Here we go again

Here we go again

Yesterday Novo Nordisk (NYSE:NVO) held their Capital Markets Day were they outlined their corporate strategy. During their presentation the company noted that IDegLira showed better control of blood sugar levels than Tresiba; IDegLira is a combination of Tresiba and Victoza.  Perhaps not by accident Sanofi (NYSE:SNY) stated yesterday that their new version Lantus is better than the old one at controlling blood sugar levels and comes with fewer hypoglycemic events. Like Novo, Sanofi is also working on an insulin/GLP-1 combo product.

Now what neither company noted was whether or not there will be a market for these products when they actually get all the way through the regulatory process, which as everyone knows is not guaranteed. Nor did either company mention how the coming of a biosimilar Lantus will impact their new long-acting insulin products.  While Novo continues to publicly support Tresiba, the drug is still at least two, more like three years away from approval given the FDA demands.  While Sanofi believes the new version of Lantus will be ready by 2017, that’s still two years after Lantus loses patent protection.

Perhaps the biggest unanswered question is how these companies see the regulators looking at their insulin/GLP-1 combo’s.  Now we hate to overstate the obvious but common sense tells us that with Tresiba delayed at the FDA any product which is combined with Tresiba, IDegLira for one would not have an easy regulatory path; nor would any product which combines Lyxumia, Sanofi’s GLP-1 with the Lantus as back in September the company made the decision to withdraw the Lyxumia application from the FDA. At the time stating; “The decision to withdraw the lixisenatide application follows discussions with the U.S. Food and Drug Administration (FDA) regarding its proposed process for the review of interim data. Sanofi believes that potential public disclosure of early interim data, even with safeguards, could potentially compromise the integrity of the ongoing ELIXA study. Sanofi’s decision is not related to safety issues or deficiencies in the NDA.”

The harsh reality for both Novo and Sanofi is that neither company is prepared to deal with the future, that both are holding onto the hope that these new drugs will somehow change the dynamics of the diabetes drug market. The fact is even if these drugs are as great as the companies claim they are, and honestly they aren’t great, their regulatory paths are problematic and even worse by the time they did make it through the regulatory process it will be a case of too little too late. What both Novo and Sanofi seem to forget or ignore is that generic insulin will forever change the market and that the diabetes drug market is quickly transforming into a commodity style market where price trumps performance.

It amazes Diabetic Investor that both companies are feeding analysts this crap and even more amazingly the analysts are eating it up.  Do they not see that payors are no longer willing to pay premium prices for what at best is incremental improvements in these new drugs? Do they not understand that after years of forcing through price increases that the arrival of a generic Lantus will provide payors with the opportunity to exact their revenge? Do they not see that while the combination of long-acting insulin with a GLP-1 in one package is nice, yet this therapy options exists today and that payors aren’t paying premium prices for patient convenience?

Now Diabetic Investor certainly understands why the companies continue to shovel this manure and to certain extent we also understand why the analysts are ignoring the real smell. For years the diabetes drug market was license to print money, innovation was amply rewarded and with the growing global patient population everything looked very rosy. Today this market has changed dramatically, yes there is still money to be made but what’s being touted as innovation is in fact just incremental improvements to existing technologies, add in the fact that the reimbursement environment has turned negative and it all adds up to tough times ahead for any company that is ignoring what is going on in front of their own eyes.

Sanofi and Novo may be putting lipstick on a pig, but no matter how they try and dress it up it’s still a pig.