Diabetes rates are rising in every region and country; globally, around 9% of adults suffered from diabetes in 2014, according to WHO – leading to an estimated 1.5 million deaths a year. By 2030, the condition is projected to be the seventh-highest cause of mortality, hitting low and middle-income countries particularly hard.

Type 2 diabetes is, to some extent, avoidable – the International Diabetes Federation estimates that up to 70% of cases can be prevented or forestalled by adopting healthier lifestyle habits. However, reducing its prevalence looks to be something of an uphill battle. Faced with ageing populations and soaring rates of obesity, many countries are treating the rise of type 2 diabetes as a grim inevitability.

For this reason, the diabetes drug market is expected to significantly expand in the coming years. According to a report by Visiongain, revenues will show strong growth in the years up to 2023, based on existing drugs and those in the pipeline.

Hemant Mistry, a pharmaceutical industry analyst at Visiongain, commented at the time: "The incidence of diabetes will surge, owing to rising levels of obesity and sedentary lifestyles in the global population. Those trends are most evident in emerging countries, such as China and India, which are expected to account for much of the growth of the treatment market.

Within diabetes drug development specifically, third-party organisations form an indispensable piece of the puzzle. Any truly cutting-edge research requires a level of specialisation it would be difficult to source in house.

"Also, as companies set up operations and facilities in developing countries to harness the growing patient pool, this increases market competition. That trend helps stimulate innovation and price reductions – an incentive for less-affluent patients in developing countries."

Mistry added that because of the close association between type 2 diabetes and obesity, we are likely to see increased demand for medications that can tackle multiple metabolic disorders at once. This will allow pharma companies to market drugs to an even larger target population.

Hat in the ring

For drug manufacturers, this is clearly a fruitful time to get involved. A recent trend report by Express Script confirmed that the market was becoming more lucrative: the category showed a 14% increase in spending in 2015, with prefilled insulin pens and newer, more expensive therapies forming the main contributing factors.

In fact, diabetes was the most expensive traditional therapy class by some margin. While four of the most commonly used diabetes treatments are generic – comprising 53% of prescriptions overall – elsewhere, brand inflation is driving up the unit cost. This applies, above all, to combination products, many of which entered the market in 2014 and 2015, and which are designed to replace the old-style multidrug regimens.

The question is what pharma companies can do to carve their niche. As they look ahead to chase the next blockbuster drug in this space, what kind of strategies can they adopt to keep their own costs down, allowing them to gain ground in the hyper-competitive marketplace?

It is clear that they have challenges on their hands. Faced with tightening margins and with greater regulatory pressures, they are operating in high-stakes conditions; and any failures are likely to prove enormously expensive. In the meantime, the drugs themselves are becoming more complex, with many of the molecules in the pipeline presenting bioavailability and delivery challenges that did not exist in the past.

As a result, pharma companies don’t always get it right. Take Sanofi’s Afrezza – an inhalable insulin drug-device combination released in February 2015. Billed as meeting "a recognised need for an insulin that doesn’t require an injection", there were suggestions that the drug might shake up the drug-delivery market and draw in $2 billion a year in sales.

Unfortunately, like Pfizer’s Exubera before it, this solution failed to live up to the hype. The drug was shelved less than a year after release, following disappointing sales. Analysts have pointed to cost and accessibility issues, reinforcing the notion that increased compliance has as much to do with affordability as it does with the route of administration. After all, however ingenious the drug, if the cost per unit is too high, its overall penetration will remain low.

Early birds

For a pharma company to get the balance right, it must pay attention to areas of need – improving patient convenience and ease of adherence, for example – and market conditions such as reimbursement factors. This requires biomedical expertise coupled with a savvy business model.

To this end, outsourcing strategies are becoming increasingly important. As pharma companies focus on their core businesses – that is, late-phase drug development and marketing – they are exiting non-core activities and looking to their development partners for the rest. According to Frost & Sullivan, the global contract manufacturing marketplace across the pharma industry is expanding at a compound annual growth rate of 6.6%.

Many of these contractors have assumed the mantle of contract development and manufacturing organisation (CDMO), differentiating themselves from CMOs, which focus exclusively on manufacturing. Because CDMOs are involved right from early-phase drug development, pharma companies can reduce their number of third-party providers. The customer-supplier relationship is therefore reframed as a genuine strategic partnership.

