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After having voted against the approval of Bristol-Myers Squibb Company (BMY - Analyst Report)/ AstraZeneca’s (AZN - Analyst Report) type II diabetes treatment dapagliflozin in 2011, the Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) of the U.S. Food and Drug Administration (FDA) recommended its approval based on the basis of available data. The panel concluded that dapagliflozin had a favorable benefit-risk profile.

The panel voted 13-1 recommending the approval of dapagliflozin in the U.S. as an adjunct to diet and exercise to improve glycemic control in adults suffering from type II diabetes. The panel also appeared to be satisfied about dapagliflozin’s cardiovascular risk profile relative to comparators and voted 10-4 on that aspect.

A final decision from the FDA is expected to be out by Jan 11, 2014. We note that although the FDA is not bound to accept the recommendation of the panel, it usually considers the same while deciding on the fate of a drug.

Background

In Jul 2011, EMDAC had recommended against approving dapagliflozin. The panel voted 9-6 against approving the candidate due to safety concerns, after reviewing the new drug application (NDA) filed by the companies in 2010. In Jan 2012, the FDA issued a complete response letter (CRL) to Bristol-Myers/ AstraZeneca. While issuing the CRL, the U.S. regulatory body asked for additional data to better asses dapagliflozin‘s risk-benefit profile. The agency said that the additional data may come from the ongoing or new studies.

Following the receipt of the CRL, Bristol-Myers/AstraZeneca conducted several new studies on dapagliflozin. The companies not only included data from the new studies in the resubmitted NDA (the receipt of which was acknowledged by the FDA in Jul 2013) but also additional long-term data (up to four years’ duration) from earlier studies.

Our Take

We are pleased by the FDA panel’s positive stance on dapagliflozin .We expect the therapy to be approved in the U.S. early next year as all the concerns regarding dapagliflozin appear to have been addressed by Bristol-Myers/AstraZeneca.

We note that dapagliflozin was approved in the EU in Nov 2012 and is marketed under the trade name Forxiga for treating type II diabetes. The drug is currently approved in 38 countries across the globe.

Moreover, Bristol-Myers’ top line has been impacted adversely following the genericization of key drugs including Plavix (co-developed with Sanofi (SNY - Analyst Report)). Consequently, new products must deliver to make up for the loss of revenues due to genericization. The U.S. approval of dapagliflozin would go a long way in increasing the drug’s sales potential (which were only $7 million in the third quarter of 2013) apart from boosting Bristol-Myers’ revenues as the type II diabetes market is very lucrative.

Furthermore, generic competition has adversely impacted AstraZeneca's revenues over the past few quarters. This has put significant pressure on the company. Consequently, U.S. approval and subsequently strong sales of dapagliflozin would provide the company’s top line with the much needed boost.

Both Bristol-Myers and AstraZeneca carry a Zacks Rank #3 (Hold). A better-ranked stock is Actelion Ltd. (ALIOF) with a Zacks Rank #1 (Strong Buy).

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