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5 Pharma Stocks in Focus on World Diabetes Day

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Every year, World Diabetes Day is celebrated on Nov 14. This year, the theme is ‘eyes on diabetes’ with a focus on promoting the importance of screening to ensure early diagnosis of type II diabetes and reduce the risk of serious complications.

According to information provided by the International Diabetes Foundation (IDF), about 415 million adults were living with diabetes in 2015 with the number expected to increase to around 642 million or one in ten adults by 2040. Moreover, many people with type II diabetes remain unaware of their condition for a long period of time and this may lead to diabetes-related complications by the time the disease is diagnosed.

Diabetes can often be the cause of other complications like blindness, cardiovascular disease, lower-limb amputation and kidney failure. It is estimated that about one-third of the 415 million adults living with diabetes will develop some form of diabetic retinopathy while more than 93 million adults currently living with diabetes already have diabetic retinopathy.

Meanwhile, as per IDF, global health spending to treat diabetes and manage complications was estimated to be about $673 billion in 2015.

Given these statistics, it is not surprising that several healthcare companies devote a significant amount of R&D dollars on developing treatments and devices for diabetes and diabetes management. The diabetes market is highly crowded with companies coming out with innovative treatments promising higher efficacy with lower side effects. Currently available diabetes drugs include different classes of treatments like DPP-4 inhibitors (Januvia, Onglyza, Tradjenta), GLP-1 receptor agonists (Byetta, Victoza) and SGLT-2 (Invokana, Farxiga) apart from metformin and insulin therapy.

Stocks to Watch on World Diabetes Day

Today on World Diabetes Day, here is a look at some of the key pharma companies in the diabetes market.

Denmark-based Novo Nordisk A/S (NVO - Free Report) is one of the key players in the global diabetes market. The company’s diabetes portfolio comprises products like Tresiba (a once-daily new-generation insulin), Xultophy (a once-daily single-injection combination of Tresiba and Victoza), Ryzodeg (a soluble formulation of Tresiba and NovoLog), NovoLog (insulin aspart) and Victoza (GLP-1). However, the franchise is under pressure reflecting increased competition in the basal insulin segment, a continued decline in the premix segment, and the increasingly tough pricing environment in the U.S. within diabetes care. Formulary changes giving preference to follow-on biologics will also weigh on performance.

As far as its pipeline is concerned, Novo Nordisk announced on its third quarter call that it will not continue current development projects within oral insulin and combinations involving oral insulin. Meanwhile, the company is currently seeking FDA approval for IDegLira (a fixed-ratio combination of Tresiba and Victoza) though the FDA action date was pushed back by 3 months with a decision now expected in December. GLP-1 med semaglutide remains a key pipeline candidate with regulatory filings expected by year end. Novo Nordisk also intends to focus on disease areas adjacent to diabetes including end organs like the liver, kidneys and the cardiovascular system.

NOVO-NORDISK AS Price, Consensus and EPS Surprise

French drugmaker Sanofi (SNY - Free Report) also holds a key position in the diabetes market. However, Sanofi’s Diabetes franchise is under pressure with key product, Lantus, facing increasing competitive pressure at the payor level and biosimilar competition in several European markets. Moreover, Basaglar, a follow-on insulin glargine product is expected to enter the U.S. market in mid-December. Sanofi expects its global Diabetes sales to decline 4–8% annually (at constant exchange rates) over the 2015–2018 timeframe.

Despite the challenges in the diabetes market, Sanofi continues to work on expanding and strengthening its diabetes portfolio and currently has quite a few diabetes programs in its pipeline including LixiLan (fixed-ratio Lantus+ Adlyxin; FDA response expected in November), SAR342434 (insulin lispro; under EU review), sotagliflozin (oral SGLT-1&2 inhibitor; phase III for type I diabetes and phase III-ready for type II diabetes) and efpeglenatiden (long-acting GLP-1 receptor agonist, phase II).

SANOFI-AVENTIS Price, Consensus and EPS Surprise

Another well-positioned company in the diabetes market is Eli Lilly and Company (LLY - Free Report) . Lilly has a strong portfolio of diabetes treatments including Trulicity (GLP-1), Jardiance (SGLT-2), Trajenta, Humulin, Humalog, and Glyxambi. Lilly has a diabetes alliance with Boehringer Ingelheim for several of these products. Lilly could well see a surge in sales of Jardiance provided the FDA gives its nod for the addition of EMPA-REG OUTCOME study data (which showed cardiovascular (CV) risk reduction) to Jardiance’s label – a decision from the FDA is expected on Dec 4, 2016. Lilly also has a strong diabetes pipeline.

LILLY ELI & CO Price, Consensus and EPS Surprise

Kenilworth, NJ-based Merck & Co., Inc.’s (MRK - Free Report) diabetes franchise, which accounted for about 16.5% of third quarter 2016 pharma segment sales, consists of products like Januvia and Janumet. On its third quarter call, Merck said that Januvia continues to be the leading DPP-4 treatment of choice in the market. The company expects Januvia’s 2017 formulary access to remain similar to that seen in 2016 though pricing pressure in the U.S. is expected to continue.  

Merck’s NDA for MK-1293, a follow-on insulin glargine (Lantus) candidate is currently under FDA review while the company and its partner Pfizer Inc. (PFE - Free Report) expect to file for approval of ertugliflozin as monotherapy and as a fixed-dose combination with metformin or Januvia by year end.

MERCK & CO INC Price, Consensus and EPS Surprise

Diabetes is one of the six growth platforms for AstraZeneca plc (AZN - Free Report) . Key products in AstraZeneca’s diabetes portfolio include Farxiga, Onglyza, Bydureon and Byetta. The company is also evaluating a combination of Farxiga and Bydureon for type II diabetes.

ASTRAZENECA PLC Price, Consensus and EPS Surprise

Despite pricing pressure and growing competition, diabetes remains a lucrative market given the growing prevalence of the disease and the demand for new treatments. Apart from Novo Nordisk and Merck, all the above-mentioned companies are Zacks Rank #3 (Hold) stocks. While Novo Nordisk is a Zacks Rank #4 (Sell) stock, Merck carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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