Who will deliver the eulogy?

Who will deliver the eulogy?

Yesterday Sanofi (NYSE: SNY) reported full year and fourth quarter results and as expected the diabetes franchise, once the goose that laid the golden eggs is now a dead duck. Frankly anyone who’s been reading Diabetic Investor should not be surprised by this as this is just another prediction that has now become fact. Although we are somewhat amused that all of a sudden the main stream financial press has just awakened to the fact that Sanofi couldn’t hit water if they fell out of an ocean liner.

Given that we have chronicled the demise of this franchise for some time we see no need to pile on here. The fact is no matter what the company says about this franchise, no matter how hard they try and convince investors that this franchise will rise from the ashes, the fact is when it comes to Sanofi and diabetes it’s over. The long-acting insulin market is commoditizing, they are again late to the game in the GLP-1 market and really have nothing of substance in their pipeline.

When the final chapter is written the fact is Sanofi just couldn’t execute. Like so many others in this space they could not capitalize on the huge success of one drug. They could not follow through on a strategy that at one time was the most promising in diabetes. Unlike Lilly (NYSE: LLY) or Novo Nordisk (NYSE: NVO) they did not recognize that the diabetes market was changing and if they were to survive they must change with it.

The MannKind (NASDAQ: MNKD) partnership is a perfect example of this. Rather than acknowledge the limitations of Afrezza, rather than understand just how many issues this drug would have they drank the kool aid. Like others before them they held onto the false belief that just because Afrezza was inhaled rather then injected it would be a hit. The simple fact is Viehbacher went against the advice of his own team to do this deal. That this deal was not done because Afrezza had blockbuster potential rather because Viehbacher needed to take attention away from how the existing diabetes franchise was headed for disaster.

Looking back, we cannot blame our good buddy Serge for beheading Viehbacher. Although we believe this beheading was not executed well but at the end of the day it was the right thing to do.

We also believe Olivier should be given credit for not riding the same losing horse twice. Thankfully he leaned from the Exubera disaster and ended the MannKind partnership before it became a $4 billion albatross. He should also be commended for doing what needs to be done with the franchise by balancing costs with existing market conditions. As we noted long ago the mass beheadings in diabetes have begun and this franchise will soon be a shell of its former self.

The next question is can Olivier go all the way and rid Sanofi of this franchise entirely. Would it not be better to sell the franchise, even in its current state of disarray, rather than wait for the new strategy to fail. Would it not be better to concentrate resources on other franchises which have more promising futures? To Diabetic Investor this would not be an admission of failure, this would be taking a realistic view of the market.

The fact is this franchise will not rise from the ashes. That we will not see a Lilly like turnaround. This isn’t just because Sanofi cannot execute, that’s only part of the problem. The other side of the coin is the market itself is transforming and Sanofi just doesn’t have the weapons to compete effectively. The harsh reality is when it comes to diabetes Sanofi should acknowledge the obvious and have the decency to give this franchise a proper burial.

The fat lady is singing this party is over.