Competition
Worse, such a delay gives competitors the opportunity to gain market share with their own products, and advance their own research efforts. Then biggest beneficiary of the FDA request is expected to be Sanofi SA (ADR) (NYSE:SNY). This company’s Lantus is a long-acting human insulin analog that is already on the market. It is a once-a-day injection, and would have seen the most pressure from a new once-a-day insulin product coming from the industry leader.
Sanofi SA (ADR) (NYSE:SNY) shares advanced on the FDA news. However, it is important to remember that Sanofi is a much more diverse company than Novo Nordisk. So the impact would be notable on a drug that earned 3.9 billion euro in 2011. While that figure represented the bulk of the company’s diabetes sales, diabetes sales only represented about 15% of Sanofi’s top line. S, Novo’s risks of a failure are far greater than Sanofi’s risks from a Novo success. And, Like Novo, Sanofi isn’t standing still, so Novo’s delay gives its main competitor a chance to further develop its own new insulin products.
With regard to new products, Johnson & Johnson (NYSE:JNJ) is working on a “wearable” insulin patch. The company recently highlighted the ease with which customers will be able to administer insulin with the product. The patch came from work done by recently acquired Calibra Medical. That company, which was privately held, was bought in the third quarter of 2012 specifically for the patch technology, which was described as “a unique, wearable three-day insulin patch” in JNJ’s third quarter earnings release.
This would be an interesting advance, and one that moves away from needles. Since Johnson & Johnson (NYSE:JNJ) hasn’t brought it to market just yet, it is hard to tell how much of an impact it will have. However, what is clear, is that Novo’s problems give Johnson & Johnson more time to both get it to market and, assuming approval, garner a customer base.
Not the End of the World
Despite the obvious competition in the space, which goes well beyond the two companies noted above, Novo Nordisk’s size and market position in diabetes should provide it ample opportunity to continue growing. The market itself is still growing in size and Novo is a well respected company with lots of product in the market. A several year delay is indeed bad, but it isn’t he end of the world.
Backing up this assessment is the fact that Novo has virtually no debt on its balance sheet and a large cash balance. Moreover, while this one drug is important, it isn’t the only drug in the company’s pipeline. In fact, investors might find the recent weakness is a good buying opportunity.
The article How This Drugmaker Will Deal With A Diabetes Delay originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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