The high cost of arrogance
It’s no secret that no one likes to lose. As Momma Kliff used to say; “Losing is part of life. This does not mean you have to like it but you do have accept it and hopefully learn from it.” Well it seems the wise words of Momma Kliff are falling on deaf ears in our wacky world. Word is spreading that the Google/Sanofi partnership is in very rocky shape and could be ending sooner rather than later.
Yes, it seems our French friends are very displeased with the how things are going. That with nothing to speak of in their diabetes pipeline and their existing franchise in shambles it might just be time to go it alone. A move which would come at a step price which does not seem to concern our Chardonnay drinking friends. Rather than take ownership of the problems between the company and our friends in the valley better to throw good money into a very bad idea.
This would not be the first diabetes partnership that has failed, far from it. Keep in mind this is a company who at one time was partnered with Medtronic and MannKind. Both partnerships ending in failure. This is also a company that thought they could do what no drug company has ever done and be successful in the diabetes device business. They have yet to learn a critical lesson drugs are one market and devices are another and the two don’t mix very well.
Yet Sanofi is not the only drug company paying a high cost for their arrogance. Lilly seems to be falling into this same trap with their ill-advised venture into the insulin pump business. Rather than buy their way into this market the company is going it alone developing their own way cool whiz bang toy which in the end will be no different than any of the other way cool whiz bang toys.
Think about this just for a moment, Lilly could have easily acquired Tandem for a few hundred million, established an immediate presence and continued to work on their own way cool whiz bang toy. Buying Tandem would have provided the infrastructure they will need, brought with them some nice toys under development while still allowing them to work on their own toy. Yes, Tandem was not without their issues but none of the issues were unsolvable.
This morning we noted that other than insulin pens Novo Nordisk does not seem interested in entering the crowded and ultra-competitive insulin pump market. Which as we noted is surprising as Lilly and Sanofi are entering. To us this shows that Novo may be many things but stupid is not among them. Yes, as we noted this morning the company has problems but thankfully they are not compounding these problems with an ill-advised move into the insulin pump market.
Watching all this are our friends in Libertyville who everyone seems to believe will be entering the insulin pump market by buying Bigfoot. As we noted many times one huge advantage Dexcom has over Abbott in the CGM space is their multiple partnerships with insulin pump companies not named Medtronic. Everyone just assumes that for the Libre to compete head on with the G6 Abbott musty have an insulin pump. Besides an insulin pump Bigfoot also has their version of a Tyler plus the shave club for men pricing model.
Yet what no one has asked is does Bigfoot want to sell. Do they really want to tie their future to a company that will have a difficult time adjusting to the innovative approaches being taken by the company. As Momma Kliff always said money does buy lots things. But here with the diabetes device space hotter than Georgia asphalt Bigfoot may decide to hold out for a better offer. Situated in the valley the company may believe their neighbors may come a calling.
Getting back to the rocky Google/Sanofi partnership. Let’s say Sanofi pulls a Sanofi and decides to go it alone, what then will Google do. Well when you have boatloads of cash, generate even more cash everyday the company has a plethora of options. Everything from doing nothing to going big is on the table. Best of all they are no rush to do anything and can take their sweet time deciding.
However, in the back of their minds, more like right around the corner from them are those folks who just moved into their swanky new headquarters. Another company with gobs of money who also are diving into the diabetes pool. And just as arrogance is endemic in the diabetes drug community its very alive and well in the valley.
Should Sanofi payoff Google a whole new set of dominos would be set up ready to fall. This reminds us of what happened to my alma mater when Kansas came and hired Bill Self as their basketball coach. This move set off a chain reaction in the college basketball world with several notable coaches changing uniforms.
As it stands today no one is saying anything publicly but privately depending on who you talk with this is all but a done deal. Everyone is talking and as the old saying goes where there is smoke there is usually a fire. The fact is no one should be surprised as Sanofi has never ever had a successful diabetes partnership and are notorious for being extraordinarily difficult to work with.
It was funny at the end of the last Sanofi earnings call an analyst asked whether the company was overly provincial. That there was a perception that the company was too French oriented. Better still it was asked in a serious thoughtful manner. The company tried to make light of the question but the fact is the analyst was spot on. Sanofi is about to pay a heavy price for their arrogance which is the Sanofi way.
