Maybe It's Time To Abandon Amylin

Dear Amylin,

We've been together a long time and, hey, you were great. But I think it might be time for us to see other people. No, it's not me, it's you.

...

The Latest Problem...
Okay, today's stock reaction to the Duration-6 study is probably overblown, but clearly Amylin (Nasdaq: AMLN) has some serious issues. This latest study basically demonstrated that Amylin's weekly drug Bydureon is less effective in controlling diabetes than a rival daily drug from Novo Nordisk (NYSE: NVO) called Victoza.

Designed to show non-inferiority, the study instead showed that Victoza lowered HbA1c by 1.5%, while Bydureon lowered it by 1.3%. That's not a huge difference, but it is still significant and you can rest assured that Novo Nordisk will market the hell out of it if or when Bydureon is approved. On a somewhat more positive note, Bydureon did show half of the side-effects of Victoza (nausea, diarrhea, and vomiting are common side effects for this class of drugs).

Now that's good (and part of the point of the study was to show a better side effect profile for Bydureon), but there did not appear to be any meaningful difference in drop-out rates, so the side effects of Victoza weren't enough to make its users quit in greater numbers.

Unfortunately, this could have some long-tail effects for Amylin (as well as Lilly (NYSE: LLY) and Alkermes (Nasdaq: ALKS). The FDA is very focused on risk-benefit these days and if Bydureon shows any hint of safety issues (and one could argue there have already been more than hints), the FDA may continue to refuse approval on the basis of Victoza being safer *and* more efficacious (even if less convenient for patients).

What Now?
So, what do I do with Amylin shares? I think this study clips the total market potential for Byrdureon, probably by $300-$500M. So, it could still be a $1B+ drug, but probably not much more than that. Working that all through my model moves the target price down to about $12 - higher than where it's currently trading as I write, but not enough to excite me.

Making matters all the worse, I once had a big gain here. This stock was a big performer a while ago (in the $50s) and I wondered at the time whether I should haven't sold at least half my position and let the rest ride. But oh no, I had to get greedy ... and I paid for it.

Anyways, now I need to figure out what to do. I could hold on and hope for the best, but that's not really a "strategy". I'm also seriously considering selling it and doubling up on Lexicon (Nasdaq: LXRX), another biotech I own that is arguably much more promising at present. A third option is just to go buy another biotech (Ziopharm (Nasdaq: ZIOP)? Celldex (Nasdaq: CLDX))? Luckily, I don't own much and it was never a huge part of the portfolio, so this whole debate is more about a bruised ego than a bruised wallet.

I would probably SELL Amylin ... unless you're really, really patient

Disclosure: I own shares of Amylin and Lexicon