Sanofi (SNY) Forms Diabetes Joint Venture With Alphabet

French drugmaker Sanofi SNY has formed a joint venture with Google parent, Alphabet Inc.’s GOOG life sciences subsidiary, Verily Life Sciences to develop innovative treatment solutions for diabetes care. Reportedly, the companies plan to invest $500 million in the partnership.

The venture, called Onduo, will develop comprehensive solutions that combine devices, software, medicine and professional care to treat diabetes patients more effectively. Onduo will initially focus on type II diabetes, the more common form of the disease.

The joint venture brings together Verily’s experience in miniaturized electronics, analytics and consumer software development, and Sanofi’s clinical expertise and experience to create tools and solutions for better diabetes management.

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Sanofi and Verily (formerly Google Life Sciences) appointed Joshua Riff, a senior executive at United Health Group’s UNH Optum, as the chief executive officer of Onduo.

The joint venture can prove to be a strategic addition to Sanofi’s Diabetes franchise, which is presently under significant pressure related to its key product, Lantus, facing stiff competition at the payer level and biosimilar competition in several European markets (including Germany, the UK, Netherlands and Denmark) and Japan. Moreover, a biosimilar version of Lantus could hit the U.S. markets by the end of 2016. Lantus has been a major contributor to the company’s top line, having accounted for 17.2% of total sales in 2015.

Diabetes and Cardiovascular Global Business Units sales declined 3.5% to €1.6 billion in the second quarter of 2016. The Diabetes franchise was down 3.2% to €1.9 billion, reflecting lower sales of Lantus in the U.S. due to a lower average net price.

Considering recent market trends, Sanofi expects its global Diabetes sales to decline 4–8% annually over the 2015–2018 timeframe.

Sanofi carries a Zacks Rank #4 (Sell). A better-ranked stock in the pharmaceutical sector is Anika Therapeutics Inc. ANIK, which sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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