without leadership the drug approval process has slowed to a crawl as agency staffers aren’t sure which direction the new administration wants to go in.
Given the concern over rising health care costs there are some who believe the FDA will follow a path similar to the British system where drugs are not only approved based on efficacy and safety but cost effectiveness as well. With so many me-too drugs on the market many believe there is no reason to approve two or three drugs in the same class without a clear and demonstrated cost benefit. It’s possible we are headed for a system where a drug like alogliptin cannot simply be as good as Januvia to gain approval. Takeda could have the additional hurdle of proving alogliptin is clearly BETTER than Januvia and therefore worthy of its cost to the patient. Why approve alogliptin if it merely does exactly what Januvia does. Do we really need multiple DPP-4’s on the market if they all do the same exact thing?
Even if Takeda believes they can navigate the choppy waters known as the FDA, they are acutely aware that GLP-1 therapy has potential to change the paradigm for treating type 2 diabetes. Besides offering solid glucose control, GLP-1 therapy offers the additional benefit of weight loss and no apparent risk of adverse cardiovascular events. Even for patients using GLP-1 therapy who do not lose weight, it’s rare to see any patient using a GLP-1 actually gain weight at worst the drug is weight neutral at best it combines solid glucose control and weight loss. During last year’s American Diabetes Association annual conference Amylin and Novo Nordisk went out of their way to point out the cardiovascular benefits of their respective GLP-1’s. In a strange twist of events the new FDA guidelines could actually benefit the entire GLP-1 class of drugs.
Liraglutide and Byetta LAR also bring with them two additional benefits, ease of use and frequency of dosing. Both liraglutide and Byetta LAR are delivered via injection using a set dose, liraglutide once-a-day and Byetta LAR once-a-week. The patient does not need to monitor glucose levels; they simply inject the same amount either once a day or once a week. For anyone who believes type 2 patients will not use an injectable therapy option need only look at the success of Lantus, the world’s number one selling insulin, to dispel this myth that injection therapy options won’t be adapted in the type 2 patient population. It’s no accident that besides Amylin and Novo Nordisk, GlaxoSmithKline (NYSE:GSK), Roche and Lilly (NYSE:LLY) are actively developing their own GLP-1 options.
With the only approved GLP-1 and the best GLP-1 under development, Amylin is becoming more valuable by the day. Add in Mr. Icahn’s interest in the company, the current drug approval environment and pressure on drug companies to do deals that smile on the faces of Amylin shareholders keeps getting bigger.
About the only thing that could turn all those smiles into frowns is the FDA. Amylin has yet to hear from the FDA on the label change for Byetta or approval as a monotherapy. Novo faces an FDA panel meeting in early April that could well decide the fate of the entire GLP-1 class of drugs.
Diabetic Investor, like so many, will not venture a guess as to what the FDA will do or which direction the agency will choose to follow. At the moment it’s easier to accurately predict the upcoming NCAA college basketball tournament than what the FDA will do. What we do know is with each passing day Amylin is becoming more valuable and the number of potential buyers are increasing exponentially. The question is will the FDA rain on Amylin’s parade?
