Adding an experimental diabetes drug co-developed by AstraZeneca PLC (AZN) and Bristol-Myers Squibb Co. (BMY) to the drug metformin reduced a measure of blood sugar versus metformin alone, a new study found.

A summary of the data for the drug dapagliflozin was posted on the Website of the annual meeting of the European Association for the Study of Diabetes; researchers are scheduled to present the findings in Vienna on Friday.

Some analysts think the drug has potential to be a blockbuster, but they're closely watching its emerging safety profile because its novel mechanism raises theoretical safety issues. Unlike other diabetes drugs that involve insulin, dapagliflozin blocks reabsorption of blood sugar and causes excretion of the glucose in urine. While this approach may prove to be effective, it has also raised the potential for higher risk of infections, which could limit the drug's market appeal.

"We remain concerned on the side effect profile of dapagliflozin with higher infection rates and potential impact on both kidney function and bone metabolism seen in" earlier stage studies, Jefferies International analyst Jeffrey Holford wrote in a research note earlier this week. He also noted the relatively short duration of the new study, saying longer term data will be needed to flesh out the safety issue.

Still, Holford estimates peak annual sales of $1.5 billion for the drug, with half being attributable to each company.

Dapagliflozin, known as a sodium glucose co-transporter 2, or SGLT2, is the second diabetes drug stemming from a partnership between Bristol and Astra. The first was Onglyza, which was approved by the U.S. Food and Drug Administration in July.

In the new study, funded by the companies, nearly 550 people with type 2 diabetes received various dose levels of dapagliflozin, or placebo, once daily, plus the drug metformin. Eligible patients had inadequate blood-sugar control on metformin alone. The study was designed to track at 24 weeks changes in HbA1c, a test that measures the amount of a substance called glycated hemoglobin, which is formed in red blood cells when blood sugar attaches to hemoglobin.

The study found that each of the dose levels of dapagliflozin produced a greater reduction in HbA1c than metformin alone. The changes in the dapagliflozin arms ranged from reductions of 0.67% to 0.84%, versus 0.3% in for metformin alone. In addition, users of dapagliflozin had greater weight loss than those on metformin alone.

The study's summary said adverse events were generally balanced across all groups in the study. Rates of urinary-tract infections were similar or lower for the dapagliflozin users, versus metformin alone, but rates of genital infections were higher for dapagliflozin users. There were no meaningful changes in signs of kidney impairment.

The researchers concluded that the drug appeared safe and was associated with significantly improved blood-sugar control and clinically meaningful weight loss over 24 weeks, versus placebo.

-Peter Loftus; Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com