The Fat Lady is singing

When we first heard the news that at long last Sanofi is calling it quits in diabetes, we had to check our calendar to make sure it wasn’t April Fool’s day. But nope it really is December 10, 2019 and yes at long last Sanofi is throwing in the towel, admitting defeat and moving onto hopefully greener pastures. This once mighty franchise which generated billions in profits is now just a distant memory.

The real question which we have and remains unanswered is what this means for Onduo their diabetes partnership with Verily. Could it be that Mr. Hudson who deserves a ton of credit for having the stones to do what needed to be done is seeking a buyer for what remains in diabetes? As poorly as this unit has been managed in the past it does hold value and could serve as the launching pad for another company interested in making the deep dive into diabetes.

Keep in mind besides Lantus, the company does have a biosimilar short-acting insulin that if properly marketed could do to Novolog and Humalog what Basaglar did to Lantus. In the right hands the Sanofi diabetes assets could create a Tyler, pre-filed insulin pump reservoirs and let’s not forget about Onduo which after a very rocky start has found some direction. Frankly it would not surprise us one bit if Verily instead of buying Sanofi out of the Onduo partnership buys the diabetes assets outright including Sanofi’s share in Onduo.

Armed with these assets Verily could become the first high tech cash rich player from the Valley to transform diabetes, something everyone has been talking about but so far something no one is doing. Apple continues to flirt with diabetes but has nothing of substance yet, Amazon is making the deep dive but seems less inclined to get into the pharma sector just yet. Verily is already familiar with the Sanofi assets and could hand pick a new management team.

Keep in mind that Verily is already working with Dexcom, that Sanofi has several insulin delivery assets and insulin is commoditizing. Who’s to say that Verily cannot use the insulin assets as a means to sell other diabetes services such as sensors or diabetes management programs from Onduo. As we have noted recently it won’t be long before someone comes along and goes 100% at risk with employers managing their employees with diabetes and only getting paid for producing verifiable results. With the Sanofi diabetes assets Verily would be almost 100% vertically integrated and could easily afford to go 100% at risk.

The very prospect of this should be making Lilly and Novo Nordisk think about making an offer for Sanofi’s diabetes assets. The last thing they need is to have these assets in the hands of a company that actually knows what the hell they are doing. Up until now Lilly and Novo could count on Sanofi to do the absolutely wrong thing at the worst time and do it the worst way possible.

The reality here is these assets in the right hands have lots of value and we don’t think Mr. Hudson is done just yet. He’s proven that he’s smarter than the average bear by ending the charade and seeing this franchise for what it really is. He also likely knows that it’s better to get something than nothing, capital he could use more effectively in areas where Sanofi excels. While we have no clue what if anything Mr. Hudson will do next, but we do know one thing the Sanofi breakout session at the annual JPM Healthcare Conference in early January has become a must attend event.