This study is designed to evaluate the safety and efficacy of PN2034 in insulin-dependent type 2 diabetics as measured by the change in average daily insulin dose from baseline to week 12. The effects of PN2034 on HbA1c, fasting plasma glucose (FPG), and lipid levels will also be measured.

Inclusion Criteria:

• diagnosed with type 2 diabetes mellitus
• 21 to 65 years of age
• on stable doses of insulin (>/= 40 units/day) alone or with metformin for at least 3 months
• HbA1c level of >/=7.5% but </=10.0%
• fasting blood sugar level >/= 125 mg/dL but </= 279 mg/dL
• BMI 26-43 kg/m2
• direct bilirubin < 1.5x the upper limit of normal (ULN)
• serum creatinine < 1.5 mg/dL (males) or < 1.4 mg/dL (females)
• blood urea nitrogen (BUN)</=40 mg/dL
• all other clinical laboratory parameters (hematology, serum chemistry, and urinalysis) within normal limits or not clinically significant
• ECG normal, or abnormalities not clinically significant
• surgically sterile,postmenopausal,or using adequate contraception and have a negative pregnancy test at Screening
• able to perform daily self-monitoring of blood glucose (SMBG) tests
• willing and able to sign an informed consent form

Exclusion Criteria:

• diagnosed with type 1 diabetes mellitus or has a history of ketoacidosis
• treatment with TZDs or any other oral antidiabetic (excluding metformin) within 3 months prior to screening or during study treatment
• change in lipid-lowering medication within 2 months of screening
• taken systemic corticosteroids within 1 month prior to screening or during study treatment
• history of or current/active cardiovascular disease
• significant current pulmonary conditions
• significant thyroid disease
• CPK value > 3x ULN
• a female who is pregnant or lactating
• systolic BP > 160 mm Hg or a diastolic BP > 90 mm Hg at screening
• previous or current history of cancer, other than basal cell or stage 1 squamous cell carcinoma of the skin, that has not been in remission within 5 years prior to randomization
• liver function tests (ALT, AST, ALP) > 2 times ULN, or active liver disease at screening
• history of positive HIV
• positive hepatitis B test at screening
• weight loss or gain >/= 15 lbs within 3 months of screening
• history of substance abuse (including alcohol abuse) within 2 years prior to screening
• donated and/or received any blood or blood products within 3 months prior to randomization
• taken an investigational study medication within 30 days prior to screening or during the study