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Diabetes: The $54 billion battleground

Many of the world's biggest drugmakers will gather Friday in San Francisco for the American Diabetes Association's annual meeting. They'll present data on medicines that make up a market worth $54 billion globally.

And it's growing fast, according to the IMS Institute for Healthcare Informatics—at about $4 billion to $5 billion a year for the last five years, said Michael Kleinrock, the institute's research director.

Daily implements of diabetes care.
Jessekarjalainen | iStock | Getty Images
Daily implements of diabetes care.

"It'll probably do that even out to 2017, 2018 without too much trouble," Kleinrock said in a telephone interview. "Diabetes is the fundamental large population disease state that we see across developed and emerging markets."

To put some numbers on it:

  • Worldwide, 347 million people have diabetes, according to the World Health Organization. The vast majority (more than 90 percent) have Type 2, in which the body can't process insulin properly or doesn't produce enough. Type 2 diabetes is typically associated with lack of exercise and excess weight, according to the WHO. In Type 1 diabetes, whose cause is unknown, the body doesn't produce insulin.
  • Diabetes is expected to be the seventh leading cause of death in 2030, according to WHO projections.
  • It cost the U.S. $245 billion in 2012, according to the American Diabetes Association, up 41 percent from 2007. The largest costs came from hospital inpatient care, prescription drugs and diabetes supplies, the ADA said.
  • It's the second-largest prescription drug class in the U.S. after oncology medicines, according to IMS. Diabetes drugs drew $24.3 billion in 2013 U.S.sales, up 12 percent from the year before.

A big market attracts big drugmakers. Analysts are watching key data this weekend affecting Sanofi, Eli Lilly, Novo Nordisk and AstraZeneca. Here's what's coming:

Sanofi

Sanofi, the largest drugmaker in France, makes the insulin Lantus. It drew 5.72 billion euros (more than US$6 billion) in 2013 revenue. But its patent expires in 2015. So Sanofi has been working on a next-generation product known as U300, or Toujeo, to take its place.

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The market may be underestimating that drug's potential, according to Jefferies analyst Jeff Holford.

"With low expectations, we feel that a greater appreciation for U300 as a viable follow-on product will develop during the ADA meeting itself," Holford wrote in a June 11 research note. "We would expect a rigorous debate in the market regarding the clinical significance of the U300 data vs. Lantus, and how this compares against Novo Nordisk's Tresiba."

Eli Lilly

Meanwhile, Indianapolis-based Eli Lilly will have data on its biosimilar version of Lantus, Holford said. ("Biosimilar" is the phrase used to describe a generic form of a medicine; because biologic drugs have a more complicated manufacturing process, the industry has opted to use the term "biosimilar.")

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Holford doesn't have high expectations for Lilly's drug at ADA.

"With market expectations firmly set that this product will be approved by the FDA (though launch timing is uncertain, due to ongoing patent litigation with Sanofi), the risk is firmly on the downside for Eli Lilly at the ADA congress," he said in a May 27 note.

Lilly also will present data on its experimental medicine dulaglutide in a head-to-head trial against Novo Nordisk's Victoza, which drew 11.6 billion Danish kroner (about US$2.1 billion) in 2013 sales for the Danish drugmaker. Results already released show Lilly's drug worked about the same to reduce blood sugar levels, though patients lost more weight on Victoza. A key difference, though, is that Lilly's drug is injected once a week, versus a daily shot for Victoza.

"Would you want to be putting a needle seven times a week in your arm?," John Boris, an analyst with SunTrust, said in a telephone interview Wednesday.

He said the data show an advantage to Lilly's dulaglutide, which he expects to draw $1.5 billion in annual sales, compared with the Street's average $1.2 billion estimate, he wrote in a June 9 research note.

Top 10 Diabetes Companies Worldwide 2013

Sales ($MN)
Share
Growth
2012-2013
Global Diabetes Market 54,015 100.00% 10.20%
1 Novo Nordisk 12,031 22.30% 15.80%
2 Sanofi 9,107 16.90% 21.90%
3 Merck & Co 6,430 11.90% 13.40%
4 Lilly 5,197 9.60% 15.00%
5 Johnson & Johnson 2,339 4.30% 7.30%
6 Bristol-Myers Sqibb 1,952 3.60% 14.80%
7 Roche 1,946 3.60% 1.90%
8 Bayer 1,461 2.70% -0.50%
9 Abbott 1,373 2.50% 11.10%
10 Novartis 1,367 2.50% 28.90%
Top 10 43,204 80.00% 14.90%
Source: IMS Health, MIDAS, Mar 2014

The key question going into the ADA meeting is what doctors think about the data, especially on weight loss, said Mark Schoenebaum, an analyst with ISI Group. He expects Lilly's drug to still gain significant market share in its class of medicines, called GLP-1s, noting they make up a $3 billion market that could grow to $5 billion "in the out years."

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"It's quite possible that even a 33 percent penetration rate is possible here (implying $1.7 billion in peak sales) given it has, on the overall, a competitive profile vs. Victoza," Schoenebaum wrote in a June 9 research note of Lilly's dulaglutide.

Finally, Lilly also will have data on a combination of drugs called empagliflozin and Tradjenta in an increasingly competitive area. AstraZeneca is presenting data on a similar combination of drugs, and Holford said he expects both to reach the market in 2015.

Which brings us to:

AstraZeneca

ADA is the second big showcase of AstraZeneca's pipeline since it escaped—at least temporarily—the clutches of Pfizer's nearly $120 billion offer to acquire it. The first showcase was the cancer conference ASCO earlier this month, where the British drugmaker's showing was well-received.

AstraZeneca has pegged its diabetes sales to grow to $8 billion by 2023, including $3 billion from its combination of drugs called saxagliptin and dapagliflozin.The combination showed positive results in data released in May—and with Pfizer potentially still hovering in the wings, all eyes will be on AstraZeneca to continue delivering.

—By CNBC's Meg Tirrell

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