We live in strange times

We live in strange times

“J&J to Cut 3,000 Jobs in Bid to Revive Struggling Medical-Devices Unit” This was the headline of a story that appeared in today’s edition of the Wall Street Journal. The shocking part of this news is the company’s diabetes device units which are part of the overall medical device unit, LifeScan and Animas were not impacted by these job cuts. This says two things – first Johnson and Johnson (NYSE: JNJ) has already cut deep enough from the diabetes device units and second these units have stabilized are now rightsized for current market dynamics. Now this doesn’t mean things won’t change in the future but for the moment things are stable.

The same cannot be said for our wine drinking friends in France as Diabetic Investor has learned that major layoffs are coming and the company’s struggling diabetes unit will be hit and hit hard. Frankly this news should shock no one as Sanofi (NYSE: SNY) CEO Olivier Brandicourt telegraphed this news when he outlined his vision of the company’s future back in November. Nor should it shock anyone since it’s impossible to fire anyone employed in France or Europe that the brunt of the cuts will hit US employees the hardest.

Truth is we wouldn’t be shocked if AstraZeneca (NYSE: AZN) followed Sanofi’s lead and also downsized their diabetes unit.

It’s about time people woke up and accepted a few facts;

  1. Lilly (NYSE: LLY) and Novo Nordisk (NYSE: NVO) are the dominate players in the diabetes drug space.
  2. The diabetes drug market HAS become a commodity market.
  3. For a multitude of reasons companies in this space can no longer afford to employee an army of very expensive sales reps.
  4. Payors continue to hold the keys to the kingdom and their position is getting stronger not weaker.
  5. Innovation will be rewarded BUT it must be real innovation not just incremental improvements of existing therapy options.
  6. When it comes to the injectable space- insulin and GLP-1’s – delivery systems matter.
  7. Pharma companies better find a way to differentiate their me-too copycat drugs from their competitors or price will be the only weapon they will have.
  8. The price war that no one wants will become a self-fulfilling prophecy and it will be brutal.
  9. One hit wonders like Januvia and all the SGLT2’s will not be immune to price sensitivity.
  10. Basaglar the biosimilar version of Lantus from Lilly is just the first biosimilar insulin that will forever alter the once lucrative insulin market.

Here are some other items that will impact the drug space.

  1. Yes, some of the drug companies will be dumb enough to enter the device area with insulin delivery systems being the focus of their attention.
  2. It’s only fair then that some device, insulin pump companies in particular, start selling insulin.
  4. Large pharma will NOT be able to buy their way out of the problem.
  5. Data will become the new currency and not just traditional data like Hba1c or cardiovascular studies. Look for additional biomarkers to start appearing in clinical studies as companies try and differentiate their me-too copycat drugs.

Yes, we certainly live in strange times but then again what fun would it be if we didn’t.