- Sanofi, with basal insulin market leader Lantus, and Novo Nordisk, with GLP-1 agonist market leader Victoza, will be the first players in the new injectable market for combination basal insulin/GLP-1 agonist therapies.
- The revenue potential is enormous for this new class and we see many gaps to fill for both Novo Nordisk and Sanofi. We expect both companies to be successful, and Sanofi’s GLP-1 agonist partner, Zealand, will also have an outsized opportunity in the growth of this market.
- Specifically, we look for the new basal insulin/GLP-1 agonist combination market to generate between $1 and $3 billion in the US in the next several years and well over $5 billion globally post 2020. This is based on Sanofi’s decision to price Soliqua in the US at parity to other GLP-1 agents on the market (~$20-25/day) and to prioritize market growth and Novo Nordisk’s decision to price Xultophy at a premium (~$31/day). These prices don’t reflect rebates or dosing; as with current GLP-1, many patients have an effective lower cost per day because they take a lower dose.
- There have been no head-to-head trials to date though many have expected Novo Nordisk to proceed now that both compounds have been FDA approved. Novo Nordisk has the advantage of “true” 24-hour insulins and GLP-1; Sanofi/Zealand will have the advantage of lower pricing, as it stands, though discounts to PBMs are unknown. Which device is easier to use is still unknown.
There has been considerable controversy in the market surrounding pricing for virtually all injectable products over the last several years. This reached high pitch this week as pricing in the US for newly FDA approved basal insulin/GLP-1 agonist combination products – Novo Nordisk’s Xultophy (Tresiba/Victoza) and Sanofi’s Soliqua (Lantus/Adlyxin) – is now a practical, not merely theoretical, issue. We believe the injectable portfolios of the “Big 5” (Novo Nordisk, Sanofi, Lilly, AZ, and Merck) will be dynamic over the next several years through innovative new products and cheaper versions of existing products, with the net result being meaningful growth and hopefully easier access and better products for patients. We estimate high market potential for the two new combination injectables, particularly the new class of basal insulin/GLP-1 agonist co-formulations, as these products should thrive in a “value-based” US healthcare market. In addition to basal insulin/GLP-1 agonist combinations, we also expect GLP-1 agonist/SGLT-2 inhibitor combinations (not the focus of this report) to be better for patients than oral agents and insulin are now.
As for market size, we look for the new basal insulin/GLP-1 agonist combination market to generate between $1 and $3 billion in the US in the first several years (though it will take some time to get to the first $1 billion given glacial speeds for many payers) and over $5 billion globally post the early 2020s, assuming payers understand and accept the advantages of these products for patients, HCPs, and the broad diabetes ecosystem. Unlike other new products, new basal insulin/GLP-1 agonist combinations have shown major progress in phase 3 trials in terms of both the traditional biomarker measurement of A1c as well as other “beyond A1c” markers such as hypoglycemia, weight, nausea, and durability – though the labels for both Xultophy and Soliqua feature only data on A1c and FPG reductions. Notably, Xultophy’s label contains Victoza’s black box warning for thyroid C-cell tumors.
We expect patient experience to show that both Xultophy and Soliqua are both more potent, easier to prescribe, easier to use, and cause less weight gain, hypoglycemia, and nausea than all other injectable products currently on the market. There is tremendous value to show – especially for Xultophy, which benefits from true 24-hour insulin and GLP-1 agonists as part of the mix – but both combination products should show meaningful benefits compared to the status quo of single agent therapy, as indicated by phase 3 trials (LixiLan-O and LixiLan-L for Soliqua and DUAL I, II, and V for Xultophy).
- We first learned US pricing information for Xultophy through an article in the Danish Medwatch (to get the English version, hit the flag). The paper interviewed Novo Nordisk’s Executive VP and Head of North America, Mr. Jakob Riis. The Danish press reports Novo Nordisk as saying it will use a “sum of the parts” strategy – that is, the list price of Tresiba (~$18/day) plus the list price of Victoza (~ $22/day) minus 20%, which totals about $31.50/day for Xultophy. This pricing makes Novo Nordisk’s list price for Xultophy (a relevant consideration for US cash-paying patients not on patient access) well above the price of market-leading Victoza as well as Tresiba. We expect patient access investment would be considerable and hope Novo Nordisk discusses this; certainly, it is important to offset the expensive costs of drug development, though it would take fewer than one million patients on Xultophy for a year to generate $10 billion in revenue (which might be closer to $5 billion in “realized” revenue after PBM discounts). As with Saxenda (Novo Nordisk’s obesity drug that is closer to a $35/day list price), the company can afford to build the business slowly – that said, even though it can, we would like with such an innovative medicine for them to try to get it to patients quickly (that seems to be Sanofi’s strategy with its GLP-1/basal insulin combo).
