Sector Snap: Diabetes drug developers

On Wednesday, advisers to the Food and Drug Administration voted 14 to 2 that all new diabetes drugs should undergo longer studies to assess heart-problem risks. The advisers made the vote less than a year after the FDA was criticized for not adding a heart-risk warning to the label of U.K.-based GlaxoSmithKline's Avandia until last November. That drug was approved in 1999.

The agency still has to adopt the proposals, but it usually follows the advice of its advisers. Nearly 24 million Americans have Type 2 diabetes, which can lead to kidney failure, blindness and heart disease.

Shares of San Diego-based Amylin fell 99 cents, or 3.9 percent, to $24.52 in midday trading. The company and Indianapolis-based partner Eli Lilly & Co. make Byetta, a twice-daily treatment. At issue for them is the development of a once-weekly version of the drug called LAR exenatide, which also involves partner Alkermes Inc., based in Cambridge, Mass.

Analysts don't foresee any delays with LAR's approval, citing studies that show it reduces blood pressure, along with the body of evidence for its marketed predecessor, Byetta. Timing of the FDA's decision on the safety proposals could also be a factor.

"It may be difficult for the FDA to implement formal action in time to impact the approval of LAR or liraglutide, underscored by the widely conflicting views on trial designs at the panel," said Piper Jaffray analyst Thomas Wei, in a note to investors late Wednesday.

Eli Lilly shares rose 47 cents to $46.56 while Alkermes shares fell 6 cents to $12.47.

Liraglutide is being developed by Danish drug maker Novo Nordisk as a once-daily diabetes treatment and is being viewed as a potentially tough competitor for Byetta. The same timing issue could also be advantageous for Novo, which recently asked the FDA for approval on Liraglutide.

Novo shares fell $2.17, or 3.3 percent, to $63.85.

Meanwhile, shares of Januvia-maker Merck & Co. rose 58 cents to $38.65. The drug brought in $667.5 million for the Whitehouse Station, N.J.-based company in 2007. It is already in a good position, said Lazard Capital Markets analyst Matthew Osborne.