Forbes: Merck's March Madness
David Kliff, Diabetic Investor 03.02.07, 1:15 PM ET
On Feb. 28, Merck raised earnings guidance for 2007, saying it now expects to earn between $2.40 and $2.55 a share, up from $2.36 to $2.49 a share. While the company is not directly linking the increase to sales of its diabetes drug Januvia, the analyst community is now projecting greater sales for the drug.
With Galvus from Novartis (nyse: NVS - news - people ) delayed for at least another year and no other competition expected until 2009, it appears that Merck (nyse: MRK - news - people ) now owns the market on the DPP-4 class of diabetes drugs. Lehman Brothers increased sales estimates for Januvia from $353 million to $488 million in 2007 and from $887 million to $1.17 billion in 2008. And Bank of America raised sales estimates for 2011 from $1.76 billion to $1.97 billion.
At the end of March, the U.S. Food and Drug Administration is expected to render a decision on Janumet, Merck's combination of Januvia and metformin into one pill. Should Janumet be approved on time, it's likely these new sales estimates will become a reality. It is widely known that used in combination, Januvia and metformin have produced solid improvements with few adverse events. This remains the main selling point with primary care physicians, who are aware that Januvia really does not work any better than current oral medications; rather, it works well enough, but with a better adverse event profile.
However there some who believe that problems with Galvus--skin lesions and kidney impairment--are not unique to Galvus and apply to the entire class of DPP-4s. It should be noted that the FDA did not delay Galvus due to skin toxicity issues; it was more concerned with kidney impairment. Some may recall the editorial in the respected New England Journal of Medicine by Dr. David Nathan, director of the Diabetes Center at Massachusetts General Hospital, in which he outlined his concerns over the FDA's quick approval of Januvia.
Before we get too far away from the skin lesion issue, it's interesting to look at how Merck and Novartis have explained why skin lesions appeared with Galvus and not Januvia. Keep in mind that this issue did not appear in human trials but in primate studies. Novartis is claiming that it is possible that the skin lesion issue could be species-specific, as they performed their primate study on cynomolgus monkeys, whereas Merck did theirs on Rhesus monkeys. Others believe it may be a dosing issue, as Novartis used higher doses of Galvus in its studies than Merck did with Januvia in its studies. Whatever the reason, Diabetic Investor considers the skin lesion issue with Galvus a non-issue that is getting way to much attention by the analyst community.
More important is what we don't know about the entire class of DPP-4s. Diabetic Investor spoke with several respected researchers, who said that when you inhibit an indiscriminate enzyme such as DPP-4, which has at least 62 known substrates, you run the risk of adverse events from one or more of the substrates.
Diabetic Investor would recommend reading the study by Dr. K. Masur on the possible tumor-promoting effects of DPP-4 inhibitors, as it outlines the role of many of the substrates. Perhaps this is why the Masur study concluded by stating, "If there is a trend in down-regulating CD26/DPP-4 activity in cancer cells per se, the use of DPP-4 inhibitors to treat diseases like diabetes, short bowel syndrome or ulcerative colitis, where a long-time treatment is indispensable, would amplify those tumor-promoting effects. With regard to patients with increased gastrointestinal cancer susceptibility, long-time investigations should be performed to estimate the risk of a prolonged GLP-2 treatment and/or the use of DPP-4 inhibitors for cancer development and progression."
It should be noted that Januvia already has dose adjustment labeling for renal impairment, the same issue that caused the FDA to ask Novartis to run additional Galvus studies. Why the FDA did not ask Merck for more data on this issue and is requiring Novartis to perform additional studies is anyone's guess.
Based on Merck's actions, it would appear the company is confident that Janumet will be approved without delay. According to the FDA's press office, it is possible that the company won't know about any delays until the actual approval date, which is why it remains confident about Janumet.
When Diabetic Investor spoke with Merck's media relations department, it would not provide an exact date that it expects a decision, saying only that it would occur in late March. That's a strange statement, if you are confident nothing bad will happen. Diabetic Investor is also concerned with the lack of clarity from Merck officials when asked about the drug. It's ironic that Merck is claiming the problems with Galvus are molecule-specific. Anyone recall how they dealt with issues surrounding Vioxx?
All this speculation may be much to do about nothing, and Janumet might receive approval without any limitations or label changes. Diabetic Investor has no direct evidence that there is a problem with Januvia--only the thoughts of several respected researchers. The real problem is this: What happens if Janumet is delayed or comes with label changes?
Has the FDA put itself between a rock and hard place? Although the FDA is supposed to be above the political fray, this is a government agency, and no government agency is above political considerations. It stands to reason, with Januvia being approved so quickly, that Janumet should not run into any issues. This really isn't a new drug--it's merely a combination of two already approved drugs into one pill. Should the FDA delay Janumet, the question will be no doubt be asked: Why did they approve Januvia in the first place? The last thing the FDA needs is more questions on how it goes about approving drugs.
At this point, Diabetic Investor sees more questions than answers, as there is much we don't know about DPP-4s. All one has to do is look at the recent developments with Avandia, which has been on the market for over five years. While physicians thought they knew the drug's adverse event profile, out of the blue comes a new concern: bone fractures. It's possible that Januvia and Galvus, although from the same class, really do work differently, and that the problems identified with Galvus are unique. It's equally possible that there is a problem with all DPP-4s, and that the FDA jumped the gun by approving Januvia so quickly.
March is typically a month associated with the college basketball tournament affectionately known as March Madness. This year, depending on what the FDA does with Janumet, that madness just might extend to the world of diabetes. This could get very, very interesting. Stay tuned.
David Kliff is editor and publisher of the Diabetic Investor newsletter. Click here for more of Kliff's analysis, commentary and stock recommendations in Diabetic Investor.
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