Surprising Results

Surprising Results

Yes it’s been a crazy day for this wacky world as besides Sanofi (NYSE:SNY) reporting and Insulet (NASDAQ:PODD) sort of reporting AstraZeneca (NYSE:AZN) also reported results. Results which actually were somewhat of a surprise, on the upside, for their diabetes franchise. According to a company issued press release sale for diabetes were up 21% for the quarter and 32% for the first half of 2015. These impressive results were driven by greater sales for Bydureon +29% for the quarter and 41% for the first half of 2015. Also contributing was Fraxiga® although sales of Onglyza were disappointing.

Diabetic Investor views these results as a microcosm of what’s going on in the diabetes drug market. First in the crowded long-acting GLP-1 space it seems as though Bydureon has finally found its footing just when new competitors have come into the market. While the Bydureon pen delivery system may not be the best of the bunch there is no question everyone prefers it over how the drug used to be delivered. The question is can the company maintain this momentum with Lilly (NYSE:LLY) and GlaxoSmithKline (NYSE:GSK) now in the market.

The results for Onglyza are no surprise for two reasons, Merck (NYSE:MRK) commitment to Januvia and the results of the cardiovascular studies which were less than favorable for Onglyza. Nor are we surprised by the results for Fraxiga given the popularity of the SGLT2 category. A popularity that may be short-lived as the FDA continues to investigate this class over issues with DKA.

Viewed as a horse race it’s interesting to see which horse each company has decided to ride. One hit wonders like Merck or Johnson and Johnson (NYSE:JNJ) have no other choice but ride the only horse they have in the race. As we noted earlier Sanofi has chosen Toujeo but will keep riding Lantus as well. Novo Nordisk (NYSE:NVO), Lilly and Astra all of whom have multiple horses in the race are being strategic about which jockeys they put on which horse.

Looked at collectively what this earnings season has confirmed is just how rapidly the diabetes drug market is transitioning to a commodity market. Basically each company has chosen where to fight and price is the blunt instrument they have chosen to fight with. They understand that payors hold the keys to the kingdom and control market share with formulary placement.

Diabetic Investor sees reality setting in for each company, that they realize where the market is going that price trumps performance. Some have already begun the process of rightsizing their franchises to deal with this, others are about too.  The race isn’t necessarily to the fastest rather to the company which rides the best overall race.