Expert Financial Analysis and Reporting

Overview and Investment Thesis

The strong Bristol-Myers pipeline story is key to the investment thesis and is driven by three potential blockbusters: Yervoy, which was just approved; apixiban which has reported very encouraging phase III data and is likely to be approved in 2012; and dapagliflozin. Of the three, the outlook for dapagliflozin is the most uncertain. Without dapagliflozin, the pipeline story is very good. With dapagliflozin, it is very, very good. I can with equal conviction come up with a scenario in which dapagliflozin is a blockbuster and another in which it is a niche product. I look forward to the advisory committee meeting to gain an insight into how experts view the drug.

Bristol-Myers is developing dapagliflozin, the first of a new class of oral anti-diabetic agents for type II diabetes. The NDA was accepted for review by the FDA on March 2011 and the PDUFA date was set for October 28, 2011. The Endocrinologic and Metabolic Drugs Advisory Group to the FDA will meet on July 19, 2011 to consider the NDA and give advice pertinent to its approvability; the FDA has the final decision. The FDA will make available public briefing papers prepared for the committee shortly before the meeting. These give valuable insights into the FDA’s analysis of the drug.

I think that the majority of investors are expecting the FDA to issue a Complete Response Letter at the PDUFA date as this has become almost routine with novel new drugs such as dapagliflozin. The exceptions are drugs that address an unmet need in a potentially deadly disease like some types of cancer. Because diabetes can be effectively treated by several other therapies, there is a general expectation that the FDA will want more long term safety data and other information before approving the drug.

The tone and manner of the discussion at the advisory committee may allow investors to judge three possible outcomes at the PDUFA date: (1) the drug will be approved, (2) a complete Response Letter will be issued but no new trials will be required or (3) a Complete Response Letter will be issued and some type of new trials will be required.

Dapagliflozin Treats Type II Diabetes Using a New Mechanism of Action

Dapagliflozin has been viewed with both great interest and caution by physicians and investors because it employs a new, unique mechanism of action to treat type II diabetes. In the kidney, glucose is filtered at the glomerulus and then reabsorbed via active transport mechanisms in the tubule. Two sodium glucose co-transporters are responsible for this reabsorption, SGLT-2 and SGLT-1. SGLT-1 accounts for about 10% of the reabsorption and SGLT-2 accounts for 90%. Dapagliflozin inhibits SGLT-2 preventing the reabsorption of glucose and causing more glucose to be excreted in the urine.

The other major classes of oral drugs for type II diabetes stimulate the production of insulin, make cells more sensitive to insulin or reduce the output of glucose from the liver in order to lower glucose in the blood. The SGLT-2 inhibitors offer an entirely new way to control blood glucose that is independent of insulin. This differentiation leads to synergy with other agents. Also, other oral anti-diabetic drugs over time lose their effectiveness requiring the ultimate use of insulin. It may be the case that dapagliflozin can be added to therapy when this occurs and extend the point in time at which insulin is required.

A downside of dapagliflozin is that the excessively high levels of glucose excreted into the urine provides a perfect breeding ground for bacteria and fungus to grow, which leads to an increase in urinary and genital tract infections. There is also uncertainty about the long term effect on the kidney from causing increased glucose excretion over a long period of time. There is a natural concern that this could cause damage although some experts think that it could be beneficial. There are a group of people who have a disease called familial renal glycosuria, a genetic abnormality caused by the lack of a gene that produces SGLT-2. This produces a similar effect to that caused by dapagliflozin as these people excrete large amounts of glucose in their urine. They do not suffer kidney damage as a result of their disease. While this is encouraging, it is not proof that there is no risk incurring kidney damage with long term use of dapagliflozin.

Issues for the Advisory Committee

The FDA in its briefing paper to the advisory committee highlights the issues that concern the agency. This is put in the form of questions that the FDA asks the advisory committee to discuss and then give a recommendation that is determined by a vote. During the meeting, Bristol-Myers will discuss the positives for the drug and address concerns of the FDA. I have put together a list of the positives and negatives that the committee will likely address during the meeting.

Positives:

1. Metformin is the cornerstone of type of type II diabetes therapy. Most patients are started on metformin and drugs from other product classes- sulfonylureas, DPP-IV inhibitors, etc. -are added as needed. Dapagliflozin is quite synergistic with metformin and should be synergistic with other drugs used for type II diabetes.
2. Weight gain in type II diabetics on oral medication is a major problem. Dapagliflozin meaningfully reduces weight gain.
3. Dapagliflozin because of its different, non-insulin dependent mode of action can be effective when other drugs that depend on increasing insulin production or insilulin uptake fail.
4. At its highest dose of 10mg, dapagliflozin may be as effective as or slightly more effective than metformin. Metformin is generally considered as the most effective of the oral anti-diabetes drugs.
5. Hypoglycemia and side effects other than urinary and genital tract infections are of low incidence. It is very well tolerated and low there is low patient drop out due to side effects.

