Tomorrow could be exciting

Tomorrow could be exciting

Considering what’s going on at the soap opera once known as Sanofi (NYSE:SNY), Diabetic Investor is anxiously anticipating the earnings announcement for Novo Nordisk (NYSE:NVO) which is scheduled for tomorrow morning.  Like it or not the Novo management team will be bombarded with questions on how they see the insulin market. Over and over they will face questions on the impact of pricing pressure, sales forecasts, and the changing competitive dynamic of the market. This should not come as a shock to management and if it does and they are not prepared well then they have bigger problems than Sanofi does.

Thankfully for Lars Rebien Sorensen, Novo’s CEO he won’t be facing questions about being replaced. As we are not aware of any secret meetings by the Board of Directors discussing such a move; nor are we aware of any rumors being spread by Danish media outlets or unions. Mr. Sorensein is likely thankful the company is based in Denmark and not France and he doesn’t have to worry about being “Danish” enough.

Yet for Novo there is an additional twist that should make this call really fun as it will be the company’s first public comments since they announced they were under investigation by the US Attorney for the District of Massachusetts. Yes just a few short days ago the company issued the following press release:

“Novo Nordisk today announced that it has been served with a subpoena by the office of the US Attorney for the District of Massachusetts requesting documents regarding potential manufacturing issues within certain production units located in Kalundborg, Denmark.

Novo Nordisk is cooperating fully with the US Attorney in this investigation. At this time, Novo Nordisk cannot determine or predict the outcome of this matter or assess the consequences thereof. In addition, the company cannot predict how long the investigation will take or when it will be able to provide additional information.

Novo Nordisk takes patient safety and product quality very seriously and is confident in the safety of its products.”

So not only will management come under fire due to the Sanofi soap opera, gas will be thrown on the fire now that this investigation has gone public. While we can’t say for certain we bet the good people at Lilly (NYSE:LLY) are thanking their lucky stars that they announced their earnings before Sanofi did.

A feeling reinforced with news today that the company has revised the terms of their partnership agreement with Boehringer Ingelheim. According to a company issued press release; “In a move that will strengthen their alliance by enhancing efficiencies and enabling greater focus on product launches, Boehringer Ingelheim and Eli Lilly and Company (NYSE: LLY) are changing the operational and financial structure of their diabetes alliance in certain countries. Under the revised agreement, 17 countries representing more than 90 percent of the alliance’s anticipated market opportunity will continue their co-promotion work. In all other countries, the companies will exclusively commercialize the respective molecules they brought to the alliance.”

Lilly did not elaborate publicly as to what prompted this move, a move which was likely in the works before they announced earnings. Guess the folks in Indy decided better not have to face questions about why the move was made. As they say timing is everything.

Getting back to tomorrows Novo call, this news from Lilly combined with soap opera at Sanofi will just make matters worse as analysts smell blood in the water as many of them were caught flat footed by the Sanofi news and if there is one thing we can almost guarantee; when analysts have been embarrassed as they were with Sanofi they will be relentless in their questioning of Novo’s management.

Now Diabetic Investor really has no idea what to expect from Novo and honestly we were anticipating more of the same before the Sanofi and Lilly news. The company like everyone else is struggling to deal with the new dynamics of the diabetes market, their pipeline isn’t all that exciting, their competitors continue to fight aggressively for each share point and payors want greater price reductions and/or larger rebates, in other words nothing much different than last quarter or the quarter before that. The fact is this market has been evolving over the past few years and the seeds planted during this evolution are beginning to yield fruit.

Perhaps we should look at this from a different perspective as recently these calls have become pretty boring and rather predictable.  Although we’re pretty certain Novo doesn’t feel this way and would prefer root canal work rather than having to face what will likely be a series of tough questions. There’s blood in the water and the sharks are hungry. Welcome to the new and even wackier world of diabetes.