June 25 (Bloomberg) -- Takeda Pharmaceutical Co.’s new diabetes drug faces a likely delay by U.S. regulators this week, leaving the company without a contender to replace sales of its star diabetes pill Actos when its patent expires in 18 months.

The Food and Drug Administration told Asia’s largest drugmaker in March that it will apply new guidelines on risks of heart attack and stroke in its review of Takeda’s diabetes medicine alogliptin. Analysts said they expect the FDA will require more testing in its decision, due by Friday, delaying the drug’s introduction by as many as four years.

Actos is the world’s best-selling diabetes drug, responsible for 387 billion yen ($4 billion), or 25 percent, of Takeda’s sales for the year ended March 31. Takeda was relying upon approval of alogliptin to replace much of that lost revenue, said Mitsuya Sakurai, an analyst at CLSA Ltd. The U.S. market represented 80 percent of the drug’s sales last fiscal year.

“Alogliptin won’t be ready on time to make up for the decline in Actos sales and Takeda’s profit will drop,” Yasuhiro Nakazawa, an analyst at Mitsubishi UFJ Securities Co. in Tokyo, said in a telephone interview.

Takeda plans to expand in countries where it doesn’t have operations to “maximize sales” of its drugs, Toshiyuki Ikeuchi, a company spokesman, said by telephone from Tokyo, reiterating comments previously made by President Yasuchika Hasegawa. The spokesman declined to comment on alogliptin’s prospects before the FDA announces its decision.

Revenue Prospects

Alogliptin will generate revenue of $90 million in its first year of sale, expected in 2013, and $2 billion at its peak, CLSA’s Sakurai said.

Takeda’s net income dropped 34 percent to 234.4 billion yen in the 12 months ended March 31, as the Osaka, Japan-based company took writedowns on an acquisition and a discontinued venture, and the yen strengthened against the dollar.

Profit may fall every year through March 2013, when Takeda is projected to post net income of 146.6 billion yen, according to the median of seven analyst’s estimates compiled by Bloomberg in the past four weeks.

Takeda rose 0.5 percent to close at 3,760 yen on the Tokyo Stock Exchange, while the MSCI World Health-Care Index of 121 companies declined 0.4 percent. The stock, which has fallen 22 percent in the past five years, reached a peak of 8,350 yen in June 2007.

If approved, alogliptin would join Merck & Co.’s Januvia, the only approved drug in the newest class of diabetes treatments, called dipeptidyl peptidase-4 inhibitors. They spur the pancreas to produce more insulin and the liver to make less glucose.

Liver Damage

Older diabetes medications include so-called glitazones such as Actos and GlaxoSmithKline Plc’s Avandia, which help the body better utilize insulin. Both of those drugs have been associated with liver failure, according to their labels. Januvia doesn’t have any liver side-effects on humans, according to its prescribing information.

The FDA issued new guidance in December for approval of proposed treatments for Type 2 diabetes to rule out an “unacceptable increase” in heart problems. Drugmakers will need at least two years of trials to obtain data on cardiovascular risks for the diabetes therapies instead of the typical three to six months, the FDA said. The recommendations apply to all experimental diabetes drugs, regardless of where they are in the approval process.

Early Entry ‘Critical’

“It’s critical to enter the market as early as possible, especially for treatments for chronic illnesses such as diabetes,” CLSA’s Sakurai said in Tokyo. Later entrants will find it hard to penetrate the market because doctors and patients are reluctant to switch treatments, he said.

Sakurai estimates the drug won’t go on sale until the second quarter of 2013. Hidemaru Yamaguchi, an analyst at Nikko Citigroup Ltd. in Tokyo, provided the most optimistic estimate in a Bloomberg News survey of 10 analysts, from telephone interviews and reports, predicting the drug may go on sale some time in 2011.

Takeda said June 4 it will delay submitting an application to seek European approval for alogliptin by at least two years to 2012 as it obtains additional data on the drug’s efficacy to ensure it clears regulators. The company is trying to make up for its “earlier haste in the U.S.,” Hiroshi Tanaka, an analyst at Mizuho Securities Co., said at the time.

Generic Drugs

Competition has already eroded sales of Takeda’s second- biggest seller, the heartburn medication Prevacid, as Prilosec and Protonix, similar treatments from AztraZeneca and Wyeth respectively, have become available as generic drugs. Total prescriptions for Prevacid slumped 35 percent from January 2007 through May 2009, according to Bloomberg data.

Just four drugs account for about two-thirds of Takeda’s sales. Prevacid contributes 18 percent; Blopress, used to treat hypertension, accounts for 15 percent; and Leuplin, a prostate cancer medication, generates about 8 percent.

Takeda also faced setbacks in the past two years for at least three experimental drugs including alogliptin. The company scrapped development of the TAK-475 cholesterol pill in March 2008 after failing to prove its safety and efficacy. TAK-491, a pill for combating hypertension, faces development delays, President Hasegawa said in May, without elaborating.

“Our R&D efforts didn’t turn out as planned,” Hasegawa said on May 11. “We focused too much on the quantity and speed of research and development, which didn’t necessarily bring results.”

Quality Versus Quantity

Hasegawa also said that day Takeda plans to start rewarding scientists based on the quality rather than quantity of their work. He blamed the old compensation system for its drug cancellations and delays.

The executive has turned to acquisitions to help build back revenue. Takeda bought Millennium Pharmaceuticals Inc. for $8.9 billion last year, gaining the bone-marrow cancer treatment Velcade and experimental medicines for cancer and Crohn’s disease. Velcade’s U.S. sales rose 41 percent to $375 million in the year ended March 31, the company said.

Takeda began selling Kapidex, a longer-acting successor to Prevacid, and Urolic, the first new gout treatment in the U.S. in four decades, after receiving FDA approval for both drugs earlier this year. Its cancer medicine AMG706 and Crohn’s disease treatment MLN0002 are in the last stage of clinical trials in the U.S.

Earlier this week, Takeda announced the creation of a global advisory board to help management deal with a “rapidly changing” pharmaceutical market. The four members are Karen Katen, formerly vice chairman at Pfizer Inc.; Sidney Taurel, chairman emeritus at Eli Lilly & Co.; Tadataka Yamada, head of the Bill & Melinda Gates Foundation; and Frank Morich, former chief executive officer of Bayer Healthcare AG.

“‘What Takeda’s president can do to cope with earnings decline is very limited right now,” Fumiyoshi Sakai, an analyst at Credit Suisse Group AG, said by telephone from Tokyo. “It will take at least five years until we see the results of Hasegawa’s efforts.”

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net.

Last Updated: June 25, 2009 04:04 EDT