Leaving no stone unturned – Sanofi outlines their diabetes strategy

Leaving no stone unturned – Sanofi outlines their diabetes strategy

This morning Sanofi-Aventis (NYSE:SNY) outlined their diabetes strategy during their Diabetes and Oncology IR Thematic Seminar. While there were few surprises and many of the strategies outlined were expected by Diabetic Investor, what truly struck Diabetic Investor was the level and depth of their commitment to the diabetes space. Simply put, the company is leaving no stone unturned in their quest to become the preeminent global diabetes company. As we have noted previously, there is no aspect of the diabetes market, whether it be drugs or devices, which will be untouched by Sanofi.

Long ago the company stated their goal was to overtake Novo Nordisk (NYSE:NVO) as the premier global diabetes company. Based on the strategies outlined today it appears the company is selling themselves short as there is no company in diabetes today, drugs or devices, who will not be impacted by the moves Sanofi makes.

To make things easy to follow Diabetic Investor will review the strategy as it was presented, anyone interested can download the presentation slides at Sanofi’s web site, www.sanofi-aventis.com.

Pierre Chancel, Senior Vice President – Diabetes Division was the leadoff hitter basically outlining what we already know, diabetes is a huge problem and an equally huge business. In a slide entitled “Becoming the 360° Partner Delivering Best-in-Class and Integrated Diabetes Solutions” he reviewed just how deep Sanofi’s commitment to diabetes is and showed that Sanofi views the diabetic customer as a customer for life. Sanofi not only wants to sell them the devices and drugs that help them better manage their diabetes, they want to expand their relationship with the patient to include education and individual disease management.

The only ironic aspect of this particular slide is that it reminded Diabetic Investor of Roche’s Circle of Care campaign. Hopefully Sanofi will have better luck with their circle than Roche has with theirs. One notable aspect of the items surrounding the circle was the mention of pumps. While Sanofi isn’t in the insulin pump, yet, it’s inclusion in the slide was telling. (More on this shortly.)

Christoph Heinemann Vice President, Strategy & Operations – Diabetes Division followed and outlined how the company will build on the success of their long-acting insulin Lantus. Like others in the space he made a point of noting how aggressively the company is expanding their presence in China and emerging markets. No surprise here.

Moving to devices he noted how the company plans to integrate their new glucose monitoring platform, provided by their partner AgaMatrix, from just a device that delivers a glucose reading into a system that helps the better manage their diabetes. This really isn’t news either as Diabetic Investor has been stating all along this was Sanofi’s goal. Still Mr. Heinemann did make a strong case as to why Sanofi is entering this already over-crowded market and very difficult market.

He correctly noted just how important insulin using patients are to the BGM market, stating that over 80% of all test strips sold are used by patients following insulin therapy. Unlike Johnson and Johnson (NYSE:JNJ) who sees their Animas unit as another way to sell more LifeScan test strips, Sanofi sees their BGM unit as method to sell more insulin. What’s clear is these two companies are on a collision course as they are both targeting their BGM efforts squarely at insulin using patients. At the moment LifeScan has the edge here as long ago they set their sets on this critical market segment and today are reaping the benefits of executing on a very wise strategy.

This brings us to one of the more intriguing possibilities, given their public comments it’s no secret Sanofi won’t be shy in their quest and if that means spending millions or billions to acquire their way to the top spot, so be it. As we mentioned earlier the company does not yet have an insulin pump and as we have noted previously while their BGM products are just fine, they also would be wise to acquire a BGM company with an existing market presence. Besides giving them an immediate installed user base, this move would bring with it formulary access and distribution agreements. We had assumed Sanofi would proceed on the acquisition trail buying the individual pieces in series of deals.  As Diabetic Investor previously reported the company had preliminary discussions with Medtronic (NYSE:MDT) about the possibility of acquiring their insulin pump unit, but walked away as Medtronic’s asking price was too high. We also believed Abbott (NYSE:ABT) who’s shopping their diabetes device would be a good fit.

