Lilly Could Grab Diabetes Share From Dow’s J&J On Amputation Woes – Investor’s Business Daily

A severe warning for diabetes patients could cut into J&J's Invokana sales. (Kaspars Grinvalds/stock.adobe.com)

Eli Lilly's (LLY) Jardiance will likely benefit most after the Food and Drug Administrationrequired Dow componentJohnson & Johnson (JNJ) to warn patients of leg and foot amputations associated with diabetes drug Invokana, an analyst said Tuesday.

In a letter to physicians Tuesday, the FDA cited two large clinical trials and concluded that diabetes meds Invokana, Invokamet and Invokamet XR "causes an increased risk of leg and foot amputations."

The FDA will now require Johnson & Johnson to add a boxed warning to its Invokana/Invokamet labels. The trials, dubbed Canvas and Canvas-R, showed that leg and foot amputations occurred twice as often in patients treated with Invokana vs. aplacebo.

"Amputations to the toe and middle of the foot were the most common, however, amputations involving the leg, below and above the knee also occurred," the FDA wrote. "Some patients had more than one amputation, some involving both limbs."

Leerink analyst Seamus Fernandez expects Lilly to benefit from an influx of Invokana patients transitioning to one of its diabetes meds, Jardiance. Invokana and Jardiance belong to a class of drugs calledSGLT2 inhibitors.

SGLT2 sodium-glucose co-transporter 2 is a protein that facilitates glucose reabsorption in the kidneys. These drugs block the reabsorption of glucose in the kidneys, increase glucose excretion and lower blood glucose levels.

"The increasingly differentiated labels and data to date suggest that Lilly's Jardiance likely will be a near-term beneficiary of further and perhaps accelerated market share losses for Invokana," Fernandez wrote in a note to clients.

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Whether physicians move their patients off Invokana and onto Jardiance or AstraZeneca's (AZN) Farxiga will likely depend on the full results of the Canvas and Canvas-R trials to be presented in June during the American Diabetes Association meeting.

J&J's Janssen subsidiary began theCanvas trial in December 2009 to examine the potential cardiovascular benefit of Invokana. The Canvas-R trial began in October 2013. Researchers examined benefits of Invokana on the kidneys.

Lilly's Jardiance wasapproved by the FDA in December to cut the risk of cardiovascular death in adults with Type 2 diabetes. Jardiance was the first Type 2 diabetes drug to get approval for cutting the risk of cardiovascular death.

"We believe a dramatic impact on the class is unlikely in the wake of Jardiance's cardiovascular death claim and could be further mitigated by directionally positive results in Canvas/Canvas-R on efficacy/cardiovascular risk reduction," Fernandez wrote.

Still, the entireSGLT2 needs to grow for Jardiance to meet or beat forecasts. Fernandez sees $665 million in U.S. Jardiance sales in 2017 and $1 billion in Invokana sales in 2017. He forecasts the entire class growing to $4 billion in 2021 from $2.1 billion this year.

"So even if Jardiance were to capture 100% of Invokana's estimates sales of $1 billion in 2017 in the immediate future, a major slowdown in category growth likely would be a bigger issue relative to consensus estimates," he said.

At the closeon the stock market today, Lilly stock was down 1.6% to 78.99, after a Goldman Sachs analyst removed the stock from her conviction list. But shares of J&J, a member of the Dow Jones industrial average, advanced 0.6%, near 127.77.

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Though long-term fundamentals look strong, Lilly is facing near-term risk from a patent battle regarding a cancer treatment. (Kris Tripplaar/Sipa USA/Newscom)

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Lilly Could Grab Diabetes Share From Dow's J&J On Amputation Woes - Investor's Business Daily