Sanofi 3Q16 – Diabetes portfolio down 3% YOY to ~$2 billion; Lantus revenues fell 10% YOY to ~$1.6 billion, driven by US pricing pressures; LixiLan approval expected in November – October 31, 2016

Sanofi provided its 3Q16 earnings update this morning in a call led by CEO Mr. Olivier Brandicourt. The press release, webcast,  presentation slides, and video interview summary are available on Sanofi’s website. Read on to learn the performance of Sanofi’s diabetes products, the progress of its diabetes pipeline, and our pooled analysis of the basal and rapid acting insulin markets. Relevant Q&A is also transcribed below.

Top Ten Highlights

1. Sanofi’s overall diabetes portfolio fell 2% year-over-year (YOY) in constant currencies (falling 3% as reported) to €1.8 billion (~$2.0 billion). Sequentially, total revenue rose 1%. Despite this negative YOY growth, management expressed optimism, highlighting that the diabetes portfolio outperformed the company’s previous financial guidance forecasting 4%-8% revenue losses for the portfolio each year through 2018.

2. Sales for Sanofi’s flagship product Lantus (insulin glargine) fell 10% YOY in constant currencies (11% as reported) to €1.4 billion (~$1.6 billion), a 5% sequential decline. Management once again attributed Lantus’ continuing challenges to pricing pressures in the US, where Lantus revenue fell 14% (in constant currencies and as reported) to €858 million (~$960 million) from €1.6 billion (~$1.7 billion) in 3Q15.

3. Sales for Sanofi’s next-generation basal insulin Toujeo (U300 insulin glargine) reached €167 million (~$186 million), a nearly 4-fold YOY increase (as reported and in constant currencies) and an 18% sequential increase. Management highlighted that Toujeo continues to make progress in gaining total prescriptions (TRx) market share.

4. Despite the exclusion of Sanofi’s Lantus (insulin glargine) and Toujeo (U300 insulin glargine) from two of the three major US PBMs (CVS Health and UnitedHealthcare) in favor of Lilly/BI’s biosimilar insulin glargine Basaglar, Sanofi management characterized the glargine franchise’s payer coverage as remaining relatively robust, particularly among people insured through Medicare Part D.

5. The basal insulin market rose 2% YOY to $2.6 billion in 3Q16, but declined 2% sequentially. Novo Nordisk captured 32% of this market by value, with Levemir holding 25% and new-generation insulins (Tresiba, Xultophy, Ryzodeg) holding 7%.

6. Sales of Sanofi’s rapid-acting insulin analog Apidra (insulin glulisine) rose 7% at constant exchange and as reported to €94 million (~$104 million). The product was the sole rapid-acting insulin to experience growth in 3Q16 – the overall rapid-acting insulin analog market fell 6% YOY and 5% sequentially to ~$1.5 billion in 3Q16.

7. Revenue for Sanofi’s short-acting GLP-1 agonist Adlyxin/Lyxumia (lixisenatide) totaled €9 million (~$10 million), flat YOY as reported (down 11% in constant currencies) and up 13% sequentially.

8. Sales for Sanofi/Regeneron’s PCSK9 inhibitor Praluent (alirocumab) totaled €35 million (~$39 million) in 3Q16, up 9-fold YOY (as reported and in constant currencies) for its fifth quarter on the market. The product’s TRx share in the US increased 60% sequentially in 3Q16.

9. Of Sanofi’s other diabetes products, BGM experienced positive 6% YOY growth, totaling €16 million (~$18 million). Insuman (human insulin) revenues experienced negative growth, falling 11% YOY to €32 million (~$35 million). Revenue for the sulfonylurea Amaryl (glimepiride) remained relatively flat at €92 million (~$103 million).

10. An FDA decision for Sanofi’s basal insulin/GLP-1 agonist fixed-dose combination LixiLan (insulin glargine/lixisenatide, also known as iGlarLixi) is expected in November 2016, following a three month delay. Management was optimistic about LixiLan’s impending approval. If approved, it will be the first-to-market drug of its class in the US – an FDA decision for Novo Nordisk’s IDegLira (insulin degludec/liraglutide) is expected in December 2016.

