Playing defense when you have the ball
Last night Diabetic Investor walked into the Lilly (NYSE:LLY) investor event excepting the company to tout their comprehensive portfolio of diabetes treatments. As we have been stating Lilly is the ONLY company who has it all, orals, GLP-1’s and insulins. Given that payors are favoring single source contracting it appears that Lilly with this portfolio is in the catbirds seat that their diabetes strategy is in line with where payors are going.
Before we go on here to all those Afrezza and MannKind (NASDAQ:MNKD) supporters who think formulary position doesn’t matter think again. This being a diabetes conference it should surprise no one that there are a few endocrinologists here. After speaking with several endo’s we wouldn’t say formulary position is the only thing that matters yet its pretty damn close to being the only thing that does. It didn’t matter whether the endo was in private practice, worked at a hospital or was part of large practice when it comes to treating their patients treatment decisions were largely determined by the payor not the physician. Simply put drugs with poor formulary position, drugs like Afrezza, don’t make the cut. Yes we know this won’t matter to the Afrezza supporters but it had to be said.
Now back to Lilly who for reasons only understood by the company decided rather than promote how their comprehensive portfolio of diabetes treatments are aligned with how payors are selecting who to deal with. Instead keep apologizing for this portfolio. Perhaps the best way to describe this is to think of the owner of American Pharoah apologizing for winning the Triple Crown. Saying something like; “Folks I want to apologize for giving you one of the greatest days in the history of sports. I am truly sorry for providing so much fun, excitement and joy.”
Lilly does have a generic version of Lantus which will soon be available overseas and will eventually be available here in the states. A drug which could alter the balance of power in the highly competitive insulin market. A drug which effectively marketed and priced will give Sanofi (NYSE:SNY) another diabetes headache and place Novo Nordisk (NYSE:NVO) into a defensive position. Yet you wouldn’t know this as it wasn’t even mentioned in the presentation.
The company also has Trulicity a once-weekly GLP-1 with an excellent delivery system, a drug seems to driving the GLP-1 market. Although you wouldn’t know this as the company seems to believe that Trulicity isn’t driving the market but is part of growing market.
We also don’t understand why they are making such a big deal out of the KwikPen which was just approved in the US. Listen if analysts don’t know by now that patients and physicians prefer simpler delivery systems, that pen delivery is where it’s at, then they shouldn’t be covering diabetes companies.
In what we can only call a Novo moment, the company spent far too much time on their new long acting insulin, Peglispro. While studies have shown the drug has performed very well, they have also shown some adverse liver events. Events which lead the company to announce they were reevaluating their original timetable for submitting the drug to the FDA.
Many may not recall but before Victoza was approved the FDA conducted a panel meeting for the drug. Well as it turned out studies showed that there was a small chance that Victoza was connected with thyroid cancer. Now the evidence was not substantial yet in typical Novo fashion they studied this issue six ways from Sunday. Simply put they made a big problem out of small one. Thankfully the panel members voted to approve the drug but it was no slam dunk as it should have been and Novo nearly screwed up what has turned out to be a very good drug.
Lilly did the exact same thing with Peglispro, explaining in detail the liver issues that were discovered. Why they gave such a detailed explanation we don’t know. But like Novo they added fuel to fire and gave the impression this issue won’t go away. At this point we should note that according to several researchers who we’ve spoken with Peglispro doesn’t stand a chance of getting approved, that these liver issue will kill the drug. Which makes one wonder why Lilly spent so much time talking about it.
Listen we know that the company really has nothing in their diabetes pipeline but the Lilly story isn’t about the pipeline. The Lilly story is about the here and now. How their comprehensive portfolio of diabetes drugs is in line with the needs of payors and when it comes to success or failure payors matter.
Yet this isn’t the story they are telling, why we don’t know.