The purpose of this study is to assess the safety and tolerability of MSDC-0602 and to evaluate the reduction in fasting plasma glucose in patients with Type 2 diabetes.

Patients must meet all of the following inclusion criteria to be eligible for enrollment into the study:

Inclusion Criteria:

1. Males and females with Type 2 diabetes (fasting plasma glucose ≥126 mg/dL at screening, glycosylated hemoglobin [HbA1c] >7 and ≤10%, and Insulin C-peptide >1 ng/mL). Patients can be naïve to diabetes therapy or if taking metformin should be on a stable dose level for a period of at least 3 months prior to screening visit (no dose limit).

2. Between the ages of 18-75 years, inclusive.

3. Females should be either postmenopausal (at least 12 months since last menses) or surgically sterilized (bilateral tubal ligation or hysterectomy). Menopausal status will be verified by a follicle-stimulating hormone (FSH) test. If FSH levels are below 40 mIU/mL, some method of birth control must be used. Those with bilateral tubal ligation must also use a barrier method of birth control. In addition, all females must have a negative pregnancy test at Screen and Day 15 regardless of childbearing potential. For postmenopausal women only, if FSH levels are above 40 mIU/mL and serum pregnancy results are indeterminant, the subject will be assessed as not pregnant.

   Males with female partners of child-bearing potential must agree to use adequate contraceptive methods (including a condom, plus one other form of contraception) if engaging in sexual intercourse.

4. Body Mass Index (BMI) ≥ 25 kg/m2 and ≤ 45 kg/m2 (inclusive).

5. Willing and able to make a screening visit to the clinic and six visits over a 10 week period.

6. Willing and able to sign an informed consent document indicating understanding the purpose of and procedures required for the study and willingness to participate in the study.

Subject Exclusion Criteria:

1. Use of TZDs or diabetes medications other than metformin (generic or Glucophage®) 3 months prior to screening.
2. History of diabetic ketoacidosis or hyperosmolar non-ketotic coma.
3. Fasting plasma glucose in excess of 240 mg/dl at screening
4. History of heart failure (including CHF) or previous cardiovascular event (myocardial infarct, by-pass surgery, or PTCA) within the past 6 months prior to screening.
5. ALT and/or AST levels that equal or exceed twice the upper limit of normal; bilirubin levels that exceed 2 mg/dL; serum creatinine >1.5 mg/dL in men or > 1.4 mg/dL in women.
6. History of nephropathy, neuropathy, or retinopathy within 6 months of screening.
7. Use of glucocorticoids (oral, injectible, intraarticular, or chronic inhaled) or weight-loss drugs within 3 months of randomization.
8. Current or recurrent disease that may affect the action, absorption or disposition of the study treatment, or clinical or laboratory assessments.
9. Current or history of severe or unstable disorder (medical or psychiatric) requiring treatment that may make the patient unlikely to complete the study.
10. Febrile illness within the 5 days prior to Visit 1.
11. Known history of HIV, hepatitis B, or hepatitis C.
12. Clinically significant findings on physical examination, including BP, pulse rate and 12-lead ECG.
13. Blood pressure greater than 160/100 mmHg. Patients with elevated BP (<160/100 mmHg) with or without current treatment will be allowed at the discretion of the Principal Investigator (PI) and primary care physician. Individuals with hypertension must have been stabilized to the current treatment regimen for at least 6 weeks prior to screening.
14. Change in BP or lipid-lowering medication within 6 weeks or change in dose of metformin or thyroid replacement within 3 months prior to screening.
15. Known or suspected intolerance or hypersensitivity to the study drugs, closely related compounds or any of their stated ingredients.
16. History of alcohol or drug abuse within 6 months of Screening.
17. Have participated in an investigational study or received an investigational drug within 30 days or 5 half-lives (whichever is longer) prior to study drug administration.
18. Blood donation of 1 pint or more within 56 days of screening.
19. Plasmapheresis or plasma donation within 30 days of screening.
20. Single 12-lead ECG demonstrating a QTcB >450 msec at Screening. A single repeat ECG may be done at the Investigator's discretion.
21. Any surgical or medical condition which may significantly alter the absorption of any drug substance including, but not limited to, any of the following: history of major gastrointestinal tract surgery such as gastrectomy, gastroenterostomy, bowel resection, gastric bypass, gastric stapling, or gastric banding, currently active inflammatory bowel syndrome.
22. Evidence of clinically relevant pathology that could interfere with the study results or put the patient's safety at risk.
23. Malignancy, including leukemia and lymphoma (not including basal cell skin cancer) within the last 5 years.