Was Anyone Listening

Was Anyone Listening

Now that we have heard from the three major insulin companies – Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO) and Sanofi (NYSE: SNY) our main question is; was anyone listening? We wonder if people understand the seismic shift that is taking place in diabetes management. We also wonder if all those people who’ve been throwing these companies under the bus for the rising out of pocket cost of insulin are paying attention to what was said. It is not an overstatement to say this most recent round of earnings calls has confirmed two things; the diabetes drug market is a commodity market and the epicenter of diabetes management is located about an hour south of San Francisco.

To be honest we are still stunned by the results released by Novo and the dramatic changes that are underway at the company. This is not a gradual slow easy does it change. This is let’s blow up the factory and start all over change. Now we are not saying this change is not necessary, it is. However, as needed as it was it’s still stunning.

Consider this statement made by Mads Krogsgaard Thomsen, Novo’s Chief Science Officer during last week’s call;

“In development, we intend to increase our focus on exploring the application of current assets, such as the long-acting GLP-1 analogue semaglutide in new adjacent areas with high unmet need. In research we will maintain our focus on diabetes new projects with distinct differentiation or even disruptive potential.

Additionally, we’ll focus on disease areas adjacent to diabetes, including end organs such as the liver, kidneys and cardiovascular system. As far as this would significantly strengthen our activities for accessing normal project in the above areas, as well as generally enhancing external academic collaborations and strategic alliances in the pursuit of new biologic target.”

Listen we’ve been covering Novo for 20 plus years now and never ever not in million years did we ever think we would hear this company with deep roots in diabetes state they would starting looking at diseases outside of diabetes. Diabetes is part of Novo’s DNA. This is like asking the Cubs to ripe the ivy off the walls at Wrigley.

Take a close at this statement made by Peter Guenter Executive Vice President and General Manager, Diabetes & Cardiovascular for Sanofi;

“Actually, there are two key messages here. Number one, despite the decline in the percentage of covered lives on commercial plans, the overall coverage situation for Lantus and Toujeo will remain favorable with two thirds of commercial lives confirmed to be covered in 2017. Number two, as you can see from the green bars on the bottom of the slide, preferred formulary status of Lantus and Toujeo under Medicare Part D will remain largely unchanged in 2017 with close to 90% coverage in 2017.

I remind you that the split in terms of volume between our commercial business and Medicare for the glargine franchise is overall roughly one-third each with the balance being in the government channels. As far as the commercial lives are concerned, coverage decisions from a number of commercial plans are still pending, representing about 15% of commercial lives based on our current account analysis and available third-party data. These pending decisions are illustrated by the gray segments in the bar charts on the top and mainly represented by custom plans under CVS and other smaller regional plans.

We continue to be in active discussions with these insurers, but we are optimistic that many of these plans will ultimately decide to cover Lantus and Toujeo. Along these lines, we were recently successful in retaining coverage for the large CVS custom clients, Blue Cross Blue Shield’s federal employees, which represents roughly 5.4 million lives.

In summary, you can see that the decline in covered lives under commercial plans in 2017 for both brands is mainly due to the previously communicated exclusion decisions by CVS and to a lesser extent United Healthcare.”

Now we know it’s his job to speak corporate crapolla but seriously the ship has hit the iceberg, it’s taking on water getting ready to sink and he’s telling the passengers it’s not as bad as it looks. Which in some respects is true as it’s a lot worse as these lost sales will never be recovered nor will they be replaced with anything that’s in the pipeline.

Diabetic Investor has heard from many in the diabetes world who say that Toujeo is a very good insulin and superior to Lantus.  We don’t dispute this but once again the company missed the point as they over-sold the supposed hypoglycemic improvement. They failed to anticipate that payors would not pay a premium for a drug that was only incrementally better than Lantus. But by far the biggest issue they missed was that payback is a bitch, after years of shoving price increases down the throats of payors when Lantus was the only game in town, would come back to haunt them.

Yes, it’s true when have been overly harsh on Sanofi management but quite frankly they deserve it. Everything they have touched in diabetes not called Lantus has failed. Even worse is they never took ownership of their mistakes. Unlike Novo or Lilly, they never acknowledged that drastic action was needed.

Our good buddy Serge said the organization, management would be held accountable. Hollow words that were never followed with action. This in a nutshell has always been their problem, lots of talk but little in the way of substantive real action.

Lilly right now is about the only major diabetes drug company that sees things as they are and not as they want them to be. The drastic action they took years ago is paying off today. Even better they understand that we are never going back to the good old days, that the reimbursement environment has changed forever. Most importantly they understand that going forward they are in for a very tough fight. They may have the deepest lineup in diabetes therapy’s but they also know that their competition won’t merely roll over and play dead.

The secondary message from these companies is like diabetes device companies the drugs they make are just pieces to a puzzle. That in many respects the drugs they make are interchangeable.  Just as it doesn’t matter which diabetes hardware a patient uses; it doesn’t matter which drugs they use. Yes, there are some exceptions but not many.  The tools used to treat diabetes both drugs and devices have become a commodity.

We hate to be repetitive but going forward it’s systems that matter. Systems which won’t come out of Indianapolis, Denmark or Paris. This is not what these companies are good at and quite frankly nothing is going to change that fact. This does not mean they cannot be part of the future, rather their role in the future will be much different than it has been in the past. Sanofi should be given credit for partnering with Google, but like so many things Sanofi we aren’t expecting much success.  It’s well known that Sanofi has a less than impressive with diabetes partnerships.

The fact, yes those pesky facts again, is that many messages came out of these three earnings calls. We just wonder was anyone listening.