Pfizer/Astra – What it means for diabetes.

Pfizer/Astra – What it means for diabetes.

Now that Pfizer (NYSE:PFE) has gone public with their $98 Billion offer for AstraZeneca (NYSE:AZN), a bid which Astra has so far rejected, it’s time to look at how this megamerger would impact the diabetes drug space. Would it, as some see it, be a positive for Astra’s diabetes portfolio or would it as Diabetic Investor recently noted distract Astra just when it appeared they were getting their act together in diabetes? And what about the possibility raised by Diabetic Investor last week and some analysts today that Sanofi (NYSE:SNY) might come along and make their own play for Astra?

Let’s take the last question first. There is no question from a diabetes perspective a Sanofi/Astra deal makes more sense than a Pfizer/Astra hook up. Although Sanofi has done an outstanding job of screwing things up in diabetes they still have Lantus which is doing quite nicely thank you very much. They also could more easily integrate Astra’s diabetes portfolio into their existing sales efforts. While Sanofi may have screwed up everything but Lantus their track record in diabetes still outshines Pfizer’s diabetes experience which consists largely of a $4 billion failure known as Exubera.

Diabetic Investor also suspects that no matter which company ends up with Astra the new owners will make cuts to the Astra sales force. Pfizer already has a large sale force calling on primary care physicians (PCP’s), physicians who treat nearly 80% of all diabetes patients.  Sanofi as noted above also has an existing sales force who has been calling on these same physicians. So it’s pretty much a given that no matter who owns Astra their diabetes sales team would be dismantled.

So based strictly on where the Astra diabetes portfolio fits best, Sanofi trumps Pfizer. However this doesn’t mean that Sanofi has the appetite for what likely would be a $100 billion plus deal. Yes Lantus is going off patent in 2015 and likely will face generic competition in the very near future. Yes without Lantus Sanofi is basically irrelevant in diabetes as they have nothing in their pipeline no matter how they want to spin it that will come remotely close to replacing what is now their number one selling drug. Yes for all practical purposes Sanofi is a one hit wonder and hasn’t shown they have what it takes to build upon the success of Lantus. Yes a deal for Astra would instantly make them a serious player in the diabetes drug space but even so we doubt Sanofi has the stones to make such a deal. Keep in mind these are the same people who at one time wanted to buy Bayer’s glucose monitoring unit, walked away, came back and walked away again. The fact that Lantus is a mega-blockbuster just boggles the mind when one considers that the management at Sanofi can’t seem to decide on what color toilet paper should be in the executive restrooms.

Diabetic Investor also seriously doubts that Novo Nordisk (NYSE:NVO) another company that has been mentioned as a possible white knight would pony up a $100 billion plus.

Therefore we believe that when it’s all said and done Pfizer will end up with Astra, which begs the question whether this is a positive or negative for the Astra diabetes portfolio. Frankly Diabetic Investor doesn’t buy the argument that Pfizer will do a better job with this portfolio than Astra, which of course assumes that someone actually believes Astra has done a good job. Based on their last earnings report it did look like Astra was getting their act together when it came to diabetes. Yet as we have learned in this wacky world of diabetes one quarter of solid performance doesn’t guarantee it will continue. As we noted as much as it looked like Astra was turning the corner in diabetes they still couldn’t say when the Bydureon pen delivery, which was approved by the FDA, would hit the market.

Actually the Bydureon pen situation is almost the perfect example of how another change in Bydureon ownership is likely more negative than positive.  There is no question that as the investment bankers were racking up huge fees selling Amylin first to Bristol-Myers-Squibb (NYSE:BMY) who partnered with Astra only then to see Bristol sell their interest to Astra, that the Bydureon pen got lost in this game of pin the tail on Amylin. As Diabetic Investor has been stating all along Bydureon HAD the potential of the becoming a blockbuster perhaps a mega-blockbuster. The fact is Bydureon had everything going for it – it was the first once-weekly GLP-1 to be approved by the FDA- simple dosing – solid performance plus the added benefit of weight loss. Give this drug a simple patient friendly pen delivery system and it was just a matter of time before Bydureon would reach blockbuster status- right?

Yet just as Januvia is perhaps the luckiest drug ever to hit the market, Bydureon appears to be cursed. Unloved when it was part of the Lilly/Amylin partnership and mismanaged under the Bristol/Astra- Astra ownership. The harsh reality Bydureon was like a ship without a captain constantly sailing in a circle while the helmsmen waited for directions. Does anyone seriously believe yet another change in ownership, which will bring with it even more changes to who manages what – will be a net positive for this drug.

Watching all this with great interest and likely a big smile are the folks at Lilly who will likely benefit from yet another change in Bydureon ownership and more changes to the management of the Astra diabetes portfolio. Also watching are the folks at GlaxoSmithKline (NYSE:GSK) who’s long-acting GLP-1 has been approved by the FDA.

Years from now long after this deal is consummated, Diabetic Investor suspects we’ll be writing about Bydureon in the past tense, about how this once promising drugs got caught in the deal making meat grinder where the only big winners are the investment bankers.  We equally doubt that when it comes to naming the top companies in the diabetes market that we’ll be including Pfizer. This isn’t to say that Pfizer lacks the talent to be successful or that it doesn’t have the resources to compete, the company has both talent and resources. However when it comes to the wacky world of diabetes, experience in the market is just as, if not more important than talent and resources.

As we noted the other day at this weekend’s Kentucky Derby it will take more than a fast horse to win the run for the roses. It will take the combination of a fast horse rode by a seasoned jockey who understands how to navigate the track and large field at Churchill Downs. Rarely does a premium thoroughbred change jockeys just days before the big race which is exactly what seems to be happening with Astra. This change of jockey’s might be just what they need to win the race, yet history tells us this is the exception rather than the rule.

The horses are gathering at the starting gate – this should be one heck of a race no matter who ends up owning Astra.