Would it matter?

Would it matter?

Now that Novo Nordisk (NYSE: NVO) has made it official and layoffs are coming it’s beginning to dawn on everyone that hey maybe there is a serious problem with the diabetes drug market. Yep, nothing like being hit upside the head with a blunt object to make people acknowledge the obvious, that diabetes drugs are commodities and its price not performance that matters. Still it amazes Diabetic Investor that in spite of all the facts, yes those pesky facts again, many still believe that if Novo could develop a “super” insulin, one that worked longer, faster, stronger things would be as right as rain.

According to piece in the Wall Street Journal –

“Now, the company has its sights on new categories of insulin. Among them: one that selectively acts on the liver; one that can be taken as a tablet, not injected; and one that acts only when blood sugar is too high, eliminating the risk of dangerous dips in blood sugar that occur when there is too much insulin in the blood.”

Let’s assume for a moment that Novo or any insulin company could develop a “super” insulin’s, would it matter? Would it change the dynamics of the insulin market? Would it give any company which developed these “super” insulin’s the upper hand with payors as Sanofi (NYSE: SNY) once had when they alone had Lantus?

Or would these “super” insulin’s run into the same issues that Toujeo and Tresiba have run into. Would payors view these “super” insulin’s as just incrementally better than what is currently on the market? Would this not place Novo, Sanofi and Lilly (NYSE: LLY) in the exact same position as they are today?

Let’s be clear here we are not against any insulin company giving it a shot but we’re also not optimistic that even if they were successful it would matter all that much. Think of it this way it would take over 5 years, likely longer to get these “super” insulins to market. It will cost somewhere near a billion dollars of capital before there is any return on investment. Therefore, it’s logical to look ahead at what the insulin market will look like 5 or so years today.

Looking ahead in the long-acting segment it’s likely that Basaglar from Lilly won’t be the only biosimilar long-acting insulin available. It’s also quite likely that we will see multiple biosimilar short-acting insulin’s on the market. In 5 years interconnected diabetes management will be gaining traction allowing for better insulin dosing algorithm’s. Basically in 5 years’ inexpensive biosimilar insulin’s will be the market leaders with branded insulin’s fighting for survival.   In 5 years thanks to technology it won’t matter which biosimilar insulin a patient uses rather which system they use that helps them dose this biosimilar insulin most effectively.

Simply put whatever “super” insulins are develop they better be really super and also super cheap. Today payors are switching patients to Basaglar, making it the preferred long-acting insulin, the hurdle for branded insulin’s just keeps getting higher. Payors aren’t buying what Novo and Sanofi are selling that the biggest benefit, the value proposition of Toujeo and Tresiba is fewer hypoglycemic events. They aren’t buying that compared to the current gold standard, Lantus, these newer insulins are not worthy of premium formulary placement or premium reimbursement. And now that they have Basaglar the price of gold is dropping.

Now the question Novo, Sanofi and Lilly should be asking before they launch this quest for a “super” insulins should be: “Given what the insulin market will look like in 5 years, given the cost of developing these “super” insulins and given the fact we’ll likely have competition is this quest for these “super” insulins worth it, will we see a reasonable return on investment? Or are we just doing this to because we think it can be done, that it will provide our stakeholders some hope when there really isn’t much hope.”

The reality is Novo and Sanofi likely won’t ask these question for if they did this back when Toujeo and Tresiba were in development they might have come up with a much better strategy. It’s not like the insulin market wasn’t in the beginning stages of commodization back then. It was also well known that Lilly was developing Basaglar. They should have anticipated that payors would want something more than fewer hypoglycemic events. Lilly should be credited with being the only company that had the common sense to understand that Basaglar didn’t have to better than Lantus, that if it was on par and cheaper they would win.

We have this feeling that Novo, Sanofi and perhaps Lilly will make a big deal about developing “super” insulins. That these “super” insulins will be stronger than a locomotive, able to leap tall buildings and be faster than a speeding bullet- that they will be SUPERINSULINS.   But just as Superman had his kryptonite, so too will these SUPERINSULINS, they are called payors. Payors who will be happy to look at these “super” insulins as long as they are really super and also super cheap.

Novo has a long, distinguished history when it comes to insulin development and if any company can develop “super” insulins Novo can. We also have no doubt that these “super” insulins would advance diabetes management. The question isn’t whether these “super” insulins are needed; no the question is can Novo or anyone in the insulin market achieve a reasonable return on investment.  Given where this market is today and where it is headed we’re not sure even if these insulins were truly “super” it would matter when it comes to achieving a reasonable return on investment.

As Momma Kliff used to say; “We should always strive to better ourselves but at the same time we must accept that realities of the world we live in. That even when we do get better we may not be in a better position than we are today.”