Spotlight On: Defence of key brands remains paramount at Sanofi and Novartis

A notable feature of the third-quarter investor calls held by management at Sanofi and Novartis was discussion based around potential defence strategies for key product franchises at both companies; Lantus (diabetes) and Gleevec (chronic myeloid leukaemia), respectively.

Competition for both brands moves ever closer, so it is unsurprising that investor attention will sharpen over the next few months/years on Sanofi and Novartis' ability to maintain market share.

Lantus faces a two-step competitive threat comprising the potential launch of Novo Nordisk's Tresiba in 2013 and loss of patent exclusivity in 2015. While insulins have yet to emerge as a broadly adopted target for biosimilar developers, the commercial value of Lantus has attracted Big Pharma attention; intriguingly Eli Lilly – one of Sanofi’s key competitors in the branded diabetes market – is hoping to file its biosimilar version of Lantus with authorities in 2013. See ViewPoints: Are biosimilar insulin products commercially feasible?

Sanofi's third-quarter results demonstrate what is at stake for the French drugmaker. Analysts noted that yet again Lantus outperformed consensus estimates for the quarter (driven by strong growth in the US and emerging markets), reflecting both Sanofi's first-mover advantage in the long-acting insulin space and continued growth for the diabetes market. Lantus now accounts for approximately 11 percent of Sanofi's revenues (estimated 2012 sales of around $6 billion) and an estimated 20 percent of its profit.

Some analysts – such as those at Morgan Stanley – are bullish that Lantus will continue to drive growth post 2015, and key to this will be the progression of a new formulation of the product from laboratory to market. On the Q3 call, Sanofi confirmed that Phase III data should be published in 2013 with the EDITION trial programme expanded to include four new trials initiated to support a potential regulatory filing in 2014 or 2015. Biosimilar concerns are also overdone, they add.

Key to shaping the medium-term performance of Lantus will be Novo Nordisk's ability to gain FDA approval for its would-be-competitor product Tresiba (which has been approved in Japan and recommended for approval in Europe). As had been speculated on, the FDA confirmed late last week that the November AdCom meeting for Tresiba will focus on potential cardiovascular risk (which prompted Novo shares to drop 4.7 percent). While there remains uncertainty, analysts broadly expect a positive decision (sentiment shaped by assessment of global safety data made by Japanese authorities). That said, even if Tresiba gains approval, Sanofi may have an opportunity to leverage the FDA’s concerns when detailing Lantus to physicians in the future. See also ViewPoints: Confidence grows for Novo Nordisk's latest blockbuster-in-waiting.

Speaking to investors and analysts, Sanofi spoke with a bullish tone about Tresiba, chiefly focusing on what the company perceives to be little difference in terms of labelling (based on Japanese approval) in comparison with Lantus. Novo Nordisk claims that Tresiba is superior at reducing hypoglycaemia and nocturnal hypoglycaemia, and the FDA is also expected to assess this in November. Speaking with regard to Europe, Sanofi expressed some scepticism to the previous assertion from Novo Nordisk that Tresiba will command a premium price to Lantus. With Lantus' growth profile particularly strong in the US, the outcome of the AdCom will be critical to both companies. Assessment of Tresiba as a competitor to Lantus continues to split the crowd; a number of analysts have suggested the hypoglycaemia data is robust enough to support promotion.

At Novartis, the company remains in the midst of one major patent expiry, with revenues for the quarter down as expected partly due to Diovan sales erosion. Beyond Diovan, Novartis' next major patent milestone concerns the Gleevec franchise, which is due to lose exclusivity in Europe in 2015 and the US in 2016. For further analysis see Spotlight On: How do you solve a problem like Novartis' Glivec patent expiry?

The company’s defence strategy has been established for some time, since the launch of follow-on product Tasigna in 2007, and Novartis sought to reiterate the potential of its second-generation CML therapy in the Q3 conference call. There also remains the possibility of increased patent life beyond the 2015-16 period (labelled the "worst case scenario" by Novartis' head of pharmaceuticals David Epstein), with a number of other patents that may or may not extend exclusivity, said the company.

Any delay to US generic approval (there is currently one generic challenger – Sun Pharmaceuticals) would add high margin annual revenues of between $1.5 billion to $2 billion to forecasts, noted Bernstein's Tim Anderson. He concedes, however, that most analysts – including himself – are not yet factoring this possibility. Novartis indicated it will provide more information on the Gleevec patent suite at its R&D day next month.

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