Novartis diabetes drug hits FDA snag

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novartisZURICH (Reuters) -- U.S. regulators have asked for more data on Novartis AG's diabetes drug Galvus, potentially delaying any approval of the possible blockbuster by a year and sending shares tumbling.

The Food and Drug Administration has requested a further clinical study to show Galvus's safety and efficacy in patients with kidney impairment, Novartis (Charts) said Monday, but the drugmaker remains confident of getting approval for the medication.

"There are no details on the study requirements, but we would expect this study to take a minimum of 12 months to complete, taking likely U.S. approval beyond August '08," JPMorgan analyst Craig Maxwell said in a note.

Analysts at UBS and Exane also see a one-year delay.

Novartis's 2007 financial outlook remains unchanged for both the pharmaceuticals unit and group as a whole.

The decision by the Food and Drug Administration puts the Swiss group further behind U.S. rival Merck & Co. Inc. (Charts) in the race to launch a new class of diabetes drugs known as DPP-4 inhibitors. Merck's Januvia was approved late last year.

Spokesman John Gilardi said Novartis still has to discuss the situation with the Food and Drug Administration and there was currently no new timetable for the review period.

Novartis shares fell 2.15 percent to 70.65 Swiss francs by 4:35 a.m. ET, faster than a 0.6 percent drop in the DJ Stoxx European pharmaceuticals index, as investors worried about a potential hole in the company's future earnings. Novartis shares on the New York Stock Exchange plunged by more than 3.2 percent by just after 7 a.m. ET.

A U.S. decision on approving Galvus had previously been delayed by three months after Novartis asked the FDA to consider new data about skin problems.

Monday's delay is not associated with the skin toxicity.

Both Galvus and Januvia have been touted by analysts as potential $1 billion-a-year-plus sellers, and the new DPP-4 inhibitors are expected to compete intensely in the lucrative market of oral treatments for diabetes.

They are designed to enhance the body's own ability to lower elevated blood sugar and could become an important way to control Type 2 diabetes - the most common form of the disease, which is becoming a major health problem around the world.

Galvus is one of three blockbuster hopes in the Novartis pipeline of new drugs, along with hypertension treatments Tekturna and Exforge.

U.S. regulatory review of Tekturna was extended by up to three months late last year. Exforge, a two-in-one pill for high blood pressure, has been approved for use in the United States and Europe.

Analysts believe DPP-4 drugs are likely to become popular in the market for oral diabetes treatments, since they are not associated with weight gain, a major side effect of established diabetes drugs known as TZDs.

That is significant since most Type 2 diabetics are overweight or obese. When patients gain weight from medicines they often stop taking it, and patient compliance is considered one of the biggest obstacles in diabetes treatment.

The two leading brands of TZDs which could be hit by the new DPP-4 competitors are Actos, from Takeda Pharmaceutical Co. (Charts), and Avandia, sold by GlaxoSmithKline (Charts).

source CNN Money