11. On the pipeline front, Sanofi highlighted the upcoming initiation of phase 3 trials for its Lexicon-partnered SGLT-1/2 dual inhibitor sotagliflozin and its Hanmi-partnered long-acting GLP-1 agonist efpeglenatide in type 2 diabetes.

Table 1. 3Q16 Financial Results for Sanofi’s Major Diabetes Products

Financial Highlights

1. Overall Diabetes Portfolio: Revenues fall but outpace financial guidance forecasts

Sanofi’s overall diabetes portfolio fell 2% year-over-year (YOY) in constant currencies (falling 3% as reported) to €1.8 billion (~$2.0 billion). Sequentially, total revenue rose 1%. Despite this negative YOY growth, management expressed optimism, highlighting that the diabetes portfolio outperformed the company’s financial guidance (updated in 3Q15) forecasting 4%-8% revenue losses for the portfolio each year through 2018. Once again, Sanofi’s declining revenues are largely attributable to the falling sales of flagship product Lantus, which fell 10% YOY in constant currencies (11% as reported) to €1.4 billion (~$1.6 billion) in 3Q16. Bright spots in Sanofi’s diabetes portfolio include its next-generation basal insulin Toujeo (U300 insulin glargine) and PCSK9 inhibitor Praluent (alirocumab). Toujeo experienced a nearly 4-fold YOY increase, posting sales of €167 million (~$186 million), and Praluent revenue rose almost 9-fold YOY, totaling €35 million (~$39 million). In addition to rising revenues, both of these products have shown promising increases in total prescription (TRx) market share.

Figure 1: Total Sanofi Diabetes Portfolio Sales (1Q05-3Q16)

2. Lantus (insulin glargine): Sales Continue to Decline due to US Pricing Pressure

Sales for Sanofi’s flagship product Lantus (insulin glargine) fell 10% YOY in constant currencies (11% as reported) to €1.4 billion (~$1.6 billion), a 5% sequential decline. Management once again attributed Lantus’ continuing challenges to pricing pressures in the US, where Lantus revenue fell 14% (in constant currencies and as reported) to €858 million (~$960 million) from €1.6 billion (~$1.7 billion) in 3Q15. According to Sanofi, this reflects both lower average net price and patients switching to the next-generation glargine product Toujeo (U300 insulin glargine). In ex-US markets, Lantus sales declined 5% YOY as reported to €533 million (~$594 million). This was largely driven by declining sales in Europe (-11% YOY in constant currencies) and Rest-of-World (-25% YOY in constant currencies); notably, Lantus revenues increased over 13%YOY in constant currencies to €232 million (~$258 million) in Emerging Markets.

Figure 2: Lantus Sales (1Q05-3Q16)

3. Toujeo (U300 insulin glargine): Positive Growth in Revenue and TRx Share

Sales for Sanofi’s next-generation basal insulin Toujeo (U300 insulin glargine) reached €167 million (~$186 million), a nearly 4-fold YOY increase (as reported and in constant currencies) and an 18% sequential increase. By geography, US sales accounted for the lion’s share of Toujeo revenues, totaling million €122 million (~$136 million). Ex-US sales totaled €45 million (~$50 million). It’s our sense that positive word-of-mouth on new basal insulins is definitely growing – access certainly remains a major issue, but more and more patients know about the newer basal insulins now and we certainly believe the curves bode well.

