In SGLT2 diabetes fight, Lilly's empagliflozin loss is J&J and AstraZeneca's gain

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Johnson & Johnson ($JNJ) and AstraZeneca ($AZN) will just have to duke it out for share of the market for SGLT2 treatments for diabetes. A potential third competitor from Eli Lilly ($LLY) and Boehringer Ingelheim, empagliflozin, failed to win FDA approval, thanks to problems at a Boehringer manufacturing plant.

J&J's Invokana (canagliflozin) was the first drug in this new class to win FDA approval, followed by AstraZeneca and Bristol-Myers Squibb's ($BMY) Farxiga (dapagliflozin) earlier this year. SGLT2 treatments control blood glucose by blocking a protein involved in its reabsorption in the kidneys. The drugs come with safety worries; Farxiga, in fact, failed to win FDA approval on its first try. As Invokana was launched, analysts suggested that side effects could limit demand for SGLT2 treatments.

Whatever the ultimate size of the market, the bigger the share, the better, and Invokana obviously has the lead here, with first-to-market advantage. In its fourth-quarter earnings presentation, J&J crowed that Invokana was the most successful diabetes launch since Januvia. The company said Invokana had overtaken Merck's ($MRK) Januvia and Novo Nordisk's ($NVO) Victoza to account for 18% new-to-brand prescriptions in endocrinology, outside of metformin or insulin.

Meanwhile, AstraZeneca is just getting started with Farxiga. Having recently bought out Bristol-Myers Squibb's share of their diabetes partnership, AstraZeneca is keen to make that deal pay off. During the company's fourth-quarter earnings call, CEO Pascal Soriot acknowledged Invokana's lead. "We certainly have very ambitious plans as you can imagine," Soriot said of the Farxiga launch in the U.S. "But of course you also have to factor in that ... we're not the first SGLT2, we're second. And there will be competition."

But Soriot said his ambitious plans include a "very substantial focus on resources allocation behind this product." Translation: AstraZeneca is prepared to throw cash and personnel at the drug to make sure it succeeds.

With the threat of Lilly and Boehringer's competitor pushed down the road, AstraZeneca will have more time to build Farxiga sales. And it can focus on just one rival, instead of two. But Lilly was banking on empagliflozin to fulfill one of its drug-approval promises for this year. You can bet the companies will be racing to fix those manufacturing problems so they can do just that.

- see the release from Lilly

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