JPM 2020

January 13-16, 2020; San Francisco, CA; Day #1 Highlights – Draft

Executive Highlights

  • In diabetes technology, Dexcom pre-announced full year 2019 sales of $1.47 billion, growing 42% YOY and outperforming JPM 2019 guidance by $270 million at the midpoint. Preliminary revenue for 4Q19 came in at a record $457 million, rising 35% YOY from 4Q18 and 15% sequentially from 3Q19. Dexcom once again reiterated limited launch in “late 2020” and full launch in “early 2021” timelines for G7. In Verily’s jam-packed fire marshal-scaring JPM debut, Verily head Dr. Andy Conrad seemed to confirm that Dexcom/Verily G7 will launch with a built-in accelerometer for activity tracking. Dr. Conrad also spent several minutes discussing the virtual diabetes clinic Onduo,  explaining why diabetes was a good case study for Verily’s “Collect,” “Organize,” and “Activate,” approach to data. Outgoing Medtronic CEO Omar Ishrak made his final JPM appearance, expressing his excitement about Medtronic’s pipeline. MiniMed 780G got the feature in Medtronic’s diabetes pipeline; Mr. Ishrak announced that pivotal data for 780G will read out at ADA 2020, almost certainly pushing US launch into 2H20. Launch of 780G in Europe could come earlier, as the “CE Mark dossier” has already been submitted.

  • In diabetes therapy, highly-regarded Novartis CEO Dr. Vas Narasimhan gave ample commentary on newly launched Beovu and heart failure therapy Entresto, along with further details on Novartis’ burgeoning NASH program. Vertex, following its much-buzzed about acquisition of Semma Therapeutics in September, shared that it plans to move its cell therapy into clinical development by late 2020/early 2021. In its fireside chat, J&J shared thoughts on drug pricing reforms (patient out-of-pocket caps = good; international reference pricing not so much). We also picked up on some rare Invokana-related commentary from J&J, as the company acknowledged that while it is putting greater efforts into the franchise following the approval of its novel renal indication, it does not see Invokana as a major growth driver moving forward when compared to other assets in its portfolio. Finally, ViaCyte gave a host of updates on its beta cell replacement pipeline in type 1 – most notable is that its PEC-Direct program is “on track” to gain a Regenerative Medicine Advanced Therapy (RMAT) designation from FDA following a recent “Type C” meeting with the agency.

 

Table of Contents 

Diabetes Technology Highlights

1. Dexcom Reports Preliminary 2019 Revenue of $1.47 Billion (+42% YOY), Surpassing Guidance by $270 Million at Midpoint; G7 Launch (With Accelerometer?) Still Slated for Late 2020/Early 2021; +17%-21% Growth for 2020

Dexcom kicked off JPM 2020 this morning, announcing preliminary (unaudited) FY2019 revenue of $1.47 billion, rising 42% YOY on a tough comparison to 42% YOY growth in 2018. Impressively, revenue growth in 2019 (+42% YOY) more than doubled the guidance given at JPM 2019 for +15%-20% YOY growth. The $1.47 billion in sales surpassed JPM 2019 expectations by $270 million at the midpoint. Preliminary revenue for 4Q19 came in at a record $457 million, rising 35% YOY from 4Q18 and 15% sequentially from 3Q19. Notably, the $457 million quarter easily surpassed guidance given in 3Q19 by ~$32 million. Dexcom continued to strong momentum OUS, where sales grew 47% YOY to $84 million as G6 continues to roll out into international markets. In the US, sales growth was a bit slower (on a much larger base), growing 33% to $373 million. The graphs below really tell the story, showing the upward trajectory Dexcom has been on since hitting an inflection ~2017/2018. Dexcom’s revenue numbers are also a testament to the growing awareness and adoption of CGM, more broadly. In our Reflections 2019+2020 piece, we estimated that CGM would cross $4 billion in revenue and 2 million in user base in 2019, driven largely by Abbott’s FreeStyle Libre and Dexcom’s G6. Dexcom will give its full 4Q19 financial results on its call on February 13. Watch the webcast of today’s presentation here and see below for our full takeaways.

 

  • For a second consecutive year, Dexcom was the first medical device company on the agenda at JPM and presented at JPM’s second largest room (Colonial). For context, Humana, Novo Nordisk, CVS Health, and Cerner are also presenting in Colonial this week. Today, Dexcom’s market cap stands at ~$22 billion – up from ~$11 billion one year ago and ~$5 billion two years ago. Interest in Dexcom was very high: after prepared remarks, investors scrambled to the breakout Georgian Room which quickly became standing room only.

  • Once again, CEO Kevin Sayer stated a limited launch for G7 in “late 2020” with full launch coming in “early 2021.” This is the same timeline Dexcom has given for over a year now, dating back to Dexcom’s Analyst Day in December 2018. As we heard in 3Q19, Dexcom and Verily are finishing “final tweaks” to the hardware design. A clinical trial and manufacturing scale up for G7 were listed as key strategic objectives for Dexcom in 2020.