Figure 3: Toujeo Sales (1Q15-3Q16)

• Management highlighted that Toujeo continues to make progress in gaining total prescriptions (TRx) market share. Now launched in 35 countries, Toujeo holds substantial market share by volume in Germany (12%), Spain (10%), Japan (9%), the US (6.6%), France (5%), and the UK (2%) (slide 12). Based on Novo Nordisk 3Q16 presentation this morning, Toujeo currently outperforms Novo Nordisk’s Tresiba (insulin degludec) in all of these markets except for Japan, where Tresiba holds 40% of the market share (slide 10).
• Tresiba certainly stands as Toujeo’s most direct competitor in the basal insulin market. Tresiba has received enthusiastic praise from many providers since its launch earlier this year. During a corporate symposium held at this year’s ADA, Ms. Davida Kruger (Henry Ford Health System, Detroit, MI) and Drs. Anne Peters (USC, Los Angeles, CA) and Christopher Sorli (Billings Clinic, MT) spoke very highly of Tresiba’s long duration of action and, in particular, the opportunity for flexible dosing. Furthermore, a presentation at the Keystone Symposium on New Therapeutics in Diabetes and Obesity characterized Tresiba as a scientifically and clinically superior insulin to others on the market. Toujeo’s duration of action, while longer than Lantus’, is not quite as long as Tresiba’s and the Toujeo label does not include a flexible dosing claim. One may work better for a given patient than another but overall we expect formulary access to be primary point of differentiation for most US patients. On the other hand, despite the flexible dosing claim for Tresiba, we have heard feedback from leaders in the field praising Toujeo’s “almost effortless” dosing and “just right, really flat” action profile which is “just not the same with Tresiba.” The Toujeo pen also got marks for being slimmer and more attractive on the surface, though the actual act of dosing Tresiba has a “slight advantage” according to some. 

4. 2017 Formulary Status Update: Lantus and Toujeo payer coverage remain relatively robust

Despite the exclusion of Sanofi’s Lantus (insulin glargine) and Toujeo (U300 insulin glargine) from two of the three major US PBMs (CVS Health and UnitedHealthcare) in favor of Lilly/BI’s biosimilar insulin glargine Basaglar, Sanofi management characterized the glargine franchise’s payer coverage as remaining relatively robust, particularly among people insured through Medicare Part D. In 2016, Lantus was covered for 99% of commercial covered lives and 95% of Medicare covered lives. In 2017 these numbers will fall to a minimum of 68% of commercial covered lives (15% of commercial insurance policies are as of yet undecided so this could reach up to 83%) and 94% of Medicare covered lives. Similarly, Toujeo will be covered for a minimum of 66% of commercial covered lives (again, 15% are as of yet undecided so this could reach up to 81%), down from 90% in 2016, and 88% of Medicare covered lives (down negligibly from 89%) (slide 18; see figure below). Notably, Lantus and Toujeo hold “preferred” status for less than half of commercial lives covered. The drop in commercial coverage is extremely disappointing, especially in light of the large rebates Sanofi accepted in exchange for favorable formulary positioning in 2015 and 2016 – we expect 2017 will only be more challenging for Lantus as a result.

Figure 4: Payer Coverage of the Glargine Franchise for US Commercial and Medicare Part D

5. Pooled Analysis: Basal Insulin Market

The basal insulin market rose 2% YOY to $2.6 billion in 3Q16, and declined 2% sequentially. This whole class growth occurs against an easy comparison, as basal insulin sales fell 9% YOY in 3Q15, 2% YOY in 1Q16, and remained flat in 2Q16. We’re disappointed, but not surprised, to once again see underwhelming growth for basal insulins, especially given the promising value of next-generation products Tresiba and Toujeo, both of which boast longer-acting PK/PD profiles and greater patient convenience. Without question, competitive pricing in the US is the major obstacle. One potential push forward is the excitement brewing over GLP-1 agonist/basal insulin combinations, including both Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s iGlarLixi (insulin glargine/lixisenatide), which could bolster sales for both drug classes, although the possibility remains that these more advanced combination products will usurp basal insulin sales further. This is something to watch closely for in 2017, as Xultophy and iGlarLixi will both (hopefully) be FDA-approved by year-end.

