Sanofi – Lantus Rules, Say good bye to BGM

Sanofi – Lantus Rules, Say good bye to BGM

Some things are just obvious and it should surprise no one that when Sanofi (NYSE:SNY) reported results yesterday that the company is more dependent on the success of Lantus than ever before. The company also continues to live under the delusion that Lantus sales will only be marginally impacted by a generic version of Lantus which loses patent protection in February 2015. Still with Lantus up nearly 20% and Tresiba from Novo Nordisk (NYSE:NVO) delayed, the company does have some breathing room.

One area which didn’t get any mention during yesterday’s call was the beleaguered device area, or least devices that aren’t connected to the Lantus franchise, as Diabetic Investor has learned that the company is converting reps hired to sell the way cool iBGStar which attaches to the way cool iPhone, to Lantus reps. Although rumors are still flying around the company that they may reconsider their earlier decision not to buy Bayer’s troubled glucose monitoring unit and actually proceed with the acquisition. Although nothing would surprise Diabetic Investor when it comes to devices other than pen delivery systems Sanofi is absolutely clueless. The truth is they were never truly committed to the BGM business and failed to understand the complexities and dynamics of this highly competitive market.

That being said the company thanks in large part to the FDA does have time now to develop their new version of Lantus which is now in phase 3 trials. Given the Tresiba delay the possibility exists that Sanofi could be launching the new version of Lantus about the same time Tresiba comes to market, assuming Novo proceeds with the product, which would also be about the same time there is a generic version of the original Lantus product.

Interestingly the company’s press release contained the following passage; “The biosimilar insulin projects entered into phase I of clinical development in Q1 2013 as planned. These insulin products will be developed in order to further enlarge the Sanofi Diabetes portfolio and better serve the needs of people with diabetes.” A strange statement given what Christopher A. Viehbacher, Chief Executive Officer, Director and Member of Strategy Committee stated during the Q&A portion of the call. When asked about the possible threat of a generic Lantus he stated; “So biosimilars, remember, the world is a big place. And there’s a number of ways that you can play biosimilars. For us, I think the idea of a biosimilar is really to start looking at: is there an interest in having a complete portfolio of insulin products. So in other words, is this a biosimilar or is this a — what is essentially a “me too,” but in an area where we can use our commercial muscle to actually gain a part of the market. Because when you actually look at the volume of insulin use there’s quite an interesting marketplace to be had there. But it would be more of a competition in terms of market share than price. What market share they have? I mean, I think it remains to be seen. Again, I used the example in the past when you look at the flu vaccine; you’ve got 5 manufacturers of flu vaccine in the United States. So — and you can pretty much argue that there are biosimilars to each other in some ways. And yet from 2002 to 2012, you saw the price of a flu shot go from $2 to $10. So I’m not so sure that — I’m not so sure anybody can really tell you today how this is going to work. This is going to depend a little bit about what the whole pricing and everything else environment is in that period. I think it’s going to depend from market to market. But I think there could be an opportunity from a commercial point of view in having a broader portfolio. We’ll make that call before we go into Phase III with these compounds. What I can tell you is that developing a biosimilar costs as much as almost a whole novel biological molecule. So you’re really only going to go down that path if you think you’re actually, I think, going to get a market share at a reasonable price because of the investment. I think trying to go into biosimilars with the idea of crashing the price is not going to be an attractive proposition. If we think that’s where it would go, we probably wouldn’t do it.

But I continue to believe that, at least in the U.S. market, that biosimilars will play a marginal role just because of the economic interest of the players. And the other thing I would say is if you look at what’s going on in the diabetes environment today, you’ve got the FDA asking questions about DPP-4, so — with the GLP-1. You’ve just had basal insulin delayed by 5 years on the back of some safety concerns, or questions at any rate. No product out there has the safety profile of Lantus. We did 3 massive epidemiology studies in partnership with the ADA, the FDA and the EMA. We published the ORIGIN study, which is the biggest study in diabetes since the UKPDS study. So if you’re looking for a gold standard anywhere, this is Lantus. And anything that comes along is going to have to measure up to that. So I wouldn’t forget this whole background of safety. There are an awful lot of questions in the minds of everybody in this whole field. And the product that really can provide the most confidence in safety has got a competitive advantage. And I think that gives me additional confidence about where I think biosimilars will go.”

Now for those not fluent in corporate speak allow Diabetic Investor to translate in understandable English, what he was really saying was “Hey, we’ve got no clue what’s going to happen in the future and given we have no clue better to protect ourselves than be caught with our pants hanging around our ankles.” And believe it or not Diabetic Investor actually sees this as the correct way to play the insulin market as no one really knows what will happen when biosimilar’s get here and as we noted yesterday they will get here.

Given the success of Lantus Diabetic Investor also believes has a major advantage over Novo and Lilly (NYSE:LLY), for if the new version is any good physicians would be less likely to switch patients to generic version of Lantus, instead switching them to the new and improved version. Additionally with biosimilar’s in their pipeline the company could also fend off Lantus copycats with their own Lantus knock off. Although this knock off would likely carry a lower price point it will have two major advantages over other knock offs. First, coming from Sanofi physicians would be less likely to be concerned and second, Sanofi would be able to buy more time to get the new version of Lantus into the marketplace.

But let’s make no mistake here the Sanofi story is no longer one about a company looking to become the first to sell a complete diabetes management system, a system which would include not just the drugs and devices used in diabetes management but also patient coaching. That horse has left the barn and Sanofi is what they have always been when it comes to diabetes as they riding that amazing thoroughbred named Lantus. The simple fact is they will ride this horse as long and as hard as they can.