    • During Q&A, Mr. Sayer was asked whether having the new class II iCGM pathway would help make for a more predictable or quicker review process. (For context, Dexcom G6 Pro was cleared in just ~three months and used the iCGM pathway created by G6.) Mr. Sayer agreed that having the lower-risk class II classification would result in quicker review times, with the caveat that study data must meet the special controls outlined by the FDA. He emphasized the high bar the FDA had set with the iCGM special controls around accuracy, saying, “Making a [CGM] this precise is a challenge…and the FDA has proven it won’t change [the iCGM special controls].” Indeed, approaching two years after the iCGM classification was created, Dexcom remains the only company with an iCGM on the market. Abbott’s FreeStyle Libre 2 has been under FDA review as an iCGM since at least 1Q19 (we’re hoping to hear an update on FreeStyle Libre 2 during Abbott’s presentation at JPM Tuesday) and based on published data, it seems likely that Senseonics’ Eversense would meet the accuracy requirements.

    • During Verily’s well-attended afternoon presentation (see below for a full write-up), we confirmed for the first time that G7 will include a built-in accelerometer. The announcement doesn’t come as a total surprise – in 2018, we caught Verily’s patent for a disposable glucose sensor that includes an activity sensor. According to Verily head Andrew Conrad, the accelerometer will enable the G7 to track activity (like a Fitbit or Apple Watch) in addition to glucose. With no other details, we can only speculate how the accelerometer might be used. Will the Dexcom app also display activity? How could activity provide additional insights for patients and providers? Could activity data be integrated to create more robust hybrid closed loop systems or smart pen + dose decisioning algorithms? How might payers use this data (e.g., lower co-pays for meeting activity goals)?

    • Other planned G7 features are: a one-piece fully disposable wearable (integrated sensor/transmitter) that is slimmer on the body (see below); significantly lower cost design (presumably similar to FreeStyle Libre or perhaps lower); iCGM accuracy and factory calibration; 14-15 day wear (or perhaps even 16-day?); an applicator that is smaller, lighter, less plastic, and more convenient; and the Android/iOS mobile apps to display real-time data with Bluetooth.

    • Notably, the G7 slide shown today by Dexcom differed slightly from the version we’ve seen for the past year: today’s slide highlights “significant manufacturing cost reduction,” while in the past, this bullet has always read, “significant cost reduction.” Is the emphasis on manufacturing cost reduction and higher margins simply there to impress the JPM audience (i.e., investors)? We’re so hoping that at least a portion of any reductions in manufacturing cost for G7 would be passed down to patients and payers.

  • From the start of 2019 to the end of 2019, Dexcom doubled its manufacturing capacity for G6. By mid-year 2020, Dexcom is hoping to once again double its G6 manufacturing capacity. Dexcom G6 was “capacity constrained” throughout 2019, particularly after a manufacturing line for G6 went down in September. In fact, during Q&A, Mr. Sayer shared that 4Q19 was the first quarter that G6 manufacturing constraints weren’t a headwind. Abbott went through similar challenges meeting demand with FreeStyle Libre and has also made significant investments in manufacturing. A Reuters/NYT article from July specifically said Abbott’s plan is to increase FreeStyle Libre manufacturing capacity “by three to five times” in the “next few years.” Ultimately, we see being supply constrained as a “good” problem to have and a testament to the excitement for CGM around the world and the difficulty of manufacturing medical devices at a scale for millions, rather than tens of thousands of users. With Dexcom boosting its manufacturing capacity, Mr. Sayer stated that the company aims to be rolling out some “aggressive marketing campaigns.”

  • In 2019, Dexcom saw its number of covered lives in the pharmacy increase by 50% - Dexcom has said for its three earnings calls that it has contracts in place for >50% of US covered lives in the pharmacy. By 2023, Dexcom is aiming for the pharmacy channel to become the “majority” of its US business, but we have not heard many recent updates on how much of Dexcom’s business is currently running through the pharmacy. In November, Dexcom (and CGM, more generally) secured a major win with Walgreens announcing a “new billing solution” for CGM and that they would make G6 available to all Medicare patients at any retail location.

  • Dexcom is guiding for total revenue of $1.725-$1.775 billion in revenue for FY20, representing 17%-21% YOY growth. Factored into the guidance calculation were (i) increasing Dexcom CGM access and awareness; (ii) Medicare rollout and new G6 geographies; (iii) launch of new connected systems; (iv) changes in channel mix (increasing pharmacy business and Medicare patients will likely drive lower per-patient revenue); and (v) competitive dynamics. This projected 17%-21% YOY growth would represent a considerable slowdown in growth from 2018 and 2019, which saw >40% YOY revenue growth. Still, the company is guiding for ~$300 million in absolute revenue growth in FY20 – no small number.

    • Dexcom has easily surpassed its full year guidance for the past two years. In 2019, the company raised guidance three times: by $75 million in 1Q19 and 2Q19 and by ~$88 million in 3Q19. During Q&A, J.P. Morgan analyst Robbie Marcus pressed Mr. Sayer on why the 2020 guidance was the “right guidance,” Mr. Sayer once again emphasized that average revenue per patient would likely decrease in 2020 with more sales coming from the pharmacy channel, Medicare patients, and outside the US. He brought up Dexcom’s goal of $2-$2.5 billion in sales by 2023, noting the company was already two years towards that five-year goal after just one year (i.e., the company reached its 2020 revenue goals one year early).

