Novo Nordisk said today it will end all R&D activities for inflammatory disorders treatments and focus more on its diabetes prevention and treatment, obesity and diabetes complications—a decision it projected will cost up to about 200 jobs.
A total 400 employees will be impacted, the company said. While “it will be possible to offer other positions within the company to more than half of the affected employees,” Novo Nordisk added that it has begun talks with affected local unions about job-redundancy plans.
All ongoing clinical activities within inflammatory disorders would be finalized within the coming six months, Novo Nordisk said.
Once clinical trials are closed, the company added, “patients will be followed in accordance with the protocol and further treatment will be the responsibility of their doctors and according to local practices.”
The company expects to incur a non-recurring cost of around DKK 700 million ($126 million) this year as a result of its ending inflammatory-disorders R&D. That figure includes around DKK 400 million ($72 million) for impairment of intangible assets, and around DKK 300 million ($54 million) related to other exit costs such as project closures and severance payments.
Novo Nordisk said it came to its decision after a strategic review that followed its decision Aug. 7 to halt development of its most advanced compound, anti-IL-20 for rheumatoid arthritis.
“The discontinuation of anti-IL-20 delays our earliest possible entrance into the market for anti-inflammatory therapeutics to the late 2020s,” Mads Krogsgaard Thomsen, Novo Nordisk EVP and CSO, said in a statement. “Significant unmet opportunities remain within diabetes, including prevention, obesity and diabetes complications. We have therefore decided to further increase our R&D efforts within diabetes which is our main business area.”
The company did not quantify how much extra it plans to spend on diabetes-related R&D.
Soren Lontoft, an analyst with Sydbank, told Reuters that Novo’s increased attention to diabetes could position the company for longer-term success.
“In the short run this is negative because of the 700 million crowns of non-recurring costs, but in the long run this can give a more focused Novo, which is positive,” Lontoft said.
Diabetes is Novo Nordisk’s strongest therapeutic specialty, with the company determined to increase to 40 million the number of patients who use its drugs worldwide by 2020—up from 23 million in 2012 – in the face of competition from new products by Sanofi and Eli Lilly, as well as from generics, biosimilars and pressure to contain prices.
Last month, Novo Nordisk CEO Lars Rebien Sorensen disclosed to reporters a best-case scenario under which his company could launch in the U.S. a new long-lasting insulin Tresiba in 2016, following submission of data that is expected to be completed later this year or early in 2015.
Novo Nordisk last year lost its contract to supply the non-insulin, once-daily type 2 diabetes drug Victoza® (liraglutide [rDNA origin] injection) to Express Scripts’ more than 40 million customers in the U.S. Despite that setback, the company reported a 15% year-over-year increase in North American sales of Victoza during the second quarter.
Sanofi’s Lantus, a long-acting human insulin analog, was the world’s best-selling insulin glargine last year, with 2013 sales of €5.715 billion (about $7.5 billion). But those sales are expected to decline sharply once patent protection expires next year.
Sanofi has sought to fight off a potential biosimilar version of Lantus that Eli Lilly is looking to market. In January, Sanofi sued Lilly in U.S. District Court for the District of Delaware, alleging that four Lantus® patents were infringed by Lilly in the biosimilar. The lawsuit effectively scuttled Lilly’s plan to market the biosimilar next year, and is expected to delay its entry to market until at least 2016.
Novo Nordisk said it would offer updated financial guidance for this year on October 30.