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AstraZeneca (AZN - Analyst Report) announced that its type II diabetes drug, Forxiga, has been approved by the Japanese Ministry of Health, Labour and Welfare (MHLW). AstraZeneca and Japan-based Ono Pharmaceutical Co., Ltd. will co-promote Forxiga, a sodium glucose co-transporter-2 (SGLT2) inhibitor, in Japan.

We remind investors that the marketing application for Forxiga was submitted to MHLW by Bristol-Myers Squibb Company (BMY - Analyst Report). However, AstraZeneca acquired full rights to Forxiga from Bristol-Myers in Feb 2014.

Forxiga is already approved in the U.S. (Jan 2014) and the EU (Nov 2012) for type II diabetes.

Our Take

We are pleased with the approval of Forxiga in Japan. According to the company, approximately 9.5 million people are suffering from type II diabetes in Japan. Generic competition has adversely impacted AstraZeneca's revenues over the past few quarters – this has put significant pressure on the company. In this context, the recent string of approvals for Forxiga and the subsequent up-take of the drug will give a much needed boost to the company’s top line.

We note that Astellas Pharma, Inc.’s Suglat, a SGLT2 inhibitor, which gained Japanese approval in January this year, has a head start over Forxiga. Meanwhile, Mitsubishi Tanabe Pharma’s SGLT2 inhibitor, canagliflozin (U.S. trade name: Invokana) is currently under regulatory review in Japan.

AstraZeneca, a biopharmaceutical company, carries a Zacks Rank #3 (Hold). A better-ranked stock in the biopharma sector is Alexion Pharmaceuticals, Inc. (ALXN - Analyst Report). Alexion carries a Zacks Rank #1 (Strong Buy).

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