This would be funny if it wasn’t sad

This would be funny if it wasn’t sad

Shares of Sanofi (NYSE:SNY) continue to plummet today so far down almost 10% for the day, given what the company stated this morning during their earnings call this is not unexpected. What amazes Diabetic Investor is how Sanofi’s announcement is impacting shares of other diabetes drug companies – shares of Lilly (NYSE:LLY) off almost 4%, Novo Nordisk (NYSE:NVO) down nearly 5%, Merck (NYSE:MRK) down almost 3%. Ironically shares of AstraZeneca (NYSE:AZN) are up almost 1% as are shares of MannKind (NASDAQ:MNKD) up over 5%. (More on these last two a little on.)

Even funnier is some of the notes and statements made by analysts who cover these companies; here are just a few examples.

“MRK: Stock getting hit on what we think is a weak SNY read across. SNY is highlighting issues with basal insulins. There are two of them (SNY and Novo). MRK has already seen pricing pressure on Januvia over time. Schott struggles to see a real read across here and if anything seems like a SNY/NOVO issue. Competitive dynamics in DPP-4s have been playing out for a couple years now. On the LLY side, there is the extrapolation that diabetes will face pricing wars and on Lantus specifically, LLY is launching a biosimilar Lantus in 2016. The broader bear case that some have pointed out is that is all about rebates and price increases are now a net negative in a market with several players.”  J P Morgan

Thanks to an excellent post by Pharmalot –

“There are battles to be fought now and where the payers can see a battle they can win, they’re definitely getting more effective at fighting them,” Berenberg health care analyst Alistair Campbell tells Moneybeat”

“Now that Sanofi says that the outlook next year for its global diabetes sales is expected to be flat, an “undisciplined” price war among drug makers may break out, at least according to Leerink analyst Seamus Fernandez.”

The entire post can be found at http://blogs.wsj.com/pharmalot/2014/10/28/sanofi-diabetes-outlook-signals-an-undisciplined-price-war-may-erupt/?mod=yahoo_hs

Once again we hate to brag but we must as Diabetic Investor has been stating these exact same sentiments well ahead of these analysts who have all of sudden found religion.  The fact is when it comes to the diabetes drug market it has turned into an all-out war with the combatants using any means necessary to win.

Now turning our attention as to why Astra and MannKind shares are up today; let’s look at MannKind first. Diabetic Investor senses that investors believe that now that Sanofi has admitted they have issues they will be even more aggressive with the partnership.  That somehow magically Sanofi can turn Afrezza into a blockbuster product, that they can overcome the many issues with this product and most of all overcome their past and actually do something right other than Lantus.

Well we hate to be the bearer of bad this but expecting Sanofi to get it right with MannKind is like expecting Jay Cutler to become an elite quarterback during the Bears bye week. As we noted this morning Sanofi diabetes needs a major overhaul, a fresh start. Either that or the company should admit defeat and go quietly into the night. As constructed today Afrezza will be no more than a niche product with sales in the millions NOT billions.

Astra is a different story as there are two possibilities why shares are up. The first could be that analysts are waking up to something else we’ve been stating for months, the company’s diabetes portfolio has value and would make a great fit elsewhere.  Now that these analysts realize that Sanofi is in major trouble what better way to get out trouble than by making a major acquisition. Mark our words over coming days and weeks all sorts of reports will come out on who will be acquiring the Astra diabetes portfolio.

The second scenario isn’t as exciting as the first as given the job Astra has done with the diabetes portfolio it’s quite possible even likely investors don’t know they have a diabetes portfolio; a portfolio which has been thrown together through a crazy conglomeration of deals. As we have noted on several occasions it’s difficult enough to execute a strategy, yet even more so when there is no strategy to execute. Astra stakeholders must be ruing the day management rejected Pfizer (NYSE:PFE).

It should be noted that shares of Johnson and Johnson (NYSE:JNJ) and GlaxoSmithKline (NYSE:GSK) both in the diabetes drug space are also down slightly today but we don’t see this directly related to the Sanofi news.

Now Diabetic Investor does not want to be overly harsh on the analysts who cover these companies. As we call this the wacky world of diabetes for a reason; a world where anything can and usually does happen. We just find it somewhat funny that all of sudden because Sanofi finally acknowledged what has been obvious they have changed their tune.  It would be funny if it wasn’t sad as call us crazy but isn’t part of being an analyst doing more than believing what companies like Sanofi have to say, to protect the people they serve so they are not blindsided by events such as today.