In March, the Food and Drug Administration issued a complete response letter -- the agency's euphemism for a rejection letter -- to Sanofi (NASDAQ: SNY) and Lexicon Pharmaceuticals (NASDAQ: LXRX) for their application to approve Zynquista as a treatment for type 1 diabetes.
A few months later, AstraZeneca got the same notice for using Farxiga as a treatment for type 1 diabetes.
Zynquista and Farxiga are both sodium-glucose cotransporter (SGLT) inhibitors. As the name implies, SGLT proteins -- there are two main ones, SGLT-1 and SGLT-2 -- transport sodium and glucose (sugar) from the kidneys back into the bloodstream. By inhibiting the proteins, more sugar ends up being excreted in the patient's urine instead of causing damage circulating through the bloodstream.
The class has been approved to treat type 2 diabetes for years, racking up substantial sales.
AstraZeneca (NYSE: AZN)
Johnson & Johnson (NYSE: JNJ)
Merck (NYSE: MRK) and Pfizer (NYSE: PFE)
Eli Lilly (NYSE: LLY) and Boehringer Ingelheim
Data source: Company press releases. Invokamet contains Invokana plus generic metformin. Synjardy and Glyxambi contain Jardiance plus metformin and Tradjenta, respectively.
Safety is key?
We don't know the exact reason why the FDA rejected the drugs for type 1 diabetics. AstraZeneca simply said it "will work closely with the FDA to discuss the next steps." Sanofi and Lexicon were equally as terse when they announced their rejections.
But given that the FDA has issued multiple drug safety communications about the drugs, it seems likely the rejections came from concerns about safety. Over the years, the FDA has noted worries about infections, acid in the blood, acute kidney injury, and leg and foot amputations.
In January, an FDA advisory committee split 8-8 on whether the benefits outweighed the risks for Zynquista as a treatment for type 1 diabetics. The agency's outside advisors were mainly worried about diabetic ketoacidosis -- high levels of acid in the blood -- which was eightfold higher in patients taking Zynquista relative to placebo.
Farxiga's label for type 2 diabetes already has a warning about ketoacidosis, which is based on post-approval reports, so presumably that may be the issue that caused the FDA's rejection in type 1 diabetics.
Europe and Japan have a different view
The European Medicines Agency EMA has approved both Zynquista and Farxiga, which goes by Forxiga overseas, for the treatment of patients with type 1 diabetes. In both cases, the agency decided that the benefits outweighed the risk in type 1 patients who are overweight, since having less sugar in the bloodstream leads to increased weight loss.
Farxiga is also approved for type 1 diabetics in Japan, where it also goes by Forxiga.
Image source: Getty Images.
Should investors be worried?
It's hard to know how severe the issue is without the companies disclosing exactly why the FDA turned down Zynquista and Farxiga for type 1 diabetes or what the companies need to do to satisfy the agency. Approvals in Europe and Japan are a good sign, but the U.S. is still the largest opportunity. Investing in drug companies is hard enough without having all the facts.
Adding a wrinkle to the puzzle, Sanofi is trying to terminate its alliance with Lexicon. Sanofi has said that it wants to focus on oncology, immunology, vaccines, and rare diseases, so the decision may have little to do with its interaction with the FDA. But clearly Sanofi has decided Zynquista's potential upside isn't worth the milestone payments and royalties it'll owe Lexicon in the future.
Sanofi was scheduled to submit marketing applications for Zynquista in type 2 diabetes in the first half of next year. That certainly could be delayed while the companies work out their breakup, but an FDA decision on Zynquista in type 2 diabetes might be the next event that shows whether the agency is down on the class of drugs or whether its worries are restricted to type 1 diabetes. An issue that could ultimately affect billions in sales.
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This article was originally published on Fool.com