A winner and a loser

A winner and a loser

This morning both Roche and Novo Nordisk (NYSE:NVO) reported full year results. The simple story here is Novo continues to move forward while Roche continues to move backwards. As we noted yesterday, Roche continues to believe the fantasy that somehow they can reinvigorate their struggling diabetes franchise with an insulin pump that still is not on the market and by targeting non-insulin using type 2 patients who rarely monitor their glucose levels.

Looking closer at the Roche results, Diabetic Investor is still trying to figure out how the company sees a 0% increase in diabetes care revenue as growth. We’re also trying to figure out how the company can claim that their diabetes care unit is growing faster than the market. Although Roche management may find it more comfortable living in lala land, Diabetic Investor prefers to live in the real world and in the real world 0% growth is not growth at all.

When looking at Roche, Diabetic Investor is reminded of something A. E. Housman said; “The house of delusions is cheap to build but drafty to live in.”  The company not only does not get it, they continue to ignore the real problems and are unwilling to do what’s necessary to solve the problems. It amazes Diabetic Investor that Roche stakeholders are not clamoring for more drastic action. How they can continue to believe the horse manure that management is spreading further reinforces our belief that this situation will get worse – and given how bad things have become that’s saying something.

Looking at the results announced by Novo this morning, you could not find a sharper contrast to the delusional circus at Roche. Novo not only gets it, they see the future of diabetes care and are willing to do whatever it takes to be part of this future. While insulin is still the straw that steers the drink at Novo, Victoza® continues to shine and proves that GLP-1 therapy is not only here to stay but is growing. Diabetic Investor also found it interesting that the company for the first time in recent memory is attributing their growth in the insulin market to their portfolio of insulin delivery systems.

There is no question when it comes to insulin delivery devices, insulin pens in particular, Novo is the world leader. While others have tried to mimic Novo’s success, the company remains well ahead of the competition when it comes to patient friendly insulin pens. This success with insulin pens also bodes well for Victoza® which is also delivered in a patient friendly pen device.

Novo is also moving full speed ahead with Degludec and DegludecPlus, both compounds are in late Phase 3 trials. Although Diabetic Investor believes the company is over-hyping both compounds, the clinical data to date is good but not great, there is no doubt that when it comes to administration the fewer injections the better.  Novo is also following their standard playbook conducting a mountain of studies around both drugs. If there is one thing we can count on from Novo is how they like to overwhelm physicians with data.

The reality for Novo is they see what Sanofi-Aventis (NYSE:SNY) is doing and they also know that Bydureon will not remain stalled at the FDA and will come to market.  They also understand that they have a limited window of opportunity to establish Victoza in the market. Finally they realize the diabetes landscape is changing and rather than deal with this change they would prefer to drive the change.  

Since the year began Diabetic Investor has been stating 2011 will be a transformational year for the diabetes market. Looking back at the results announced so far, the seeds of this transformation were planted last year and will begin to blossom this year. While Novo Nordisk may not be the company they were a few years ago, they are still a formidable player in diabetes. Management clearly understands where things are going and what hurdles they will face along the way.

Roche on the other hand remains mired in the past unable or unwilling to acknowledge market realities. One just might think that at some point they would see what everyone else does and begin to deal with it. However, based on past performance and current public statements its clear management, for whatever reason, cannot make this transition.