Cause for concern

Cause for concern

This morning Novo Nordisk (NYSE: NVO) issued a press release which stated the following;

“Novo Nordisk today announced that it plans to invest more than 100 million euros in production facilities at its site in Chartres, France. The expansions will help Novo Nordisk meet the increasing worldwide demand for its diabetes medicines. “

This news may not seem all that important on the surface but consider that Novo’s competitor our wine drinking friends are not just based in France but they are trying to eliminate jobs in France. Yes, our good buddies at Sanofi (NYSE: SNY) have made it clear that since things aren’t going all that well they must hunker down and what else, cut costs. A move which was tired by their ex now beheaded CEO without much luck.

But this is only half the story as think of the message this is sending. Here you have Novo Nordisk clearly a dominate global diabetes player expanding in the backyard of Sanofi who is clearly becoming an irrelevant player in diabetes. Here you have Novo with a long and distinguished history in diabetes adding jobs in the same country where Sanofi wants to eliminate jobs.

Now before everyone starts thinking this is just another chance for Diabetic Investor to have fun at Sanofi’s expense, which in a way it is, think again.  The stark reality is that Novo is not as pure as Creaser’s wife, that this diabetes powerhouse has experienced their own set of issues and challenges. The same can be said for our friends in Indy, Lilly (NYSE: LLY) another dominate global player in diabetes faced some very serious challenges. The differences between these three companies, Sanofi, Lilly and Novo, is how they responded to these challenges.

While it may seem implausible today there was a time not that long ago when Diabetic Investor was regularly bashing Lilly as relentlessly as we are doing with Sanofi now. And believe it or not we were heaping praise on none other than our wine drinking friends in France. Yes, back then it was Lilly who seemed headed for irrelevance and Sanofi for stardom. (We know this seems hard to believe which is why we have an archives section on the Diabetic Investor web site, so feel free to check it out.)

Novo as well has seen their share of difficulties. Yet both Novo and Lilly did what Sanofi couldn’t, acknowledge the issues facing them followed by action. Sanofi’s problem was not for lack of good ideas it was their failure to execute, their inability to turn words into action. They talked a great game but couldn’t get beyond talk. Rather than acknowledge the issues that were coming they buried their heads in the sand.

The reality is Lilly and Novo these two long standing rivals have legacy franchises for good reason. There is a reason they are the most dominate players in diabetes. No they are not perfect and yes each has issues they must face going forward yet both will be relevant in diabetes 10 years from today while the same cannot be said for Sanofi.  The harsh reality is Sanofi had their chance to become a dominate player and not just a one-hit wonder. They could have used the huge success of Lantus to propel themselves into the game with Lilly and Novo.

Instead they failed to execute and now are headed for obscurity.