Why the Street is Wrong on Amylin
The strangest thing happened on Friday, a new drug with blockbuster potential gets approved and the stock of the company that discovered the drug went down. Stranger still is all the explanations given for why the stock went down.
The fact of the matter is the street is dead wrong on Amylin (NASDAQ:AMLN) and this is buying opportunity if there ever was one.
After reviewing the comments made over the weekend the street is concerned about three factors, potential market size, side effects and injection delivery. Let’s take a look at all three.
Market Potential- Byetta was approved for use in combination therapy, Diabetic Investor suspects the drug will soon receive approval as a mono therapy as well but we do not see the fact that the approval was limited to combination therapy as limiting factor. According to studies published in Diabetes Care, over 60% of type 2 patients are not achieving treatment targets, while 42% have A1C levels greater than 8%. (The American Diabetes Association (ADA) recommends that people with diabetes achieve an A1C of 7% or lower.) The ADA estimates there are 13 million people diagnosed with diabetes in the United States and that 90% to 95% fall into the type 2 category. That means the type 2 patient population ranges from 11.7 to 12.35 million patients. Diabetic Investor estimates that 65% to 75% of these patients are using one or more oral medications to control their diabetes, that puts the potential market size somewhere around 8.4 million patients. Diabetic Investor believes that Byetta could easily capture 10% of the market within the first year.
Side Effects – A big deal has been made of the fact that one of the side effects of Byetta is mild to moderate nausea. While this is a side effect early in the use of Byetta the side effect typically dissipates after the patient has been on the therapy for 30 days. Physicians are well aware of this side effect as they are also aware that Byetta has shown excellent results in lowering A1C. Patients on Byetta have also shown significant weight loss. While there will be some physicians who will limit their prescription activity due to this side effect, Diabetic Investor believes that powerful combination of solid control and weight loss will offer physicians compelling reasons to prescribe Byetta.
Injectable – This is the biggest misconception about Byetta. Yes, there are physicians who will be reluctant to prescribe any injectable drug. But the fact that Byetta is delivered with twice daily injections will not prevent the drug from achieving commercial success. Anyone who believes this should take a look at Lantus, now the number one selling insulin, which also is an injectable. A major reason for the success of Lantus is the popularity of the drug with type 2 patients using both oral medications and Lantus to achieve control. Byetta will have two major advantages over Lantus. First, unlike Lantus, Byetta is not dose dependent. Patients on Byetta inject 5 ml twice daily for the first 30 days and 10 mg twice daily thereafter. Second, studies have shown that Lantus and Byetta in combination with oral medications produced better outcomes than patients on oral medications alone. The major difference being patients on Byetta lost weight while patients on Lantus gained weight. Given the choice Diabetic Investor sees physicians opting for the therapy which is more patient friendly. Coming in an easy to use pen delivery system, simple dosing options and weight loss makes Byetta the obvious choice.
This would not be the first time the street has been wrong when it comes to a diabetes related company and it won’t be the last time either.