We have updated our Diabetes Type II models to reflect new prevalence data and some changes following the American Diabetes Association (ADA) conference. To see the full market share breakdown for the Diabetes Type II market, please click here.

PREVALENCE

We have recalculated prevalence numbers and percent treated for type II diabetes based on the CDC’s National Diabetes Fact Sheet (2005). This has resulted in an approximate 9% reduction in the estimated numbers of patients treated for 2006.

DRUGS

DPP-IV Inhibitors

Though we still question the relative efficacy of the DPP-IV inhibitors compared to approved oral drugs, we think studies presented at the ADA, such as one showing comparable efficacy between Januvia and Glipizide (up to 20 mg daily), will help the DPP-IV inhibitors take greater share from the thiazolidinediones and sulfonylureas, particularly as second line agents behind metformin and in patients who cannot tolerate metformin. We are also projecting Januvia to come out slightly ahead of Galvus.

For Januvia, we now project peak U.S. revenue of $2.481 billion, up from $1.188 billion. For Galvus, we now project peak US revenue of $2.046, up from $1.832 billion.

While PSN9301, a DPP-IV inhibitor given prandially (with meals), has shown clinically meaningful efficacy in a proof-of-concept study, its shorter term duration of action relative to the above drugs means it will likely have to be given more often. Though Januvia and Galvus are also being studied in combination pills with metformin, which would be given twice daily, it is unclear how twice daily PSN9301 would compare. PSN9301 could have an advantage if Januvia and Galvus turn out to have more side effects when used in a larger population of patients. However, pending more information for an advantage from the drug, we have adopted more conservative projections, with peak US revenue of $313.4 million, down from $691.4 million.

GLP-1 Agonists

For Byetta, data came out at the conference regarding use in type II diabetics also taking insulin. We have raised our share estimates in this segment, as we feel physicians will increasingly use the drug in this setting, even prior to approval. We have also slightly raised our share for Byetta for use earlier on, though we think that its acceleration in growth will be higher for 2006 than after the DPP-IV inhibitors are introduced. More detail on how manufacturing shortages will affect 2006 revenues should be available at Amylin’s earnings call. The combination of these changes with our change in diabetes prevalence results in slightly higher peak US revenue than previously projected.

Regarding Exenatide LAR, we have similarly raised share in patients on insulin. In patients not on insulin, our shares have changed slightly, balancing considerations over strong early data for Exenatide LAR but also the potential introduction of competitors such as Liraglutide (though we think Liraglutide will only have a modest effect as in its current formulation it must be given daily). There are also longer-acting GLP-1 agonists in earlier stage development that may prove to be competitive with LAR, though it will have a first-to-market advantage.

The net effect of these small share changes and a revised prevalence estimate is peak US revenue for LAR of $3.573 billion, down from $3.902 billion.

Our new model for Liraglutide has peak US revenue of $570.2 million.

PPAR

We have also adjusted our model for Metaglidasen, a partial PPAR gamma agonist/antagonist. Unlike the dual PPAR alpha gamma drugs that failed in the past year, Metaglidasen only targets PPAR gamma, which is more similar to the currently approved thiazolidinediones. Its next trial will utilize only 1 higher dose than the maximum in its original Phase II trial, and we are concerned that efficacy will not be as great as higher dose thiazolidinediones. Hence we are taking a more conservative stance. Our new peak US revenue is $1.017 billion, down from $1.997 billion. Of note, the company has a follow-on drug in Phase I, MBX-2044, that may be more potent.

Inhaled Insulins

Based on projections for trial enrollment, we have also made adjustments to estimated approval dates for the inhaled insulins.

COMPANY MODEL UPDATES

Amylin Pharmaceuticals
Based on our updated projections for the Exenatide franchise, we now value Amylin’s 5 and 10-year pipeline at $52.56/share and $36.74/share, up on the 5-year from $51.08/share and down on the 10-year from $39.89/share. We feel Amylin offers a very attractive long-term investment and any weakness in the stock is a buying opportunity.

OSI Pharmaceuticals
The reduction in PSN901 revenue impacts the 10-year valuation more than the 5-year, which is largely attributable to Tarceva. Our new OSIP 5 and 10-year pipeline valuation is $52.47/share and $44.17/share, up for the 5-year from $51.70/share and down for the 10-year at $46.01/share.

Alkermes
We are now valuing Alkermes’ 5 and 10-year pipeline at $30.85/share and $19.68/share, up from $29.81/share and $19.63/share.

MannKind
We are now valuing MannKind’s 10-year pipeline at $21.61/share, up from $20.71/share.