It was the best of times, it was the worst of times

Although the famous novel by Charles Dickens A Tale of Two Cites was not set in Denmark that famous quote It was the best of times, it was the worst of times applies to what’s happening to Novo Nordisk who released results this morning. It’s the best of times because sales of GLP-1’s continue to accelerate, it’s the worst of times because insulin is now a commodity. It’s the best of times because Novo has a solid and expanding portfolio of GLP-1’s, it’s the worst of times as the insulin market will not get any better and likely will get worse.

As expected, the company did not speak to the pink elephant in the room as what everyone really wants to know is when the oral version of semaglutide will be approved by the FDA and is Novo prepared for the launch. Our view on this drugs remains unchanged we expect the FDA to approve it, we expect it will get off to a fast start being the first orally administered GLP-1 on the market but will run into issues as the complex dosing regimen becomes more wildly known. For this drug the mantra isn’t how it starts but can it sustain itself over time.

It won’t be long before the GLP-1 market which continues to expand also commoditizes as we have now have Novo and Lilly both battling in the once-weekly injectable space. Intarcia will be resubmitting their exenatide micropump to the FDA, a product which we see doing better than expectations and the already mentioned oral version of semaglutide with its complex dosing regimen. Just as payors discovered that all insulins are basically the same, they are quickly becoming enlightened that this also applies to GLP-1’s.

To their credit Novo knew this was coming and shrewdly repositioned Victoza their once daily GLP-1 as a weight loss drug which is doing quite well. Excuse the expression but the obesity market is huge and also continues to expand. Lilly is late to the game here and Novo is taking full advantage of the open field, this will change as well but for now Novo owns the obesity side of the GLP-1 market.

A more important question is how to sustain profitability in the insulin market where prices continue to decline. As Novo noted today their insulin volume is up so they are basically selling more insulin but making less money due to price contraction and rebates. Given their huge scale which produces manufacturing efficiencies the insulin franchise is not bleeding money. However what happens when a biosimilar version of Novolog gets here and erodes prices in the short-acting market even further, what then?

To us this is where Tyler kicks in and Novo does have a connected pen already. The pen has had some issues but Novo being the smart people they are will eventually get it right and if they don’t there are plenty of connected pen companies who’d be delighted to be bought. It also appears that Novo is taking the open connectivity route allowing both the Dexcom and Libre sensors to communicate with the app that goes with their pen. And being Novo it looks as though they will use their internally developed insulin dosing algorithm.

What we don’t know is does Novo have a fully disposable connected pen as Lilly does. Although to be honest Lilly says they have this but to the best of our knowledge no one has seen it and it appears it won’t even go to the FDA until their still unapproved cap-cover comes out. To us Lilly’s issues are directly related to what we say all the time that pharma and medical devices are like oil and water they just don’t mix very well. Novo is actually is one of the very few pharma companies that has done well with devices that was until the recent issues with their connected pen, oh well.

The harsh reality facing all the major insulin companies and we suppose we should include Sanofi in this group is pricing is going to get worse and could get much worse depending on who ends up in the White House and who has control of Congress. Throw in a biosimilar short-acting into the mix and what looks bad now will look like kibbles and bits by comparison. This is why we can’t understand why these companies are dragging their feet with Tyler. But then again think of who we are talking about here.

Novo is trying to insulate themselves from this bad situation with their aggressive push into the GLP-1 market, Lilly has insulated themselves with the most comprehensive portfolio of diabetes therapies while Sanofi has ……..

Have a great weekend everyone.