When Amylin Pharmaceuticals Inc. won approval of its second diabetes drug in as many months, Byetta (exenatide), the company's stock - rather than skyrocketing, as likely would have happened in the old days - fell 6 percent.

Some investors grumbled about the label, which many expected would allow Byetta as a single agent, instead of as an adjunctive therapy to improve blood sugar control in Type II diabetics who have not achieved adequate control on two common oral diabetes medications, metformin or sulfonylurea, or a combination of the two.

It wasn't cleared for that, but the FDA did tell Amylin and partner Eli Lilly and Co. that the drug is approvable as a single agent. However, that means a six-month wait and, quite possibly, another study, as the pair pursue Phase IV work with pediatric patients and a drug-interaction study with oral contraceptives. And the adjunct label is what Amylin and Lilly had sought all along.

Byetta's approval came less than two months after FDA clearance of another injectable Amylin diabetes drug, Symlin (pramlintide acetate) for patients with Type I or Type II diabetes, whose insulin is not giving them glucose control - yet the stock last week was trading within pennies of its 52-week low.

Amylin is not the only company in the low-value boat, providing "significant opportunity" for investors willing to buy specific stocks despite the currently dim Wall Street sentiment, said Bennett Weintraub, analyst with Hibernia Southcoast Capital in New Orleans.

Weintraub stated the matter flatly in a recent research note, declaring that "investors currently are according no value to biotech drug development pipelines," and the further-seeing buyers are faced with a good chance to make some money.

"We're advising long-term investors to look at these companies with approved products and a floor on their valuations first," he said, and Amylin is an example.

Weintraub uses a "sum-of-parts" valuation, estimating revenues for approved drugs, but also multiplies the peak revenue potential of each compound in 2010 by the modeled probability of its clearance for marketing.

Assuming the longer-acting version of Amylin's exenatide is approved, he models a share price in 2010 of $33, with a "best-case scenario" - that is, with high sales of all approved compounds - of $46 per share. Amylin last week was trading at about $16.

Weintraub also cites BioMarin Pharmaceutical Inc., which this month advanced its small-molecule drug, Phenoptin (sapropterin hydrochloride), into a pivotal trial to treat phenylketonuria, or PKU. The firm has randomized the first patient in its Phase III trial of the drug, which has received orphan drug designation and could become the first drug to treat the mild to moderate form of the disease.

About 19,000 people in America have PKU.

"The interesting thing is, there's newborn screening for PKU, so every single patient is known," Weintraub said, noting that other enzyme conditions require locating those afflicted, which is far from simple. "For PKU, that's not the case at all."

BioMarin's drug would boost enzyme activity in PKU patients, and get them off their restrictive diet "or at least relax it," he said. Almost all foods must be processed into "mush" in order for PKU patients to eat them.

"They would have to be on the drug continually, but it wouldn't be an egregious drug to take," he said.

BioMarin markets Aldurazyme, an enzyme-replacement therapy for mucopolysaccharidosis-I, with Genzyme Corp., and sells Orapred (prednisolone) for children's asthma. This year, the firm likely will make available rhASB (galsulfase) for mucopolysaccharidosis-VI. Weintraub modeled BioMarin's shares to be worth $15 by 2010, with a best-case scenario of $24. The price last week hovered at less than $6.

Another example is The Medicines Co., which markets the clot buster Angiomax for patients with unstable angina who are undergoing percutaneous coronary interventions, with Phase III data in acute coronary syndrome due in the fourth quarter.

"They've got a product that doctors love" as an alternative to heparin in some settings, and without the drawbacks, such as allergic reactions, Weintraub said.

"It's a lot easier to use, and around October we're going to get data from a very large study called Acuity that will show whether it can be used as a heparin substitute as soon as [patients] come into the hospital," he said. "One of the questions that comes up is that heparin is almost free, so you have to show the cost-benefit of Angiomax is OK in that setting." That ratio has "been quite supportive so far in [Angiomax's] approved indications."

Also part of The Medicines Co. story, though less important, is the blood pressure drug Clevelox (clevipidine). The company in late March voluntarily suspended enrollment in its Phase III safety trials after about half the study's drug population showed what the company called a "puzzling" rate of atrial fibrillation.

Weintraub estimated the share value in 2010 at $33, best-case scenario of $65. Last week, The Medicines Co. was trading at just more than $21.

Tanox Inc. is yet another example of his thesis. The firm gets about 10 percent of worldwide revenue from Xolair (omalizumab), the asthma drug that sold $65.3 million in the first quarter of this year, as reported by Genentech Inc. By 2010, Weintraub forecast, the drug will generate $1.2 billion worldwide, and could be approved for peanut allergies and hay fever. Tanox's share value in his model is $20, with a best-case scenario of $40. The stock was priced last week at about $9.70.

"We've always thought Xolair is a big deal, and we continue to think it's a big deal, but Tanox has gotten so cheap that you don't have to think Xolair is a big deal" in order to buy the stock, Weintraub said.

"They've got what most biotech companies don't have - a steady stream of income to support their drug development," he said. "And they're not rookies. They've been around."

This is hardly the first such slump for biotechnology, Weintraub noted, the most memorable one having taken place in 2002, when investors became unhappy about the (overstated) near-term promise of genomics. Genentech's colorectal data with Avastin (bevacizumab, which had failed in breast cancer) marked the beginning of the end for those doldrums - and how. "By mid-2004, we viewed many cancer developers as overvalued," Weintraub said.

A catalyst that might soon brighten the current valuation picture is merger-and-acquisition activity. Scant pharma pipelines will lead to more buyouts as pharma companies with repatriated cash look for buying opportunities. Already the market has been cheered by Shire Pharmaceuticals Group plc's plan to pick up Transkaryotic Therapies Inc. in a deal worth $1.6 billion, and GlaxoSmithKline plc's buyout of vaccine partner Corixa Corp. for $300 million in cash.

Meanwhile, there are exceptions to the hard times. Onyx Pharmaceuticals Inc. "has an almost $1 billion market cap and it doesn't have any products on the market, so obviously they're getting some value," Weintraub said. "But even the ones like Onyx have come down."

The main reason is the withdrawal of Tysabri (natalizumab) from the market. Biogen Idec Inc. and Elan Corp. plc withdrew the multiple sclerosis drug because of patient deaths stemming from progressive multifocal leukoencephalopathy. (See BioWorld Financial Watch, March 7, 2005.)

"The small-cap drug development sector was having a rough time before Tysabri's withdrawal," Weintraub pointed out. "It happened in a bad environment and made things worse."

Things are starting to change - "people have seen that the FDA is going to continue to approve drugs" - but until they change more, Weintraub is urging long-term players to look at firms that are unfairly discounted.

Corgentech Inc. "is trading below its cash value, and that's a pretty stark demonstration of the pipeline being worth zero," he said. "The Street is saying it's better to put your money in a bank." In April, Corgentech cut its work force by about 45 percent, following two disappointing Phase III trials of its investigational drug E2F Decoy and the early termination of a partnership with Bristol-Myers Squibb Co.

Another possible upshot, though probably not immediate, could be a takeover attempt of Amylin by partner Lilly, Weintraub said.

"I don't think it's that urgent," since Amylin doesn't want to be taken over, he said. "But the lower their stock price gets, the more Lilly must be glancing their way."