      • “We’re very comfortable with the guidance we’ve given with $300 million in growth in a lower pricing environment. That’s a big lift and a lot of work - don’t underestimate that.” – Mr. Sayer

  • One of the key objectives for Dexcom in 2020 will be to “advance CGM use and demonstrate value proposition in [the] type 2 non-intensive population.” During prepared remarks, Mr. Sayer showed data from an internal pilot (n=207) with G6 in non-insulin using type 2s that saw 93% of participants saying G6 was “comfortable to wear” and a perfect net promoter score of 100. Ninety-percent of participants reported that the CGM contributed to a healthier lifestyle and 87% reported that it changed their food choices. Results from this study were published in Clinical Diabetes just this month.

    • In another very exciting study, we saw a small pilot between Intermountain Healthcare and Dexcom that matched 99 non-insulin using people with type 2 diabetes. Fifty patients were randomized with G6 for six months with 49 placed on SMBG. Total annualized cost savings was “~$5,000” per member, excluding the cost of CGM.

    • Highlighting the limitations of A1c, Mr. Sayer showed a slide from a “Dexcom pilot” (unclear whether it is from the same pilot as above) with CGM traces from two patients with identical A1cs.

  • Once again, Mr. Sayer highlighted strong G6 uptake in Canada following launch in September. In “three months,” the number of patient opportunities “doubled” with an impressive 70% of G6 sales coming through Dexcom’s online store. OUS rollout for G6 will continue into 2020 with Japan and South Korea specifically highlighted. G6 is a considerable upgrade from G5 (doubled wear-time, no more calibrations) and will certainly help drive growth in Dexcom’s smaller OUS business (Abbott’s OUS business is ~5 times larger than Dexcom’s.)

To a fire marshal’s nightmare of a room, Alphabet’s life sciences organization Verily made its first ever appearance at JPM. Verily head Dr. Andy Conrad addressed a jam-packed room of analysts eager to hear unique perspectives on how a “Big Tech” company would approach healthcare. We were pleasantly surprised to hear a lot of diabetes-related content throughout the 30-minute presentation, largely around Verily’s work with Dexcom on G7 and with Sanofi on Onduo.

  • For the first time (to our knowledge), Verily seemed to confirm that the next-gen Dexcom G7 sensor will include a built-in accelerometer. The accelerometer would allow the G7 to effectively serve as both an activity tracker (e.g., Fitbit, Apple Watch) and CGM. Integrating activity data with glucose data could provide insights for patients and providers to help identify what behaviors are positive (“Bright Spots”) and negative (“Landmines”). When combined with data from connected pens or insulin pumps and meal and medication logs, how much more can patients and providers learn? Of course, providing the right tools (e.g., algorithms) and training to patients and providers will be key to derive useful insights and create meaningful behavior and outcome changes. How much will having a built-in accelerometer help different G7 from its competitors? At the very least, we think activity tracking can serve as a motivational tool to help people meet their activity goals. 

    •  “Lastly, the G7 – I don’t know if [Dexcom CEO Kevin Sayer] already talked about this - is that we put an accelerometer in the G7. All of a sudden, they can see a trace of their blood glucose and how much activity they did, what they were eating, the medicines they were taking, and the effect it had on this integrator called hemoglobin A1c.” – Dr. Conrad

      • Note: Dr. Conrad said this when talking about Onduo, which allows patients to log meals and medications.

    • Admittedly, Dr. Conrad could have been referring to a pre-commercial version of G7 that will not be launched; however, it seems more likely that G7 will have a built-in accelerometer at launch. This announcement also does not come as a total surprise: in 2018, we caught a Verily patent for a disposable glucose sensor that includes an activity tracker. 

  • Highlighting the “Care Solutions” part of Verily’s businesses, Dr. Conrad spent several minutes discussing its virtual diabetes clinic, Onduo. Dr. Conrad walked through why diabetes was a perfect case for Verily’s problem solving approach, “Collect”, “Organize,” and “Activate” data. According to Dr. Conrad, the data collection for diabetes is “relatively simple,” with just four data sets: glucose, eating, activity, and medications. To improve the data collection process, Verily decided to partner with Dexcom to produce the next-gen G7 sensor (late 2020/early 2021 launch). As an example of data organization, Dr. Conrad showed the AI-driven photo-based meal identification algorithm in Onduo’s app. Lastly, to actually “activate” the data, Onduo licensed clinicians and built out an entire “virtual clinic.” Dr. Conrad also showed off real-world data published in JDST (n=740) that showed a 2.3% absolute A1c reduction over ~four months in the highest baseline A1c group: mean A1c reduction from ~10.7% to 8.3%.

    • Dr. Conrad emphasized Verily’s partnership-based approach to its projects. Onduo began as a joint venture between Verily and Sanofi, but with Sanofi’s recent exit from diabetes-related R&D, the company also backed off its operational involvement in Onduo (Sanofi will remain a financial backer.). Verily has re-affirmed its commitment to the project, writing, “We recently restructured its ownership with Sanofi to enable Onduo and Verily to move faster, invest more and serve a much broader population of patients managing multiple chronic conditions.”

