Who Will Win This $45 Billion Market?

The diabetes drug market continues to be a street fight between major pharmaceutical companies like Sanofi , Novo Nordisk , and Lilly . Considering that about $45 billion a year in spent on therapeutic agents for diabetes (drugs and insulin), it's no wonder why these companies compete so aggressively and look to gain labeling advantages through their clinical trials.

This year's American Diabetes Association annual meeting has come and gone, with not a lot in the way of market-shifting events. Sanofi comes out of the meeting looking a little weaker, Novo a little stronger, and Lilly looks like the most aggressive player in the space.

For Sanofi, keeping what it has may be hard enough
This was not an ADA that will be fondly remembered by Sanofi. The company's successor to Lantus, an $8 billion/year drug for Sanofi, appears underwhelming and so too does the company's Lixilan combination of GLP-1 and insulin. A drug-device development partnership with Medtronic helps a bit, but likely won't result in real revenue for some time.

Sanofi has been hoping for a while now that U300 (now called Toujeo) will prove to be a worthy successor to Lantus. Based upon the companies series of EDITION clinical trials, that may be overly optimistic. Toujeo did show comparable glycemic control and lower hypoglycemia compared to Lantus, but it required 10% to 20% higher doses and there was no benefit seen for Type 1 patients. That doesn't bode well relative to Novo's degludec. Lilly, too, has big hopes for its peglispro insulin, but a liver toxicity signal is a risk into phase 3 data in 2015. Sanofi should be able to get Toujeo through the FDA and onto the market in 2015, but premium pricing could be tough to achieve.

Lixilan continues to unimpress. phase 2 results showed that lixilan does offer superior efficacy to insulin alone, but not superiority to Novo's ideglira. Comparing across trials is problematic, but ideglira appears to produce a better HbA1c reduction relative to insulin (0.47% versus 0.18%), better weight loss (2.2kg versus 1.4kg), and less nausea (2-3% versus 7.5%). On the plus side, lixilan will likely be first to market (with a headstart of one year or more) and will help establish market share.

Sanofi announced it is moving forward with phase 3 studies of a new insulin lispro similar to Lilly's Humalog (SAR342434) and is exploring oral GLP-1 drugs, but does not have any plans to pursue oral insulin.

Can Lilly deliver?
Setting forth a bold vision has never been a problem for Lilly, but delivering on that vision has proven to be another matter. To its credit, Lilly has emerged as one of the strongest players in diabetes, with oral and injectable therapies that cover pretty much every major therapeutic class.

Management continues to be bullish on dulglutide, its weekly GLP-1 drug that will compete with Novo's Victoza. Lilly's AWARD-6 trial did show non-inferiority to Victoza for glycemic control (something no other weekly formulation has done yet), but Victoza offers more weight loss and enjoys a multiyear headstart and entrenched market position.

Lilly also announced that its Lantus biosimilar produced clinical results on par with Lantus, though Sanofi has already announced its intention to block this through the courts.

On the oral drug front, Lilly is looking to be first to market next year with a fixed-dose SGLT2/DPP-4 combo drug, while AstraZeneca looks to be ahead of them in pursuing labeling for Type 1 diabetes in SGLT2 (having announced Phase III studies for this indication).

Novo wins without doing anything
This was a sedate ADA for Novo Nordisk largely just because the company's clinical development schedule didn't provide the company with much data to present this time around. Even so, Novo comes out of this meeting looking pretty solid.

Sanofi's results with Toujeo suggest that degludec will likely emerge with a superior clinical profile, and so too with ideglira relative to lixilan. Novo continues to work on a once-weekly GLP-1 (semaglutide) that is in phase 3 development, while also pursuing an oral form in phase 2.

The bottom line
Annual medical meetings like the ADA (or ASCO in oncology) arguably get more attention than they deserve, but that are useful checkpoints for assessing an industry. In the case of diabetes, there is still significant opportunity here as fewer than half of the diabetics taking medications for the disease are reaching treatment goals for glycemic control.

Novo Nordisk continues to look like the strongest player in the space - the company does not move all that fast and may appear to ignore large segments of the market, but the company's R&D team has a knack for producing superior drug candidates in the therapeutic areas it does target. For Lilly, it is about marrying bold talk and significant R&D investments with execution - the breadth of the business is there, but execution has to improve. Finally, Sanofi may have the most to lose between the Novo R&D rock and the Lilly marketing hard place; Lilly is no slouch when it comes to marketing, but the less than stellar clinical performance of recent pipeline candidates does raise the risk that Sanofi will be ceding share in the coming years.

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The article Who Will Win This $45 Billion Market? originally appeared on Fool.com.

Stephen D. Simpson, CFA has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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