Roche's Diabetes Drug Trouble Is a Shot in the Arm for Amylin

As is often the case, bad news for one company is good news for another. Roche (RHHBY) said Friday that because of new safety concerns about its potential billion-dollar type 2 diabetes drug, taspoglutide (or Taspo), the regulatory filing for the drug will likely be delayed by 12 to 18 months. Roche shares declined some 2.6% in late afternoon trading.

The lucky beneficiary of Roche's misfortune is rival Amylin (AMLN), which, with its partners Eli Lilly (LLY) and Alkermes (ALKS), stands to gain as the delay puts them ahead in the race to get first approval of a once-weekly injectable type 2 diabetes drug. Amylin saw its shares soar as much as 20% Friday, and Alkermes shares surged some 11% in afternoon trading.

Amylin and Eli Lilly have already submitted Bydureon, their own version of the diabetes treatment, for approval with the U.S Food and Drug Administration. But that submission drew requests from the FDA for additional information, which they are now in the process of providing. With the delay of Taspo, some of the pressure on Amylin and Eli Lilly to reply to the regulatory agency has now been lifted. Meanwhile, Byetta, their twice-daily injectable treatment, has dodged a bullet: For now, it need not compete with a more convenient version.

Of course, it didn't hurt Amylin's share price that JPMorgan upgraded the company from neutral to overweight following the Roche news. The brokerage firm also boosted its price target on Amylin shares from $20 to $24. And Piper Jaffray, which recently upgraded Amylin to overweight from neutral following release of an abstract that showed Bydureon is superior to Taspo, said that the Taspo delay is a positive for Amylin.

At least one other pharmaceutical has benefited from Roche's delay of Taspo: Novo Nordisk (NVO), which got its own once-daily type 2 diabetes treatment approved by the FDA in January. Novo Nordisk shares jumped 3% in afternoon trading.