The recent stories on Amylin (first in Barron's in late January, now in the WSJ, yesterday, see below) are provocative as they suggest (between and in the lines) that the risk of Byetta prompting cancer is quite high. Several related and unrelated comments:
1) Suggesting that the Amylin sales multiple is 62x rather than 31x because they give half the profits on Byetta to Lilly is ridiculous - this is already priced into the multiple. 31x isn't low, but then, neither is the potential for Byetta. 4Q sales of Byetta were pre-announced at $49 million, nearly 50% higher than the average Wall Street estimate of about $33 million
2) Suggesting that investors don't care about competion is ridiculous. Of course any good investors thinks about the competitive landscape for any company in which they invest - in this case, it's just probably fair to say that investors feel like there's room for many diabetes therapies - that's reasonable in our view since probably 80% of 15 million diagnosed patients in the US are not at goal (66% according to Diabetes Care and 80% according to highly regarded endocrinologists who note that even those at an A1C of 7% are not necessarily at goal due to high glycemic instability). Consider - to reach a billion dollars in sales for Byetta, about half a million patients would need to go on Byetta. That's about 3% of patients with diabetes in the US. Since there are over a million patients who become diabetic each YEAR in the US, getting 3% of the total number of patients doesn't seem too unlikely. This math might be rough, but it doesn't matter, because directionally, the point is that the disease is growing far faster than it needs to to support big sales for Byetta - no matter what other drugs are released. We actually see inhaled insulin as a postive for Byetta because we expect Pfizer marketing will focus on earlier, more aggressive therapy - and that any drug that reflects positive outcomes from earlier more aggressive therapy will benefit. (We also believe that over time, Byetta will be taken by those with pre-diabetes, as first-line monotherapy, and by those who already take insulin - it doesn't take long for low millions of patients to seem like a low number.)
3) The cancer risk is already in the label. https://pi.lilly.com/us/byetta-pi.pdf (see below)
All in all, the stories are overdone in our humble view.
"A 104-week carcinogenicity study was conducted in male and female rats at doses of 18,
70, or 250 mcg/kg/day administered by bolus SC injection. Benign thyroid C-cell
adenomas were observed in female rats at all exenatide doses. The incidences in female
rats were 8% and 5% in the two control groups and 14%, 11%, and 23% in the low-,
Page 11 of 16 medium-, and high-dose groups with systemic exposures of 5, 22, and 130 times,
respectively, the human exposure resulting from the maximum recommended dose of
20 mcg/day, based on plasma area under the curve (AUC).
In a 104-week carcinogenicity study in mice at doses of 18, 70, or 250 mcg/kg/day
administered by bolus SC injection, no evidence of tumors was observed at doses up to
250 mcg/kg/day, a systemic exposure up to 95 times the human exposure resulting from
the maximum recommended dose of 20 mcg/day, based on AUC.
Exenatide was not mutagenic or clastogenic, with or without metabolic activation, in the
Ames bacterial mutagenicity assay or chromosomal aberration assay in Chinese hamster
ovary cells. Exenatide was negative in the in vivo mouse micronucleus assay.
In mouse fertility studies with SC doses of 6, 68 or 760 mcg/kg/day, males were treated
for 4 weeks prior to and throughout mating and females were treated 2 weeks prior to and
throughout mating until gestation day 7. No adverse effect on fertility was observed at
760 mcg/kg/day, a systemic exposure 390 times the human exposure resulting from the
maximum recommended dose of 20 mcg/day, based on AUC."
Amylin Is Richly Priced
By BILL ALPERT
February 5, 2006
Diabetes is becoming a grave problem in America and around the world. So investors have cheered a new treatment developed by Amylin Pharmaceuticals (AMLN; near $39). Shares of the San Diego company have more than doubled since April, when Amylin and its partner Eli Lilly (LLY) got U.S. approval to market their twice-a-day injectable product: Byetta.
Amylin's market value now exceeds $4.3 billion, or 31 times 2005 sales. The multiple is really twice as high, because Amylin pays Lilly almost half the gross profits on Byetta.
By mimicking a natural substance called GLP-1, Byetta helps the pancreas produce proper amounts of insulin. In human trials, Byetta reduced blood glucose and allowed patients to lose a meaningful amount of weight. Yet hopes for Byetta are so huge that investors don't seem concerned about impending competition. Last month, the Food and Drug Administration approved Pfizer's (PFE) Exubera, the first insulin that patients can inhale. The agency also is likely to approve Acomplia, an obesity drug from Sanofi-Aventis (SNY) that doctors will probably prescribe for diabetes patients.
Some endocrinologists at cancer centers in Texas and New York say they wish Amylin would examine Byetta's effect on the thyroid's C cells, which also have receptors for the GLP-1 hormone. Before last year's U.S. approval of Byetta, Amylin tested it for carcinogenicity in mice and rats -- using the standard approach of dosing the critters for up to two years, at concentrations as high as 90 times the human dose. Of the female rats subjected to Byetta, 11% to 23% developed noncancerous C-cell growths, versus 5% and 8% in placebo groups. The rat results weren't statistically significant and didn't seem to affect the rats' longevity, so the FDA found the study no cause for worry. A parallel study in mice showed no C-cell growths.
An unrelated study that dosed human pancreas cancer cells with GLP-1 showed no effect.
"It's nice that it doesn't cause pancreatic cancer to grow," responded R. Michael Tuttle, who heads endocrinology at New York's Memorial Sloan-Kettering Cancer Center. "But it's the wrong cell. You need the similar sort of experiment done with C cells." His uneasiness is echoed by Robert F. Gagel, an endocrinologist at the M.D. Anderson Cancer Center in Houston. Both cancer specialists stress that their concerns must be kept in perspective.
Fewer than 2,000 cases of C-cell cancer appear each year, and odds are that only a few hundred of those patients would also have diabetes. With American diabetes cases growing by 1.5 million each year, the risk-benefit balance strongly favors Byetta. Amylin's regulatory vice president, Orville Kolterman, emphasized that patient safety is Amylin's top concern.