A Monster Drug for Lilly?

You might not want to meet a Gila monster in a dark alley, but who knew the creature might be a boon to diabetics? Data earlier this month showed that Eli Lilly (NYSE: LLY) and Amylin Pharmaceuticals' (Nasdaq: AMLN) drug, Exenatide -- copied from the venom of Gila monsters -- was of particular benefit to patients who suffer from Type 2 diabetes. Today, the two companies filed a new drug application (NDA) with the FDA for the drug.

Recent data on Exenatide showed the drug lowered blood glucose levels in patients for whom common treatments weren't working. In addition, there's evidence that the drug also fostered weight loss -- another benefit, considering most diabetes treatments result in weight gain.

Lilly might have needed good news, considering that last week the FDA asked for more information on an important drug, and potential blockbuster, Cymbalta. There were lots of hopes pinned on the release of that antidepressant, though the space includes its share of controversy these days. It's important because as you recall, Lilly needs a replacement for Prozac, which now faces generic competition.

The FDA's request for more information and analysis of Cymbalta test results could result in a three-month delay, though Lilly backed its data and said it expects approval by the end of the summer.

Given the delay in releasing the antidepressant, a possibly strong treatment for diabetes is good news for Lilly. Diabetes is a common and serious illness that requires constant maintenance. In 2002, 18.2 million Americans, or 6.3% of the population, suffered from the disease, according to the National Diabetes Information Clearinghouse. Worldwide, 194 million adults suffer from the disease. There's also the danger that more and more Americans will suffer from the disease, given recent health trends.

When it comes to Exenatide, there are other companies who have set their sights on providing medications in the same class, known as incretin mimetics. However, two -- Novartis AG (NYSE: NVS) and Novo Nordisk AS (NYSE: NVO) -- are expected to be about a year behind Lilly and Amylin. If Lilly and Amylin do gain FDA approval, first-mover advantage in the area should be key.

If investors took today's news with a grain of salt, it was a good thing. An NDA for a potential blockbuster drug is a good sign and an indication of a strong pipeline. However, if the current Cymbalta situation reminds us of anything, it's the risks inherent in drug companies. They must navigate the regulatory hoops that come with FDA approval, and final approval is never guaranteed.

Another large drug company, Merck (NYSE: MRK), is a Motley Fool Income Investor pick. Find out what other companies Mathew Emmert has chosen for income and growth by trying a subscription.

Alyce Lomax does not own shares of any of the companies mentioned.