Expanding the market?

Expanding the market?

This morning Novo Nordisk (NYSE:NVO) announced the FDA has a scheduled an advisory committee meeting on September 11th to review liraglutide as treatment for obesity. Back in December of last year the company submitted an NDA to the FDA.

This news is not unexpected but it does confirm something Diabetic Investor has been stating; the diabetes drug market is moving closer and closer to becoming a commodity market forcing companies like Novo to seek additional indications for drugs which have additional applications. Liraglutide which is marketed as Victoza to treat diabetes, has performed much better than anticipated yet Novo is well aware that the competition in the GLP-1 market is intensifying, although the company is getting another lucky break as AstraZeneca (NYSE:AZN) is once again distracted unable to focus on getting their diabetes house in order.

Speaking of which Diabetic Investor isn’t quite sure Astra is thinking clearly these days, rejecting Pfizer’s (NYSE:PFE) bid for the company. Reviewing the many statements and projections made by the company we just don’t believe they can hit the aggressive sales targets they have projected for their diabetes franchise. This really has more to do with the changing nature of the diabetes drug market rather than products in the Astra portfolio. Given that Lilly (NYSE:LLY) will be the only company with a complete portfolio, insulin’s, orals and GLP-1’s, and Astra lacks any presence in the insulin space it’s doubtful given the competitive nature of the GLP-1 and oral space they can hit the numbers projected. About the only way Astra can hit these targets would be to enter the insulin space and the only way this can happen is via acquisition. Considering what they’ve spent already to enter the diabetes drug space this is not a scenario that seems likely.

Getting back to Novo this move to reposition Victoza as a treatment for obesity, if successful, fits perfectly into their existing structure while at the same offering the potential for greater revenues. Consider that like diabetes, obesity is growing at epidemic rates. Consider that like diabetes, the vast majority of obesity patients are treated by primary care physicians; physicians who are already well acquainted with Victoza. This is a huge advantage for Novo as they really wouldn’t have to teach physicians about the benefits of Victoza as they are already using the drug and have seen its weight loss capabilities.

The harsh reality here is that Novo really has nothing to lose and everything to gain with this attempt to reposition Victoza. It’s not like they would have to add additional manufacturing lines or retrain their sale force. Physicians are already aware of the product and considering how well the drug has done they wouldn’t be shy using the drug to treat their obese patients. Perhaps most importantly at least in the short term they would own the market, at least when it comes to using a GLP-1 as a treatment for obesity.

Worst case the FDA says no, best case the FDA says yes and Novo finds a new very profitable revenue stream.