  • Highlighting the “Research Solutions” part of Verily’s business, Dr. Conrad touched on Project Baseline, a large-scale effort to collect a comprehensive set of health information from participants. The study is combining EHR data, lab and imaging results, sleep data, activity tracking, cell phone behavior, and much more in what Verily CMO Dr. Jessica Mega has called “one of the deepest dives into understanding human physiology.” By serving as “E-Harmony” for hospitals and drug companies, Verily was able to match patients with clinical trials they would be eligible for, boosting enrollments.

3. Medtronic MiniMed 780G Pivotal Data Will Read Out at ADA 2020; Zeus iCGM, Personalized Closed Loop, and Fully-Disposable Synergy iCGM “Beyond Next Few Quarters”

In Medtronic CEO Omar Ishrak’s final presentation at JPM, he highlighted MiniMed 780G in the diabetes pipeline, sharing that pivotal data was expected to read out at ADA 2020 in June. On Medtronic’s most recent earnings call, we heard that some data would be presented at ATTD; today, we learned that will be “use case data under extreme conditions.” The CE Mark dossier for 780G has already been submitted, while we learned that the hardware for 780G was submitted to the FDA as of 3Q19. Given that US pivotal data won’t read out until June, it seems that if Medtronic meets its longstanding plan to launch 780G by April 2020 (before end of FY20), it will be in Europe first. At DiabetesMine’s 2019 Innovation Summit, the 780G study design was described as “single-arm, 150 patient study for ages 14+.” Approval for “adults” is expected to come first (unclear if that’s 14+ or 18+ years), with pediatric approval following (7+ years). On ClinicalTrials.gov, the study has a primary completion date of January 31, 2020 and is enrolling for 7+ years of age. Mr. Ishrak showed a slide claiming “3 adult feasibility studies” of 780G showing Time in Range of “approximately 80%.” At DiabetesMine 2019, we got a detailed look at one of these studies (n=12) which showed Time in Range improvement from 75% in the open-loop period to 85% during at-home closed-loop use. As a reminder, MiniMed 780G has an ambitious >80% Time in Range goal, along with >99% time in closed loop.

  • During Q&A, Mr. Ishrak was asked about whether patients and providers might be hesitant to use MiniMed 780G because of its less compelling CGM offering. Guardian Sensor 3 has seven-day wear and requires two calibrations per day (though four per day are recommended). While Mr. Ishrak acknowledged the limitations of Guardian Sensor 3, he also pointed at the MiniMed 780G’s simplified meal management and resiliency to unannounced meals as an area where 780G could compete with no-calibration CGM closed loop systems in terms of patient burden. New Diabetes Group President Mr. Sean Salmon also chimed in saying that Medtronic’s upcoming extended wear infusion sets would also help reduce burden, even if patients still have to calibrate.

4. Teladoc CEO Sees “A Lot of Opportunity in Chronic Care”; FY19 Revenue of ~$155 Million From “Over 4.1 Million” Virtual Visits; InTouch Acquisition to Integrate Care Across Conditions and Markets

Telehealth giant Teladoc beat 4Q19 expectations, posting preliminary financial results of $155-$156 million in quarterly revenue and $552-$553 million in annual sales. The company also reported over 1.2 million virtual care visits during 4Q19 and 4.1 million visits over FY19. CEO Jason Gorevic stated that each measure exceeded internal and external expectations, explaining that “virtual care is a global need” and Teladoc was “providing a global solution.” Beyond the exciting financial results, much of the presentation was spent on the company’s recent $600 million acquisition of InTouch, a provider of cloud-based telemedicine software, expected to close in 2Q20. InTouch’s software is used by over 470 clients (including Kaiser Permanente) in 3,600 global care facilities and is also deployed across 40+ clinical use cases including neurology, psychiatry, and intensive care. While there were no direct mentions of diabetes, Mr. Gorevic said that the acquisition will help expand the company’s footprint in chronic care, virtual primary care, and behavioral health, adding in Q&A that “chronic care is an area where [Teladoc] sees a lot of opportunity.” He also stated that the acquisition was a complement to Teladoc’s portfolio to expand consumer access points to the healthcare system across all sites of care including the hospital, emergency room, retail clinic, pharmacy, worksite, home, ambulance, post-acute setting, and physician’s office. The acquisition places Teladoc in a position to effectively to integrate novel software with virtual care initiatives at a single point of entry as the company scales remote monitoring and chronic care programs. Lastly, the deal also makes sense from financial standpoint, with InTouch expecting revenue of ~$80 million in FY19, rising 35% YOY.

  • Teladoc dominates the telehealth industry, controlling at least 75% of the market. However, the company believes it is only scratching the surface of its market opportunity with its 54 million users in the US. It sees ~75 million potential users among current Teladoc clients and another ~191 million individuals through Medicaid and retail clinic expansion. Current trends in telemedicine adoption and the shift towards value-based care seem to support this hypothesis.

