The Diabetes Pipeline With a Clog

Brandy is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Big pharma placed its bets on a new class of diabetes drugs called SGLT2. Last year, buzz surrounded late-stage projects from Johnson and Johnson (NYSE: JNJ), Eli Lilly (NYSE: LLY), and the partnership of Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca (NYSE: AZN). But the path to market proved tricky.

Johnson and Johnson's Invokana earlier this year became the first SGLT2 approved in the United States. Bristol-Myers and AstraZeneca’s Forxiga was the first out in Europe but remains stuck in the Food and Drug Administration’s pipes.  Could Eli Lilly’s empagliflozin follow Invokana to the U.S. market -- or will it become stuck behind Forxiga?

And how much does an SGLT2 win even matter to these companies?  

Bumpy road for SGLT2s

SGLT2s were hyped because they’re insulin-independent, which means they can fit into a combo therapy with insulin without risking counteraction. The class also has the potential to become a blockbuster market, with sales of Invokana predicted to reach $1 billion by 2018.

But the FDA has become notoriously skittish when it comes to the safety of diabetes drugs.

Bristol-Myers Squibb and AstraZeneca’s SGLT2 received European approval under the name Forxiga, and brought in $3 million in the first quarter. But an FDA approval hangs just out of reach due to concerns of cancer risks. An advisory committee voted 9-6 that the safety and efficacy data wasn’t sufficient to support an approval. Then the FDA issued a complete response letter requesting more data.

Johnson and Johnson’s Invokana didn’t show any of Forxiga’s cancer risks. But the drug did need to undergo long-term cardiovascular trials, which should wrap up in 2015. And coming first into the U.S. could provide Johnson with the market advantage.

Which path will Eli Lilly’s pipeline contender follow?  

Lilly’s contender

Eli Lilly provided a glimpse at empagliflozin’s late-stage data during the American Diabetes Association meeting last month. Empagliflozin went up against placebo and showed improvements in reducing blood sugar, blood pressure, and weight. But the drug also showed an increased chance of genital infection due to the glucose that leaves the body through urine.

There’s a good chance the FDA won’t issue a denial or complete response letter based solely on the risk of genital infection. That’s not quite in the same ballpark as Forxiga’s cancer concerns. A cardiovascular safety requirement is more likely, but could be met with data from the late-stage trials.  

It’s a fool’s errand these days to guess which way the FDA will rule on a diabetes drug’s safety. But we should have an idea of the agency’s direction soon; Lilly filed its new drug application in March.

Drug dependence

Eli Lilly is coming up on a wounding patent expiration of its $5 billion antidepressant Cymbalta and has cancelled a fair number of late-stage pipeline products.  But empagliflozin is only one of the company’s diabetes bets. There’s also an insulin and a GLP-1 agonist meant to compete with Sanofi’s Lantus and Novo Nordisk’s Victoza, respectively. It would help the company to at least get two of these drugs to market. 

Bristol-Myers and AstraZeneca took a giant step into the diabetes market with last year’s acquisition of Amylin, which brought in the GLP-1 agonists Byetta and Bydureon. But the companies have both also suffered major patent losses in the past couple of years. And AstraZeneca’s had problems getting its pipeline to pay off.  

Johnson and Johnson wins at becoming the first SGLT2 to market but also because this is the company least reliant on a victory here. The recent second quarter report beat estimates. The company is at the forefront of the game-changing, all-oral hepatitis C drugs coming down the pipes. And, as Brian Orelli noted, the company’s always a buy if you’re patient enough.

Foolish final thoughts

SGLT2 drugs have lost the glossy shine of hype but that doesn’t mean they’re valueless. Invokana’s approval proves it’s possible to get to market if a drug has a decent safety profile and if the company is willing to jump through some FDA hoops.

Eli Lilly and AstraZeneca are most in the need of an SGLT2 win, but empagliflozin seems to have fewer issues than Forxiga. As for Lilly’s chances of approval -- it’s safest to wait and see which way the FDA wind blows.  

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Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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