After two delays, the Food and Drug Administration approved once-weekly injectable Bydureon for treating adults with Type 2 diabetes, which is linked to poor diet and lack of exercise. Bydureon is a longer-acting form of Amylin's older Byetta treatment.

Amylin shares jumped 16.6 percent to $14.16 in after hours trading on Nasdaq. The shares of partner Alkermes Plc, which provided some technology for the medicine, rose 4.7 percent to $20.

More than 300 million people worldwide suffer from diabetes, including nearly 26 million Americans. They run a high risk of heart disease, stroke, kidney failure, blindness and limb loss.

Bydureon is seen as Amylin's most important new drug, and critical to its future earnings growth, with analysts estimating peak sales of close to $1 billion.

But after repeated delays in gaining approval in the United States, the medicine faces a daunting competitive landscape.

Novo Nordisk's Victoza, another injectable diabetes medicine, has had almost two extra years to gain traction with patients and doctors. The delays have also given time for potential rival treatments from GlaxoSmithKline Plc and Sanofi SA to catch up.

The FDA had rejected Bydureon twice before, most recently in October 2010, asking for more data on potential side effects to the heart. A trial of Bydureon in July found no link between the drug and changes in heart rhythms, the company said.

However, as a condition of approval, the FDA said on Friday Amylin must conduct another long-term clinical trial by 2018 to study heart-related side effects from Bydureon.

WITHOUT LILLY

Taken once a week, Bydureon has been viewed as crucial to sustaining the franchise started by the twice-daily Byetta.

Investors are closely watching whether Amylin will be able to pull off a successful launch without the help of long-time partner Eli Lilly & Co after the two companies broke off their diabetes partnership in November. Alkermes would also get royalties from the sales of Bydureon.

Amylin will price its new drug at $323.44 for four weeks of therapy and make it available in U.S. pharmacies starting in February.

The company also plans to hire 650 sales specialists who will promote Bydureon and Byetta to doctors, and start working by March, the company said in a conference call with investors.

Mark Schoenebaum, an analyst at ISI group, said Bydureon's price was equivalent to about $4,200 a year, compared with about $3,400 to $5,000 for Novo Nordisk's Victoza, depending on the dose.

Victoza, which is injected daily, proved superior to Bydureon in controlling blood sugar levels, trial results published last March showed. But Bydureon may get a boost because of its more convenient dosing.

Analysts at Deutsche Bank expect peak Bydureon sales of $1.5 billion, above market forecasts of $940 million by 2016, because of its convenience compared with Victoza.

Bydureon, Byetta and Victoza belong to the new GLP-1 class of therapies that stimulate insulin production when blood sugar levels become too high. They can also prompt weight loss, a benefit because obesity is a leading cause of diabetes.

European regulators approved Bydureon as a treatment for Type 2 diabetes in April 2011.

(Additional reporting by Deena Beasley in Los Angeles; editing by Tim Dobbyn, Steve Orlofsky and Andre Grenon)

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