It amazes me how much investors can overreact to known side effects of a drug.
A few weeks ago, Elan
This seems a bit excessive: a 13% drop after news that the number of pancreatitis cases from patients taking Amylin's diabetes drug Byetta increased to 36 from the 30 reported last October. Not being as dependent on sales of Byetta for its livelihood, marketing partner Eli Lilly
It's not that pancreatitis isn't a serious issue -- the newly diagnosed patients had a more severe form of pancreatitis, and two of the six patients died -- it's that diabetics are already at increased risk of pancreatitis. At worst, patients with other risk factors for developing pancreatitis -- gallstones, severe hypertriglyceridemia, and alcohol use -- will stop using Byetta. But the rate of pancreatitis is so low that I doubt sales of Byetta will suffer more than they already have.
The biggest worry may be about how the new cases of pancreatitis will affect Amylin's once-weekly version of Byetta that it's developing in conjunction with Alkermes
Still, I think the market overreacted to a known issue. Just as Elan has recovered more than 30% since its jaw-breaking drop, I expect Amylin's stock will recover as well. It just might be a case of, if you've got the guts to buy, a panicking market can provide a treasure trove.