Memorandum

Sanofi 4Q13 – Diabetes Division up 12% in 4Q13; LixiLan phase 3 initiation; Lantus breaks $7 billion in yearly sales – February 6, 2014

Executive Highlights

  • Diabetes Division sales grew 12% in 4Q13 to $2.3 billion and 14% in 2013 to $8.7 billion.
  • Lantus grew 13% in 4Q13 and 15% in 2013, breaking $7 billion in annual sales; 4Q13 is its 12th consecutive quarter of double-digit growth.
  • LixiLan’s phase 3 trials have commenced; Sanofi is targeting late-2015 US submission to beat Novo Nordisk’s IDegLira.

Sanofi reported 4Q13 and 2013 financial results in a call this morning led by CEO Chris Viehbacher. Sanofi’s Diabetes Division continued its tradition of strong growth with worldwide diabetes sales rising 12% as reported (19% operationally) in 4Q13 to $2.4 billion and rising 14% (19% operationally) to $8.7 billion in 2013. Lantus experienced its 12th consecutive quarter of double-digit growth, growing 13% as reported (20% operationally) in 4Q13 to $2.1 billion and growing 15% (20% operationally) to $7.6 billion.

The big news of the day for diabetes was that LixiLan’s phase 3 trials have commenced and that Sanofi is targeting late-2015 submission in the US to beat out Novo Nordisk’s IDegLira. Sanofi aims to position LixiLan as the first injectable of choice for anyone needing to initiate injectable therapy and as a better alternative to insulin for people with inadequate control on basal insulin alone (and needing better control of postprandial glucose, weight, or hypoglycemia – practically every type 2, for a start!).

The report below details our top six highlights for the call – three financial and three pipeline – which include (i) the overall Diabetes Division’s strong performance; (ii) continued stellar performance from basal insulin Lantus; (iii) Lyxumia’s steady climb; (iv) LixiLan’s phase 3 initiation; (v) management’s narrowing of the US and EU submission timeline for U300 insulin glargine from 1H14 to 2Q14; and (vi) management’s discussion of PCSK9 timelines and market positioning.

 

Top Three Financial Highlights

1. Sanofi’s Diabetes Division continues growing strong, reaching €1.7 billion ($2.4 billion) in worldwide sales in 4Q13 (up 12% as reported and 19% operationally) and €6.6 billion ($8.7 billion) in 2013 (up 14% as reported and 19% operationally). The comparison was very challenging against 25% (21% operational) growth in 4Q12 and 23% (17% operational) growth in 2012. Sanofi’s Diabetes Division includes the basal insulin analog Lantus, the rapid-acting insulin Apidra, the sulfonylurea Amaryl, the human basal insulin Insuman, the GLP-1 agonist Lyxumia, and the blood glucose meters BGStar and iBGStar. Lantus continues to be the largest driver of growth, with 87% of Sanofi’s diabetes sales made up by Lantus in 4Q13 and in 2013 (compared to 86% in 4Q12 and 2012). In relation to its nearest competitors, Novo Nordisk and Lilly, Sanofi experienced greater growth than Novo Nordisk (total diabetes care up 4% in 4Q13 and 7.5% in 2013, as reported) and similar growth compared to Lilly (up 15% in 4Q13 and up 10% in 2013, as reported).

Table 1: Diabetes Division 4Q13 and 2013 Sales

 

4Q13 Sales (in millions)

Operational/Reported Growth from 4Q12

2013 Sales (in millions)

Operational/Reported Growth from 2012

Diabetes Division Sales

€1,735 ($2,361)

19% / 12%

€6,568 ($8,722)

19% / 14%

US

€1,032 ($1,405)

25% / 19%

€3,862 ($5,129)

26% / 22%

W Europe

€270 ($367)

6% / 5%

€1,051 ($1,396)

4% / 4%

EM

€329 ($448)

19% / 10%

€1,250 ($1,660)

16% / 9%

ROW

€104 ($142)

5% / -17%

€405 ($538)

6% / -12%

*USD assumes a conversion rate of €1 to 1.361 USD during 4Q13 and 1.328 during 2013; EM = Emerging Markets; ROW = Rest of World.

