Day late dollar short

Day late dollar short

This morning Sanofi (NYSE: SNY) announced they have submitted LixiLan to the FDA. According to a company issued press release:

“Sanofi announced today that it has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for its investigational fixed-ratio combination of insulin glargine 100 Units/mL and lixisenatide, which if approved would be administered as a single daily injection for the treatment of adults with type 2 diabetes.”

Realizing that LixiLan is going to the FDA well after Xultophy®, another GLP-1/Insulin combination from Novo Nordisk (NYSE: NVO) the release also states:

“Sanofi redeemed a priority review voucher (PRV) with the submission to designate the NDA for an expedited 6-month review if the submission is accepted by the FDA, instead of the standard 10-month review.”

Based on the most recent information from Novo the company anticipates a decision on Xultophy sometime in third quarter of 2016, which would mean that should LixiLan gain approval it would technically beat Xultophy to the market.

Now we don’t want to over hype this next point but looked at realistically Sanofi does not exactly have an impressive track record when it comes to new drug launches. This is particularly true in diabetes as the two most recent launches Afrezza and Toujeo haven’t gone all that well. Plus, this launch will be even tougher as LixiLan, like Afrezza and Toujeo, brings some baggage that must be jettisoned or at least dealt with if the drug is going to be successful.

The good news for LixiLan is the insulin part of the combination is Lantus the world’s number one selling insulin. The bad news is the GLP-1 portion is Lyxumia which was recently resubmitted to the FDA after being pulled from the FDA in 2013. The good news is the GLP-1 market continues to expand, the bad news is Sanofi has no experience in this market. The good news is Sanofi will only have to square off against Novo in this category, the bad news Sanofi has to square off against Novo in this category. The good news expectations for LixiLan are low, the bad news expectations are low.

The harsh reality is Novo will not only be aggressive with Xultophy they also understand this market much better than Sanofi. The simple fact is Novo will out execute Sanofi. Unlike Sanofi who likes to turn gold into sand, Novo knows how to launch a new diabetes drug.

One last item that cannot be understated as it would be foolish to discount how the recent turmoil at Sanofi will impact this launch. Although nothing has been made official just yet, the company has already stated that costs need to be addressed to reflex market conditions, i.e. layoffs are on the way. This comes at a time when morale is at an all-time low. Simple put the sales team or whatever’s left of this team after the layoffs are going to be given a new product to sell, they are going up against a formidable competitor in Novo and they have no confidence in management to provide them the tools they will need to stand a chance. Other than that Mrs. Lincoln how was the play?

Ok one more last item while we don’t want to beat a dead horse this submission combined with the expedited review is one more nail in the Afrezza coffin. The reality is Sanofi can do something with LixiLan they cannot do with Afrezza, make money. Based on past public statements it’s also clear LixiLan is a priority and Afrezza is not. Going forward when it comes to diabetes and Sanofi it’s a stool with three legs, Lantus, Toujeo and LixiLan. Come the new year the process to terminate the MannKind (NASDAQ: MNKD) partnership will begin.

Happy holidays everyone.