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Sanofi (SNY - Analyst Report) recently presented positive data on its type II diabetes drug, lixisenatide at the 73rd scientific session of American Diabetes Association. The company presented pooled data from three phase III studies (GetGoal-L, GetGoal-L Asia and GetGoal Duo1; n = 753).

The studies evaluated the combination of lixisenatide and standard of care, which includes basal insulin with or without oral anti-diabetic therapies versus placebo and standard of care.

Data revealed that lixisenatide plus a current standard of care regimen reduced HbA1c, an indicator of glucose level in the blood, by controlling postprandial glucose daytime exposure.

We note that in Feb 2013, the US Food and Drug Administration (FDA) accepted the marketing application for lixisenatide for the treatment of adults with type II diabetes.

The company submitted the New Drug Application for lixisenatide on the basis of the GetGoal program. The program, initiated in May 2008, consisted of 11 trials and enrolled more than 5,000 type II diabetes patients. Lixisenatide demonstrated a promising efficacy and tolerability profile in the trials. Sanofi had in-licensed lixisenatide from Zealand Pharma.

We remind investors that the European Commission (EC) cleared lixisenatide (brand name: Lyxumia in EU) for glycemic control in adults suffering from type II diabetes in Feb 2013. The EC approved Lyxumia in combination with oral glucose-lowering medicinal products and/or basal insulin when these, in combination with lifestyle management, did not provide adequate glycemic control.

Approval of lixisenatide in the US would not only boost the drug’s sales potential but also strengthen Sanofi’s diabetes portfolio further which already includes blockbuster product, Lantus. Although Sanofi holds a strong position in the diabetes market, we note that the market is highly crowded with players like Novo Nordisk (NVO - Analyst Report), Eli Lilly and Company (LLY - Analyst Report) and AstraZeneca (AZN - Analyst Report).

Sanofi carries a Zacks Rank #3 (Hold). We remain concerned about generic erosion confronting most of Sanofi’s key drugs including Plavix, Avapro, Lovenox, Taxotere, Eloxatin and Xatral. The genericization of Avapro and Plavix is expected to negatively impact Sanofi’s business net income by around €800 million in the first half of 2013.

Sanofi is looking to combat headwinds by containing operating costs. Additionally, new product launches should make significant revenue contributions in the upcoming quarters.

Companies that currently look attractive include Novo Nordisk, carrying a Zacks Rank #2 (Buy).

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