NEW YORK (CNNMoney.com) -- The FDA has approved Merck's diabetes drug Januvia, the drug manufacturer said.

Januvia helps patients with the most common type of diabetes, type 2, to control their blood-sugar levels by enhancing the body's ability to produce its own insulin. Analysts have projected blockbuster-sized sales for the drug.

Merck's (down $0.15 to $43.61, Charts) Januvia, also known as sitagliptin phosphate, is the first FDA-approved drug in the DPP-4 inhibitor class, and would be taken orally in a 100 mg pill once a day. The drug can be used alone, or added to more traditional diabetes treatments, like metformin.

Barbara Ryan, analyst for Deutsche Bank North America, projects $2 billion in annual peak sales for Januvia by 2010.

Ryan said that regulatory approval of Januvia was expected, but it's still a big bonus for Merck, especially considering that earlier this year, the Whitehouse Station, N.J.-based company received FDA approval for another potential blockbuster, the cervical cancer vaccine Gardasil.

Januvia's most likely competitor in the drug industry is Galvus, an experimental diabetes drug from the Swiss drug giant Novartis (down $0.07 to $57.47, Charts). Both of the drugs are once-a-day pills. Like Januvia, analysts consider Galvus to be a potential blockbuster.

Diabetics do not produce enough of their own insulin, which is necessary for the body to use sugar, so their blood-sugar levels can be difficult to control. More than 20 million Americans are diabetic, according to estimates from the American Diabetes Association, and nearly one-third of them don't know they have the disease. Most diabetics are type 2, which typically develops in adults, often as the result of bad health.

Merck heats up diabetes drug competition