Undaunted, drugmakers aim at diabetes

Despite recent setbacks for Glaxo, Takeda drugs, companies large and small to discuss possible entries in $8 billion market.

By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Thousands of experts converge in Chicago next week to discuss potential new diabetes drugs - a growing and lucrative industry that has suffered recent setbacks because of side effects in currently available treatments.

The findings will be announced at the American Diabetes Association annual meeting, beginning June 22, which serves as an annual showcase for drugs in development.

The importance of diabetes - a disease that breaks down the body's natural ability to convert food into energy - and its impact on health care cannot be overstated. More than 20 million Americans have diabetes, and a third of them don't even know it, according to estimates by the diabetes association.

Diabetes drug spending is expected to jump 70 percent through 2009, according to drug benefit manager Medco Health Solution. Analysts estimate the industry's current size as $8 billion-plus in annual sales.

Incoming drugs from companies such as Bristol-Myers Squibb (up $0.28 to $30.11, Charts, Fortune 500) are expected to fuel the surge. Most diabetes drugs - including those on the market and still in company pipelines - work by controlling blood-sugar levels. These levels can run dangerously high in diabetics because they don't produce enough insulin to convert the sugar into energy.

Next week, Bristol will announce findings from late-stage studies on its experimental treatment, saxagliptin. If the experimental drug lacks serious side effects, then Bristol could get a competitive edge over industry blockbusters Avandia and Actos, which have come under fire for suspicion of heart attack risks. Assuming saxagliptin gets approved by the Food and Drug Administration, annual sales could exceed $400 million by 2011, says Chris Schott, analyst for Bank of America.

The New York-based Bristol will also announce study results on its diabetes compound, SGLT-2. These are early-stage results and the compound is still years away from potential market entry. Annual sales could reach $150 million by 2011, says Schott.

Also, the San Diego-based Amylin (up $0.19 to $42.83, Charts) is expected to announce new findings for its diabetes drugs Byetta - a treatment it shares with partner Eli Lilly & Co., based on Gila monster saliva - and Symlin. Byetta sales totaled $430 million in 2006, about tenfold the total for Symlin.

Amylin hopes that these study results could bolster sales for its injectable drugs. But Biren Amin, analyst for the Stanford Group Co., said Amylin's most important study results - for an extended-release version of Byetta - won't be released until later this year.

The extended release version isn't expected to hit the market until 2009, but even without it, Amin believes that Byetta sales could approach billion-dollar blockbuster levels by 2008.

These experimental and up-and-coming diabetes drugs are entering an industry that is ripe for change, as some of the more well-known names are taking a regulatory beating.

Established diabetes blockbusters Avandia from GlaxoSmithKline (up $0.15 to $52.29, Charts) and Actos from Takeda are facing Food and Drug Administration fallout and slipping market share, according to a Morgan Stanley report, over concerns that the drugs might increase heart attack risks. However, the level of risk that these drugs might pose is still being determined.

These drugs are major earners - with 2006 sales of $3 billion for Avandia - and they already carry warnings of heart failure risks. Andrew von Eschenbach, an FDA commissioner, said during House testimony June 6 that the current warnings could soon be increased to the most severe "black box" warnings.

Meanwhile, on June 13, the weight loss drug Zimulti from the French company Sanofi-Aventis (up $0.37 to $41.70, Charts) was unanimously shot down by an FDA panel of advisors. Zimulti, also known as Acomplia and rimonabant, is already approved in more than a dozen countries, most of them in the European Union, but the FDA advisers were concerned about risks of suicidal thoughts and behavior.

The panel's vote is non-binding, but FDA regulators follow the direction of their advisers most of the time.

The FDA will decide July 26 whether the drug merits approval. Whether or not Zimulti gets approved relates to the diabetes market because the drug has been studied as a treatment for that disease, as well as for smoking cessation. Also, obesity is major problem for diabetics - thus the industry term "diabesity" - so anything dealing in weight loss is relative to the market.

Approval of Zimulti could be the first step in creating another diabetes competitor, but analysts say this scenario is unlikely. "Acomplia [Zimulti, rimonabant] does appear to be dead in the U.S.," said Schott of Bank of America, in a recorded message to industry-watchers.

Other players in the diabetes market include the newly-launched drug Januvia, from the New Jersey-based Merck & Co. (up $0.96 to $51.20, Charts, Fortune 500), which analysts see as a potential blockbuster. In addition, Amylin is experimenting with a weight loss drug combination. But analysts aren't expecting major studies concerning these drugs at the conference.

Pfizer Inc. (up $0.21 to $26.60, Charts, Fortune 500) plans to release study results on its product Exubera, the first form of inhalable insulin to enter the market. This device, which allows diabetics to breath insulin instead of injecting it, was considered a potential blockbuster until the product hit lackluster sales after its postponed launch in 2006.

Other companies are working on inhalable insulin devices, including Mannkind Corp., Lilly, Akermes, Inc., Novo Nordisk and Aradigm, but these products are still experimental.

Also at the conference, Bentley Pharmaceuticals will announce study results for its experimental "intranasal" device Nasulin, which delivers insulin through the nose and not the lungs, like Exubera. This device is still years away from potentially entering the market.

More than 90 percent of diabetics are type 2, which typically occurs later in life and strikes the baby boomers most acutely. Poor dietary practices, leading to bad health is often to blame for the onset of type 2. The rarer type 1 is more serious, and usually emerges in children and adolescents.  Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.