The Natives Are Getting Restless
Rumors are swirling that Novo Nordisk (NYSE:NVO) is formulating plans to downsize their sales force and institute a series of cost cuts. Central to the rumors is the status of their once-daily GLP-1 Victoza® which is stalled at the FDA. Novo’s next scheduled public event is the release of their full year financial results on February 2nd. This assumes, of course, they don’t receive an update from the FDA before that date.
It seems as if the folks at Novo are in somewhat of a pickle as to what to do, when or if the FDA ever approves Victoza®. They see that Byetta LAR from Amylin (NASDAQ:AMLN) and Lilly (NYSE:LLY) appears on track with the FDA and based on available public information will hit the March 5th PUDFA date. They also know they have a marketing issue with Victoza® even with an approval. Just how do you convince physicians to prescribe a once-daily injectable when a once-weekly is available?
About the only true advantage Victoza® has over LAR is needle size, a secondary consideration would be there is no mixing involved with Victoza® as there is with LAR. Other than those two points, which Diabetic Investor believes will be more than offset by once- weekly dosing regimen; Victoza® doesn’t have much to brag about. For anyone who still believes that LAR needle size or mixing will be a problem Diabetic Investor suggests they review the clinical work down with LAR. In nearly every study completion rates exceed 90% and neither needle size nor mixing seemed to be much of a concern when the drug is administered just once a week.
The fact is if you take away needle size and mixing and put the results data side by side LAR is clearly the superior drug. Novo has also compounded their marketing problem given the way they’ve handled the thyroid cancer issue that came to light during the FDA panel meeting. Now some will point out that this issue could be offset by the pancreatitis issue that’s been associated with Byetta. After some initial missteps Amylin has done a pretty good job of putting the pancreatitis in context. While it’s true if this issue wasn’t around the majority of physicians who will be choosing between the two drugs understand two key facts. First, patients with diabetes are at greater risk of developing pancreatitis just because they diabetes and second, no drug is perfect for every patient. You could add in a third item, as physicians also know that should they see any signs of pancreatitis they can remedy the issue by taking the patient off the drug. Finally it should be noted that Victoza® is not immune to the pancreatitis issue.
So just what does Novo do? In some respects the FDA would do the company a huge favor by not approving the drug or delaying approval even further. This would provide the company with all the ammo they need to start laying off sales reps and cutting costs. The reality is the company has been gearing up for the Victoza® launch for some time, unfortunately all these new reps have nothing new to sell.
The real problem is what happens if the FDA actually approves Victoza®, what then? This simply is the dilemma faced by the company. If history is any guide Novo may wish to look at the situation that faced Abbott (NYSE:ABT) when they were waiting for the approval of the Navigator. Due to a series of missteps by the time the Navigator was finally approved it was the third entry into the continuous glucose monitoring category. While many considered the Navigator a solid product the fact was by time it got to market Medtronic (NYSE:MDT) and Dexcom (NASDAQ:DXCM) had already established themselves in the marketplace. In a classic marketing blunder the company decided to price the Navigator higher then there already well established competitors.
This is the conundrum facing Novo; do they try and blunt LAR’s many strategic advantages by selling Victoza® at a sustainably lower price? Having invested millions already the company could well decide in order to save face it’s better to get something than nothing at all. This would also buy the company some time to develop their long acting version of Victoza®. They could reason that the GLP-1 market is large enough to support multiple long acting offerings. The only problem with this strategy is besides LAR, Roche is also developing a long-acting GLP-1. Short of a non-approval Diabetic Investor doesn’t believe the company will abandon Victoza® entirely as the GLP-1 market is just too important.
Another possibility is the company could pursue an entirely different strategy altogether, something they have tried before with their long acting insulin Levemir®. Given that Lantus® from Sanofi-Aventis (NYSE:SNY) continues to gain share the company needed something that would provide a boost to Levemir®, something that would give physicians a reason to switch patients from Lantus to Levemir. Low and behold along comes a series of articles that seem to link Lantus to cancer. And it just so happens, that Novo by some incredible stroke of luck is ready to hit the street with material showing that Levemir carries no cancer risk.
Thankfully the scientific community stood by Lantus and the cancer risk was largely exposed for what it really was. Now can Diabetic Investor prove beyond a shadow of a doubt that Novo is responsible for the Lantus controversy? No we cannot. However, the circumstantial evidence is compelling. Just to be absolutely clear here Diabetic Investor is not saying that Novo is directly responsible for the studies being published. We just find it an amazing that a company could be so well prepared for a controversy, almost as if they knew it was coming.
The reality here is that anything, no matter how far-fetched it may seem, could happen. The fact is Novo has placed a huge bet on Victoza® and is learning they instead of holding a pair of aces, their opponent is about to draw to a Royal Flush, the best possible poker hand. What they are truly hoping for is the river card comes up empty for Amylin and Lilly so they can win the hand. As it stands today there are four cards on the table and Amylin and Lilly are holding the best hand. About all Novo can do know is bluff and try and steal the pot before the dealer turns over the river card.
