FDA approves Abbott’s FreeStyle Libre for replacing fingersticks (non-adjunctive)! US launch in pharmacies by end of year; 10-day wear, 12-hour warmup – September 27, 2017

Just minutes ago, the FDA and Abbott announced approval of the FreeStyle Libre (real-time) Flash Glucose Monitoring system. It is the first factory-calibrated sensor in the US and has achieved the big hope for a non-adjunctive (insulin dosing) claim as a replacement for fingersticks – major wins for people with diabetes to avoid routine fingersticks and a huge sigh of relief.

FreeStyle Libre is approved for 18+ years, upper-arm wear only, and will require a prescription (as expected). The approval comes roughly a year after the product’s 3Q16 submission, and a year after the approval of the professional (blinded, retrospective) Libre Pro.

FreeStyle Libre will be available in major retail pharmacies across the US (!) by the end of the year – mail order will also “technically” be an option, but the focus is on key pharmacy retailers. Abbott’s press release said it will be “at a fraction of the cost of other CGM systems currently available,” and we’ve confirmed cost will be consistent with cash-pay monthly prices in Europe. We’re speculating that this means sensors will go for ~$120/month and readers (one-time expense) will be around ~$60. This pricing is obviously a competitive threat for Dexcom and Medtronic - relative to Dexcom, this would reflect an ~50% monthly price cut with no extended wear (unusual), or ~25% cut with a week extended wear. Read more on the implications below. We’re not sure what the reimbursed pharmacy price will look like, but presumably Libre will have a copay/coinsurance. www.freestylelibre.us is now live and allows patients to sign up for updates. Abbott will even inform a healthcare provider and help with obtaining a prescription - brilliant marketing.

In a material change, FreeStyle Libre is approved in the US for 10-day wear with a 12-hour warmup. The factory-calibrated MARD has improved to 9.7% with these changes. Presumably these changes helped hit FDA’s bar for non-adjunctive accuracy to retain factory calibration – day one has the most challenging accuracy for all sensors, given the wound response. This is a very smart tradeoff in our view, even if Abbott couldn’t retain the OUS version’s 14-day wear and one-hour warmup. With 10-day wear, Libre is still the longest real-time sensor in the US, although we think the majority of patients extend wear for other sensors, particularly Dexcom. Otherwise, FreeStyle Libre has the same slim form factor (~the size of two stacked quarters, fully disposable), still stores eight hours of glucose data on the sensor, does not have alarms, and (notably) doesn’t carry concerns of acetaminophen interference.

Both the FDA and Abbott refer to FreeStyle Libre as a “continuous glucose monitoring” system, a clear win as Abbott seeks to (presumably) use existing CGM reimbursement codes. Outside of the US, Abbott markets the device as a “flash glucose monitor,” more clearly differentiating the on-demand functionality from sensors that send readings to a receiver/phone every five minutes. Libre does continuously capture glucose data, though it won’t have continuous streaming communication with alarms until the next-gen launches (the pivotal with Bigfoot will still happen in 2018).

At US launch, FreeStyle Libre will not have smartphone connectivity via LibreLink (this was not included in the submission), meaning that patients will have to use the “mobile reader” to scan for data. They will also not be able to share data with caregivers via LibreLinkUp – this is another negative, compared to Dexcom, along with the alarms. We imagine it won’t be long before we see these approved, as Abbott is fairly bullish about getting data on the phone, and especially being able to share it with the support network.

The 12-hour warm-up is something people can avoid by acquiring a second reader and overlapping wear times. Since each reader can only be used with one sensor at a time, an in-use reader can’t kick off a second sensor’s warm-up. The obvious solution is for patients to have two readers and alternate them, starting a new sensor’s 12-hour warmup in the last 12 hours of the current sensor’s life. Aside from wearing two sensors, the obvious downside is that data on each reader would only reflect half of the patient’s total glycemic data. (We also assume Abbott can’t encourage this practice, but some patients will do it anyways.) Abbott and FDA will hopefully work together to reduce the warmup time, though perhaps studies or better day-one stability will be needed.

Overall, this is a great day for patients and public health as the move toward CGM as a standard of care further strengthens. We are particularly excited about the potential for prevention of diabetes and diabetes complications for both type 1 and type 2 patients.

