JPM 2019

January 7-10, 2019; San Francisco, CA; Full Report – Draft

Executive Highlights

  • In diabetes technology, not one, but two CGM manufacturers – Dexcom and Abbott – announced that they both surpassed $1 billion in 2018 CGM revenue. Dexcom accelerated to 42% YOY growth on G6 momentum, while Abbott CFO Mr. Brian Yoor positioned FreeStyle Libre as the market leader  (we wondered how he’d speak about Libre – he sure was an excellent advocate). In other CGM news, Ascensia announced two agreements with manufacturer POCTech (distribution and co-development), and Medtronic’s pipeline now includes a non-adjunctive claim and iCGM labeling between April 2019-April 2020. In insulin delivery, BD confirmed that its type 2 patch pump will launch in limited fashion by the end of 2019, Insulet shared that the Dash PDM will launch in the US broadly this quarter, and Medtronic said it will launch its next-gen advanced hybrid closed loop (MiniMed 780G) between April 2019-April 2020. While it was a meeting more of updates than outright surprises such as new partnerships, it was weighty and cool on the technology side.

  • In therapy, multiple companies were quiet on their respective diabetes franchises and candidates, notwithstanding a few notable highlights. Overall, Lilly got the most attention for being front and center in promoting their work on the world’s biggest public health problem – they also made positive waves days later for keeping prices steady on insulin.

    • Lilly CEO Mr. Dave Ricks touted Trulicity in the competitive GLP-1 class, projecting 60-100% more class growth with no diminished access due to high manufacturer investment (e.g., Lilly’s phase 3 GIP/GLP-1 agonist tirzepatide) and differentiated clinical profiles. Somewhat mysteriously, Mr. Ricks stated that the positive REWIND CVOT showed benefit “across the whole population and in each part of the population” – seemingly suggesting that CV benefit was observed in both primary and secondary populations. We’re staying tuned on that.

    • Novartis highlighted the increasing autonomy of its generic Sandoz division, newly in the insulin biosimilar business, as well as the potential for Entresto to become the first-ever drug with an indication for heart failure with preserved ejection fraction (pending PARAGON-HF results in mid-2019). Related to the former, new Novartis CEO Dr. Vasant Narasimhan pretty much blew everyone away with his eloquence on large-scale social problems like diabetes and the importance of access. He spoke very articulately about access, solo, before Lilly CEO Mr. Dave Ricks and CVS Health CEO Mr. Larry J. Merlo took the stage – all three gave their insider’s perspective on drug pricing, access, and value-based care in what we felt was one of the most valuable discussions of the entire JP Morgan meeting, hands down. Disparate evaluations of public opinion on formulary design prompted hypotheses on how to resolve high gross-to-nets of insulin, including rebate pass through, alternate products with everyday low prices, or administrative action. Merlo was particularly impressive and we felt CVS was especially well-placed given the recent merger with Aetna.

    • Mr. Kåre Schultz, CEO of Generics Giant Teva, was also bullish on the potential of biosimilar GLP-1s but bearish on biosimilar insulins because, “The per-mg price of insulin is extremely low, whereas the per-mg price of GLP-1 is extremely high.” Intriguingly, he expects Teva to “actively pursue the whole GLP-1 space.” We’ll believe it when we see it.

    • Additionally, 2019 is poised to be a pivotal year for SGLT inhibitors in general and in type 1, with Lexicon CEO Mr. Lonnel Coats looking forward to an eventual launch for Sanofi-partnered sotagliflozin in the US (2Q19 in Europe) – should the upcoming FDA Advisory Committee support approval.  We applaud the companies for working to expand options for type 1 given very little commercial upside. We look forward to an expansive discussion Thursday at FDA and we salute FDA for not delaying this meeting despite the shutdown of the US government.

  • Big picture highlights included valuable discussions from Kaiser Permanente CEO Mr. Bernard Tyson, JPM CEO Mr. Jamie Dimon, and a piercing, most-valuable panel with Harvard’s Dr. Michelle Williams and former NIMH Director Dr. Tom Insel. It was terrific to hear Mr. Tyson expound upon all of his organization’s efforts to address social determinants of health (SDoH), Mr. Dimon’s vision for the Amazon-JPM-Berkshire Hathaway healthcare nonprofit (expanded from last year), and Drs. Williams/Insel on the intersection of diabetes and mental health. Additionally, FDA Commissioner Scott Gottlieb teleconferenced in to outline the Agency’s new Office of Drug Evaluation Science and highlighted efforts to accelerate drug evaluation and approval.

    Greetings from San Francisco, where our team attended JPM 2019, Biotech Showcase, and the StartUp Health Festival last week. Below, we’ve divided our coverage from over 60 company presentations, panels, and symposia into technology, therapy, health systems + payers, and keynotes + additional topics. We’ve also highlighted key themes from the week in therapy, tech, and big picture, just below the table of contents. Talks highlighted in blue are new in this full report. Read on.

    Table of Contents 


    Diabetes Technology

    • CGM’s acceleration continues, now with two $1+ billion franchises. Dexcom pre-announced impressive 2018 sales of $1.025 billion, accelerating to 42% YOY growth on outstanding G6 US momentum. Not to be outdone, Abbott positioned FreeStyle Libre as the market leader in CGM, also confirming 2018 sales passed the $1 billion mark. The most unexpected CGM news came from Ascensia and Chinese manufacturer POCTech: Ascensia is becoming the exclusive distributor for POCTech’s CGMs in 13 markets, and sales of Ascensia-branded CGM are expected to start “by the end of 2019.” Medtronic’s short CGM pipeline update shared plans to launch a non-adjunctive claim and iCGM labeling in the April 2019-April 2020 window.

    • In insulin delivery, BD, Insulet, Medtronic, and Companion Medical all offered pipeline updates. BD confirmed its type 2 patch pump has been filed with the FDA and is on track for a limited launch by the end of 2019 (calendar year). Insulet confirmed that the new Dash PDM will see its full US launch this quarter (1Q19) with over 100 million covered lives in the pharmacy and a free PDM (no upfront cost). Medtronic highlighted plans to launch its next-gen MiniMed 780G hybrid closed loop in April 2019-April 2020, adding automated correction boluses, Bluetooth, and remote software updating. And at its first JPM, Companion Medical gave a great update on its smart InPen, slated for retail pharmacy availability this month.

    • Telemedicine and connected care continued their unstoppable march forward, with impressive scale at both Kaiser and WeDoctor. Kaiser Permanente CEO Mr. Bernard Tyson shared that 59% of visits are now virtual, up from 33% in 2013 and 0% in 2008. We were also impressed with We Doctor Group, a multi-level healthcare approach in China. The company is building an interconnected health ecosystem via the cloud, AI, and devices, including a network of 2,700+ major hospitals (100+ “internet hospitals”), 260,000+ doctors, and 180 million registered users. Also in connected care, Livongo made its first JPM appearance, now with 112,000 users and the recent launch of 246 new company partners. Finally, Cecilia Health – formerly Fit4D –announced plans to use remote CDE’s to virtually onboard patients to CGM.

    • Just down the street from the JPMorgan Conference, past the Biotech Showcase and across Market Street, venture- and pharma-backed (Novartis, Otsuka) StartUp Health featured presentations from many of the 250 companies they have invested in over the past 7 years in their quest for healthcare “moonshots.” In the Tuesday keynote, renowned neurosurgeon and CNN Medical Correspondent Dr. Sanjay Gupta opened up his viewpoint on the opioid epidemic, for which much of the blame he believes falls on the medical community. As he sees it, the first step must be narrowly defining the problem and objectively quantifying pain, so as better prescription practices can be established. We felt as though his talk captured the general sentiment of the conference, which primarily focused on visceral narratives (e.g., the opioid epidemic) and emerging technologies (e.g., genome sequencing) with comparably little focus placed on chronic disease despite far higher prevalence (not that it’s a competition). See our highlight on the Rapid-Fire Pitch Session for the most notable diabetes updates including Fruit Street Health (DPP; 4.2% weight loss at 16 weeks), Veloce (smart ingestible drug delivery capsule), and Metalogics (weight loss + hardware).

    Diabetes Therapy

    • Insulin Pricing and Access: As they are in society at large, questions of insulin pricing took center-stage in a fascinating conversation between Lilly CEO Mr. Dave Ricks and CVS CEO Mr. Larry J. Merlo; we applaud JPM for bringing together pharma leaders for what turned out to be an open and honest discussion. Most notable were the disparate evaluations of public opinion on formulary design: Mr. Merlo stated that “many would say formularies have been proven to reduce the net cost associated with prescription drugs,” while Mr. Ricks believes that there is “too much difference in what patients pay and net [income]… I think formulary design has gone too far and is unfair.” These contrasting assessments hardly come as a surprise; PBMs generate revenue from rebates provided by manufacturers in exchange for formulary position when therapeutic classes have “multiple clinically equivalent products,” according to Mr. Merlo. As he stated, “formularies are born out of the question: ‘do we need all of those products and the cost associated with each to provide the appropriate outcomes for patients and members?’” From our perspective, this process, while well-intentioned, seems to be working backwards; rather than removing products and associated costs from the insulin supply chain, companies are pitted against one another to provide the greatest rebate possible (i.e., pricing pressure), which does not seem to trickle down to the patient. Moreover, formularies often infringe on patient choice; while a PBM may consider NovoLog and Humalog equivalent, many patients have drastically difference experiences and strongly prefer one over the other. From our perspective, little is understood about the value PBMs add, and we are very excited to see what could happen in new models that cut out the “middleman.” For example, our hat is off to Sanofi for capping out-of-pocket costs for next-generation basal insulin Toujeo (alongside all other Sanofi insulins) at $99/vial, for all uninsured and commercially-insured patients not on Medicare or Medicaid – the VALyou Savings Program was used by 6,500 people by the start of November. We strongly believe that Sanofi could talk about this program more, and diabetes was not a big focus of the company’s presentation. Other models also give us hope: Lilly’s Diabetes Solution Center is purportedly connecting nearly 10,000 people with diabetes in the US each month to underutilized resources such as co-pay cards or the Lilly Cares patient assistance program, according to Lilly’s communications department. Most recently, Novartis’ entry to the biosimilar insulin market through generic division Sandoz represents a massive commitment to a social bottom line which, while not nearly as profitable, is strategic; we of course recognize that this approach is often only possible for companies with other profitable divisions.

      • Notably, the last major insulin manufacturer, Novo Nordisk, was not present at JPM, and we have not heard any substantial updates of late related to access for its insulin products. We did hear of a pricing update last week on the insulin front – this was surprising to hear in the absence of any offsetting program. We’ll be eager to hear their 2018 results coming up in several weeks.  

    • Big Upcoming Quarter for SGLTs in Type 1: As the story of SGLTs in type 1 diabetes draws significant interest, Sanofi/Lexicon’s SGLT-1/2 dual inhibitor sotagliflozin will come up before an FDA Advisory Committee this Thursday, January 17. We can’t understate the importance of this for Lexicon, and neither could CEO Mr. Lonnel Coats during the company’s presentation at JPM. Lexicon supports FDA in approving sotagliflozin for an indication in type 1 diabetes. While it’s understandable to see this bullish take from Mr. Coats, we anticipate serious measures to be taken to address DKA risk mitigation – we look forward to hearing more about this comprehensive program (outlined in the Briefing documents) this week. How that could be sufficiently and effectively done is what we hope to hear – this will likely be discussed at length during FDA’s review. Overall, we were immensely pleased to see Lexicon place such a focus on diabetes during its JPM presentation.

    • A New Breed of CEO: Among standout presenters, to us, were Novartis CEO Dr. Vas Narasimhan and GSK CEO Ms. Emma Walmsley – who represent a younger generation and new breed of CEOs in their prominent focus on stakeholder over shareholder value. From where we stand, key segments of Big Pharma are becoming more mission-driven as the younger generation of healthcare leaders rises through the ranks – a trend that, we think, mirrors that going on in politics. This was also reflected in a valuable assertion from Roivant CEO Mr. Vivek Ramasamy (hardly over 30 years old) that diabetes is “an area of major underinvestment from industry when compared to the magnitude of societal need.” We also continued to be impressed by Alkermes which, despite no longer being involved in diabetes, is centered entirely on issues of great importance to public health and strives to approach them in a holistic, socially conscious manner. Richard Pops is clearly a CEO who has inspired younger ranks, as seems to be Merck’s Ken Franzier. More to follow on our view on messages (implicit and explicit) given on large-scale social problems by CEOs at the forefront of health.

    Big Picture

    • Convergence of Tech + Therapy: First and foremost, tech companies did very well at JPM 2019: From Dexcom’s location on the second-biggest stage of the meeting (where it announced >$1 billion in 2018 revenue to a full audience) to a crowd out the door for Livongo, diabetes tech and digital health companies drew a crowd. Compared to what we heard on the pharma side, the performance and focus from diabetes tech giants was notable; if a company was talking about diabetes, it was probably talking about tech. In this vein, we found it notable that Omada came up during Sanofi’s breakout session, and the digital health panel on Monday afternoon was both highly notable and well-attended.

    • How to Talk About Diabetes: Across companies involved in diabetes, there was a broad spectrum in how management talked – or didn’t talk – about the disease. There was striking silence from the vast majority of drug manufacturers, including J&J (where we’ve heard there is virtually no investment in Invokana), Pfizer, Daiichi Sankyo, Takeda, GSK, Mylan, and AbbVie; Merck and Sanofi addressed diabetes but in very brief course (of course, AZ and Novo Nordisk did not present). Only Lilly CEO Mr. Dave Ricks was all-in on diabetes, highlighting both GLP-1 agonist Trulicity and phase 3 GIP/GLP-1 tirzepatide – in line with the impressive strength of the company’s diabetes franchise, which grew 18% YOY to $2.4 billion in 3Q18. And while he asserted that Lilly’s therapeutic foci are among the most attractive in all of pharma, he also said that diabetes, five years ago, did not look that way. Broadly speaking and in our observation, companies in diabetes either (i) virtually ignored their products and candidates; (ii) emphasized the need to approach diabetes differently (e.g., through a different division like Novartis’ Sandoz, or via a different business/reimbursement model); or (iii) were very committed (e.g., Lilly). Among companies in diabetes, it seems that most are betting heavily and enthusiastically on oncology, and this therapeutic area stood in sharp contrast to diabetes – raising the question, for us, of how companies “winning” in oncology can best reinvest for public health.

    • JPM Expands Content with Panels + Events: JPM expanded its agenda this year with more panels and non-company-specific events than in any recent years. In addition to the usual lunch keynotes (this year from (i) Mr. Jamie Dimon; (ii) FDA Commissioner Scott Gottlieb; and (iii) Mr. James Carville and Ms. Mary Matalin), there were nearly a dozen additional panels and bigger-picture presentations – and most were really fascinating and quite valuable. Thematically, these events focused on digital health, precision medicine and big data, healthcare costs/spending, and Chinese biopharma. We particularly enjoyed Monday’s Digital Health Panel, Tuesday’s drug pricing and access panel, and Wednesday’s presentation on big data from Dr. Michelle Williams (of Harvard’s T.H. Chan School of Public Health), as well as Commissioner Gottlieb’s Tuesday keynote – a tour de force on how the agency is aiming to improve drug review.

    Detailed Discussion and Commentary

    Technology & Digital Health Companies

    Abbott: FreeStyle Libre On Pace for $1+ Billion in 2018 Revenue, 1+ Million users (~200,000 in US); ~$2 Billion Annual Revenue for Diabetes Overall; CFO Yoor Positions Libre as Market Leader; Libre 2.0 Launched in Germany

    Brian Yoor (Abbott, Lake Bluff, IL)

    Implying 2018 CGM financial results on par with Dexcom’s pre-announced $1.025 billion, Abbott CFO Mr. Brian Yoor suggested that FreeStyle Libre is “on track to achieve over a billion in sales this year.” This comes as no surprise, given Q3 FreeStyle Libre sales of >$300 million alone. Mr. Yoor cited over one million Libre users globally (also shared in 3Q18), specifying ~800,000 Libre users internationally and ~200,000 in the US. We wonder how the fourth quarter looked for Abbott in the US, given G6’s momentum – certainly there is a lot of runway for both products. As with prior estimates, Libre is reimbursed in 30+ countries, and ~2/3 of customers remain type 1 while ~1/3 are type 2. However, as we’ve heard from Mr. White in the past, Mr. Yoor noted that type 2s who are not insulin dependent and want to stay that way “represent a whole ‘nother rich world out there.” Indeed, Mr. Yoor estimated that there are ~40 million people dependent on insulin globally – ~20 million in the markets in which Abbott is active – so the potential runway in non-intensive type 2s is hundreds of millions. Looking at it another way, Mr. Yoor said that Abbott’s diabetes business hauled in ~$2 billion in 2018, meaning that SMBG still accounts for ~$1 billion per year. He added that if Abbott’s fingerstick market were all converted to CGM, that could be a $16 billion annual business – we’ll be back to unpack that math but we certainly believe it that the field would be many double-digit billions of dollars if all BGM users moved to CGM. Notably, Mr. Yoor explained that the underestimated complexity of manufacturing Libre in an exacting, precise, and cost-efficient manner, and that this was one reason Abbott isn’t expanding even faster, while it is in the midst of building capacity for millions of people: “We’re pacing it since we have multiple years of growth behind this.”

    • Mr. Yoor’s remarks continued the strong confidence we’ve heard on recent calls, positioning Abbott and FreeStyle Libre as the definitive CGM market leader. Indeed, Abbott does dominate the market in terms of number of reported users, affordability, simplicity, and fully disposable design, though from a revenue perspective it is on par with Dexcom. We wish user bases were reported in a standardized way, which would make comparisons much easier! (We estimate Dexcom is nearing 400,000 users vs. FreeStyle Libre’s 1 million, but defining a “user” is tricky.) Features-wise, FreeStyle Libre is behind G6 on accuracy and behind both Medtronic and Dexcom on analytics/data ecosystem and automated insulin delivery (Bigfoot will help). A few of Mr. Yoor’s direct quotes:

      • “We are the leader, I will just say that to go on the record. Others are chasing, trying to emulate what we’re doing – we get that, we know that, but we already have plans in place for our next gen product too. We couldn’t be in a better position.” Editor’s note – while we believe Abbott is in a very strong position, we believe this is very true for Dexcom as well …

      • “We’re leaders here, and it’s honoring and flattering to see others trying to emulate us – the market could certainly use [more CGM] – but we’re not sitting still as we think about next versions of the product. We’re being smart about capacity.” Editor’s note – we believe everyone in the field continues to try to make products simpler and more user-friendly in diabetes.

      • “We feel like we’re in a leadership position – we know we are. The form factor, it’s so affordable, it’s in the pharmacy, reimbursed as pharmacy benefit. We know people will gravitate to this moving forward, and we’re in a cost position to appeal to the broader market.”

      • “Libre is truly a revolutionary product and solution. It’s a small patch worn on the arm, it’s disposable, it’s affordable, it’s convenient, it’s continuous glucose monitoring, and its designed with value to treat the mass market.”

    • The CE-marked FreeStyle Libre 2 with optional, customizable hypoglycemia and hyperglycemia threshold alarms has officially launched in Germany. The “gradual European rollout” does not sound like it has commenced, meaning the EU launch is still pretty early. Said Mr. Yoor, “We’re in a great position here, looking to bring it to the US, and we’re confident in our ability to do that.” Our impression is that Bigfoot will be using FreeStyle Libre “3” with continuous communication for its pivotal, now pushed back to 2H19. 

    Ascensia: Diving into CGM With Distribution and Co-Development Agreements with Chinese CGM Manufacturer POCTech; Holds 20% of Global SMBG Market Share

    Michael Kloss (Ascensia, Basel, Switzerland)

    Ascensia – owned by PHC Holdings (formerly Panasonic Healthcare Holdings) – announced this morning that it has signed a global alliance with Chinese CGM manufacturer POCTech. Marking Ascensia’s official R&D entrance into the competitive world of CGM and building on a highly-accurate BGM line, the alliance consists of two separate agreements: A distribution agreement and a co-development agreement.

    • Distribution Agreement. Ascensia is now the exclusive distributor for POCTech’s CGMs in 13 markets (not specified), and anticipates commencing sales of “Ascensia branded and boxed” CGM sensors “by the end of 2019” – that is very, very quick and we’ll be somewhat surprised if things are ready to go that quickly. A rep told us that Ascensia will commercialize “a version” of POCTech’s CT-100B CGM system, implying that it might have slight modifications (hopefully the name is one of them). CT-100B as we’ve seen it in exhibit halls (most recently at EASD), is already CE-marked and has 7-day wear, one calibration per day, a reusable battery-powered transmitter lasting up to two years, and direct Bluetooth-to-smartphone connectivity or a dedicated receiver. In a 2015 hospital study (n=80), the sensor had MARD of 8.7% vs. venous blood glucose and 91.6% and 8.4% of paired glucose values in Zones A and B of the Clarke Error Grid, respectively. That said, we still haven’t seen study details or protocol – e.g., Was it in people with diabetes? How many matched pairs? Percent of points in hypoglycemia? According to today’s release, CT-100B has started entering selected countries worldwide. This is a new development, as we were told in October that the system had not yet been commercialized, but was “in the process of being registered” in countries including the UK, Korea, Greece, and Malta. We’re still unsure if/when the product will be filed with FDA. Can POCTech and Ascensia actually deliver on a commercial product with strong accuracy and features to match Abbott’s FreeStyle Libre and Dexcom’s G6?

