Just How Likely Is It That Diabetes Drugmaker Amylin Could Go Bankrupt?
Is diabetes drugmaker Amylin (AMLN) close to bankruptcy, as suggested recently by The Business Insider? The short answer is no. The long answer is ... it's actually possible, if everything that can go wrong does go wrong.
Amylin's 2010 sales slipped 12 percent to $668,813, and the company lost $152 million. It lost money the year before, too. The company has laid off about 400 people in the last three years. The cause of these troubles is that Amylin is currently dependent on just one drug, the twice-daily injectable Byetta. Last fall, the FDA declined to approve Bydureon, a new version of Byetta, that is injected just once a week. Amylin's stock tanked on the news.
A once-weekly treatment for diabetes would be massive -- if Amylin can get it to market. It would free diabetics from the painful ritual of daily injections, something no other company has ever done.
In the meantime, Amylin is having its lunch eaten by Novo Nordisk (NVO)'s competing product, Victoza, which is injected just once a day. Two needles vs. one needle: It's not much of a contest. On top of that, Novo is building buzz that Victoza also helps with weight loss.
Without Bydureon, there is not much of a future for Amylin. But even if the FDA does a U-turn, things could go badly: Bydureon is likely to cannibalize Byetta. Which drug would you rather use, the twice daily injection or the once-weekly injection, given that they're the same drug in different extended-release forms? Amylin's main hope is that this cannibalization is offset by market share it steals from Victoza.
The other issue that's draining the life out of Amylin right now is its second major R&D effort, a weight-loss drug that is a combination of the diabetes drug pramlintide and metreleptin, a hormone that regulates metabolism. Sounds great on paper, but that's what Abbott Labs (ABT), Vivus (VVUS), Orexigen (OREX) and Arena (ARNA) all thought -- and the FDA rejected every one of their obesity drugs.
The bottom line is that Amylin won't go bankrupt, but if it cannot get Bydureon approved and its weight-loss product flunks, then its future will be as a very much smaller company indeed.
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