2. In its 12th consecutive quarter of double-digit growth, Lantus grew 13% as reported (20% operationally) to €1.5 billion ($2.1 billion) in 4Q13 and grew 15% (20% operationally) to €5.7 billion ($7.6 billion) in 2013. Once again, Lantus has set a new quarterly and yearly record for itself – this is the first time Lantus has broken $7 billion in yearly sales. The comparison was quite challenging against 27% growth (23% operationally) in 4Q12 and 27% growth (19% operationally) in 2012. As is usually the case, growth in the US was the strongest, where as mentioned during Q&A, management noted that the growth mix was two-thirds due to price increases and one-third due to volume increases. We do continue to be very cautious about future growth driven by price.

  • By our calculations Sanofi held 39% of the branded insulin market by value in 4Q13 and 2013, and Lantus held 78% of the basal insulin analog market by value in 4Q13 and 79% in 2013. Sanofi’s share of the overall insulin market has grown from 37% in 2012 and 34% in 2011, reflecting strong ability in the marketplace to drive Lantus use. Lantus’ share of the basal insulin analog market has remained stable over the past several years, and this market has grown substantially.
  • In the US, Lantus SoloSTAR sales represented 58% of total Lantus sales (compared to 53% in 4Q12). We are glad to see that more patients are availing themselves of the pen and look forward to the day where no one must use a needle and syringe.
  • Notably, Sanofi has filed a suit against Lilly claiming patent infringement on four patents related to Lantus, as the company announced last week. As a reminder, last week, after the announcement by Sanofi, Lilly issued a statement denying that its biosimilar glargine infringes on any of the patents in question. There hasn’t been any further commentary from either company on this topic until Q&A in the Sanofi call, where Sanofi management said that it will be able to delay Lilly’s launch unless Lilly is able to get a “summary judgment.” Sanofi CEO Viehbacher then expressed doubt that Lilly would be successful: “…normally that will only end if Lilly can get a summary judgment, and I won’t speculate on court processes, but obviously we wouldn’t have launched this suit unless we thought we had a very robust case.” He then went on to say that their lawsuit does hold what he characterized as a “major benefit” – giving Sanofi enough time to establish U300 as the standard in diabetes care.
    • We are not legal specialists, but as we understand it, Sanofi's suit automatically invokes a 30-month “stay” on FDA approval for Lilly's candidate, pushing expected launch from February 2015 to mid-2016 if Lilly can’t get the summary judgment, as noted. We will be trying to get more color on this.
    • As management mentioned, even if Sanofi’s suit is unsuccessful, it could delay Lilly's glargine for long enough for Sanofi's own U300 glargine biosimilar to gain a foothold first. In the meantime, holding back Lilly’s candidate will allow Sanofi and Novo Nordisk to retain control over the pricing environment in basal insulins – a pricing environment that is prompting some controversy in circles in which access is getting more and more challenging. Management did not add any new commentary on this matter during the call except for the confident statement in Q&A.
  • Other companies are also working on next generation basal insulins that could produce headwinds for Lantus in the future. Merck is also purportedly working on a biosimilar insulin glargine although the company has never publicly confirmed or denied this. Novo Nordisk’s ultra-long acting Tresiba (insulin degludec), which provides the option for flexible dosing and claims nocturnal hypoglycemia benefit over Lantus, is on the market outside of the US and is awaiting interim results of its CVOT for re-submission to the US FDA (likely in 2016). Lilly, in addition to its biosimilar glargine in partnership with BI, is also working solo on a novel basal insulin analog, peglispro, which should report phase 3 results this year.
  • We note that European sales for Lantus were very weak, up just 3-4%. Undoubtedly that is largely due to price increases not being pushed through in the EU as they are in the US and lack of volume increases driving other geographies like the emerging markets.