    • Teladoc has also demonstrated success in increasing utilization rates among customers as new services are added. For example, when a “large client” rolled out behavior health and dermatology care products during 4Q17 and 1Q18, utilization jumped 1.6-fold and 2.3-fold in 2018 and 2019, respectively. Based on an analysis of 40+ employer clients in 2019, per employee per month (PEPM) rates increased 30% after new virtual care products were added.

  • On the note of market expansion, Teladoc has secured several major client wins including Centene, United Healthcare, Aetna, Blue Cross Blue Shield, UPS, and AIG. Coverage extends across almost every channel in employers (40% of Fortune 500 companies), insurers (50+ US health plan clients including Medicare and Medicaid populations), governments (InTouch acquisition gives access to Medicare fee-for-service populations), providers (~4,000 care locations with InTouch Health addition), and international consumers (70 global insurance and financial services firms).

Quotes on the InTouch Acquisition

  • “Hospitals and health systems are a customer channel that has been growing incredibly rapidly, and they’ve been asking us for more solutions, use cases, and capabilities. We’ve been looking at that stage as an area of growth for quite some time. Reimbursement trends are favorable for virtual care among hospitals. Convergence of payers and providers points to virtual care among hospitals and health systems, and consumer demand as well has moved towards a value-based reimbursement model. InTouch has been feeling the same pressure. It’s had a market-leading solution for many years and has been the leader in providing virtual care technology solutions to hospitals for provider-to-provider interactions where we’re bringing in a highly trained specialist into an acute, time-sensitive need. InTouch has been getting requests to help us enable that care outside the four walls of the hospital system which is where Teladoc Health excels. The combination of the two makes perfect sense.” – Mr. Gorevic

“The InTouch platform has three major components to it. There’s hardware which includes purpose-built and technology-oriented devices that are specific to use cases and have tremendous [intellectual property] in them. For example, when you have video interactions that integrate with the hospital system’s technology and have [intellectual property] built into them, it automatically moves the camera to pick up that person’s voice and video interaction. These are designed for high acuity cases in the hospital. That sits on top of a global technology network that is proprietary to InTouch and enables it to manage these devices remotely. For example, if an attendant has forgotten to plug in a device, InTouch will remotely see the battery draining the device and reach out to the hospital to make sure it gets plugged in so that when it’s needed most, it’s fully powered.  Lastly, there is a software platform that is device agnostic and facilitates the utilization and use cases that now represent over 40 different clinical situations.” – Mr. Gorevic

Diabetes Therapy Highlights

1. Novartis: Beovu for DME + PDR on the Horizon; Entresto HFpEF Submission Imminent; Tropifexor Heads to Phase 3 for NASH, Multiple Phase 2 Combo Studies

The second speaker to take the Grand Ballroom stage at JPM 2020, Novartis CEO Dr. Vas Narasimhan conveyed enthusiasm for and confidence in the company’s recent and imminent launches (15 total expected in 2019-2021), particularly highlighting Beovu’s recent launch and touching only briefly on heart failure therapy Entresto. Beovu (brolucizumab) won FDA approval for neovascular (wet) age-related macular degeneration (AMD) in October 2019, bringing new life to the anti-VEGF landscape with data supporting similar (on some endpoints, superior) efficacy to Bayer/Regeneron’s Eylea (aflibercept) – but with fewer injections via three-month dosing. Critical to the product’s future success are phase 3 readouts in DME (diabetic macular edema) and initiation of phase 3 for PDR (proliferative diabetic retinopathy), both slated for 2020 per today’s presentation (click here for all the details on Beovu development). This possibly indicates DME trials wrapping up more quickly than expected. Submission in DME is still expected in 2021, to our knowledge, with PDR to follow in ~2023.

While it wasn’t a big focus of today’s presentation, Novartis remains committed to its Cardiovascular, Renal & Metabolism division, where it houses 13 of its 85 current pharmaceutical projects (this does not include a remarkable 79 oncology projects); nine of these are phase 1/2. Entresto (sacubitril/valsartan) is the superstar of this portfolio despite last year’s narrow miss on superiority over valsartan alone, on an endpoint of heart failure hospitalization and CV death in patients with HFpEF (a notoriously difficult-to-treat disease) – see full PARAGON-HF results. However, the drug showed clear benefit on a variety of secondary endpoints and the company remains committed to a label expansion, though it seems the planned 4Q19 sNDA submission in HFpEF has been pushed to 2020, per today’s presentation. Commercially, Dr. Narasimhan was excited about growth potential in China for Novartis’ entire business, but particularly Entresto and arthritis drug Consentyx.

  • In NASH, 2020 will see the start of phase 3 start for FXR agonist tropifexor (LJN452) on the heels of positive interim results from the phase 2 FLIGHT-FXR study (n=345) vs. placebo, released in November. While not specifically addressed during the presentation, this trial start was listed on a slide of key 2020 events. As a reminder , the phase 2 TANDEM trial (n=200) of tropifexor in combination with Allergan’s cenicriviroc (CCR2/5 inhibitor) is also set to complete this July, and Novartis is emerging as a key player in the slowly-shaping-up NASH landscape, though submission and approval aren’t expected until ~2023.

