AstraZeneca and Bristol-Myers Squibb have announced that they are working with the FDA to determine their next steps and are in ongoing discussions with health authorities in Europe and other countries where they are seeking approval for the drug.  Shares of both companies fell more than 2% on the news.

The FDA decision cited elevated rates of bladder and breast cancer seen in clinical studies.  There were also concerns about infections and possible liver damage.  The FDA requested data from ongoing studies and may require new studies to be performed in the future to better evaluate the benefits and risks of the drug.  Expert FDA advisers recommended that dapagliflozin not be approved back in July.  Dapagliflozin has been tested in more than 5,000 patients in 19 clinical studies.

The decision by the FDA is likely to delay approval of dapagliflozin by a couple of years and spell trouble for other drugmakers developing the new type of diabetes pill.  Dapagliflozin is considered to be an important new drug in the fight against diabetes because it works differently than other diabetes medications.  Dr. Tim Anderson, an analyst for BernsteinResearch, forecast that sales of the drug could potentially reach about $1.2 billion a year by 2020.

Dapagliflozin belongs to a new class of drugs for Type 2 diabetes called SGLT-2 inhibitors.  SGLT-2 inhibitors reduce blood sugar by increasing the amount that is excreted in the urine.  Type 2 diabetes accounts for at least 90% of diagnosed cases of diabetes in adults.  SGLT-2 inhibitors have also been found to help patients lose weight.  Type 2 diabetes is typically related to obesity and a lifestyle that is sedentary.

Both Bristol and AstraZeneca have blockbuster drugs facing generic competition this year and in the near future.  Bristol’s blockbuster blood thinner Plavix is the world’s second best selling drug but loses patent protection in the U.S. this May.  AstraZeneca loses patent protection in March for its popular drug Seroquel, for schizophrenia and bipolar disorder, which is currently the world’s third best selling drug.

This is the second wave of redundancy cuts in the past three months.  The cuts come on top of the 400 jobs lost in the US divisions of the company in October.  The positions being eliminated are in addition to the wide-ranging program of job cuts announced by AstraZeneca in January 2010 totaling 8,000 jobs and designed to be implemented over a period of several years.

A company spokeswoman said AstraZeneca was looking for ways to make greater use of alternative methods for promoting its medicines, such as online tools.  The reductions in the sales force represent about 24% of the US sales organization.  This latest round of job cuts is expected to be finalized by February of 2012.

Analysts are expecting a steady decline in sales for the company as patents expire on popular medications like Nexium for heartburn and Seroquel for schizophrenia.  The company is also expecting major challenges as generic versions of leading cholesterol pill Lipitor come onto the market and take market share from AstraZeneca’s Crestor.  The company has few drugs available that could potentially match the success of these blockbuster drugs, leaving management under pressure to cut costs and the sales force exposed to reductions.

Rich Fante, president of AstraZeneca U.S., said it was a difficult decision to make, but “The changes we are making, however, will help us deliver better results for our business and, most importantly, continue delivering on our mission of patient health.”  Pfizer, Merck, and Novartis have also announced major job cuts in recent months.