19 Clinical Trials Aren't Enough

It looks like Bristol-Myers Squibb (NYS: BMY) and AstraZeneca (NYS: AZN) might have to run at least one more trial on their diabetes drug candidate dapagliflozin. The Food and Drug Administration turned down the drug, requesting more data, despite the duo having run 19 clinical trials already.

Nineteen!

The agency wants more data to assess the risk-benefit profile for dapagliflozin. Ongoing studies might be enough, but there's a good possibility that another clinical trial might be necessary. If they're on the fence about an approval after 5,000 patients have been treated with the drug, somehow I doubt one more trial is going to make a difference.

There's still a lot of potential for dapagliflozin because it's a first-in-class molecule. Bristol-Myers and AstraZeneca's other diabetes drug Onglyza has been a relative flop because it acts in the same way as Merck's (NYS: MRK) Januvia. Without any way to differentiate Onglyza, the companies have struggled to take a bite out of Januvia's market share.

Of course, being first in class has its drawbacks. While the companies didn't say, the aforementioned risk-benefit profile almost certainly has to do with dapagliflozin's potential cancer risk. The FDA advisory committee voted 9-6 recommending against approving the drug in large part because of nine cancers seen in patients taking dapagliflozin. While that's not enough to prove that there's a higher cancer risk, the FDA doesn't need another Avandia. A lot of patients took GlaxoSmithKline's (NYS: GSK) drug before potential heart problems were determined, tarnishing the agency's reputation. The pulling of Avandia off the European market and stringent requirements in the U.S. have significantly diminished the drug's earning potential, having only brought in $135 million for the first three quarters of 2011.

Bristol-Myers and AstraZeneca are in a bit of a bind because proving that a drug doesn't have a side effect can be difficult. But after so much time and money was put into the development, the duo is likely in too deep to just give up and throw dapagliflozin on the shelf.

At least Bristol-Myers and AstraZeneca offer attractive dividend yields for investors to collect while they wait to see next move for dapagliflozin. And if you like tasty dividends, take a look at a select group of dividend companies Fool analysts believe are good buys in this new report: "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can get your copy for free by following this link.

At the time thisarticle was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.