    • Clinicaltrials.gov lists two more upcoming phase 2 studies of tropifexor: ELIVATE will test combination therapy with licogliflozin (Novartis’ SGLT-1/2 inhibitor) in 210 patients, while NEXSCOT will test combo therapy with LYS006 (an anti-inflammatory also under development for acne) in 250 patients.

  • We also noted an under-the-radar phase 1 candidate, MBL949, listed under a broad diabetes indication. Based on the name, we imagine this drug targets mannan-binding lectin, an immune molecule thought to be involved in the development of diabetic nephropathy – while very early stage and a difficult indication, we’d be thrilled to see Novartis get involved in the diabetic nephropathy landscape. The pipeline also includes an intravitreal phase 2 EPO (erythropoietin) inhibitor (LKA651) under development for diabetic retinopathy, as well as a phase 2 FXR agonist nidufexor (LMB763) for diabetic nephropathy (the drug was previously investigated in phase 2 for NASH). As far as we can tell, these candidates are not currently in Novartis’ online pipeline.

  • During Q&A, Dr. Narasimhan briefly spoke to the company’s generics division, Sandoz, focusing on the company’s biosimilar efforts, including a partnership with Gan & Lee to develop and commercialize biosimilar insulins worldwide. While only mentioned in passing, we’re pleased to hear any focus on biosimilar insulin given the challenging commercial landscape for these products and Novartis’ recent silence on the deal. Indeed, Dr. Narasimhan contrasted the European biosimilar market – where Novartis has had strong sales across almost 10 launched biosimilars – with that of the US, where he called for reforms to accelerate biosimilar uptake. That said, he was also optimistic about Novartis’ ability to find success with biosimilars broadly in the US, alluding to the company’s ability to drive down costs.

  • Dr. Narasimhan dedicated a sizable chunk of time at the close of his presentation to Novartis’ priority to “build trust with society,” one of five corporate priorities. To be sure, Dr. Narasimhan brought an optimistic and encouraging ethos throughout his presentation. We particularly appreciated a comment during Q&A arguing that the pharmaceutical industry has an obligation and responsibility to take on conditions of high morbidity and mortality, specifically cardiovascular and pulmonary disease. He emphasized four areas of focus within trust-building: (i) ethical standards; (ii) pricing & access; (iii) global health; and (iv) corporate citizenship. The company is drafting a new Code of Ethics and has implemented a new “Third Party Risk Management System”, and it has also joined the UN Equal Pay International Coalition and achieved 44% female representation in management (with goals to achieve 50/50 gender representation). Particularly notable is the company’s continued commitment to vulnerable patients around the world: Novartis has now formally prioritized access over profits in sub-Saharan Africa to maximize access in the region and aims to reduce launch lag-time between the US/EU and lower middle income countries to three months. Moreover, Novartis will achieve carbon neutrality on in-house operations by 2025, among over global access and environmental initiatives. Dr. Narasimhan closed, “This is something that is core to our strategy. I believe it motivates our associates, it gives us the license to operate in countries around the world.” We were impressed by the specificity of this plans and the detail offered, as well as Dr. Narasimhan’s emphasis on transparency surrounding these initiatives, their outcomes, and the company’s entire business.

2. Vertex: Cell Therapy to Move into Clinical Development by “Late 2020/Early 2021”; Current CMO Dr. Reshma Kewalramani Prepares to Take the Helm as CEO

Cystic fibrosis drug-powerhouse Vertex took a unique fireside chat approach to this year’s JPM (sans breakout session), with the majority of commentary focusing on the recent US launch of triple CF therapy Trikafta and future visions for the company’s pipeline. CEO Dr. Jeff Leiden led the session with the help of CMO Dr. Reshma Kewalramani, who is set to replace Dr. Leiden in his current role on April 1, 2020; Dr. Leiden will assume the role of Executive Chairman following the transition. Vertex dove headfirst into the diabetes world this past September with the acquisition of type 1 cure company Semma Therapeutics for a whopping $950 million. Excitingly, Dr. Leiden noted that Vertex plans to advance Semma’s cell therapy into clinical development by late 2020/early 2021. This point is listed as one of Vertex’s Key Goals and Milestones for 2020 (photo below), and considering that the company met all of its goals laid out at both JPM 2019 and JPM 2018, we have high hopes for Vertex to deliver. In our view, the type 1 venture is a perfect fit for managements’ visions of the future. As Dr. Leiden put it, “We will only work on transformative medicine. You will never see a “me too” medicine from Vertex – that’s just not what we do. We think transformative medicines have the highest value for patients and for us as a company. We are very disciplined to sticking to specialty markets. The reason for that is we can sell into those markets with very low SG&A expenditures, which allows us to invest the vast majority of our operating expenses into R&D, which is essential to this type of serial innovation model.” Although traditionally a small molecule company (the primary focus within interval innovation), Dr. Leiden also pointed out that Vertex is “therapeutic modality agnostic,” and sees acquisitions as the means to increasing the number of these modalities, which now include gene editing and cell therapy. Broadly speaking for 2020, Dr. Kewalramani predicts that the first half of the year will be directed towards the continued launch of Trikafta, while the latter half will pivot to focus on the pipeline. Promisingly, Dr. Kewalramani closed out the session on an extremely positive note: “This company has never been stronger. We’ve never been better positioned for success.”

