Bad to Worse

Bad to Worse

First a clarification according to Express Scripts Senior Director, Corporate Communications David Whitrap – “Express Scripts has NOT excluded Lantus from our 2017 formulary. We have only stated that we may re-assess the basal insulins once Basaglar is on the market.” Yesterday we stated Lantus had been excluded from the company’s preferred list. Diabetic Investor regrets this error however the implication for Sanofi (NYSE: SNY) remains the same, once Basaglar gets here its bye bye Lantus.

Well CVS HAS dropped Lantus from their list. According to a story posted on the FirstWordPharma website;

“We want to signal that this biosimilar movement is real,” remarked CVS Health chief medical officer Troyen A. Brennan, adding “we have big hopes for [biosimilars] to reduce drug costs over all.” Brennan suggested that biosimilars are typically priced 10 percent to 15 percent cheaper than the originator products, although the executive indicated that CVS Health has negotiated additional discounts.”

The Express Scripts statement is bad, the CVS statement is worse and Diabetic Investor doesn’t think it will stop with these two major payors. Simply put when it comes to Lantus Sanofi has hit an iceberg named Basaglar, is taking on water and it’s just a matter of time before it sinks to the bottom of the ocean.

The real problem is Sanofi has nothing in their portfolio or pipeline that can or will replace the revenue they will lose as Lantus sinks into the abyss. These decisions also make it difficult if not impossible should Olivier and his partner in crime our good buddy Serge, decide to sell the diabetes franchise. At one time the Sanofi portfolio looked to be a good fit with the AstraZeneca (NYSE: AZN) portfolio but based on the public statements made by Astra management its more likely they would sell their diabetes franchise. Although both franchises have major issues as it stands today the Astra portfolio has more value than the Sanofi portfolio.

Now we suppose it’s possible that someone would come along buy both franchises, eliminate duplications, streamline operations and go for a low cost high volume strategy but we also view this as unlikely. Not because we believe Astra wouldn’t consider an offer rather Sanofi just can’t admit mistakes. To Sanofi selling their diabetes portfolio would be admission that they killed the goose that was laying the golden eggs, an admission that other than Lantus they have the reverse Midas touch when it comes to diabetes products, it would be an admission that they have no vision, no viable strategy and are basically clueless as to what to do now.

Sanofi has known for years that Basaglar was coming. Sanofi has known for years that Toujeo was only incrementally better than Lantus and payors would not pay a premium for this drug.  They also witnessed first-hand what was happening with the insulin market. Rather than deal with the problem what did our wine dinking friends do – they partner with MannKind (NASDAQ: MNKD), they double down on Toujeo, they then reverse course and go back to Lantus. Management throws the sales team under the bus, then after running them over backs up the bus just to make sure they didn’t miss anyone.

We have no sympathy for our wine drinking friends nor do we have any for their stakeholders who have remained silent as management steered the ship directly into the path of the iceberg. Listen we warned everyone that these guys were clueless, that they had no idea what they are doing.  Yet in what we can only classify as willful blindness everyone else seemed to buy the bullshit management was shoveling. Frankly we have been amazed at how some very smart people fell for this malarkey.

Our sympathies lie with the many good people at Sanofi who have been forced to endure one failed strategy after another. The teams that have been assigned to execute disastrous strategies designed by management. These people who will soon lose their jobs because management was flat out stupid and worse would not listen to anyone who had a difference of opinion. This my friends; is hubris combined with arrogance, throw in no accountability and what you have is the Sanofi management team.

Momma Kliff used to say that people get what they deserve, that if someone cannot or will not acknowledge the obvious and won’t listen to constructive criticism then don’t shed any tears they are getting what they deserve. The only sad part here is the collateral damage management has left ion their wake. It is management who should be beheaded here not the teams they managed.