10/20/10

Is the FDA going to Approve Anything These Days? As Amylin And Alkermes Tumble I Look At China Biopharma Plays

Amylin PharmaceuticalsImage via Wikipedia
Is the FDA going to approve anything this October? Right now the FDA has rejected an astounding rate of drugs for approval.  I could see the Obesity drugs not getting approved but the overall approval rate is not very good right now.  Less than 50%.  More like 1 out of 4.  I personally have moved my interests into China Pharmaceutical makers, Medical Devices, and Biotechs with high profit margins and low P/E values. 

One of the one drugs it approves, Vivitrol for Opioid Dependence is tied up to today's FDA CRL for Amylin Pharmaceuticals and their Diabetes drug Bydureon.  Amylin is down roughly 50% while Alkermes is down 28%.  I personally see Alkermes as a huge buy right now.  They are the company with 2 FDA approvals under their belt and are actually generating a profit right now.  This is a loss for Alkermes but I think they will bounce right back.  It is oversold at this level.  I also see Lilly as a slight buy after being down close to 4% on the news.

Wikinveset--Alkermes (ALKS)
Wikinvest--Amylin Pharmaceuticals (AMLN)
Wikinvest--Eli Lilly (LLY)

Are you thinking over possible Short Interests in BioPharma stocks up for FDA approval?  Shorting these stocks is becoming more and more tempting with the overall likelihood of a FDA non-approval.  Shorting stocks however, requires borrowing money on a margin account set at a 7% interest rate.  This is a pretty high rate to overcome and can dig into future profits.  But with drug stocks going down well over 50%, it is not that bad an idea.  Warren Buffett might not approve but I think it can work with the right FDA plays.

I would personally think that Phase I and II clinical trials might be better investments with hopes that the FDA changes in the next few years.  It is highly geared toward Big Pharmaceutical players right now and small cap biotechs in Phase III clinical trials are not gaining the momentum for FDA approval.  Is there something wrong with the clinical trial process that is inhibiting these smaller biotech firms from gaining an approved drug in this Obama administration FDA Panel?  I truly wonder sometimes what really is going on behind closed doors of the FDA panels sometimes.  But it should be looked at during the Clinical Trial Process at what the FDA is really looking for for drug approvals in the future.  Clinical Trial companies are paid regardless of the FDA outcome so CRO (clinical research organizations) might be looked at as good investments right now.  Quintiles has mulled over the idea of an IPO so look out for Quintiles and do research on Clinical Trial Research companies or CROs.  Read more about Quinitles IPO at the following link:  Quintiles IPO For Asian Expansion   and IPO Round 2 For Quinitles.

Highly Profitable Chinese Pharmaceuticals at the current moment are Skystar BioPharmaceuticals(SKBI), China Pharma Holdings (CPHI), Sinovac (SVA), China Biotics (CHBT), 3SBIO (SSRX), China Biological Products (CBPO).  You might even want to learn about stocks trading on the Shanghai Composite Index.   One such stock is Beijing Tiantan Biological Products Corporation.  More can be learned about the Shanghai Composite index at the following site:  http://www.chinesestock.org/

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Biotech Stocks
Oct. 20, 2010, 2:54 p.m. EDT

FDA decision moves diabetes drug makers

BOSTON (MarketWatch) — Shares of Amylin Pharmaceuticals Inc. and partner Alkermes Inc. were crushed Wednesday on news that U.S. regulators have declined to approve their hotly anticipated diabetes drug Bydureon.

Shares of Amylin  (AMLN 11.05, +0.02, +0.18%) plunged 45% while Alkermes (ALKS 10.51, -0.21, -1.10%) shares spiraled down 25%.

Late Tuesday, the companies announced that the U.S. Food and Drug Administration is refusing to approve Bydureon until more studies are conducted. Bydureon’s market application was originally submitted in May 2009.

In particular, the agency is requesting that the companies test higher doses of Bydureon to see if it has any effect on heart rhythms. The FDA is also looking for results from an ongoing clinical trial studying the product’s effectiveness.

Wall Street had largely been expecting an FDA approval by Friday, the agency’s self-imposed deadline for issuing a ruling on the product. As a result, investors had substantially bid up shares of both Amylin and Alkermes in recent weeks.

On Wednesday, Amylin and Alkermes said they hope to resubmit Bydureon’s application by the end of 2011.

Bydureon is a long-acting version of Amylin’s popular diabetes medication Byetta. Both products were co-developed with Eli Lilly & Co.  (LLY 35.84, -0.17, -0.48%) , shares of which were down 4%.

The FDA decision also rattled investors of Mannkind Corp. (MNKD 6.57, -0.35, -5.06%) , which has developed an inhaled insulin product for the treatment of diabetes. The company re-submitted its application to market the product, Afrezza, in July and hopes to receive a decision from the agency by the end of December.

