Our wacky world in a nutshell

Our wacky world in a nutshell

Before we get started today a Happy Valentine’s Day to one and all. Valentine’s Day may be a Hallmark holiday but there’s nothing wrong with spreading the love. Ok now onto business as this morning AstraZeneca reported results. The actual numbers don’t matter all that much, but Astra is almost the perfect example of just how wacky our world truly is.

Like so many companies in our wacky world Astra did not invent their way into diabetes, they bought their way in. So, indulge us a little as we take a trip down memory lane as Astra’s journey in many ways explains just how screwed up our wacky world can be. A journey which started almost 20 years ago when Amylin began. Amylin was the first company to successfully market a GLP-1 when Byetta was approved back in late April of 2005.

Back then Amylin was partnered with Lilly, a partnership like so many in diabetes which was a little rocky which in turn lead to nasty divorce. Set free from Lilly Amylin then was acquired in 2012 by Bristol Myers Squibb for about $7 billion. To help finance this deal Bristol teamed up with Astra who provided $3.4 billion of the purchase price. About a year later Astra in turn bought out Bristol paying them $4.3 billion.

This series of events shows why when it comes to diabetes deals about the only people who make any real money are the investment bankers who put these deals together and the executives who cash in. As we say with consistency when it comes to diabetes it’s all about money who spends it who saves it and when it comes to deals who makes it.

While all these deals were happening Novo Nordisk was building their GLP-1 franchise as was Lilly. Although Astra had Byetta a twice daily injection they also had Bydureon a once weekly injection. However, thanks to all this deal making no one was minding the store and working on such mundane things like getting Bydureon on formulary or getting the new delivery device for Bydureon through the FDA. Mistakes that company never recovered from.

Novo took over leadership in GLP-1 when Victoza a once daily injection came out and Lilly took over leadership in the long acting space when Trulicity came out. Simply put while Astra was managing their diabetes franchise like the Keystone Cops it allowed Novo and Lilly to come in and eat their lunch in the expanding GLP-1 market.

Not to digress but this same scenario played out in the long acting insulin space just for different reasons. Thanks to hubris and arrogance Sanofi helped Lilly build the Basaglar franchise. Which proves that when it comes to being successful in diabetes it’s not necessary to be innovative when you have companies like Sanofi and Astra who specialize in idiocy. We hate to be redundant, but this is the reason we keep harping on having a talented management team something that is in very short supply these days.

Astra also has some oral medications which are now doing well but not because these drugs are all that good rather because Astra is discounting and rebating the hell out of them. Their leading drug is Farxiga a SGLT2 which by all measures is inferior to Jardiance from Lilly. This proves something else we’ve been saying for years for in a commodity market the only thing that matters is price. That when you have multiple drugs in the same category that do the basically do the same thing the same way performance is thrown out the window.

Yet the SGLT2 category is proof that even when there is clear performance differences performance still doesn’t matter. The three leading SGLT2’s are Farxiga from Astra, Jardiance from Lilly and Invokana from JNJ ask any diabetes researcher who has reviewed all the data from these three drugs and Jardiance is clearly the best in class yet even, so it was not until after Lilly started playing the discount rebate game that Jardiance started to gain traction in the marketplace.

Back in the day when the first signs emerged that Sanofi was struggling in diabetes, we speculated that they should buy the diabetes franchise from Astra as this would round out their portfolio and allow them to more effectively compete with Lilly. To us this was a win win scenario giving Sanofi the drugs they needed and Astra the money they needed. This deal made so much sense it’s likely the reason it never happened. Which proves another point in our wacky world rarely are deals out together that make sense.

Diabetes is perhaps the only world where the wackier the deal the more likely it is to get done, common sense be damned. Hence why we say when it comes to diabetes deals anything can happen no matter how crazy it sounds.

The harsh reality for Astra is they could have owned the GLP-1 market or at minimum made life much more difficult for Novo and Lilly. A mistake which in turn created their strategy for Farxiga as they could ill afford another diabetes blunder. Yet the even harsher reality is that Astra had no business being in diabetes in the first place, Bristol we can understand as they had some history. Yet like so many companies once in they threw good money after bad buying out Bristol.

Truth be told when it comes to companies like Astra and Sanofi, those who have bought their way in and are not legacy companies like Lilly or Novo, hubris and arrogance lead to their demise. Sanofi and Astra have both failed and neither has the stones to admit it. As Momma Kliff used to say the difference between a child and an adult is that when adults make a mistake, they own up to it and try to fix it, while children never admit it and tend to repeat it.

There is no question that when it comes to diabetes drug companies Lilly and Novo are the adults seated at the head of the table. While Sanofi and Astra are seated at the kids table.