Feb 10 (Reuters) - U.S. drugmaker Merck & Co has joined the race to make a cut-price copy of Sanofi's top-selling insulin treatment Lantus, increasing the long-term threat to the French company's $7 billion-a-year product.

Merck, which is working with Samsung Bioepis on the project, said on Monday its version of glargine - the generic name for Lantus - would soon enter late-stage Phase III studies in type 1 and type 2 diabetes.

Until now, the only company with a copycat version of Lantus in late-stage clinical development has been Eli Lilly.

"The relevance of today's announcement to Sanofi is the potential for greater price erosion and market share loss from two 'generic' Lantus," analysts at Bernstein said in a research note.

"We currently model 'generic' erosion of Lantus in our Sanofi model in the mid-2016 timeframe. This erosion could accelerate more quickly now that a second player is likely to enter in the 2016 timeframe."

In the case of the Lilly product, Sanofi sued triggering a 30-month stay of approval by the U.S. Food and Drug Administration. It could consider the same action with Merck.

Lantus accounts for close to a fifth of Sanofi's total sales and over a third of its operating profit.