Johnson & Johnson (JNJ) may have the next multi-billion-dollar drug for type II diabetes on the market before anybody else since the FDA advisory committee gave its blessing. This is a multi-billion dollar industry and usually when a new class of drug comes on the scene, the one who crosses the finish line first and wins approval usually ends up being a drug of choice. Lets take a look at this new class of drug.
Type II Diabetes
If you are unfamiliar with type II diabetes, the Center for Disease Control and Prevention estimates that one in eleven adults in the United States has diagnosed diabetes. Of this, type II diabetes accounts for 90% or more. Type II diabetes causes the beta cells in the pancreas to become dysfunctional which decrease the sensitivity and secretion of insulin in the body. This is what leads to elevated glucose levels in people. Present treatment for this disease has focused on insulin dependent mechanisms.
Sodium - glucose transporter - 2 or (SGLT2) is the name given to what they call a "transporter protein" in the kidneys. People with normal blood glucose levels can thank the (SGLT2) for keeping the glucose from being excreted in the urine. Glucose is a major fuel source to keep the body's machinery going. Here is how this glucose transporter works:
The kidney allows glucose molecules to pass from the bloodstream into the renal plumbing and it is quickly reabsorbed by the (SGLT2) without being excreted through the urine. There is a (SGLT1) and (SGLT2) but the latter is the one that is responsible for most of the absorption. This is not good for people with diabetes or elevated glucose levels because as the (SGLT2) re-encourages absorption it contributes to glucose levels that are already too high. So the natural work of this transporter protein ends up being counterproductive.
These new SGLT2 inhibitors block the re-absorption of the glucose into the body, and thus are given the name "inhibitors." It is nice that these inhibitors work only in the kidneys and contributed to lower levels of BG and A1C. The SGLT2 inhibitors also do not intervene with glucose metabolism so they can be used with present approaches to glucose regulation.
There is a race between two drug makers to have the first SLGT2 inhibitor approved in this lucrative market. First drug to the market in this arena usually has a huge financial plus so they're working hard to get there. Merck's (MRK) Januvia was the first DPP-4 inhibitor on the market approved for treating type II diabetes patients and is also the therapy of choice for doctors presently. $5.75 billion in sales in 2012 is nothing to sneeze at either. This shows the potential market is very big.
There has been much discussion about the DPP-4 Inhibitors having a link to cancer, but since its use started five years ago, there have been no major cancerous side effects that have occurred in clinical trials.
FORXIGA- Candidate #1
In Europe, the drug Forxiga, manufactured jointly by Bristol Meyers Squibb (BMY) and AstraZeneca (AZN), has already been approved for treatment for type II diabetes and received the go ahead the end of 2012. Why hasn't it received approval in the United States yet? It appears earlier this year the FDA requested additional clinical data in order to allow better assessment of the benefit/risk profile of Forxiga (dapagliflozin). They need information from ongoing trials but also may require information from new clinical studies.
Evidently the FDA did not approve the drug initially because it had concerns the medication might cause certain types of cancer. When the drug was being studied for side effects, half the patients were put on the drug and half the patients were put on a placebo. Neither group had a more noticeable amount of tumors, but there were more tumors in the bladder, prostrate, and breast regions for the Forxiga group. This does not mean that the drug caused these tumors; I just wanted to point this out. Apparently other studies did not find any difference in the amount of tumors between the drug or placebo groups. In research of this is considered "non-statistically significant" but there were enough open ended questions left over at the FDA decided it needed more research information.
INVOKANA- Candidate #2
The drug Invokana (canagliflozin), by Johnson & Johnson , may win the race to be the first drug used in the United States since it was reviewed earlier this year by the FDA's advisory committee and the vote came out (10 to 5) in favor of approval for the drug and type II diabetes. This does not mean that Invokana did not raise concerns of some sort of side effects. Concerns about risks of dealing with heart disease, stroke and also the use of the drug by patients who had kidney disease were some concerns that were raised. But the drug did not appear to signal an increased risk of cancer as the dapagliflozin did.
Johnson and Johnson has been on a classic textbook strong bullish run since the beginning of January. The stock continues to hug the upper Bollinger band which identifies the strongest move possible. It appears to be on the second leg of its run and I would look for if the stock to level out or slow down soon. The overbought position in the RSI indicator is strong and a peak in the MACD indicator also looks to have appears. Both signal a possible end coming to the present run. At this point I'm not sure if it's something I would get into as a growth stock because I believe we may have missed trend and it could be on its last leg here.
From a short-term perspective I would expect the stock to top out soon may be level off dip here there, but long-term this new SGLT2 drug will continue to help Johnson and Johnson be a global leader in the drug market.