• Sanofi maintained the large majority (67%) of the basal insulin market by value: Lantus (insulin glargine U100) remains the frontrunner with 60%, while next-gen product Toujeo (insulin glargine U300) held 7% (a marginally greater share of the overall basal insulin market compared to Tresiba). Novo Nordisk captured 32% of the basal insulin market by value, with Levemir holding 25% and new-generation insulins (Tresiba, Xultophy, Ryzodeg) holding 7%. Lilly’s biosimilar insulin glargine Basaglar captured ~1%, although we anticipate Lilly’s share of this market will markedly increase once Basaglar is launched in the US on December 15, 2016, especially given its exclusive formulary status for CVS Health and UnitedHealthcare. Novo Nordisk’s 3Q16 presentation slides displayed each basal insulin product’s share of new-to-brand prescriptions (NBRx) in the US as well: (i) Lantus leads with 46%, followed by (ii) Levemir with 19%, (iii) Toujeo with 14%, and (iv) Tresiba with 12%.

Figure 5: Basal Insulin Market (1Q06-3Q16)

Figure 6: Basal Insulin Market by New-to-Brand Prescriptions (NBRx)

6. Apidra (insulin glulisine): Growth from a Low Base in Challenging Rapid-Acting Insulin Market

Sales of Sanofi’s rapid-acting insulin analog Apidra (insulin glulisine) rose 7% at constant exchange and as reported to €94 million (~$104 million). Sequentially, sales rose 1% as reported. By geography, US sales totaled €32 million (~$36 million) and ex-US sales totaled €62 million (~$69 million).

Figure 7: Apidra Sales (1Q08-3Q16)

• The overall rapid-acting insulin analog market fell 6% YOY and 5% sequentially to ~$1.5 billion in 3Q16. By value, Novo Nordisk’s NovoLog (insulin aspart) remains in the lead with 50% of sales in the rapid-acting insulin market. Revenue for Lilly’s Humalog (insulin lispro) was close behind with 43% of the market, and sales of Sanofi’s Apidra accounted for 7%. MannKind’s inhaled insulin Afrezza (formerly partnered with Sanofi) has not reported sales for since 4Q15, so it is not included in these calculations. Given its flat $2 million sales throughout 2015, it likely had a negligible impact on whole-market trends.

Figure 8: Total Rapid-Acting Insulin Market Sales (1Q06-3Q16)

• The rapid-acting insulin market has been slowing in recent quarters due to competition from the increasing popularity of the GLP-1 agonist class as an option for basal insulin therapy intensification and the growing use of SGLT-2 inhibitors to address postprandial excursions. Indeed, all three major rapid-acting insulin products experienced modest to negative growth in 3Q16: Humalog fell 9%, NovoLog fell 3%, and Apidra grew by 7% YOY as reported. Time will tell whether this trend continues; we look forward to learning whether the launch of new products like Novo Nordisk’s faster-acting insulin aspart, Lilly/Adocia’s BioChaperone Lispro, and Sanofi’s biosimilar insulin lispro can revitalize the rapid-acting insulin market in future quarters, though based on data at ADA 2016 it appears that these upcoming products offer only modest improvements over current rapid-acting insulin analogs.
• The decline in the rapid-acting insulin market is largely driven by declining sales in the challenging US market. All three major rapid-acting insulin products universally experienced falling revenues in the US: as reported YOY, NovoRapid fell 12% to ~$396 million, Humalog fell 14% to $379 million, and Apidra fell 6% to ~$36 million. Rapid-acting insulin was one of the first areas within diabetes to confront the threat of exclusive formularies and their price eroded rapidly as a result. That said, Lilly management optimistically suggested in its 3Q16 update that it’s unlikely to see further switches between exclusive formularies, and thus we may be able to expect a slowing of price erosion.