  • Last we heard, Semma’s technology is still at the pre-clinical stage, and the company had planned to initiate its first clinical trial in patients with “difficult to treat diabetes” and hypoglycemia unawareness in 1H20, following positive pre-clinical data announced in July 2019. Although Vertex’s new timeline pushes this clinical launch date about half a year further, we aren’t too surprised given the many logistics surrounding any acquisition.

3. J&J: A Dose of “Realism” on Invokana, w/ Company Acknowledging Further Efforts Behind Promoting Novel Renal Indication But Indicating It Is Not a “Major Growth Driver” Compared to Other Assets

In a breakout session following the company’s fireside chat, J&J EVP Ms. Jennifer Taubert offered the following on SGLT-2 inhibitor Invokana: “Invokana is the first SGLT-2 inhibitor to have an indication for slowing the progression of kidney disease and hospitalizations for heart failure in patients with type 2 diabetes and chronic kidney disease – this is a very significant indication for patients with diabetes. But, we also have safety warnings in the label that are a barrier for the franchise. As we go forward, we’ve noted additional interest from payers, customers, and patients about this indication and we will be putting more energy and effort behind it. Still, to give some realism on this: we don’t see Invokana being on the level of other major growth drivers that some of our other assets are.” Ms. Taubert succinctly summarized here the competing forces at play regarding the Invokana franchise, with major headwinds due to a blackbox warning for amputations on Invokana’s label offsetting more positive developments with Invokana’s novel renal indication and CV risk reduction indication as well. This remark came in response to a question posed by our own Ms. Kelly Close about the Invokana franchise and J&J’s overall involvement in diabetes; otherwise, both of these topics went unmentioned during J&J’s fireside chat and the subsequent breakout session. This continues a general trend on both J&J’s recent earnings calls (where Invokana and diabetes have been de-emphasized) and at JPM 2019, where the topic was not discussed at all either. To be sure, we’re glad to hear at least some enthusiasm behind the franchise (“we will be putting more energy and effort behind it”) but it is clear that the larger structural factors at play in the diabetes ecosystem (tough competitive environment within the SGLT-2 class, unfavorable pricing pressures and regulatory hurdles) are dissuading J&J from viewing Invokana as a major growth driver moving forward for the company.

  • Ms. Taubert touched on drug pricing and healthcare reforms during the fireside chat, expressing support for legislation that can cap patient out-of-pocket costs and for value-based care agreements with healthcare systems. Both of these points are not surprising given the stances taken by the pharmaceutical industry in discussions around reform. Ms. Taubert pointed to the inclusion of patient OOP caps as a positive aspect of legislation introduced by the Senate Finance Committee in their drug pricing reform bill. However, she also noted that other parts of the bill, such as those that refer to international reference drug pricing, do not address the root cause of the problem in drug pricing, which according to her and other pharma industry members is high patient OOP costs.

4. ViaCyte: Updates on Beta Cell Replacement Pipeline – Company “On Track” for FDA RMAT Designation for PEC-Direct; Further Data for PEC-Encap Expected in Coming Months; Series of Recent Preclinical Wins for PEC-QT

CEO Dr. Paul Laikind provided a host of updates on ViaCyte’s “multi-generational” beta cell replacement pipeline in diabetes. The company currently has two candidates in ongoing clinical trial programs (PEC-Direct and PEC-Encap) and another candidate in preclinical studies (PEC-QT) – see below for updates on each of these programs below. This progress follows an impressive 2H18 for the company in which it raised $105 million including funding from W.L. Gore, CRISPR Therapeutics, and a Series D financing led by Bain Capital Life Sciences.

  • PEC-Direct: PEC-Direct is the company’s system that allows direct vascularization of the grafted islet cells in the device and therefore also requires continuous immunosuppression (meant for highest risk type 1 patients). In reviewing clinical progress for PEC-Direct over the past year, Dr. Laikind most notably shared that ViaCyte is “on track” to have a Regenerative Medicine Advanced Therapy (RMAT) designation from FDA following a recent “Type C” meeting with the agency to discuss the possibility. This designation is based off of positive results in the clinic showing that PEC-Direct can stimulate clinically relevant levels of C-peptide production in a group of 8-10 patients. This data from the candidate’s phase 1/2 study was presented in October 2019 at the Cell & Gene Meeting on the Mesa. Moving forward, the focus will be on further optimizing graft cell organization in order to get C-peptide production rates up to higher levels. Dr. Laikind noted that initial proof of efficacy from these further optimizations may be expected in the next 12-18 months; we previously heard from Dr. Laikind at JPM 2019 that completion of this trial could be expected sometime in 2020.