Global Libre User Base Update – 400,000+ Users

• Very notably, yet overshadowed by the day’s very positive news, Abbott shared that FreeStyle Libre is now used by “more than 400,000” people across >40 countries, just over three years after CE marking! For comparison, Dexcom hopes to expand its user base to “270,000+” by the end of the year. This represents a huge uptick from the last Abbott update earlier this month, when we were told that the global user base was 300,000+. We aren’t surprised that the number has gone up markedly from the 1Q17 call (“about 300,000” worldwide), since reimbursement momentum has been steady – the device is currently fully or partially covered in 17 countries, with the most recent reimbursement victory coming from UK’s NHS. See here a list of markets with reimbursement.

Labeling

• FreeStyle Libre is approved as a replacement for “routine fingersticks” and sensor readings can be used for making treatment decisions, including dosing insulin. There are four exceptions where fingersticks are required: (i) when the “Check Blood Glucose symbol” appears; (ii) when symptoms do not match system readings; (iii) when a user suspects readings may be inaccurate; or (iv) when a user experiences symptoms that may be due to high or low blood glucose. Obviously fingersticks will also be required during the 12-hour warmup.
  • The label is a terrific regulatory win for Abbott, who submitted Libre for both adjunctive and non-adjunctive claims. The non-adjunctive label stays competitive with Dexcom’s G5 and maximizes the compelling factory calibration. Abbott had a tough FDA history going for an insulin dosing claim with Navigator; we’re glad it was able to push this one through.
• The approval reflects a one-year review, but may have come sooner than expected for Abbott. The FDA’s announcement was out first, and when we tried to access the US FreeStyle Libre page through the link in the Abbott release (www.freestylelibre.us), it wasn’t live. Now the website is live and includes a patient sign-up for more information, including help getting a prescription – brilliant marketing.
• We're not sure if the hypoglycemia accuracy warning on the FreeStyle Libre Pro label will be included on the consumer version label. The Pro label reads: “The device may inaccurately indicate hypoglycemia. The results of the clinical study conducted for this device showed that 40% of the time when the device indicated that user sensor glucose values were at or below 60 mg/dl, user glucose values were actually in the range of 81-160 mg/dl.” The extended warm-up and shorter wear duration may result in improved accuracy in the hypoglycemia range, which could be reflected in the improved 9.7% MARD – we’re not sure on this, as we haven’t seen the FDA label or presumably new accuracy studies.

US Competitive Implications

• For both Dexcom and Medtronic, FreeStyle Libre is a US competitive threat on many fronts – no calibration, longer 10-day wear length, lower pricing, smaller on-body form factor, disposable transmitter, broad pharmacy distribution, and path to a no-fingersticks automated-insulin-delivery system. Of course, Libre also has some drawbacks relative to Dexcom and Medtronic – it cannot send data to a smartphone yet, the 12-hour warmup is a hassle, it doesn’t have approval for pediatrics or Medicare, and it cannot automate insulin delivery. We’ll be fascinated to see how FreeStyle Libre’s US launch affects the entire category, and particularly US growth and revenue for Medtronic and Dexcom. On this news, Dexcom’s stock price has dropped a marked ~25%. In the table below, we’ve highlighted in yellow which device has the edge in the major product categories.
  
  • Factory calibration is something both Dexcom and Medtronic have long talked about, though Abbott likely has at least a year head start on Dexcom/Verily’s first-gen factory-calibrated product – this will leverage G6 and is expected to last 14 days. (The first version of G6 will be one fingerstick calibration per day; FDA submission was expected in September.) Medtronic has never given timing on factory calibration, but we do know it is in the pipeline. 

Our Comments on Dexcom’s Stock Price

On the FDA approval news and FreeStyle Libre’s non-adjunctive label, Dexcom’s stock price dropped ~25%, down from ~$67 on Wednesday to the current ~$50. Broadly, we see this as an overreaction from the Street, particularly given the category’s tremendous runway in both type 1 and type 2 diabetes in the US. Below, we discuss both sides.   

