Are they ready for a fight?

With the insulin market commoditizing and the coming of a biosimilar short-acting insulin Novo Nordisk (NYSE: NVO) has turned their attention to the expanding GLP-1 market. While Victoza their once daily GLP-1 continues to perform well the company is preparing to do battle in the once-weekly arena. At the moment Trulicity from Lilly (NYSE: LLY) leads this category while Bydureon from AstraZeneca (NYSE: AZN) struggles to compete.

Ozempic, from Novo joins this race and according to a Reuters report will be “included on a 2018 formulary list of acceptable medicines drawn up by Express Script.” This is obviously good news for Novo who needs favorable formulary access if Ozempic has any chance to be successful. However, even with formulary access being the third entrant in the once-weekly category means that Novo must resort to discounting and rebating to gain share.

Looking down the road to 2019 Novo could have the oral version of semaglutide headed to the FDA. As we have noted in the past we see this drug is a potential blockbuster for two reasons. First, it would be the only oral GLP-1 on the market and second as we note GLP-1 usage continues to increase. The drug got a boost this week when the company released data from the first Phase 3 study which according to a Novo press release;

“The trial achieved its primary objective according to the primary statistical principle by demonstrating significant and superior improvements in HbA1c(long-term blood sugar) for all three doses of oral semaglutide compared to placebo. Moreover, the 14 mg dose of oral semaglutide demonstrated significant and superior weight loss versus placebo, weight loss was observed for the 7 mg and 3 mg doses but did not reach statistical significance.”

This is just the first piece of data from the trails known as PIONEER. In typical Novo fashion there are a total of 10 PIONEER trails, so it goes without saying we’ll have plenty of data to look at as this drug moves through the regulatory process.

The reality is Novo needs this drug to be a hit in the worst way. With insulin’s both long and short-acting becoming a commodity and the injectable GLP-1 category becoming more competitive, this drug has a shot at becoming a mega-blockbuster. A highly profitable mega-blockbuster. Still with a 2019 submission target Novo won’t see these profits until 2020 at the earliest which basically means it could be tough sledding between now and then.

Over the past 12 months shares of Novo have performed very well, up 48.30% while shares of Lilly are down 6.49% over that same time span. The company has finally gotten the memo and has begun to right size the organization to fit the new market realities and their R&D efforts are more focused on producing innovative rather than copycat drugs. This as Momma Kliff likes to say is the good news.

On the flip side however their new short-acting insulin Fiasp® is being met with less than stellular reviews and is unlikely to produce anything significant in terms of revenue and profits. With Admelog looming on the horizon the short-acting insulin category is about to undergo the same carnage as the long-acting category when Basaglar arrived. Yes, Ozempic looks good but it is the third entrant in this category and Lilly will not sit around twiddling their thumbs and just let this drug win the day.

The reality is Novo must go all-in with the oral version of semaglutide. Let’s also hope that Novo has the stomach for a fight as all the companies in the diabetes drug arena will do whatever they can to protect their turf. As innovative as this drug may be innovation alone will not guarantee its success. Novo must gear up as this is going to be a battle, a battle they can win if they are prepared to fight.