And the winner isn’t….
Diabetic Investor has learned that Panasonic has decided against acquiring Bayer’s diabetes device unit, and the leading contender to acquire the unit is now Sanofi (NYSE:SNY). Frankly Bayer should receive kudos for how well they handled this sale which eventually turned into a bidding war driving the price well beyond what Panasonic was willing to pay. The fact that Panasonic dropped out and Sanofi is willing to overpay for this struggling franchise, tells Diabetic Investor that Panasonic isn’t as dumb as we thought and Sanofi isn’t as smart as we thought.
While we are not surprised that Sanofi made an acquisition to add scale to their glucose monitoring unit, something that was desperately needed, acquiring Abbott’s (NYSE:ABT) diabetes device unit would have been a much better fit. Although Bayer has some nice offerings, the ContourUSB being one, they lack a series presence with insulin using patients and given that Sanofi is using their device unit to help sell more insulin acquiring Bayer doesn’t help all that much. Nor does it help that Bayer gutted their managed care unit and has virtually no formulary presence. About the only thing going for Bayer was like Roche they had a stronger overseas presence then they do here in North America.
As we have noted for some time Sanofi has embarked on an aggressive diabetes strategy to help shield the company when Lantus goes off patent in 2014. The main gest of this strategy is to be the first company to sell a fully integrated diabetes management system. A system which contains the drugs used to treat diabetes, the devices used to manage/monitor diabetes all of which communicate with each other and the cloud allowing the company to add the final component – disease management.
Besides the recently launched iBGStar glucose monitor which attaches to the way cool and very popular iPhone, the company is working on an insulin pen which also communicates with the cloud and while the company isn’t overly keen on getting into the insulin pump business, Diabetic Investor is convinced this reluctance will be overcome and they will make an acquisition here too. The problem here isn’t the strategy; the problem here is the company is having a very difficult time executing the strategy.
Before Amylin was acquired by Bristol Myers (NYSE:BMY) and AstraZeneca (NYSE:AZN), Sanofi had a very strong interest but couldn’t make a decision which cost the company the opportunity to be a major player in the most important diabetes market of the future, GLP-1’s. Rather than own the only FDA approved once-weekly GLP-1, which is off to strong start, the company is left with their once-daily offering that is just now at the FDA and is basically a Victoza knock off.
The fact that they are now willing to buy Bayer, who’s the number four player in BGM and seriously behind market leader LifeScan, tells Diabetic Investor that the company is getting a little desperate and is willing to throw good money into a very bad market. One has to wonder how the company plans on resurrecting this struggling unit which has been on its death bed before. The simple fact is that no one has been able to replicate the success delivered by the units former President, Sandra Peterson. While it is true Sanofi has capital, money alone won’t buy happiness or market share gains.
The harsh reality here is that Sanofi is grasping at straws and try as they might they cannot capitalize on the success of Lantus. Although Diabetic Investor does not see a generic Lantus appearing as soon as the Lantus patent expires; nor do we see a generic costing 80% less as a traditional generic does; we do see a generic coming and costing less. Apidra, their short-acting insulin, has been a dismal failure and the iBGStar while way cool is finding a difficult time gaining traction in the marketplace. Their near term pipeline, which is basically their once-daily GLP-1, will be late to market and nothing all that special. Looking over their longer term pipeline there are some interesting compounds but again nothing all that special or unique.
From the first day Sanofi began this journey the company noted they wanted to replace Novo Nordisk (NYSE:NVO) as the most dominate global diabetes company. They have thrown millions of dollars into this effort, now billions and what do they show for their efforts? Are they any less dependent on Lantus then they were before? Is their dream of commercializing a fully integrated diabetes management system ever going to become a reality? What does it say that they passed on the most promising diabetes drug which would have given them the Lantus replacement they needed and they are now spending over a billion dollars to buy a franchise that has been in decline for the last five years?
Long ago Diabetic Investor noted that the Sanofi strategy had many possibilities but the key was the ability to execute. Back then, we thought Sanofi was on the right track and while the strategy was ambitious they had the resources necessary to see it through to the end. Sadly the company has failed to execute and frankly is no closer to overtaking Novo then Lilly is. Novo may not be the company it once was and they do have their own set of issues but they have never strayed from their core competencies. Put another way, they know who they are and what they are good at.
Sanofi for all their bluster and bravado has been able to talk the talk but unable to walk the walk. As we have far too often in diabetes anyone can talk a good game but very few can deliver and right now Sanofi isn’t delivering anything but hot air.
