Things are about to get interesting

Things are about to get interesting

This afternoon we learned that the FDA has officially accepted the resubmission of Tresiba® and Ryzodeg®. According to a press release issued by Novo Nordisk (NYSE:NVO);

“Novo Nordisk today announced that the US Food and Drug Administration (FDA) has accepted for review the Class II Resubmissions for Tresiba® (insulin degludec) and Ryzodeg® (insulin degludec/insulin aspart).

To preserve the integrity of the ongoing DEVOTE trial, only a small team within Novo Nordisk has access to the data. This team has prepared the interim analysis for the Class II resubmission and will interact with the FDA during the review on matters related to the interim analysis.

As previously communicated, the result of an interim analysis carries a higher level of uncertainty than the final study results as this preliminary estimate is built on a substantially lower number of observations. Accordingly, the relative risk estimate derived from the interim analysis is thus only an indication of the final trial results.

Novo Nordisk management does not have access to the results of the interim analysis. The trial is expected to be completed in the second half of 2016.”

As the release makes clear the fact that the FDA has accepted this resubmission guarantees nothing. However should the FDA eventually approve the drugs it will intensify the pressure on Sanofi (NYSE:SNY) who recently launched their new long-acting insulin Toujeo. This move is also being watched closely by Lilly (NYSE:LLY) as they also have a long-acting insulin under development plus the generic version of Lantus which has already been tentatively approved by the FDA.

Diabetic Investor remains convinced that no matter what happens with Tresiba or Ryzodeg, the insulin market will continue its march towards commodization. Just as Toujeo is not that much better than Lantus, Tresiba isn’t that much better than Levemir. Like Toujeo, Tresiba does not offer physicians a compelling reason to switch patients. The same goes for reimbursement and formulary placement as payors are in mood to pay a premium for incrementally better drugs. Even more so since they know a generic Lantus is coming down the road.

As we have noted previously all the insulin companies have some tough choices to make. Given the pricing and competitive dynamics of the market they must decide where, when and how hard to fight. They must decide how much capital they want to spend on sales and marketing.  Should our belief that payors will demand lower prices, higher rebates or both come true, and we suspect it will, every battle will become critical to Novo, Lilly and Sanofi. None of these companies can afford a major blunder as each share point is significant.

It won’t be long before we know whether Lilly’s strategy of offering a complete diabetes drug portfolio will start paying off. Yes we know that payors prefer single source contracting but we also know they prefer lower pricing more. We hate to repeat ourselves but this is all about money, who makes it and who saves it.