A sign of things to come
One of the biggest questions facing Sanofi (NYSE:SNY) is how they will deal with a biosimilar version of Lantus when it hits a major market. As everyone knows Lilly (NYSE:LLY) has already received approval for Abasaglar, their biosimilar version of Lantus in Europe and has received contingent approval here in the US. Given that the US launch is tied up in the courts as Sanofi has sued Lilly, everyone has been looking for clues. Well it looks like we’re finally getting some.
According to a story published on the PMLIVE web site;
“The biosimilar – called Abasaglar – is available as a 100 units/mL solution for injection in a cartridge or pen injector, with a list price of £35.28 for a five pack in each case. That compares with a price of £41.50 for five Lantus cartridges, according to a Lilly spokeswoman, and is a 15% discount.”
The story goes onto state;
“For Sanofi, the increased competition to Lantus increases the urgency of its efforts to switch patients to Toujeo, a longer-acting version of insulin glargine which was approved in April has just been launched in the UK at the same price per day as Lantus.
While still early days, the French pharma major says switching to Toujeo is gaining momentum thanks to a strong label claim versus Lantus.
Lantus is also being squeezed by Novo Nordisk’s rival basal insulin Levemir (insulin detemir) which has been growing strongly with sales approaching $2.5bn last year, while Merck & Co and Samsung Bioepis are also working on an insulin glargine biosimilar which is in late-stage development.”
Suffice to say Sanofi whose diabetes franchise is in complete disarray, as sales of Afrezza continue to underwhelm, has some issues to deal with. As we’ve been stating the company is caught between a rock and hard place when it comes to Lantus and Toujeo. Based on the price Lilly has chosen for Abasaglar it looks like another Diabetic Investor prediction will come true in that Lilly has no problem using price as a weapon to gain share, no surprise there. It also true that when available here in the US payors will have even more leverage over Sanofi likely demanding and receiving lower prices and/or higher rebates for Lantus and Toujeo.
The company has already publicly acknowledged they discounted Toujeo to gain favorable formulary placement. Yet even with these discounts the drug early sales have been lackluster. The reality is Toujeo is just slightly better than Lantus and not superior to Lantus. Prior to its approval Sanofi claimed that physicians would switch patients from Lantus to Toujeo based on study data that indicated patients experienced fewer hypoglycemic events using Toujeo. While true this one slight difference has not been compelling to physicians especially for their patients who are doing just fine with Lantus.
Even before Toujeo hit the market Lantus had issues as Novo Nordisk (NYSE:NVO) like Lilly wasn’t shy about using price as a weapon for their long-acting insulin Levemir. Today physicians have three long-acting insulins to choose from – all of which do basically the same thing the same way. Once Abasaglar hits US shores they will have a fourth and likely cheaper option they can use. An option we suspect will be embraced by payors who will provide Lilly with preferred formulary placement.
Sanofi and Novo know this and while the last thing either company wants is a price war that’s exactly what’s going to happen. While Diabetic Investor believes Novo can weather this coming storm the same cannot be said for Sanofi. Lantus the goose that laid the golden eggs is now a dead duck, Toujeo was supposed to be the swan that replaced the golden goose looks to be an ugly duckling. Making matters even worse while Novo has some compelling drugs in their pipeline and Lilly has a full complement of diabetes drugs, Sanofi has neither.
The Sanofi pipeline is full of me-too late to market offerings and the only other diabetes drug they have other than Lantus and Toujeo is Afrezza which as we’ve noted continues to underwhelm. Yes they have Apidra, a short-acting insulin which like everything else Sanofi has in diabetes other than Lantus has been a colossal failure.
Now that Lilly has revealed their pricing strategy for Abasaglar the problems at have Sanofi have gone from bad to worse, hard to imagine but true. Do they discount/rebate Lantus/Toujeo more than they already have in an attempt to maintain share yet cut into declining margins? Do they bet the farm on Toujeo and begin to phase out Lantus basically forcing physicians to switch patients yet risk seeing physicians switch to Levemir or Abasaglar? Do they develop a two tier pricing strategy with Lantus becoming a value offering and Toujeo a premium offering? Can they afford to support Afrezza or do they terminate their MannKind (NASDAQ:MNKD) partnership reallocating resources to Lantus/Toujeo? Is there any way they can avoid reducing head count?
Needless to say the company is not facing a pleasant set of options and shows just how badly they have managed their diabetes franchise. Frankly the company should have known that Toujeo was just incrementally better than Lantus and that physicians would not see it as a credible replacement. The MannKind deal should never been done as everyone outside of Sanofi, and actually many inside, knew that Afrezza at best was a niche product at worst a billion dollar disaster waiting to happen. When the franchise was fat and happy more thought should have been given to strengthening the pipeline.
Today the company is paying a heavy price for some very bad decisions. Bad decisions that were compounded by the beheading of the company’s CEO and followed on by the departure/beheading of high ranking members of the diabetes management team. When it comes to the diabetes franchise Olivier Brandicourt has been basically handed the task of trying to raise the Titanic from the floor of the ocean. Then if successful he must get the ship to sail again and then sail it through some very rough waters.
As we have noted many times market conditions in the diabetes drug market are not for the faint of heart and even the most talented management team has a difficult task ahead. For the sake of Sanofi stakeholders let’s hope that Mr. Brandicourt, who was not the first, second or even third choice to replace Viehbacher, is up to the task. Let’s hope that his strategic vision for the company which is set to be revealed in late October be more than just the usual slash and burn strategy. Yes cuts are needed but that’s just the beginning.
The wild card here is of course will our good buddy Serge and his fellow board members give Olivier the freedom to do what needs to be done. Will Serge who stated that the team needs to be held accountable allow Olivier to do exactly that? Or will Sanofi be true to their history continuing to throw good money into bad ideas.
Time will tell but time is the one thing that’s not on their side. The time bomb is ticking for the diabetes franchise and once it explodes all the kings’ horses and all the kings men cannot put Humpty Dumpty back together again.