As a former professional cyclist, Phil Southerland knows about competition.
So when Southerland, a diabetic whose team was funded by drugmaker Sanofi (SAN) for six years, wanted a better sponsorship deal, he knew who to contact: archrival Novo Nordisk A/S (NOVOB).
Novo was quick to snap him up, offering a contract worth several million dollars, according to people familiar with the negotiations. The Danish company put Southerland, a man known for his ties to Sanofi, on the cover of its annual report last month along with his crew, now called Team Novo Nordisk.
The Southerland move is one of the latest examples of the acrimonious battle between the world’s two biggest providers of insulin, the hormone diabetics need to prevent sugar from pooling in their blood. Sanofi (SAN) has sued Novo in Germany over an ad that suggests its best-seller Lantus can cause more weight gain and the two CEOs trade barbs on conference calls. At stake: a bigger slice of the $35 billion market for diabetes drugs.
“They’re at each other’s throat,” said Jerome Forneris, who helps manage $8.5 billion at Banque Martin Maurel in Marseilles, including Sanofi shares. “Each company is taking advantage of the other’s missteps.”
Both are under pressure. They must find new treatments as some of their top medicines age and rivals such as Eli Lilly & Co. (LLY:US) and Bristol-Myers Squibb Co. (BMY:US), which partnered with AstraZeneca Plc (AZN) last year to develop and market the diabetes drugs portfolio of Amylin Pharmaceuticals Inc., step up efforts to serve a booming number of patients.
Sanofi hasn’t yet found a good successor for Lantus, the world’s best-selling insulin. The drug garnered 4.96 billion euros ($6.38 billion) in sales last year, making it the Paris- based drugmaker’s top earner, but its patent expires in 2015.
Novo, headquartered outside Copenhagen, suffered a setback last month on Tresiba, the product it developed to challenge Lantus. The medicine was rejected by U.S. regulators, delaying its entry into the biggest drug market by at least two years and leaving Novo reliant on the older Levemir, which lags behind Lantus. Regulators also put another key Novo drug, Victoza, on watch for a potential link to pancreatic cancer this month.
“It’s a vulnerable time for both,” said Edwin Gale, a diabetes researcher at the University of Bristol in England.
The rivalry goes back a long way.
Novo’s researchers were the first to develop a form of long-acting insulin that better mimicked the body’s natural release of the hormone in the 1990s. Novo abandoned the experimental product, called NovoSol Basal, because of local inflammatory reactions. Scientists at Hoechst AG, one of the forerunner companies to Sanofi, persisted, finding a way to solve the problem. There’s been “no love lost” between the drugmakers since, according to researcher Gale.
“I don’t think it’s a particularly healthy situation,” said Chris Viehbacher, Sanofi’s chief executive officer, when asked about the drawn-out sparring between the two companies. “We should be medically focused and scientifically focused and that’s certainly what I’d like to see from us. But everybody’s got to defend their interest.”
Novo tried to garner patients in Germany five years ago with a flyer for doctors suggesting an insulin called Levemir causes less weight gain than Lantus. Germany’s top civil court handed a partial victory to Novo last month, saying the Danish drugmaker can claim a weight advantage for Levemir, also known as detemir, because clinical studies used to obtain regulatory approval back up that point.
Viehbacher described Novo’s Tresiba, the new product the drugmaker is introducing to power sales growth, as “essentially a me-too” version of the older Levemir in a conference call with analysts in February 2011. Later that year, he said a Novo- funded clinical trial was designed to unfairly favor Tresiba over Sanofi’s Lantus, and that some physicians had “questioned some of the ethics” of the study.
In an interview that same year, Novo CEO Lars Rebien Soerensen described Viehbacher’s comments as “somewhat hollow” and “a little bit desperate.”
Lifestyle changes around the globe have kindled a surge in diabetes cases. The number of sufferers worldwide will almost double to an estimated 552 million by 2030, according to the International Diabetes Federation.
The companies’ share price performances reflect those growth prospects, even though they can’t quite compare because Novo focuses mostly on diabetes while Sanofi makes products ranging from vaccines to pet flea repellent. The French drugmaker’s stock has gained 35 percent in 12 months, compared with a 20 percent increase for Novo. Sanofi trades at about 13 times this year’s estimated earnings, compared with 21 times for Novo.
Patients like Southerland, diagnosed when he was seven months old, have a lifelong inability to produce insulin -- a rarer form known as type 1 diabetes. The more common variant, known as type 2, tends to strike later in life, brought on by obesity and sedentary lifestyles, as people become resistant to the insulin their body produces.
For drugmakers, the stakes are high. The market is likely to grow to more than $58 billion in 2018 from $35 billion in 2012, Standard & Poor’s wrote in an October report.
The diabetes field is “pretty hot,” said Matthew Riddle, a professor of medicine at the Oregon Health & Science University. Sanofi and Novo “are striving to develop superior products and do their job well, but it does sometimes turn sour. That doesn’t make academics like me feel good.”
In June 2009, when the medical journal Diabetologia published studies highlighting a possible link between Lantus use and cancer, Soerensen arranged a conference call the next business day to remind investors and doctors about “the solid safety profile” of its own insulins. He also said the Danish company would only pursue clinical development of “compounds with an acceptable safety profile” and that Novo was briefing its sales force about the findings.
“When this came out, Novo jumped on it,” said Gale, who was the editor-in-chief of Diabetologia at the time. “That, of course, did not endear them to Sanofi. Sanofi would have done the same the other way round, I am sure.”
Gale conducted a study on the marketing practices of Novo, Sanofi and Lilly and found the Danish company used clinical studies to promote costly new insulins and influence the prescribing habits of doctors more than the other two. Of the nearly 400,000 patients enrolled by the companies -- most of them in developing countries -- and mentioned in the study, published last year in the British Medical Journal, almost 360,000 were recruited for research sponsored by Novo, the report shows. To explain the company’s behavior, the author cited possible “commercial pressure” on Novo because of the success of Sanofi’s Lantus.
Novo declined to comment on the study and any rivalry with other drugmakers. Sanofi’s efforts in diabetes are driven by “our focus on patient needs, not by the competition” with Novo or any other company, Yanyan Chang, a spokeswoman for Sanofi Diabetes, said in a telephone interview. Neither company would comment on the German lawsuit.
Southerland, who still cycles but no longer races professionally, said with Novo his 17-person crew got a multi- year contract, more cycling gear and extra funds to collect “massive amounts” of health data like heart rates to improve racing performance and help promote insulin use in developing regions like Africa. Novo declined to give financial details of the contract. Southerland’s team also got sponsorship from Abbott Laboratories in the past.
From the 31-year-old cyclist’s viewpoint, there’s a silver lining to the bitter rivalry.
“I’ve worked with both companies now,” said Southerland. “The competition they have with each other, it’s going to make medicines and technology for diabetes better. Having all the brilliant people on both sides of the fence trying to take the lead, it’s going to make my life better.”
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