Novo Reports

Novo Reports

After reading through their earnings release and listening to the earnings call it’s becoming clear that Novo Nordisk (NYSE:NVO) has put their boxing gloves on and isn’t afraid to fight. Their long-acting insulin Levemir continues to gain share here in the US, a fact acknowledged today by Sanofi (NYSE:SNY) who during their earnings announcement noted they have been forced to provide payors with lower prices and higher rebates to maintain formulary position for Lantus. Even with that sales of Lantus continue to erode.

Not surprisingly sales of Victoza declined somewhat even though the GLP-1 market continues to expand. This is hardly surprising now that there are three once-weekly GLP-1’s on the market and Victoza is a once-daily product. It’s unclear now that the drug has been approved as treatment of obesity whether this new indication will offset the loss of share in the diabetes market.

Looking ahead it will be interesting to see just how aggressive the company will be should the FDA approve Tresiba, which is now back in front of the agency. As Sanofi noted during their call besides being more aggressive with Lantus they have been equally aggressive with their new long-acting insulin, Toujeo. Based on how aggressive Novo has been with Levemir we would anticipate that the company won’t take the gloves off with Tresiba. As we noted earlier today the insulin market has turned into a bloody street fight a fight which will become even more intense when generic Lantus hits the market.

With the Sanofi diabetes franchise in disarray, the battle for insulin share – long or short-acting – remains a battle between two heavyweights- Novo and Lilly (NYSE:LLY).  Given the issues with Lilly’s non-generic branded long-acting insulin which is under development and the legal issues with the generic version of Lantus we anticipate Novo keeping the pedal to the metal going after as much share as they can gain while they can. They know that the legal issues with the generic Lantus will eventually go away which depending on how aggressive Lilly is could push the long-acting insulin market into a costly price war. The short-acting market won’t be much different.

This market could go completely crazy should Sanofi decides to sell their franchise to AstraZeneca (NYSE:AZN). As we speculated earlier today this move isn’t as off the wall as it seems given the many issues facing Sanofi. Should this happen this would set up one of the greatest fights in diabetes as there would be three major players battling it out and not just for insulin share. Keep in mind that AstraZeneca, Lilly and Novo are also fighting for share in the growing GLP-1 market. While Victoza may be at a disadvantage due to more frequent dosing, Novo does have an oral GLP-1 under development which if approved could alter this market yet again.

Now should Sanofi decide to stay in the market the diabetes drug market which is already transforming into a commodity market things will become nasty. This is what happens when the new products entering the market are just incrementally better than the existing products already on the market. Throw in the arrival of generic insulin’s – short and long-acting – and the picture isn’t pretty.

The question for Novo remains the same can this company whose used to producing premium products which in the past received premium reimbursement, transform itself into a leaner structure that maintains margins. This structure is a vast departure from their DNA but as difficult as this transformation may be it is a necessary transformation.