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Amylin Scores a Hat Trick

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Amylin Pharmaceuticals (Nasdaq: AMLN  ) got a triple dose of good news over the weekend. Individually, each update might not have amounted to much, but together they were good for a 10% pop in the company's shares yesterday.

Amylin and marketing partner Eli Lilly (NYSE: LLY  ) have been dealing with potential pancreatitis issues for their diabetes drug Byetta for more than two years now. The Food and Drug Administration has finally gotten around to changing the label, and it won't contain a "dreaded" black-box warning. I'm not sure the lack of a strong warning will help sales much, but the tempered warning isn't likely to hurt sales any more than the reported cases already have.

In other Byetta news, the drug was approved for use as a monotherapy; it had been approved only for use in combination with other diabetes drugs. The CEO claims that it'll potentially add 3 million to 4 million patients, but the key word there is "potentially." I have a hard time seeing very many doctors recommend and patients accept a twice-daily injected drug as a first-line treatment, because so many oral diabetes medications from Merck (NYSE: MRK  ) , Bristol-Myers Squibb (NYSE: BMY  ) , AstraZeneca (NYSE: AZN  ) , and others are available. Byetta is a good drug, arguably better than its oral counterparts, but most doctors are still going to try the oral medications first, and only use an injected drug if the oral drugs can't control glucose levels.

The monotherapy indication isn't a complete waste of time, though. It should carry over to the extended-release version of Byetta currently under review with the FDA. The once-weekly drug, made possible through Alkermes' (Nasdaq: ALKS  ) extended-release technology, should have a fighting chance against oral medications at grabbing diabetics early in their disease progression.

The third bit of good news came from Amylin's obesity pipeline. The company partnered the drugs out to Takea Pharmaceutical for a measly $75 million up front, but the deal could be worth more than $1 billion more in milestone payments as the drugs progress through the regulatory and commercialization process. Amylin would also get double-digit royalties -- that is, at least 10% of sales -- on drugs that eventually make it to market.

The structure of the deal is good for Amylin. The company is taking on more risk than if it had taken a larger up-front payment and lower milestone and royalty payments, but it's not struggling for cash, and it can afford to take the chance.

The company's hat trick was excellent for investors, but an investment in Amylin still remains a play on once-weekly Byetta. Even if an approval comes next year all by itself, it'll have more bang than the trio did on Monday.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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