An Opportunity For Astra?

An Opportunity For Astra?

While the diabetes drug world continues to ponder the value, or lack thereof, of the MannKind (NASDAQ:MNKD) Sanofi (NYSE:SNY) deal, one has to wonder whether this fiasco has created an opportunity for AstraZeneca (NYSE:AZN).  At the moment the only drug lacking in Astra’s diabetes portfolio is insulin. The company does not have short or long acting insulin’s. We also know that Lilly (NYSE:LLY) for the moment is the only company who has a complete portfolio of diabetes treatment options.  The fact is if Astra plans on competing seriously with Lilly they must add insulin’s to their portfolio. The question is where they would get them.

We suppose it’ still possible that Sanofi could do some sort of deal with Astra but we wouldn’t count on it. It’s also possible that they could somehow hook up with Novo Nordisk (NYSE:NVO) but again this possibility seems remote. So where does Astra go to get the insulin’s they need to go head to head with Lilly? Or is it possible that Diabetic Investor is over estimating the importance of Astra adding insulin’s to their portfolio?

Let’s look at the second question first. As we have been stating with regularity it’s not a question of whether generic insulin is coming but when it is coming. It’s quite possible that Astra has reasoned that they shouldn’t play in a market that is already very price competitive and will only get more so when the generics arrive. They may believe that Lily will actually become distracted allowing them to capture more managed care plans. Simply put why play in a market that’s about to undergo a complete transformation, which for all practical purposes will not be for the better.

It’s also possible that Astra is actually waiting to enter the insulin once generics hit the market. It wouldn’t surprise Diabetic Investor should Astra actually buy one of the makers of generic s. This would give the company a powerful weapon in their battle against Lilly. While we don’t anticipate the company using generic as a loss leader, owning a generic manufacturer would give them greater pricing flexibility. Under this scenario they could actually turn the tables on Lilly and force Lilly to go from offense to playing defense.

Watching this play out is Novo who’s got to be scared to death not just with generics on the way but the possibility of a very nasty insulin price war. As we noted in some previous posts as good as Novo is in the injectable market, market dynamics don’t favor their existing portfolio. Yet the company has basically the same problem Astra does just with a different set of drugs. There really isn’t one company out there, other than Astra, who has the assets Novo needs to round out their portfolio.

The way this is setting up Diabetic Investor sees a very nasty, very bloody battle coming in the insulin market. Already we’ve seen that Novo and Lilly will use price as weapon to gain share. To Diabetic Investor this is just the beginning of the coming transformation of the insulin market. A transformation that will move at warp speed when generics arrive.  Looking at this realistically the opportunity for Astra today is to let this play out, let Novo Lilly and Sanofi fight it out. Then after the dust settles they just might be able to scope up an insulin manufacturer on the cheap.

As poker players know sometimes the best move is no move at all.