Hanmi Pharmaceutical’s diabetes drug candidate efpeglenatide, which had led to a massive licensing deal with Sanofi, is on the brink of being discarded in the middle of the phase-3 trial.

On Thursday, the company announced that the French multinational drugmaker abruptly decided to return all rights concerning efpeglenatide to Hanmi.

In 2015, Hanmi licensed-out three diabetes pipelines – efpeglenatide, weekly, long-acting insulin, and a combo of efpeglenatide and long-acting insulin -- to Sanofi. The deal, also known as Quantum Project, was worth 5 trillion won ($4.06 billion)– the largest ever in the history of the Korean pharmaceutical industry.

In December 2016, however, Sanofi returned the rights of the two pipelines, including the long-acting insulin to Hanmi. As the company on Thursday notified its intention to return the rights of the remaining efpeglenatide, it gave up all rights concerning Quantum Project.

Sanofi’s unilateral decision sparks controversy over ‘moral responsibility’

Usually, a licensing deal for new drug development can be easily canceled. A drugmaker may return the development rights when it finds it difficult to commercialize the agent due to insufficient data on efficacy in clinical trials, or the drug shows unexpected side effects.

However, Sanofi’s decision was unusual because it suddenly requested a termination of the contract in the middle of the phase-3 study on efpeglenatide.

Industry sources said Sanofi’s move might have resulted from recent changes in the company’s R&D strategies.

Sanofi CEO Paul Hudson, who took office in September, announced that the company would stop investing in research in diabetes and cardiovascular disease, and focus on four sectors – cancer, blood disease, rare diseases, and nervous system disease. This year, Sanofi is already dumping pipelines in diabetes and cardiovascular disease. The company nullified the deal with U.S. pharmaceutical firm Lexicon over the diabetes treatment Zynquista last year.

Unlike the Zynquista case where Sanofi exited the deal after the completion of the phase-3 study, Hanmi’s efpeglenatide faced discontinuation of the contract in the middle of the phase-3 trial.

Hanmi and Sanofi were conducting five phase-3 trials on the experimental diabetes drug. Three of them almost completed patient recruitment and administration, and the rest two were in progress. The five trials have recruited about 5,000 patients.

A critic said Sanofi was on the negotiation table, putting the safety of thousands of patients at risk.

Hanmi said it would push for the completion of the phase-3 study on efleglenatide during the next 120-day negotiations with Sanofi.

“Despite the new R&D strategies, Sanofi has repeatedly said it would finish the phase-3 efleglenatide study,” an official at Hanmi said. “At the negotiation, we will demand Sanofi keep its word. If necessary, we will consider taking legal actions such as a suit for damage compensation.”

Has commercial value of diabetes drug candidate changed?

Some speculate that Sanofi might have become less willing to commercialize efpeglenatide because of the heated competition in the diabetes treatment market. Despite efpeglenatide’s potential to effectively treat diabetes, it might not sell remarkably well, they said.

Among the glucagon-like peptide-1 (GLP-1) receptor agonists that fight diabetes, Lilly’s Trulicity (dulaglutide) and Novo Nordisk’s Ozempic (semaglutide) are leading the market.

Pharmaceutical firms are also competing to change GLP-1 agonist injections to oral drugs.

Lilly is conducting a clinical study on oral diabetes treatment. Novo Nordisk has already obtained U.S. approval for Rybelsus, the oral version of Ozempic, which is the first oral GLP-1 agonist.

Although Rybelsus is expensive and has side effects, oral GLP-1 drugs are expected to become widely popular in prescriptions, observers said. Given the patients’ reluctance to use an injection, drug companies will focus the developing pattern of GLP-1 on oral treatments rather than injectable ones.

A local doctor at a university hospital’s endocrinology department said the latest diabetes treatment guidelines recommend using a GLP-1 agonist, which proved better cardiovascular benefits compared to insulin.

“If GLP-1 agonists become oral drugs, pharmaceutical companies’ competition in injectable drugs will become meaningless,” the physician said. “If a patient chooses an oral treatment over an injection, GLP-1 injections will be used only in patients who also receive insulin.”

Sanofi owns Soliqua, the combination drug of the GLP-1 agonist and insulin. Thus, it might not need efpeglenatide.

However, Hanmi emphasized that the commercial value of efpeglenatide remains unchanged.

If the drug proves its superiority to Trulicity in a direct comparison study, efpeglenatide will become successful, the company said. Hanmi hopes to release the results of the comparison study in late 2020 at the earliest.

“Korean patients have a strong reluctance to an injection, but those in other countries don’t. So, the local situation is quite different,” an official at Hanmi said.

The company was anticipating for the positive results of the comparison study involving efpeglenatide and Trulicity, the official said. As the global diabetes market is expected to grow to $10 billion by the time when efpeglenatide is commercialized, the potential drug has a sufficient market value.