Memorandum

Sanofi hosts “Meet Sanofi Management” seminar and unveils new strategic plan – November 6, 2015

Executive Highlights

  • Sanofi’s diabetes priority areas moving forward will include developing its insulin franchise, strengthening the pipeline through strategic partnerships, and leading a shift toward a broader definition of managing diabetes outcomes.
  • The call highlighted Sanofi’s new licensing agreement with Lexicon for the SGLT-1/2 dual inhibitor sotagliflozin.

Sanofi hosted a Meet Sanofi Management seminar this morning in Paris, France, with the morning plenary session webcast live. New CEO Mr. Olivier Brandicourt presented a fresh strategic vision for Sanofi’s future. The company’s “roadmap to 2020” centers around four key priority areas: (i) reshaping the portfolio; (ii) delivering outstanding launches; (iii) sustaining innovation in research and development; and (iv) simplifying the organization. Within its diabetes business, Sanofi will focus on developing its insulin franchise (including Lantus [insulin glargine], Toujeo [U300 insulin glargine], and LixiLan [lixisenatide/insulin glargine]). Although Afrezza [inhaled insulin]) wasn’t mentioned in this group, we certainly believe Sanofi is committed to the millions of patients not in good control in the US (where Afrezza is approved) and getting them to better management whether through new therapies like orals (especially considering their SGLT-2/SGLT-1 announcement earlier today with Lexicon), GLP-1, or oral or injected insulin.

Management highlighted Sanofi’s recently announced partnerships with Lexicon (see below for details) and Hanmi Pharmaceutical that will build the future of the company’s diabetes portfolio by strengthening its pipeline and bolstering the diversity of their partnerships. Finally, Sanofi noted its commitment to “leading the market shift to managing diabetes outcomes” through its partnership with Google Life Sciences. Through that partnership, Sanofi and Google aim to integrate diabetes devices, healthcare services, data management, and drugs to improve patient outcomes – a lofty goal indeed! In its 3Q15 update this week, Sanofi forecast that its diabetes portfolio sales would fall 4%-8% per year from 2016-2018, which certainly reflects the challenges abreast in the field and for Sanofi in particular, as Lantus faces biosimilars. With the exciting new developments revealed today, Sanofi stated its belief that its diabetes portfolio would return to growth by the beginning of 2019. See below for a product-by-product breakdown of the top highlights from the call.

Toujeo (U300 insulin glargine)

  • One of Sanofi’s major goals in diabetes is to establish Toujeo within the next-generation basal insulin market. During the webcast, Sanofi management highlighted Toujeo, along with the other products in the insulin glargine franchise, as a one of the focus areas for development within the diabetes portfolio. In the presentation slides from the breakout diabetes-focused session, Sanofi highlighted IMS data for Toujeo. As of the week of October 23, cumulative total prescriptions (TRx) reached 205,299, new prescriptions (NRx) reached 134,476, and new-to-brand prescriptions (NBRx) reached 91,838. This compares to ~40,900 cumulative new prescriptions as of Sanofi’s 2Q15 update. Toujeo’s market share based on NBRx was 13.7%. The presentation slides also highlighted Toujeo’s formulary coverage access. The product is covered for 86% of commercially-covered lives (in Tier 2 for 69% of lives and Tier 3 for 17% of lives). An impressive 91% of Medicare lives are covered with Tier 2 access. Sanofi made a strategic, deliberate decision to price Toujeo at a cost similar to Lantus (insulin glargine), in order to secure rapid formulary access comparable to the access Lantus enjoys. This contrasts with the strategy employed by Novo Nordisk, which has stated that it will not lower the price of its next-generation basal insulin Tresiba (insulin degludec) in favor of access when it launches in the US. However, several speakers at CODHy noted that since Toujeo required a 10-20% dose increase to match Lantus’ efficacy in clinical trials, the nominally equal price could be somewhat misleading – we point out in the “real world” we’re not necessarily hearing every patient does this. Novo Nordisk intends to price Tresiba at a ~10% premium to Levemir.
  • Sanofi has initiated three real-world studies to further establish Toujeo’s clinical value and the company has committed to a phase 3b/4 program aimed at enhancing the product’s US label. Sanofi noted that its R&D strategy involves committing 40% of R&D funds to “consolidation innovation,” or actively supporting existing products and their competitive positioning. An enhanced US label for Toujeo, plus real-world clinical data, could strengthen its standing in the competitive landscape as Sanofi prepares for the entrance of next-generation basal insulin competitor Tresiba (insulin degludec) from Novo Nordisk and a biosimilar version of insulin glargine (Basaglar) from Lilly/BI. In addition, Sanofi is developing a new pen for Toujeo that will have a higher single maximum daily dose and greater capacity.
    • Sanofi management suggested in a conversation with us that these real-world studies are a response to an increasingly data- and outcomes-driven payer environment. Sanofi’s current head of diabetes Mr. Pierre Chancel noted that there is a growing need to demonstrate a benefit of interventions on real-world outcomes. He acknowledged that real-world studies are a fairly new frontier and expressed his belief that Sanofi is prepared to meet the challenge. We agree that this is the direction the diabetes field is headed, particularly given the increasing focus on value by payers, and we see Sanofi ahead of the curve in its emphasis on this front.
  • Sanofi’s presentation slides also highlighted recent and upcoming ex-US launches of Toujeo. The slide noted that Toujeo has been launched in the UK, Czech Republic, Norway, Japan, Canada, and South Korea so far in the second half of 2015. Launches in Austria, Finland, Ireland, Sweden, and Switzerland are expected by the end of the year. The product will be launched in Belgium, France, Greece, Italy, Poland, Spain, Australia, Brazil, and Mexico in 2016.