    • Global Co-Development Agreement. POCTech and Ascensia also signed an agreement to co-develop an enhanced CT-100B, which could be market-ready in two to three years. The joint initiative will leverage IP and R&D expertise from both companies in order to improve upon the existing system, with obvious targets including improved accuracy and extended sensor lifetime. Potentially in this vein, a POCTech rep at EASD clued us in to plans for a 15-day sensor could be filed in early 2019. Ascensia will have exclusive distribution in every market besides China, where distribution rights will be non-exclusive. POCTech’s founder/president Dr. Yanan Zhang previously spent eight years working on glucose sensing as Senior Principal Scientist at Medtronic, which is certainly relevant experience. The existing CT-100B is already behind the competition in terms of user experience, calibration burden, wear time, etc., but joining forces with a larger company with more resources and scientists could certainly accelerate R&D. At the same time, Ascensia’s regulatory, marketing, and distribution mechanisms will surely help the technology get into patient hands.

    Ascensia is positioning its CGM pipeline as short, medium, and long-term opportunities. In the short-term (2H19), it aims to deliver CT-100B to market; in the medium-term, it will co-develop a CGM with POCTech; and in the long-term, it’s own internal CGM R&D program will continue. The internal CGM project was vaguely introduced at JPM 2017, where a generic, illustrated picture of a round transmitter with goals for better accuracy, affordability, and comfort were displayed – two years have passed without updates, but we were assured that development continues. As a reminder, Bayer’s CGM was sold to AgaMatrix (WaveForm) a few years ago, so we assume Ascensia is internally developing a new system based on its very accurate line of BGM strips. POCTech is an unconventional partner choice, but big picture, it might give Ascensia an immediate CGM entry and know-how to inform further sensor development. POCTech may also have a path forward for integration into EOFlow’s JDRF-funded closed loop system. Ascensia’s private company status has precluded visibility into its BGM sales over the past few years, but pricing pressure and the rise of CGM are certainly motivators for this deal. All of the other major players – Abbott, Roche, and J&J – have evolved their businesses or jumped ship (in J&J’s case), though we’re eager to learn more about Platinum Equity’s plans for recently-acquired LifeScan. Will LifeScan acquire/partner on CGM? Ascensia’s decision to diversify and embrace CGM technology strikes us as prudent, though obviously the bar is high.

    • An Ascensia rep highlighted three other goals for 2019:

      • (i) Though the BGM market is still shrinking in the US and EU, Ascensia intends to further accelerate growth in emerging markets (particularly China and India).

        • Notably, CEO Mr. Michael Kloss shared in today’s presentation that Ascensia has an SMBG market share of 20%, making it #3 in the world. Ascensia owns almost half of the Japanese market. Mr. Kloss further shared BCG estimates forecasting significant BGM demand in the years to come, with emerging markets expected to nearly triple from ~$1 billion in 2017 to ~$3 billion in 2030. This seems difficult to believe, especially accurately predicting where diabetes technology will be 12 years from now. Ascensia recently signed a promising strategic cooperation agreement with China Resources Healthcare Group and is working with various portfolio companies of Mitsui and Co., LTD to coordinate improved diabetes care. Mr. Kloss said this could be a “big differentiator for us in BGM, CGM spaces, new service models, and beyond medical device business,” given the scale of the collaboration.

      • (ii) Ascensia’s Interconnected Diabetes Management program – their version of connected care – wrapped up pilot studies through US medical centers in December, and will move into commercial pilots in 2019. We look forward to learning much more about this program – particularly now that it could be bolstered by both BGM and/or CGM – this year. In his presentation, Mr. Kloss said that the solution entails connected devices, apps, and data, and could be built around the existing Contour Diabetes app. Business models could include direct-to-consumer subscriptions, outcomes-based models with payers, and/or population data and white label offerings for B2B customers to support research. This is a logical move to compete with Roche/mySugr, One Drop, and Livongo.

      • (iii) The company will focus on partnerships with the likes of Insulet (Contour Next One BGM integrated with Omnipod Dash, set to launch broadly in the US in 2019), Voluntis (basal insulin titration BGM integration), and Health2Sync (bringing integrated digital diabetes management to Asia).

    Baxter: Initiates US Clinical Trial with On-Demand Dialysis System

    James Saccaro (Baxter, Deerfield, IL)  

    Baxter CFO Mr. James Saccaro highlighted today’s announcement that it has initiated a US clinical trial with its on-demand peritoneal dialysis solution system. This next-generation system is based upon the AMIA automated dialysis system, but promises to improve upon the unwieldy home dialysis protocol by incorporating a small water filtration device that allows patients to turn tap water into dialysis solution as needed. Water filtration may not sound like cutting-edge technology, but it promises to significantly reduce burden on the end user – and every step counts in something as burdensome as dialysis. Currently, patients receive up to 40 boxes of pre-made dialysis solution every four weeks (!), weighing in at more than 900 lbs on average. The boxes take up space and demand that patients maneuver heavy six-liter bags of solution while they set up their therapy. This next-gen is going to be a big improvement! Another benefit of the on-demand system is its remote monitoring capability, which enables physicians to titrate the intensity of dialysis therapy in near real-time, as opposed to what we assume would otherwise be monthly or less frequently. Each participant in the study will use the system for 12 weeks, after which Baxter will submit an NDA for the concentrates and a 510(k) for the new device to FDA. Though we’re dismayed by the continued rise in dialysis-requiring CKD, it’s great to see technological progress that could improve the user experience and potentially increase time on therapy leading to better outcomes.

    • In a breakout session, Mr. Saccaro expressed confidence that available Baxter PD systems are already improving outcomes: “With AMIA, we’ve seen great success. It’s a wonderful improvement, we have Sharesource – my belief is we’ll be able to prove that Sharesource improves time on therapy. We’re working to assess that, and we’ve already seen some evidence that it reduces hospitalization. If it makes it more comfortable for patients in home, they have a higher level of confidence being alone, and it improves outcomes because clinicians can monitor and intervene.”

    BD: Type 2 Patch Pump Filed with FDA, CE Mark Application in the Works – Still Slated for Limited Launch by End of 2019; BD “Very Committed” to this Product

    Alberto Mas (BD, Franklin Lakes, NJ)

    BD Medical Segment President Mr. Alberto Mas confirmed that the type 2 patch pump is on track for a “deliberate, cautious” limited launch by the end of 2019 (calendar year). In line with expectations from the 3Q18 call, the device has been filed with FDA, and a CE mark application is in the works. Critical for a disposable patch pump, initial manufacturing lines are up and running, and management is comfortable that production will not be an issue. In Q&A, one analyst asked about historical uptake challenges for pumps in type 2 diabetes – how will BD be different? Mr. Mas boiled down his response to components: (i) BD has done a number of clinical trials, gaining insight not only on the product, but also on its use and ecosystem; (ii) The pump will be complemented by the Briight app (AI chat and diabetes education), which will help with “compliance” and other lifestyle aspects (we note that Briight is still early, with 10,000+ total installs on Google Play); (iii) BD has placed an emphasis on access, evidence generation, and value proposition for payers – all components of a successful launch (it’s been promised to be priced on par with pen therapy); and (iv) The limited, sequential launch approach offers the ability for BD to gain insights before taking the next step, “though it’ll take some time.” Mr. Mas concluded that the long-term prospects of this pump are fantastic, and that BD is “very committed” to it. We’re glad to hear this, since diabetes device R&D from BD has been rough over the past few years, including discontinuing the CGM program, discontinuing its work on microneedles, and discontinuing its FlowSmart infusion set (MiniMed Pro-set).

    • Still, it’s a big question: what is the profile of the type 2 pump market and where does BD’s patch pump fit in? We’re optimistic about the coming two years in this nascent market. In addition to BD, CeQur is expected to launch Calibra (bolus only insulin delivery device acquired from J&J) in the US in mid-2019 via pharmacy distribution, and PAQ (basal-bolus device) could launch stateside in ~2020-2021. (Though CeQur has had many delays over the years, Calibra is pretty ready to go – it has FDA clearance, manufacturing lines, and payer conversations.) Also in the mix are: (i) Valeritas’ currently available V-Go (plans for 1H19 launch of connected Bluetooth dose capture attachment plus Glooko integration); (ii) Sanofi/Verily and Sensile Medical’s “all-in-one” connected patch pump pre-filled with Sanofi insulin; and (iii) Insulet’s U500 Omnipod, we learned yesterday, has still not been submitted to FDA, and is now slated for a late 2019/early 2020 launch (back from “2019”) – Insulet’s delay could bode well for BD, since BD’s pump is expected to have a 50% larger reservoir than the current 200-unit OmniPod. In our view, the type 2 insulin delivery market is a classic “rising tide lifts all boats” scenario considering the number of players that can raise awareness about pump therapy, as well as the volume of type 2s currently on basal-bolus therapy (likely as large as the type 1 market), a figure which will only grow as people live longer. On the other hand, the parallel rise of connected insulin pen devices + automated dosing support may make injections easier to use and more effective.

    • A slide showed that FY18 (October 2017 - September 2018) revenue growth in the Diabetes Care segment was 2.9% – low single digits, as we’ve come to expect from the stalwart pen needle-driven business.

    Cecilia Health: (Formerly Fit4D) to Commence Virtual CGM Onboarding Pilot with Jaeb Center, Funding from Helmsley Charitable Trust

    David Weingard (Cecilia Health, New York, NY)

    In the final minute of CEO/founder Mr. David Weingard’s Startup Health talk, he shared that Cecilia Health – formerly Fit4D (more on that below) – has entered into a partnership with the Jaeb Center and Helmsley Charitable Trust to have Cecilia Health’s remote CDE’s virtually onboard patients to CGM. Per Mr. Weingard’s slide, the program will entail “scaled initiation, persistency, and data-driven guidance for patients using CGM.” For those that remember JDRF’s 2018 Mission Summit where Chief Mission Officer Dr. Aaron Kowalski and Helmsley Trustee Mr. David Panzirer treated attendees to a dinner conversation, this project might sound familiar. At the time, Mr. Panzirer said: “I think about a model like Best Buy’s Geek Squad. Imagine a dedicated team of professionals to help people get on diabetes technology…How could we get people with diabetes straight to the Geek Squad (company agnostic) to help them with technology? We need a new model; the current model is failing.” Mr. Weingard didn’t share further details on the onboarding program, and we have numerous questions, but this does sound like something that could be high impact in the very near-term. As far as our questions go: How much funding did Helmsley contribute to this project? How many Cecilia CDEs will be deployed, and for how many patients? Type 1, type 2, or both? Will this be a single-arm study, or double arm? If double arm, will it be an RCT? How long will it last? How will Cecilia CDEs communicate with patients? What will be the primary outcomes (time on CGM? Improvement in time-in-range?)? If the pilot is deemed successful, is there a path to commercialization for Cecilia Health and possibly other remote care providers? If yes, would Helmsley continue to allocate funding for this “Geek Squad,” or might CGM manufacturers be willing to pitch in to a device agnostic CGM onboarding service that benefits all parties? Needless to say, we are very eager to see this new chapter in targeted remote care open – the number of people that could benefit from CGM, given the right level of support, dwarfs the number of people who are on it right now.

    • Mr. Weingard also announced the name change on the Startup Health stage: The Fit4D name has been changed to Cecilia Health. Mr. Weingard explained how he felt hopeless and overwhelmed when he was diagnosed with diabetes, and that Cecilia was the educator who fit him into her overbooked schedule week after week, gave him support, compassion, and crucially, hope that he could live with diabetes. Hundreds of running races and Ironmans later, he is more convinced than ever that diabetes is not a death sentence, and that with the right education and support, anything is possible. Recently, he sought out Cecilia to tell her that she had help him and inspired him, indirectly leading to help being delivered through Fit4D to hundreds of thousands of people. After learning that this incredible woman had passed away eight years ago, Mr. Weingard tracked down her son Ken, telling him about how compassionate and caring his mother had been. There were moist eyes in the room, and we can’t think of a better namesake for this CDE-centric company.

    • In 2018, Cecilia Health totaled a remarkable >400,000 live interactions, more than doubling what it had in 2017 (and that doesn’t account for email, text, and other asynchronous means of communication). Mr. Weingard explained that the company integrates data from CGMs and BGMs, connected pens, smartwatches/trackers, blood pressure and ECG monitors, and apps to drive data-driven guidance for patients, healthcare providers, and population management. The image below lists a number of Cecilia’s impressive clientele: Humana, BCBS plans on the plan side (studies with Humana show Cecilia confers 3.5 extra health days per month to members – we’re not sure what this metric means); a number of undisclosed pharma companies and Valeritas on the pharma and device side (where Cecilia aims to boost adherence and brand loyalty); and Healthfirst and Public Storage on the employer side. The insurer Healthfirst is a particularly notable case, since it initially contracted with Cecilia to provide coaching for its members, and upon seeing results, asked Cecilia to offer its service to Healthfirst employees as well!  

    Companion Medical: Nearly 2,000 users, median $50 copay/year; retail pharmacy distribution this month; outcomes study to start with Libre this week

    Sean Saint (Companion Medical, San Diego, CA)

    In his first-ever JPM appearance, Companion Medical CEO Sean Saint provided an update on the first-in-class connected InPen, including retail pharmacy launch plans (this month!), a user base update (nearly 2,000), reimbursement metrics (median $50 copay/year), and plans for an upcoming study vs. traditional MDI using FreeStyle Libre. Mr. Saint noted that following US launch (December 2017) with only six sales reps, Companion Medical is seeing “strong adoption momentum” to date – InPen has nearly 2,000 users and another 1,000 Rx referrals in the pipeline, with a median $50 out-of-pocket copay for the pen that lasts one year (wholesale acquisition price: $665) and over 70% of users approved for payer coverage through the pharmacy. “This is unheard of for a new category of device,” he noted, while also emphasizing that the startup/ongoing cost is significantly lower than a pump. This month, Companion is rolling out “true retail pharmacy distribution,” enabling users to pick up the pen at over 60,000 brick-and-mortar retail pharmacies – an improvement over the current mail-order pharmacy model. This also means that a healthcare provider can prescribe InPen like a drug, avoiding the C-peptide hassles that plague access to pumps. And for the 30% of coverage denials seen so far, Companion will soon launch a copay card enabling users to get on the pen inexpensively. Interestingly, ~80% of InPen users have come from pens/syringes and ~20% of InPen users have come from pumps, suggesting that “when you design a product in the middle, you pull from both sides.” Also in new news, Companion will start a post-market study this week comparing InPen to traditional (non-connected) MDI, using FreeStyle Libre to assess time-in-range as the primary endpoint at three and six months. The trial will take place at Hoag Hospital under the smart, young endocrinologist Dr. David Ahn. It is excellent to see the category starting to invest in evidence! By the end of 2019, Companion will expand its manufacturing capacity to build 10,000 pens per month, a ten-fold increase from the current level and supporting revenue of $60 million. After this charismatic, persuasive talk, Mr. Saint was mobbed with questions from investors – as one of only two private diabetes tech companies presenting at JPM (the other being Livongo), this was a strong showing.

    • Mr. Saint spent much of his presentation framing the smart pen category, which he believes balances convenience and intelligence with costs. The 2x2 shown below was an interesting way to segment the insulin delivery market – between non-connected pens (top left), simple patch devices like V-Go (bottom left), smart pens (top right), and full insulin pumps (bottom right). The cost slide with the traffic light shown further below made the point well – smart pens have many of the features of pumps, but can deliver those in a much less expensive package. We’ll be eager to see what level of outcomes smart pens can deliver, especially when combined with CGM and bolus-basal insulin dose decision support. For now, InPen’s decision support is a bolus calculator, but obviously basal titration could be added over time.

    • The InPen app for Android quietly became available in November, though no timing was provided on other pipeline efforts, especially the planned 2019 European launch (CE Mark came in July 2018). The slide design below implied the next launches will be fixed dose insulin regimens, all insulins (basal and bolus and filled cartridges), and OUS expansion.

    • Regarding competition, Mr. Saint noted, “Smart Pens Are Not Created Equal.” He acknowledged that competition is coming and is welcome in the nascent category, but emphasized other companies’ products will lack decision support for dosing insulin, or will offer a cap/sleeve form factor that may not be as seamless as the integrated InPen (no recharging, lasts one year, Bluetooth connectivity to the phone, differentiation between priming and therapeutic doses). These are fair points, though one could also argue the reusable form factor is a hassle for those used to disposable pens. As with any new category – CGM is a great example – we expect to see many form factors emerge the fill different users’ needs. See our 2018+2019 Reflections piece for more on smart pens, including 2019 plans for Novo Nordisk (launch of both a durable smart pen and a smart add-on for disposable pens) and Lilly (FDA submission of an add-on for disposable pens).

    • Mr. Saint shared the following estimates for global and US insulin users and pumpers. The global and US pump numbers and number of insulin users are on par with what Medtronic shared in its 2018 Analyst Meeting. (Medtronic also estimated 20 million MDI users globally, which might be better fit for the left graph than 52 million on insulin.) Mr. Saint’s broader point was that pumps have extremely low penetration, both in the US and globally – offering clear runway for smart pens.

    Dexcom: 2018 Sales Exceed $1 Billion (+42% YOY), Outperforming Guidance by $50 million on G6 US Momentum; G7 Launch (aka Verily Gen 2) Still Slated for Late 2020, “Finalize” in 2019; Softer +15-20% Growth in 2019

    Kevin Sayer (Dexcom, San Diego, CA)

    In a major sales milestone, Dexcom announced 2018 preliminary sales of $1.025 billion, accelerating to 42% year-over-year (YOY) growth and exceeding full-year guidance by an impressive $50 million. Preliminary 4Q18 revenue totaled $331 million, a remarkable 50% YOY gain from 4Q17 and a 24% sequential gain from previous record-high sales in 3Q18 ($267 million). The chart below puts the quarterly and annual acceleration into perspective – as we noted in our 2018+2019 Reflections theme on CGM, the category has really hit an inflection point with G6 and FreeStyle Libre, and both Abbott and Dexcom crossed $1 billion in annual CGM sales in 2018. For Dexcom, 2018 marked a notable sales acceleration to 42% YOY growth, handily exceeding the 25% growth posted in 2017. In Q&A, CFO Quentin Blackford noted that the Q4 outperformance came from the US commercial business, which propelled US growth of ~45%; OUS sales grew ~70% YOY in 4Q18, in line with expectations. Lower per-patient revenue – described in 3Q18 and at the Investor Day in December – played out as expected, contributing ~$20 million in downward sales pressure. Much of this came from the initial move to the pharmacy channel with G6, which is expected to ramp further in 2019 but offer improved profitability and expanded volumes. Leaving 2018, revenue grew at more than double the rate of operating expense growth. Summarized CEO Kevin Sayer, “We accomplished more in 2018 than in the past three to four years put together.” Full sales will be reported on the Q4 call on February 21 (during ATTD). Watch today’s webcast here, and read more details below, including the rebranding of “Verily Gen 2” to “G7” (launch to start in late 2020) and 2019 guidance.

    • Notably, in a sign of Dexcom’s growth, CEO Kevin Sayer presented in the second-largest JPM conference ballroom (Colonial) for the first time ever. For context, healthcare giants like CVS Health, McKesson, and Allscripts are also presenting in Colonial. Dexcom’s market cap stood at over $11 billion today, with an ~12% share price gain driven by the revenue outperformance and standout excellent talk – the rest of the management team were also completely on their game and even the massive Georgian “breakout room” was packed. Dexcom was also the first medical device company to present at JPM 2019 – an obvious strategy to get investors in the door. 

    Dexcom Quarterly Revenue – 2012-2018

    Dexcom Annual Revenue – 2012-2018

    • For the first time ever, Dexcom has re-branded the disposable Verily Gen 2 sensor as “G7,” which is still stated for an initial launch in late 2020, followed by a full rollout in 2021. This was the only pipeline product discussed in detail today, with the same slide (see below) as we saw in December (comparing the slim G7 side-profile to G6). In new news, Mr. Sayer revealed that “extended sensor wear” will actually be 14 or 15 days – the latter would make it a true twice-monthly product, and both would be a step up over G6’s current 10-day wear. Fully disposable electronics, a “significant cost reduction,” a much smaller profile, no-calibration, and real-time transmission via Bluetooth are still the plan for G7/Verily Gen 2, as previously expected. Mr. Sayer commented that this product takes the “convenience level” to “like nothing we’ve ever had.” He mentioned in passing that the teams have been working on things like Bluetooth pairing, which still present challenges for some users. Mr. Sayer noted the picture doesn’t do the volume reduction justice. Dexcom expects to “finalize” G7 in 2019 and share “very clear timing” on the plan. “This is a tremendous advance for us,” said Mr. Sayer. With the amended Verily collaboration agreement and consistency between 3Q18 and the Investor Day, things are feeling clearer on this next major pipeline launch.  

