This isn’t the answer
This morning Sanofi (NYSE:SNY) announced that the LixiLan-O Phase III clinical trial met its primary objective in patients with type 2 diabetes treated with metformin. LixiLan is their once-daily combination of Lantus and Lyxumia. According to a company issued press release; “The fixed-ratio combination of insulin glargine 100 units/mL and lixisenatide, a GLP-1 RA, demonstrated statistically superior reduction in HbA1c (average blood glucose over the previous three months) compared with lixisenatide and compared with insulin glargine 100 units/mL. Overall, the fixed-ratio combination had a safety profile reflecting those of lixisenatide and insulin glargine 100 units/mL. “
Now before everyone starts jumping for joy this news while positive needs to be kept in perspective as Novo Nordisk (NYSE:NVO) has already received approval in Europe for their combo product Xultophy. Besides coming to market after Xultophy, LixiLan faces another hurdle as Sanofi lacks any real experience in the GLP-1 category a stark contrast from Novo.
Tomorrow we should gain additional perspective on just where the Sanofi diabetes franchise is and where it’s going. Yes the company will likely tout this study but the fact is LixiLan even if eventually approved really won’t change much for the company. Sales of Afrezza, Toujeo and Lantus are more pressing issues.
Diabetic Investor remains convinced that Olivier will begin rightsizing the diabetes franchise here in the US. That the recently announced departure, actually another Sanofi beheading, of Pierre Chancel is just the first of several changes to this struggling franchise. A franchise which has seen more than its fair share of executive changes, some voluntary others well…..
Frankly Diabetic Investor does not envy the challenges faced by Olivier. Not only must he deal with pleasing the French government, unions and European officials he must also please stakeholders who’ve seen shares of Sanofi basically go nowhere these past few years. He has walked into a mess when it comes to diabetes and must navigate his way out of this mess as the dynamics of this market continue to deteriorate. Competition continues to intensify at the same time payors are pressing for even greater price reductions and/or greater rebates.
We highly doubt that our good buddy Serge and his fellow board members would provide Olivier with the freedom to be truly bold. Yet this is just what the company needs right now as cost cutting might fix things in the short term but won’t do much for the long term. As we’ve said before for the Sanofi diabetes franchise it’s either go big or go home. Either fill the gaping holes in the portfolio or exit the market. Quite frankly there is no middle ground given where rivals Novo and Lilly (NYSE:LLY) are today.
Sanofi does not have the time to develop a pipeline that isn’t filled with me-too copycat late to market drugs. They must deal with the here and now or risk becoming an also-ran in the diabetes space. This is why exciting the market as crazy as that may sound is not off the table. Olivier could easily reason better to sell now and then reallocate this capital to more promising franchises.
Looks like tomorrow will be a wacky fun day stay tuned.
