Novartis’ worst fears have been realised with the news that US regulators have asked for additional data on the firm’s diabetes drug Galvus, which will involve a new clinical study.

The US Food and Drug Administration has sent the Swiss group an approvable letter for Galvus (vildagliptin) and its request for more data includes a demand for another clinical study to demonstrate the safety and efficacy of the treatment, which belongs to the new dipeptidyl peptidase (DPP)-4 inhibitor class, in specific patient groups with renal impairment.

Last November, the firm submitted additional information to the FDA showing that reactions affecting the skin, which were seen in preclinical studies of Galvus have not been seen in human tests of the drug. This delayed the FDA's review deadline for the drug by three months and the verdict has not been positive.

Novartis remained upbeat by the news, which has sent shares down over 2% on early trading this morning, and head of development James Shannon said "we are confident in the safety and efficacy of Galvus and will continue working closely with the FDA to agree on what final actions are required to obtain US approval." The firm added that its 2007 financial outlook remains unchanged.

Nevertheless, this is a serious blow to Novartis as the FDA’s move puts the firm even further behind Merck & Co whose rival drug Januvia (sitagliptin) was approved last October. In the fourth quarter, the latter brought $42 million into Merck's coffers and the company is already filing for new indications for Januvia.

Both Galvus and Januvia are predicted to be potential $1 billion-a-year-plus sellers and the new DPP-4 inhibitors are expected to compete intensely in the lucrative market of oral treatments for diabetes, given that they are not associated with weight gain. Novartis has given no timeline yet regarding the additional clinical trial requested by the FDA and will be hoping that Januvia has not disappeared over the horizon by the time Galvus finally gets full approval.

Proxy advisory firm backs Vasella re-election

Meantime Novartis has taken the interesting step of issuing a statement which notes that the leading proxy advisory firm ISS recommends shareholders to approve all board proposals at its annual general meeting to be held on March 6. The recommendation includes approval of a 17% increase in 2006 dividend payments and the re-election of Daniel Vasella as chief executive and chairman.

The timing of the statement is significant, coming as it does amid murmurs that Dr Vasella could face a tough time at the AGM from shareholders who are unhappy at the stock’s performance as well as the size of his salary.