7. Lyxumia/Adlyxin (lixisenatide): Continued Challenges Breaking into the GLP-1 Agonist Market

Revenue for Sanofi’s short-acting GLP-1 agonist Adlyxin/Lyxumia (lixisenatide) totaled €9 million (~$10 million), flat YOY as reported (down 11% in constant currencies) and up 13% sequentially. Management offered little commentary on Adlyxin/Lyxumia and did not include the product’s revenue in its 3Q16 net financial sales worksheet (though total global sales were listed in the press release). We believe the upside and very meaningful potential here is not in standalone GLP-1 agonist sales but in the combo iGlarLixi – we are waiting for US FDA approval but are a bit concerned payers elsewhere (and in US) are not fully understanding the power of combos and are overly focused on price rather than the long term benefits associated with putting the appropriate patients on more potent drugs with a longer duration that are easier to use, which may well result in better adherence for many.  While some point out that Lyxumia faces an uphill battle as the sixth product to enter the increasingly competitive GLP-1 agonist arena, we emphasize that was never Sanofi's goal to win in GLP-1 monotherapy. As such, we are very interested to see what Big Data will be able to show on this front with patients "in the real world" who are lucky to get this combo class.

Figure 9: Lyxumia Sales (2Q13-3Q16)

• While 2Q16 results for the overall US GLP-1 agonist market are not yet available, revenue for the class exceeded $1.2 billion in 2Q16. According to Novo Nordisk’s 2Q16 update, by total prescriptions (TRx), Novo Nordisk’s Victoza held 52% of the US market share, Lilly’s Trulicity and Astra Zeneca’s exenatide franchise (Bydureon and Byetta) both held 20%, and GSK’s Tanzeum held 9%. We look forward to Astra Zeneca’s 3Q16 update on November 10, to gain a better sense of how the GLP-1 agonist market may have shifted since. Looking ahead, Adlyxin will soon face additional competitive pressures as Intarcia’s implantable GLP-1 agonist ITCA 650 (exenatide mini-pump) and Novo Nordisk’s next-generation semaglutide (in both oral and once-weekly injectable formulations) arrive on the market. Intarcia has suggested that ITCA 650 will be competitively priced, at a per-day discount to current GLP-1 agonist options, while the injectable formulation of semaglutide will enjoy evidence from the SUSTAIN 6 trial suggesting a cardioprotective benefit.

8. Praluent (alirocumab): Strong sales and steady increase in TRx share, despite challenging PCSK9 inhibitor market

Sales for Sanofi/Regeneron’s PCSK9 inhibitor Praluent (alirocumab) totaled €35 million (~$39 million) in 3Q16, up 9-fold YOY (as reported and in constant currencies) for its fifth quarter on the market. Revenue increased 67% sequentially from €21 million (~$24 million). These gains were largely driven by US revenues. By geography, US sales totaled €28 million (~$31 million) and ex-US sales totaled €7 million (~$8 million). Management expressed optimism about Praluent’s steady gains in total prescriptions (TRx); TRx share in the US increased 60% sequentially in 3Q16.

• A significant topic of discussion throughout the call was the difficult pricing environment facing the PCSK9 inhibitor class. Indeed, we learned at CMHC 2016 that coverage for PCSK9 inhibitors has a denial rate of 80%-90%, and even after expensive appeals only about 27% of privately insured patients and 46% of Medicare beneficiaries are able to obtain approval. Sanofi affirmed that despite these challenges it is “committed to unlocking the value of Praluent” and highlighted two potential bright spots that may influence payers to improve reimbursement for Praluent in the future: (i) upcoming results from the ODYSSEY OUTCOMES CVOT (second interim analysis expected in 4Q16) and (ii) the European Society of Cardiology’s updated guidelines to move PCSK9 inhibitors forward in the treatment algorithm for high cholesterol. We certainly believe this will be true, depending on magnitude - we are also extremely impressed with patient advocates in this arena and believe they will be able to have much stronger messages once this data is available. That said, we underscore what we hear from these advocates, that the payer environment is extremely challenging, particularly the education of payers themselves.
• Sanofi’s main competitor in the PCKS9 arena is Amgen’s Repatha (evolocumab), though the market may soon gain a third player with Pfizer’s phase 3 candidate bococizumab. Repatha revenues totaled $40 million for its third quarter on the market according to Amgen’s 3Q16 update yesterday, putting it neck-and-neck with Praluent at ~$39 million. Our sense is that coverage and access, rather than any meaningful clinical or administration differences, is the main determinant of which PCSK9 inhibitor is utilized – and coverage remains difficult for both products overall.