    • Verily Gen 1 was again not mentioned at all, and we asked in Q&A if it has been shelved. To our surprise, EVP Steve Pacelli commented it “may still” launch outside the US, and the amended agreement with Verily gives Dexcom flexibility to do so without triggering a milestone payment. However, Mr. Pacelli was clearly in stating not to expect a big US commercial launch of Verily Gen 1. Indeed, Mr. Sayer later noted that 2019 will not have a major product launch like 2018, meaning 2020 will be the next big product for Dexcom with G7/Verily Gen 2. For context, JPM 2018 positioned Verily Gen 1 as a “late 2018/early 2019” launch, but comments got more vague as 2018 progressed: the 3Q18 call only said Dexcom was “considering options” for the product, and December’s Investor Day did not mention it at all. Per the original 2015 agreement, Verily Gen 1 was expected to launch in 2017-2018 (~2-3 years), timing that has now been missed. Overall, we think it’s the right move to mostly punt on Verily Gen 1 and wait for G7/Verily Gen 2, given the huge manufacturing disruption and the need to improve cost and expand access.

    • 2019 Guidance: Dexcom expects sales of ~$1.175-$1.225 billion, reflecting softer growth of ~15%-20%. This is exactly in line with the Investor Day in December and contemplates a number of factors: (i) no major 2019 product launch like G6; (ii) launching G6 in Medicare and Medicaid; (iii) further OUS expansion for G6; (iv) increased access and awareness; (v) continued move to the pharmacy channel within the US commercial business, resulting in lower per-patient revenue, but better profitability and likely higher volumes; and (v) continued competitive headwinds. Relative to the annual sales trajectory shown above, 15%-20% growth in 2019 is arguably quite conservative. Of course, the 2019 comparison to 42% growth in 2018 is much more difficult than Dexcom had in 2018 (25% growth in 2017). In Q&A, CFO Quentin Blackford did note that the ~$20 million Q4 headwind on pricing will be present in every quarter in 2019, translating to almost $100 million in headwinds this year; absent that, Dexcom’s underlying revenue growth for 2019 would effectively be ~20%-25%.

      • We’ll be interested to see if guidance is raised multiple times in 2019, as it was three times in 2018. Originally at JPM 2018, Dexcom guided for sales of $830-$850 million, followed by three consecutive guidance raises (1Q18, 2Q18, and 3Q18) and sales that actually came in at $1.025 billion – a full $200 million more than expected!

      • Interestingly, there was no 2018 global patient base update today, nor guidance for the patient base in 2019. Mr. Sayer said that Dexcom has much less granularity on this metric than in previous years. Will we hear an update in the 4Q18 call? As of JPM 2018, the patient base had exceeded 270,000 users (+35% YOY, exceeding 25% revenue growth), and we image the base is now close to (or over) 400,000 users globally starting 2019 (i.e., +50%, exceeding 42% revenue growth).

    • Beyond G6 expansion, key strategic objectives for 2019 include: (i) achieving further operating leverage (i.e., faster revenue growth vs. expense growth); (ii) expanding manufacturing capacity (key for G6, which has had backorders and a lot of US demand); (iii) driving additional offerings in insulin delivery and data connectivity (e.g., Diabeloop and Tandem’s Control-IQ should launch in 2019); (iv) finalizing G7 (see above), including getting the manufacturing lines up and running; and (v) further validating Dexcom CGM in new market opportunities (per Investor Day, these will include non-intensive type 2, hospital, gestational diabetes).

    • In Q&A, we asked if Dexcom will become a partner for Tidepool Loop. Said Mr. Pacelli, “It’s something we are evaluating. We are not beholden to TypeZero and we are willing to support others, especially if they can develop software better than we can or if there is patient preference. We think the TypeZero algorithm is the best, but we’re willing to support others.” From our view, there is strong patient community enthusiasm around Loop – see Adam’s just-published test drive in diaTribe, with Kelly’s coming soon – and we’d hope to see Dexcom continue its drive on interoperability as the first CGM in the platform. See our 2018+2019 Reflections theme for more on Loop and interoperability; Insulet is currently the first partner on the pump side (in addition to its own Horizon efforts), and we’d expect many more to sign on.

    • We also asked in Q&A about potential for an over-the-counter indication for G7 (no prescription), and Mr. Sayer shared the following: “We’ve broached that with the FDA. As long as we are providing glucose values and managing insulin delivery, we likely won’t be OTC. To the extent we explore a health and wellness indication, that might turn it into OTC. But we aren’t there. It’s a great use of the technology, so stay tuned – it’s something we have contemplated and thought about.” We think this could go a long way towards promoting more CGM in naïve users, especially once the product is fully disposable and lower cost. (Certainly, this has helped many get on FreeStyle Libre in Europe – “I’ll order it online and see how it goes.”) It’s also absurd that meters are OTC but CGM is not; what will it take to change FDA’s view?

    • Though not mentioned in the slides, Q&A confirmed plans for a G6 Professional CGM launch in 2019. The product was cleared as of 3Q18, and was positioned as a fully disposable system at the time; we assume the on-body wearable still looks like the current G6 transmitter, but aren’t sure. Mr. Sayer noted that this is a huge upgrade from the current G4 Professional product, which should obviously help compete with Abbott’s very strong FreeStyle Libre Pro.

    • A competitive slide – “Truly No Fingersticks” – expanded on comments comparing G6 to FreeStyle Libre at the December Investor Day. The label comparison slide again included FreeStyle Libre, but added Medtronic’s Guardian Connect and Senseonics’ Eversense. “This is what no fingersticks means,” emphasized Mr. Sayer. We’d note that Dexcom’s G6 safety information does still mention at least one scenario where fingersticks are required – e.g., “If your G6 doesn’t show a number or arrow…use your meter to make diabetes treatment decisions.” (FreeStyle Libre also has this warning, but it too was not on the slide.) A fingerstick with G6 would also be needed with a “sensor error” message (which happens unexpectedly on days 8-10 of wear in our experience), lost Bluetooth signal, and where a number is shown without a trend arrow. Obviously, fingersticks also need to be used during the G6’s two-hour warmup. In short, Dexcom has a labeling advantage over all three other systems in the US (iCGM, non-adjunctive, factory calibrated), but it is slightly smaller than the slide below suggests.

    • In line with 3Q18, Dexcom has contracts in place for >40% of US covered lives to go through the pharmacy; however, this doesn’t mean 40% of the business is flowing through the pharmacy right now. Over time, this channel is still expected to become a majority of the business, in line with the Investor Day. (Currently, it is a minority of the business, but growing.) In a comment on competition, management later noted that the push to the pharmacy will help with access and competing with FreeStyle Libre – particularly for those who don’t have reimbursement for CGM.

    • Expanded OUS reimbursement in 2019 could come in Japan, where there are ~1 million insulin users and ~100,000 type 1s. Mr. Pacelli said he has made several trips to Japan, commenting that KOLs have “dismissed FreeStyle Libre as CGM; it is very much termed flash glucose monitoring. KOLs also dismiss it as not accurate enough.” It was not clear today if Dexcom has already launched G6 in Japan, and if so, whether the launch was for a professional (previous expectation) or real-time version. As of 3Q18, Dexcom had received approval in Japan and Korea, but it didn’t sound like either country had launched. The Dexcom/Terumo distribution agreement for Japan announced last year expected the first launch by March 31, 2019.

    • Dexcom has been considering what product to submit to China’s multi-year regulatory process. Mr. Pacelli said Dexcom is debating between submitting with G6 or waiting for G7 – a tough call, but it sounded like things are leaning to G6. Of the ~100 million people with diabetes in China, Dexcom estimates “maybe 10%” could pay cash for CGM. “G7 would be a more appropriate product [for China]” (i.e., lower cost), but Mr. Pacelli “is not sure Dexcom is going to wait.”

    • “Success for all type 2 diabetes programs is simple: Drive the cost of type 2 diabetes treatment down. We do not believe it is going to be one platform; it will be many, and we want to be the CGM of choice…We’ve seen some of the Onduo software and we think it’s fabulous.” – CEO Kevin Sayer in Q&A. The slides on CGM for non-intensive type 2 diabetes were identical to those shown at the Investor Day and in previous talks., and there were no specific updates on the various programs/pilots with UnitedHealthcare/Fitbit or Onduo.

    FDA Digital Health: Releases of PreCert Model 1.0 Greeted with Optimism, with Nuance to Come

    Scott Gottlieb, MD (FDA Digital Health, Silver Spring, MD)

    At JPM and Biotech Showcase today, we heard comments on FDA’s just-released milestones for the Digital Health PreCert program: a Version 1.0 working model (58 pages), a 2019 Test Plan (4 pages), and a framework describing how the pilot program fits within current authorities (4 pages). This FDA webpage has an excellent overview that describes the vision we’ve covered for the past 18 months – to allow FDA to first look at the company, rather than primarily at the digital health software product being submitted. This “firm-based approach,” sort of like a ‘TSA Pre-Check’ for digital health submissions, is intended to expedite product reviews from vetted “excellent” companies – either minimizing the burden of submissions or eliminating them in some cases. As we’ve expected since the January 2018 workshop – and as the new graphic below shows – the PreCert program includes three main components: (i) an excellence appraisal of software developers based on five categories (patient safety, product quality, clinical responsibility, cybersecurity responsibility, and proactive culture); (ii) a premarket review determination and (if needed) a streamlined review of the product; and (iii) real-world, post-market performance data to verify product safety/efficacy and a company’s ongoing culture of excellence. Then the cycle repeats, driving continuous improvement in both the company and software. As expected, FDA is currently considering two levels of precertification based on how a company meets the excellence principles and whether it experienced in delivering safe and effective software. Consistent with prior digital health regulation everything here will be based on level of risk, leveraging the IMDRF Framework. FDA is accepting public comments here until March 8, and the Agency will hold a webinar on February 7 at 1-2:30 PM EST to do a deep dive on the materials. We’ll return with more detailed coverage after own read-through. The materials are emphasized as a “working model v 1.0,” as 2019 is about testing the program with the nine pilot participants, including seven with some connection to diabetes (Apple, Fitbit, J&J, Roche, Samsung, Tidepool, Verily). This could be especially interesting for Tidepool Loop, which is a perfect pressure test of PreCert – can the program accommodate class III software that automates insulin delivery? During this test phase in 2019, FDA will assess whether the company excellence appraisal and streamlined review components together can provide reasonable assurance of safety and effectiveness prior to launch, as compared to the traditional product-focused paradigm.

    • In his keynote address at JPM today, FDA Commissioner Dr. Scott Gottlieb shared optimism and discussed the need for PreCert: “On the medical device side, we have software that we can’t regulate the same way we regulate medical devices. Highly iterative products undergo updates every night, in some cases, or weekly – we can’t review products on a weekly basis, especially things like AI. We’re taking a novel approach through the PreCert process. We took significant steps two days ago, saying that once we validate the underlying software architecture, validate the Standard Operating Procedures a company uses to evaluate its own software, we can say their processes provide assurance of safety and effectiveness – an evaluation just like our (product-focused) process would. Then we can allow the manufacturer to go to market with modifications and new devices. We think that’s a much more applicable approach to regulation for technology.”

    • At Biotech Showcase, we also heard a panel sharing excitement for PreCert, though there are near-term areas of nuance and confusion. Former FDA reviewer Sam Surette from Bay Labs (AI startup focused on echocardiograms) and two pilot participants (Pear Therapeutics and Roche) had plenty of astute comments on the program. For one, they noted that FDA currently operates within small teams of ~8-15 reviewers, who take responsibility for products in a certain area; how will this bottom-up approach work with the top-down-developed PreCert program? How will reviewers accustomed to a product focus switch to a firm focus, especially if the specialized team has not been involved in developing PreCert or assessing a company’s software excellence? Will reviewers buy into the PreCert program? These threads were a reminder that PreCert is not just a change for companies; it’s also a change for FDA internally, which will bring near-term tension and require a cultural change. Panelists also pointed to the difficulty of regulating AI-based technology, which is constantly learning and improving – how will companies explain to reviewers how an algorithm is making its decision from vast quantities of data? (This will be especially important as automated insulin dosing becomes more sophisticated, pulling in Big Data and multiple data sets.)  Zooming out, Welldoc’s Anand Iyer asserted that FDA is “unequivocally” in front of other countries on digital health regulation, though Canada, Australia, Brazil, Sweden, Japan, and UK are keen to follow in the direction of PreCert. Perhaps ironically, an FDA member was supposed to be on the panel, but couldn’t attend due to the government shutdown.

    Insulet Omnipod Dash: Launch in late 1Q19 in pharmacies (>100M covered lives, free PDM); Horizon pivotal in 2019, 2H20 launch on Samsung Galaxy; Tidepool Loop = Faster Path to Apple iOS

    Shacey Petrovic (Insulet, Billerica, MA)

    In her first presentation as Insulet CEO, Shacey Petrovic shared five notable updates/confirmations: (i) the new Dash PDM will see its full US launch this quarter (1Q19) with over 100 million covered lives in the pharmacy and the PDM offered for free (no upfront cost); (ii) Insulet’s own Horizon hybrid closed loop will enter a pivotal trial this year ahead of the expected 2H20 launch; (iii) the direct smartphone control for Horizon will initially be available only for Samsung Galaxy Android phones, with Apple iOS to follow; (iv) integrating with Tidepool Loop gives Insulet a faster path to getting hybrid closed loop for Omnipod on Apple iOS; and (v) the Lilly U500 Omnipod has still not been submitted to FDA, with launch now slated for end of 2019/early 2020 (back from a “2019” launch). Beyond those product updates (more covered below), we loved Ms. Petrovic summary of the access wins since JPM 2018: “12 months ago today, Omnipod was arguably the least well-covered insulin pump in the US. 12 months later, we are now the most well-covered insulin pump in the US.” Indeed, beyond Dash’s pending pharmacy launch, Insulet has obtained Medicare Part D coverage, expanded Medicaid access to over 50% of US covered lives, and established a direct contract with UHC. “This will fuel growth into 2019 and beyond.” There were no 2018 installed base or 4Q18 revenue updates today.

    • The Dash full launch timing (1Q19) is right on par with expectations for an “early 2019” US launch, following FDA clearance last June and the six-month limited market release. Continuing 3Q18 commentary, much of today emphasized the huge benefits of getting Omnipod into the pharmacy with a free PDM: no upfront cost for patients to get on the pump, more predictable out-of-pocket costs for patients (copays instead of deductibles), a true pay-as-you-go model for payers (less upfront risk), and simpler prescribing for healthcare providers. We asked in Q&A about expected Omnipod Dash copays in the pharmacy, and Ms. Petrovic broadly agreed with our rough estimate of ~$50/month; in a later email, Insulet clarified that a remarkable >50% of copays were <$35. Using pump therapy for a predictable monthly price with no upfront cost is very exciting for expanding the market! Insulet stood at over 75 million covered lives as of 3Q18, and it was impressive to hear today that the goal of over 100 million will indeed be ready for launch later this quarter. Indeed, both Ms. Petrovic and CFO Mike Levitz emphasized the tremendous payer traction Dash has seen – getting to over 100 million covered lives in six months reflects how much the pay-as-you-go model makes sense for payers. Giving the Dash PDM free is expected to be revenue neutral for Insulet across the entire installed base, as the price of pods will go up slightly to offset the reduction in upfront revenue. (Of course, since new patient starts account for <10% of revenue in any given quarter, upfront revenue doesn’t drive the business anyways.) Today, ~10%-15% of Insulet business goes through the pharmacy, and Dash will help bring that to a majority of the business over the coming years. There were no comments on a European launch of Dash, though a CE Mark had been received as of November’s call.

    • Insulet’s own Horizon hybrid closed loop system will enter its pivotal study this year (2019), the first pivotal timing shared since the new 2H20 launch timing update in November’s call. It was not clear if the fourth IDE study mentioned last fall has been completed – this was expected to test real-world use in 20-30 people. We also wonder how large and long the pivotal studies will be; Insulet has breakthrough device designation for Horizon, which was oddly not mentioned today but will allow an expedited path to market.

    • Ms. Petrovic also reiterated the 3Q18 news that Horizon will launch with direct smartphone control in 2H20. However, today confirmed that the initial launch will only be for Samsung Galaxy phones, with Apple iOS to follow “in the future.” This is not a surprise on one hand, as Insulet announced an agreement with Samsung just after the 3Q18 call. Still, we had been assuming Horizon would have a similar setup on Apple iOS in time for 2H20. Today made it clear that the launches will be staggered, as we often see with other diabetes products. Ms. Petrovic noted that Horizon on Android is a faster initial path to market for Insulet, since the Dash software runs as an app on a locked-down Android phone already. Meanwhile, integration with Tidepool Loop allows Insulet to get on Apple iOS with direct smartphone control for AID around the same time (or perhaps earlier) – a smart play indeed. Tidepool Loop was not mentioned in prepared remarks, but did come up a couple times in Q&A. We think the combo of Loop + Omnipod is going to be very compelling – see Adam’s just-published test drive of Loop in diaTribe, with Kelly’s to come soon. Launching Horizon only for Samsung phones to start is a good way to take one bite at a time, though it may limit early uptake – most data sources (e.g., here and here) put Apple’s US smartphone market share notably ahead of Samsung.

    • In the few pictures shown today, the user experience of Horizon has changed a bit – there is more use of purple on the home screen, with a prominent large purple box now around the CGM number (presumably to indicate a user is in automated insulin delivery, similar to the MiniMed 670G’s blue shield) and an “automated” symbol in the top right. Unlike Loop, Horizon does not show insulin delivery on the home screen. Beyond that, Horizon looks similar to previous screens we’ve seen, to the G6 app’s user interface, and to Dash.

    • The Insulet/Lilly U500 has still not been submitted to FDA, and a launch is now expected by the “end of 2019/early 2020” – a delay from the last update to launch in “2019.” The latter update came almost a year ago and there has not been a timing update since, including after the clinical trial data shared at ADA. This product has seen lengthy delays since this partnership was announced in May 2013 – nearly six years ago! One positive point of emphasis today was that just under 15% of Insulet’s user base already has type 2 diabetes (and growing rapidly), meaning the current reservoir size will fill the needs of many. Indeed, Ms. Petrovic called the Lilly concentrated insulin Omnipods “attractive, but more as a supporting player than a feature player.” 

      • Ms. Petrovic added that pharmacy channel could simplify the path for type 2s to get on Omnipod, since it gets rid of the dreaded C-peptide requirement – wow! As mentioned in 3Q18, she also noted the importance of discretion in the type 2 population, making Dash and phone control “really, really valuable” for the type 2 pump market.

    • In Q&A, Ms. Petrovic shared that Wayde McMillan has been appointed Insulet’s new CFO starting on March 1 (announced via press release yesterday). Noted Ms. Petrovic: “This is a change that Mike Levitz (current CFO) and I have been contemplating together for some time – especially given the future trajectory of the company as we move past $1 billion in sales in 2021. Mike will stay on to ensure a successful transition, including through the 10-K filing. It has been a tremendous four years, and Mike and I have known each other for the better part of two-and-a-half decades. It is time for Mike to move on, and this is a good move for both Insulet and Mike.” Mr. Levitz was extremely gracious in his remarks, thanking the team and expressing price over Insulet’s progress over the past four years. Mr. McMillan’s background is impressive: he most recently served as CFO of the Minimally Invasive Therapies Group at Medtronic, where he managed an $8 billion revenue business with greater than 20,000 employees and a global finance team. He played a critical role in integration efforts following the company’s acquisition of Covidien in 2015, including reorganizing into the Medtronic Group structure and developing a new global financial plan and strategy. This CFO change was unexpected, but Mr. McMillan seems like a very strong asset for the company – especially as it gains more global scale.

    • In Q&A, CFO Mike Levitz casually addressed an ongoing arbitration with former EU distributor, Ypsomed. Ypsomed initiated the arbitration proceedings in late December, as the companies could not amicably agree on the final expiration payment. Said Mr. Levitz: “We expected this and it is not a surprise. We have disclosed a range in payment of between $10-$55 million to Ypsomed, and those proceedings are probably going to play out over some period of time – 24 months is a typical arbitration. One important thing to note, from our standpoint, is that this is an asset amortized over ten years, so it won’t affect the P&L.” We note this is an extremely wide-range and on the high-end, $55 million would have at least some impact – even spread over ten years. (Kelly also points out that even $10 million would buy a paperback copy of Bright Spots & Landmines for every type 1 in the US, with 500,000 copies left over.) According to the press release, Ypsomed believes the amount to be paid should be CHF 50 million (~$51 million). Per the agreement terms, the final amount Insulet pays to Ypsomed depends on the number of patients using Omnipods sold by Insulet in the 12 months after Insulet assumed distribution on July 1, 2018.