- According to Reuters, Soliqua will be priced on par with a “traditional” GLP-1 agonist. Though this is currently the most expensive drug class on the market at $20-$25/day, this is as much as 25-50% lower than Xultophy’s expected list price. Which GLP-1 agonist product is the question! Dose can obviously make these drugs more or less expensive per day. In the US, the GLP-1s are currently priced between $20 and $25/day as the list price, with GSK’s Tanzeum the cheapest at $20/day, then AZ and Novo Nordisk in the middle at $22-$23/day, and Trulicity the highest at $25/day (source: Walgreen’s). Formulary pricing is likely all over the map, with discounts up to 50% or more. By pricing Soliqua at the same level as GLP-1 agonists, and lower than only other product in the class, Sanofi will win some favor, both for a better product than the GLP-1 alone at the same price as well as for pricing the branded combo product at the same level as the single agent GLP-1.
- Sanofi’s decision to price at parity to GLP-1 is striking for several reasons, particularly given that they share all profits with partner Zealand. Although pricing the combo below even a GLP-1 agonist would have been even a more momentous decision (and would’ve won rave reviews from patients), their aim appears designed to build volume and we certainly believe showing greater economic value versus Lantus alone or Adlyxin alone will be a positive.
- Sanofi may also be trying to simplify decisions for PBMs and HCPs by pricing the basal insulin/GLP-1 agonist combination at zero premium compared to traditional GLP-1 agonists. There will be no controversy based on Sanofi’s price between whether patients are urged to take a GLP-1 agonist only or the combination – Lantus itself will be continue to be cheaper with a list price of $10-$13/day (based on five pens per month or equivalent vials) but competitive GLP-1 will be similar, starting at $20/day.
- Regardless of the two list prices, the actual price PBMs are paying likely starts at below $10/day and goes up, depending on formulary and negotiating power. Sanofi probably also has a well-intended desire to reduce controversy around pricing – they have taken the lion’s share of the blame around increases in pricing for Lantus over the last several years, even though the press has discussed higher prices for all insulins and has in fact accused the companies of price-fixing, which we believe has no basis.
- List price is incredibly relevant for underserved and vulnerable patient populations that do not have insurance; we expect both companies to have patient access opportunities associated with the drugs. Patients and others are asking for “transparency” around PBMs, etc. – we hardly expect entire pricing strategies to be shared, but we are looking to better understand patient access programs and we hope these program investments are made more visible so that patients take advantage of them.
- Despite the different approaches to market entry, we see tremendous economic opportunity for both compounds. To date, while global payers have not embraced the products, presumably due to pricing, we believe Sanofi’s strategy for Soliqua will launch the field well in the US (other manufacturers have provided a “floor” where GLP-1 pricing starts), and that Novo Nordisk will be able to follow in building a strong presence for Xultophy when it chooses to, given the strength of the compound and potential cardioprotection.
- Even using conservative numbers, this market could be quite sizable:
- We estimate the number of people with diabetes in sub-optimal control as measured by A1c in the US alone at 8-10 million. This number of patients “not doing well” is conservative since it includes people with diabetes with A1cs under 7% who have significant hypoglycemia – this used to be mostly type 1 patients but is increasingly type 2 patients given the sheer number emerging and staying alive longer and on advanced therapies. Both populations will have meaningful percentages that could benefit from the new combo GLP-1/basal insulin class in terms of A1c, “time in zone”, quality of life, and economic benefit.
- A new basal insulin/GLP-1 combination market could easily emerge as a $1-$3 billion market in the next several years. This assumes a 10-20% conversion of this population to this new class (we’re thinking about gross revenue so we’re not using a PBM discount estimate though presumably these would be around 50%.) This could grow to $5 billion-plus market within a decade, depending on how a number of trends evolve including proven cardio-protection or renal-protection associated with the combination, patients staying older longer and on the combination longer, patients going onto the combination sooner, and faster development of domestic and international markets as “value-based” healthcare.
- We see the emergence of the basal insulin/GLP-1 agonist combination therapy market as a driver of the broader GLP-1 market. From our view, the question isn’t whether Novo Nordisk can build a strong business for Xultophy – it obviously has the choice whether to compete on price and based on the Danish press, has opted not to go this direction at present. Given the strength of the compound (two true 24-hour therapies, etc.), were Novo Nordisk to price Xultophy at parity, Sanofi would be in a weaker positon though it may then compete on pricing – both compounds are considerably better than all single-agent therapy, from what we understand. The emergence of these therapies may put short-term pressure on the rest of the GLP-1 competition, though there are more than enough patients to fight for (millions in the US alone) – much of this will be done at the formulary level and we believe the entire field will continue to grow. Presumably, price will emerge as a major issue; although PBM discounts are unknown, Sanofi has a major bargaining chip in pricing its compound lower. Greater political fallout continues to be possible and we would hope that could be avoided given all the investments the companies have both made.
- Compared to current injectable products (basal insulin, rapid acting insulin, and daily and extended formulations of GLP-1), we believe the market will perceive many more positives about both Xultophy and Soliqua medium- to long-term, particularly as positive Big Data associated with these products emerges (especially, eventually, cardioprotection and possibly kidney protection). While global payers have not embraced branded combination therapy to date, presumably due to pricing (some have also claimed complexity), we believe Sanofi’s strategy for Soliqua could launch the field well in the US with its current pricing – we think this will hit the popular press well, relatively speaking at least. Novo Nordisk could of course succeed with higher pricing for Xultophy, particularly with the advantages of “true” 24-hour GLP-1 and basal insulin components and demonstrated cardioprotection/kidney protection – presumably the latter will take a little while to prove officially.