9. Other Financial Highlights

Sanofi’s sulfonylurea Amaryl (glimepiride), human insulin Insuman, and BGM business continued to contribute modestly to the company’s overall diabetes-related revenue.

• Sales of the sulfonylurea Amaryl (glimepiride) fell 1% at constant exchange (up 1% as reported) to €92 million (~$103 million). Sequentially, Amaryl sales fell 1% as reported from €93 million (~$105 million) in 2Q16.

Figure 10: Amaryl Sales (1Q05-3Q16)

• Sales of Sanofi’s human insulin Insuman fell 11% operationally (down 8% as reported) to €32 million (~$35 million). This decline was driven by European sales, which fell 17% in constant currencies to €20 million (~$22 million) in 3Q16. Insuman performed well in emerging markets, growing 18% operationally to €11 million (~$12 million).

Figure 11: Insuman Sales (4Q12-3Q16)

• Sanofi’s BGM portfolio accrued revenue of €16 million (~$18 million) in 3Q16, up 6% operationally and as reported. This represents a 6% sequential decrease. Sanofi has been deprioritizing its BGM portfolio of late and did not include its BGM revenue in its 3Q16 net sales financial worksheet, though the company did break out sales in its press release.

Pipeline Highlights

10. LixiLan (lixisenatide/insulin glargine): FDA Approval Expected in November

Sanofi was optimistic about the upcoming FDA decision for the basal insulin/GLP-1 agonist fixed-dose combination LixiLan (insulin glargine/lixisenatide, also known as iGlarLixi), which will be marketed as Soliqua in the US, noting that the company is “preparing for approval.” The FDA decision, expected in November 2016, comes after a three month delay following the FDA’s request for a Major Amendment to LixiLan’s NDA early in 3Q16. A decision from the EMA is also expected shortly, in 2017 The FDA also extended the review period for Novo Nordisk’s IDegLira (insulin degludec/liraglutide) by three months, with an expected decision by December 2016. The race for the first-to-market basal insulin/GLP-1 agonist between Novo Nordisk and Sanofi thus remains neck-and-neck. IDegLira is already approved in Europe under the trade name Xultophy.

• Specifically, the FDA had requested that Sanofi submit a Major Amendment providing additional information on the LixiLan pen delivery device. Though LixiLan received a 12-2 vote in favor of approval at the FDA Advisory Committee meeting in May, with panelists expressing nearly unanimous confidence in its A1c-lowering ability and the importance of the reduced injection burden that comes with a combination drug, a number of concerns were raised surrounding Sanofi’s proposed pen delivery device - a yellow pen providing medications in a 2:1 ratio (with 10-40 units of insulin glargine and 5-20 ug of lixisenatide) and a green pen providing medications in a 3:1 ratio (with 30-60 units of insulin glargine and 10-20 ug of lixisenatide). Panelists focused on (i) use of color as the primary point of differentiation between the 2:1 and 3:1 dose ratio pens (a challenge for patients who are colorblind or have poor eyesight); (ii) confusing pen labeling; and (iii) dosing nomenclature in “units” that describe the number of insulin glargine units without explicitly referring to the amount of lixisenatide. We continue to believe that the extended timing may reflect under-resourcing at the FDA more than any meaningful problems with the device.

11. Other Diabetes Pipeline Highlights: Upcoming Phase 3 Trials for Sotagliflozin and Efpeglenatide

On the pipeline front, Sanofi highlighted the upcoming initiation of phase 3 trials for its Lexicon-partnered SGLT-1/2 dual inhibitor sotagliflozin and its Hanmi-partnered long-acting GLP-1 agonist efpeglenatide in type 2 diabetes. Both of these trials are slated to begin in 4Q16. We detected particular enthusiasm for sotagliflozin during the call; Sanofi shared that it will go “full steam ahead” with the development of this candidate. Management underscored the potential of sotagliflozin to differentiate itself from the rest of the SGLT-2 inhibitor market for its unique mechanism involving dual action on both SGLT-2 and SGLT-1, and highlighted that its less renal-dependent mechanism provides a beneficial option for the many diabetes patients with impaired renal function. Sanofi is responsible for the phase 3 development of sotagliflozin in type 2 diabetes while Lexicon has been responsible for its development in type 1 diabetes and recently reported positive topline phase 3 results in this population.