LixiLan (lixisenatide/insulin glargine)

  • Sanofi management shared that in the LixiLan-O and LixiLan-L phase 3 studies, LixiLan demonstrated reduced nausea and similar hypoglycemia rates compared to lixisenatide and insulin glargine, respectively. Topline results had not included safety or adverse event information for the highly-anticipated GLP-1 agonist/basal insulin combination. The call did not delve into details of the magnitude of the effect and we eagerly await the announcement of full results at a future conference, particularly to gain some sense of how LixiLan’s profile compares to that of Novo Nordisk’s Xultophy (insulin degludec/liraglutide). Sanofi also celebrated LixiLan in the context of a broader shift in the diabetes field toward combined therapies, comparing it to recent trends in the cancer field.
  • Phase 3 results indicate LixiLan is “weight neutral vs. insulin glargine,” according to the presentation slides from the diabetes breakout session. Sanofi clarified that this means they do not expect patients exposed to LixiLan to see an increase in body weight during treatment.  We’ll be watching closely for more details when the full results from LixiLan-O and LixiLan-L are available. While we will have to wait for full results to be sure, based on this it seems that Xultophy could come out of phase 3 with a more clearly differentiated profile vs. Lantus, as it demonstrated significant weight and hypoglycemia advantages in phase 3 trials. We have generally assumed that the two products would be fairly comparable clinically, but Novo Nordisk indicated in its 3Q15 update that it believes Xultophy is highly differentiated – it will be very important to see what is in the label of course.
  • Sanofi appears to be positioning LixiLan both as a first injectable therapy or as an intensification option for patients not at target with basal insulin alone. We’ve heard quite a bit on the conference circuit (at EASD 2015 and CODHy 2015) on the logic behind adding short-acting GLP-1 agonist lixisenatide for postprandial glucose control on top of basal insulin. Basal insulin can often bring fasting plasma glucose to target, but high postprandial glucose excursions can contribute to an overall high A1c. There is growing support for the use of short-acting GLP-1 agonists (such as lixisenatide and twice-daily exenatide) to target these postprandial excursions instead of rapid-acting insulin, as evidenced by the recently-updated ADA/EASD guidelines, which offer both rapid-acting insulin and GLP-1 agonists as options for basal insulin intensification. Using the LixiLan combination when intensification is needed can halve the number of daily injections and reduce patient copays compared to using a basal insulin and GLP-1 agonist separately. In addition, the fact that LixiLan includes a short-acting GLP-1 agonist could differentiate it from Novo Nordisk’s competitor GLP-1 agonist/basal insulin combination Xultophy, which includes long-acting GLP-1 agonist liraglutide along with insulin degludec. Novo Nordisk plans to target Xultophy initially to patients on basal insulin but believes the appropriate population could expand over time. We wonder how Sanofi’s launch strategy will compare. 

