From bad too worse

From bad too worse

Listening to the Sanofi (NYSE: SNY) earnings call this morning all we could think about was something Momma Kliff used to say; “Just when you think things can’t get any worse, they do.” With that being said let’s get the numbers out of the way and then look at the longer term implications for this struggling franchise.

Lantus sales DOWN 11.2% for the quarter and DOWN 11.1% year to date. Toujeo sales $157 million for the quarter and $272 million year to date. According to the earnings press release;

“Over the quarter, sales of Lantus® were €1,465 million down 11.2%. In the U.S., as anticipated, sales of Lantus® decreased 15.7% to €896 million mainly reflecting lower average net price and patients switching to Toujeo® . In Europe, second-quarter Lantus® sales were €228 million, down 9.1% while in Emerging Markets, sales were €250 million, up 5.3% (up 9.8% excluding Venezuela), driven by China. First-half sales of Lantus® were €2,860 million, down 11.1%.

Second-quarter sales of Toujeo® were €141 million of which €106 million were recorded in the U.S. and €27 million were from Europe. The global roll-out of this product continues and Sanofi expects Toujeo® to be available in over 40 countries by the end of 2016. First-half sales of Toujeo® were €244 million.”

The bottom line here is the expected uptake of Toujeo isn’t happening as the company had anticipated, no surprise there. Also as expected the sales of Toujeo are coming at the expense of Lantus and not competing products. Finally, also not shocking, payors are exacting their revenge on Sanofi by demanding and receiving lower prices and/or higher rebates for Lantus.  Payback is certainly a bitch but this should have been anticipated given how the company rammed price increases down payors throats when Lantus was the only game in town.

Looking towards the future it’s highly unlikely anything will change all that much and quite frankly likely will get worse. The company faced several questions on the coming of Lilly’s biosimilar version of Lantus and how this will impact contracting discussions with payors. There were also several questions as to what’s the strategy for LixiLan and Adlyxin™, their once-daily GLP-1 which was just approved by the FDA. One analyst asked a very logical and pointed question about Lyxumia® (which is what Adlyxin is called outside the US) noting that sales have been disappointing which made him wonder why the company felt that sales of Adlyxin in the US would be any different. Why indeed.

Management did their best to tap dance around the contracting questions but it’s obvious that regardless of how Lilly prices Basaglar pricing pressure on Lantus and Toujeo will only increase.

We got a good laugh when management said they could not talk about their strategy for LixiLan or Adlyxin for “competitive reasons.” Allow Diabetic Investor to translate as our wine drinking friends are becoming very good at spewing corporate crapola, they haven’t a clue what to do.

We hate to pile on here but quite frankly management deserves it as nothing they said would come true has come true. Prior to Toujeo coming to market all they talked about was how much better it was then Lantus. How payors would embrace this me-too, copycat drug which is only incrementally better than Lantus, because patients using the drug had fewer hypoglycemic events. They ignored the fact when measured by glycemic control Lantus and Toujeo are almost identical. They also completely ignored the fact that physicians are loathe to change therapy options when something is working and Lantus works pretty damn well.

One of the more glaring errors in judgement, and there are many, was their foolish belief that payors would not exact their revenge. That payors would buy into the hypoglycemia story and ignore the fact these two drugs are nearly identical. They also must have been high to think that payors were not aware that besides Basaglar coming, that Novo Nordisk (NYSE: NVO) would not be aggressive with their long-acting insulin’s. Frankly it amazes Diabetic Investor that they could be this stupid but the fact is they were.

Now one just think that management has learned from past mistakes, that they would take a more realistic look at where this market is and more importantly where it is headed. That they would not bet on the same losing horse twice. We’re sorry to say about all management has learned is how to speak bullshit in multiple languages. The sad reality is they are completely clueless and have absolutely no idea what to do with their latest crop of me-too, copycat, late to market drugs LixiLan and Adlyxin. The stark and very harsh reality is the only weapon they have is price and even with deep discounts and high rebates both products will be swimming upstream against a company that actually knows what they are doing. Put in simple terms Sanofi has thrown Novo Nordisk a hanging curveball and believe us Novo will knock it out of the park.

Oh and that much ballyhooed partnership with Google, that partnership that will save the day. Not one word. No mention at all on any of the slides used in today’s presentation. Heck there was only one, that’s right, one slide on the diabetes franchise. We were sorry that no one asked about this much hyped partnership as we would have just loved to hear the tap dancing around that question. Diabetic Investor isn’t much for tap dancing, the hippy hippy is more our style, but this answer would have been one for the ages.

Now at this point we’re sure everyone is beginning to wonder if the company has any chance at all to turn things around. Can they do what Lilly did when it looked as though they just might become irrelevant. We can remember way back to our college days when we weren’t part of the drinking Illini and actually went to a lecture. One of our professors was fond of saying that is theoretically possible for an elephant to stand atop a coffee table without breaking the table. So it just might be possible for Sanofi to turn things around, but as our professor used to say don’t put too much stock in theory as that coffee table is in big trouble. So too is Sanofi.