• Sanofi’s pipeline additionally includes a number of phase 1 and 3 peptides, though no notable updates were mentioned for these candidates. Sanofi recently presented phase 3 results from the SORELLA 1 trial for its insulin lispro biosimilar SAR342434 at ADA 2016. Sanofi also recently added long-acting insulin analog SAR440067/LAPSInsulin-115 – acquired from Hanmi – to its phase 1 pipeline. The candidate is expected to support once-weekly dosing; Sanofi is also investigating a once-weekly combination of LAPSInsulin-115 and efpeglenatide in the preclinical stages. Sanofi’s phase 1 diabetes pipeline also includes a GLP-1/glucagon dual agonist (SAR425899), a GLP-1/GIP dual agonist (SAR438335), and a stable glucagon (SAR438544). Promising full phase 1 results for GLP-1/glucagon dual agonist SAR425899 were presented at ADA 2016 – see our competitive landscape for an overview of other efforts for this class.

Table 2: Sanofi Diabetes Pipeline

Questions and Answers

On 2017 Formulary Updates for Lantus and Toujeo:

Q: You have shown a 31% reduction in the coverage for Lantus in terms of volume in the commercial channels. Could you just talk about what we should be expecting in terms of price change?

A: I hope you will understand that I cannot disclose any details here for competitive reasons. The important thing is that we remain in the guidance that we have previously disclosed. However, I think it's important to remind everyone that channel mix is an important point of net pricing.  For example, in the third quarter where you see the glargine business decreasing by 5% in the US, this is actually the sum of a roughly 5% uplift in volume, so by default you can calculate that there is a 10% price effect. This price effect is pure channel mix, increase of the Medicaid channel.

Q: What is the profitability of Lantus in Medicare versus commercial preferred? And how will you retain the patients in the commercial non-preferred segment – do you think that will require a big rebate discount?

A: For competitive reasons I cannot give you the full details, but directionally I can tell you that the commercial segment is more profitable than the Part D segment, but Part D remains an interesting and profitable segment. We feel confident that we can pull through in those non-preferred segments. We have done that in the past quite successfully and we are confident that we will do that again in the future.

Q: So thank you for the contract positioning data. Overall I think it implies about 20% lost coverage by volume into 2017. Is there any reason, therefore, we shouldn't expect US Lantus volumes to decline by an equivalent amount?

A: Taking into account that we basically retained our full coverage for Medicare Part D, and that in the commercial arena we still have 15% of decisions pending, we feel relatively confident. If you would single out the CVS Health and UnitedHealthcare commercial non-custom plans, this represents a high single digit percentage of the market by volume. So that gives you an indication of what could be the impact on our volume.

Q: I'm just trying to square the circle on why Novo Nordisk is changing its guidance into 2017 and beyond and Sanofi isn't. Having lost the CVS Health and UnitedHealthcare contracts, did that change your behavior for Part D and remaining commercial contracts? Have you been a lot more aggressive in using price to pursue some of the other contracts and thus winning on volumes so Novo Nordisk is losing out there to a certain extent?

A: I'm not going to comment on the Novo piece of that. But I think it's fair to assume that when we issued our guidance two years ago – the famous -4% to -8% YOY decreases within the diabetes portfolio – we had taken into account many things. This is a tribute to reasonable and cautious planning when we first gave our guidance.

Q: How were you able to protect part of the access in Medicare channels versus the commercial channels and how confident are you to retain such a position in the coming years?

A: We kept over coverage for Medicare Part D nearly the same in 2017 compared to 2016. I cannot judge about the strategy and the rebating strategy of our competitors; but I think this is partially driven by the fact that the Part D segment is a little bit less profitable than the commercial segment, because of the coverage gap contribution. This might be an indication why some of our competitors might have been more aggressive against us in the commercial channel than in the Part D channel.