Table 2: Lantus 4Q13 and 2013 Sales

 

4Q13 Sales (in millions)

Operational/Reported Growth from 4Q12

2013 Sales (in millions)

Operational/Reported Growth from 2012

Lantus

€1,512 ($2,058)

20% / 13%

€5,715 ($7,590)

20% / 15%

US

€997 ($1357)

24% / 18%

€3,747 ($4,976)

25% / 21%

W Europe

€204 ($278)

4% / 3%

€804 ($1,068)

4% / 3%

EM

€234 ($318)

21% / 11%

€874 ($1,161)

17% / 10%

ROW

€77 ($105)

11% / -8%

€290 ($385)

12% / -4%

*USD assumes a conversion rate of €1 to 1.361 USD during 4Q13 and 1.328 during 2013; EM = Emerging Markets; ROW = Rest of World.

3. Lyxumia revenue totaled €5 million (~$7 million) in 4Q13, up from €3 million ($4 million) in 3Q13 and €1 million ($1 million) in 2Q13. Lyxumia has now been launched in Germany, the UK, Spain, Japan, and Mexico; Sanofi has elected to wait until the completion of the ELIXA CVOT in 2015 to submit to the US FDA after concerns about potential interim data disclosure. In Q&A, management indicated that Lyxumia has captured anywhere from six to 11% of market share in the different regions in which it is available. During the call, management strongly positioned Lyxumia as an add-on to basal insulin therapy with its complementary postprandial glucose lowering effect and low risk of hypoglycemia. In the EU Lyxumia is approved for use as an add-on to oral agents and to basal insulin. As announced during Sanofi’s 3Q13 financial update, the German G-BA has ruled that Lyxumia shows no additional benefit over existing therapies due to a lack of trials with appropriate comparators, meaning that Lyxumia will likely be subject to generic pricing in Germany. Management said on the call today that pricing negotiations were still ongoing.

  • Sanofi released Lyxumia data at IDF 2013 Day #4 – a trial found that dosing Lyxumia before breakfast or before the main meal of the day produced similar glycemic and weight reductions, which means that patients can take Lyxumia each day when it is most convenient for them.

Honorable Mention Highlight: Apidra continues its return to growth as it recovers from supply issues that resolved in 2012. Apidra grew 25% as reported (34% operationally) to €81 million ($110 million) in 4Q13 and 25% as reported (32% operationally) to €288 million ($382 million) in 2013. Amaryl and Insuman continue to sputter – Amaryl’s 4Q13 sales totaled €91 million ($124 million), down 11% as reported (up 2% operationally with all growth coming from emerging markets), and 2013 sales totaled €375 million ($498 million), a decline of 11% (down 1% operationally). Insuman fell 8% (down 3% operationally) to €33 million in 4Q13 and fell 2% in 2013 to €132 million ($175 million; flat operationally).

Top Three Pipeline Highlights

1. Management announced that phase 3 trials have commenced for its GLP-1 agonist/basal insulin fixed ratio combination product LixiLan; management also announced that it is targeting late-2015 submission of dossiers to FDA (which would put it ahead of Novo Nordisk’s IDegLira, since insulin degludec’s resubmission would likely be 2016 at the earliest). Two trials are underway: LixiLan-O (n=1,125 patients with inadequate control on oral agents) and LixiLan-L (n=700 patients not at goal on basal insulin); the trials are not yet registered on ClinicalTrials.gov. According to management, these populations reflect the two populations Sanofi intends to target with LixiLan – Sanofi aims to position LixiLan as the injectable therapy of choice for patients newly initiating injectable therapy, and as a solution for obtaining better glycemic, weight, and hypoglycemic control for those not at goal on basal therapy.