    • “According to dQ&A, Omnipod has the #1 net promotor score as compared to all other insulin pumps.” This was mentioned briefly on the below slide, though the actual NPS number and quarter of collection was not shared. It will also be interesting to see how NPS evolves once Dash is on the market against Tandem’s Basal-IQ and Control-IQ and Medtronic’s MiniMed 670G.

    Livongo for Diabetes: Average A1c Drop of 0.8% at Three Years (Baseline: 7.7%) and 15% Less Hypo; Up to 112,000 Members, Launched 246 New Company Clients on January 2nd

    Glen Tullman (Livongo, Mountain View, CA)

    Livongo Executive Chairman Mr. Glen Tullman presented to a brimming room of JPM attendees, providing a number of company data points and updates – boy, people were having a very hard time even entering the door! A slide (below) showed that the average Livongo for Diabetes member’s (no “n” provided) A1c drops from 7.7% to 6.9% at the three-year mark, with the biggest drop (-0.6%) occurring in the first year. In addition, users see 15% less hypoglycemia, presumably measured as blood glucose values <70 mg/dl. In the weight management and DPP program (acquired from Retrofit), systolic blood pressure in the subset of members with baseline hypertension (>130/80 mmHg) has dropped by ~9 mmHg at (baseline 130 mmHg) by six months. This improvement in blood pressure comes in tandem with notable 6.5% weight loss at one year (no baseline or “n” provided). The slide title implying these outcomes are “best in industry” is a pretty bold claim, but it’s true that no one is presenting three-year, real-world A1c data. Mr. Tullman alluded to a poster presented at ADA, showing that these clinical improvements lead to financial returns of $83 saved per participants per month, and clients only pay for a member when that member is engaged. These data are encouraging, and we are looking forward to the readout of the UCSF SUGAR study (n=300), pitting Livongo for Diabetes Program (with coaching) against the iHealth smartphone BGM and unlimited strips (no coaching) in an RCT. The six-month study will likely read out at ADA (three-month outcomes) and DTM (six-month outcomes), respectively. See below the picture for more details on clients and a Livongo for Behavioral Health.

    • On the growth side, Mr. Tullman shared that Livongo launched 246 new client companies on January 2nd, by our math, bringing total clients to ~850! This presents strong 2019 tailwind for growth from a user base of 112,000 in 2018, and is a testament to the ease with which Livongo can onboard new users through automated emails. It is difficult to compare the user base to competitors such as mySugr (~1.4 million users) and One Drop (860,000 users as of June) since the others report users of the free app, not necessarily paid premium subscribers. As a side note, Livongo more than quintupled its user base over the past two years from a base of ~21,000 in 2016. Mr. Tullman also shared that Livongo works with four of the top seven payers and top PBMs (CVS Health, Express Scripts). Livongo’s enrollment rate in clients is 30%-35% vs. typical telehealth utilization rates of ~5%-10%. In Mr. Tullman’s words, once Livongo gets someone to opt-in, “We simply don’t lose members” – retention rates are >95%. This is supported by a Net Promoter Score of 66.

    • Mr. Tullman foreshadowed a future launch of a ‘Livongo for Behavioral Health’: “Livongo for diabetes is where it started, but the reality is 70% of diabetics have hypertension. 70% of them have weight issues. 70% of them have depression. We need a platform that addresses all of these issues.” We love this idea and think many could benefit, especially the convenience of mental healthcare via connected devices rather than in person visits. The company has done a lot of horizontal integration – programs for diabetes, prediabetes/weight management, and hypertension (and previously plotted for one in dyslipidemia) – and this move to tackle behavioral health also makes sense. We imagine Livongo will build out a separate coaching team of licensed mental health providers, and presumably they would need providers in the state of care (as therapists are licensed state-by-state). Remote mental health care will be a benefit in its own right for payers, Livongo, and patients, and it will also presumably provide direct support for existing members who would benefit from mental health support.

    • Mr. Tullman was joined at the front of the room by new CEO Mr. Zane Burke (former Cerner president), President Dr. Jennifer Schneider, and new CFO Mr. Lee Shapiro. Mr. Shapiro, whose appointment was announced four days ago, goes way back with Livongo and Mr. Tullman: He was previously President of Allscripts Healthcare Solutions (2001-2012), co-founded 7wireVentures with Mr. Tullman, and has been on the Livongo board since its inception. He also serves on the national board of the American Health Association. This leadership team brings diverse experience to Livongo! See notes from our recent interview with Mr. Burke and Dr. Schneider.

    Medtronic: Advanced HCL with Bluetooth (MiniMed 780G) and non-adjunctive iCGM to Launch by April 2020; Sugar.IQ IQcast a “Gamechanger”

    Omar Ishrak (Medtronic, Minneapolis, MN)

    In one slide devoted to diabetes, Medtronic CEO Omar Ishrak shared an updated pipeline, with four product launches expected to launch in the upcoming April 2019-April 2020 (FY20) window: (i) the next-gen “advanced hybrid closed-loop system,” now called the MiniMed “780G,” with automated correction boluses, Bluetooth, and remote software updating; (ii) non-adjunctive CGM claim and iCGM indication for what looked like Guardian Sensor 3 (enabling Medicare coverage); (iii) Guardian Connect on Android (previously expected by this coming April); and (iv) Sugar.IQ “Gen 2” with meal handling and carb counting advice (Nutrino acquisition) and predictive insights going beyond 60 minutes (partly launched last week for hypoglycemia). Relative to the 2018 Analyst Meeting and ADA Briefing, Medtronic’s pipeline has thinned out in terms of number of entries, but shows better focus and more realistic expectations – the most notable change is the advanced hybrid closed loop (780G) timing has moved up by a year (in line with 3Q18) and will launch together with Bluetooth/remote software updating. The 780G is a critical product to compete with Tandem’s Control-IQ (summer 2019 launch), which will leapfrog 670G on pretty much every feature (auto boluses, no-calibration G6 CGM, Bluetooth, software updateable). It was also positive to see specific timing attached to non-adjunctive/iCGM labeling, which was not shared in 3Q18 – this is required to enable a Medtronic CGM launch into Medicare and to innovate in the 510(k) pathway. Two key pipeline projects were not pictured today that were previously slated by April 2020: (i) Sugar.IQ dosing assistant and insulin pen dose capture (though perhaps that is now called Sugar.IQ “Gen 2”); and (ii) Envision Pro (formerly iPro 3) professional CGM with fully disposable, no-calibration, and Bluetooth. Medtronic’s pipeline continues to be a moving target, and we were surprised there was not more focus on the segment during today’s remarks.

    • Positioned “Beyond FY20” (i.e., after April 2020) were four products: (i) personalized closed loop with advanced adaptation (>85% time-in-range); (ii) the newly-named Synergy CGM sensor (50% smaller than Guardian Sensor 3, day-one calibrations, and three-step application); (iii) the no-calibration Unity CGM sensor (10-14 day wear); (iv) Sugar.IQ Gen 3 (with behavioral feedback and overnight glucose prediction) and Gen 4 (meal prediction with dosing, advanced glucose prediction). The biggest change here is the addition of the “Synergy” sensor, and more specifics about features – day 1 calibration, three-step application (presumably similar to G6), and 50% smaller size than Guardian Sensor 3.

    • Mr. Ishrak called the Sugar.IQ hypoglycemia prediction feature, IQcast (launched last week) a “gamechanger,” especially within the Sugar.IQ app that differentiates Guardian Connect from other CGMs. We’ll have to see if IQcast really drives Guardian Connect update, since other features are behind Dexcom and Abbott (seven-day wear, adjunctive labeling, 14+ years, two calibrations/day, Apple iOS only). We are also eager to see how accurate IQcast’s hypoglycemia predictions can be 1-4 hours in advance, especially if food/insulin data is entered inconsistently.

    • Mr. Ishrak also mentioned the MiniMed 670G now has 150,000 users, up from >135,000 shared in November and with “good success” in the initial European launch. It is not clear what specific countries have launched, nor what countries are on the docket for this calendar year.

    • There was only one mention of diabetes in Q&A – CFO Karen Parkhill acknowledged that diabetes has tougher YOY comparisons in the coming two quarters, meaning the business will not see double-digit growth. This reiterated 3Q18 remarks, which expected high-single-digit diabetes growth in the upcoming quarter. Indeed, the upcoming Q4 comparison to 17% growth will be the toughest Medtronic has faced in seven years, and the one after that is even harder (+26% YOY).

    • Though not mentioned today, an India news outlet reported last week that Medtronic and Eris Lifesciences are collaborating to bring the Guardian Connect CGM to India. According to the article, Eris will provide Guardian Connect to “clinics and healthcare delivery units under its patient care initiative.” We look forward to hearing more about CGM in India, which is obviously a huge potential market but one where low-cost solutions will be critical.

    NHS: At new gathering “Startup Health,” Head of NHS England Lord Prior Announces HealthTech Connect: Streamlined Portal for Digital Health Tool Integration into NHS; Vision to Make NHS “Most Accessible Healthcare System in the World for Tech”

    Lord Prior of Brampton (NHS, Redditch, England)

    Head of NHS England Lord Prior of Brampton announced that HealthTech Connect – an online system for identifying and integrating novel health technologies (including devices, diagnostics, apps, and wearables) into the UK’s NHS – will launch in early 2019. As part of Lord Prior’s vision for NHS to be “the most accessible healthcare system in the world for technology,” companies and entrepreneurs can submit and continuously update information about their digital health technology through the portal. The goal is to help companies understand what information (such as levels of evidence) decision-makers in the UK healthcare system need to confidently incorporate the tech into NHS, as well as to clarify routes to market access. Underpinning the project is a clear desire to simplify complex entry routes for new health technology into clinical care workflows – an already evident and ever-growing issue in the age of start-ups and digital health. We’re thrilled by the UK’s forward-thinking move here and would love to see similar, streamlined access points for technology into healthcare systems/EMRs in the US and elsewhere around the globe. As we understand it, the philosophy is simple: allow the developer to update relevant information about its product in one location, rather than sending the same information to regulators, payers, potential clients, etc. in a million different formats.

    • A day earlier, US HHS Chief Data Officer Dr. Mona Siddiqui broke down the many barriers to internal and external sharing of patient data – cultural practices, confidentiality assurance, legal and technical hurdles – ultimately expressing optimism that data sharing struggles are primed for public/private collaboration. While most of her recommendations were very high level (“more discussion, learning from successes and failures, use case by use case”), she did urge members of the private sector to come forth and meet with HHS to discuss routes and technologies by which data sharing could be streamlined. Doubtless, curiosity around big data’s potential in diabetes is high, though we have yet to see discussion or action move much beyond the overarching ideas put forth by Dr. Siddiqui.

    Personalized Medicine: Value of Social Data, Replacing “Family History” with Genomics, Need for a High-Profile Case Example of Big Data

    Zach Brohawn (MedImmune, Gaithersburg, MD); David Karow, MD (Human Longevity, San Diego, CA); Othman Laraki (Color Genomics, Burlingame, CA); Beth Rogozinsk (AIDIA Collective, Tiburon, CA); Oodaye Shukla (HVH Precision Analystics, Wayne, PA)

    Too often we hear the terms “big data” and “personalized medicine” tossed around without use cases or substance; a series of panels today helped cut through the noise. With increasing use of connected glucose monitoring, wearables, clinical data from millions of patients, and machine learning, researchers and scientists can theoretically learn from real-world data like never before, but how is that data actually being transformed into actionable ideas?

    • Chief Data Science of HVH Precision Analytics Mr. Oodaye Shukla highlighted the value of tracking less overt variables related to health, such as whether one lives in an urban or rural setting. More generally, he termed this process, “quantifying the patterns of life” to predict not only health risk but also a person’s future social equity. Notably, a new project at HVH aims at improving adherence in low-income neighborhoods while engaging with the question: How do we use data to improve the outcomes of those without health records? To do this, the company is employing a wealth of social data (crime rates, faith prevalence, congregation hot spots, weather and seasonal patterns) to determine which community leaders, institutions, or areas could best direct patients to resources as well as the optimal time to implement these initiatives to promote uptake. We envision such analysis could be quite useful in improving access and visibility of diabetes prevention programs in areas where they are needed most. As one example, Novo Nordisk’s Cities Changing Diabetes program in Houston is leveraging local faith-based communities as focal points for diabetes education.

    • Chief of Radiogenomics and interim CEO at Human Longevity Dr. David Karow suggested replacing the “family history” portion of regular medical checkups with full genomics data. He hopes that combining genomics with revamped core diagnostics – full body MRI instead of the outdated reflex/stethoscope approach – and blood work will be the next level of clinical decision support in primary care, enabling PCPs to pinpoint not only genetic and physiologic risk but also the “one lever” (BMI, cholesterol, hypertension, etc.) that patients could pull to reduce that risk. In his experience, being able to provide that one lever makes monumental difference in motivating patients to adopt lifestyle changes compared to a more general approach. We love the sentiment here – exacted decision support based on genetic risk and deeper physiological data – though we imagine that both aspects of the process need a lot more thought on cost of implementation and clinical workflow.

    • Many panelists underscored the need to work within existing healthcare systems rather than completely reinventing them. According to Chief Product Officer at AIDIA Collective Ms. Beth Rogozinski, the tech industries first forays into healthcare were massive busts: “Google spent millions of dollars and thought they would just overrun our highly involved and complex healthcare system.” (Presumably this was a reference to Google Health, which indeed did not take off as a personal EMR.) To her, that “abysmal” effort has only proved that tech innovation in healthcare must start internally. While some systems are ripe for innovation – for example shifting hospital systems to telemedicine to improve equity in access – Ms. Rogozinski advised the tech industry to be mindful of the established systems in healthcare rather than complete overhaul. We think both incremental and 10x moonshot thinking are needed – the former improves on existing systems, while the latter reimagines it completely.

    • MedImmune’s Mr. Zach Brohawn underscored the need for a high-profile example of big data improving health outcomes before it will truly disrupt the healthcare system. Unlike the transportation industry, which was disrupted in a relatively short amount of time through ride-sharing apps, many of the applications of big data in drug discovery and novel treatment approaches won’t reap benefits until at least a decade later – after developmental and regulatory pipelines. To this end, there has been a delay in the overt entrance of the tech boom into healthcare relative to other industries. However, once a widely-applicable use case emerges, Mr. Brohawn believes regulators and payers will begin to “fall in-line,” enabling machine learning and AI to truly take off. In his words, “we could create a perfect solution, but without a regulatory path for applications of machine learning and AI there would be zero uptake.” He did not posit how long that might take. Yesterday, Sanofi talked about using more technology for clinical trials, which can reduce cost and time to completion; over time, we imagine Big Data and AI helping with faster patient selection and recruitment and real-time monitoring.

    • An important byproduct of the movements toward big data and precision medicine is that the definition of risk has evolved to a continuous distribution over the course of disease, according to CEO of Color Genomics Mr. Othman Laraki. This, he believes, lends itself to preventative medicine; if big data can help identify sooner when someone has prediabetes (or even better, if they are at risk for prediabetes), then earlier action will be promoted. This is a big focus of Verily’s efforts – turning health from reactive to proactive.

    Precision Medicine Experts Underscores Need (and Industry Responsibility) for Greater EHR Interoperability, Bending the Cost Curve

    Jill Hagenkord, MD (Color Genomics, Burlingame, CA); Kristen Murtos (NorthShore University Health System, Evanston, IL); David Nash, MD (Jefferson College of Population Health, Philadelphia, PA); Heidi Rehm, PhD (MGH, Boston, MA)

    Dr. Heidi Rehm (Chief Genomics Officer, MGH), Dr. Jill Hagenkord, (Chief Medical Officer, Color Genomics), Kristen Murtos (Chief Administrative & Strategy Officer, NorthShore University Health System), and Dr. David Nash (Dean, Jefferson College of Population Health) expounded on precision medicine – its challenges and steps forward. As new diabetes treatment algorithms underscore patient-centricity and individualized targets, personalized medicine is becoming the clear goal – but how can it be achieved? While nearly the entirety of this discussion revolved around using genetic testing to predict hereditary risk (primarily for cancers), some key quotes caught our attention:

    • What is precision medicine? “A lot of physicians would argue that they practice precision medicine every day. The goal is to use things that are precise and specific about a patient to direct care. Especially in the era of personalized medicine, I think that changing the term to precision represents our use of biomarkers, genetics, proteomics, and metabolomics to more specifically direct the care of the patient.” – Dr. Rehm (Editor’s Note: We would more succinctly describe it as “moving from ‘what works on average’ to ‘what works for me in this particular situation with these data.’”

    • “[Precision medicine] is not just about the data and being able to extract insights. It’s also about being able to integrate and analyze it in conjunction with all of the other elements that impact a patient’s care. It’s not enough to have those insights in isolation… As leaders in the field, it is our responsibility to make that system interoperable. We have made healthcare complex as is for patients and making them responsible for pulling together all of those pieces and integrating their own health data is not what we should be doing. We deserve better than that. Our patients deserve better than that.” – Ms. Murtos

    • “As we look at the primary care setting, precision medicine is filling in that complete circle of information that allows us to move from reactive medicine to proactive care.” – Ms. Murtos

    • How broad is precision medicine? Has it broadened beyond cancer? “In my field – molecular pathology – we have been equally focused on molecular oncology applications, inherited disease risk applications, pharmacogenetics, molecular infectious disease, and the microbiome equally throughout the history. I think it really was just the media who focused on cancer. In the scientific and medical worlds, we really have to be focused on all of those to get a better understanding of disease risk, prevention, and getting the right drug to the right person at the right time.” – Dr. Hagenkord

    • The long-term goal [of precision medicine] is not just improving health outcomes but also bending the cost curve. By making those early identifications and promoting early interactions we can actually curb expense while driving outcomes.” – Ms. Murtos

    • What is the role of some of these big technology companies in precision medicine going forward? “There are so many aspects – generating the raw data, creating platforms where we analyze and compare that data to other populations, storing the data, and using it in a healthcare environment to support clinical decision support. There are lots of steps along the way with opportunity for commercial platforms to support, and there are a ton of companies in those spaces.” – Dr. Rehm

    • “I think generally our healthcare system is broken, but the EHR systems are really not in a good place. Even the major players – for example Epic, which is in a lot of healthcare systems today – every installation of Epic is actually different and not interoperable with other instances of Epic. This is a huge problem and a real opportunity for companies like Google and Apple and Amazon to come up with innovative solutions, so that when you break your arm and walk into an ER not in your hometown, your health record is not buried in some record in another town where you usually see your doctor. Maybe you could have your health record right there on your iPhone instead. This is something we have to solve.” – Dr. Hagenkord (Editor’s Note: Apple launched Health Records on iPhone with EHR integration last April.)

    Proteus Digital: Ingestion Tracking System Used with 40 Meds, Commercialized Through Value-Based Contracts; Real-World Hypertension Reduction in 116 Patients Similar to Benefit Seen in RCT

    Andrew Thompson (Proteus, Redwood, City, CA)

    Proteus CEO Mr. Andrew Thompson delivered a confidence-inspiring update on the company’s Discover digital ingestion tracking system, including real-world hypertension data that was new to us. Discover includes ingestible sensors (in the pill), a small wearable patch, a mobile app, and a provider portal. The system captures whether a pill was taken (along with information about activity and sleep), encourages adherence, and helps physicians optimize therapies and thereby improve patient outcomes. At this stage, Proteus’ Digital Medicine (“DigiMed”) is used in conjunction with 40 medications in mental health (notably Otsuka’s Abilify MyCite, the first FDA-approved pill with an embedded sensor to track adherence), cardiovascular & metabolic, and infectious diseases – oncology is in the works. Mr. Thompson touted “literally hundreds of clinical studies in 1,000s of patients,” tallying to >170,000 ingestions, and adherence has never been lower than 80% (presumably within a given population). A 2017 JMIR study (Frias et al.) showed that in patients with “uncontrolled” hypertension and type 2 diabetes, the Proteus system lowered SBP by 24.6 mmHg (vs. 15.2 mmHg in the control arm), lowered LDL by 30.1 mg/dl (vs. 10.9 mg/dl in the control arm), and lowered A1c by 0.3% (vs. a 0.3% rise in the control arm). Remarkably, one of the inclusion criteria was they had to be on medications for at least six months and remain above goal for all of the endpoints; by three months, 98% of the Proteus cohort had reached the blood pressure goal vs. 51% of the usual care arm. In the real-world (n=116 patients across four health systems), use of the system resulted in 88% mean adherence, 90% mean patch wear, and a sustained ~10 mmHg drop in SBP out to at least a year. Given these compelling data, Proteus pursues partially at-risk contracting: Standard drug pricing + monthly fees for a defined package of data services + outcomes payments for patients who are >80% adherent. Quipped Mr. Thompson, “We’re selling outcomes and data, not pills and promises; implementations always crush medical expenses.” We are encouraged by Proteus’ progress to date, particularly the clinical data; we see this as another opportunity to capture non-existent data, learn more about real-world use, and drive smarter reimbursement and outcomes tracking. The next step, in our mind, would be combining with a diabetes drug in a single pill (metformin? DPP-4s? SGLT-2s?) and perhaps building out interventions tailored to different strata of behavior – how can Proteus drive strong medication taking throughout populations, rather than stopping at notifying an HCP that a given patient is for some reason not reliably taking his/her medication? We also wonder if Proteus would be interested in exploring alliances with remote coaching services or CGM (our speculation).