Q: How does the net price of Lantus compares to the net price of Toujeo in the US?

A: The channel mix between Toujeo and Lantus is very different, and that impacts the net blended price. The net blended price of Toujeo is superior to the net blended price of Lantus. That being said, if you compare the net price of Toujeo and Lantus in the same channel, prices are very similar. There is a very, very small premium of Toujeo if you would take that comparison.

On Pipeline Products (LixiLan and Sotagliflozin):

Q: You seem to feel confident that a launch of LixiLan is coming up. Can you update us on your thoughts on the appeal of continuing to put forward significant effort R&D effort in the diabetes space, given the rapidly changing environment?

A: Yes, we are very excited about LixiLan. The decision date is in November, so we are preparing for the launch. As you know, what makes this product particular for us is that it goes extremely well together with Lantus; the FPG effect of Lantus is very complementary with the PPG effect of the lixisenatide. We also have a possibility to price LixiLan in a pragmatic way, so we continue to believe that the LixiLan, or Soliqua as it will be called in the US, is going to be a very good addendum to our portfolio. I would also add that the more we build our portfolio in a broader way, the more we will be also capable of broadening our discussions with payers.

A: We're very interested in pursuing sotagliflozin. It is clearly a product of the SGLT-2 class, but distinguished by the fact that it also has an SGLT-1 effect. The type 1 diabetes results published by Lexicon were very encouraging, so we're going full blast ahead in terms of starting phase 3 right now. We are currently looking at the best way to design the outcomes studies to really differentiate this SGLT-1/SGLT-2 mix product, which could have quite an advantage in patients with degrees of renal insufficiency. We believe that sotagliflozin will be an important part of the portfolio of therapies in diabetes for long-term.

Q: You haven't had an approval for LixiLan in the timeframe that you would normally be using for your 2017 negotiations, so how will LixiLan develop next year? Should we realistically assume that this is going to be pushed out and won't be considered by many of the insurance plans at least until 2018?

A: If you take into account a launch early next year for LixiLan, it means that we will be able to have commercial access. We have done that in the past, and for new products you can have upfront discussions with commercial plans to progressively build up your access. Of course, we can also tactically mitigate the early launch phase with couponing since the degree of access will be relatively thin, at least in the commercial segment. We feel confident that we will progressively build up that access in the course of 2017 and we will not have to wait for 2018. In Part D, the situation is probably a little bit different, but we will focus first on the commercial piece.

Q: How will sotagliflozin get positioned? After all it is late to the market and no CV outcomes data at the time of launch.

A: First, the type 1 results from Lexicon already differentiate the product as an option for type 1. We are going to begin the type 2 study very soon. We take it as a strategic objective for this product to make sure that we come out with CVOT results as soon as possible after we launch the product. We will take that into account with our study design.

On Praluent:

Q: Access restrictions for the PCSK9 inhibitor class have clearly frustrated both you and your competitor [editor’s note: Amgen] and there is the potential for outcomes data from both companies coming out in the next few months. Will this make a difference to next year's contract negotiations with payers, or do you still expect payers to resist reimbursing PCSK9 inhibitors until that positive that data is on the label?

A: Even before the CVOT studies we are making some successes with Praluent coverage, at least in Part D. Obviously, the CVOT studies will be a very important catalyzer of discussions with the payers, but this is very hard to predict. Even outcomes data from our competitor will move the needle by adding to the mounting scientific evidence to support the PCSK9 inhibitor class.

Q: What percentage coverage of Praluent is now prior authorization and requiring both two statins and a prior failure to reach target on Zetia or Vytorin? How that has changed since the beginning of the year?

A: I don’t have all the details, but the coverage is not really the issue, right? We have a very, very large coverage, whether it's in commercial or Part D. The issue is really the utilization of management criteria and that is really what we're working on pre-CVOT and post-CVOT.

-- by Abigail Dove, Helen Gao, and Kelly Close