The purpose of this study is to assess changes from baseline in insulin sensitivity, hepatic fat content and beta cell function after approximately 24-25 weeks of treatment with canagliflozin compared to placebo in participants with type 2 diabetes mellitus (T2DM) with inadequate glycemic (blood sugar) control on metformin monotherapy or on combination therapy with metformin and a dipeptidyl peptidase-4 (DPP-4) inhibitor.

This is a double-blind (neither physician nor participants knows the treatment that the participant receives), randomized (the study medication is assigned by chance), placebo-controlled (an inactive substance is compared with a medication to test whether the medication has a real effect in a clinical study), parallel-groups study which will be conducted at 2 clinical research centers (CRC) in the US. Approximately 56 participants, ages 25-70 years, with T2DM inadequately controlled on either metformin monotherapy or combination therapy with metformin and a DPP-4 inhibitor, will be enrolled. The study has 3 phases: pre-treatment, double-blind treatment, and post-treatment.

Pre-Treatment Phase will consist of a screening visit (Week -5), 14 days Single- Blind Placebo Run-in period, followed by 14 days of Single-Blind Placebo Baseline Period, during which participants will be randomized (1:1) to one of 2 treatment groups, either canagliflozin or placebo. Double-Blind Treatment Phase begins on Day 1, and ends at approximately Week 25, during which participants will be assessed at least biweekly at outpatient visits or by telephone contact. Canagliflozin treatment will be initiated at 100 mg/day, with up-titration to 300 mg/day, consistent with the approved INVOKANA® US Prescribing Information 2013. During post-treatment phase, a follow-up visit will occur within approximately 28 days after the last dose of study drug.

At baseline and after 24 weeks of treatment with canagliflozin, hepatic and peripheral insulin sensitivity will be assessed using tracer labeled euglycemic clamp technique; hepatic fat content will be determined using 1H nuclear magnetic resonance spectroscopy (MRS); beta cell function (insulin secretion rate and beta cell glucose sensitivity) will be assessed during mixed meal tolerance test (MMTT); substrate oxidation and energy production rates will be measured using indirect calorimetry during euglycemic clamp and MMTT.

During the study, participants will remain on their stable dose regimens of metformin or combination metformin DPP-4 inhibitor therapy, unless the investigator considers dose modification to be medically necessary. The total study duration for each participant participating in this study will be up to approximately 34 weeks.

Inclusion Criteria:

• Must have a diagnosis of T2DM for at least 3 months and be on either metformin monotherapy at a stable dose of >=1,000 mg per day or on combination therapy of metformin >=1,000 mg per day and a DPP-4 inhibitor at stable daily doses for at least 12 weeks prior to screening with an HbA1c of >=7.0% and <= 9.5% at Screening
• Fasting plasma glucose >=120 mg/dL and <=240 mg/dL at the Week -4 visit
• Fasting fingerstick glucose >=120 mg/dL and <=240 mg/dL performed at clinical research center on Day -14
• Must be medically stable on the basis of clinical laboratory tests performed at screening

Exclusion Criteria:

• Has a history of diabetic ketoacidosis, type 1 diabetes mellitus (T1DM), pancreas or β-cell transplantation, or diabetes secondary to pancreatitis or pancreatectomy
• Has claustrophobia or anxiety, related to previous negative experiences with magnetic resonance imaging procedures which cannot be managed with an anxiolytic drug
• Has a history of brittle or labile glycemic control, with widely varying glucose measurements
• Has proliferative diabetic retinopathy (based on an eye examination within one year prior to Screening), currently receiving or requiring treatment
• Has a history of 1 or more severe hypoglycemic episodes within 6 months before screening
• Has history of hereditary glucose-galactose malabsorption or primary renal glucosuria.