Johnson & Johnson (JNJ) Invokana PDUFA Preview: AstraZeneca plc (ADR) (AZN), Bristol Myers Squibb Co. (BMY)

It’s almost here! Johnson & Johnson (NYSE:JNJ) is eagerly awaiting a decision on its type 2 diabetes drug Invokana (canagliflozin) by the end of the month. The novel small molecule inhibits the SGLT2 protein, which is responsible glucose retention in the kidney, thus allowing diabetes patients to maintain healthy glucose levels. Invokana has blockbuster potential as the first SGLT2 diabetes drug to (potentially) hit the market. Here’s what investors need to know.

Johnson & Johnson (NYSE:JNJ)

Pass or fail?
It looks like Invokana should have no problem gaining approval. The only thing that could put a lid on investor enthusiasm is the cautious outlook on the new class of drugs by the FDA. Bristol Myers Squibb Co. (NYSE:BMY) and AstraZeneca plc (ADR) (NYSE:AZN) failed to get their SGLT2 inhibitor Forxiga (dapagliflozin) approved in November of last year, although the drug did gain approval in Europe.

What was the holdup? Forxiga showed a possible link to increased cancer risk. Invokana data has steered clear of a similar link thus far, but that didn’t stop a panel from voting 8-to-7 over long-term cardiovascular safety concerns. Johnson & Johnson (NYSE:JNJ) is conducting a trial evaluating the long-term effects of Invokana, which is expected to wrap up in 2015. That should appease the FDA panel for the upcoming PDUFA and lead to a thumbs-up for the new drug.

Market competition: SGLT2 inhibitors
There are big advantages for a first-in-class drug such as Invokana. Pfizer (NYSE:PFE)’s ertugliflozin and Eli Lilly’s empagliflozin are the next SGLT2 inhibitors that will be thrust upon the market. Both drugs are in phase 3 trials at the moment, which pegs approval to late 2014 or 2015 and gives Johnson & Johnson (NYSE:JNJ) a sizable window to get comfy with doctors and patients.

The FDA is also expected to reconsider Forxiga later this year after reviewing additional safety data. Should it gain approval in its second attempt, will doctors be able to overlook previous safety concerns and prescribe it over Invokana?