Expert Financial Analysis and Reporting

Overview of Advisory Committee Meeting

The FDA Endocrinologic and Metabolic Drugs Advisory Committee voted 6-9 against approval of dapagliflozin for the treatment of type II diabetes. This will almost certainly result in a Complete Response Letter from the FDA on the PDUFA date of October 28. As I pointed out in a recent report on July 18 and an earlier one on July 14, most analysts were expecting a CRL. The FDA and its advisory committees are almost routinely rejecting approval on the first go around for novel, new drugs unless they meet an unmet medical need in a life threatening or debilitating disease. Dapagliflozin does not fall into this category as there are several effective drugs available for treating type II diabetes.

This negative vote does not mean that the drug is dead. Negative committee votes and complete response letters are commonplace in the risk adverse regulatory environment of today. Investors will await clarification from the FDA on what actions need to be taken to gain approval of dapagliflozin. This will involve further analysis of existing data and perhaps more trials. Until there is a better understanding of what the FDA will require, it is hard to judge what the delay in introduction (assuming ultimate approval) will be, but I would think that it would be two to three years at a minimum.

My own view is that dapagliflozin does have a role to play in treating type II diabetes. It is an effective drug, perhaps as effective as metformin which is the gold standard, and was well tolerated in clinical trials. It does not cause weight gain and seems free of cardiovascular risk. The uniqueness of the drug is that it is not dependent on increasing insulin production or making cells more sensitive to insulin which is how some of the most widely used, currently available drugs work. As the disease progresses, patients become less sensitive to these mechanisms of action. Perhaps dapagliflozin has a role to play in some of these patients.

The panel was concerned about use in patients with impaired kidney function and how this might affect the efficacy of dapagliflozin. Some members suggested additional studies to clarify this point as well as better approaches to monitor the effect of the drug in such patients. The breast and bladder cancer risk was discussed at some length. There is no known biological mechanism that would suggest a link to cancer, but the trials pointed to a potential 4-5 fold increase in risk. The committee felt there was the need for additional data to better define this risk. A clinical trial to detect the true cancer risk would likely require a very large study involving 25,000 to 40,000 patients and require up to five years of follow-up. However, several members of the committee agreed that a well-defined post-marketing surveillance trial might be sufficient. There was also discussion that the risk of hepatic toxicity needs to be better defined.

Importance for Bristol-Myers Squibb

The pipeline story for BMY is led by Yervoy (ipilimumab), which is already approved. I see this drug as having the potential for over $1 billion of sales in its approved indication of stage III/IV metastatic melanoma. However, the mechanism of action for this drug could make it more broadly effective in other cancers. It is in late stage trials in earlier stages of melanoma and in prostate, non-small cell lung cancer and small cell lung cancer. Success in some of these trials could increase sales potential by several fold.

The second key drug is Eliquis (apixaban) which has not yet been filed for approval in the US. This is an oral, anti-coagulant drug that is targeted at replacing Coumadin (warfarin) in clinical practice. The company just reported top line phase III results that showed that apixaban was superior to warfarin in efficacy and produced statistically significant fewer major bleeds, a very important safety concern. Apixaban is also a much easier drug to administer than warfarin which must be carefully titrated and monitored and has frequent interactions with food and other drugs that alters its effect. The primary use of warfarin is for preventing stokes caused by atrial fibrillation. At the $7.00 per day price that I anticipate for apixaban, the US addressable market if about $6 billion and the worldwide market is perhaps $15 billion. This drug could be as big as Yervoy.

As a note of caution, BMY has not reported in detail on side effects associated with this drug. Johnson & Johnson has a similar drug rivaroxaban that is slated for an advisory committee review on September 8, 2011.There was a question about liver toxicity with rivaroxaban that led to a complete response letter for an NDA filed in a different although related indication, prevention of deep vein thrombosis. However rivaroxaban was just approved for this indication. The FDA is very edgy about liver toxicity and any remote link could cause a delay. Other than the rivaroxaban experience, I have no reason to believe that there might be a signal of liver toxicity with apixaban. Like all investor

Dapagliflozin was looked at as a distant third to Yervoy and apixaban in terms of importance in the BMY pipeline. The initial reaction to the decision of the advisory committee has been a shrug.

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