A Diabetes Airbus?

A Diabetes Airbus?

Back in 1967 ministers from France, Germany and Britain agreed “for the purpose of strengthening European co­operation in the field of aviation technology and thereby promoting economic and technological progress in Europe, to take appropriate measures for the joint development and production of an airbus.”  This move was unprecedented at the time and quite frankly back in the day no one was sure this corporate structure would work. Yet Airbus after some fits and starts did work. Today Airbus is a leader in aviation and a serious competitor to Chicago based Boeing.

Diabetic Investor has learned that CEO’s from Roche, Sanofi (NYSE: SNY) and AstraZeneca (NYSE: AZN) have been conducting secret discussions about doing the same thing with their respective diabetes franchises. Although these discussions are in the early stages the three CEO’s – Dr. Severin Schwan – Roche- Pascal Soriot – AstraZeneca and Olivier Brandicourt – Sanofi – have all received preliminary approval from the various boards plus have agreed on a general framework of what this new company would look like.

Again please note these discussions are still very early stage and could fall apart at any moment given the complexity of such a sweeping proposal. Yet, sources with knowledge of these discussions have told Diabetic Investor that as complex as these negotiations are they are very real. As one source stated; “This may not happen at all but all the teams are actively talking and I’d give it a better than 50/50 chance of happening.”

It seems that all three CEO’s have looked over the competitive landscape and realized that if they are to effectively compete against Lilly (NYSE: LLY) and Novo Nordisk (NYSE: NVO) they stand a better chance as a combined entity then three stand-alone franchises. Again based on sources with knowledge of these discussions it was Olivier Brandicourt who initiated the talks. According to high level sources in Sanofi, Olivier went to our good buddy Serge Weinberg and basically said – even after all the cuts and the new deals we have made in diabetes we won’t be able to compete effectively on a global basis. Olivier also likely knew that the Sanofi board would not have the appetite for another major acquisition or in this case a series of acquisitions.

Sources inside Roche noted that Dr. Severin Schwan was “eager” to join the group which should come as no surprise as the company has been looking to get this unit off their books for some time.

It also seems that Pascal Soriot was reluctant at first and needed some prodding from his fellow Frenchmen, Olivier. This reluctance did not stem from believing there were not synergies between the three units, on the contrary although the units are not perfectly synergistic they do fit well together with the proper pruning. It seems this reluctant stems from the fact that Pascal basically blew it when Pfizer wanted to acquire the company. That he over-promised when it came to what the diabetes unit could do and was afraid to approach the board.  Although it is not known what Olivier said Pascal did approach the board and was given preliminary approval to begin discussions.

It seems that Olivier has been reading Diabetic Investor and has bought into our vision of the future. That when it comes to diabetes, whether it’s drugs or devices, that in the future patients will be prescribed a diabetes management system which includes all the tools they need to manage their diabetes. These tools will not just consist of drugs and devices but extend to include mobile apps i.e. interconnected diabetes management (IDM). That in the future the reimbursement will be directly tied to patient outcomes.

Honestly we are somewhat shocked by all this, not because of the complexity of the deal rather that Olivier came up with it and Serge went along with it. The same can be said for Pascal and his board. The only non-surprise here is Severin who would like nothing better than to get this dog of a unit off his hands.

Taking a step back for a moment all three companies do have something in common besides being located in major European cities. All three have shown an incredible knack for turning gold into sand. That all three have majorly screwed up their various diabetes franchises all by themselves so just think of how well they could do as a combined entity. Seriously Diabetic Investor is salivating over the potential copy such a deal would bring our way. We have always stated that when it comes to great copy diabetes is the gift that keeps on giving but this deal would the greatest gift of all.

Now we want to reiterate these discussions are still in the early stages and a deal may never materialize. As besides have a knack for majorly screwing up their respective diabetes franchises these three companies have another commonality, the inability to close deals. Yes, all three over the years have at one time or another considered major deals, only to back away at the last moment. Yet, on the flip side all three have executed on deals that have turned into complete disasters. Roche with Disetronic, Sanofi with MannKind (NASDAQ: MNKD) and AstraZeneca with Amylin/Bristol Myers Squibb (NYSE: BMY).

So this hook up between the three may not be as crazy as it sounds. That this is after all the wacky world of diabetes where anything can and usually does happen no matter how ludicrous it seems. Or this just might be a figment of our imagination as today is April’s Fool’s Day.