"The FDA wants more data and another clinical trial," Huckman said, which stem from skin lesions in monkeys that were given the drug in lab tests.
Shares of Novartis , based in Basel, fell on the news.
Sanford Bernstein's European pharmaceutical analyst, Dr. Gbola Amusa, said in a research note that this could delay Galbus for two to four years, Huckman said.
That's a gift for Merck, which recently launched its version of a similar drug, Januvia, "which will now have the corner on that part of the Type 2 diabetes drug market for a much longer period of time," Huckman said.
Merck, based in Whitehouse Station, N.J., has said that it hasn't seen any skin lesion problems with tests on Januvia, which has already been launched.
Citigroup upgraded Merck's stock on Monday--to buy from hold--based on its bullish outlook on Januvia. Citigroup also raised its 2007 earnings per share estimates to $2.64 from $2.59. for 2008; it also boosted its profit forecast for 2008, to $2.89 a share from $2.68 a share.
Novartis said it is not changing its financial guidance on the news, Huckman said, but investors clearly believe it is going to have an impact.