Correction: Amylin's newly approved diabetes drug Bydureon is priced at an 11% premium to Byetta, not a 20% premium as previously stated. SAN DIEGO ( TheStreet) -- Last week, after more than two and a half years, two FDA rejection letters, and at least a dozen amendments to the application, Amylin Pharmaceuticals ( AMLN) received FDA approval for Bydureon, a once-weekly formulation of its existing diabetes drug Byetta. Bydureon's approval reminds me of a favorite healthcare aphorism: "The worst thing a company can do is bring a drug to market." Commercialization means hope must yield to reality. For Amylin and Bydureon, reality isn't pretty. Investors can be forgiven for only dimly remembering the rapturous excitement over Bydureon's initial phase II data, announced in August 2005, which implied the drug might be vastly more effective than Byetta with fewer side effects. Unfortunately, subsequent pivotal studies failed to replicate these early results. One of Amylin's Phase III studies even showed Bydureon to be less effective than Novo Nordisk's ( NVO) Victoza, a key competitor. Oops. Wall Street peak sales estimates for Bydureon have followed a similar trajectory, sliding from $2 billion to about $900 million now ($1.3 billion if you include Byetta sales). Although Amylin and formulation partner Alkermes ( ALKS) deserve congratulations for winning Bydureon's approval, I believe the drug will miss even analysts' lowered sales targets. Before I dissect the drug's potential, let's note a few minor positives. First, the company successfully avoids mention of the failed study against Victoza in the FDA-approved label (though you can bet Novo's sales reps will make these data well known to doctors). In fact, the only efficacy data in the Bydureon label are from the solidly successful first Phase III trial, which showed improved efficacy versus Byetta. That makes Bydureon's labeled efficacy look okay, but only if you're a doctor who hasn't done extracurricular reading. Second, the drug is priced at an 11% premium to Byetta. If Amylin only switched existing patients, Bydureon would generate sales of $575 million (based on Byetta's $518 million run rate.) Third, Bydureon causes less nausea and vomiting than Byetta (though other adverse effects do occur more frequently; some meaningfully so.) So it's not all bad news for Amylin. However, the key question remains: Can Bydureon reignite physician excitement and reverse the ongoing decline of Amylin's diabetes franchise? I think the answer is no.