    • Mr. Thompson explained that for $20-$30 million and 30 months, a company can obtain FDA approval for a digital medicine (approved drug + approved sensor), including a new NDA, a new NDC code, and a new name. “You have the ability to build a whole new business, where innovation is about silicon, software, and data.” Since both components are already approved, it sounds to us like a stability study, bioequivalence evaluation, and human factors are the only studies that have to be run. This drug/device combo could be appealing to pharmaceutical companies in the business of chronic diseases, particularly if they are already or plan to be engaged in outcomes-based contracting with a payer, for instance. Taking on risk becomes significantly less risky if a manufacturer can ensure that patients are ingesting the medications they are prescribed.

    • Mr. Thompson presented three notable Proteus case studies:

      • A Provider insight story: Sue had “uncontrolled” type 2 diabetes prior to using Proteus’ DigiMeds. She was on metformin, Januvia, and Invokana. After three months on DigiMeds, her diabetes was “under control” and she was off Invokana. Her provider realized she didn’t need to be on Invokana – a costly therapy that is not without chance of side effects – so long as she took her other medications reliably as-prescribed.

      • A patient empowerment story: Clare has chronic heart failure and is generally in poor health – she can’t get out of her chair, and sleeps in it. After using DigiMeds for well over a year, she was able to successfully control her condition using her existing medication. And a year later, she has zero hospital admits, takes the bus, and sleeps in bed.

      • A patient access story: Paul has hepatitis C, but because he misses clinic visits, his provider denies him DAA therapy. (As a side note, >50% of hepatitis C patients eligible for DAA are screened out due to adherence risk). Paul was on DigiMeds for two months, and took the medication as directed 94% of the time. He was cured of hepatitis C, where he otherwise wouldn’t have been granted access to the treatment.

        • Proteus even conducted an n=30 study of homeless San Franciscans with hepatitis C, a group who would otherwise have very slim chances of receiving DAA. According to Mr. Thompson, they were all cured. We weren’t previously aware of this use case, but we hope that it is widely adopted and severely cuts back on the number of patients who are denied treatment because they are considered an “adherence risk.”

    Roche: No Mention of Diabetes in Slides or Q&A

    Alan Hippe, PhD (Roche, Basel, Switzerland)

    Roche CFO Dr. Alan Hippe did not mention “diabetes” a single time during prepared remarks or Q&A. The talk focused almost entirely on the pharma pipeline (e.g., oncology, hematology, MS), with just one slide labeled, “Transforming healthcare through new era of data and analytics.” All of the examples on the slide were from oncology – Flatiron Health, Synapse, Foundation Medicine, Ignyta. Dr. Hippe did mention that with real-world, historic Flatiron data replacing a control group, Roche brought the oncology therapy Alecensa to market faster in more than 20 countries. This has obvious diabetes drug implications – could real-world, Big Data enable faster, more efficient, and less expensive clinical trials? This was far less in diabetes than a year ago, that is for sure.

    Sanofi: Head of Digital and Analytics Dr. Heather Bell: Digital Tech’s Differentiating Impact at this Juncture is in Clinical Trial Efficiency

    Heather Bell, PhD (Sanofi, Paris, France)

    In a StartUp Health interview conducted by CNBC’s Ms. Christina Farr, Sanofi SVP/Global Head of Digital and Analytics Dr. Heather Bell explained that, at the moment, digital technology’s differentiating impact at Sanofi is in clinical trial recruitment and monitoring. This was great to hear since so much more progress is needed in diversifying trials and making them more streamlined and efficient. Wearable technology allows Sanofi to “bring the study to patient”, “allow for treatment in a home setting”, and provide “continuous data gathering”. Citing the time patient recruitment takes (on average 35% of clinical duration) and the cost of patient care during trials (75% of total cost on average), Dr. Bell stated digital technology is both shortening time and, through monitoring, reducing the size of the patient sample needed for trials. We would love to learn how this is being used in diabetes trials at Sanofi. She also was very optimistic about continuous monitoring allowing Sanofi and FDA to identify new endpoints for trials, although she did not specify therapeutic areas. Her answers also referenced the role digital technology has played in improving therapeutics for diabetes (dosing algorithms, real time monitoring), oncology (Israeli ehealth company Sivan Innovation, “a personal favorite” due to its lung care monitoring product), atopic dermatis (dosing), and neuroscience (retraining neural pathways in ADD as a specific example). Finally, Ms. Farr asked about digital technology in relation to the “social determinants of health”, a phrase she says she hears more and more frequently in her coverage of the industry (so do we, although we note that we do not often hear much expansion around it after the “importance” is acknowledged). Dr. Bell predicted that, enabled by digital technology, quality of life will become an increasingly important component of healthcare (we’d love to see more focus on Patient-Reported Outcomes – this is the next area for standardization in our view) and that behavioral specialists and others will be important members of pharma therapeutic development teams. This was all great to hear from a major pharma exec who certainly has tremendous influence on the development and evaluation of therapies. A question mark is whether the drug side of FDA will move in lockstep with the device side in accepting real-world data and integrating digital health tools; hopefully there will be more cross pollination between the centers as pharma moves into technology.


    Startup Health Rapid-Fire Pitch Session: Fruit Street Health (DPP; 4.2% Weight Loss at 16 Weeks), Veloce (Smart Ingestible Drug Delivery Capsule), and Metalogics (Weight Loss Coach + Hardware)

    Laurence Girard (Fruit Street Health, New York, NY); Greg Guettler (Metalogics, Minneapolis, MN); Robert Niichel (Veloce, Dever, CO)

    We will be back with more information on new “JPM conference week” conference “The StartUp Health Festival,” which closed today with a rapid-fire “pitch” session for a handful of portfolio companies, some of which could have implications for the diabetes field, some of which have a ways to go. Below, we highlight three of these startups that we found particularly intriguing: Fruit Street Health, Veloce, and Metalogics.

    • Fruit Street Health: We first wrote about Fruit Street Health a year-and-a-half ago when it became the first organization to deliver the CDC’s National Diabetes Prevention Program (DPP) via group telehealth classes and video conferencing (CDC recognition pending). CEO Mr. Laurence Girard shared that the company has now surpassed $10 million raised (from 250+ MD investors) and has 1,000 educators in network. In a small demonstration project, the program (telemedicine-based group education sessions + wireless scale + Fitbit + app with photo meal logging) resulted in 4.2% weight loss at 16 weeks (on pace to surpass the 5% CDC benchmark), 96% of participants lost weight, 86% of participants said it improved their quality of life, and Net Promoter Score came in at a whopping 85%! We’re not sure how large this study was or how many participants have gone through Fruit Street overall – key data to get  - but we’re intrigued by the group telemedicine approach – when it comes to behavior change, the more providers that are taking differing approaches, the merrier.

    • Veloce: Veloce is developing the SmartTab system, which aims to allow for the delivery of the right medicine, to the right place, at the right time. SmartTab is an ingestible capsule that contains an electronic receiver, smart polymer actuator, and active ingredients; the idea is that people will ingest the capsule, which will then deliver medication to targeted areas of the GI tract in response to external remote cues or a monitored physiological condition. We would imagine this being put to good use for ingestible therapies such as SGLT inhibitors/oral GLP-1 agonists, or perhaps, thinking into the more distant future, as a potential closed loop actuator that delivers concentrated insulin when glucose levels drop (a form of “smart insulin”). This would presumably entail a patient taking a capsule every day or so, and having a CGM inform a smartphone algorithm that controls the release of the insulin.

    • Metalogics: Metalogics’ “Lume” measures caloric expenditure with an armband (calories out) and caloric consumption with a digital scale (calories in), to give customers guidance through an app pertaining to exercise and diet. The user selects a weight loss goal, and Lume helps them get there through tailored lifestyle advice. Lume has not yet launched, and the armband strikes us as a slightly clunky approach in a world where Fitbit and Apple Watch are quite good. Absent efficacy data, we’re not sure to what degree this product improves adherence to regimens and outcomes, nor whether the “calories in, calories out” model is sufficient to explain weight trends (see carb-insulin model).

    We Doctor: Revolutionizing Care in China with “Internet Hospitals,” Mobile Clinics, Telehealth, Support for Community Hospitals and Patients; ASTOUNDING Statistics on Challenged Chinese Healthcare System

    Xiaochun Zhang (We Doctor, Hangzhou, China)

    We were totally blown away by Goldman Sachs- and Tencent-backed We Doctor Group, an “online healthcare services firm” that is taking China by storm with a multi-level healthcare approach that extends far beyond its description. We’d heard about this company earlier this year and have been waiting for this talk! In a 20-minute presentation, management explained how the company is in the business of building an interconnected health ecosystem via the cloud, AI, and devices, with the goal of addressing China’s over-burdened and poorly allocated health system by moving 50% of medical services to the home, 35% to local health providers, leaving only 15% of healthcare to large hospitals. We Doctor already has a network of 2,700+ major hospitals, 260,000+ doctors, and 180 million registered users. This network includes over 100 internet hospitals (according to The Lancet, “patients go to a medical consultation facility near their home and meet through the internet with a doctor who is based in a top-level hospital in a big city”), and looks to grow considering Chinese President Xi Jinping’s reported interest. We Doctor now performs 8,000 virtual consultations per day through these remote locations, amplifying efficiency of top doctors and reducing waste. In the realm of AI, We Doctor has opened a research center at a top university in China, and offers client hospitals and clinics AI diagnosis equipment and applications, as well as diagnostic decision support to allow “community level doctors to practice at the level of the top hospitals.” Finally, to scale, We Doctor supplies patients with apps and devices that can connect with a doctor at the touch of a button. (We wonder if patients are using any connected diabetes devices.) The slide deck also contained an image of a nurse with a mobile check-up unit, where she can perform all physical tests on patients in the waiting room – after the clinical workup, a remote doctor receives the data and offers a diagnosis via video. Similarly, many pharmacies have kiosks where patients can video chat with HCPs and receive a prescription on-site. And for the 46% of China’s population (600 million people) who can’t access these services because they live in the countryside, We Doctor deploys mobile clinics – minivans packed with nurses and medical supplies. Each Chinese citizen has an idea card, which, when scanned, provides the nurses and remote doctors with all of the individual’s relevant health information (this would surely make healthcare easier and more affordable stateside!); the traveling providers can then give checkups and regular family doctor consultations (from a parking lot!). On the brick and mortar side, We Doctor is also prolifically building primary clinics across China, aiming to have 100 more built in the three years. Given China’s centralized purchasing paradigm, We Doctor is also able to coordinate pharmaceutical suppliers and prescribers, as well as insurers – we’d love to learn more about these areas of focus. As we said at the outset … this company blew us away as the implications and opportunity for better outcomes are huge. This single company is essentially taking it on itself to reconstruct healthcare to improve quality, access, and cost in a China whose sheer size and dispersion pose major challenges. We hope and expect to hear more from this company, particularly as it sets its sights on international expansion (Africa was specifically mentioned).

    • The presentation began with a slate of stirring (and concerning, in many cases) statistics about Chinese healthcare:

      • China as a nation has 8-9 billion checkups/medical visits per year.

      • There are >1,000 large hospitals in China, which treat >11,000 patients per day. Meanwhile, ~970,000 community hospitals are barely seeing 100 patients per day.

      • The top Chinese hospitals – comprising 8% of all Chinese hospitals – receive 46% of all outpatients every year.

      • The average wait time for a 30-minute consultation with a physician is three hours.

      • Chinese pharmaceutical companies are spending 50%-70% of their resources on distribution, and only 5%-7% on R&D.

    Diabetes & Obesity Pharmaceutical Companies

    3SBio (Chinese Distributor of Bydureon, Byetta, Humulin): On GLP-1 Market in China: 2% of Total Diabetes Prescriptions, Currently Valued at $200 Million (70% Victoza) – and Projected to $2 Billion

    Jing Lou, MD, PhD (3SBio, Shanghai, China)

    CEO of 3SBio Dr. Jing Lou expounded on the company’s May 2018 launch of AZ’s GLP-1 Bydureon (exenatide) in China – the first once-weekly type 2 diabetes treatment to be introduced in the nation. 3SBio also owns the rights to Byetta (twice-daily exenatide) in China; both products were licensed from AZ for $100 million in October 2016Very notably, from conversations with leaders after the talk, we understand the 2018 GLP-1 market in China (which is not yet reimbursed) is valued at approximately $44 million (RMB 300 million) – approximately 70% of which goes for Novo Nordisk’s Victoza (liraglutide). Seeing as GLP-1 prescriptions account for only 2% of all current diabetes prescriptions in China, compared to >20% in the US (we assume he meant of the injectable market), he believes the market could grow to at least $440 million (RMB 3 billion) as coverage is secured, likely starting with short-acting GLP-1s in 2020 (Byetta). Doubtless, the introduction and reimbursement of novel diabetes therapies in China could be seriously important. The country currently houses the largest diabetes population in the world with at least ~110 million patients (see below; management raised that number to ~130 million in Q&A), and China also has strikingly lower diagnosis and treatment rates than the US (37% vs. 77%, and 32% vs. 63%, respectively – source was not clear). As the first company to bring a once-weekly type 2 diabetes treatment to China, 3SBio is uniquely positioned to have a major impact on not only adherence, glycemic control, and even CV outcomes, but also general awareness of the disease. From a market perspective, 3SBio’s optimism aligns with that of other diabetes manufacturers in China. AZ is bullish on Farxiga’s (dapagliflozin) growth since its 2017 launch as the country’s first approved SGLT-2 inhibitor, Novo Nordisk’s Victoza boasted 186% YOY growth in 3Q18 (to $23 million), and DPP-4 growth in China is consistently counterbalancing US losses for Merck’s Januvia (sitagliptin) and Novartis’ Galvus (vildagliptin).


    • In addition to Byetta and Bydureon, 3SBio also distributes Lilly’s Humulin (human insulin) in China and has maintained just over 10% human insulin market share since licensing the product in 2017. According to the figure below, Humulin market share dropped in 3Q17 (which Dr. Lou attributed to the licensing transition period) but has since stabilized. Moreover, he forecasted payer tailwinds for Humulin, as the country’s newest National Reimbursement Drug List (NRDL) includes human insulin as a “category A” drug, meaning it cannot be adjusted by any province and is 100% reimbursable.

    AbbVie: Continuing a Trend Dating Back to 2015, No Mention of Terminated Phase 3 Nephropathy Candidate Atrasentan

    Michael Severino, MD (AbbVie, North Chicago, IL)

    AbbVie Vice Chairman and President Dr. Michael Severino provided the company’s update early Wednesday morning in the Grand Ballroom, with no mention of diabetic nephropathy candidate atrasentan. Understandably, much of the presentation focused on the impending loss of exclusivity for mega-blockbuster Humira and how AbbVie will work to offset this major loss – no small task, seeing as the arthritis drug raked in >$18 billion (!) in 2017 revenue. AbbVie’s omission of atrasentan does not come as a surprise, seeing as we haven’t heard any direct mention of the candidate since all the way back in 3Q15. As a reminder, the phase 3 SONAR study for the candidate was terminated in 1Q18 due to “strategic considerations.” Management has not addressed this termination; in the past, we’ve speculated that the costs of running the trial could have exceeded expectations and/or AbbVie grew concerned about the drug’s market potential. To be sure, DKD remains an area of very high unmet need, as no new therapy has been approved for such an indication since the year 2000 (!). Nevertheless, an increasingly strong case for renal protection with SGLT-2 inhibitors may have given AbbVie pause when considering the impact atrasentan could have had amongst these (impressive) competitors. Most notably, J&J’s CREDENCE renal/CV outcomes trial for SGLT-2 inhibitor Invokana was recently stopped ~one year ahead of schedule because canagliflozin had already met its primary efficacy endpoint. Similar renal outcomes trials (Dapa-CKD and EMPA-KIDNEY) with other SGLT-2s are also ongoing, and actually enroll patients both with and without diabetes who have CKD. Still, the need for expanded patient choice is of great import within this area of high unmet need, making atrasentan’s termination disappointing, especially as it was one of very few late-stage non-SGLT-2 inhibitor candidates in the nephropathy landscape.

    Alkermes: Continues to Inspire with Public Health Conscious Approach to Drug Development

    Richard Pops (Alkermes, Dublin, Ireland)

    As CEO Mr. Richard Pops opened his presentation on Alkermes, “It’s a company we’re really building as a model of what a biopharmaceutical company can do for patients and for society … We’re taking on critical public health challenges in a way that … is quite distinctive and quite laudable.” We would certainly agree. The company is focused on meeting unmet need in addiction and mental health disorders (it markets Vivitrol for addiction and Aristada for schizophrenia), and though only implicated in diabetes through Bydureon royalties, we’re always struck by the way Alkermes balances its for-profit business with a very intentional awareness of and commitment to public health. In Mr. Pops’ words, the faces are as important as the numbers, and we were struck throughout his presentation by his emphasis on impact of chronic disease on both patients and their families. To our understanding, Alkermes has built robust compliance infrastructure and patient support programs around both therapies to maximize their real-world impact. This holistic approach to chronic disease is commendable, and we would love to see more of biopharma consider how it can have a deep impact on public health through drug development. We also loved hearing the importance of schitzophrenia drus that did not prompt weight gain and obesity – this has been a major area of education according to Pops.

    Allergan: Highlights NASH and Diabetic Gastroparesis Candidates: Potential to Fill Unmet Need as Company Expands GI Business

    Brent Saunders (Allergan, Dublin, Ireland)

    Allergan CEO Mr. Brent Saunders briefly highlighted NASH candidate cenicriviroc (CVC) and diabetic gastroparesis candidate relamorelin (both in phase 3) as key additions to its GI business. As background, CVC is currently under investigation as monotherapy for F2-F3 fibrosis in the phase 3 AURORA trial, as well as (perhaps more excitingly) part of a combination therapy with Novartis’ FXR agonist tropifexor in the phase 2b TANDEM study. Both studies are still enrolling; primary completion for AURORA is anticipated in July 2019 and for TANDEM in July 2020. Of course, we’ve heard strong excitement over the potential of combination therapy for NASH, and Allergan/Novartis are very much on the leading edge – thought leaders have pointed specifically to the potential of the FXR/CVC combo. Also in phase 3 is relamorelin, which Allergan acquired from Rhythm’s Motus subsidiary back in 2016. We were glad to hear CEO Mr. Brent Saunders emphasize the vast unmet need in diabetic gastroparesis, which hasn’t seen meaningful innovation in ~30 years, as well as NASH. Most recently in gastroparesis, Evoke Pharma submitted a nasal reformulation of metoclopramide to FDA, but that therapy treats the symptoms of diabetic gastroparesis rather than the cause (and the NDA was only for women). Importantly, an estimated 16 million people in the US alone experience symptoms of gastroparesis (per Evoke), and innovation here would certainly be welcome. Allergan is fairly new to the metabolic arena with IBS therapies Linzess and Viberzi, but Mr. Saunders’ identification of NASH and gastroparesis as growth areas is certainly encouraging. 

    • Allergan’s early-stage pipeline also includes phase 1 FXR agonist AGN-242266 and preclinical second-gen FXR agonist AGN-242256. To our understanding, both were acquired through Allergan’s buyout of Akarna Therapeutics for $50 million in 2016, days after Allergan also bought Tobira (and its assets CVC and DPP-4 inhibitor evogliptin) for $1.7 billion. As such, Allergan has established itself as a major player in the NASH landscape – which includes multiple FXR agonists in Intercept’s obeticholic acid (phase 3), Gilead’s GS-9674 (phase 2), Enanta’s EDP-305 (phase 2), and Terns’  TERN-101 (phase 1), in addition to partner Novartis’ phase 2 tropifexor. Novartis also has another FXR agonist, LMB763, in the early-stage pipeline. Indeed, FXR agonism was highlighted in Monday morning’s NASH panel as one of the most proven and promising NASH mechanisms, putting Allergan in a strong position going forward.

    Amarin: 1Q19 sNDA Filing Planned with Potential for FDA Ad Comm; 2019 Outlook Includes $350 Million Revenue Projection (>50% Growth)

    John Thero (Amarin, Bedminster, NJ)

    Amarin CEO Mr. John Thero provided a host of updates on Vascepa (icosapent ethyl), emphasizing its “unprecedented positive results” in the REDUCE-IT CVOT and touting the therapy’s potential in “leading a new paradigm in preventative CV care.” See below for our top takeaways from Amarin’s presentation and breakout session, starting with an updated timeline for sNDA submission, thoughts on a potential FDA Ad Comm for Vascepa’s CV indication, a 2019 financial outlook, a shift in physician contact strategy, and a reiteration of Amarin’s commitment to affordable Vascepa pricing.