Negatives

1. Because of its unique mechanism of action, there will be concern that long term use might damage the kidney. This may be the biggest stumbling block for approval as there is not a lot of long term data on the drug. However, there are some experts that think that dapagliflozin may protect the kidney.
2. The clinical trials raised the issue of whether there may be a cancer signal with dapagliflozin. In the overall clinical trials the occurrence of malignant tumors was not different from control groups. However, in the case of bladder cancer there was an imbalance as 9 patients out of 5,478 patients treated with dapagliflozin were diagnosed with bladder cancer as compared to 1 out of 3,136 patients in the control groups. There were also 9 breast cancers in 2,223 women treated in the dapagliflozin groups as compared to 1 of 1,053 in the control groups. Preclinical gentoxicity and carcinogenicity studies importantly showing no genotoxicity or carcinogenicity in animal models. There are no known off-target pharmacology effects according to BMY and the company states that SGLT-2 is not expressed in the breast or in the bladder.
3. There is an increased risk of urinary and genital tract infections, but this does not seem to lead to people dropping from therapy. This is not likely to be a show stopper.
4. It is my experience that there is often an unanticipated concern that comes out of the briefing papers. There may be a factor x emerge.

Presentations on Dapagliflozin at the American Diabetes Association (ADA)

Bristol-Myers issued two press release summarizing data on dapagliflozin clinical studies at ADA. There is a mind-boggling amount of data in these releases and I have included links for those who want to wade through them. For others, I have summarized what I believe are the key data points of the two releases.

The first press release reported on two 24-week phase III trials involving 598 patients in one study and 638 in the second. The first looked at metformin combined with a 5mg dose of dapagliflozin and compared results to metformin used alone and the 5 mg dose of dapagliflozin used alone. The second study was identical except that it used 10 mg of dapagliflozin. My key takeaways from these studies were:

There is synergy between metformin and dapagliflozin. For both doses, the combination was statistically superior to either dapagliflozin or metformin used alone. Remember that metformin is the cornerstone of oral anti-diabetes therapy and other drugs are almost always added to metformin when better glucose control is needed.

Hypoglycemia doesn’t seem to be an issue. The combination did not result in any major hypoglycemia related events. This is important because sulfonylurea drugs that are frequently added to metformin can result in high incidence of hypoglycemia. Dapagliflozin, if approved, may be looked at as a better alternative to the sulfonylureas for this reason when hypoglycemia is an issue.

Dapagliflozin is quite effective as a single agent. Importantly, the 10 mg dose of dapagliflozin was equivalent to metformin in reducing blood sugar levels and was statistically superior to metformin in reducing morning blood sugar levels. Metformin is generally considered as the most effective of the type II agents.

Reducing weight is a major positive for dapagliflozin. Weight gain with some oral anti-diabetic drugs is a problem, but dapagliflozin reduces weight. Over 24 weeks dapagliflozin at 5 mg combined with metformin reduced weight by 5.9 pounds versus a reduction of 5.8 pounds for dapagliflozin alone and 2.8 pounds for metformin alone. The 10 mg dose combined with metformin reduced weight by 7.3 pounds versus a reduction of 6.0 for dapagliflozin alone and 3.0 pounds for metformin alone.

Adverse events other than urinary tract infections don’t seem to be an issue. At the high dose of 10 mg of dapagliflozin the most common adverse events for dapagliflozin was diarrhea with an incidence of 2.7% and nausea at 3.7%. Metformin’s most frequent side effects were diarrhea 7-10% and nausea 2.4% to 4.0%.

The drug is well tolerated. The discontinuation rate due to adverse events for the 5 mg dose of dapagliflozin plus metformin was 1.0%, for dapagliflozin alone 2.5% and for metformin alone 3.0%. The discontinuation rate due to adverse events for the 10 mg dose of dapagliflozin plus metformin was 1.9%, for dapagliflozin alone 4.1% and for metformin alone 3.8%. Some of these dropouts were due to lack of efficacy rather than side effects.

Genital tract infections for dapagliflozin are higher than metformin. The incidence of signs, symptoms and other reports suggestive of genital infection for the 5mg dose of dapagliflozin combined with metformin was 6.7%, 6.9% for 5 mg dapagliflozin alone and 2.0% for metformin alone. The incidence of signs, symptoms and other reports suggestive of genital infection for the 10mg dose of dapagliflozin combined with metformin was 8.5%, 12.8% for 10 mg dapagliflozin alone and 2.4% for metformin alone.

