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How Serious Is This News for Diabetes Drugmakers?

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Three weeks ago, I offered my best postulations of where diabetes medications could be headed in the not-so-distant future. It isn't that the current FDA-approved medications don't help control the disease where the body either fails to produce enough insulin or resists its effects; it's that the current medications have far too many potential side effects and/or don't work quickly enough.

This week brought us a perfect example, with FiercePharma reporting that a study by JAMA Internal Medicine quantified the risk of developing pancreatitis based on two current Type 2 diabetes treatments. The study found that Januvia by Merck (NYSE: MRK  ) , and Byetta, which AstraZeneca (NYSE: AZN  ) and Bristol-Myers Squibb (NYSE: BMY  ) acquired when they jointly purchased Amylin Pharmaceuticals, doubled a patient's chances of developing pancreatitis.

Now some of this can be taken with a grain of salt because type 2 diabetes has a tendency to cause swelling of the pancreas to begin with. In fact, despite the FDA enforcing a tougher warning label on Byetta's packaging after six patient deaths, four of them couldn't be causally related to Byetta usage.

Still, this represents a stark reminder that while our current type 2 diabetes treatments are good, they could be markedly better. It also places Merck's blockbuster Januvia -- which accounted for $4.09 billion, or about 10% of total sales -- squarely in the spotlight. Combined with Janumet, its newer diabetes medication that combines Januvia with metformin, Merck relies on Januvia in some form or shape for nearly 15% of its sales. If it's proved to be too risky for diabetic patients to take, sales could falter and so will Merck.

The news is even more depressing for Merck considering that multiple promising revolutionary diabetes treatments are working their ways through the clinical pipeline and starting to find their way onto pharmacy shelves.

One of the most exciting pathways in diabetes treatments is SGLT-2 inhibitors, which work in the kidneys and help prevent glucose reabsorption. Even more intriguing, SGLT-2 inhibitors have been shown to reduce A1C levels and to contribute to weight loss, which is the opposite of what most of the medications currently on the market do -- although, I should point out, none are indicated for weight-loss or control.

AstraZeneca and Bristol-Myers' Forxiga, for instance, has already received approval from the European Medicines Agency for type 2 diabetes. Although it was denied approval in the U.S. because of potential cancer risks, I feel that further safety data will lead to an approval in the U.S.

The even more exciting SGLT-2 inhibitor is Johnson & Johnson's (NYSE: JNJ  ) Invokana. Not only did Invokana moderately reduce A1C levels in trials, but it did so more effectively than Merck's Januvia. A few weeks ago, implying that Invokana would easily take market share from Januvia would have been a tough sell given Januvia's short list of side effects compared to Invokana's need for patients to urinate more frequently, as my Foolish colleague Brian Orelli noted in June. With a study demonstrating that pancreatitis risks are doubled for Januvia users, perhaps the pendulum swings a little easier in Invokana's direction.

The development of glucokinase activators may also take a slight hit. Amgen's (NASDAQ: AMGN  ) AMG 151 -- which I highlighted three weeks ago as an intriguing long-term type 2 diabetes therapy option -- is undertaking multiple combination studies with existing drug metformin, or Merck's Januvia.

This study may turn out to be nothing more than hot air in the wind as Januvia's benefits appear to have far outweighed its risks up until now. However, as newer therapies become available, that risk-reward benefit is going to shrink, and further studies like that released by JAMA Medical Journal will help sink Januvia quicker than Merck would like.

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