Hot Dog! No Competition for Now

Amylin Pharmaceuticals (Nasdaq: AMLN  ) , Alkermes (Nasdaq: ALKS  ) , Eli Lilly (NYSE: LLY  ) , and Novo Nordisk (NYSE: NVO  ) are smiling today. Shares in the first two were up as much as 10.7% and 19%, respectively, earlier, and the other two are ahead of the broad market.

Roche? Not so good.

I previously highlighted Roche's taspoglutide as a diabetes drug not to be ignored. The data coming out of several clinical trials looked good, with taspoglutide beating Amylin and Lilly's Byetta and Merck's (NYSE: MRK  ) Januvia, and tied with sanofi-aventis' (NYSE: SNY  ) Lantus.

But the Swiss drugmaker said today that development of the diabetes drug would be delayed by 12 to 18 months because a small fraction of patients in the clinical trials showed a hypersensitive reaction to the drug. Roche plans to develop a test to identify patients with antidrug antibodies, the cause of the hypersensitivity.

The development probably won't keep taspoglutide off the market, but it could decrease the drug's sales substantially, as patients will have to be given the test after starting the drug. Unless taspoglutide's efficacy is worth it, doctors may not want to bother with a drug that requires extra monitoring.

With taspoglutide out for the foreseeable future, Bydureon from Amylin, Lilly, and Alkermes will have the once-weekly GLP-1 drug market all to itself -- assuming it gets past the FDA on its second attempt.

Novo's once-daily Victoza, which is in the same class, will also have decreased competition, but it's not likely to help all that much. The once-daily formula is going to have a hard time competing against extended-release formulas whether there's one or two of them. The bigger advantage for Novo is that the delay will help its own once-weekly GLP-1 drug catch up; it's currently behind taspoglutide, having finished phase 2 trials.

In investing, sometimes the competition can hurt you and sometimes it'll slip up and help you zoom ahead. Diabetes drug investors still need to keep an eye on taspoglutide, but they won't need to check their rearview mirror quite as often.