A key action date, October 28, is coming up for Bristol-Myers Squibb Company (BMY) with the US Food and Drug Administration (FDA) expected to decide the fate of its type II diabetes candidate dapagliflozin. Bristol-Myers has co-developed dapagliflozin with AstraZeneca (AZN).
The final verdict is highly awaited since the candidate did not receive the backing of the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee in July 2011. The panel voted 9-6 against the approval of the diabetes candidate.
The members, after reviewing the new drug application (NDA) filed by the companies late last year, voted against approving the candidate due to safety concerns. The existing data was found to be insufficient to address their concerns.
However, we note that the US regulatory body is not bound to follow the advice of the advisory committee. Consequently, all hopes regarding dapagliflozin approval are not over for Bristol-Myers/AstraZeneca. We believe that dapagliflozin will be cleared by the FDA, albeit with some restrictions. Dapagliflozin is also under review in Europe.
Dapagliflozin’s approval would be perfectly in tune with Bristol-Myers’ strategy of introducing new products to combat the loss of revenues, that is feared due to the impending genericization of its key drugs. We note that Bristol-Myers has already tasted success in this respect so far in 2011 with several new products being launched/approved this year.
We believe that dapagliflozin, on approval, would be a significant contributor to the top line since it targets the highly lucrative diabetes market which provides one of the largest opportunities in pharmaceuticals.
However, we note that once approved, dapagliflozin would face tough competition in the type II diabetes market, which has players like Merck & Co. (MRK) and Novo Nordisk (NVO).
Currently, we have a Neutral long-term stance on Bristol-Myers.
