Sanofi/Bayer Report – Bydureon goes to the FDA

Sanofi/Bayer Report – Bydureon goes to the FDA

This morning the Bydureon three musketeers – Amylin (NASDAQ:AMLN), Alkermes (NASDAQ:ALKS) and Lilly (NYSE:LLY) – announced they have resubmitted Bydureon™ to the FDA. According to a jointly issued press release;

“Amylin Pharmaceuticals, Inc. (Nasdaq: AMLN), Eli Lilly and Company (NYSE: LLY) and Alkermes, Inc. (Nasdaq: ALKS) today announced that the companies have submitted their reply to a complete response letter issued in October 2010 by the U.S. Food and Drug Administration (FDA) regarding BYDUREON™ (exenatide extended-release for injectable suspension), an investigational medication for type 2 diabetes. The companies expect to receive an updated Prescription Drug User Fee Act (PDUFA) action date from the FDA within the next two weeks. Since the reply included additional data, it will likely be categorized as a Class 2 resubmission requiring up to six months for review.”

Although Diabetic Investor is not foolish enough to predict what the FDA will do and when they will do it, there is no logical reason for the FDA not to approve the drug. However, as we have seen before the FDA does not always operate in a logical manner.  Assuming for the moment that the FDA actually does what it should have done months ago and approves Bydureon all eyes are looking to see how Amylin and their “partner” Lilly execute the Bydureon launch while they continue to battle in court.

This morning Sanofi-Aventis (NYSE:SNY) and Bayer reported second quarter results, let’s take Bayer first. As anticipated the Bayer glucose monitoring business continues to struggle, sales of their flagship product the Contour™ grew an anemic 0.9% worldwide, while the Breeze™ monitor continues to falter with sales down almost 10% for the quarter.  According to the material that accompanied the call the company acknowledge the problems Contour is having in US noting that sales declines in the US were offset by gains outside the US.

Being the last of the major BGM companies to report a clearer picture of the BGM market is emerging and it’s really a tale of two continents. As Diabetic Investor has been reporting for some time the conditions in the US market continue to deteriorate as companies face stiffer reimbursement policies and intensifying pricing pressure.  Competition is also intensifying overseas as companies realize that sales declines in the US need to offset elsewhere in the world even if these sales come with lower profit margins. The simple fact is the BGM market is all about scale, the more test strips sold the better and it really doesn’t matter if those strips are sold in Ohio, France or the Congo.

That being said it’s also clear the real winners here are none of the major companies but companies like Nipro which sells co-branded value priced systems and Sanofi who sees BGM as method for selling more insulin. Operating with greater efficiencies Nipro can better navigate the highly competitive US market as they don’t have the bloated and costly infrastructures of the major brands. Even with all the cost cutting measures instituted by the majors, they are not yet as lean as they need to be. Diabetic Investor believes it’s only a matter of time before one of the majors makes the decision to abandon the current sales model and eliminate the majority of their sales team or outsource sales entirely. The simple fact is with insurers and distributors controlling access to their products, the major BGM companies can no longer afford to have an army of sales reps handing out free samples to physicians and educators.  Nor can they afford to spend millions on advertising for a product that has basically become a commodity.

Looking to the future, which in some respects is already here, companies will use the internet and social media as their primary advertising and customer support tools. This move will accelerate as the market moves to interconnected systems which besides reporting data to a centralized database, will also allow patients to order test strips directly from their monitor. The day is quickly approaching when patients will no longer need to go to their local pharmacy to pick up their test strips as they will be automatically sent to them via the mail.  The reality is this technology already exists and it’s just a matter of time before it becomes more widely adopted.

Turning our attention to Sanofi, the company continues to see solid growth with their leading diabetes product Lantus® with sales growing 14.5% worldwide and 12.4% in the US. Not surprisingly more patients are using the SoloSTAR® pen delivery system; according to the company – “The contribution from Lantus® SoloSTAR® in the second quarter represented 46.2% of total Lantus® sales in the U.S., an increase of 13.9 percentage points versus the fourth quarter of 2009.”

Although sales of Apirda® grew by nearly 30%, this growth was largely due to favorable comparisons. The company still has a long way to go before Apirda comes close to its two well established competitors in the short-acting insulin market.  While all the companies in this market will beg to differ there really isn’t much difference between the three short-acting insulin’s currently on the market, the battle comes down to brand recognition and price.

This is why Sanofi is anxious to get into the BGM market, unlike everyone else Sanofi sees BGM as their ticket to increasing insulin sales. As Diabetic Investor has been stating for some time Sanofi is positioning themselves to be the first company to sell an integrated diabetes management system, a system which will include everything the patient needs to manage their diabetes. This strategy is in sharp contrast what their arch rival Novo Nordisk (NYSE:NVO) is doing, as Novo prefers to concentrate on diabetes drugs and other than insulin pens has no desire to enter the BGM market.

Diabetic Investor remains convinced that at some point to make this vision a reality the company will eventually  make an acquisition in the BGM space and that Abbott’s (NYSE:ABT) diabetes device unit makes the most sense. As noted earlier scale is critical to the BGM business and there is no way the company will achieve the scale necessary with their current crop of monitors no matter how good and how cool they are.

Looking at the Sanofi pipeline the company continues to develop their once-daily GLP-1, which now has a name Lyxumia®, and like Novo they are looking at product that combines their GLP-1 with their long-acting insulin Lantus.  Given the news today with Bydureon it will be interesting to see which tack the company takes with Lyxumia and how they will position the drug once it gets here. Should Amylin and Lilly not screw up the Bydureon launch, by no means a given, and Novo continue to make progress with Victoza, their once-daily GLP-1, it’s difficult to see where Lyxumia will fit in.