Alphabet’s Verily, Sanofi to Invest $500 Million in Diabetes

  • Partnership, Onduo, aims to combine software and medicine
  • Increased diabetes competition here to stay, Sanofi says

French drugmaker Sanofi and Alphabet Inc.’s life sciences arm plan to invest about $500 million in a joint venture to tackle diabetes amid forecasts for the number of people with the disease to surge.

Sanofi is betting the partnership with Verily Life Sciences LLC will spur advances in the way diabetes is monitored and treated and help it navigate an increasingly competitive market. The venture, Onduo, plans to combine devices, software and medicine, according to a statement Monday from Sanofi and Verily, previously known as Google Life Sciences. Sanofi is investing $248 million in cash, and Verily the equivalent in an unspecified way.

“The beauty of the joint venture in a way is that we don’t rely on the typical 10-year development cycle of a pharmaceutical asset,” Stefan Oelrich, senior vice president and head of the global diabetes franchise at Sanofi, said in an interview. “We start to innovate today.”

Sanofi expects increased competition in the diabetes market to remain as cheaper copies of biotech drugs known as biosimilars are rolled out. It plans to distinguish itself from rivals with programs like the Verily venture, first unveiled last year, Oelrich said.

“With more market entrants and as the space gets more crowded, it will be more difficult to maintain your stance from a contracting and commercial standpoint,” Oelrich said. “There’s increased competition on price. I think it’s here to stay.”

Reshaping Portfolio

The drugmaker has been reshaping its diabetes portfolio after cutting its three-year sales forecast for the business last year because of a slump in demand for its best-selling medicine, Lantus. Sanofi is relying on new treatments including its Toujeo insulin to help make up for the Lantus revenue shortfall. The company plans to step up efforts to convince purchasers that its drugs are better than rivals’ treatments, Oelrich said.

Lantus in August was replaced on CVS Health Corp.’s 2017 list of covered drugs by Eli Lilly & Co.’s Basaglar, a cheaper version of the insulin that is scheduled to be sold in the U.S. starting in December. Given Sanofi’s reliance on Lantus, it will be hard for the company to escape near-term pressure as such biosimilars are introduced, according to a Sept. 7 report from Berenberg Bank analysts in London.

‘Convincing’ Story

Sanofi is carrying out its “the biggest real-world evidence” program ever for Toujeo to highlight to payers the differences between the treatments, Oelrich said. “It’s our job to make sure that we have a convincing value story behind that because not all these products are the same.”

The results of the program, which involve more than 4,500 patients in the U.S. and Europe through three studies, will assess the efficacy of the once-a-day insulin, with results expected next year.

The Sanofi and Verily venture will focus on developing ways to improve medication management and habits for patients and will be led by Joshua Riff as chief executive officer. Riff joins from UnitedHealth Group Inc.’s Optum services, technology and consulting unit. The company will take advantage of Verily’s experience in miniaturized electronics, analytics and consumer software, according to the statement.

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