Big Pharma Diabetes Drugs Not So Sweet. What's In Store?

It is a common practice for pharma companies to invest R&D dollars copiously in developing treatments and devices for diabetes and diabetes management. The diabetes market is chock-a-block with companies coming up with innovative treatments promising higher efficacy with lower side effects. Currently available diabetes drugs include different classes of treatments like DPP-4 inhibitors (Januvia, Onglyza, Tradjenta), GLP-1 receptor agonists (Byetta, Victoza) and SGLT-2 (Invokana, Farxiga) apart from metformin and insulin therapy.

However, sales of diabetes drugs from most large pharma companies slipped in the first quarter due to a tough pricing environment and intense competition. What’s worse is that the companies are not too optimistic about any step-up this year.

Performance of Diabetes Franchise in Q1

Sanofi (NYSE:SNY) said that sales of diabetes drugs in the U.S. declined 14.7% in the quarter due to a tough U.S. payer environment. Sales of its key diabetes drugs, Lantus and Toujeo, were hurt by the exclusion from various CVS commercial formularies.

Sanofi’s Diabetes franchise is under significant pressure with the key product, Lantus, facing increasing competitive pressure at the payor level and biosimilar competition in several European markets and Japan. Moreover, a biosimilar version of Lantus hit the U.S. markets in Dec 2016. Lantus has been a major contributor to the company’s top line, having accounted for 14.1% of total sales in 2016.

Merck & Co., Inc.’s (NYSE:MRK) diabetes franchise, comprising Januvia and Janumet, is also facing pricing pressure due to higher discounts and rebates to maintain good managed care coverage. Sales declined 5% in the first quarter.

Johnson & Johnson’s (NYSE:JNJ) Diabetes Care franchise experienced an operational sales decline of 6.5% year over year, primarily due to price declines and competitive pressure.

AstraZeneca plc’s (NYSE:AZN) diabetes franchise was also weak with sales declining 1% in the quarter. Diabetes product sales in the U.S. declined 7% as a result of intense pricing and competitive pressure.

Eli Lilly & Company (NYSE:LLY) has a strong portfolio of diabetes treatments including Trulicity, Jardiance, Trajenta, Humulin, Humalog and Glyxambi. Lilly has a diabetes alliance with Boehringer Ingelheim for several of these products. Lilly is probably the only large healthcare company seeing a strong uptake of its diabetes drugs. Trulicity sales were up 160% while Jardiance sales were up 94% year over year in Q1.

Novo Nordisk (CO:NOVOb) A/S’ (NYSE:NVO) diabetes franchise which consists of drugs like Victoza, Tresiba, Saxenda and Xultophy, is also under pressure reflecting increased competition in the basal insulin segment, continued decline in the premix segment, and an increasingly tough pricing environment in the U.S. within diabetes care.

What’s in Store for This Year?

Management at Sanofi warned that its U.S. diabetes franchise sales will decline faster through the rest of the year due to its exclusion from the United Health formulary plans, which started on Apr 1, 2017 as well as the incremental effect of the CVS formulary exclusion. Others were also not too hopeful of improving diabetes drugs’ sales.

However, despite the challenges in the diabetes market, the companies continue to work on expanding and strengthening their diabetes portfolio and quite a few diabetes programs are in the pipeline or under regulatory review. These include Sanofi’s sotagliflozin, Merck/Pfizer’s ertugliflozin and MK-1293 and Novo Nordisk’s semaglutide.

Despite pricing pressure and growing competition, diabetes remains a lucrative market given its widespread malice and demand for new treatments.

Meanwhile, if these companies are successful in getting the labels of their diabetes medicines updated to include their cardiovascular benefits, sales of the drugs may pick up.

With death from cardiovascular diseases being significantly higher in adults with diabetes compared to those without diabetes, the addition of positive cardiovascular (CV) outcomes on labels of diabetes drugs can give sales a shot in the arm. Almost all these companies are conducting CV outcomes studies to evaluate the cardiovascular benefits of their diabetes drugs. While some diabetes drugs have been successful in lowering CV risk in high-risk diabetic patients in outcomes studies, some have not.

Novo Nordisk's key diabetes drug Victoza, also a GLP-1 analogue, has in the past, shown a statistically significant reduction of risk in the LEADER cardiovascular outcomes study in type II diabetes patients. The application to include the LEADER data on Victoza’s label is under review in the U.S. and EU.

Lilly received FDA approval last year to include CV risk reduction data from the EMPA-REG OUTCOME study on the label of Jardiance. The updated label including the cardiovascular indication was launched in Jan 2017 while the American Diabetes Association (ADA) has also updated its diabetes treatment guidelines. The European Commission also okayed the Jardiance label update for the cardiovascular indication in 2016.

The company expects the inclusion of this data to improve sales of Jardiance. On the Q1 conference call, Lilly said that since the launch of the CV indication and ADA’s addition of Jardiance to its treatment guidelines, its new-to-therapy volume has increased 75%.

However, last month, Merck was denied approval by the FDA to include cardiovascular outcomes data from the TECOS study on the labels of its DPP-IV inhibitor Januvia (sitagliptin) and other medicines containing Januvia.

AstraZeneca’s Bydureon also failed to reduce cardiovascular risk in a phase IIIb/IV cardiovascular outcomes study EXSCEL.

Is There a Cure for Investors?

Investors in the diabetes space should be used to a wait-and-see approach for long-term gains. If the bitter truth about diabetes drugs is pinching now, it’s best to keep calm until the pipeline drugs get approved and are successfully commercialized. Also, once the marketed drugs’ labels are expanded to include CV indications, sales may pick up.

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