Musical Chairs
Well according to the latest rumors AstraZeneca (NYSE:AZN) is going to buy GlaxoSmithKline (NYSE:GSK) or maybe it’s the other way around. Frankly it really doesn’t matter who’s buying whom nor does it matter if this deal actually happens. Ever since AstraZeneca spurned Pfizer’s (NYSE:PFE) offer the company has been backpedaling.
Looking at the company’s diabetes portfolio the situation has also gone downhill as Bydureon is about the only drug they have which isn’t in trouble. Given the issues Astra is dealing with we doubt even the addition of insulin to their portfolio would help. The fact is the diabetes therapy area belongs to Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) with Merck (NYSE:MRK) and Johnson and Johnson (NYSE:JNJ) playing a supporting role.
Now we could state once again that Sanofi (NYSE:SNY) is in a world of hurt but what’s the point. The diabetes franchise is in such disarray that baring a major overhaul – like blow it up and start all over – we doubt it will ever come close to what it once was. And based on what we’ve seen from Olivier, or maybe we should rephrase, based on what we haven’t seen it doesn’t appear that our good buddy Serge is letting him do what desperately needs to be done.
To Diabetic Investor this situation creates an opportunity for Lilly and Novo to put some distance between themselves and everyone else. It will also reignite one of the most heated rivalries in diabetes. To say that the folks at Lilly don’t care much for the folks at Novo (and vice versa) is like saying fans of the Chicago Bears aren’t particularly fond of the Green Bay Packers. The fact is years ago Novo was kicking Lilly’s backside pretty good and quite frankly is the reason Lilly had to reevaluate their diabetes strategy.
It’s actually ironic that Novo now faces a more formidable competitor because of how well they executed when Lilly lost their focus.
Yet the more things change the more they stay the same. Both Lilly and Novo have long and distinguished track records in diabetes. Diabetes is part of their DNA, a core competency. The same cannot be said about their competitors, competitors who generally are one hit wonders. Take Januvia away from Merck or Invokana away from JNJ and what do they have in diabetes drugs? Nothing, nada, zilch. Take away Lantus from Sanofi and what do they have – two new products in Afrezza and Toujeo which are sucking wind – and a pipeline of me-too way late to market drugs which won’t do a damn thing to help them avoid the disaster that lies ahead.
Now that the FDA has come down on Onglyza and there are concerns with Farxiga, all Astra has left is Bydureon which now is facing real competition. All Glaxo has is Tanzeum one of Bydureon’s competitors.
The harsh reality is we could care less who buys whom as it’s not about just filling holes in the portfolio, the diabetes drug market, heck the wacky world of diabetes, is all about the ability to execute a clear and well thought out strategy. The ability to acknowledge when mistakes are made and having the stones to actually fix them. The rest as they say is just white noise.
So let the investment bankers play this game of musical chairs for when it comes to the diabetes therapy space only two players will playing for the long term. The more things change the more they stay the same.
