Majestic Research

Bloomberg

Glaxo Diabetes Drug Backlash May Profit Novo, Lilly

By Michelle Fay Cortez and Lisa Rapaport
Published: June 21, 2007

Bad news for GlaxoSmithKline Plc and its diabetes pill, Avandia, may be good news for the world’s biggest makers of insulin, Novo Nordisk A/S and Eli Lilly & Co.

Sales of Avandia have plunged about 25 percent since a study linked it to heart attacks last month, according to Verispan LLC, which tracks drug data. Insulin sales are rising 10 percent a year worldwide as Novo, Lilly and Sanofi-Aventis SA introduce improved versions that generate higher profit.

The concerns about Avandia and other diabetes drugs have doctors recommending insulin injections instead. The pills, with global sales of $13 billion a year, are popular because they help the body use insulin without the need for daily shots. New versions of the hormone, simpler ways to give it and increased marketing will almost double worldwide sales to $14.5 billion by 2010, according to RNCOS, the New Delhi-based company that provides consumer and health industry research.

“The Avandia situation may create a new opportunity for marketing insulin to doctors and patients who have resisted it,” Eric Staeva-Vieira, an analyst with Majestic Research in New York, said in a telephone interview.

Shares of Novo Nordisk, with headquarters in Bagsvaerd, Denmark, rose as much as 3.9 percent today after the company said its once-daily injection of liraglutide improved blood sugar control in a late-stage study. Patients using the treatment also lost an average 3.5 kilograms (7.7 pounds).

The shares gained 22 kroner to 587 kroner at 10:08 a.m. in Copenhagen. They’ve gained 20 percent since the start of this year, while Indianapolis-based Lilly has climbed 10 percent.

Seeking Pills

Shares of Glaxo, based in London, fell 7 pence, or less than 1 percent, to 1,308 pence. They’ve dropped 10 percent since the Avandia report, slashing $17.5 billion from its market value. Sanofi’s shares declined 69 cents, or 1.1 percent, to 60.96 euros in Paris. They’ve slumped 9.1 percent since U.S. advisers recommended rejection of the weight-loss drug Acomplia last week, citing safety concerns.

Novo, Lilly and Sanofi are in an unprecedented position to reverse the tide of diabetes care. Since insulin was discovered in 1922, companies have been searching for pills that reduce the need for the injections and produce higher profits.

In the past decade, a half-dozen new drug classes have been introduced to push the body to produce more insulin or help it process the hormone more efficiently. While none cut blood sugar levels more than insulin, the main goal of therapy, they have been embraced by millions of patients seeking to avoid shots.

Diabetes Epidemic

The drugmakers have been responding to an epidemic of diabetes, fueled by rising obesity rates and sedentary lifestyles. More than 170 million people worldwide have the disease now, and the number is expected to double to 366 million by 2030, according to the World Health Organization in Geneva.

Insulin is a mainstay for type 1 diabetes, in which the body doesn’t make insulin needed to convert blood sugar to energy. About 90 percent of patients have type 2, in which the cells develop resistance to insulin. While most diabetics eventually need hormone shots in addition to drugs, doctors are trying to get them to embrace it sooner to head off complications.

“Insulin is the only naturally occurring treatment; it’s the most powerful and among the cheapest,” said David Nathan, director of the diabetes center at Massachusetts General Hospital in Boston, affiliated with the Harvard Medical School.

Diabetes Association

Novo and Lilly have the most to gain from renewed sales of insulin. Novo, the leader with 45 percent of the market, is targeting simplicity with pen-size devices that deliver insulin through tiny needles. Lilly, its closest competitor with about 30 percent, is introducing three new products of its own. Both have added hundreds of salespeople in the past two years to teach doctors that insulin shots can be simple and beneficial.

At the American Diabetes Association’s annual conference starting tomorrow in Chicago, doctors and health-care providers will see dozens of devices to deliver insulin. More than 50 studies will be presented, including evaluations of implanted pumps that automatically inject insulin and pre-loaded devices that replace vials of insulin and syringes.

“People tend to think of insulin as an end-of-the-road therapy,” said Sherita Golden, an endocrinologist at the Johns Hopkins University School of Medicine in Baltimore. “But we now know it should be used sooner rather than later.”

Novo, which has made insulin pens for more than two decades, has a new device that comes with a large, easy-to-read dial and clicks audibly so patients can hear when the dose has been adjusted.

Lilly’s Devices

“Somebody can take an insulin pen out of their pocket at a restaurant and inject through their clothing between bites without anybody noticing,” said Alan Moses, chief medical officer for Novo Nordisk in North America.

Lilly, which pioneered the commercial use of insulin in 1923, began selling its first insulin pen in 1998. One of its new devices is a digital pen that records the patient’s last 16 doses. Another calibrates doses for children. The third, under review, is prefilled and disposable.

The new scrutiny of Avandia provides an opportunity to talk to patients and doctors about insulin devices, said Matt Beebe, who supervises marketing for Lilly’s diabetes products, including the insulin Humalog.

As type 2 diabetes progresses, more of the hormone must be injected. A pump made by J&J’s Animas Corp. unit regulates insulin levels, taking into account exercise, sleep and mealtime surges in glucose. It can adjust doses to respond to 500 foods.

“You can tell it about Grandma’s spaghetti, which we all know isn’t the portion recommended on the box, and it will release the proper amount of insulin every time you go to her house for dinner,” said Michael Rechtiene, president of Animas.