Betting the farm

We knew going in that the Friday Novo Nordisk earnings report and corresponding call would be all about GLP-1’ s and that’s exactly what we got. Before we go into a more detailed analysis things for Novo can be summed up this way- the insulin market has fully commoditized making volume growth critical as prices will continue to contract – the battleground for making money has become the expanding GLP-1 market where Novo is doing quite nicely. Also as expected Rybselsus dominated the Q&A session as everyone wants to know how much will it actually cost, what type of coverage will it get and will payors put any preconditions on the drug.

Novo in typical fashion was pretty straightforward with their answers while not revealing any critical information. All we really know for sure is that the company has bet the farm on this drug and should there be any missteps along the way it could have devastating consequences. The simple facts are these;

1. Victoza even with newer long acting versions on the market is holding up.

2. Ozempic and Trulicity from Lilly are in a fierce battle for leadership in the long-acting segment.

3. Saxenda (Victoza renamed for the obesity market) is doing better than anticipated.

4. Rybselsus is a huge unknown.

To fully appreciate how much of the company’s future they have placed with Rybselsus the company announced the discontinuation of their oral GLP-1 analog, OG2023 stating “based on the encouraging progress for the enhanced oral semaglutide we have decided to discontinue further development” . Yet later on in the Q&A session when analysts were questioning the company about the bioavailability of the enhanced oral semaglutide the company avoided the questions.

It’s beginning to dawn on everyone that being the first orally administered GLP-1 may not be enough for Rybselsus. That even with competitive pricing and wide formulary access the complex dosing regimen may just get in the way. This is why this launch is so difficult to gauge as it does NOT come down just to price and formulary access. Patient acceptance will be a critical factor and likely will determine the drugs fate.

Based on everything we know we still see no reason to change our outlook for Rybselsus- being the first orally administered GLP-1 we see a strong start – physicians continue to embrace GLP-1 therapy – there is wide knowledge of the drug and yes NO injections. However after this strong start we’ll learn whether Rybselsus has any legs for the long run or is just a flash in the pan. This has nothing to do with price or formulary and everything to do with the drugs dosing regimen. Simply put will patients put up with the hassles or will they prefer simplicity.

This is what it comes down to and frankly Novo can only hold their breathe to see how this turns out. We are fully confident they will get the drug on formulary and widely covered. We are equally confident they will leave no stone unturned promoting the drug. What they cannot do is change how the drug is dosed. The most critical factor which we see determining success or failure is completely out of their control and firmly in the hands of patients. This is going to be very interesting.