Approval for this indication could help boost Byetta sales, which have been lagging expectations over the past few quarters. Byetta was initially approved in April 2005 as an add-on therapy to diet and exercise for adult type II diabetes patients who were unable to achieve adequate glycemic control using commonly prescribed oral diabetes medications. In Oct 2009, Byetta was approved as a monotherapy in type II diabetes patients.

However, pancreatitis fears associated with the use of Byetta have led to a slowdown in sales. Although Amylin has been working on reviving growth, we believe the next few quarters will remain challenging from a growth standpoint. Fears of pancreatitis and new-found fears of GLP-1 molecules like Byetta potentially causing C-cell malignant carcinoma of the thyroid could keep a lid on growth. .

Byetta's approval for the additional indication would generate huge investor confidence in Amylin, which suffered a huge setback in October 2010 when the FDA issued a second complete response letter (CRL) for lead pipeline candidate, Bydureon.

Amylin intends to meet with the FDA as early as possible so as to fix the design of the required tQT study. We note that at this point of time, we are looking at a delay of at least 1.5-2 years in the US launch of Bydureon, provided there are no additional stumbling blocks.

Neutral on Amylin

We currently have a 'Neutral' recommendation on Amylin, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Going forward, we expect investor focus to remain on Byetta's performance and updates on the approval process for Bydureon. Longer-term, we are optimistic about the mid-stage obesity pipeline. We view Amylin's deal with Takeda for the obesity pipeline as a major positive.