UPDATED: Sanofi's Lantus empire imperiled as EU recommends Lilly, Boehringer biosimilar

Lantus--Courtesy of Sanofi

Sanofi's Lantus is not only the best-selling diabetes drug in the world; it is one of the best selling drugs in the world with $7.6 billion in 2013 revenues. But the foundation for this juggernaut is starting to crack. The EU Friday recommended approval a biosimilar of Lantus developed by Eli Lilly ($LLY) and Boehringer Ingelheim.

The two companies announced that the European Medicines Agency (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended use of their new insulin glargine product, Abasria, for the treatment of type 1 and type 2 diabetes. The approval, the first for an insulin biosimilar in the EU, not only creates the leading edge of a wedge between Sanofi ($SNY) and its mega blockbuster's sales, it is an approval that should help propel the acceptance of biosimilars in the EU where uptake on biosimilars so far has been slow. Lilly said Abasria is not considered a biosimilar in the U.S.

Fortunately for Sanofi, the financial downside of a copy in the EU is not all that great, Mark Clark, an analyst at Deutsche Bank AG in London, explained to Bloomberg. That is because Sanofi deeply discounts the price of Lantus there compared to its cost in the U.S. Lantus captured about $1.1 billion in 2013 sales in the EU. "The imperative to switch to the cheaper version is probably less in Europe," Clark said. "It's not much of a needle-mover, this news."

Still, it provides a precedence for Lilly and BI which is seeking appproval for the copy in the U.S. But Sanofi has already made a move to protect itself there.The patent for Lantus expires in February 2015 but the French drugmaker last January sued Eli Lilly over infringement claims on four of the patents for its Lantus, a legal maneuver that puts an automatic 30-month stay of approval by the FDA. That should keep Lilly's copy off the U.S. market until mid-2016.

The U.S. is where Sanofi is most vulnerable to the copy. Lantus generates nearly 20% of Sanofi's total revenue and over a third of its operating profit. Bloomberg points out that the French drugmaker gets about two-thirds of its Lantus sales in the U.S. and they were up more than 20% last year to about $5.15 billion as it took aggressive price hikes ahead of competition. So it will more than sting when copies hit. In addition to the Lilly and Boehringer Ingelheim generic, Merck ($MRK) has one in the works with Samsung Bioepis.

But Sanofi has not been just holding its breath awaiting the onslaught. Sanofi is working on a new, long-acting Lantus successor known as U300, for which the the company expects FDA approval in 2015. Holding off the Lilly copy until 2016 gives it time to get doctors to make the switch.

- get more from Bloomberg
- here's the Lilly announcement
- here's the EMA recommendation

Special Report: The 10 best-selling drugs of 2013 - Lantus

Editor's Note: The story was updated to indicate that Eli Lilly is already seeking approval in the U.S. for its insulin glargine product.