Wall Street Is Overreacting – Libre Will drive CGM Awareness and Benefit Dexcom

• We expect FreeStyle Libre will be very positive for the CGM field/category expansion in the US. It will drive awareness as well as more patients understanding their glucose levels far better and being able to improve diabetes management through medication, food, exercise, sleep, and stress. Having a cheaper CGM option in a field previously dominated by patients with type 1 (and heavily reliant on reimbursement, instead of cash pay) is a definite positive. With factory calibration, FreeStyle Libre is characterized by many as easier-to-prescribe and train for HCPs and easier-to-use for some patients, though there is still a massive market for multiple companies to compete – CGM penetration is most recently estimated at ~15-20% in type 1s in the US, meaning the market could easily triple and still be underachieving. FreeStyle Libre  should be a massive CGM awareness driver in the US that will help Medtronic and Dexcom, particularly in raising awareness about the category among a broader population of HCPs and in less engaged patients. We’re not sure how big Abbott’s US sales force will be, but we assume it will be larger than Dexcom’s force. We look forward to all three products competing against each other in a growing market, rather than battling lack of awareness.
• Given the heterogeneity of patients, the field will benefit – and require! – multiple CGM options at different price points and with different feature sets. As always, competition drives innovation – Dexcom is itself working on easier-to-use, factory calibrated, smaller, disposable CGM with Verily, leveraging the G6 sensor (one calibration per day, 10-day wear, smaller wearable, automatic inserter; FDA submission was expected in September). Dexcom also has many advantages on the product front (see above) and data analytics and has driven greater innovation in the field since it was founded. The same is true for Medtronic.
• Many current CGM users do not need an “easier to use” product and/or would not give up benefits like alarms, app connectivity, and remote monitoring. Dexcom has the clear advantage on the latter, at least for the time being. A bigger question is how FreeStyle Libre will affect the sales cycle and new patient pipeline, a topic we address below.
• Wall Street appears not to have expected a replacement claim for Abbott's Libre – this was surprising, since it was unlikely FDA would approve a factory calibrated sensor without such a label. We imagine smart investors are welcoming the chance to purchase Dexcom stock at levels not seen since 2014. From our view, future innovation at Dexcom is not fully “priced in” to the stock, assuming it is successful in driving to factory calibrated CGM with a smaller on-body footprint and lower cost. Dexcom has a number of other advantages as noted above, including a head start on Medicare adoption.
• We continue to expect Dexcom users to relish Dexcom and we see little chance of most current Dexcom users deciding to opt for a different device (Dexcom’s Net Promotor Score is very high; contact dQ&A CEO Richard Wood for more information). Beyond the products, patient advocacy could drive greater coverage of CGM; demand for choice is likely to be high and it will be interesting to see how type 1s and type 2s segment with a growing number of products.
• FreeStyle Libre might not see the same pace of adoption in the US in 2017 as it has outside the US since 2014. Abbott launched into a “blue ocean” for CGM back in 2014, as there was little reimbursement and Dexcom was not focusing its efforts OUS. Now in 2017 in the US, the CGM market is more competitive than it was in Europe in 2014. Plus, the products are competing in a market where reimbursement exists, meaning the cash-pay advantage could prove less valuable for Abbott. Accordingly, the pace of adoption Abbott has seen in Europe might be slower in the US. Of course, that is speculation and only time will tell.  
• Automated insulin delivery (AID) will likely expand CGM and pump use dramatically over time. AID is a big positive for Dexcom, and it has Tandem, Insulet, Diabeloop, and Beta Bionics as partners. Over time, AID will benefit Abbott as Bigfoot work progresses and if the company can hit its milestones (Bigfoot’s pivotal trial with a pump and Abbott’s next-gen Libre is expected to start next year). For many, AID=killer app for CGM, especially in type 1s who are still only gradually adopting CGM at this point. AID is not moving as quickly as it could for Medtronic, given sensor supply constraints, though the 670G is the only game in town right now.
• We see diabetes prevention as major potential upside for Abbott; early-stage type 2 patients moving onto CGM will almost certainly choose Abbott at present. We do not see prevention or early-stage type 2s as major current thrusts for Dexcom or Medtronic, but we expect this to change over time, especially as both companies improve on calibration and on-body wear. CGM could be very positive for public health according to major public health leaders with whom we have spoken.

Wall Street’s Reaction Reflects Libre’s Competitive Threat to Dexcom’s Pricing and New Patient Pipeline

• There are two big competitive unknowns as FreeStyle Libre comes to the US market: (i) the impact on Dexcom’s sensor pricing and reimbursement; and (ii) Dexcom’s pipeline of new patients. We certainly expect the “sales cycle” to lengthen for those considering CGM in the US, since there is now another compelling sensor option to consider. But ultimately, we’ll have to see over the coming quarters and year how Dexcom’s sales growth and user base metrics are impacted.
  
