Sanofi SA (ADR) (SNY) Facing Challenging Environment for Drug Prices

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One of the areas of focus for pharmaceutical firms is that the prices of the drugs should not be very high to avoid criticism. That makes companies like Sanofi SA (ADR) (NYSE:SNY) face significant challenges in terms of marketing, as well as, developing of products. The pharmaceutical industry believes that not all drugs pass through different countries’ regulations. That means only a certain percentage of drugs get the approval and the rest are gone. Similarly, not all the drugs generate the kind of sales that they are supposed to get even after getting approval from the FDA in the United States and other nations’ respective bodies. A classic example for Sanofi is Afrezza, which is developed by Mankind Corporation (NASDAQ:MNKD), that is being marketed by the German firm. Despite the FDA approval, its inhaled insulin failed to deliver the expected sales until now. The blame was slapped on the German drug maker for a dismal launch. Let’s look at the challenges ahead of it and the recent developments.

Big Hurdle To Overcome

Following a seven-month period of Afrezza sales, Sanofi SA (ADR) (NYSE:SNY) realized some of the pains it had undergone. Its immediate focus is to get unrestricted insurance coverage for Afrezza. The company jump started with free samples of 50,000 coupled with a free one month prescription for the drug for first time users. Aside from that, a savings card was given to patients for refill prescriptions to bring down costs. The company is continuing its efforts to educate doctors on the inhaled insulin, which is a new type of treatment compared to the conventional injection.

Sanofi SA (ADR) (NYSE:SNY) marketed Afrezza is placed at tier three currently by most of the private health insurance firms. It is a tier where there is every possibility of patients encountering restrictions by private health insurance service providers. If the patients need to face restrictions, then it could come in the form of the need to get prior authorization that a patient should first try other types of treatments. That included orals or injectable insulin or a DPP-4 inhibitor. It is quite natural that patients and physicians might feel that the restrictions were burdensome. The inhaled insulin is classified into different tiers by different people now.

Why Afrezza Is Important

For Sanofi SA (ADR) (NYSE:SNY) and Mankind Corporation (NASDAQ:MNKD), Afrezza is an important one. The latter depends heavily on the former to make the inhaled insulin a grand success if not immediately at least in the near to medium term. That will enable them to come out with a similar type of treatment for different diseases. Also, there are an increasing number of people being affected by diabetes the world over. In the United States alone, as much as 9% of the population is affected by diabetes. That totals nearly 14 million people.

Therefore, if same 9% is taken into consideration on this, the total number of people affected by diabetes should be approximately 1.26 million. Sanofi SA (ADR) (NYSE:SNY) and Mankind Corporation (NASDAQ:MNKD) believe that Afrezza is valuable for those people. That is primarily because it removes the requirement for a diabetic patient to find a restroom in public to take injections. Additionally, there is a section of needle phobic patients, and the injection insulin was not a starter. A study revealed that about 10% of the population was needle phobic, which meant an addition of three million more possible users for Afrezza. Aside from these, some of the patients were also needle-averse, and some of them were not properly controlled by injection insulin.

Latest Development

Sanofi SA (ADR) (NYSE:SNY), as well as its unit Genzyme, disclosed positive data from an extended study, as well as a final stage trial on its multiple sclerosis drugs, i.e. Lemtrade and Aubagio. Significantly, both the drugs were given approval for the treatment of relapsing forms of multiple sclerosis. The company plans to present the results during the European Committee for Research and Treatment in Multiple Sclerosis, or ECTRIMS, meeting.

According to the company, fresh data spanning a five-year period from the extended study indicated that a majority of them were showing consistent treatment effects when treated with Lemtrada. Also, about 68% of the people who got treatment in the extended study on Lemtrada during two pivotal final stage studies did not get any additional treatment after the four years. On the aspect of safety, Sanofi SA (ADR) (NYSE:SNY)’s study indicated that the results were either lower than the fundamental studies or comparable until year five.

In the first half of the current fiscal year, the German company reported 468 million euro sales of both Aubagio and Lemtrada. That reflected 118.3% growth over the year-ago period. The company indicated during the second quarter earnings conference call that its MS franchise was on track to deliver over $1 billion revenue at an annualized rate in the current year. Zacks has ranked the shares of Sanofi SA (ADR) (NYSE:SNY) as a Buy.

Conclusion

One of the reasons for the German firm to buy the marketing rights of inhaled insulin is that it has already been in the diabetic market. Therefore, it believes getting marketing rights will extend its presence in the diabetic treatment market. Some analysts have blamed the company for the dismal launch of the most crucial product while others believe that Afrezza is worth more than what it is now. Therefore, the challenge for Sanofi SA (ADR) (NYSE:SNY) is to ensure Afrezza’s advantages reach diabetic patients and get the top-tier ranking among the insurance firms to generate better sales.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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