The Goose is cooked
“Sanofi recently managed to secure earlier and broader market access for Toujeo® than expected due to a refined contracting strategy with payers in the U.S
“Lantus® sales were down 5.0% to €1,584 million over the period reflecting lower sales in the U.S., which were partially offset by strong growth in Emerging Markets. In the U.S., sales of Lantus® were €1,007 million, a decrease of 13.1% due to the expected rebates required to maintain favorable formulary positions with key payers for contracts that started January 1, 2015.”
“Sales growth is primarily driven by the underlying volume growth of the insulin market and continued market share gains for Levemir®.”
The first two quotes come from a Sanofi (NYSE:SNY) earnings release the third from Novo Nordisk (NYSE:NVO) who also released earnings this morning. What these statements really say is when it comes to diabetes at Sanofi the goose that laid the golden eggs is now a dead duck and it won’t be long before this franchise is a mere shell of its former self. As Diabetic Investor predicted Sanofi has had to sell their soul to payors in order to keep Lantus on formulary and make similar deals to get Toujeo on formulary.
The news was equally bad for MannKind (NASDAQ:MNKD) as Sanofi noted sales for Afrezza barley exceeded $1 million, a number which included wholesaler stocking. While we’re sure the MannKind zealots will find something good from this number the fact remains that Afrezza is what we said it is – nothing more than a niche product. In a somewhat ominous sign new CEO Brandicourt noted that when it comes to Afrezza it will take time, not exactly a ringing endorsement.
Looking over the results and listening to the call it’s looking more and more as though the company is pursuing a strategy outlined by Diabetic Investor. As we have stated previously given the ultra-low almost non-existent margin on Afrezza and the size of the long-acting insulin market better to allocate resources towards Toujeo. This is exactly what the company is doing. They know that Toujeo stands a better chance at being profitable and has a ready-made built in market.
The fact that Sanofi is supporting Lantus and Toujeo with more aggressive pricing and higher rebates should send a very clear signal to anyone who believes the company is fully committed to Afrezza. Diabetic Investor does not believe the company will completely abandon Afrezza, at least not yet anyway. However given the dismal results for the entire diabetes franchise and the equally dismal outlook for this franchise the possibility exists that Brandicourt in an effort to shake things up starts shopping the franchise.
Given that the company has just 3 diabetes products in the pipeline and two of them are me-too copycat way late to market products it doesn’t appear the company is committed to the space for the long-term. Add in the fact that the diabetes drug market and insulin market in particular has become a bloody street fight and the possibility of a sale becomes a real possibility. As we have noted several times the company just might find a willing buyer with AstraZeneca (NYSE:AZN) who needs insulin to more effectively compete with Lilly (NYSE:LLY).
The bottom line for Sanofi is their diabetes moment has come and gone. Lantus had a great run but that run is quickly coming to an end. Toujeo will likely hold its own but will never make up for the revenue lost when the generic Lantus hits the market. Afrezza will end up being nothing more than a costly distraction for the company and could well end up as yet another failure in diabetes.
The question is will Brandicourt have the vision or will he be allowed to sell the franchise while it still has value, while there are willing buyers who would take this franchise off their hands and pay a nice multiple to boot. Or will he just strip the franchise cutting costs in a desperate attempt at maintaining profitability. Given that our good buddy Serge has noted that acquisitions are not in Sanofi’s future we see it as highly unlikely that Brandicourt would throw more money at the franchise.
The reality is the party is over for Sanofi and diabetes. It was a good run while it lasted but as Momma Kliff used to say, and she has been quoted by many, all good things come to an end eventually.
