Do the words matter?
Nine times out of ten we’re more interested in the statements made by a company during an earnings call then we are the numbers. Having been around the block more than once we know that numbers can be played with, manipulated, massaged to such an extent that they almost become meaningless. The same goes for the prepared remarks of an earnings call. Yes, those communication people go to great lengths to find new and creative adjectives to describe how business is doing.
Typically, the most excitement comes during the unscripted Q&A portion of the call. While there is a fair amount of corporate tap dancing every now and then someone makes a mistake and tells the truth. Mind you these are rare occasions but when they do happen they are priceless.
However, we have reached the point in the insulin world where words really don’t matter much. Look at the numbers released by Novo Nordisk (NYSE: NVO) this morning right there on slide 6 of their presentation;
Growth break down – first quarter of 2018
Local Currencies Growth Share of Growth
Long-Acting Insulins (3%) (10%)
Fast-Acting Insulin 0% 0%
Just how bad has the insulin market become sales of Levemir fell by over 30%.
Now we will state for the record we did not listen to the call this morning. Excuse the expression but what’s the point. Honestly, we have better things to do then to get up at the crack of dawn and listen to the company state they are running into headwinds while experiencing pricing pressure. Listen when your training for a triathlon at the young age of 57 sleep is more important.
Before we leave the insulin side of the ledger we will note once again that Novo has the same problem Lilly (NYSE: LLY) does, a problem named Amedlog. Now we have no idea if Novo is as clueless as Lilly about Amedlog coming impact, but does it really matter. Yes Sanofi (NYSE: SNY) is being Sanofi but at some point, after they are finished guzzling their chardonnay they will eventually go to payors with a very attractive price/rebate package forcing Novo and Lilly into the uncomfortable and unprofitable position of either matching or beating Sanofi’s offer.
While Sanofi has a notable history of screwing up in diabetes we’re not exactly sure that counting on these continual screw ups is a good strategy for either Novo or Lilly. As the old saying goes even a broken clock is right twice a day. But then again this is Sanofi and yes, they can be that stupid. As we have said before our friends in Paris could screw up a simple peanut butter and jelly sandwich.
Turning to the GLP-1 segment, another commodity, things are a little better but not much. Yes GLP-1 usage continues to grow and yes Novo has done a fine job here. However, Lilly has done an equally fine job with Trulicity which will force Novo to discount/rebate their once-weekly fourth to the market GLP-1 Ozempic®.
Seriously think about this for just a minute. A company comes up with some way cool whiz bang new drug which for about a minute is innovative. Soon their competition has the exact same drug that works almost the exact same way and produces almost the exact same results. This in turn creates the perfect storm for payors who understand they hold the keys to kingdom allowing them to extort lower prices and larger rebates from these companies who are desperate for volume. As if they needed even more leverage someone then comes along with biosimilar version of this way cool whiz bang drug driving prices even lower.
We have yet to reach the biosimilar stage for GLP-1’s but this exact scenario has played out already in the long-acting insulin segment, is playing out now in the short-acting segment and will eventually play out in the GLP-1 segment. What’s astonishing here is that these companies, Lilly, Novo and Sanofi all seem surprised when they get hit by the biosimilar ax. This is like in the great movie Casablanca when Captain Renault states; “I’m shocked! Shocked to find that gambling is going on in here.”
The lone bright spot for Novo is their oral version of semaglutide which they continue to study for every conceivable possibility. The company has 10, that’s right 10 studies’ underway for this drug. We honestly believe the company will soon initiate a new round of study’s which will examine the impact of this drug on woman who are full figured or men who are beer drinkers. This is so damn Novo another company which can’t escape their past.
We suspect at some point the company will submit this drug for approval just when is anyone’s guess. Never mind they desperately need this drug or that it has the potential to become an instant blockbuster. Nope let’s be Novo and study the damn thing to death.
Now we hope you can understand why we no longer feel it’s necessary to get up at the crack dawn to listen to this crap. As Momma Kliff used to say; “Sometimes you reach a point when you just have to accept the fact that stupidity out numbers smarts by a very wide margin.”