2. Management narrowed its US and EU submission timeline for U300 insulin glargine from 1H14 to 2Q14. On the call, management reminded listeners that U300’s flatter and prolonged PK profile compared to Lantus offers less hypoglycemia at equal efficacy. As a reminder, full results of the phase 3 EDITION I study were presented at ADA 2013 (see page 3 of our ADA 2013 Insulin Therapies report), showing a 21% reduction in nocturnal hypoglycemia and non-inferior glycemic control to Lantus. In addition, EDITION II data were presented at IDF 2013 Day #2, and concurrently, Sanofi released topline results for EDITION III, IV, and JPI. All of these trials met their primary endpoints of similar glycemic control compared to Lantus. EDITION II and IV also found lower rates of hypoglycemia with U300 compared to Lantus, but EDITION III did not, potentially because of its patient population (it enrolled patients earlier in disease progression). EDITION JPI did not have hypoglycemia as a prespecified endpoint. EDITION JPII is the final trial in the phase 3 program left to report.

  • Notably, management said in Q&A that it believes ORIGIN data could be applied to the U300 label. This could be a pretty big positive for assuring HCPs and patients that the new product is safe – we are curious whether other biosimilar glargines could also capitalize on these data (e.g., Lilly’s insulin glargine formulation).

3. In line with previous guidance, Sanofi plans to file its PCSK9 inhibitor, alirocumab, outside the US in early 2015 and subsequently in the US also in 2015. Sanofi released topline phase 3 data in 4Q13 fro ODYSSEY-MONO (alirocumab as monotherapy), showing that alirocumab provided a very impressive 47% LDL reduction from baseline to week 24 (compared to 16% on ezetimibe). More phase 3 data readouts are expected mid-year to 3Q14. Alirocumab’s filing will follow Amgen’s evolocumab (AMG 145), which Amgen plans to file in 2014. Topline phase 3 data for evolocumab suggest roughly 50% LDL reductions from baseline to week 12 or 52. It continues to be very interesting to watch this race between Sanofi and Amgen on this important therapy.

  • During the call, management illustrated the unmet need in hypercholesterolemic patients: within the 62 million statin-treated adults with LDL above goal (>70 mg/dl) in the US and EU5, there is a high risk population of about 36 million that are either statin intolerant (~6 million), have coronary heart disease (CHD) or a CHD equivalent, diabetes, or familial hypercholesterolemia. Moreover, there is a “highest” risk group of about 22 million who are statin intolerant and at high risk; have diabetes with two risk factors; have diabetes and previous history of heart disease, or familial hypercholesterolemia. On balance, the population that could take Sanofi’s PCSK9 inhibitor, alirocumab, appears to be a bit bigger than many may have expected.

Management made no other updates to the diabetes pipeline.

Table 3: Sanofi’s diabetes pipeline

Name

Class

Status

Timeline

U300 Insulin Glargine

Basal insulin

Phase 3

US/EU submission 2Q14

Lyxumia (lixisenatide)

Once-daily short-acting GLP-1 agonist

Approved/Phase 3

US submission expected 2015

LixiLan (Lyxumia/Lantus)

GLP-1 agonist/basal insulin fixed-ratio combination

Phase 3

Targeting late-2015 US submission

Alirocumab

PCSK9 Inhibitor (for hypercholesterolemia)

Phase 3

Submission in 2015

Insulin Biosimilar Program

Biosimilar insulins

Phase 1

Unknown

 

Questions and Answers

Q: Can you give some flavor on the Lyxumia launch in Germany in terms of market share and what kind of forecasts you have for 2014?

A: We have launched in a couple EU markets, Japan, and Mexico. We see a pretty consistent picture of market share gains. It’s doing much better than the initial launch of Byetta and Bydureon. Market shares are 6%, 7%, 8%, 9%, and up to 10-11% depending on the market. In Germany we reached pretty quickly a market share of about 8%. You might recall we are discussing with the Germans pricing because IQWiG did not give added therapeutic benefit for Lyxumia for having inadequate comparators. We are still in pricing negotiations.

