Novo Lures Sanofi Pitchman as Diabetes Battle Heats Up

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 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)
and Bristol-Myers Squibb Co. (BMY), 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.

Old Enemies

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.

Fat Claim

“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.

‘Somewhat Hollow’

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.

Turn Sour

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.

Doctor Sway

“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.

Silver Lining

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.”

To contact the reporter on this story:
Albertina Torsoli in Paris at
atorsoli@bloomberg.net

To contact the editor responsible for this story:
Phil Serafino at
pserafino@bloomberg.net