The Bull Case for SNY’s Diabetes Franchise – Update


Consensus expectations for SNY’s basal insulins (Lantus/Toujeo) appear too low. Expectations fell 28% after SNY warned last October that US pricing had weakened, and have fallen to the point that consensus now expects 2017 sales to be lower than 2014 sales

This seemingly ignores the facts that in the US (66% of global Lantus sales) unit demand for basal insulins is growing at 10%, Lantus’ unit share of the basal insulin market is growing; and, both SNY and its key competitor (Levemir/NVO) increased list prices of their products by 11.9% in the month following the warning

In short, consensus expectations for Lantus (and the follow on product Toujeo) have failed to adjust for recent volume, share, and pricing trends, all of which point to substantially higher than consensus sales

As an entirely separate matter, we believe SNY’s pre-phase 3 pipeline is undervalued – so much so that SNY’s share price would have to increase by roughly 45% in order to more accurately reflect the apparent amount of innovation in the pre-phase 3 pipeline. To be clear, this is on an all-else-equal basis; i.e. we would argue SNY is roughly 45% undervalued even if consensus figures for Lantus and Toujeo were correct, though we don’t believe they are

Taken together, we see two powerful – and independent – reasons to believe SNY is substantially undervalued

For our full research notes, please visit our published research site

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