From the contractor side, this means branching out and looking at what services they can offer earlier in the value chain. In recent years, we have seen a wave of M&A activity, with CMOs looking to acquire companies with complementary strengths and assets.

In 2013, for instance, dosage forms supplier Capusel acquired Bend Research, a specialist in drug delivery and bioavailability research, while Pathogen merged with DSM to create the world’s second-largest CMO in 2014.

Within diabetes drug development specifically, third-party organisations form an indispensable piece of the puzzle. Any truly cutting-edge research requires a level of specialisation it would be difficult to source in house.

Sanofi is a particularly interesting example. Currently the second-largest company in the world based on global anti-diabetic revenue, Sanofi has lately been stockpiling diabetes assets in a bid to reverse its decline in sales. Its bestselling product, Lantus, is rapidly ceding ground to alternatives, with patent protection having expired in most countries in 2015.

Against this less-than-ideal backdrop, Sanofi is staying firm. In August 2015, the company announced it was launching a strategic collaboration with the German CRO Evotec, with a view to developing a beta-cell replacement therapy. This therapy, based on stem cell research, is intended to halt the development of diabetes.

"Combining Sanofi and Evotec’s beta cell and stem cell expertise in drug discovery and development will enable optimal exploitation of the potential of stem-cell-derived human beta cells for therapy and drug screening in diabetes," said Philip Larsen, vice-president, global head of diabetes research and translational science at Sanofi, at the time. In November, the company entered a partnership with Hanmi Pharmaceutical to develop a portfolio of experimental, long-acting diabetes treatments. It also announced a collaboration with Lexicon Pharmaceuticals for the development and commercialisation of sotagliflozin, an oral medicine for type 1 diabetes.

"This agreement with Lexicon reinforces our commitment to helping people living with diabetes," said Pascale Witz, executive vice-president at Sanofi, and head of the global diabetes and cardiovascular care business unit in the company’s new organisational structure. "Adding sotagliflozin to our portfolio, which includes medicines at virtually every stage of the treatment pathway, highlights our focus on providing a large and diverse set of therapeutic options for people with this disease."

As for Sanofi’s failed drug, Afrezza, this was developed and manufactured by Californian drugmaker MannKind, with Sanofi responsible for the marketing side. Under the terms of this deal, struck in August 2014, MannKind secured an upfront payment of $150 million and stood to receive further payments up to $775 million alongside a share of the profits. However, this was conditional on meeting targets that did not come to pass. MannKind is currently trying to find another partner to continue commercialisation activities, while Sanofi seeks out its next blockbuster diabetes drug.

We seek to collaborate with anyone – whether it’s academia, biotech companies or even individuals – to make these proteins ‘drugable’.

Revel in alliance

As Sanofi continues its bullish acquisition strategy, the market leader, Novo Nordisk, has been enjoying a boost of its own. The company, which draws 80% of its revenues from diabetes products, received good news in September after FDA finally approved Tresiba, its long-acting insulin product. Meanwhile, its blockbuster drug Victoza, which dominates the GLP-1 market, has been found to have a side benefit – reducing the risk of heart attacks and strokes.

Although much of Novo Nordisk’s work is done in house, it maintains a "vision to drive innovation through healthy and productive alliances". According to chief science officer Mads Krogsgaard Thomsen, the company actively seeks input from others with complementary strengths.

"If we move, for instance, from injectable insulin or injectable GLP-1 to oral delivery, we realise that Novo Nordisk may not be the leader in oral delivery of protein tablets," he explained on a video on the company website. "And we cannot discover all the targets ourselves – we may be the world leaders in insulin and GLP-1, but there are so many proteins and peptides that have never been pharmaceutically explored.

"We seek to collaborate with anyone – whether it’s academia, biotech companies or even individuals – to make these proteins ‘drugable’."

It seems clear that in the current diabetes landscape, the trend towards outsourcing will continue. In some cases, a pharma company may take a backseat, delegating all of its research and development to third parties; in others, it simply looks to fill the gaps in its own expertise. The common denominator, however, is collaboration, with companies perennially on the lookout for partners that will help them deliver on their goals.