Although diabetes drugs have come under fire lately, insulin maker Novo Nordisk (NYSE:NVO) is moving full steam ahead with its newest drug to help fight type 2 diabetes.

The company yesterday released data from the second and third (of a planned five) phase 3 clinical trials testing the effectiveness of Liraglutide. Novo Nordisk isn't trying to get the drug approved as a frontline medicine. It's banking instead on approval of its use in combination with other drugs for patients who have problems regulating their glucose levels.

Liraglutide is an analogue of a human hormone that senses glucose levels and stimulates insulin production to compensate. It's more effective than using the hormone directly, because the natural protein is broken down in the kidneys; Liraglutide has a much longer half-life, and it can be taken just once a day.

All the patients in the first trial were taking Sanofi-Aventis' (NYSE:SNY) Amaryl, and the trial compared Liraglutide to placebo as well as the currently approved treatment Avandia, marketed by GlaxoSmithKline (NYSE:GSK). The Liraglutide fared considerably better than Avandia at bringing down a specific measure of long-term glucose levels. Forty percent of the subjects reached the American Diabetes Association goal of HbA1c levels of less than 7%.

The second trial compared Bristol-Myers Squibb's (NYSE:BMY) Glucophage in combination with placebo, Liraglutide, or Amaryl. The Liraglutide and Amaryl treatment arms faired equally well, with more than 40% of the patients reaching the magical 7% HbA1c level. But Amaryl causes high rates of hypoglycemia -- low blood sugar levels -- which weren't seen in the Liraglutide-treated subjects. It's good enough to be equal in efficacy, if the drug has a superior side effect profile.

Liraglutide also decreased the weight gain seen when taking the currently approved medications. That may seem superficial, but weight increases due to diabetes drugs cause serious side effects, and that's an important consideration when doctors choose a medication.

Novo expects to complete the remaining two clinical trials in the second half of this year and the first quarter of 2008. If the data continues to show that the drug works as well or better than the current medications with decreased side effects, the company will be on track to submit a marketing application in the middle of next year.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Glaxo is an Income Investor selection. The Fool has a disclosure policy.