- Even using conservative numbers, this market could be quite sizable:
- We believe both Sanofi and Novo Nordisk can be successful commercially in building GLP-1/basal insulin combination businesses. Given their current portfolio differences and product differences, we had assumed to hear more from the drug giants about market access – perhaps this will emerge soon. Nearer-term, Novo Nordisk has significant upside in continuing to build its Victoza (liraglutide), Saxenda (liraglutide 3.0 mg) and Tresiba (insulin degludec) markets (which are effectively Xultophy’s components) and some downside risk with potential cannibalization – as well as cannibalization of Novolog by type 2 on MDI (though presumably those already on mealtime insulin wouldn’t switch “back” – but they may want to!). By contrast, Sanofi has no products to protect outside Toujeo, so it will be easier for it to build larger sales near-term.
- Comparing the two branded combination products is not possible since there hasn’t yet been a reported head-to-head trial yet. Since Novo Nordisk’s Xultophy has a “next-gen insulin” Tresiba component compared to Sanofi’s “current gen” Lantus component, and since Victoza is a true 24-hour GLP-1, we imagine that future head-to-head trials would favor Xultophy; that said, Sanofi’s Soliqua looked good in its own phase 3 trials. Both combination products have shown meaningful benefits compared to the status quo of single agent therapy, as indicated by phase 3 trials (LixiLan-O and LixiLan-L for Soliqua and DUAL I, II, and V for Xultophy).
- Potential cardiovascular benefit and renal protection stand as a major question – what will the data show? We have no reason not to believe in the potential of class benefit for GLP-1 agonists though Novo Nordisk is certainly in the driver’s seat on this front given the positive LEADER data. That said, getting a cardio-protective or renal-protective indication would likely be years off and presumably could be generated only with Big Data, as another CVOT is unlikely, except perhaps a “group” one as a public/private partnership.
- Which patients might be recommended for Sanofi’s Soliqua?
- Anyone for whom MDI management is difficult (dangerous hypoglycemia and weight gain) and it’s not working – Soliqua would be cheaper, and potentially better;
- Anyone who is not managing their diabetes well on Lantus;
- Anyone who is managing it well on Lantus but who has hypoglycemia and weight gain; and
- Anyone not managing it well on GLP-1.
- Sanofi will have higher revenue and profitability in switching any of these patients and presumably payers will be more open to switching them.
- Which patients would be recommended for Novo Nordisk’s Xultophy?:
- Anyone who is not managing their diabetes well on Levemir;
- Anyone who is not managing their diabetes well on Levemir and Novolog;
- Anyone who is not managing their diabetes well on solely Victoza;
- Anyone on MDI whose diabetes management is particularly difficult (excessive weight gain or hypoglycemia, etc.).
- Novo Nordisk will have higher revenue and profitability in switching any of these patients except the last group if they are on Tresiba though presumably payers will not want to switch most of them due to price.
- We could imagine patient advocacy around getting access to these classes particularly as long-term data comes in but even in the short term. We’d love to see a trial designed like “A Real-world Study of Treatment Patterns and Outcomes in US Managed-Care Patients With Type 2 Diabetes Initiating Injectable Therapies” that compares both Xultophy and Soliqua to other diabetes management strategies like metformin, SFUs, GLP-1 agonists, SGLT-2 inhibitors, SGLT-2 inhibitor combos, etc. It may be fanciful but we’d love to see a multi-arm CVOT with multiple GLP-1 and SGLT-2 products and combinations funded by different corporations and/or major foundations. The investment potential is incredibly high and we hope to engage foundations in considering this in the coming months – it would be like GRADE, but to examine long-term complication prevention, and with strong design.
- Last, and notably, we believe stigma associated with both Xultophy and Soliqua will be well less than multiple other injectables, particularly rapid acting insulin, where we do see downside risk. While “insulin resistance” continues to be a major HCP problem, we would hope to see less of it with basal insulin/GLP-1 agonist combinations. HCP enthusiasm associated with both products should be significantly greater after the problems around accessing the products subsides, which we hope will happen medium-term.
Close Concerns Questions
Q: How will healthcare providers view the different basal insulin/GLP-1 agonist combinations given that one will include a GLP-1 agonist (Victoza) that has been demonstrated to reduce cardiovascular risk (when used individually at a higher dose) while the other (Adlyxin) has demonstrated cardiovascular non-inferiority? Is it a moot question since the Xultophy dose hasn’t been tested?
Q: What will happen in the US with formulary status for the two therapies? How will PBMs and insurers respond? How long will it take to show positive long term data?
Q: Will there be patient advocacy growing to ensure patient access to these drugs?
Q: How will the therapies be positioned, to which patients?
-- by Abigail Dove and Kelly Close