It’s So Over

It’s So Over

Reading through the Sanofi (NYSE: SNY) earnings release, looking over the slides used with this morning’s call and listening to the call it’s difficult to find any sunshine through all the dark clouds. The simple fact is the goose that laid the golden eggs is now a dead duck. Simple fact number two, with all the king’s horses and all the king’s men Humpty Dumpty can’t be put back together again. Simple fact number three, you can put lipstick on a pig but it’s still a pig.

We mention this last point after listening to the company try to explain that things aren’t as bad as they seem to be. The company went into a rather detailed explanation of how Lantus is still covered by lots of payors and all the 2017 formulary changes have not been made yet. Now given how payors have been favoring Basaglar over Lantus only Sanofi management would be delusional enough to believe that the coverage decisions yet to be made will go their way. About the only way this happens is when the company offers bigger discounts and/or higher rebates.

This is in a nutshell is the problem, even when the company wins they lose. The only way they can stay on formulary is to lower prices increase rebates and go for volume over margins. Even with this approach they are still losing more than they are winning. To Diabetic Investor this shows two things, first as expected Lilly (NYSE: LLY) has been aggressive with Basaglar and second payback is a bitch. We’ve said it before and we’ll say it again payors are exacting their revenge as Sanofi was notorious for raising the price for Lantus when it was the only game in town. Now with 5 yes 5 long-acting insulins on the market payors are firmly in control and are enjoying watching Sanofi suffer.

The bottom line for Lantus is its long and slow death march continues which basically means when it comes to Sanofi and diabetes the long slow death march continues. By nearly every measure Toujeo is a failure and LixiLan will likely follow a similar path. Keep in mind when LixiLan does get here it will face a competitor from Novo Nordisk (NYSE: NVO) who needs their combo product to succeed. Basically, what this means is that GLP-1/Insulin combo market will face an immediate price war.

The lipstick on a pig analogue also applies to the company’s pipeline, a pipeline that is full of me-too copycat way late to market products. In other words, a pipeline that is so Sanofi.

Now one just might think the company would tout something, anything positive in diabetes. That they would give stakeholders a reason to believe that the ship isn’t sinking that the iceberg did not do irreparable damage. Something like this new company they formed with the folks in Mountain View. But nope not a word no mention of this new company which is supposed to revolutionize diabetes management which is supposed to save the ship from sinking.

Perhaps they said nothing because their track record with diabetes related partnerships is like their track record for any diabetes product not called Lantus, a track record which by any measure sucks. There is no need to provide a list of the company’s failures in diabetes as quite frankly they are well known. What’s shocking here is how the company still believes they can get stakeholders to buy the manure they are shoveling.

This is like the Black Knight in the Monty Python movie getting his arms and legs hacked off and claiming it’s only a flesh wound. (Seriously this is one of the funniest scenes we have ever seen and can be found on YouTube at https://youtu.be/zKhEw7nD9C4)

The harsh reality is when it comes to Sanofi and diabetes it’s over. Nothing will save the day and it’s only a matter of time before this franchise fades away.