Can Sanofi parlay low Lantus prices into Toujeo sales? That's the billion-dollar question

It was Sanofi's first public event without ex-CEO Chris Viehbacher. But the French drugmaker's investor day didn't bring much in the way of surprise. As expected, Sanofi ($SNY) Chairman Serge Weinberg talked up the launches expected for next year and beyond, all $38 billion worth.

Interim Sanofi CEO Serge Weinberg

Somewhat unexpectedly, however, the company fleshed out its forecast for diabetes sales--the forecast that dismayed investors when it appeared two weeks ago. That's when Viehbacher, still in the driver's seat, volunteered that Sanofi's diabetes business would be disappointingly flat in 2015. Long the company's growth driver, the diabetes drug Lantus would be lagging, thanks to price breaks given to U.S. payers, Viehbacher said.

Now, the post-Viehbacher Sanofi says diabetes sales will be "flat to slightly growing" from 2015 to 2018. And it says that those numbers depend on "substantial conversion of patients from Lantus to Toujeo," not to mention growth in emerging markets and three other new launches in the U.S. Those would be Affreza, the Mannkind ($MNKD) inhaled insulin it signed up to market, along with the GLP-1 treatment Lyxumia and the Lantus-Lyxumia combo med LixiLan.

Sanofi's diabetes franchise has been a huge growth engine, thanks to Lantus, which dominates the basal insulin category. It's by far the biggest seller in Sanofi's entire portfolio, and when it comes to diabetes, Sanofi's other meds are also-rans by comparison. For the quarter, Lantus brought in €1.57 billion, an 8% increase. So far this year, it's racked up €4.57 billion ($5.83 billion), up almost 9%.

Problem is, Sanofi has fueled Lantus growth not only by pumping up volume, but by raising prices. U.S. prices, to be exact. From 2007 to 2013, the price increase amounted to 160%, according to Bloomberg data. Not so much anymore. Plus, Lantus is now facing biosimilar competition from Eli Lilly ($LLY) and Boehringer Ingelheim, which recently won European approval. European sales of Lantus aren't that large, and in the U.S., Sanofi has managed to hold Lilly and Boehringer off with a patent lawsuit that could keep their copycat off the market till 2017. But sales erosion in Europe only adds to the pressure on Sanofi's franchise.

Obviously, Sanofi's diabetes fortunes will turn on the Toujeo launch, expected in the U.S. next year. In the third-quarter call with analysts, Viehbacher suggested that Sanofi's wheeling-and-dealing on Lantus prices was a way of preparing the ground for Toujeo. Thanks to those deals with payers, Sanofi could build its patient base for Lantus, a basal insulin injected once daily. Then, it would have a bigger base to convert to the longer-acting Toujeo.

Presumably, Sanofi is stuck with those contracts, with or without Viehbacher. It has to hope--and strive--for the Toujeo launch to take advantage of that loss-leader Lantus pricing. But it doesn't have to pretend it likes the Lantus setback. "The launch of new medicines and vaccines in other therapeutic areas and the sustained performance of Sanofi's other growth platforms is expected to continue to further reduce the relative contribution of Lantus to the Group's overall performance," the drugmaker said in a statement Thursday. So there.

- see the release from Sanofi

Special Reports: Top 10 five-year drug price increases - Lantus | The top 10 pharma companies by 2013 revenue - Sanofi

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