By Elena Berton
FRANKFURT (Reuters) - In a leafy suburb of Frankfurt, a state-of-the-art plant churns out up to 1 million insulin pens every day in French drugmaker Sanofi's drive to keep its no. 2 spot in the $43 billion-a-year diabetes market.
The facility is part of a hub - nicknamed Insulin City - dedicated to research and development, production, and smart technology for diabetes treatments that Sanofi says will help drive its growth as older blockbusters lose patent protection.
"This site represents an investment of more than 1 billion euros ($1.3 billion) and clearly shows our dedication to diabetes," Christian Lerche, head of R&D project direction at Sanofi's diabetes unit, told Reuters.
It is a critical moment for Lerche and his colleagues: while arch-rival and market leader Novo Nordisk has suffered a recent product setback in the United States, competition is mounting from the likes of Eli Lilly, Bristol-Myers Squibb and AstraZeneca.
All are eyeing a fast-growing global market in which the total number of diabetes sufferers is projected to leap to well over half a billion by 2030.
Lantus, a synthetic insulin developed at the Frankfurt centre in the 1990s, is currently Sanofi's top-selling drug. Last year it grew almost 20 percent to generate 5 billion euros in sales - but is set to lose patent protection in 2015.
To fend off its rivals, Sanofi is testing an improved version of Lantus in late-stage trials as well as a combination of the product with Lyxumia, a once-daily injection that controls blood sugar levels in a different way.
Investors and medics will get an insight into whether Sanofi has a new winner when data on these studies are made public at the June 21-25 American Diabetes Association annual meeting in Chicago. If positive, the results could prove Sanofi is in good shape to protect its market position.
As part of its plan to broaden its diabetes portfolio beyond drugs and injection pens, Sanofi has also rolled out new devices, like a blood glucose meter plug-in for Apple's iPhone in the United States, which allows diabetics to check their levels on a smartphone. It is currently testing more advanced versions that would e-mail readings to the doctor.
Drugmakers are competing fiercely in the type 2 diabetes market as the number of people with the disease, which is linked to obesity, continues to grow rapidly - including in emerging markets where middle classes are switching to a Western diet.
An estimated 371 million people worldwide are living with diabetes, with China now topping the list, according to the International Diabetes Federation. It predicts as many as 552 million may have the disease by 2030.
Diabetics typically start out on oral medicine but often need to move on to insulin injections to regulate their blood-sugar levels.
One side-effect of taking insulin can be hypoglycaemia, when sugar levels become dangerously low.
The new formulation of Lantus promises to last longer and reduce the incidence of hypoglycaemia seen with the old version - a drawback that Novo Nordisk has highlighted when touting its big new product hope, a novel insulin called Tresiba.
Although Tresiba is approved in Europe, Novo Nordisk suffered a setback in the United States where concerns over potential heart side effects mean new tests are needed, delaying a U.S. launch by several years.
That delay could play straight into Sanofi's hands, provided the improved version of Lantus avoids similar safety issues.
Deutsche Bank analysts expect the latest clinical trials to confirm a good profile for the Sanofi product, increasing investors' confidence that the French group can not only protect but also grow its diabetes business beyond 2016.
Sanofi shares have outperformed the European drugs sector by 16 percent over the past 12 months on growing optimism that the company will find new growth drivers, in diabetes and elsewhere, to offset loss of patent protection on older medicines.
Still, the pressure is on. Sanofi needs to make its new Lantus a success because it is likely to face competition from a so-called biosimilar version of the original Lantus made by Eli Lilly, the world's no. 3 insulin maker.
Because Lantus is a complex biological drug, it is difficult to make chemically identical generic versions but rivals can develop a product that is very similar.
"Since Eli Lilly is an established diabetes player, that's quite a threat," said Valentina Gburcik, a healthcare analyst at consulting firm GlobalData.
At the same time, Sanofi faces indirect competition from the growing class of injectable GLP-1 medicines that stimulate insulin production when blood sugar levels become too high.
Sanofi's own Lyxumia is just such a product but the GLP-1 landscape is becoming increasingly crowded. Novo Nordisk is pushing its top-seller Victoza hard in the face of competition from Byetta and Bydureon, which are now sold jointly by Bristol-Myers and AstraZeneca, after they bought out Amylin Pharmaceuticals. Several others are waiting in the wings.
Having launched Lyxumia in Europe, Sanofi is working to develop a pen that would deliver a combination of the treatment with Lantus.
"Lyxumia will take a small market share by itself, but it may grab considerable market share from Lantus biosimilars because the combination shows a much better profile than Lantus alone," Gburcik said.
There is plenty of work to keep the diabetes team in Frankfurt busy. ($1 = 0.7579 euros)
(Editing by Ben Hirschler and Mark Trevelyan)