    • Mr. Thero confirmed that an sNDA for Vascepa’s expanded label indication is on track to be submitted by the end of 1Q19. This is a more concrete timeline than we heard on Amarin’s 3Q18 update, when management put forth an “early 2019” timeline for the sNDA. Our sense is that this sNDA is quite large: Amarin has underscored the size of the REDUCE-IT dataset, along with the “extensive” list of prespecified endpoints which will be included in support of a CV indication. Following sNDA submission, Amarin expects the normal 10-month FDA review process and hopeful approval by the end of 2019. Notably, Mr. Thero today indicated that Amarin will speak to FDA about the potential for priority review of the sNDA, but he also admitted that accessing this path for review and approval is unlikely. Still, Amarin believes that a priority review may be justified given the enormous unmet need in addressing residual CV risk, particularly through triglyceride lowering. Either way, Amarin remains optimistic about Vascepa’s label expansion, and Mr. Thero reinforced his sentiment from company’s 3Q18 update: “we’re sure the FDA will approve an expanded label for Vascepa.”

    • An FDA Advisory Committee over the sNDA for a CV indication is a possibility. From where we stand, it makes sense to liken Amarin’s impending sNDA to that which Lilly/BI submitted for Jardiance’s CV indication: This would be a first-of-its kind indication for a newer class of therapy, and it’s one supported by strong outcomes data but without a well-characterized mechanism of cardioprotective action. Mr. Thero disclosed that Amarin is “preparing for an Ad Comm,” but, of course, it’s unclear at this time whether FDA will hold one. Mr. Thero reasoned that FDA may want to hold an Ad Comm for Vascepa because the indication could apply to one-in-four adults, or to “re-emphasize that [REDUCE-IT] is not a validation of triglyceride reduction – it’s a validation of Vascepa.” To our understanding, however, this is not the reason why FDA holds an Advisory Committee; rather, it is to seek expert opinion on the validity and clinical meaningfulness of available data. Conversely, he also provided points as to why FDA may not require an Ad Comm: The product has already been on the market for six years, has shown a 20% CV death risk reduction benefit, has a strong safety/tolerability profile, and lives could be saved by approving the indication sooner.

      • Our biggest question remains whether FDA will grant an indication that extends to a primary prevention population: Approximately 30% of REDUCE-IT’s enrolled was primary prevention, and the magnitude of risk reduction was nominally less in this group compared to the majority secondary prevention cohort. To be fair, REDUCE-IT was not powered to demonstrate significant benefit in primary prevention alone, and analysis showed that there was no statistically significant interaction between the primary and secondary prevention cohorts. It’s likely that any FDA Ad Comm would dissect this important distinction, with the ramifications being huge for Amarin. A primary prevention CV indication for Vascepa would massively expand the pool of patients who FDA says could benefit from the therapy and correspondingly increase Vascepa’s earning potential.

    • Amarin also provided its 2019 financial outlook: $350 million in net revenue is expected, up more than 50% from 2018. Some have been disappointed by this rather conservative revenue estimate for Vascepa, but Mr. Thero clarified that there are several factors stymieing growth in 2019. For one, Vascepa has still not earned its CV indication, which Amarin expects will hinder promotion and commercial sales of the therapy. Amarin is confident that sales will increase with the addition of a CV indication, and it’s hard to disagree on this point. Moreover, Mr. Thero stressed that it will take time to influence prescribing practices of HCPs (more on this below), especially with Amarin still finalizing its sales force increases. From a broader perspective, Amarin remains confident that Vascepa “will reach billions of dollars in revenue.”

    • In terms of HCP response, cardiologists have apparently been more enthusiastic and embraced REDUCE-IT results more rapidly; as a result, Amarin is ramping up contact with this specialist group. Mr. Thero noted that amongst HCPs that Amarin has reached out to so far, cardiologists have proven to be the most receptive to REDUCE-IT results. Due to the positive experience sales reps have had, so far, in reaching out to cardiologists, Mr. Thero explained that Amarin is increasing the number of cardiologists they will reach out to by an additional 40,000. We’ve seen this enthusiastic response from cardiologists firsthand: At AHA 2018, nearly 90% of the audience indicated that it would prescribe Vascepa after learning about REDUCE-IT results. During its 3Q18 update, Amarin originally provided the following breakdown of HCPs it hopes to target: 85% GPs, 7% cardiologists, and 5% endos.

      • Nonetheless, convincing HCPs to incorporate Vascepa into their prescribing routines won’t happen overnight. Mr. Thero stressed that external data shows target audiences may need to see data multiple times (between 5-7) before their usage patterns are meaningfully changed. On some level, this admission is a bit of a disappointment to those who were hoping to see Vascepa penetration immediately skyrocket; it’s clear that it will likely take time and persistence for Amarin to profoundly affect CV care practice on the population level.

      • As a reminder, Amarin is working to expand its US sales team to ~400 members, from a previous size of ~150. In its preliminary 2018 results and 2019 guidance released late last week, Amarin noted that >90% of these sales reps are now well-trained and that meetings with HCPs would start this week. In terms of ramping up commercial activities, Mr. Thero conceded that Amarin is working at a bit of a disadvantage, seeing as nearly all of the company’s resources for the past seven years have been poured into REDUCE-IT (at the expense of sales force and other avenues). On this note, he chuckled over the fact that Amarin had zero total sales reps in the entire New England area previously, and explained that connection with the HCPs and broader system will need to be built from the ground up in certain regions.

    • In Q&A, Mr. Thero gave a deep dive on Vascepa’s closest potential competitor – AZ’s Epanova (omega-3 carboxylic acids). AZ’s STRENGTH CVOT (n=13,086) is set to complete in October 2019, five years after its initiation in October 2014. Although Mr. Thero did express a hope that AZ succeeds in this pursuit – having another competitor may actually benefit Vascepa’s penetration into the market – he also pointed out that omega-3 mixtures have not worked in CV risk reduction to date. Manufacturing hurdles may also pose a problem for Epanova, as Mr. Thero expressed some concern over the stability and purity achieved in the manufacturing process. Moreover, Epanova does contain DHA, which raises LDL, a known CV risk factor (Vascepa is pure EPA, with no DHA). Earlier studies have also indicated GI tolerability issues with Epanova. Nevertheless, STRENGTH is enrolling a higher risk population (patients with hypertriglyceridemia, low HDL, and high CVD risk) than REDUCE-IT, which may help in achieving statistical superiority on three-point MACE. Moreover, we take all of these points with the grain of salt that Epanova does represent a possible direct competitor to Vascepa. We echo Mr. Thero’s sentiments hoping for success in the STRENGTH study – more patient choice, especially in a landscape with such a large unmet need, is a clear-cut win. 

    • Mr. Thero stressed that KOL reception of REDUCE-IT results has been overwhelmingly positive. Impressively, REDUCE-IT was named the number one cardiology story in 2018 by NEJM and also placed in the top ten of ACC’s year-end list. Mr. Thero noted that NEJM has incorporated REDUCE-IT results into its CME program, and well-respected academic institutions such as Harvard and Oxford have used Vascepa as an example in their grand rounds. At this point, it’s clear that REDUCE-IT is considered a landmark trial amongst KOLs and the broader academic realm. Now, the challenge Amarin faces is translating this for a broader HCP and patient audience in order to deliver on the massive potential of Vascepa in improving preventative CV care.

    • Mr. Thero continues to underscore that he views Vascepa as more of a volume than pricing opportunity. We’re glad to see this sentiment reiterated, especially in the face of questions from investors over whether Amarin may exploit Vascepa as a “pricing opportunity.” This strategy – of ensuring broad access for Vascepa at an affordable price – is especially interesting when juxtaposed against branded therapies elsewhere in the CVD landscape, namely PCSK9 inhibitors, which have notoriously struggled in the face of persistent access and affordability issues. On this front, Mr. Thero emphasized that coverage remains strong for Vascepa and most patients on commercial plans can access the therapy at $3/month with a co-pay card. Furthermore, Mr. Thero disclosed that Amarin is currently conducting a pharmacoeconomic analysis of Vascepa’s cost-effectiveness and will have results of this study sometime in 2019, to further inform pricing decisions with Vascepa.

    • Mr. Thero also announced that Amarin has entered into an agreement with Teva for a potential generic Vascepa launch in August 2029.

    Amgen: Remains Bullish on Repatha Despite Access Woes; Touts It as a Potential “Very Strong Growth Driver”

    Bob Bradway (Amgen, Thousand Oaks, CA)

    Amgen CEO Mr. Bob Bradway highlighted PCSK9 inhibitor Repatha’s potential to address “the world’s biggest public health problem” and the “greatest unmet need in healthcare” – cardiovascular disease. While Repatha’s clinical potential to treat hyperlipidemia and CVD is undeniable, we struggle to see how Mr. Bradway’s ambitions for the product will be realized unless patient access and affordability are dramatically improved. To this end, he highlighted positive effects emerging following the 60% list price cut for Repatha in October 2018. Mr. Bradway noted several important signs of progress:

    • More than 50% of commercial patients can now access Repatha with physician attestation only (presumably, no prior authorization is needed). For these patients with commercial coverage, co-pay cards are available to lower out-of-pocket costs.

    • Approximately 80% of current Repatha users on Medicare have access at the new lower list price through their respective plans. Mr. Bradway elaborated that as the proportion of Medicare patients continues to grow over time in accordance with the aging US population, Repatha will continue to improve in affordability for the general population.

    Regarding Repatha’s price cut, Amgen announced yesterday that all device options for the PCSK9 inhibitor will now be available at a 60% reduced list price of $5,850/year. The initial announcement of this list price cut only applied to the SureClick autoinjector, which is the most commonly used delivery system for Repatha, but the discount now extends to the Pre-Filled Syringe and Pushtronex (on-body infuser with prefilled cartridge) devices as well. Whereas the Pre-Filled Syringe and SureClick autoinjector are administered once every two weeks, the Pushtronex system allows for once-monthly dosing and enables patients to perform moderate physical activities as Repatha is delivered subcutaneously. We’re thrilled to see Amgen expand its list price cuts to include these other modes of delivery for Repatha and allow for expanded patient choice. That said, we imagine there’s a much longer road ahead to optimizing reimbursement of PCSK9 inhibitors.

    • Mr. Bradway underscored that Repatha (evolocumab) remains the market leading PCSK9 inhibitor as it continues to outpace Sanofi/Regeneron’s Praluent (alirocumab). As of the end of 2018, Repatha holds 64% of total weekly US prescriptions (see graphic below); notably and encouragingly, total prescriptions for the class continue to display sustained (yet incremental) growth. Amgen management expressed during the company’s 3Q18 financial update that they expect Repatha’s price cut to drive long-term volume gains for the franchise, and we hope to see volume gains significantly pick up for both Repatha and Praluent in the near future.

    • New cholesterol guidelines released at AHA 2018 further bolster the utility of Repatha in disease management. These guidelines, the first full update since 2013 guidelines from AHA/ACC, recognize the benefit of even lower LDL-C levels, giving more credence to the idea of broader Repatha use. Mr. Bradway mentioned these updated guidelines as another potential tailwind that will lift Repatha revenue in the coming years. 

    Array: CEO Mr. Ron Squarer Discusses Partnering Philosophy for Oncology vs. Non-Cancer Disease Areas; No Update on Autoimmune Partnership with Amgen

    Ron Squarer (Array, Boulder, CO)

    Array’s presentation and breakout session were almost entirely dedicated to oncology, with a brief mention of the company’s partnering strategy for non-cancer disease states. CEO Mr. Ron Squarer reviewed the “evolution” of Array BioPharma, which began as a research company eager to partner its molecules. Over the years – and especially since the current executive team has been in place – management realized that carrying oncology candidates through clinical development could be more effective for Array vs. partnering on all projects. According to Mr. Squarer, Array has consciously reduced its frequency of partnering and has doubled down on INDs (Investigational New Drug Applications) for cancer. Where the company has less expertise (outside of cancer), management will most likely explore partnerships, Mr. Squarer explained. Array and Amgen teamed-up in mid-2017 to discover and develop treatments for autoimmune disorders, possibly including type 1 diabetes, though the initial announcement was vague and we’ve heard no additional details since then.

    Astellas: No Mention of SGLT-2 Inhibitor Suglat’s (Ipragliflozin) Recent Type 1 Approval in Japan; Roxadustat for Anemia Associated with CKD Submitted to Japanese Regulatory Agencies

    Kenji Yasukawa, PhD (Astellas, Tokyo, Japan)

    Astellas President and CEO Dr. Kenji Yasukawa failed to mention the company’s SGLT-2 inhibitor Suglat (ipragliflozin), which was recently approved for an indication of adjunct therapy in type 1 adults in Japan – this was very new news to us as of about a week ago. Ipragliflozin was approved for type 1 diabetes on December 21, 2018. To our knowledge, this is the first instance of an SGLT inhibitor formally approved for adjunct type 1 therapy, which is incredibly (!) exciting from our view. Dosing and administration info for the type 1 indication is as follows: “For adults, the usual oral dosage is 50 mg ipragliflozin once daily before or after breakfast, co-administered with insulin preparations. In the case of inadequate efficacy, the dose may be increased to 100 mg once daily while careful monitoring of the patient’s conditions.” For context, type 2 patients are also dosed at 50 mg ipragliflozin once daily, with the option to escalate to 100 mg. We’re particularly curious as to what “careful monitoring of the patient’s conditions” means in this context – what DKA preventative measures are being taken? We assume that more details on dosing, ketone monitoring, patient selection, patient education, and DKA prevention/treatment are included in the prescribing information for this indication – if you have access to this, please let us know! To be sure, SGLTs in type 1 have emerged as a major theme in the diabetes field of late, and this discussion will only intensify as we approach January 17 – the Advisory Committee Meeting for Sanofi/Lexicon’s sotagliflozin in type 1 diabetes. Although we doubt that this approval will have a massive bearing on this Ad Comm next week, it is certainly notable to see other regulatory agencies forge ahead with approval of SGLT inhibitors for type 1 diabetes. We’re eager to track uptake of ipragliflozin in the type 1 Japanese population following this approval, and we hope to learn more about corresponding DKA prevalence. Of note, AZ has filed SGLT-2 inhibitor Forxiga (dapagliflozin) for a type 1 indication in Japan; a decision is expected in 2Q19, and this positive news for Suglat bodes well.

    • Elsewhere in the pipeline, Astellas views roxadustat as a potential growth driver, with regulatory filing completed in 2018 following robust readouts of phase 3 data. Roxadustat, an inhibitor of hypoxia inducible factor prolyl hydroxylase activity, has shown impressive phase 3 results in CKD patients with anemia not on dialysis. An NDA was submitted in Japan in October 2018, and management has expressed great optimism over the oral therapy’s ability to reduce treatment burden and offer a new therapeutic option in an area of unmet need. Astellas also hopes that roxadustat’s robust phase 3 data will help to establish reimbursement both in Japan and the EU. Notably, AZ is also pursuing a roxadustat candidate for anemia in CKD or ESRD, with an FDA filing planned for 1H19 (and approval already achieved in China).

    Daiichi Sankyo: Omits Diabetes from its Five-Year Business Plan

    George Nakayama, (Daiichi Sankyo, Tokyo, Japan)

    CEO Mr. George Nakayama did not mention diabetes during Daiichi Sankyo’s presentation. As a reminder, Daiichi Sankyo markets DPP-4 inhibitor Tenelia (tenegliptin) and bile-acid sequestrant Welchol (colesevelam), along with fixed-dose SGLT-2/DPP-4 inhibitor combination Canalia (tenegliptin/canagliflozin). Instead, Mr. Nakayama outlined Daiichi Sankyo’s five-year business plan that focused on (i) growing oral anticoagulant Edoxaban, (ii) growing to be the number one company in Japan (we assume pharmaceutical), (iii) expanding US businesses, and (iv) establishing its oncology business. We were disappointed to see that diabetes is not considered an integral part of Daiichi Sankyo’s five year plan. Despite this omission, however, we would still like to be (at least theoretically) optimistic about Daiichi Sankyo’s diabetes pipeline, which continues to focus on areas of high unmet need among diabetes complications (see the company’s full pipeline here). Mirogabalin, an oral α2δ ligand for diabetic peripheral neuropathic pain (DPNP) is expected to be approved in 1Q19 after submission to Japanese regulatory authorities in February 2018. Additionally, esaxerenone (mineralocorticoid receptor agonist for diabetic nephropathy) remains in a phase 3 study (ESAX-DN) expected to complete in March 2021. 

    Eisai: Management Silent on Belviq in Favor of Alzheimer’s Candidate

    Ivan Cheung (Eisai, Tokyo, Japan); Ryohei Yanagi, PhD (Eisai, Tokyo, Japan)

    Continuing a recent trend, Eisai CEO Mr. Ivan Cheung and CFO Dr. Ryohei Yanagi did not mention obesity therapy Belviq (lorcaserin; partnered with Arena). As a reminder, the neutral CAMELLIA-TIMI CVOT for lorcaserin was initially presented at ESC 2018, with further glycemic data added at EASD 2018. Lorcaserin demonstrated CV safety and a significant 19% RRR for new-onset diabetes vs. placebo; however, mean weight loss difference was only ~4 lbs vs. placebo at a median 3.3 years of follow up. While these results should solidify Belviq’s mid-term safety in the eyes of HCPs, we don’t expect that they will significantly shift the trajectory of the branded obesity market or Belviq. For example, Dr. Naveed Sattar labelled lorcaserin a very down-the-line adjunct therapy for weight loss in his independent commentary at EASD. With its high cost vs. off-label generic options and underwhelming efficacy, Belviq hasn’t garnered significant commercial success – though that’s not to say it isn’t very helpful for some people, as all patients respond differently to different therapies. Eisai management reiterated in 2Q18 (though not in 3Q18) that they are deprioritizing Belviq in favor of a new Alzheimer’s candidate, which was heavily discussed alongside the company’s oncology pipeline in Eisai’s JPM presentation and breakout session. Belviq partner Arena also did not mention the therapy in its Thursday presentation at JPM.

    GSK: No Diabetes/Tanzeum Talk During GSK’s Presentation or Breakout

    Emma Walmsley (GSK, Brentford, UK)

    CEO Ms. Emma Walmsley made no mention of GLP-1 agonist Tanzeum during GSK’s presentation or breakout. We can’t say we’re surprised, since the company has discontinued Tanzeum (once-weekly albiglutide) and is looking to divest the asset as we understand it – we did get the impression from a brief conversation after that seeing Tanzeum go to another player would make them very happy given the CV benefits, which they acknowledged. Ms. Walmsley noted that GSK has terminated or discontinued 80 programs in the last couple years, in order to streamline investments into HIV, infectious disease, oncology/immuno-oncology, and respiratory disease – and it was very clear how much attention oncology/immuno-oncology in particular was receiving. We wonder whether Tanzeum could actually return to the market in the hands of another commercial company – although positive HARMONY CVOT results which read out at EASD 2018 were striking, it is more difficult and expensive to manufacturer and the glucose potency and weight loss are not as favorable as the other drugs – but boy is it on CV risk reduction! Indeed, allthough albiglutide has never been able to compete with other GLP-1 molecules on potency (GSK management has gone so far as to say it shouldn’t have been developed as a diabetes drug after early data showed low glycemic efficacy – that may have been very apt or very short-sited), it seems to offer profound CV benefit regardless. In HARMONY, albiglutide reduced risk for three-point MACE by 22% vs. placebo (p=0.0006 for superiority) and reduced risk for MI by 25% vs. placebo (HR=0.75, 95% CI: 0.61-0.90). Given the unmet need in lowering CV risk for diabetes patients, it would be a travesty in our view for Tanzeum to simply disappear from the treatment arsenal. Rather, we’d love to see a company like Walmart (as just one example) buy the asset and offer albiglutide as a low-cost cardioprotective diabetes medicine; in the best-case scenario, Tanzeum would be re-launched at a lower price point, expanding access to the GLP-1 class (we doubt it would prompt movement away from next-generation GLP-1s since the weight loss and lower average glucose levels are major selling points). There’s no shortage of challenges in the diabetes market, but quite notably, the GLP-1 market is on an impressive growth trajectory and shows no signs of slowing down – and this is before the major public health benefit from GLP-1 is really quantified. Several factors make it more appealing to invest in GLP-1 including continued underlying class growth, far less pricing pressure than you see in the insulin market, emerging consensus on a cardioprotective class effect, etc. – here’s hoping that by JPM 2019, we’re hearing another company talk about its acquisition of albiglutide and about expanding commercial prospects for the therapy.

    • Ms. Walmsley did not comment on otelixizumab, GSK’s anti-CD3 candidate in phase 2 for new-onset type 1 diabetes, which again was what we expected. She dedicated a substantial portion of her remarks to Shingrix, the company’s highly-successful Shingles vaccine. For what it’s worth, vaccines typically aren’t the most profitable products in a company’s portfolio, so pharma often under-invests on this front. It’s thus notable that GSK is prioritizing vaccines, and we were also pleased to hear Ms. Walmsley’s perspective on minimizing patient burden with longer-acting therapies for HIV. Of course, we’d ideally like GSK to apply this mentality to diabetes, obesity, and cardiovascular (the most prevalent chronic diseases and the world’s leading public health problems), but it seems that ship has sailed – at least for now. Finally, we note that it was terrific to hear Ms. Walmsley position GSK as a “modern company.”

