Headed for the guillotine

Headed for the guillotine

According to Wikipedia “A guillotine is an apparatus designed for carrying out executions by beheading.”  According to our wine drinking friends in France a guillotine is a device used to rid the company of underperforming executives and poor performing products. We mention this as it’s becoming obvious that Olivier Brandicourt the new CEO at Sanofi (NYSE:SNY) has made a choice between Toujeo and Afrezza. Toujeo gets spared while Afrezza is headed for the guillotine.

Looking over the results released today combined with remarks made, or in Afrezza’s case not made, by management this really wasn’t a difficult choice. Sales of Afrezza for the quarter continue to underwhelm coming in at slightly above $2 million for the quarter and slightly over $3 million for the first half of the year. In a telling sign there was no mention of Afrezza during the prepared remarks nor did Afrezza appear on any slide.

By way of comparison Toujeo received a great deal of attention as the company continues to believe it will eventually offset revenue lost when the biosimilar Lantus arrives. As we have noted previously while Toujeo is merely incrementally better than Lantus, it does have a built in market and carries higher margins than Afrezza. The problem is physicians and payors aren’t buying what Sanofi is selling, namely that patients already on Lantus should switch to Toujeo. The harsh reality is Toujeo just isn’t that much better than Lantus and certainly not worth of premium reimbursement or favorable formulary placement.

Also as expected the company touted the recently released study data for LixiLan yet management seemed less then enthused about the drug and its future. Perhaps management is beginning to realize that even if LixiLan is approved, and there is no guarantee this will happen, it will be another late to market copycat me too drug.

Although Olivier did not shed any additional color on the changes he plans to make for the company or the diabetes franchise we cannot envision a scenario which does not come with more beheadings. The company acknowledged that a biosimilar Lantus combined with a more competitive market will adversely impact sales. Based on the remarks made regarding LixiLan they are not overly optimistic this drug will have any material impact anytime soon, if at all. Even though the results for Toujeo were less than impressive this is the horse they are riding.

Yet the truly astonishing aspect of the call was there no absolutely no mention of Afrezza. Heck there wasn’t even a question about this wonder drug. It was as if this drug didn’t exist. This is in stark contrast to the last earnings call.

To Diabetic Investor this signals that Olivier has seen the numbers and doesn’t like what he sees. That Afrezza now has six months of sales under its belt and the results flat out suck. Olivier also knows that with its poor formulary placement and equally poor reimbursement the company can’t make money with Afrezza. Given how poorly the diabetes franchise is doing combined with the competitive dynamic of the insulin market he has made his choice and it’s not Afrezza.

So in typical Sanofi fashion being loyal to their French roots Afrezza is headed to the guillotine. Viva La France.