  • Pricing/reimbursement: FreeStyle Libre’s cash pricing is obviously much lower than Dexcom’s cash pricing, which could put downward pressure on Dexcom’s sensor pricing and payer coverage over time. We’re not sure how payers will compare the two products and what case both companies will make. We’re especially unsure of how Dexcom’s G5 and Abbott’s FreeStyle Libre will stack up on a reimbursed level – if FreeStyle Libre only requires a pharmacy copay (e.g., $30/month), it may also be less expensive than Dexcom’s reimbursed price (typically coinsurance). If the reimbursed price for FreeStyle Libre is also cheaper than Dexcom’s reimbursed price, that is a further threat to Dexcom’s pricing on a patient uptake level. Over the next year, we’ll have to see what moves payers make – will some chose to exclusively cover FreeStyle Libre (given lower pricing), or perhaps put Libre on a better tier of coverage? Will Libre be easier to prescribe (e.g., less prior authorizations)? We’re also not sure how many Dexcom users are paying cash and whether they will decide to move to FreeStyle Libre for lower costs.
  • Pipeline of new patients: Given Dexcom’s very large base of sales, new patients do not boost revenue significantly in any given quarter. That said, Dexcom has seen rising adoption in the MDI population, which is a strong target market for FreeStyle Libre. Will the pipeline of new patients slow now that FreeStyle Libre is out? Or will the pipeline stay the same or grow, assuming Abbott drives broader category awareness? 

Medicare Coverage

• Given the non-adjunctive labeling and FreeStyle Libre’s de facto classification as a “therapeutic CGM,” we wonder if and when we might see Medicare coverage – Abbott told us that it will be “beginning discussions right away.” Next, we assume Medicare will have to determine that Libre falls in the DME Part B category (durable equipment like Dexcom’s G5, because of the reader), followed by a coverage decision. As we understand it, FreeStyle Libre does meet the requirement of therapeutic CGM – “CGM used as a replacement for fingerstick blood glucose testing for diabetes treatment decisions i.e., non-adjunctive use,” per Medicare’s site. We’re not sure if the lack of alarms will be a stumbling block for Medicare; presumably it won’t be, or will be addressed in Libre’s next-generation. Medicare coverage would certainly open up a huge market chunk for Abbott and stay competitive with Dexcom.
  
  • Dexcom blazed the Medicare trail, announcing back in March that coverage will be provided for its G5 sensor for people with type 1 and type 2 diabetes on intensive insulin therapy (MDI or pump). As of the 2Q17 update, Dexcom has 20,000+ Medicare patients in the pipeline, though was only slowly rolling out shipments. Abbott will theoretically have a distribution advantage here, as FreeStyle Libre will presumably not need to ship with strips (or perhaps ~10 strips included for the 12-hour warmup periods).

Thoughts from Bigfoot CEO Jeffrey Brewer

• Bigfoot CEO Mr. Jeffrey Brewer wrote to us minutes following the announcement, sharing the quote below. Bigfoot and Abbott announced a partnership in July to develop and commercialize a next-gen version of the FreeStyle Libre sensor (with real-time communication and factory calibration) into Bigfoot’s automated insulin delivery (pump) and MDI auto-titration systems. Obviously, approval of the consumer version of FreeStyle Libre de-risks development for Bigfoot. Mr. Brewer confirmed that the duo is still on track for a pivotal trial of the automated insulin delivery (pump) system in 2018. We’re not positive if Abbott will commercialize the next-gen Libre with continuous communication as a standalone product too.
  
  • Wrote Mr. Brewer: “Libre is the leading edge of a new generation of diabetes products that will finally address the most important problem plaguing people with diabetes, the real-world, day-to-day, moment-to-moment usability. The Freestyle Libre is the first product that truly makes life easier. With fewer pieces to assemble and fewer steps to keep it working, along with the painless insertion and superior wearability, the result is a drastically diminished footprint on the life of a person with chronic disease. All the technology I've seen in the last decade only provided more power, but at the sacrifice of quality of life. Libre is a dramatic step in the right direction, enabling a better quality of life by combining ease-of-use along with the improved safety and real-world accuracy that can only be achieved if you don't force a person to go through a complicated calibration procedure that works in clinical trials but not in the real world. As for the Abbott/Bigfoot collaboration, we are still on track for 2018 pivotal. Bigfoot could not be more thrilled with the partnership with the Abbott team. Is everything we hoped in terms of the product and people.”