    Hanmi: Names Obesity + NASH as Strategic Priorities; Primes 2019 as Year Filled with Important Pipeline Milestones

    Sechang Kwon, PhD (Hanmi, Seoul, South Korea)

    President and CEO Dr. Sechang Kwon provided Hanmi’s update at JPM, highlighting obesity and NASH among Hanmi’s strategic priorities. The South Korean pharmaceutical company currently has nine candidates in obesity, NASH, and diabetes: three in preclinical development, four in phase 1, one in phase 2, and one phase 3. We’re surely glad to see Hanmi carry such a strong focus in diabetes and diabetes-adjacent conditions. Dr. Kwon gave a primer on what’s to come in 2019 for some of these candidates:

    • Phase 3 studies for Sanofi-partnered GLP-1 agonist efpeglenatide will continue on schedule. Efpeglenatide’s phase 3 program currently consists of five studies, none of which are expected to complete before 2020, according to As a reminder, Sanofi licensed efpeglenatide from Hanmi in 2015 and has since expressed strong confidence in the candidate’s ability to compete in an increasingly-competitive GLP-1 market. The once-weekly candidate is being developed with an autoinjector, and we’ll be curious if and how Sanofi/Hanmi look to differentiate efpeglenatide (particularly from Trulicity, which seems to be its closest comparator right now). On some level we are not sure how much it’ll need to – the world’s an oyster for GLP-1 at this stage, we think.

    • Phase 2 completion of Janssen-licensed GLP-1/glucagon dual agonist JNJ-64565111 is expected in 2019. Notably, this candidate is currently in two phase 2 studies: one study in obesity and another in severe obesity + type 2 diabetes. Seeing as several thought leaders have suggested that dual agonists represent the next stride forward in diabetes and obesity therapy, we’re particularly keen on reviewing these results. See our GLP-1/glucagon and GLP-1/GIP competitive landscapes for a full rundown.

    • Phase 2 initiation for once-weekly glucagon analog HM15136 for obesity may come in 2019. Dr. Kwon boasted that Hanmi believes HM15136 “could be a best in class treatment for obesity,” and noted that phase 2 studies are expected to begin for the candidate in the upcoming year, most likely in 4Q19. The candidate drives weight loss by promoting increased energy expenditure and reduced food intake while increasing lipid clearance and decreasing lipid synthesis. We’re interested to learn more about the pros and cons of glucagon mono-agonism vs. GLP-1/glucagon co-agonists, particularly on the issue of tolerability that has raised concern with dual agonists so far.

    • Phase 2 initiation of GLP-1/GIP/glucagon triple agonist HM15211 in NASH/obesity may also come in 2019. Hanmi expects phase 2 studies for this candidate to begin in 4Q19. Dr. Kwon highlighted that both mice and primate studies with HM15211 have shown dramatic reductions in NASH biomarkers in the liver, and we note that impressive preclinical data for this candidate was also presented in a poster at ADA 2017.

    Intercept: Interim Phase 3 Data for Intercept’s Obeticholic Acid in NASH (F2/F3) to Come in 1Q19, Potentially Supporting Regulatory Filing

    Mark Pruzanski, MD (Intercept, New York, NY)

    Intercept CEO Dr. Mark Pruzanski focused primarily on phase 3 NASH candidate obeticholic acid (OCA) during the company’s afternoon presentation at JPM, highlighting the recent announcement that interim data from REGENERATE will be available in 1Q19. This interim 72-week analysis is expected to support regulatory submission and approval ahead of full 72-week results, which the company hopes will be a post-market readout; the interim analysis will be based on data from ≥750 participants with F2/F3 fibrosis, and the study will continue blinded to completion. Indeed, Intercept is already busy with commercial launch preparations, per Dr. Pruzanski. For context, obeticholic acid – one of four candidates in phase 3 for NASH right now – is under investigation in two studies:

    • REGENERATE is still enrolling up to 2,370 participants with F1-F3 fibrosis due to NASH; the F1 subgroup is exploratory. Per, full completion up to 72 weeks is anticipated in October 2022, but the expected interim analysis, if positive, would support regulatory approval. To date, over 2,000 patients have been enrolled, making this the largest NASH trial to date.

    • REVERSE is enrolling participants with compensated cirrhosis due to NASH (F4 fibrosis), and the primary endpoint is an improvement in fibrosis of ≥1 stage with no worsening of NASH, up to 52 weeks. Intercept aims to have the study fully enrolled (n=540) in 2019. Full completion is currently anticipated in July 2021.

    While this session (in the Grand Ballroom) was not very highly-attended, the audience was very engaged during the breakout. Of note, REGENERATE has two co-primary endpoints: (i) ≥1 stage improvement in fibrosis with no worsening of NASH and (ii) NASH resolution with no worsening of liver fibrosis. This make Intercept’s trial unique among those for phase 3 candidates and could give OCA a key leg up if it hits on both: Most therapeutic targets under investigation in NASH are geared toward improving steatohepatitis (fat and inflammation) or fibrosis, but not both. OCA functions as an FXR agonist – which, as we wrote on Day #1, is one of the most promising and validated mechanisms in NASH right now, impacting insulin resistance, inflammation, lipid metabolism, and fibrosis. Indeed, the phase 2 FLINT trial of OCA conducted by NIDDK (which garnered the candidate a breakthrough therapy designation) demonstrated improvements in NAFLD activity score (the primary endpoint), but also in all key facets of NASH including measures of fibrosis, steatosis, lobular inflammation, and hepatocellular ballooning. Dr. Pruzanski was, understandably, very keen to emphasize his confidence in the mechanism, and he devoted a notable amount of time to outlining the mechanism and pathophysiology of OCA and NASH. Some attendees, during the breakout, did express concern over the trial’s power to show superiority on two primary endpoints, but management was stalwart in its belief that alpha should not be an issue. Moreover, to garner FDA approval, OCA will only have to succeed on one of the two endpoints, not both.

    • OCA could be the first-ever approved NASH therapy, and is apparently neck-and-neck with Gilead’s selonsertib. Gilead has stated NDA timing in mid-2019, pending positive interim phase 3 data. However, our sense is that the field is more bullish on OCA than selonsertib: In a recent survey of NASH professionals conducted by Hanson Wade (which puts on the annual NASH Summit), 26% of respondents felt OCA was the most likely phase 3 candidate to garner approval first, compared to 7% for selonsertib and 23% for elafibranor – though 40% still felt it was too close to say. We agree with the latter, and we’re eager for interim results.

    • In the longer term, Intercept plans to explore options for combination therapy for NASH, and Dr. Pruzanski emphasized the company’s goal of expanding its pipeline. To this end, Intercept has zeroed-in on bezafibrate, a PPAR-alpha agonist used for treating hyperlipidemia outside the US, which the company just acquired the US rights for from Aralez Pharmaceuticals. Intercept intends to explore a combination of bezafibrate with OCA in primary biliary cholangitis; in the future, he says, the company could explore a similar combination in NASH, but no formal plans have been made. During Q&A, management was also positive on the potential of GLP-1 agonists for NASH, characterizing this is a likely “complimentary approach to an FXR agonist” and piquing our interest in a potential partnership. Given that GLP-1s can impact NASH not only through solid weight loss but also via anti-inflammatory and other metabolic mechanisms, they could well compliment an FXR-like mechanism. We’ll be curious to see if Novo Nordisk in particular considers a combination approach and/or partnership for injectable semaglutide, which is currently in phase 2b for NASH.

    Ionis: Says NASH Candidate May Enter Pivotal Studies Within Next Two Years, But Continues Silence on Glucagon Antagonist

    Stanley Crooke, MD, PhD (Ionis, Calsbad, CA)

    Ionis CEO Dr. Stanley Crooke gave considerable slide real-estate to the company’s angiopoietin-like protein 3 inhibitor (IONIS-ANGPTL3-Lrx), currently in phase 2 for NASH. The candidate was listed on a slide touting medicines in Ionis’ pipeline with the potential to enter pivotal studies in the next two years. The candidate is currently in a phase 2 trial in people with high triglycerides, type 2 diabetes, and NAFLD that is expected to complete in May 2019; positive data from a phase 1/2 study was presented at AHA 2016. We’re pleased to see this confidence in ANGPTL3 from Ionis management, though it’s admittedly a soft commitment and was hardly a focus of the presentation. Slides also indicated that a phase 2 readout for the candidate is planned for 2019, and we’re eager to see whether these results build upon positive phase 1/2 results and support further study of the unique candidate. Elsewhere in the pipeline, we were disappointed not to hear any mention of/updates on Ionis’ potential first-in-class glucagon receptor antagonist (IONIST-GCGRRx) for type 2 diabetes (stalled in phase 2) or its DGAT2 inhibitor (IONIS-DGAT2Rx) for NASH (phase 2 just completed). We hope that these candidates’ exclusion from Ionis’ list of medicines to enter pivotal studies within the next two years does not signal lost confidence in their potential. Regarding the GCGR antagonist candidate, this omission aligns with continued silence from management – we haven’t heard any updates since topline results from a phase 2 dose ranging study were reported in 1Q17.

    • Dr. Crooke also highlighted Ionis’ ligand-conjugated antisense (LICA) technology, which has been instrumental in targeting drugs to the liver. The technology adds specific chemical moieties onto antisense drugs in order to increase the efficiency of drug uptake in particular tissues. Dr. Crooke underscored how this technology has led to a greater than 30-fold increase in the dose potency of several therapies targeted to the liver when compared to previous generations of parent antisense medicines. Notably, IONIS-ANGPTL3-Lrx uses this LICA technology, along with 12 other candidates in the Ionis pipeline – we wonder if this could result in lower drug costs, as less medication would be required to achieve efficacy.

    J&J: No Mention of Invokana or Metabolic Pipeline; Device Divestiture Best “from a Portfolio Management Perspective”

    Joe Wolk (J&J, New Brunswick, NJ)

    J&J executives did not once mention SGLT-2 inhibitor Invokana (which we understand is receiving very little investment internally) or the company’s metabolic pipeline (GLP-1/glucagon dual agonists, CB1 agonist, PYY agonist) in a pre-determined Q&A (i.e., no open audience questions) or breakout. J&J’s silence continues to disappoint: Invokana has been on a downward trajectory since ~1Q17 and recent earnings calls have included only brief discussion of the franchise despite the clear fact that impressive burgeoning tailwinds – a first-in-class CV indication in the US for reducing risk of three-point MACE, plus imminent results from the very positive CREDENCE renal outcomes trial – hold promise for both Invokana and the entire SGLT-2 class. We had hoped J&J management would be eager to highlight these or that it would state something about the under-investment. The only tangentially-related discussion revolved around drug pricing, with Worldwide Chairman of Pharmaceuticals Ms. Jennifer Taubert broadly advocating for value-based care and out-of-pocket caps in Medicare Part D.

    • Presumably in reference to Platinum Equity’s $2.1 billion acquisition of LifeScan, CFO Mr. Joe Wolk rationalized J&J’s divestment in “some devices” as best “from a portfolio management perspective.” Worldwide Chairman of Medical Devices Ms. Ashley McEvoy subsequently reaffirmed J&J’s commitment to devices, stating that the company expects to continue its same spending cadence despite divestment. Unfortunately, it does not appear as though any of this will go toward diabetes. As a reminder, Ms. McEvoy asserted in 3Q18 that J&J’s diabetes device exit will be acknowledged in the company’s 4Q18 call (January 22) – in stark contrast to much focus on diabetes in years past.

    Lexicon: Pivotal Quarter for Sotagliflozin in Type 1 Includes FDA Ad Comm, CHMP Opinion, and FDA PDUFA Date; Potential Launches in 1Q19 (US) and 2Q19 (EU)

    Lonnel Coats (Lexicon, Woodlands, TX)

    CEO Mr. Lonnel Coats deemed 2019 a “transformational year” for sotagliflozin in type 1 diabetes, with several key dates lined up in 1H19. The year is frontloaded, and the first milestone will come next week (January 17) at FDA’s Advisory Committee meeting to review Sanofi/Lexicon’s NDA for sotagliflozin as an adjunct to insulin in type 1 diabetes. Then, as we learned just before Christmas Day, and as many learned today, the CHMP will offer its analogous opinion by January 31, after a closed-door EMA/CHMP meeting that was held back in November 2018 to discuss both sotagliflozin and dapagliflozin in type 1 diabetes. This date confirms that EMA/CHMP will offer its opinion on either submission (sotagliflozin or dapagliflozin) until after FDA’s Ad Comm has cast its (literal) vote. We think this is good overall – we are not sure but assume they may meet again. Following both preliminary opinions, the NDA’s PDUFA date from FDA is set for March 22. If approved, Sanofi/Lexicon may launch in the US soon – it’s far too soon to speculate but presumably a massive educational process is in place. To be sure, a US launch soon would be an aggressive timeline (especially in the context of a March 22 PDUFA date – decisions don’t typically come long before these, in our observation); certainly, confidence from Lexicon going into the Ad Comm next week is not surprising but we’d like to make sure the systems are set up for success. Finally, Mr. Coats highlighted that the companies will present new analyses from the inTandem program for sotagliflozin in type 1 diabetes at both ADA 2019 and EASD 2019 in June and September, respectively – we’ll be curious to see what these add to the existing body of available data and we are sorry we were not able to get further data.

    • Mr. Coats acknowledged that DKA imbalance will be a big focus at the upcoming FDA Ad Comm meeting. This comes as no surprise, as increased DKA risk is widely recognized as a class risk with SGLT inhibitors in type 1 diabetes – the sponsor must be able to show how to address risk. On the topic of DKA risk, Mr. Coats focused on the importance of education and awareness. He pointed toward education on DKA risk management with SGLT use from clinical associations, including recommendations from AACE/ACE, Dr. Satish Garg and others, and a Prof. Thomas Danne-led ATTD Consensus Meeting document expected to be published soon. A similar focus on education/awareness channeled through consensus documents was also evident on Lexicon’s 3Q18 earnings call. Lexicon’s strategy for assuaging concern over DKA is readily apparent – cultivating thought leader consensus on DKA risk mitigation and prevention serves as an important reference to address inevitable regulatory concerns over the risk. Of course, consensus usually comes with data and this isn’t an area where there is much data – but there is plenty of room to standardize and minimize risk.

    • Mr. Coats underscored the tight bond between sotagliflozin in type 1 diabetes and the beyond A1c movement. The inTandem program demonstrated sotagliflozin’s efficacy not only on A1c lowering, but also on a host of other measures that are important to “read” on productivity : reduced postprandial glucose, bolus insulin, body weight, glycemic variability, and even hypoglycemia, along with meaningful increases in time in range. We’re always thrilled to see Mr. Coats emphasize these outcomes-beyond-A1c and reinforce their importance to patients. Moreover, we recently noted in our 2018 + 2019 Reflections piece that, broadly, the SGLT inhibitor in type 1 story has both leveraged and benefitted from the beyond A1c movement, perhaps more than any other diabetes therapy use case. On this front, Mr. Coats explained that he sees the upcoming FDA Ad Comm as “a remarkable opportunity for [FDA] to test the concept of benefit beyond A1c within the Advisory Committee.” We’re eager to see how FDA will synthesize the totality of sotagliflozin’s risk/benefit profile in its presentation of the data, especially considering the fact that the many benefits of sotagliflozin go beyond what the agency is accustomed to considering in the diabetes realm – and also given that CDER has not that we know of encouraged submission of CGM (that we know of – this is speculative). There is one new paper out by Roy Beck, et. Al., showing DCCT time-in-range analysis just published in Diabetes Care. To be sure, we’ll be interested in how the panel responds to and discusses these endpoints; big picture, we do not think it is safe to have these drugs prescribed to tens of thousands of people off-label – Dr. John Buse recently estimated as many as 50,000 type 1 patients could be on an SGLT-2.

    • Lexicon continues to tout the novel dual inhibition of sotagliflozin as a driver of differentiation amongst a crowded SGLT-2 inhibitor market. This was a continuous theme during Lexicon’s presentation – and understandably so, seeing as sotagliflozin stands to be the only dual SGLT inhibitor on the market. Mr. Coats expressed considerable confidence in this unique mechanism, noting that Lexicon believes “that the mechanism of SGLT-1 inhibition is going to prove to be very valuable” in differentiating sotagliflozin amongst its peers and yielding a best-in-class profile for the agent. We would just like to see the approval of an SGLT for type 1 patients at this stage – a rising tide will lift all boards. Mr. Coats explained that SGLT-1 inhibition better reduces post prandial glucose levels, elevates GLP-1 release, and provides for lower SGLT-2 associated urinary glucose excretion – as Lexicon has emphasized, potentially making sotagliflozin more viable in patients with CKD (more on this below). In the past, we’ve also seen Lexicon discuss with enthusiasm putative enhanced cardioprotective effects associated with SGLT-1 inhibition. We’re eager to see how this novel mechanism may hold up in outcomes-based clinical trials.

    • Turning fully to sotagliflozin in type 2 diabetes, Mr. Coats singled out five studies from the 13-trial phase 3 program as key in differentiating sotagliflozin. As on past quarterly calls, Mr. Coats highlighted the importance of SOTA-CKD3 (moderate renal impairment), SOTA-CKD4 (severe renal impairment), SOTA-EMPA (head to head sota vs. empa on DPP-4 background), SCORED (CV and renal outcomes), and SOLOIST-WHF (CVOT in worsening heart failure). He further remarked that, although this phase 3 program is surely broad (with 13 total studies), it also represents a program that is “geared to win” – for sure, it’s clear that these five highlighted studies give sotagliflozin the opportunity to differentiate itself amongst the class despite its potential fifth-to-market status. Regarding the CKD studies, this emphasis aligns with Lexicon’s continued focus on differentiating sotagliflozin in patients with renal impairment. Mechanistically, because of its unique dual inhibition, sotagliflozin could offer both enhanced renal protection and glucose control in patients with lower eGFRs when compared to SGLT-2 inhibitors, which lose their function as eGFR declines (but may still maintain renal protection at low eGFR).

      • Notably, “core” phase 3 studies for sotagliflozin are already fully enrolled, and readouts will start to emerge in 2Q19. Mr. Coats said that data from this phase 3 program should be expected “throughout 2019” as well. We’ll expect to first see data soon from the sotagliflozin as monotherapy (estimated completion date May 2019), sotagliflozin as add-on to metformin (est. March 2019), sotagliflozin as add-on to sulfonylurea (est. May 2019), and SOTA-EMPA (est. May 2019) trials. For a full rundown of the phase 3 program for sotagliflozin in type 2 diabetes, see here.

    Q: What is the “right” type 1 patient who should be on sotagliflozin?

    A:  Patients who are not adequately engaged in their care [should not be on sotagliflozin]. Patients who are willing to monitor their blood glucose levels and ketone levels – for these patients, sotagliflozin may be appropriate. Patients who are not willing to add that additional step [of ketone monitoring] into the process may not be a good candidate.  (Editor’s note – or, presumably, those patients who may not have access.)

    Q: How frequently would patients have to monitor their ketone levels?

    A: They would have to monitor whenever they didn’t feel good – when they felt nauseas, if they’re going to be consuming lots of alcohol. There are things we can say from a very practical matter, “you should always check your ketones in situations just like this.” Now, for a patient living with type 1 diabetes, they’re already going to know all of these things, because already they know they have to check their blood glucose levels when they have infections, when they go and exert themselves – they already know those things. (Editor’s note – with all due respect to Mr. Coats, we think it is important to realize that patient heterogeneity in type 1 is critical to remember; there are many patients who may not have the same education. Notably, this should be easily addressable.)

    Q: What should we look for in a label?

    A: We should be very clear on the label and say that patients who are not willing to do certain things like checking ketones, patients who are not able to adequately monitor their diet, meaning that those who are on ketogenic diets, cannot be on this drug. Those patients are not applicable. On the label, you should look for contraindications. You should look at the “Caution” section of the label – all of these things are to guide the community and guide physicians on what the appropriate use of this agent should be and how to administer this to patients with all of the benefits in the absence of risk. (Editor’s note – we agree and believe education on DKA monitoring will be important to establish as well as education on the other side effects.)

    Lilly: CEO Mr. Dave Ricks Touts Trulicity in Competitive GLP-1 Class, Expects Significantly More Class Growth with No Diminished Access; REWIND Positive in Primary Prevention?; First Jardiance for HF Data Possible in 2019

    Dave Ricks (Lilly, Indianapolis, IN)

    Lilly CEO Mr. Dave Ricks is not beloved like John Linkleiter was but he seemed much more expansive in his address this year versus last year at JPM, his first as CEO. Overall, diabetes got a decent amount of attention and we’d say Lilly is certainly positioning the area more favorably than did other companies like Sanofi, Merck, and J&J. He touted Trulicity’s (dulaglutide) strong performance within the competitive GLP-1 class (best-in-class 43% volume-share [US only] and second-in-class 40% value share [global] in 3Q18), projecting far more class growth as GLP-1s are increasingly adopted as first-line injectables. We agree! While some would say it’s taken quite awhile, the products have all improved massively in our view – and finally (finally!) pancreatitis is no longer a worry. The field has come a long way from “twice-daily” but boy was the first GLP-1 the start to some history!  