As expected, urinary tract infections are an issue. The incidence of signs, symptoms and other reports suggestive of urinary tract infection for the 5mg dose of dapagliflozin combined with metformin was 7.7%, 7.9% for 5 mg dapagliflozin alone and 7.5% for metformin alone. The incidence of signs, symptoms and other reports suggestive of urinary tract infection for the 10 mg dose of dapagliflozin combined with metformin was 7.6%, 11.0% for 5 mg dapagliflozin alone and 4.3% for metformin alone.

Is there a cancer signal? In the overall clinical trials the occurrence of malignant tumors was not overall different. However, specifically in the case of bladder cancer these were nine cases out of 5,478 patients treated with dapagliflozin as compared to one out of 3,136 patients in the control groups. There were nine breast cancers in 2,223 women treated as compared to one of 1,053 in the control groups.

Preclinical gentotoxicity and carcinogenicity studies were clean. In preclinical studies, dapagliflozin was not shown to be genotoxic or carcinogenic and the investigational agent has no known off-target pharmacology. SGLT2 is not expressed in the breast or in the bladder.

In the second press release there were results from an extension study that enrolled 483 patients who had completed an initial 24 week study. These patients were studied in a 78 week extension study, the primary purpose of which was to look at long term safety. Three doses of dapagliflozin-2.5 mg, 5.0 mg and 10.0 mg were combined with metformin. My key takeaways were:

The combination of various doses of dapagliflozin with metformin were synergistic. This study of dapagliflozin added to metformin over 102 weeks suggests that this drug has sustained improvements in glycemic control and sustained reductions relative to metformin alone. The completion rate was lower for the metformin plus placebo group (63.5%) than for the dapagliflozin groups (68.3% –79.8%) which suggests better efficacy for the combinations.

Reduction in body weight is a positive. The mean change from baseline in body weight at Week 102 in patients receiving placebo plus metformin was a gain of 3.0 pounds, compared to a loss of 2.4 pounds for patients receiving dapagliflozin 2.5 mg plus metformin, a loss of 3.8 pounds for patients receiving dapagliflozin 5 mg plus metformin and a loss of 3.8 pounds for patients receiving dapagliflozin 10 mg plus metformin.

Urinary tract infections are an issue The rate of events suggestive of urinary tract infections for patients receiving placebo plus metformin was 8.0%, compared to 8.0% for patients receiving dapagliflozin 2.5 mg plus metformin, 8.8% for patients receiving dapagliflozin 5 mg plus metformin and 13.3% for patients receiving dapagliflozin 10 mg plus metformin.

Genital infections The rate of events suggestive of genital infections for patients receiving placebo plus metformin was 5.1%, compared to 11.7% for patients receiving dapagliflozin 2.5 mg plus metformin, 14.6% for patients receiving dapagliflozin 5 mg plus metformin and 12.6% for patients receiving dapagliflozin 10 mg plus metformin.

Dapagliflozin does not seem to increase hypoglycemic events when added to metformin. Of patients treated with placebo plus metformin, 5.8% experienced at least one hypoglycemic event, compared to 3.6% of patients receiving dapagliflozin 2.5 mg plus metformin, 5.1% of patients receiving dapagliflozin 5 mg plus metformin and 5.2% of patients receiving dapagliflozin 10 mg plus metformin. There were no major episodes of hypoglycemia.

Is there an effect on the kidney? Events of renal impairment or failure were reported in 1.5% of patients treated with placebo plus metformin, compared to 4.4% of patients receiving dapagliflozin 2.5 mg plus metformin, 2.9% of patients receiving dapagliflozin 5 mg plus metformin and 1.5% of patients receiving dapagliflozin 10 mg plus metformin.

Is there a cancer signal? One case of transitional cell bladder cancer was reported in the dapagliflozin 5 mg treatment group; none were reported in the placebo, dapagliflozin 2.5 mg or dapagliflozin 10 mg treatment groups. One case of breast cancer was reported in dapagliflozin 10 mg treatment group; none were reported in the placebo, dapagliflozin 2.5 mg or 5 mg groups.

Disclosure: The author of this article owned shares of Dendreon at the time this note was written. This should be taken into account as it may introduce bias into the conclusions and interpretations that are made. In reading this note, you acknowledge that you have not used it as the sole basis of your decision making and that all investment decisions are based on your own analysis. An investment in Dendreon carries substantial risk and investors could potentially lose much of their investment. The reader acknowledges that he/she has carefully read the Investment Approach, Terms/Conditions and Disclosures sections in the About Us section of the website. The reader acknowledges that he/she will not hold SmithOnStocks accountable for any investment loss that may be incurred if a decision is made to invest in Dendreon.