Shares of Mannkind were down 5% at $6.56.

On the upside, Bydureon’s woes stoked shares of Danish drug maker Novo Nordisk A/S  (NVO 100.52, +9.53, +10.47%) , which markets a rival medication called Victoza. The product received FDA approval in January.

Shares of Novo jumped 10%.

Abbott Laboratories (ABT 52.12, -0.26, -0.49%) shares dipped 1%.

Early Wednesday, the diversified health-care-products maker reported mixed third-quarter earnings, due in part to hefty costs associated with its acquisition of Solvay SA’s pharmaceutical unit. See Abbott earnings story.

Gilead Sciences  (GILD 38.39, +0.01, +0.03%) shares hopped 6%. Late Wednesday, the HIV-drug developer reported improved third-quarter financial results that topped Wall Street estimates.

Shares of enzyme developer Verenium Corp. (VRNM 4.35, -0.03, -0.69%) shot up 34% to $4.35.

Verenium said that Chinese officials have approved its enzyme product Purifine. The product is used to help refine such edible oils as soybean oil.

The sector’s two main indexes, meanwhile, were split. The NYSE Arca Pharmaceutical Index  (DRG 315.57, +3.59, +1.15%) was up 1.3% at 315.91. The NYSE Arca Biotechnology Index (BTK 1,150, -14.67, -1.26%) , of which Amylin is a major component, was down 0.7% at 1156.21.

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Amylin, Lilly, Alkermes tumble on Bydureon setback
(Reuters) - Amylin Pharmaceuticals' (AMLN.O) shares lost nearly half their value on Wednesday, after U.S. regulators declined to approve the company's long-acting diabetes drug until more data is obtained on its potential effect on heart rates.

Shares of drug-development partners Eli Lilly and Co (LLY.N) and Alkermes Inc (ALKS.O) also tumbled after the setback for the high-profile medicine, Bydureon, was announced late on Tuesday.

The companies said they would reply to the Food and Drug Administration by the end of next year -- meaning the agency is unlikely to make a decision until mid-2012, representing a potential delay of more than 18 months.

Shares of Novo Nordisk (NOVOb.CO), which sells Victoza, a drug similar to Bydureon, rose 9 percent on news of the delay.

The delay stunned analysts, who were expecting an approval this week after an initial response from the FDA earlier this year.

"The news comes as a major surprise," JP Morgan analyst Cory Kasimov said in a research note. "Indeed, investor controversy had been around Bydureon's potential to meet the seemingly aggressive sales estimates and not whether approval was at risk."

Analysts had projected annual sales of more than $1 billion for Bydureon, a once-weekly version of Lilly and Amylin's widely used Byetta treatment for Type II diabetes.

Now, analysts said that even if Bydureon were to win approval in 2012, the competitive landscape would be more daunting.

Victoza had been seen as superior to Byetta but was expected to face a stiffer challenge from Bydureon because of its more convenient dosing.

Now, Victoza will at least have a longer period to gain further traction in the market, while the delay also gives time for potential rivals from GlaxoSmithKline Plc (GSK.L) and Sanofi-Aventis to catch up. (SASY.PA)

Amylin was trading at $11.27 in early afternoon, down $9.22 or 45 percent. Shares earlier fell as low as $9.51.

Canaccord Genuity analyst Adam Cutler said the news creates a "balance sheet overhang" for Amylin, noting the company continues to burn cash, while having $200 million of debt due in 2011 and $575 million due in 2014.

Cutler lowered his price target on Amylin to $8 from $18, saying the delay makes the stock "hard to own."

Lilly shares were down 4.1 percent at $35.91 on the New York Stock Exchange. The Indianapolis drugmaker, which badly needs new drugs to offset looming generic competition for its top-selling Zyprexa schizophrenia drug, has been counting heavily on Bydureon to be approved and become a blockbuster in its own right.

"With Bydureon representing essentially the only meaningful product launch for Lilly over the next several years, we believe today's setback puts further pressure on Lilly's already challenged 2012-2014 earnings profile," JP Morgan analyst Chris Schott said in a research note.

The Bydureon setback comes as Lilly grapples with anemic sales of a new blood-clot drug, Effient, which it had hoped would be a blockbuster. It increases the need for Lilly to strike more deals, said Leerink Swann analyst Seamus Fernandez.

While this news alone does not affect the sustainability of Lilly's dividend through 2014, the pressure on Lilly to either do a deal and/or partner some of its pipeline products and reduce its cost structure likely will intensify," Fernandez said.

Bydureon uses technology from Alkermes, whose own shares were down 25. percent at $10.89.

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