Afrezza (inhaled insulin)

  • Afrezza was not mentioned in the main webcast seminar. One of Sanofi’s main goals for its diabetes portfolio is to support development of its insulin franchise. In particular, Sanofi listed Lantus, Toujeo, and LixiLan as priorities. Afrezza, however, was not mentioned, despite the fact that it is a newly-launched, innovative product. We believe this is because management is assessing if and how to make it more successful and how to remove some of the barriers. Sales of Afrezza in its three quarters on the market have been sluggish, with no growth between 2Q15 and 3Q15 and sales of €2 million (~$2.2 million) each quarter. In the diabetes breakout session presentation slides, it was emphasized that Afrezza needs time to reach its full market potential. Among the reasons for this, Sanofi cited Afrezza’s gradual market access, the FDA requirements for starting patients on Afrezza, and the unfamiliar novel administration method. The slide noted that the company is focusing on marketing Afrezza to the roughly 1.1 million patients on basal insulin who are in need of therapy intensification. While we believe Afrezza has potential based on its ultra-rapid action profile and needle-free administration, we also believe that pricing would have to be more attractive, which may ultimately mean that more investment will be required commercially short-term – we do think Sanofi had modest expectations for the product, and while it is underperforming even those, Sanofi is very committed to patients that are not at their glycemic target. How it winds up addressing those patients who do not or cannot take traditional rapid acting insulin is a question. We also believe Sanofi is likely facing many challenges not easily seen by the market – for example, many would suggest how DTC ads should be changed while they may not know all the regulatory requirements.  

