FDA's SGLT2 warning bad news for AZ, J&J and Lilly--but could be a boon for Merck

Top companies are counting on the SGLT2 class of diabetes meds to ratchet up sales. But a new FDA warning could put a crimp on that plan.

The agency issued a communique about cases of ketoacidosis in SGLT2 patients, a serious condition that sent patients to emergency rooms. The reports covered patients using the entire suite of SGLT2 meds, including Johnson & Johnson's ($JNJ) Invokana, AstraZeneca's ($AZN) Farxiga and Eli Lilly ($LLY) and Boehringer Ingelheim's Jardiance.

That may be bad news for these companies, which not only market the single-agent pills, but combination drugs, too. It could be good news, however, for another class of oral meds, including Merck & Co.'s ($MRK) powerhouse Januvia franchise, Bernstein analyst Tim Anderson said in an investor note.

"Inasmuch as there will be heightened awareness of this new safety issue with the SGLT2s, it could benefit other oral diabetes drug classes such as the DPP4 inhibitors," Anderson wrote. "The biggest of the DPP4s, by a wide margin, is Merck's Januvia."

It would be the second boost in as many weeks for Januvia, which recently posted promising data from a cardiovascular outcomes trial. Unlike rival DPP-4 med Onglyza, Januvia sailed through the post-marketing study without a black mark for heart failure risks. At the time Anderson hiked his long-term sales expectations for Januvia and cut estimates for Onglyza.

Invokana could have the most to lose from the new warning; as the first SGLT2 drug to hit the market, it has built up a more sizable chunk of sales, with $278 million in the first quarter of this year alone. It has built up a 4.9% share of the entire noninsulin diabetes market (excluding standby med metformin). But AstraZeneca is counting on big things from Farxiga, too; in its annual report, the company bragged that the drug was capturing one in three SGLT2 scripts, and had helped the class grow sales by 115%.

- see the FDA release

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