The good side.
Type I and type II diabetes are characterized by high levels of blood glucose leading to glucotoxicity which results in increased risks of heart disease, blindness and kidney damages. Type II diabetes represents 90% of diabetes cases in the US and affects 24 millions of people around the globe. The market was $20 billion in 2009 and might reach $36 billion in 2017.
Briefly, type II differs from type I diabetes in its etiology. Type I results from a primary default in insulin production due to an auto-immune reaction in 90% of cases, which in turn will lead to the destruction of a subgroup of pancreatic cells that secrete insulin. On the contrary type II diabetes patients first show unaffected secretion of insulin, but the cells around the body are insensitive to the message of insulin and blood glucose levels remain elevated.
While most of the competitors such as Pfizer (NYSE:PFE) bet on insulin inhaler systems, Johnson & Johnson (NYSE:JNJ) developed a drug that targets SGLT2. A part of the glucose is excreted in the kidney and as it is a precious compound, kidney cells capture it by using SGLT2 transporter and put it back in the blood. This might be the critical point. Indeed, while others aim to increase insulin levels to somehow bypass the poor response to insulin, Johnson & Johnson's strategy is to target the SGLT2 transporter to decrease glucose uptake by the cells (and therefore, it lowers blood glucose levels). It bypasses the need of insulin to increase glucose uptake by directly targeting the effector of glucose entry.
Following successful clinical trials involving over 10 000 patients, the FDA approved JNJ's drug last Friday. Wall Street analysts predicted that the drug could bring $111 million in 2013 and even rise to $667 million by 2016.
Of note, Lilly's empagliflozin (NYSE:LLY) has recently been approved in Europe which might narrow the potential market. While Bristol Meyers Squibb (NYSE:BMY) and AstraZeneca's (NYSE:AZN) Forxiga was rejected by FDA due to increased liver cancer risks, it was approved in Europe. I believe that European clinicians who have heard about Forxiga risks will probably prefer other drugs such as Lilly's or Johnson & Johnson's one and that Forxiga does not represent a considerable threat.
The bad side.
There is, however, one dark cloud in J&J's sky. Indeed, the safety of diabetes drugs have been carefully analyzed in recent years and more than one experienced issues after it has been released. The best example is probably GlaxoSmithKline's (NYSE:GSK) Avandia failure. Post-marketing studies revealed that Avandia was responsible for increased fatalities from heart disease. Avandia is linked to as many as 100 000 heart attacks and the result might cost up to $6 billion to GSK.
Why does Avandia's failure have to do with Invokana?
In addition to the approval, the FDA required five post-marketing studies: an enhanced pharmacovigilance program to monitor malignancies, serious cases of pancreatitis, severe hypersensitivity reactions, photosensitivity reactions, liver abnormalities, and adverse pregnancy outcomes; a cardiovascular outcomes trial; a bone safety study; two pediatric studies under the Pediatric Research Equity Act (OTCPK:PREA), including a pharmacokinetic and pharmacodynamics studies and a safety and efficacy study.
A look at FDA's slides gives clear insights into the risks generated by Invokana.
Regarding the cardiovascular outcomes trial, it is fully justified by the Hazard Ratio of 1.46 for "fatal or non-fatal stroke." What does this ratio mean? It represents the ratio of risks between two conditions. If Invokana did not increase the cardiovascular compared to the reference drug, the Hazard ratio would be 1. In this case, the 1,46 ratio means that people who received Invokana during the study developed 46% more fatal or non-fatal stroke than the others. This is a significant increase. Note that there were some differences in the profile of patients from the different groups: some groups that received Invokana contained more current smokers than there were in the placebo group.
Regarding bones, Invokana was associated with an increased incidence of overall fracture.
Finally, Invokana was associated with a 4 to 7 fold increase in genital mycotic infections.
There is no doubt that Invokana will generate great profits for JNJ, for an economical point of view, please read this excellent article. The current article rather focuses on the risks that are threatening Invokana. Those risks won't affect at all Invokana sales and profits at short term, but care should be taken about mid-long to long term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.