Interesting Times Indeed

Interesting Times Indeed

There is an old Chinese curse that says, “May you live in interesting times”. Although this had nothing to do with the wacky world of diabetes it certainly applies. Think about this just for a moment over the past year we have witnessed the Chicago Cubs win a World Series, Sergio Garcia win a major and in a shocker yesterday my beloved Chicago Bears picked a quarterback in the draft. As shocking as these events where nothing compares to what Sanofi (NYSE: SNY) stated when they reported earnings this morning. Per a company issued press release;

“In the first quarter, Sanofi glargine (Lantus® and Toujeo® ) sales decreased 7.7% to €1,418 million. In the U.S., Sanofi glargine sales of €805 million were down 15.5% and reflected the impact of the exclusion from various CVS commercial formularies. The U.S. Diabetes sales decline is expected to accelerate over the remainder of the year primarily due to the United Health formulary exclusion which started April 1, 2017 as well as an incremental impact from the CVS formulary exclusion. In Europe, Sanofi glargine sales decreased 3.1% to €245 million due to biosimilar competition in several European markets.”

Think about that statement for just a moment. There was a time not that long ago when Lantus was the goose that was laying the golden eggs for Sanofi. Each quarter sales results for Lantus was the first thing mentioned by the company. The diabetes franchise lead by Lantus was king of the hill for Sanofi, the straw that was stirring the drink. Oh, how times have changed, talk about going from the Penthouse to the outhouse.

To say that the Sanofi diabetes franchise is a dead duck isn’t far from an overstatement. To say that the company seriously over-hyped Toujeo is spot on. To mention that when it comes to diabetes and any product not named Lantus the company had the reverse Midas touch is borne out by those pesky facts. Still it is somewhat astonishing that any company could perform so badly when they knew the golden goose would not lay profitable eggs forever. That they could not come up with a more coherent strategy to deal with this inevitable eventuality.

The question now becomes what next? Is there any chance at all that Sanofi can recover from their many missteps and reverse direction in diabetes? Will the much-hyped partnership with Google yield anything of substance or will it end like every other Sanofi diabetes partnership, a path to nowhere? Is it possible that the company will actually follow through with recent public statements and buy their way into the diabetes device business? Would this make any difference or would it just be another disaster?

Yes, we suppose a turnaround is possible we also suppose it’s possible that the Chicago White Sox will win the World Series this year. At least the Sox have a plan to get back on top, not sure we can say the same with Sanofi. This recent statement about buying their way into the diabetes device market is a perfect example of what looks like a helter skleter diabetes strategy. As everyone knows the device market is undergoing its own difficultly and even under solid leadership success will be difficult to achieve.

Conventional blood glucose monitoring is dying a slow and painful death. The insulin pump market is also ultra-competitive and requires tons of money and talent to have any chance at all. “Smart” insulin pens are a commodity and there is no place in the market for all these dumb patch pumps. The lone bright spot in devices is the growing continuous glucose monitoring market but here too the market is becoming ultra-competitive. The fact is outside of CGM, diabetes devices have become a commodity and it’s not the hardware that matters anyway. Diabetes devices are just tools that work within a diabetes management system, a system that at one time it looked like Sanofi was building but a system that like all things Sanofi diabetes never got built.

We hate to be redundant but when it comes to success in diabetes devices it’s not about the hardware or way cool or whiz bang. It’s not about getting the data to the cloud or even transforming that data into patient relevant or patient actionable information. This market is all about money combined with talent. Sanofi has the bucks but lacks the talent and yes, it is that simple. About all Sanofi has proven in diabetes is they are very good at turning gold into sand. Or as a close friend says they are great at turning a large fortune into a small one.

Now we suppose the company could buy talent but would they then let that talent do their job or will they do what they traditionally do and micro-manage this talent not allowing them the freedom they need to succeed.

The reality is that Sanofi must undergo a major cultural change if they are to have any chance at all. As Momma Kliff used to say; “There is a time for the kids to play, to have their fun and make their mistakes. But at some point, these children must grow up and become responsible adults. They must learn from the mistakes of the past and most importantly don’t repeat them. Otherwise this is just an exercise in futility.”