Across the pond

Across the pond

This morning we heard from the overseas contingent of the diabetes world as AstraZeneca (NYSE: AZN), Novo Nordisk (NYSE: NVO) and Sanofi (NYSE: SNY) all reported results. Before we look at each company individually it’s important that we examine some broader themes and trends that are emerging in the diabetes drug space.

Although we have been writing about this for time the insulin market, both short and long-acting, is becoming an all-out war for volume. Take a look at how Novo and Sanofi characterized their insulin results (both statements come from press releases)

Novo

“Sales of insulin in USA increased by 3% in local currencies and by 5% in Danish kroner. Sales growth is driven by the introduction of Tresiba® as well as Levemir® benefitting from the underlying volume growth of the insulin market. This is partly offset by nonrecurring rebate adjustments in the Medicaid patient segment, a contracting premix insulin segment and a NovoLog® contract loss. 49% of Novo Nordisk’s modern insulin volume in the US is used in the prefilled devices FlexPen® and FlexTouch®.”

Sanofi

“First-quarter sales of Sanofi’s glargine (Lantus® and Toujeo®) were €1,498 million, down 5.0%. In the U.S., glargine sales of €921 million were down 10.7%. In Europe, sales of Sanofi’s glargine increased 4.1% to €255 million despite the launch of a biosimilar glargine in several European markets.

Over the quarter, sales of Lantus® were €1,395 million down 11.0%. In the U.S., as anticipated, sales of Lantus® decreased 17.8% to €843 million mainly reflecting lower average net price. In Europe, first-quarter Lantus® sales were €236 million, down 3.7% while in Emerging Markets, sales were €228 million, up 6.3%, driven by China and the Middle East.

Sales of Toujeo® were €103 million in the first quarter of which €78 million were recorded in the U.S. and €19 million were from Europe. The global roll-out of this product continues and Sanofi expects Toujeo® to be available in over 40 countries by the end of 2016.”

Combined with results already released by Lilly (NYSE: LLY) the reality is that as much as these companies don’t want insulin to be a commodity, that’s exactly how payors see it and how payors see it is all that matters. This basically means performance can be thrown out the window and critical formulary access will be driven by a combination of price/discounts and off course rebates.

A second trend, predicted long ago by Diabetic Investor, is that the GLP-1 market continues to grow and as expected the newer once-weekly GLP-1’s are taking share from once-daily GLP-1’s. Something Novo management acknowledged today when they stated that once-weekly Trulicity, from Lilly, was taking share away from their once-daily Victoza.

All three companies acknowledged the importance of this market, although Sanofi has yet to seriously contend in this critical category. Yet, Diabetic Investor sees storm clouds looming on the horizon particularly since Novo will soon have their own once-weekly GLP-1 on the market. All the pieces are falling into place that just as insulin has become a commodity, so too will GLP-1’s follow this path. This is why Novo is trying to change the dynamics of the GLP-1 market with all the cardiovascular studies they conducted for Victoza and Semaglutide.

Novo knows that if they are to compete just on HbA1c and weight loss data it’s a losing proposition as all GLP-1’s have shown solid glycemic lowering capabilities combined with the additional benefit of weight loss.  In an attempt to prevent another price war like they are seeing in the insulin market, Novo is hoping to prove that their GLP-1’s goes beyond the traditional diabetes biomarkers and their GLP-1’s produces positive cardiovascular benefits.

Novo does have an ace in the hole in their pipeline as they are developing an oral version of semaglutide. Should this drug reach the market it has the potential to alter the balance of power for the entire GLP-1 market and could well impact the DPP4 and SGLT2 markets as well. This drug is high on the Diabetic Investor watch list.

Looking at the companies individually not much has changed all that much. Sanofi for all practical purposes is going backwards and the pipeline continues to be filled me-too copycat late to market compounds.

AstraZeneca while doing somewhat better in the space remains outgunned in nearly every category they compete in. Whether it’s DPP4’s, SGLT2’s or once-weekly GLP-1’s AstraZeneca must be content to be the bridesmaid but never the bride. As we have noted in the past they could have owned the once-weekly GLP-1 category had they not mishandled Bydureon but that as they say this is water under the bridge. Even if they added insulin to their portfolio, the one diabetes drug they don’t have, we’re not sure it would help all that much. The reality is unless the company has dramatic shift in strategy their fate of being a second or third choice in each category has been sealed.

Novo for their part remains along with Lilly dominate in diabetes. As we noted earlier their most promising compound is the oral version of semaglutide. This drug has game changing potential. Also like Lilly they must be cognizant of new technologies such as Intarcia’s exenatide micro-pump as this product has the potential to alter the GLP-1 market as well.

The game for Novo is to manage costs effectively, this has always been the company’s Achilles Heel. This battle is no longer about boots on the ground, those days are gone. The battle today is all about being lean and very mean. They have the weapons they need to fight and win provided they can manage costs for their core insulin and GLP-1 franchises.

When it comes to the overseas diabetes contingent Novo is head and shoulders above AstraZeneca and Sanofi. As in the past their biggest competitor is right here in the USA. Yes, the more things change the more they stay the same, in the diabetes drug space it’s a battle between two super heavyweights Novo Nordisk and Lilly. All the other “supposed” contenders can do is be content to undercard status as they are not the main attraction, not by a long shot.