Bristol-Myers, AstraZeneca Diabetes Drug Gets New Hope

A glowing review by the prestigious Cleveland Clinic could give new life to an emerging class of diabetes drugs that many industry observers had all but given up for dead.

Several weeks ago, Steve Nissen, the head of cardiovascular medicine at Ohio-based Cleveland Clinic, told Bloomberg that the experimental diabetes medication dapagliflozin from Bristol-Myers Squibb (NYSE:BMY) and AstraZeneca (NYSE:AZN) “is as good as anything we’ve seen.” Nissen added that he expects the drug to be approved within the next year and become a “potentially important addition” to treatment options.

Before that happens, though, the FDA needs to undergo a change of heart. This past summer, an advisory committee from the agency voted against approving the drug, citing the increased risk for cancer and toxicity issues. At the time, Goldman Sachs analyst Jami Rubin thought the “nay” vote would put the kibosh on the entire class of drugs, called SGLT-2 inhibitors. Other companies with SGLT-2 inhibitors in development include Johnson & Johnson (NYSE:JNJ) and Pfizer (NYSE:PFE), a Lilly (NYSE:LLY) and Boehringer partnership, Lexicon (NASDAQ:LXRX), Isis (NASDAQ:ISIS) and others.

Nissen doesn’t think the cancer risk cited by the FDA has any merit. He believes the small number of tumors found in dapagliflozin clinical trial patients already were developing before they started treatment. “Obviously, the issue will need ongoing surveillance, but it might turn out to be a false signal,” he said.

We won’t know until early next year whether the Cleveland Clinic’s endorsement will cause the FDA to change its mind about the drug. The agency recently said it was postponing its final decision on dapagliflozin for three months.

Dapagliflozin works in a unique way, blocking absorption of blood sugar in the kidney and expels it in urine. Doctors are eager to prescribe the drug because studies show it also reduces blood pressure, cholesterol and weight — causes of heart disease that eventually kill most diabetics, Nissen said. In naming it a top-10 medical innovation for 2012, the Cleveland Clinic said dapagliflozin and others in its class represent a paradigm shift in diabetes treatment.

Diabetes is spreading at epidemic levels, according to the U.S. Centers for Disease Control and Prevention. One in 10 adults in the U.S. — almost 26 million people — already have diabetes, while 35% have elevated blood sugar levels that puts them at risk for the condition, according to the agency. Most people with the disease have the Type 2 form — in which the body doesn’t make enough insulin to convert blood sugar to energy — which is linked to older age and excess weight. With an estimated two-thirds of U.S. adults overweight, Type 2 diabetes is on the rise.

More than 275 million people suffer from diabetes across the globe, and this population is expected to exceed 350 million by 2030. The global market for diabetes management, including drugs, accounted for $41.9 billion in 2010 and is expected to grow to $114.3 billion in 2016, according to a new report published by Transparency Market Research, “Global Diabetes Market: Drugs & Devices (2011-2016).”

As of this writing, Barry Cohen was long BMY, AZN, JNJ and PFE.

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