Diabetes Pipeline Highlights

  • Just before this meeting, Sanofi announced that it has licensed Lexicon’s SGLT-1/SGLT-2 dual inhibitor sotagliflozin. Lexicon provided more details on the deal – and its own perspective – during its 3Q15 update this morning as well. Under the terms of the agreement, Lexicon will receive $300 million upfront and is eligible for up to $430 million in development and regulatory milestone payments and up to $990 million in sales milestone payments – up to $1.7 billion total. Lexicon is also entitled to royalties on net sales of the compound that are tiered based on region (US vs. elsewhere) and indication (type 1 diabetes vs. type 2 diabetes). These royalties start in the low single digits and go up to as much as 40% (for type 1 diabetes sales in the US). Lexicon management repeatedly emphasized during the call that the high end of royalties for type 1 diabetes in the US represents the investment that the company has already made in its ongoing phase 3 program for sotagliflozin in type 1 diabetes. Lexicon decided to move forward with a solo development program for type 1 diabetes after failing to find a partner for a type 1 and type 2 diabetes development program. With this deal, Lexicon will remain responsible for the phase 3 program in type 1 diabetes and will co-commercialize the product with Sanofi for this indication in the US. Sanofi will be responsible for ex-US commercialization in type 1 diabetes and for all development and commercialization in type 2 diabetes. Lexicon will contribute up to $100 million in funding for the type 2 diabetes development program.
    • This deal adds a novel, likely first-in-class product to Sanofi’s pipeline. Lexicon management had projected sales of $1 billion per year for sotagliflozin in its 2Q15 update. If this forecast plays out, this revenue would certainly help offset the declining sales for Lantus expected in the coming years. The product will also help Sanofi further diversify its diabetes portfolio, enhancing its ability to compete with companies like Lilly and AZ that have a broader presence in the field and hopefully minimizing the impact of challenges in one segment (like basal insulin) on the entire company. 
    • Lexicon is “remarkably pleased” with this deal. Its ideal endgame all along was to commercialize sotagliflozin for both type 1 and type 2 diabetes. The company had a challenging time finding a partner for the product and had been de-emphasizing partnership discussions in its last few updates, focusing instead on moving forward independently with a solo type 1 diabetes program. During its update, Lexicon management repeatedly highlighted that this deal “unlocks” the full potential of sotagliflozin and will allow the product to reach hundreds of millions of patients. In addition, Lexicon is eager to gain commercialization and diabetes market expertise from Sanofi.
    • Lexicon’s 3Q15 call provided an update on the phase 3 program in type 1 diabetes and hinted at a development and regulatory timeline for sotagliflozin. Management noted that enrollment in the type 1 diabetes phase 3 program is progressing ahead of schedule, and there is no expectation that the program will slow down following the partnership. The phase 3 program for type 2 diabetes will begin at some point in 2016 (Lexicon and Sanofi will determine a more specific development timeline in the near future). Lexicon reiterated that sotagliflozin has been ready for phase 3 in type 2 diabetes for quite some time, but the regulatory aspects of the deal will take some time to work out. Given this discrepancy, Lexicon management forecast that sotagliflozin will be available on the market for type 1 diabetes before a label for type 2 diabetes is approved. Since the FDA has previously signaled a preference for an integrated type 1 and type 2 development program over a solo type 1 development program, Sanofi and Lexicon may face limitations on how wide of a time gap there can be between the two development programs. Providers can always prescribe sotagliflozin off-label for type 2 diabetes during this lag period, which we imagine may provide a reason for the FDA to delay approval in type 1 diabetes until the data package for type 2 diabetes is complete.
    • “You don’t get a deal like this if you don’t think you can win.” Lexicon is very confident in sotagliflozin’s potential to differentiate itself in the marketplace. Management noted that a cardiovascular outcomes trial will be necessary now that the candidate is pursuing a type 2 diabetes indication and suggested that sotagliflozin can demonstrate cardioprotection even beyond that shown with Lilly/BI’s Jardiance (empagliflozin) in EMPA-REG OUTCOME. The company particularly emphasized sotagliflozin’s impressive blood pressure-lowering efficacy – the phase 2 trial in type 2 diabetes demonstrated a 14 mmHg reduction in systolic blood pressure. Several speakers at EASD suggested that empagliflozin’s blood pressure-lowering effect was likely not the driver of its cardioprotective benefit given the lack of an effect on stroke rates. Lexicon management went so far as to say that it “believes sotagliflozin is a cardiovascular drug” – we wonder if Lexicon and Sanofi could pursue an even wider indication for hypertension in the future.
    • Lexicon also highlighted sotagliflozin’s efficacy in people with renal impairment as another important point of potential differentiation. Sanofi’s Mr. Chancel echoed this point during our conversation and suggested that sotagliflozin’s mechanism (targeting glucose reabsorption in the gut as well as the kidney) might also give it a safety advantage over SGLT-2 selective inhibitors.  We wonder if Sanofi might consider a renal outcomes study for sotagliflozin if J&J’s CREDENCE study demonstrates renal protection with SGLT-2 inhibitor Invokana (canagliflozin) – this will be very interesting to watch.
    • Sanofi expects sotagliflozin to complement its broader portfolio of insulins and GLP-1 agonists. Mr. Chancel expects sotagliflozin to demonstrate significant benefit as an add-on to insulins or GLP-1 agonists. He stated that Sanofi is trying to build different tools that can be combined, not tools that work in isolation. We wonder if this suggests Sanofi may develop an SGLT-1/2 inhibitor/GLP-1 agonist fixed-ratio combination in the future, though this would likely require the development of either an oral GLP-1 agonist component or an injectable SGLT-2 inhibitor component.
