A potent novel compound (MK-3577) was developed for the treatment of type 2 diabetes mellitus (T2DM) through blocking the glucagon receptor. A semi-mechanistic model was developed to describe the drug effect on glucagon and the interaction between glucagon, insulin, and glucose in healthy subjects (N = 36) during a glucagon challenge study in which glucagon, octreotide (Sandostatin), and basal insulin were infused for 2 h starting from 3, 12, or 24 h postdose of a single 0-900 mg MK-3577 administration. The drug effect was modeled by using an inhibitory E max model (I max = 0.96 and IC50 = 13.9 nM) to reduce the ability of glucagon to increase the glucose production rate (GPROD). In addition, an E max model (E max = 0.79 and EC50 = 575 nM) to increase glucagon secretion by the drug was used to account for the increased glucagon concentrations prechallenge (via compensatory feedback). The model adequately captured the observed profiles of glucagon, glucose, and insulin pre- and postchallenge. The model was then adapted for the T2DM patient population. A linear model to correlate fasting plasma glucose (FPG) to weighted mean glucose (WMG) was developed and provided robust predictions to assist with the dose adjustment for the interim analysis of a phase IIa study.