The Food and Drug Administration has given only conditional approval to a diabetes drug from Bristol-Myers Squibb ( BMY) and Merck ( MRK), saying it wants more clinical test data before it signs off on the compound. The FDA's decision, announced by both companies Tuesday, should push back the launch of the drug Pargluva by at least a year, analysts say. The agency's response isn't surprising because an FDA advisory committee in early September
raised questions about potential heart risks, even though it voted 8-1 to support the drug as a stand-alone treatment. Both companies stock prices' reflected the fact that the decision was expected. In afternoon trading, Bristol-Myers Squibb lost 8 cents to $22.40, while Merck's stock rose 16 cents to $27.24. "The FDA has requested additional safety information from ongoing trials, or those completed since the safety data from the last formal regulatory submission, to address more fully the cardiovascular safety profile of Pargluva," the companies said. They are "eager to begin discussions with the FDA to address this issue and to determine what additional information may be necessary." Pargluva represents a new approach to treating Type 2 diabetes, the most common form of the disease, in which the body doesn't make enough insulin to turn sugar into fuel for the body's cells. If this happens, too much sugar remains in the blood. The drug could be the first FDA-approved product in the class known as dual peroxisome proliferators-activator receptor agonists, or PPAR. It also represents an opportunity for two Big Pharma companies that need hit products to offset existing and impending revenue erosion from generic competition to several major products. "Pargluva appears to have a less favorable safety profile than currently marketed products," David Moskowitz of Friedman Billings Ramsey wrote in a Tuesday report maintaining a market perform rating on Bristol-Myers Squibb. "Given that the ongoing safety studies will not be complete until mid-2006," Moskowitz revised his estimated U.S. launch for the drug to the fourth quarter of next year.