A non-insulin drug for diabetes decreased blood-sugar levels in four Phase 3 clinical trials, Boehringer Ingelheim GmbH and Eli Lilly & Co. (LLY), the developers of the treatment, announced Monday.

The companies’ diabetes partnership of two years was also altered, with Boehringer Ingelheim ending its involvement in the development of a different drug, an investigative form of insulin.

The full rights of the insulin product will go to Lilly, however, the companies will proceed to work together on other medications.

Empagliflozin, the non-insulin drug, will be submitted for approval in Europe, Japan, and the U.S. this year.

Now the stage is set for an industry showdown over what experts say may well be a modest-sized market opportunity for a new type of diabetes medication.

Canagliflozin, a comparable medication from Johnson and Johnson (JNJ), will be assessed this week by an FDA advisory committee.

A different drug in the same class, dapagliflozin, known as Forxiga, developed by Bristol-Myers Squibb Co. (BMY) and AstraZeneca PLC (AZN), has been approved in Europe. The companies hope that their drug Forxiga, which was previously rejected last year, will soon be approved by the U.S. FDA.

Since a target in the kidney called sodium glucose co-transporter 2 is blocked by these types of drugs, they are referred to as SGLT2 inhibitors. They are made to reduce levels of blood sugar in type 2 diabetes patients by not allowing blood sugar to be re-absorbed while causing excretion of the glucose in their urine.

According to Lilly and BI, in four clinical studies, empagliflozin notably decreased a measure of HbA1c, a blood sugar, from baseline as opposed to a placebo. Two dose levels of the drug were analyzed as a monotherapy as well as an add-on to different therapies.

The results showed that empagliflozin and the placebo had comparable negative health effects. However, there were more people with genital infections using empagliflozin than the placebo.

The SGLT2 class has been associated with genital infections, causing analysts to be concerned with commercial possibilities.

Liver toxicity has also a problem with these type of drugs. A disparity in the chance of particular cancers linked to the Bristol-Myers/AstraZeneca drug, dapagliflozin, has been noted by FDA analysts.

The possible risk of cancer has been recognized by regulators in Europe, which they said that they would keep an eye on. According to them, the advantages of dapagliflozin are much greater than the risks.

The complete outcomes of the trials will be announced in the near future, Lilly and BI said. Empagliflozin was first created by BI, and it was contributed to a diabetes-drug partnership that the company made with Lilly in 2011.

The partnership has undergone a change, which the company announced on Monday. All development and commercialization rights will go to Lilly for an experimental type of insulin, LY2605541, referred to as a basal insulin analog.

Basal insulin is normally injected one time each day and is made to last longer than mealtime insulin. An important kind of basal insulin is Sanofi’s (SNY) Lantus, which has resulted in impressive sales.

Novel types of basal insulin are being created by Lilly, Boehringer and other companies which they hope will rival Lantus.

Germany’s Boehringer Ingelheim decided to end work with Lily on LY2605541, “given independent strategic portfolio considerations”, the companies said. However, they will keep working together on other drugs, such as Tradjenta, and empagliflozin.

Indianapolis-based Lilly will begin new research in 2013 and 2014 to help gain the approval of LY2605541 in 2014.

The companies noted in June 2012 that the basal insulin reduced blood sugar levels in mid-stage clinical studies.

Lilly shares closed last week at $51.56, an increase of 29% over the previous year.

Written by Sarah Glynn