  • Just before this meeting, Sanofi announced a licensing deal with Hanmi Pharmacueticals for a long-acting GLP-1 agonist, a once-weekly basal insulin, and a once-weekly GLP-1 agonist/basal insulin combination. The three candidates included are (i) efpeglenatide (HM11260C), a phase 2b GLP-1 agonist with the potential for once-weekly to once-monthly dosing, (ii) LAPSInsulin-115 (HM12470), a phase 1 once-weekly insulin, and (iii) LAPSInsulin Combo, a preclinical once-weekly fixed-ratio GLP-1 agonist/basal insulin combination of efpeglenatide and LAPSInsulin-115. Together, they are known as the “Quantum Project.” The three candidates were all developed using Hanmi’s proprietary LAPSCOVERY technology. Under the terms of the deal, Sanofi will provide Hanmi with an upfront payment of €400 million (~$434 million). Hanmi will also be eligible for up to €3.5 billion (~$3.8 billion) based on development, registration, and sales milestones and will earn double-digit royalties on net sales of the products. While Sanofi gains worldwide commercialization rights, Hanmi will retain an exclusive option to co-commercialize the products in South Korea and China.
  • The two deals revitalizes Sanofi’s medium- to late-stage diabetes pipeline. Prior to the announcement of the two deals, Sanofi had few recently-launched or pipeline products that were likely to be best-in-class or first-in-class. One of Sanofi’s top three priorities within diabetes is to strengthen its pipeline. These licensing agreements will allow Sanofi a competitive foothold in the arena of next-generation diabetes products. Partly as a result of this, the company hopes to return its diabetes portfolio to growth by 2019.
  • During our call, Sanofi framed the Lexicon deal as an expansion of its diabetes portfolio and the Hanmi deal as an advance in promoting patient adherence. Ultra-long-acting GLP-1 agonists and insulins have the potential for more convenient dosing schedules and reduced copays. Overall, the company envisions offering a suite of therapeutic options for diabetes that patients can choose from at different stages of their disease progression. As incoming head of Sanofi’s Diabetes & Cardiovascular unit Ms. Pascale Witz put it, Sanofi hopes that individualization of therapy through the variety of options will allow patients to “jump in the driver’s seat” of managing their diabetes.
  • Earlier in the pipeline, Sanofi management appeared particularly excited about the GLP-1/glucagon dual agonist SAR425899. The call noted that the phase 1 study for the candidate recently completed (ahead of schedule – ClinicalTrials.gov still lists the expected completion date as December 2015). The company is especially interested in the weight-loss potential of the dual agonist – in animal studies, the candidate had a similar glucose-lowering effect and a superior weight-loss benefit compared to liraglutide. A GLP-1/GIP receptor dual agonist (SAR438335) was also added to Sanofi’s phase 1 pipeline in 3Q15.
    • The competitive landscape for GLP-1/glucagon dual agonists is quite crowded. Janssen recently announced a licensing deal for Hanmi’s phase 1 GLP-1 agonist/glucagon dual agonist. Other companies in the race include Lilly (phase 2), Transition Therapeutics (phase 2; partnered with Lilly), Sanofi (phase 1), AZ (phase 1), Xenetic Biosciences (phase 1), Zealand (preclinical), and OPKO Health (preclinical). Novo Nordisk has also indicated that it ultimately intends to co-formulate its phase 1 glucagon analog with liraglutide.
  • Through its collaboration with Google Life Sciences, Sanofi hopes to “lead a market shift to managing diabetes outcomes.” In particular, Sanofi hopes to be at the forefront of the use of data analytics and population outcome care standards in this field. Details were sparse at the time the collaboration was announced. We learned from Sanofi’s diabetes breakout session slides that the partnership hopes to produce improved clinical outcomes, real-time health monitoring and care, better patient and provider engagement, and significant cost savings. In its webcast, Sanofi management shared that the collaboration aims to integrate devices, healthcare services, data management, and drugs to improve patient outcomes. We’re waiting on the edge of our seats to see what these two behemoths come up with!
    • In our valuable conversation with Sanofi management, the leaders emphasized that the collaboration with Google is a “convergence of different worlds” that allows both companies to bring their expertise to the table. Ms. Witz noted that pharmaceutical companies like Sanofi aren’t always able to grasp the full potential of cutting-edge technology while tech companies such as Google don’t necessarily have a firm understanding of the patient perspective and regulatory environment. She stated that Google was aware of their gaps in its knowledge early on and realized that it would have greater impact in diabetes if it sought a partner familiar with the pharmaceutical environment.

Praluent (alirocumab)

  • Sanofi is “confident that Praluent will transform the management of hypercholesterolemia.” The company noted that it plans to rebuild its cardiovascular portfolio around the LDL cholesterol-lowering PCSK9 inhibitor. Management reiterated that Praluent’s launch is proceeding gradually as expected. Its priorities this year are building awareness, increasing US market access, and driving adoption. The company plans to continue and expand these efforts over the next two years. In terms of increasing US market access, the recent Express Scripts decision to cover both Praluent and competitor Repatha (evolocumab) was highlighted. Sanofi also noted that it is waiting on coverage decisions from CVS Health and UnitedHealthcare.
  • Slides from a Praluent-focused breakout session disclosed that cumulative new prescriptions (NRx) for Praluent totaled 628 as of the week of October 23. In addition, the company shared that 95% of prescriptions in the US are for the lower 75 mg dose of Praluent. The slides also noted that there is a backlog of patients awaiting coverage decisions for Praluent. Praluent is a very expensive drug at $40 a day (~$14600), so gaining good coverage access will be crucial for uptake to increase.

-- by Helen Gao, Emily Regier, and Kelly Close