Thoughts from Dr. James Gavin III

• Dr. James Gavin III told us he is equally excited by Libre’s application for those with diabetes to monitor their glucose, and by the prospect of the cheap, discreet, zero calibration sensor in detection and prevention of diabetes. We don’t believe Libre is indicated for diagnosing diabetes, though we imagine it will be a great low-cost, additional tool for HCPs to conveniently understand how patients are doing, to teach them, and to inform further diagnosis with A1c or fasting glucose.

Pediatric Timing

• Pediatric timing in the US has not been disclosed, but Abbott “continues to work to evolve the platform.” Currently, FreeStyle Libre is approved for pediatric use in the rest of the world (at least ages 4+; we’re not sure exactly how far down it goes and how it varies by country), and trial data supports its efficacy: The SELFY study of FreeStyle Libre in pediatrics ages 4-17, showed strong 1+ hour improvements in time-in-range per day vs. baseline (presented at ADA). We assume FDA will require a separate trial in children and adolescents, and if so, we’re not sure of the timing on this.

Libre Pro in the US and Other Background

• The one-year anniversary of FDA’s FreeStyle Libre Pro (blinded, retrospective) approval is tomorrow (approval came on September 28, 2016)! According to Abbott, Libre Pro has a “pretty significant market share” as the number one professional CGM in the US. Enthusiasm for the professional version has been plentiful at conferences (see Dr. Daniel Einhorn’s remarks at ADA 2017, for just one example), and we can’t wait to hear provider and patient feedback on the consumer version – as well as how each form factor is leveraged – once it launches.
• Abbott has a lot of real-world data supporting its efficacy: (i) strong hypoglycemia data from RCTs REPLACE and IMPACT; (ii) 400,000+ users worldwide; (iii) real-world data presented at ATTD suggesting that increased scanning translates to lower A1c and less time in hypoglycemia (with fingersticks basically eliminated).
• In what must be a record for a press release, Abbott’s announcement had 18 – 18! – citations. Six of them were “data on file” and five were from published papers. The amount of research and time put into the release strikes us as a reflection of how enthused the company must be about this milestone, as well as how long they have been waiting!

Close Concerns’ Questions – FreeStyle Libre in the US

Q: How much pent-up demand is there for FreeStyle Libre in the US? How quickly will we see an impact on Abbott’s US sales?

Q: Will patients purchase two FreeStyle Libre reader devices to overlap sensor wear times and avoid the 12 hours without real-time data? (i.e., staggered sensor wear, so the final 12 hours of a current sensor wear overlap with the 12 hours of warmup time for the new sensor – a second reader is required because each reader can only start one sensor)

Q: Is there room to improve the 12-hour warmup near time? How quickly could this happen?

Q: How quickly will Abbott get pediatric approval? Medicare approval?

Q: How quickly will LibreLink come? How will Abbott’s app and data efforts compare to Dexcom and Medtronic? Will these be a key differentiator or ancillary?

Close Concerns’ Questions – Competitive Implications

Q: How will the US launch of FreeStyle Libre impact Dexcom and Medtronic? Will it impact new patient growth, steal share, or both?

Q: How much will FreeStyle Libre expand the CGM category in the US? Will it drive uptake in type 2, where there is no reimbursement and cash pay is too expensive for current products?

Q: Will FreeStyle Libre’s pricing put pressure on Dexcom and Medtronic to drop prices? By how much? How will Libre’s pricing affect private insurers?

Q: How will patients weigh the different pros and cons of all three major CGM devices – see table above? How will the patients on CGM segment between the three products? How will it change if/when Senseonics is approved in the US?

Q: Will FreeStyle Libre’s approval ease the regulatory path for Dexcom’s factory calibrated ambitions?

Q: How will the next-gen Libre with Bigfoot differ from the current  version in the US? When might Bigfoot launch its automated insulin delivery (pump) and MDI auto-titration systems?

-- by Brian Levine, Adam Brown, and Kelly Close