One more step

Before we begin today a moment to acknowledge a true Hollywood icon and legend Kirk Douglas who passed at the age of 103. Perhaps best known for his role of Spartacus he was the consummate professional from an era long gone. RIP Kirk as you will be missed thankfully your great performances will live on forever.

We’d also like to give a shout out to Utah Senator Mitt Romney, no matter what your politics you have to admire his courage. It’s rare in this time of political polarization that anyone in politics shows courage, follows their convictions and does what they believe is right for the country. It’s also refreshing and hope others in both parties follow his example.

Now onto business which in this case is also a sad story as Sanofi reported results this morning and the slow death march of the diabetes franchise continues. There really is no need to get into the numbers for as expected they aren’t pretty. Nor is there anything to discuss about the pipeline. The one and only question we have is will Mr. Hudson take the final step and sell the franchise while it still carries some value, or will he just let die a slow and painful death?

Based on everything that was said today it appears that Mr. Hudson has gone as far as he wants to go with being bold and decisive. Rather than complete his transformation of Sanofi and shed the diabetes franchise he appears content to let the franchise die a slow and painful death. Now is it possible he’s playing coy here and is secretly seeking buyers for this franchise, sure. However given the continued erosion of the franchise he better not wait too long.

Ironically this decision to keep the franchise is actually good news for Lilly and Novo Nordisk. The last thing either company needs are these assets in the hands of someone who knows what they are doing in diabetes, someone who understands the dynamics of the insulin market. Insulin may be a commodity, but this does not mean the insulin companies are losing money selling it. They just aren’t making the obscene margins they once made.

This is what makes Mr. Hudson’s decision to remain in the market strange. He seems to understand the dynamics of the insulin market, he knows he must change the culture at Sanofi and up until now has been bold with his decisions. Why stop now, why not complete this transformation? Yes, we know a sale would not come easily however any value realized would be better than the continued death march.

Perhaps we’re looking at this wrong and Mr. Hudson has already investigated selling the franchise. It’s quite possible that after running all the numbers it makes more sense to keep the franchise. However, the sale of the franchise isn’t just about the numbers the sale would allow Sanofi to move forward with no baggage from the past. This is one time it would be better to let go even if the numbers aren’t perfect.