Expectations Deflated for Alkermes

I believe the company's efforts in the diabetes segment with Eli Lilly (LLY Quote) hold similar potential to greatly enhance therapeutic options for patients. The most immediate opportunity is in the development of Exanatide LAR, which is the extended version of Lilly and Amylin's (AMLN Quote) popular diabetes treatment, Byetta. Since Byetta is currently dosed as a twice-a-day injection for type II diabetics, the extended once-a-week version of Exanatide LAR is a major drug-delivery enhancement.

The next key catalyst in the progression of this product line will be the mid '07 release of head-to-head phase 2 data of Exanatide LAR in comparison to Byetta. Favorable efficacy and tolerability observations from this trial should greatly improve visibility for the long-term prospects of Exanatide LAR.

The other major product opportunity in the diabetes space is also with Eli Lilly for AIR Insulin, which is an inhalable version of insulin for type I diabetics. This product will compete with Pfizer (PFE Quote) and Nektar's (NKTR Quote) Exubera, as well as two or three others, by the time it reaches the market around 2009.

At this time, the key differentiating feature is the delivery mechanism. Both Alkermes' AIR Insulin and Mannkind's Technosphere system are believe to be more efficient and easier to use than Nektar's first-generation product. Importantly, I believe Pfizer is doing much of the heavy lifting to develop the inhaled-insulin space through its early launch efforts with Exubera. Although the inhaled-insulin landscape is likely to remain highly competitive, I believe the company's partnership with a dominant diabetes firm, like Lilly, assures it a seat at the table.

In addition, Alkermes has other earlier-stage pipeline opportunities from which to develop its value-added delivery technology. The company recently entered into a small-molecule collaboration with Rensselaer Polytechnic Institute for several pain treatment compounds. I expect that additional collaboration opportunities will further improve sentiment toward Alkermes' lowly share price.