Upside Down

Looking at the results released by Novo Nordisk and listening to the call anyone who’s been following this company for more than a few years must feel like the world has turned upside down. While it’s difficult to imagine today it wasn’t that long ago that insulin sales were driving Novo and GLP-1 sales were a mere afterthought. Today the exact opposite is true, now that insulin has fully commoditized sales of insulin are a mere afterthought while sales of GLP-1 continue to fuel the Novo earnings engine.

Sales of Ozempic® their once weekly GLP-1 and initial sales of Rybelsus® their once daily oral GLP-1 are driving growth. Not surprisingly sales of Victoza® their once daily injectable GLP-1 have been negatively impacted by the strong Ozempic sales and introduction of Rybelsus. A trend which we suspect will continue in the coming quarters.

Thankfully for Novo sales of Saxenda®, which is Victoza marketed for obesity, have been growing partially offsetting the decline in Victoza sales. Moving Victoza from diabetes to obesity is one the smartest moves ever made by Novo.

Looking at the pipeline Novo has some interesting long-acting compounds but nothing that jumps out as a possible blockbuster. Head to head we’d have to say at the moment Lilly has a more robust pipeline.

As expected, the Q&A sessions was focused on Rybelsus and as anticipated the company was guarded with their comments. Here’s what they did say – at the moment coverage in the US has reached 75 million lives which is approximately a 30% coverage level. This isn’t really all that surprising given how early it is in the drugs launch. Given how important this product is to Novo we suspect coverage levels will increase in the coming quarters.

One surprising note came when the company was asked if patients using Rybelsus came from other injectable GLP-1’s or converted from oral meds. While early the company noted that between 70 to 80% of the patients have converted from oral meds. To us this indicates a few things. First physicians are following their typical pattern of testing something new on a select group of patients, getting feedback before prescribing the drug to a greater percentage of their patients. Second, physicians have fully embraced GLP-1 therapy and now that they have an oral GLP-1 will move more quickly moving patients from other orals to Rybelsus. We don’t necessarily see this hurting the sales of injectable GLP-1’s as should the patient not like the Rybelsus dosing regimen the next step would be Ozempic or Trulicity, not insulin.

The fact is insulin sales already suffering from commodization will be hurt more by Rybelsus than other injectable GLP-1’s. In the old days before GLP-1’s when orals failed it was a straight, excuse the expression, shot to insulin. Today GLP-1’s have replaced insulin as the preferred therapy add-on when orals fail. With Rybelsus now available it’s not surprising that physicians use it before an injectable GLP-1 for their patients failing on other orals. These patients are already familiar with oral therapy and the dosing regimen while complex likely won’t bother these patients too much. Even if it does the next step is another GLP-1.

This continued growth in the GLP-1 segment has broader implications for the insulin and insulin delivery markets. Although the company did not mention their version of Tyler, we are beginning to see his introduction as a defensive rather than offensive move. What Novo, Lilly and Sanofi want to do is to prevent insulin using Type 2 patients from switching to GLP-1 therapy and Tyler is their answer to this. The same can said for any insulin pump company as well many of their patients are insulin using Type 2’s who convert from multiple daily injection (MDI) therapy to a pump.

The reality is no matter how well Rybelsus does its mere presence as a therapy option is changing the dynamics of the Type 2 market. The discussion is no longer which insulin to put a patient on when orals fail, the choice now is between GLP-1’s do they add Rybelsus or a once-weekly injectable. While its way too early to tell how Rybelsus will impact insulin and insulin delivery systems sales there is no question in our mind it will.

This does not mean insulin use will fall by the wayside as there are still plenty of Type 1’s and insulin using Type 2’s around. Rather insulin will fall further down the treatment paradigm chart for Type 2’s failing orals.

Now that Novo and Lilly have reported we await Sanofi who reports tomorrow morning. Without seeing anything in advance we already know when it comes to diabetes the results will suck and not just because the company has pretty much said they will suck. The problem, well one huge problem anyway, is that Sanofi unlike Novo and Lilly never transformed themselves from an insulin company to a GLP-1 company. They tried but in typical Sanofi fashion failed.

Novo and Lilly have basically turned their diabetes franchises upside down, putting GLP-1’s ahead of insulin. Lilly has gone one step further than Novo building a comprehensive portfolio of diabetes therapies. However, and again its early, if the early trends continue Novo may have leveled the playing field a little with Rybelsus. Regardless these two diabetes heavyweights continue to battle it out while Sanofi slowly fades away. Some things never change.