No surprises today

No surprises today

After yesterday’s FDA panel where they voted 16-0 to approve Novo Nordisk (NYSE: NVO) long-acting insulin GLP-1 combination, it was no surprise when Sanofi (NYSE: SNY) who has basically the same drug received a 12-2 positive vote. So in the space of two days this panel has given the nod to two combo products in spite of notable reservations raised by the FDA.

Now we are certain that many in the diabetes world will hail these two votes as major victories, that patients will soon have more treatment options to choose from.  Listen there are plenty of cheerleaders out there who believe every new drug, every whiz bang device is the greatest thing since sliced bread and soft soap. These are the same people who live in LaLa land and have no clue how things work in the real world.

From a practical standpoint we still believe that both Sanofi and Novo will find it tough going with payors. We also give the edge in this battle to Novo as unlike Sanofi they know how to execute where Sanofi will do what they always do in diabetes. Hey but look on the bright when the Sanofi product fails Olivier and Serge will have someone new to blame and likely behead. This will also give Serge another chance to throw the sales team assigned to this product under the bus when it fails to meet expectations.

Just so we are clear here we don’t see either product as a bad drug and yes there is a place for both in the treatment paradigm. However, given the many options physicians have to treat patients with Type 2 diabetes and the handcuffs placed on them by payors we don’t see either becoming blockbusters anytime soon. We also know that whatever sales are reached they will come at a step price as payors will do what they always do when there are two me-too copycat drugs which do the same thing the same way competing against each other, they will demand and receive lower prices combined with higher rebates in exchange for favorable formulary placement.

This is why Diabetic Investor can’t believe that Sanofi wasted their expedited review voucher on this product. This like an NFL team trading up so they can select higher in the draft only to select a player that would have been available at their original draft position. This is almost as stupid as believing that Afrezza would be a mega-blockbuster or that the way cool now way dead iBGStar would be a hit or that Apidra would make a dent against two well established competitors or that patients with diabetes would just love to have way cool specially designed lunch bags. (And no this is not a joke.)

We have a word of advice for any executive considering taking the spot vacated by the recently beheaded Ms. Witz, don’t walk away RUN away as fast as you can. Either that or hire a great attorney who will get you a contract with a fat severance package after you too are beheaded.

The reality here is Novo will win this battle and will win by a wide margin unless of course Sanofi does something really stupid, and remember this is Sanofi so anything is possible, and starts an unwinnable price war. The fact is Sanofi NEEDS their product to be successful Novo does not.  Yet even under the most optimistic scenarios we just don’t see either doing anything substantial. Niche products for sure but major blockbusters highly unlikely.

So congrats to Sanofi and Novo for making it through the FDA panel, you have earned the right to fight it out with payors and get physicians to prescribe it. As a constellation prize you also have earned the right to compete against the many other, cheaper options with better formulary position and greater physician acceptance. So enjoy the moment it won’t last long.