Bringing a gun to a knife fight

Bringing a gun to a knife fight

This morning Novo Nordisk (NYSE:NVO) announced top line results from the SUSTAIN3 trial. According to a company issued press release;

“Novo Nordisk today announced the headline results from the second phase 3a trial for semaglutide, SUSTAIN3. Semaglutide is a new GLP-1 analogue administered subcutaneously once weekly. The trial investigated the efficacy and safety of 1.0 mg semaglutide compared with 2.0 mg exenatide once-weekly after 56 weeks of treatment added on to 1-2 oral antidiabetic drugs in 813 people with type 2 diabetes.

The trial achieved its objective by demonstrating that from a mean baseline HbA1c of 8.4%, people treated with 1.0 mg semaglutide achieved a statistically significant and superior improvement in HbA1c of 1.5% compared to the improvement in HbA1c of 0.9% with 2.0 mg exenatide once-weekly.

66% of the people treated with 1.0 mg semaglutide achieved the American Diabetes Association (ADA) and the European Association for the Study of Diabetes (EASD) treatment target of HbA1c below 7% compared with 40% of the people treated with 2.0 mg exenatide once-weekly.”

Also today according a survey conducted by FirstWord Pharma;

“Better than expected cardiovascular outcomes data for Boehringer Ingelheim and Eli Lilly’s diabetes treatment Jardiance look poised to substantially increase usage of the drug, according to feedback from 128 endocrinologists polled by FirstWord this week. This second of two recent polls focused on data from the EMPA-REG OUTCOME study (the first poll was run when a positive top-line result was announced in August), not only confirms improved physician sentiment in favour of Jardiance, but illustrates that expectations of increased use for the drug have grown further on the strength of full data presented more recently at the European Association for the Study of Diabetes (EASD).”

While these two pieces of news may seem unrelated as semaglutide is an injectable GLP-1 and Jardiance is an oral SGLT2 we see it differently. As we’ve been stating for some time now the diabetes drug market is moving ever closer to a commodity market where price trumps performance. That as companies have focused their efforts on developing me-too copycat drugs the balance of power lies not with the drug companies rather with payors. Payors knowthey effectively control market share with formulary position. They also know companies like Novo and Lilly (NYSE:LLY) will pay a heavy price to achieve this position.

Although no diabetes drug company wants a price war it appears that is exactly what’s happening. The reality is competition is fierce and without a compelling performance difference companies have little choice but to capitulate to the demands of payors. This is exactly what has happened in the long acting insulin market as Sanofi (NYSE:SNY) has been forced to heavily discount Toujeo as it’s just incrementally better than Lantus, the drug which it is supposed to replace. Without this discounting Sanofi risked seeing Toujeo regulated to adverse formulary position which would have basically doomed the drug, a situation Sanofi could not risk.

Yet as the survey data by FirstWord shows when there is a compelling performance difference physicians stand up and take notice. And let’s be honest here as the data for Jardiance is not just compelling but game changing. As we’ve been noting the critical question is whether this is a class effect which will benefit all SGLT2’s or is this data unique to Jardiance.  Should this be a class effect payors will maintain the upper hand, if on the other hand the data is unique to Jardiance Lilly is sitting in the catbirds seat.

This is why Novo is doing whatever they can to distinguish semaglutide from other once-weekly GLP-1’s. Like everyone else they see GLP-1 usage increasing and without a substantial performance difference they will little choice but to use price as a weapon to gain critical formulary position.

As we await to determine whether the cardiovascular benefits for Jardiance also extends to Invokana or Fraxiga, making this a class effect Lilly basically is bringing a gun to a knife fight. They know that they besides having real and very compelling data, they also have time on their side. The fact is by the time we have data for the other SGLT2’s it might be too late as physicians seeing this data will favor Jardiance. That is of course assuming all things are equal and this is where things get just a little wacky.

Yesterday Lilly conducted a conference call to review the Jardiance data and besides trying to determine whether this is a class effect what everyone wanted to know was whether this would boost sales for the drug. Given what the company said the jury is still out. Yes this data is very compelling however Johnson and Johnson (NYSE:JNJ) for the moment has the upper hand when it comes to coverage and formulary position for Invokana. As Lilly management correctly noted changing this situation does not happen overnight and it isn’t easy.

Lilly may hold the high ground when it comes to data yet JNJ is in an equally strong position with Invokana. The key for Lilly is not just to get this new data onto the Jardiance label but to convince payors that this is NOT a class effect. That Jardiance is unique and worthy of premium reimbursement combined with favorable formulary position. Frankly Lilly could intimate that even if this may be a class effect why payors should take the chance. Why wait for data from the others when they have real data today. What happens if this isn’t a class effect and payors favored drugs which aren’t as good as Jardiance.

As we said earlier when it comes to the SGLT2 class of drugs Lilly is bringing a gun to knife fight.