French pharmaceutical giant Sanofi (SNY -0.15%) has long been a leader in the market for insulin. However, the company recently made two notable moves that could affect its trajectory in the broader diabetes care market. First, Sanofi was forced to decrease the price of its most prescribed insulin product after its only two real competitors in this area did something similar.
Second, Sanofi announced the acquisition of Provention Bio, a biotech focusing on developing medicines to delay or prevent the onset of autoimmune diseases, such as Type 1a diabetes. What do these moves mean for Sanofi's future?
How will the insulin price drop affect Sanofi?
Sanofi decided to decrease the price of its most prescribed insulin product, Lantus, by 78% and cap out-of-pocket costs at $35 for patients with commercial insurance. At first glance, this could be a major problem for the biotech giant. Lantus was one of the company's best-selling products last year, with total sales of 2.3 billion euros (about $2.5 billion). But there is more to the story.
Lantus' sales were already decreasing, to the tune of 9.4% year over year in 2022 (on a reported basis), partly due to generic competition. This decision does not affect Sanofi's other insulin products, such as Toujeo, whose revenue in 2022 increased by 15.3% year over year to 1.1 billion euros ($1.2 billion). The company's move toward substantially decreasing the price of Lantus will speed up a process already happening.
Namely, Lantus' sales are dropping continually and accounting for an increasingly smaller share of Sanofi's total top line. But since this was still one of its top-selling medicines, Sanofi will need to find ways to replace it. Perhaps that's why Sanofi announced the acquisition of Provention Bio just three days before it decided to slash the price of Lantus.
The acquisition of Provention Bio could prove lucrative
Sanofi's buyout of Provention will cost $2.9 billion in cash and is subject to close in the second quarter. What's the biotech giant getting out of the deal? In November, Provention Bio earned approval for Tzield, which is indicated to delay the onset of stage 3 type 1 diabetes (T1D) in at-risk patients; stage 3 is when clinical diagnosis happens.
It is the first medicine approved by the U.S. Food and Drug Administration (FDA) to delay the onset of T1D successfully. Tzield is also being developed to treat newly diagnosed T1D. Furthermore, Provention boasts several other candidates that treat other autoimmune diseases, including systemic lupus. With about 65,000 diagnosed T1D patients every year, Tzield could have a relatively large market opportunity ahead. And that's not to mention Provention's other candidates.
That's why this move could pay for itself down the road for Sanofi.
Sanofi has other exciting products
Sanofi generated total revenue of almost 43 billion euros last year ($46.7 billion), representing an increase of 13.9% year over year. The biotech's adjusted earnings per share came in at 8.26 euros (about $9), 25.9% higher than in 2021. The company's biggest growth driver was eczema treatment Dupixent, the rights to which it shares with Regeneron.
Dupixent's total sales for Sanofi soared by 58% year over year to 8.3 billion euros ($9 billion). This medicine will continue growing its revenue -- especially as it adds new indications -- and there are others Sanofi will be able to count on. That includes its vaccine business, whose revenue in 2022 came in at 7.2 billion euros, 14.3% higher than the previous year.
Sanofi will also add new products to its offerings. In February, the company earned the regulatory nod from the FDA for a brand-new hemophilia treatment called Altuviiio. Sanofi currently has 26 programs in late-stage studies and more than four dozen in earlier stages of development.
In short, investors shouldn't count the company out just because of the recent insulin-related developments, which will do little to affect the company's business in the long run. With a long list of more than two dozen medicines or vaccines, a pending acquisition that will add an exciting product to its arsenal, and a rich pipeline that will yield new approvals and label expansions regularly, Sanofi's stock definitely looks like a buy right now.