Wonder how he feels today?

Wonder how he feels today?

While we listened to a replay of the AstraZeneca (NYSE:AZN) earnings call which was this morning, we couldn’t help but wonder how CEO Pascal Soriot feels today. This morning we learned that Pfizer (NYSE:PFE) who at one time had an interest in buying Astra is now paying $16 billion for Hospira. Later in the morning we learned that Sanofi (NYSE:SNY) will soon name a new CEO, a job Soriot could have had if he wanted the job. And then finally there were today’s results which were underwhelming. No we don’t feel sorry for Soriot but we have to wonder if he really is talented as everyone says he is given the recent decisions he’s made.

While the Astra diabetes franchise is holding its own many of the suspicions held by Diabetic Investor that the company was not focused on the franchise seem to be true. Like everyone else in the diabetes drug space the company openly acknowledges just how difficult this market has become.

Astra’s results also point to how many of these companies are between a rock and hard place. As the company stated sales of their DPP4 Onglyza were adversely impacted as Merck (NYSE:MRK) became more aggressive to protect their Januvia franchise. Sales of Farxiga, an SGLT2 which competes with Invokana from Johnson and Johnson (NYSE:JNJ) look strong but come at a cost. Finally Bydureon sales seem to be improving since the pen delivery device became available which makes one wonder why they didn’t get this pen through the FDA sooner. Could it be they were distracted? Now that Trulicity is here one has to wonder whether this recent growth in Bydureon scripts has legs or not.

Listen we know we sound like a broken record here but Astra really has decision to make. Without insulin in their diabetes portfolio they cannot compete effectively against Lilly (NYSE:LLY). As we just noted they must fight on multiple battlefields oftentimes deciding some battles aren’t worth fighting at all, which is what they decided with Onglyza. When they do fight as they are doing Farxiga the victories they achieve come at heavy cost, as price is the primary weapon to gain share and lower price means lower profits. Some battles which seem won today will likely be fought again soon something we see happening with Bydureon. One can only speculate where Bydureon would be had the pen been on the market sooner, had the company not been distracted.

Back when Pfizer was pursuing the company and Soriot was fending off their generous offer he made a point of noting that the diabetes franchise was one reason the company should remain independent. He gave some very aggressive growth estimates for this franchise. Estimates which today look like pure bravado rather than based on real set of facts.

The simple fact is for their diabetes franchise it’s too big to be small and small to be big. Either they find a way to add insulin to the portfolio and compete with Lilly head on, or be regulated to fighting a series of individual battles against competitors who do whatever it takes to protect their territory. This is why Diabetic Investor remains convinced that an all-out price war is inevitable, given that price trumps performance and so many of these drugs have similar results, price is the only weapon companies have if they are going to maintain share and formulary position.

We should also note that even with insulin in the portfolio this will not guarantee success nor will it stop the coming price war. What it would do is narrow the main enemy to Lilly and allow the company to develop a strategy designed to fend off one major enemy rather than fighting multiple enemies. As we said the company is between a rock and hard place.