This single-center, randomized, double-blind, placebo-controlled study will evaluate the effect of aleglitazar on insulin sensitivity in patients with type 2 diabetes mellitus who are inadequately controlled on metformin monotherapy. Patients will be randomized to receive either aleglitazar 150 mcg or placebo orally daily for 16 weeks, in addition to their existing dose and regimen of metformin.

Inclusion Criteria:

• Adult patients, 30 to 70 years of age inclusive at screening
• Type 2 diabetes mellitus patients treated with stable metformin therapy for at least 12 weeks prior to screening; metformin dose should not exceed the maximum dose specified in the label
• HbA1c >/= 6.5% and </= 9% at screening and baseline
• Fasting plasma glucose </= 13.3 mmol/L (</= 240 mg/dl) at screening and baseline
• Body mass index (BMI) >/= 25 at screening; BMI >/= 27 for subjects with HbA1c < 7%
• Stable weight +/- 5% for at least 12 weeks prior to screening

Exclusion Criteria:

• Women who are pregnant, intending to become pregnant during the study period, currently lactating women, or women of child-bearing potential not using highly effective, medically approved birth control methods
• Diagnosis or history of type 1 diabetes mellitus, diabetes resulting from pancreatic injury, or secondary forms of diabetes
• Acute metabolic diabetic complications such as ketoacidosis or hyperosmolar coma within the past 6 months
• Any previous treatment with a thiazolidinedione or with a dual peroxisome proliferator activated receptor (PPAR) agonist
• Any body weight lowering or lipoprotein-modifying therapy (e.g. fibrates) within 12 weeks prior to screening with the exception of stable (>/= 1 month) statin therapy
• History of bariatric surgery or currently undergoing evaluation for bariatric surgery
• Prior intolerance to fibrate
• Treatment with any anti-diabetic medication other than metformin in the last 12 weeks prior to screening and/or herbal/over-the-counter preparations that may affect glycemic control within 12 weeks prior to screening
• Clinically apparent liver disease
• Positive for hepatitis B, hepatitis C or HIV infection
• Clinical evidence of anemia
• Symptomatic congestive heart failure (New York Heart Association Class II-IV) at screening
• Myocardial infarction, acute coronary syndrome, or transient ischemic attack/stroke within 6 months prior to screening
• Known macular edema at screening or prior to screening visit
• Uncontrolled hypertension despite stable (for at least 4 weeks) anti-hypertensive treatment
• Diagnosed and/or treated malignancy (except for treated cases of basal cell skin cancer, in situ carcinoma of the cervix or in situ prostate cancer) within the past 5 years
• Chronic oral or parenteral corticosteroid treatment (> 2 weeks) within 3 months prior to screening
• History of active substance abuse (including alcohol) within the past 2 years or positive test result for drugs of abuse or alcohol prior to first dosing
• Presence of any absolute or relative contraindication for the conduct of magnetic resonance imaging (MRI) investigation