Yet the possibility exists that Sanofi might just make a bold move and acquiring LifeScan and Animas from JNJ. This move may not be as crazy as it sounds. It’s well known that JNJ is unhappy with how Animas is performing and they have already taken major costs out of their LifeScan unit. Add in the fact that just as JNJ is very good at acquiring companies, they are equally skilled at knowing when to sell units. Given the current market dynamics in both the pump and BGM markets, which JNJ understands very well, they just might decide it’s time to sell. Such a move would immediately vault Sanofi into the devices market and fill two important needs. Wouldn’t that be something? As we have noted on several occasions anything is possible in the wacky world of diabetes.

Hitting in third spot was Jochen Maas Vice President, Research & Development – Diabetes Division who outlined the company’s drug pipeline. Just as Sanofi will butt heads with JNJ in diabetes devices, the company is set take on Amylin (NASDAQ:AMLN), Lilly (NYSE: LLY) and Novo Nordisk in the drug arena. Although Lantus has been a huge success, the company understands that insulin sales alone will not be enough to get them where they want to be.

Understanding the importance of GLP-1 therapy, it was no surprise Mr. Mass began by talking about Lixisenatide, Sanofi’s once-daily GLP-1 which they plan to submit to the FDA in the second half of 2012. Here too, the company seems to be borrowing from their competition as they are building a robust clinical program around the drug while at the same time understanding the importance of a patient friendly delivery device. The issue isn’t one of safety or efficacy, as from the data we’ve seen so far; the drug looks comparable to drugs already on the market.

The real issue is one of timing. Victoza, a once-daily GLP-1 from Novo, is already on the market as is Byetta, a twice-daily GLP-1 from Amylin. Two drugs that will soon be joined by Bydureon, the once-weekly GLP-1 from Amylin, Lilly and Alkermes (NASDAQ:ALKS). It’s difficult to see how a drug, no matter how good it is, will gain traction coming to market more than a year, more likely two years, after Victoza and Bydureon. The reality is Bydureon, with its once-weekly dosing regimen should dominate the GLP-1 market, especially after the Bydureon pen becomes available.

Like Novo who wants to combine Victoza with Levemir, Sanofi is looking to combine their GLP-1 with Lantus. While both programs look promising, it’s still too early to tell whether or not this combination will produce the desired results.

Looking at their core insulin franchise it was interesting to see the company tackle head on the insulin/cancer issue. Rather than duck what could have been a thorny issue, the company stated the need for more studies. Unlike, Novo who in their zeal to fend off Sanofi has made cancer an issue, Sanofi is taking the high road here. Hopefully these ongoing studies will once and for all put this issue to rest, one way or another. Can’t say we’re optimistic this will happen, but we can always hold out hope.

The reminder of the pipeline looks interesting; however they are still in the early stages. As we have seen far too many times, early stage compounds often look interesting only to falter as they progress through the process. This as they say is the nature of drug development, where anything can happen and usually does.

Finally, throughout the presentations the company sprinkled in references to patient education, again telling everyone what we already know- namely that educated patients achieve better outcomes. For the moment Diabetic Investor will give Sanofi the benefit of the doubt here. But as we have seen so many times before, companies in the space always talk about education but rarely put their money behind it. Time will tell if Sanofi is really serious here or if they will join a long list of companies who talk a good game but when the rubber meets the road, fall woefully short on execution.

The bottom line here is actually quite simple, can the company execute on their ambitious plans. This is not the first time Diabetic Investor has heard companies outline strategies for owning the diabetes space. There is no question Sanofi has the resources necessary to accomplish their goals. It’s also true what they don’t have they can buy. However, as we have seen before it’s one thing to buy your way in, quite another to enhance the value of the acquired asset.  It’s also true that the company is becoming aggressive at time when all the markets they seek to enter and dominate have their own unique set of issues which could easily derail the company.

On the surface we like what we have seen so far, but the game is still in the early innings. Funny thing about the future it’s never quite what we think it will be. Or as E.J. Hobsbawm wrote, “The only certain thing about the future is that it will surprise even those who have seen furthest into it.”