Q: On Lantus could you give us the split on volume and price in the US in 2013? Has there been any change in your strategy now that you have the litigation ongoing in terms of sales force, pricing strategy?

A: On Lantus for the US we see price-to-volume of two-thirds/one-third. Globally it’s more half and half. On the litigation with Lilly, as you have seen there has been an infringement on some of our patents. The process will follow its due course, and we can’t predict what will happen along those lines. Concerning the 30-month stay, let’s wait and see. The underlying strategy is still much the game plan. We have our U300 next generation insulin. We have four studies done demonstrating safety and efficacy, so we have a fileable drug. It differentiates not only on hypoglycemia, but also in its whole 24-hour coverage. Degludec kind of oriented everyone to the importance of hypoglycemia, but it had a 40-hour half-life, so they preferred not to talk about that part of the story. We’ve got LixiLan now starting phase 3 and Lyxumia rolling out. There’s a broader portfolio here.

In terms of the 30 month stay, normally that will only end if Lilly can get a summary judgment, and I won’t speculate on court processes, but obviously we wouldn’t have launched this suit unless we thought we had a very robust case. It does hold a major benefit – clearly we have better time to establish U300 as the standard in diabetes care.

Q: Is a U300 and Lyxumia combination in the cards?

A: We already have the approval in label for Lyxumia to combine on top of Lantus. We have a lot of data validating the notion that combining the two gives you a better effect because you can provoke weight loss with Lyxumia and counteract weight gain. In addition, we see insulin dose sparing. Patients don’t go up in dose as fast and have lower doses of insulin, which ultimately provides a good combination. LixiLan is the representation, in a single product, that can be used by patients as they go onto the first injectable. The importance of that from a medical standpoint – it is a shift in medical practice that will basically say if you have to take an injectable, you really have to combine the two [GLP-1 and insulin]. That we approved. So the next step will be to enhance that with the unique pharmacologic profile of U300. But right now you know Lantus is approved, so we’re doing LixiLan development because we have good medical evidence. We’ll do the LixiLan development and then have a much better read on efficacy of this, especially in the “first injectable” space, and then develop that with U300 as we learn more about it in our current trials.

Q: Can you comment on PCSK9 pricing? Is basal insulin as a chronic injectable product a good benchmark? Or would you go more towards specialty care so more expensive?

A: I can certainly tell you you’re thinking too low on basal insulin. We think our own is priced too low already, which is why we’re doing price increases. Yet it is still only $6 per day. Yet Victoza is sitting there at $12-18 per day based on dose. You can take it from there. There is still a big population of statin intolerance and familial hypercholesterolemia. Obviously we’ve also got a competitive situation so we’ll be attentive to that. We’ve got an extremely efficacious and tolerable drug. Concerns about injection don’t seem to be an issue. We have over 20,000 patients in phase 3. Amgen and Pfizer have had no trouble recruiting patients and very low drop out rates. The acceptance of the form of therapy seems to be favorable. Then I think we’ll probably give some closer guidance as we get closer to launch, probably sometime in 2015.

Q: With U300, can you assure us there is really no regulatory risk at this point with that product whether it be on CV safety, manufacturing, or anything else? It is one of your more important near term products.

A: We’ve told you as much as we know and can say. More studies will be published at upcoming congresses. It’s a concentrated form of insulin glargine. The main benefit is that it’s a higher concentration so the depot degrades at a different rate, so you get a different PK/PD profile. From a molecular point of view we are thinking the safety profile of Lantus carries forward. We’d believe the ORIGIN data could transfer over to the U300. As much as we know, we’ve been able to disclose. You know as much as I do nothing is ever 100%, and I don’t want to give an absolute guarantee that nobody could give.

 

-- by Jessica Dong and Kelly Close