Medical conventions are often the scene of new hopes for experimental drugs, and this year's American Diabetes Association gathering is no exception.

Starting Friday in Washington, the 2006 ADA meeting will feature a showdown of what medical researchers and financial analysts say could be the next big advance in diabetes treatment.

The duel will pit Merck ( MRK - Get Report) against Novartis ( NVS - Get Report), both of whom are hoping to get approval for drugs that control blood-sugar levels, called dipeptidyl peptidase-4 inhibitors, or DPP-4 inhibitors for short.

"The key issue will be the relative competitive profile of the two agents," says James Kelly of Goldman Sachs in a recent report. "It is unlikely that efficacy will vary significantly between the drugs. However, safety and dose frequency for similar efficacy will likely be the swing factors in determining physician and patient preference for either product."

Merck and Novartis have already filed applications with the Food and Drug Administration for their drugs. Merck's Januvia is in the regulatory lead, and the company promises to reveal new clinical trial data at the diabetes convention. The FDA accepted Januvia for review in February, and the agency is scheduled to act in October.

Merck also said this week that it was moving up its plans to file an application with the FDA for combining Januvia with a generic blood-sugar control drug, metformin, to this year rather than in 2007. The combination drug is called MK-0431A for now.

However, Novartis isn't far behind with Galvus, which was accepted for review by the FDA on March 30, suggesting that the agency could act by year-end. Both Novartis and Merck are planning to file DPP-4 approval applications with European and other countries' regulators this year.

Still, the DPP-4 inhibitors will have to share the spotlight at the convention with inhaled insulin, most notably Exubera from Pfizer ( PFE - Get Report) and Nektar Therapeutics ( NKTR - Get Report).

Although Exubera was approved by the FDA in January, Pfizer hasn't revealed its price or launch date, saying only that it will be available in the U.S. by midyear. Some analysts are predicting that an announcement could come at the ADA meeting and that the drug could be available in July.

Exubera has been approved by regulators of the European Union, and the drug recently was launched in Germany. Pfizer will present scientific data at the ADA convention and will demonstrate how the product works.

Also, Eli Lilly ( LLY) and Alkermes ( ALKS - Get Report) are expected to present data on their experimental inhaled insulin product.

Inhaled insulin, the hit of last year's ADA convention, is hardly old news, but DPP-4 inhibitors are attracting considerable attention on Wall Street and in research labs.

Bristol-Myers Squibb ( BMY) and Japan's Takeda Pharmaceuticals both have DPP-4 drugs in late-stage testing. Other companies with DPP-4 inhibitors in mid- or early-stage testing include GlaxoSmithKline ( GSK), OSI Pharmaceuticals Japan's Tanabe and France's Sanofi-Aventis ( SNY).

"With modest but acceptable efficacy, a new mechanism for action and a weight-neutral effect, we expect this class to see strong uptake as an add-on treatment among Type 2 diabetics," Andrew Forman of WR Hambrecht wrote in a recent research report.

Type 2 diabetes, the most common form of the disease, is caused by cells ignoring insulin or the body's failure to produce enough insulin. Type 1 diabetes is caused by the body's inability to produce insulin, the protein hormone that helps turn sugar into fuel for cells. DPP-4 drugs can't help Type 1 diabetics.

Many companies keep working on new blood-sugar control compounds to find improved benefits, such as weight loss and fewer side effects, as well as to find replacements for older drugs whose effectiveness eventually wears off.

Galvus is designed to affect two types of cells in the pancreas that stimulate the organ to produce more insulin and that lead to a reduction in sugar production from the liver. Novartis says clinical trials have shown "significant reductions" in blood sugar over one year.

The most common side effects were cold-like symptoms, headaches and dizziness. Overall, Novartis says the rate of side effects, including excessively low blood sugar and fluid retention, was similar to a placebo. Patients didn't gain weight.

Merck's Januvia uses the same strategy for blood-sugar control. Clinical studies show patients didn't gain weight and that the rate of seriously low blood-sugar, or hypoglycemia, was similar to placebo, Merck says. The most common side effects reported in clinical studies were stuffy or runny nose and sore throat, headaches, diarrhea and joint pain.

Forman notes that DPP-4 inhibitors have one advantage over another new class of drugs, known as incretin mimetics, because they can be taken as pills rather than being injected. The first incretin mimetic on the market is Byetta from Lilly and Amylin Pharmaceuticals . Drugs like Byetta offer an advantage over DPP-4 inhibitors because they can produce some weight loss.

Launched 12 months ago, Byetta is off to a strong start, but it must be injected twice a day. Lilly, Amylin and Alkermes are developing an extended-release version of the drug, which would require a once-a-week injection. The companies are scheduled to release additional data at the ADA meeting.

Another entrant in this field with a product in late-stage clinical testing is Novo Nordisk ( NVO), the world's biggest insulin company.