Looking for a Sliver of the Me-Too Pie

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Approval for Bristol-Myers Squibb (NYSE: BMY) and AstraZeneca's (NYSE: AZN) Onglyza in the U.S. and Europe seems inevitable at this point, but the big question is whether the diabetes drug will give the drugmakers any appreciable revenue.

Yesterday, Europe's Committee for Medicinal Products for Human Use (CHMP) gave its positive recommendation for Onglyza. Now the companies just need to wait the couple of months for the European Commission to put its stamp of approval on the marketing application -- then marketing of the drug can begin.

In the U.S., an approval is a little less certain, but seems likely. The drug clearly works, but the Food and Drug Administration has become more strict about heart issues for diabetes drugs in the wake of GlaxoSmithKline's (NYSE: GSK) Avandia issues. The companies skirted around the issue by doing a post-hoc analysis of the clinical trials and in April, an FDA advisory panel voted 10-2 that the analysis was sufficient to rule out unacceptable cardiac risk. The FDA was set to rule on the drug later that month, but pushed the date out three months, so the companies should now hear by July 30 -- assuming the FDA doesn't delay again.

As we get closer to the drug getting on the market, the question is how well Onglyza will be able to compete in a crowded diabetes market. The drug is taken orally, so it's got that going for it over Eli Lilly (NYSE: LLY) and Amylin Pharmaceuticals' (Nasdaq: AMLN) Byetta, but it's in the same class as Merck's (NYSE: MRK) Januvia. As far as I can tell, the drug doesn't seem to have any clear advantage over Januvia, so doctors may be inclined to stick with Januvia, which they have more experience with.

On the other hand, Merck expects products containing Januvia to bring in $2.4 billion to $2.7 billion this year, so even a sliver of the me-too pie would be an OK addition.

Have another slice of Foolishness:

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