The fight intensifies

The fight intensifies

For months now Diabetic Investor has been reporting on how the competitive landscape in the diabetes drug market is changing. About how this space is becoming an all-out battle between heavyweights. As this market continues to move ever closer to a commodity market where price trumps performance, diabetes drug companies are using whatever means they have at their disposal to gain favorable formulary status. That as much as they dislike it the price war that no one wanted has arrived.

While drug companies have always attempted to differentiate the drugs they have against what the competition offers in today’s environment an arms race is developing. Besides the many studies that compare one drug against another diabetes drug companies are also adding new weapons to their arsenal. Sanofi (NYSE:SNY) has partnered with Google, Novo Nordisk (NYSE:NVO) is making new investments while partnering with MIT to develop novel delivery systems. Not to be outdone Lilly (NYSE:LLY) has a renewed interest in developing new delivery platforms. And every company in their own way is jumping into growing field of diabetes related apps.

With the EASD conference going on this week in Stockholm Diabetic Investor is seeing an escalation to this arms race. First we heard from Sanofi who released positive study data for their insulin/GLP-1 combination LixiLan. Novo countered with data for their combo product Xultophy, which is approved in Europe. In a strange bit of irony both combo products are stalled at the FDA as Novo is awaiting approval for Tresiba and Sanofi Lyxumia. Today Novo added more fuel to the fire releasing study data which shows Victoza outperforming Lyxumia.

Not content to outdo Sanofi in the growing GLP-1 space Novo has Sanofi’s newest insulin Toujeo squarely in their sights. Sanofi’s big selling point for Toujeo has been a lower incidence of hypoglycemic events. Well according to study data released by Novo yesterday; “New data presented today at the 51st annual meeting of the European Association for the Study of Diabetes (EASD) show that patients with type 2 diabetes receiving the U200 formulation of Tresiba® (insulin degludec) experienced significantly lower rates of confirmed hypoglycemia and significantly reduced mean fasting blood glucose compared to those receiving insulin glargine U1001 . Tresiba®” As of today Sanofi has yet to counter with data of their own for Toujeo.

Lilly seems intent to stay out of this cat fight and has been unusually quite at the EASD. AstraZeneca (NYSE:AZN) has also been relatively quite as well.

We sense that Novo is looking to deliver a knockout blow to Sanofi, or at minimum inflict some serious damage. The company sees the same thing we do as the Sanofi diabetes franchise continues to struggle. Afrezza and Toujeo sales continue to underwhelm and the pipeline even with the positive LixiLan data is weak. They know that Sanofi has had to discount Toujeo and that Tresiba will likely receive FDA approval in the not too distant future. An event which will set the stage for a yet another battle between the two companies.

We further suspect both Sanofi and Novo have resigned themselves to the fact that Lilly’s biosimilar version of Lantus will eventually arrive in America. Given how Lilly has priced this drug in Europe it appears that Novo and Sanofi will have a major fight on their hands once the drug arrives here in the States.  Rather than see an all-out price war in the long-acting insulin market Novo and Sanofi are doing what they can to position their respective long-acting offering as the best of the “premium” area.

The way we see it the long-acting insulin market will become divided into two segments, value and premium. A segment which will be a battle between Lilly and Sanofi as Diabetic Investor believes Sanofi will greatly discount Lantus to remain competitive in this segment. On the flip side Novo and Sanofi will battle it out in what we call the premium segment with Tresiba pitted against Toujeo.

Given that Sanofi has no current presence in the expanding GLP-1 market and that they are already well behind the curve this market will be a battle between Novo, Lilly and Astra. Here Novo is at somewhat of a disadvantage as they lack a once-weekly GLP-1. Yet looming on the horizon they have an oral version of semaglutide while Intarcia has their implantable exenatide pump. Should both of these products reach the market and we suspect they will, they will forever change the balance of power in this expanding category.

Basically the way we see it the battle lines are being drawn and reinforced. Lilly for their part remains committed to the have it all strategy. Given their lack of oral drugs Novo has decided that better to take on Sanofi directly rather than fight with Lilly directly. By Novo’s thinking if they can eliminate or minimize Sanofi in the insulin market it will provide a buffer against what Lilly is doing. Novo is confident that while Lilly has a once-weekly GLP-1 their oral version of semaglutide will eventually dominate the GLP-1 category.

AstraZeneca is caught in the unenviable position of fighting a war on multiple battle fields. In the oral category they are not just fighting Lilly but Merck (NYSE:MRK) and Johnson and Johnson (NYSE:JNJ). In the GLP-1 market they are fighting Lilly, Novo, GlaxoSmithKline (NYSE:GSK) with Sanofi and Intarcia coming to the fight.

We remain firm in our belief that Lilly and Novo are in the best position to survive this fight. Both companies have committed to a well thought out strategy. More importantly both have shown they can execute, yes both have stumbled in the past but for the most part they have shown they can recover from these missteps. This is in sharp contrast to Sanofi who other than Lantus has had one disaster after another in diabetes. AstraZeneca is the most difficult company to gauge as just when it looks like they are finally getting their act together something new develops which makes one wonder just what the heck are they thinking.

Even though it’s unlikely to happen the best thing that can happen to Sanofi and Astra is for one to buy the other. Although a combined diabetes portfolio of these two companies wouldn’t be perfect it’s better than the two standing independently.

Yes this battle and arms race is intensifying and the way we see it when the smoke clears it will be Novo and Lilly standing. Both will be wounded from the experience yet both will survive. The same cannot be said for Sanofi and Astra.