The likes of cancer and rheumatoid arthritis might have upstaged diabetes in the biotechnology limelight, but the disease is steadily on the march. More than 12 million Americans have been diagnosed, and the prevalence of the disease has jumped by 30 percent in the past decade. It's the No. 1 cause of adult blindness, kidney failure and amputations - not to mention heart disease.

In the U.S., 18.2 million people in the U.S., or 6.3 percent of the total population, have diabetes, but about 5.2 million of those have not been diagnosed and don't realize they have the disease.

And the known market is anything but well penetrated. A study of insured people with Type II diabetes (the most common form, afflicting about 17 million Americans) found that 17 percent to 30 percent of them get no anti-diabetic medicine or insulin over the course of a year.

This has consequences. In one part of the study, which included almost 200,000 patients, those going without medicine for their condition had 15 percent more days in the hospital than those treated, 20 percent higher health costs related to the disease and 18 percent more visits to the doctor - making diabetes not only a potentially lucrative prospect but a serious public health problem. The Pharmaceutical Research and Manufacturers of America funded the study, results of which were disclosed in April.

By 2006, the market for diabetes medications is expected to surpass $20 billion and drugs already abound for the condition. Notable among them is metformin, approved in 1994 for Type II diabetes and sold by Bristol-Myers Squibb Co. as the immediate-release Glucophage and the once-a-day Glucophage XR. BMS had $2.5 billion in U.S. sales of the immediate-release version in 2002, before the company lost marketing exclusivity.

Plenty more are in the pipelines of pharmaceutical and biotechnology firms, such as the inhaled insulin from Aradigm Corp. and Novo Nordisk A/S, which made news last week when the drug met primary safety endpoints in the interim analysis of the Phase III trial - but delayed post-meal plasma glucose suppression in Type I diabetics. Novo said it will end the trial early.

Type II patients in earlier Phase II trials with NN1998, also known as the AERx insulin Diabetes Management System, had shown satisfying post-meal glucose profiles. Results from the Phase III trials of Type I diabetics, though, show glucose levels right after meals were higher than those in patients given subcutaneous insulin. At night, levels were lower than those in trial participants given the subcutaneous form.

Aradigm's stock took a hit of almost 30 percent on the news, and Richard Thompson, president and CEO, said the company was "looking forward to a rebound at some point, when people fully understand the story."

Type I patients are more sensitive than Type II diabetics. Another factor that might be blamed for the outcome is that patients in the subcutaneous comparison group in the trial got a newer, faster-acting insulin, called insulin aspart, while AERx patients were given regular human insulin. Only about 30 percent of people who take insulin take the aspart form.

"Some of the competitive products are not using that standard," Thompson said, but Novo insisted on a high bar for the trial.

In any case, inhaled insulin is hot. MannKind Corp.'s version also made news last week, when the company filed for an $86.25 million initial public offering - having pulled down $50 million less than two months earlier in a Series C sale of equity. The firm said it would devote IPO proceeds to the Technosphere Insulin System, in late Phase II trials for diabetes. The treatment deploys dry-powder insulin and MannKind's MedTone inhaler.

Another company with inhaled insulin is Nektar Therapeutics, which in March said the European Medicines Evaluation Agency accepted the filing of an application for its Exubera, partnered with Pfizer Inc. and Aventis SA, for adult patients with Type I and Type II diabetes. The companies said they were talking with the FDA about the timing for submission of a new drug application here.

Another product coming down the development pike with diabetes remedies is exenatide (synthetic exendin-4) from Amylin Pharmaceuticals Inc. in partnership with Eli Lilly and Co. The first-in-class candidate for the Type II form is a 39-amino-acid peptide designed to lower glucose, and the companies said last month that they expect to submit a new drug application for the drug in the middle of this year, using data from three Phase III studies.

Big pharma has products in late-stage development. An example is AstraZeneca plc's Galida (tesaglitazar), a dual-acting oral peroxisome proliferator-activated receptor agonist to fix glucose and lipid abnormalities. Bristol-Myers has a similar drug, muraglitazar, also in the clinic.

Novartis AG has LAF237, an oral inhibitor of the DPP4 gene, and Merck KGaA has MK-0431, a tablet to elevate glucagon-like peptide, thereby controlling blood sugar.

Aradigm's Thompson last week told BioWorld Financial Watch that "there are different classes of people out there making different conclusions, but the fact that we can't say very much about the timing is probably being perceived pretty negatively." Having closed the day of the NN1998 news at $1.23, down 52 cents, Aradigm's stock ended the week trading at about the same price.

Novo said it will finish the study in the next few weeks, giving patients about 19 months of maximum exposure to the drug, rather than the originally planned 24 months. Whether another trial will be conducted is unclear.

"Even Novo is not ready to make those projections yet," Thompson said.