Januvia from Merck (MRK) is a real success story. Approved by the FDA in 2006 for type 2 diabetes, it dominates sales of the DPP-4 class in developed markets. Januvia and its combination version Janumet (combined with metformin) have a 75% share of the global DPP-4 market.
DPP-4 inhibitors like Januvia are a fast-growing segment of the diabetes market. DPP-4 (dipeptidyl peptidase 4) is an enzyme that breaks down GLP-1 (glucagon-like polypeptide 1), a hormone that has a profound effect on stimulating the release of insulin from the pancreas. As a result, GLP-1 has a very short life in the blood.
Drug developers came up with two methods of extending the insulin-releasing effect of GLP-1, and both have proven successful. A synthetic GLP-1 was developed that is not broken down by the enzyme, for example: Byetta from Amylin (AMLN) or Victoza from Novo Nordisk (NVO).
Inhibitors were also developed that stop the enzyme from breaking down the GLP-1. This class of drugs are called DPP-4 inhibitors. They prevent the breakdown of GLP-1, thus enabling it to circulate longer in the blood. Since DPP-4 inhibitors only enhance the body's own ability to release insulin and regulate blood glucose, these drugs can only treat type 2 diabetes. Their effect is dependent on some function of the insulin-releasing beta cells in the pancreas. People with type 1 diabetes generally do not have a significant number of functioning pancreatic beta cells, so the drug cannot help them.
GLP-1s are injected, DPP-4s are pills.
Worldwide sales in 2011 for Januvia were $3.3 billion, and for Janumet, $1.36 billion. Sales in the first quarter of 2012 were $919 million for Januvia and $392 million for Janumet. Sales in the second quarter of 2012 for Januvia reached $1.058 billion, a 36% jump from the same quarter a year ago, while Janumet sales were $411 million, a 28% increase. Januvia has become Merck's biggest growth engine and its biggest hope of offsetting looming declines of its current star Singulair, a COPD medication.
In treating newly diagnosed diabetics, doctors usually try to delay the use of insulin and try other options first to control blood sugar. Many patients are started out on an older medication, metformin. When metformin alone eventually fails to control blood sugar, other treatments may be added including Januvia, or other oral agents or injectables. Lantus is also an alternative to Januvia as a second-line therapy after metformin.
In phase 2 trials, Lantus insulin reduced blood-sugar levels to a greater degree than Januvia. But Lantus was associated with higher rates of low blood-sugar episodes and weight gain.
In August 2009, a second drug in the DPP-4 class was approved in the U.S., Onglyza, made by Bristol-Myers Squibb (BMY) and AstraZeneca (AZN). Sales in 2011 for Onglyza together with its combination version Kombiglyze (combined with metformin) reached $473 million.
Galvus from Novartis (NVS) was approved in Europe in 2007. The U.S. approval has been delayed by the FDA pending further data concerning to its effect on people with kidney disease. Galvus and its combination version Eucreas are doing very well around the world, generating sales of $677 million in 2011. The two drugs are now approved in 90 countries. The drug just entered the Chinese market in 2012. Galvus and Eucreas are doing especially well in emerging markets, like Brazil, Russia and India. Novartis products accounted for more than 50% of the DPP-4 market in 2011 in those countries, mostly thanks to Eucreas, which has outperformed Janumet considerably.
Emerging markets offer good opportunities for diabetes launches, or to compensate for failures in established markets. The size of the market plays a big role. In 2011, combined sales of non-insulin anti-diabetics (both generic and branded) across BRIC (Brazil, Russia, India, China) were higher than sales in Germany, France, and the U.K.
Another drug in the DPP-4 class, Tradjenta from Boehringer Ingelheim, was approved in 2011. Because Tradjenta is not excreted via the kidneys, Boehringer Ingelheim targeted a niche patient population: people with kidney trouble. Sales are somewhat slow however. Maybe doctors fail to distinguish the drug from its competition.
Sodium-glucose transporter inhibitors (SGLT-2s) are the next major class of drugs on the horizon. The conventional way of treating diabetes is through controlling insulin production. SGLT-2 drugs are unconventional in that they remove excess sugar from the body through urine before glucose rises to critical levels. The first product in a new class to reach the market always has a significant advantage.
AstraZeneca/Bristol-Myers Squibb's dapagliflozin was recommended for approval in Europe.
In the U.S., however, in July 2012 a panel voted 9-6 against advising the FDA to approve dapagliflozin. The panel cited possible liver damage and signals of breast and bladder cancer as a reason for their decision. In July 2012, Johnson & Johnson (JNJ) applied for approval of canagliflozin, a similar drug administered once daily in pill form.
In the latest clinical trials, canagliflozin was found to be more effective for both blood sugar control and weight loss than its closest competitor Januvia. Uncertainty looms over the approval because of the drug's unknown risks. Many trial patients have reported higher rates of genital infections, urinary tract infections, and increased urination. The FDA's earlier rejection of a drug that worked the same way as canagliflozin has stirred apprehension. However, if these concerns prove unjustified, drug sales could expect to surge.
The research firm EvaluatePharma predicts Januvia will be the top-selling drug in the world in 2018 in all categories of drugs with projected sales of more than $9.7 billion. While optimistic, this prediction also highlights the unpredictability of a drug's success. Nobody would have expected Januvia to become such a key player 6 years ago.
Sales of drugs to treat type 2 diabetes in seven major markets are set to nearly double by 2020, increasing from $23.4 billion in 2012 to almost $45 billion.
The global type 2 diabetes therapeutics market is driven by the increased number of diabetic patients and the rise in the variety and cost of therapies. According to market research firm GlobalData, in 2011 Lantus from Sanofi was the world's leading diabetes drug, with approximate sales worth $3.6 billion and a market share of 18%. Januvia/Janumet of Merck was the second leading drug, with approximate sales of $3.4 billion and a market share of 17.1%.
Actos from Takeda Pharmaceuticals (TKPYY.PK) was the third leading drug, with an approximate sales value of $1.9 billion and a market share of 9.6%. Actos's patent protection has expired, and generics will appear soon.
Both Merck and Sanofi stocks are above their 50 and 200 day simple moving averages in August 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.