Spin the bottle

Spin the bottle

Way back in the day kids used to play spin the bottle. The rules of the game were simple, the kids sat in circle put a bottle in the middle of the circle and each would take a turn spinning the bottle. Once the bottle stopped spinning the spinner would kiss whoever the bottle pointed at. Looking over the results released by AstraZeneca (NYSE: AZN) this morning we’re beginning to believe this is their diabetes strategy. First the bottled pointed at their once-weekly GLP-1 Bydureon, next the bottle pointed at their DPP4 Onglyza, today the bottle is pointing at their SGLT2 Farxiga.

Now we’re not sure where the bottle will land next but one thing is becoming obvious no matter where it lands it won’t change one fact, the diabetes drug market has become a commodity market. Take a look at some of the statements from the earnings press release;

“Sales of Farxiga in the US increased by 78% to $327m in the year to date, primarily reflecting overall market growth and increased market share. Greater emphasis on promotional activity and improved levels of patient access resulted in higher market share.” Translation the company is heavily discounting and rebating Farxiga.

“Year-to-date sales in the US declined by 6% to $304m, as the Company prioritised sales and marketing resources towards Farxiga. Continued competitive pressures in the DPP-4 class were partially offset by favourable restocking activity, encouraging federal-business sales and lower utilisation of patient-access programmes.” Translation the competition, namely Merck (NYSE: MRK), is being more aggressive discounting and rebating Januvia.

“The decline in both Bydureon and Byetta US sales was attributed to lower market growth, increased competition from new market entrants and the lack of a competitive delivery device. A regulatory submission for the new Bydureon autoinjector is anticipated in the US in the first half of 2017.” Translation the competition from Trulicity combined with Lilly’s (NYSE: LLY) aggressive discounting and rebating is hurting. Additionally, the fact that the company took way too long to get the Bydureon pen to market and it wasn’t a very good pen added to the pain.

Like so many in the diabetes drug space Astra is choosing were to fight and were to surrender. For the moment, and keep in mind this is Astra so things might change depending on where the bottle points, they have decided to fight in the growing SGLT2 category. They have basically surrendered to Januvia in the DPP4 category and by the looks of things will soon be waving the white flag in the long-acting GLP-1 category.

Since the company has no insulin products they have decided to combine Farxiga with Bydureon and join the growing chorus of combination products. The combination looks interesting but we doubt even if it makes its way to the market it will change things all that much. Like everything else in diabetes drug land it’s a copycat world and so far, combo products have yet to prove themselves in the marketplace.

Nor do we anticipate payors paying a premium for these combo products which is what everyone wants. Payors don’t care about patient convenience which is the only true benefit of these combo products. From the payors perspective if these two drugs do work well together that’s great but don’t ask them to pay a premium just so the patient can take them together. Seriously there are times we wonder if the people at the diabetes drug companies are paying attention, that payors care about one thing and one thing only and it’s not patient convenience.

What these results show is what we already knew about Astra they don’t have a real strategy and they will kiss whoever the bottle points at. Back in the day Momma Kliff, who god love her raised four rambunctious sons, told them as they sought their mates that they would kiss lots of frogs before they found their princess. The problem with Astra is they keep kissing frogs.