    According to Mr. Ricks, use of GLP-1s as the first injectable in the US sits at just under 30% in terms of total market share, but new-to-brand starts (a stronger indicator of where the market is heading) are at ~50% and accelerating on the back of Trulicity and Novo Nordisk’s Victoza (liraglutide) and Ozempic (semaglutide). While there has been much excitement surrounding the last’s entry to the GLP-1 market, Mr. Ricks maintained that Trulicity is “a bit better drug” based on its purported best-in-all-of-diabetes-medication adherence, which Mr. Ricks attributed to the product’s once-weekly autoinjector with no need to titrate (the latter is a big deal for doctors). Coupling this with Trulicity’s glycemic and newly-demonstrated CV benefit, he believes (speaking on behalf of all GLP-1 manufacturers, as he sees it) that GLP-1s should be the first-line injectable therapy for type 2 diabetes – and fortunately for Mr. Ricks, the recent ADA/EASD consensus statement on managing hyperglycemia in type 2 diabetes and ADA’s 2019 Standards of Care both agree, particularly in cases of established ASCVD (atherosclerotic cardiovascular disease). Notably, Lilly’s positive REWIND CVOT for Trulicity could expand the use of GLP-1s (particularly Trulicity) for CV risk reduction to those with only CV risk factors (primary prevention), as Mr. Ricks stated during the breakout: “What’s unique about the REWIND study is that we included a large number of patients without existing CV disease, and across the whole population and in each part of the population we showed benefit.” This seems to suggest that both the primary and secondary populations achieved significant CV benefit in the trial, though it could also mean that overall benefit was achieved without a significant statistical interaction between the subgroups (since the study was not powered to show superiority in each subgroup) – we’ll have to wait for the data to know for sure. Mr. Ricks reiterated that the company plans to file for an indication prior to the full results presentation at ADA 2019, and he expects an early 2020 approval.

    • While potential headwinds exist, Mr. Ricks does not see the currently “good” access to GLP-1s or Trulicity dwindling in the near future for two reasons. First, if any players wanted to control growth as the class expands, they would have to change their pricing pattern. However, as it stands, long-term interest seems to be focused on preserving long-term value of GLP-1s with manufacturers investing heavily in the class – including Lilly, in both Trulicity and GIP/GLP-1 dual agonist tirzepatide – the latter is now entering phase 3 and garnering massive attention for its potency and tolerability (especially the medium dose). Second, payers have not yet been able to substitute one product for another based on differentiated clinical profiles – at least some of which can likely be attributed to CVOTs and CV indications, but also to differentiated efficacy on metabolic endpoints (A1c, weight). Indeed, we did hear Merck’s CEO Ken Frazier say yesterday how important differentiation was among Big Pharma drugs and that is much easier to show in GLP-1 than in SGLT-2 inhibitors or DPP-4 inhibitors, to date.

    • Mr. Ricks is “very confident” that unprecedented phase 2b efficacy (~25 lbs weight loss, ~2.4% A1c drop in 26 weeks) for tirzepatide is reproducible in phase 3, without the concerning tolerability profile. The candidate’s phase 3 SURPASS program, which is now underway, uses a 20-week titration scheme to achieve 15 mg dosing vs. six weeks in phase 2b – which results in a 34% dropout rate at this highest dose. As a reminder, President of Lilly Diabetes Mr. Enrique Conterno stated during a recent investor call that the company would and should cannibalize Trulicity sales should tirzepatide prove itself a breakthrough diabetes product (of course it should! Toujeo is doing this for Lantus at Sanofi, Tresiba is cannibalizing Levermir, etc.). Notably, a phase 3 program in obesity and a phase 2 study in NASH (including biopsy) are set to start in 2019 – this is a big deal for Lilly who traditionally has not invested in metabolic areas outside diabetes, for the most part.

    • When asked about Jardiance and slowed SGLT-2 class growth, Mr. Ricks acknowledged that any drug and/or class that “works on mortality” should certainly be showing even stronger growth. He likened current class-wide concerns over amputation risk to those over pancreatitis in early GLP-1 development, expressing optimism that a return to growth is imminent. Mr. Conterno made this point during the company’s December investor meeting. He also reminded the audience of the class’ potential in heart failure with or without diabetes, pointing to Lilly/BI’s EMPEROR-Preserved and EMPEROR-Reduced (n=6,976 total) trials, for which functional outcomes data could be available in 2019. As he sees it, this data should give substantial reassurance to HCPs on the benefits of SGLT-2 inhibitors beyond glucose control – that is certainly true. Of note, we would also add mounting evidence of renal benefit as a serious future tailwind for the class. At least, we hope so – renal disease is not particularly well-understood to many patients, nor is dialysis, nor is the payment model (do some payers push patients toward dialysis at some point – Medicare takes over all the payments, after all).

    • In brief mention, Mr. Ricks was bullish on a 2019 launch of nasal glucagon, which was submitted to FDA and EMA in 2Q18. We strongly believe this new class of product could have been fast-tracked – real innovation is about to be introduced!

    Merck: Continuing Recent Trend, No Mention of Diabetes or NASH

    Kenneth Frazier (Merck, Kenilworth, NJ); Roger Perlmutter, MD, PhD (Merck, Kenilworth, NJ)

    Continuing a recent trend, diabetes was not discussed during the fireside chat with Merck CEO Mr. Kenneth Frazier and President of Merck Research Labs Dr. Roger Perlmutter. Naturally, much of the conversation revolved around cancer immunotherapy Keytruda (pembrolizumab), which dethroned DPP-4 inhibitor Januvia (sitagliptin) as Merck’s top-earning franchise in 3Q18. Unsurprisingly, management also remained quiet on SGLT-2 inhibitor Steglatro: Merck and partner Pfizer have yet to break out earnings for the class newcomer, though we’re hopeful for the candidate’s future. VERTIS CV, the CVOT for Steglatro, is expected to complete in September 2019; as cardioprotection grows increasingly important to the SGLT-2 class (Jardiance and Invokana both have CV indications), the long-term commercial success of Steglatro will likely depend at least partially on VERTIS’ ability to support a CV indication for Steglatro (which could also affect formulary access and rebate negotiations). With Steglatro’s fourth-to-market status and the relative lack of differentiation among SGLT-2 inhibitors, Merck’s reticence becomes more understandable.

    • There was also no mention of Merck’s metabolic pipeline, which includes phase 2 GLP-1/glucagon dual agonist MK-8521, an undisclosed glucose-responsive insulin, and – newly – phase 2b NASH candidate MK-3655, just licensed from NGM Bio. Of course, commercialization of biosimilar insulin glargine Lusduna was terminated in 3Q18. However, according to Dr. J Hans DeVries talk at IDF 2017, Merck has moved a second glucose-responsive insulin to phase 1 after earlier candidate MK-2640 was discontinued due to insufficient efficacy in a phase 1 trial. In addition to Merck’s very recent optioning of NGM Biopharmaceuticals’ NGM313 (now MK-3655), it seems that Merck will remain invested in metabolism for some time to come.

    Moderna: Early Phase Moderna Therapeutics/AstraZeneca VEGF-A mRNA Candidate (AZD8601) for Ischemic Vascular Disease, Including Diabetes Wounds

    Stephane Bancel (Moderna Therapeutics, Cambridge, MA)

    Moderna Therapeutics presented at JPM following a record-setting IPO last month. The company has a suite of early stage mRNA-based therapies, including one in partnership with AZ that codes for VEGF-A and has implications for diabetes wound healing, heart failure, and other ischemic vascular diseases. VEGF-A stimulates growth of new blood vessels, which can restore circulation to oxygen-deprived tissues (see this AZ slide deck from 2016 for more details). The mRNA therapy (AZD8601) has already proceeded through a phase 1 safety study (n=18) and is currently being evaluated in a phase 2a randomized study, in which the molecules are injected directly into the heart of people undergoing CABG (coronary artery bypass grafting). In a separate activity study, people with diabetes were given the VEGF-A mRNA intradermally; VEGF-A protein levels in the skin and blood flow at the injection sites were found to be elevated up to seven days post-dose. These results are reportedly going to be published shortly by AZ. While this was an early stage demonstration, there’s clear potential to treat ischemic injury. Better yet, we could imagine an earlier intervention when neuropathy is detected to restore tissue perfusion and prevent ulceration in the first place.

    • Moderna has whipped up a frenzy in popular media in recent years, building hype over its platform’s potential to develop therapeutics for nearly any disease state. For more on the science, history, and envisioned future for this exciting (yet secretive) biotech, we point toward this excellent article in Science.

    Mylan: Quiet on Biosimilar Diabetes Pipeline

    Heather Bresch (Mylan, Canonsburg, PA)

    Mylan did not directly address diabetes in a late-morning fireside chat, instead speaking broadly on the company’s efforts to diversify geographically and scientifically while building access. The company is somewhat atypical in that it produces both generic and branded products (though more so the former – including metformin, SUs, and TZD pioglitazone). Mylan’s vast generics catalog involves the company in a diverse range of therapeutic areas, so we’re not surprised diabetes didn’t come up. Additionally, Mylan is highly notable for its deep investment in biosimilars, and the company has recently reaffirmed its commitment to biosimilar insulin glargine product Semglee (partnered with Biocon). Mylan actually has a deep pipeline of diabetes biosimilars, though the status of ~half of that pipeline is somewhat uncertain (i.e., candidates have been announced but no updates have followed). By all means, Semglee is closest to reaching the market in the US, and Mylan/Biocon have already begun European launch of the second-ever biosimilar basal insulin (after Lilly/BI’s first-to-market Basaglar). While Biocon still has to complete bridging studies to resubmit Semglee in the US, we’re glad to see the companies continue their commitment to biosimilar insulin despite commercial uncertainty.

    Novartis: CEO Dr. Narasimhan: Imminent HFpEF Data for Entresto Potential “Big Inflection Point”; Sandoz to Become Fully Autonomous Generics Company on Heels of Biosimilar Insulin Announcement

    Vasant Narasimhan, MD (Novartis, Basel, Switzerland)

    To a packed 8:00 am ballroom, Novartis CEO Dr. Vasant Narasimhan underscored a possible “big inflection point” for heart failure therapy Entresto (sacubitril/valsartan): The upcoming readout from the PARAGON-HF CVOT (n=4,822) could support a first-ever indication for heart failure with preserved ejection fraction (HFpEF). Indeed, with topline results expected in mid-2019, Dr. Narasimhan believes Entresto has serious potential to become the fundamental standard of care for HFpEF – equalling confidence in the product during the company’s 3Q18 earnings call. Addressing HFpEF in patients with diabetes (and all patients) remains a huge unmet need; of course, SGLT-2 inhibitors also offer strong promise in this arena. To this end, Dr. Narasimhan could “easily imagine” a scenario in which Entresto is used as standard of care for a patient with heart failure on top of an SGLT-2 inhibitor for comorbid diabetes and bolstered cardioprotection – fascinating! Given that HFpEF is more tightly linked to adiposity, obesity, and diabetes than HF with reduced ejection fraction (associated with myocardial injury), we’re keen to see a success story with Entresto here. Moreover, as heart failure continues to gain recognition as a tremendously costly and deadly comorbidity of diabetes, we’re eager for more investment in and awareness of heart failure.

    • Dr. Narasimhan labelled transformation of generics division Sandoz as critical to Novartis’ future. Specifically, this means giving more autonomy to the division, allowing it to be a fully autonomous generics company under Novartis. With this newfound freedom, Sandoz will look to medicines and markets with value-adding opportunity. We sincerely hope this was a nod toward the company’s recent agreement with Chinese insulin supplier Gan & Lee to manufacture, develop, and commercialize biosimilar insulins glargine, lispro, and aspart (Sanofi’s Lantus, Lilly’s Humalog, and Novo Nordisk’s NovoLog) in the US, Europe, Japan, South Korea, Canada, Australia, and New Zealand. Undoubtedly, this was refreshing news following Merck’s recent decision to halt commercialization of biosimilar insulin glargine Lusduna, which cast some doubt on the future of insulin biosimilars – an attitude we felt might have reflected ubiquitous manufacturer reservations over the biosimilar insulin market (see Teva’s Mr. Kåre Schultz in this report for more). As far as we know, the project currently remains in “early and clinical stages of development” and we’re keen for more details as soon as possible. As Novartis acknowledged in its press release, quoting a recent statement from FDA Commissioner Dr. Scott Gottlieb on the agency’s new Biosimilars Action Plan, “access to affordable insulin is literally a matter of life and death for (certain) Americans.”

      • Of note, one slide alluded to work with Science 37, which brings clinical trials to patients through an app, enabling “site-less” clinical trials and boosting diversity in the process. The company has a history of working in metabolic disease, including a now-completed smart pen trial investigating missed meal boluses with Lilly, a diabetes probiotic study in type 2, and a NASH study. Given its experience, we wonder if Science 37 could be part of Sandoz’s new biosimilar insulin development program.

    • Novartis listed brolucizumab (anti-VEGF therapy for neovascular age-related macular degeneration with DME) – noted by Novartis as a future Eylea competitor – as a key 2019 approval target. Regulatory submission was originally planned for 2018; we haven’t seen an update that submission has occurred, but it’s very possible if Novartis is anticipating approval in this calendar year.

    Pfizer: Provides No Updates on Diabetes or NASH

    Albert Bourla, PhD (Pfizer, New York, NY)

    Pfizer CEO Dr. Albert Bourla and Head of R&D Dr. Mike Dolsten made no mention of diabetes in a morning fireside chat. Notably, this was Dr. Bourla’s first public interview since assuming the role of CEO on January 1, succeeding Mr. Ian Read. The conversation was understandably dominated by other candidates in Pfizer’s pipeline, including Lilly-partnered anti-nerve growth factor tanezumab for osteoarthritis. Dr. Bourla noted that Pfizer’s pipeline currently includes 25+ candidates, 15 of which have blockbuster potential (>$1 billion in annual revenue). Nevertheless, we would have loved to hear more on Pfizer’s recent partnership with Novartis to investigate NASH candidates in combination with FXR agonist tropifexor, the continued rollout of Merck-partnered SGLT-2 inhibitor Steglatro (ertugliflozin), and Pfizer’s early stage metabolic pipeline that includes three NASH candidates and an oral GLP-1 for type 2 diabetes.

    Regeneron: Highlights Eylea’s Continued Success and Growth Potential through Label Expansion – “Our Strategy is to Maximize Eylea Growth Opportunities”

    Leonard Schleifer, MD, PhD (Regeneron, Eastview, NY)

    As we have come to expect, blockbuster VEGF inhibitor Eylea (intravitreal aflibercept) was a major focus of Regeneron’s presentation, with CEO Dr. Leonard Schleifer highlighting (i) its status as the market leader in the anti-VEGF landscape, (ii) Regeneron’s continued work in expanding the label for this therapy, and (iii) the future growth potential for Eylea in light of an increasingly aging US population. Several Eylea-related highlights from 2018 were mentioned during the presentation, all previously announced in Regeneron’s most recent financial update; these include:

    • Regulatory approval by FDA in August 2018 for an expanded label indicating Eylea dosing every 12 weeks in wet age-related macular degeneration (wet AMD);

    • Regulatory filing with FDA for an expanded indication in non-proliferative diabetic retinopathy without DME. In September 2018, FDA accepted an sBLA for Eylea for this indication, with a PDUFA date of May 2019; this was based on positive 24-week data from the phase 3 PANOMARA trial.

    • Commercially, it was a banner year for Eylea, with US net sales of ~$4.07 billion (~10% YOY growth).

    Looking toward the future, Dr. Schleifer outlined a “next-generation” strategy for Eylea to ensure continued success. This includes investigating high-dose formulations of Eylea, but also developing other new molecular entities and gene therapies that may prove more efficacious than Eylea. Regeneron plans to initiate a study of higher Eylea doses in 2019. We’re surely glad to see this continued commitment to eye disease and anti-VEGF therapies, and it makes sense given the success of Eylea: Retinopathy and DME remain highly prevalent complications of diabetes, and the need for more effective therapies to address these will only continue to grow as population demographics shift toward an older population and as people live longer with diabetes.

    • Regeneron is also planning a 2019 resubmission of its pre-filled Eylea syringe, following a CRL from FDA. The CRL requested “additional information regarding manufacturing and supply processes and the completion of a usability study evaluating a single injection of the Eylea pre-filled syringe in approximately 30 patients.” Information on this resubmission was similarly provided on Regeneron’s 3Q18 update – see here.

    • Little airtime was given to Sanofi-partnered PCSK9 inhibitor Praluent, outside of a passing mention of continued efforts to improve access for this therapy. This was somewhat disappointing given the potential of this class to lower residual CV risk in people with CVD, but it’s true that progress continues to inch forward at a slow pace and leaders probably won’t say a lot ‘til there are results on the commercial side. As a reminder, Sanofi/Regeneron announced in 2Q18 their decision to lower Praluent’s net price in exchange for increased access on formularies – a deal that Express Scripts has taken. FDA is also currently reviewing a potential CV indication for Praluent based off of results from the ODYSSEY Outcomes CVOT, with a PDUFA date of April 28, 2019. Finally, Regeneron also expects an EMA decision on a CV indication in 2019.

    Rhythm: Topline Phase 3 Data for Setmelanotide in POMC and LEPR Deficiency Obesity Expected 3Q19; Once-Weekly Dosing Enters the Clinic; Enrollment for Pivotal Study in BBS and Alström to Complete 2H19

    Keith Gottesdiener, MD (Rhythm Pharmaceuticals, Boston, MA)

    Dr. Keith Gottesdiener, CEO of genetic obesity specialist Rhythm Pharmaceuticals, announced that topline data from phase 3 studies of once-daily setmelanotide in POMC and LEPR deficiency obesity will be available in 3Q19, hopefully supporting initial NDA submissions for these indications in late 2019 or early 2020. For context, the phase 3 trial in POMC deficiency was originally expected to complete in October 2018 before being delayed one year. Also of note, enrollment for a combined pivotal phase three trial in Bardet-Biedl Syndrome (BBS) and Alström Syndrome (n=~30) is expected to complete in 2H19, and interim phase 2 data in MC4R pathway heterozygous deficiency and POMC epigenetic disorders is expected in 1Q19. All of these target populations were identified in a phase 2 basket study conducted by Rhythm, in close coordination with the GO-ID Genotyping Study (see below), and reflect Rhythm’s strong focus on rare genetic orders of obesity. However, World Obesity Federation President Dr. Donna Ryan speculated whether setmelanotide could be more widely applicable for obesity, beyond only rare diseases, at Obesity Week 2018. To our knowledge, though, Rhythm does not intend to pursue a general obesity indication for its candidate at this time.

    • In 2018, Rhythm launched the Tracing the Effect of the MC4R Pathway in Obesity (TEMPO) registry – a database housing the genetic information of individuals with mutations of the MC4R pathway who may be eligible for study and treatment with setmelanotide. Individuals are identified through the GO ID genotyping study and may be enrolled in future clinical trials of setmelanotide, observational trials, or TEMPO alone. The ultimate goal of the study and registry is to increase genetic testing frequency and shift practice patterns among physicians. Indeed, Rhythm estimated the current number of people in the US with either POMC or LEPR deficiency obesity at up to 2,500, based on clinical epidemiology. However, management said, that number quintuples to ~13,000 when using genetic epidemiology. Based on this estimate, there is a clear market benefit for Rhythm in shifting provider practice for obesity treatment toward genotyping. GO ID plans to enroll ≥9,000 patients from more than 140 centers worldwide, with a target enrollment for TEMPO of ~1,000.

    • In the pipeline, Rhythm has begun clinical development for a once-weekly version of setmelanotide, though no timeline or details were given. Another preclinical candidate, RM-853, was recently in-licensed for Prader-Willi Syndrome (PWS), with the hopes of submitting an IND in early 2020.

    Roivant: CEO Vivek Ramaswamy Calls Diabetes an “Area of Major Underinvestment from Industry when Compared to the Magnitude of Societal Need”

    Vivek Ramaswamy (Roivant, Basel, Switzerland)

    Roivant CEO Mr. Vivek Ramaswamy provided an overview of the company and its several “-Vants” spanning the pharmaceutical and health landscape, highlighting Metavant’s focus on diabetes. Mr. Ramaswamy described Metavant as “our Vant focused on cardiovascular and metabolic diseases, specifically diabetes, an area of major underinvestment from industry when compared to the magnitude of societal need.” We are beyond thrilled by this framing from Mr. Ramaswamy and we assume this messaging signals continued investment in diabetes from Metavant. Roivant/Metavant seem to appreciate that, even with roughly a dozen diabetes drug classes on the market, patients are still not doing well enough and could benefit from having expanded choice – we think this is particularly true on the type 1 front whereas type 2s are already spoiled for choice but less able to get access due to other more structural problems.

    As background, Metavant has built a small but exciting pipeline through two acquisitions:

    • RVT-1502 is an oral small molecule glucagon receptor antagonist licensed from Ligand in