  • PEC-Encap: PEC-Encap is the company’s system that involves fully-enclosed islet cells in an implantable, semi-permeable membrane (meant for all type 1 patients). Dr. Laikind highlighted the company’s ongoing partnership with materials company W.L. Gore & Associates, and noted that additional data from testing of its Encaptra device with a new Gore membrane is expected in the coming months. The newly developed Gore membrane is meant to resist the foreign body response associated with implantation of the device in humans and therefore circumvent the need for patients to take immunosuppressive drugs with the device. As a reminder, development of PEC-Encap was previously paused by ViaCyte in early 2017 after foreign body response issues that impacted effective engraftment were identified in a phase 1/2 trial.

  • PEC-QT: This is ViaCyte’s newest, preclinical program of immune-evasive stem-cells with a vascularized device, which would have the potential to be used in any person that requires insulin treatment. Details have been sparse on this project since its launch, but Dr. Laikind highlighted several updates today: (i) positive in vitro data demonstrating successful gene editing of the CyT49 cell line used by ViaCyte, presented at EASD 2019; and (ii) preliminary in vitro data suggesting that these edited cells are actually immune evasive (and therefore would not require concomitant immunosuppressive drugs to be taken by patients). Moving forward, Dr. Laikind noted that a transplantation study in nude rats to test glucose-stimulated insulin secretion from these gene edited cells are underway, and that ViaCyte is also currently making a “clinical bank” of gene edited cells for further evaluation. Overall, he expressed optimism about the program and said that it is “moving faster than we would have initially expected” – a welcome sentiment to hear.

5. Merck: Focus on “Growth Drivers” (Vaccines, Oncology, Animal Health, Hospital Services) As Diabetes Goes Unmentioned

As expected, the majority of CEO Mr. Kenneth Frazier and President of Merck Research Labs Mr. Roger Perlmutter’s fireside chat remarks focused on blockbuster cancer immunotherapy Keytruda, which usurped DPP-4 inhibitor Januvia (sitagliptin) as Merck’s leading franchise in 3Q18. Management also remained silent on Pfizer-partnered SGLT-2 inhibitor Steglatro, despite study completion for the drug’s VERTIS CVOT expected in December 2019. When questioned on pipeline diversification beyond Keytruda, Dr. Perlmutter did however maintain that on top of the company’s other oncology assets, “early in the pipeline, there are still more opportunities in cardiovascular disease,” amongst other endeavors in vaccines and HIV. Despite the optimism, Merck’s metabolic pipeline (cardiovascular diseases + diabetes and endocrinology) is rather sparse, with only a soluble guanylate cyclase (sGC) stimulator in phase 3 for heart failure with reduced ejection fraction and a GLP-1/glucagon dual agonist MK-8521 “still on hold in phase 2,” following 1Q18 termination of its type 2 diabetes trial as of 3Q19. Merck also optioned NGM Biopharmaceuticals’ phase 1 NASH/type 2 candidate earlier in January 2019, though the “insulin sensitizer” is not currently listed on Merck’s pipeline website.

  • In response to a question on whether or not Merck has rationale to split off a portfolio of its older, more slower growing assets, Mr. Frazier emphasized the company’s focus on “growth drivers” above all. He commented, “I made a decision a few years ago to put a great deal of focus around our growth drivers: oncology, vaccines, animal health, as well as certain parts of our hospital portfolio. As we move forward, we see even greater opportunities for focus on our growth drivers…Prioritize the assets around greatest growth opportunities, then optimize everything else. There comes a point in time when you have to challenge yourself and see if that optimization really makes sense. We continually evaluate the whole company portfolio. We continually ask ourselves how we can put those assets to the best use – both from the perspective of public health, but also from the perspective of shareholder value. While we’ve made no decisions, I will say we continuously evaluate that portfolio.” Taking these comments into consideration, we certainly hope that Merck remains a player in the cardiometabolic field. Though Steglatro was the last SGLT-2 inhibitor to hit the market, we remain hopeful that it can bring the many benefits of the class at a more affordable price point for patients. Indeed, it does appear that Steglatro continues to be marketed at a much lower price point compared to its peers, as GoodRx shows Steglatro at $286/month, compared to $495/month for Jardiance, Invokana, and Farxiga.

6. Regeneron: Management Highlights Eylea’s Growth with Recent Approval of Pre-Filled Syringe; No Mention of Sanofi-Partnered PCSK9

Anti-VEGF Eylea (intravitreal aflibercept) continues to be a focus of Regeneron’s presentation, which was led by CEO Dr. Leonard Schleifer and CSO Dr. George Yancopoulos. One of the company’s largest 2019 approvals was that of the Eylea pre-filled syringe, which helpd boost the franchise to ~$1.22B in total 4Q19 sales (+13% YOY from $1.1B in 4Q18). Again, Eylea was cited as one of Regeneron’s key growth drivers, consistent with the company’s 3Q19 update. Just like at JPM 2019, Dr. Schleifer also mentioned Regeneron’s continued work in expanding the label for this therapy and future growth potential for Eylea in light of an increasingly aging US population. Relatedly, Regeneron is planning for a regulatory submission of high-dose Eylea in wet AMD and DME in 2022+. Though not mentioned otherwise during the presentation, Regeneron is planning regulatory submissions for Sanofi-partnered PCSK9 inhibitor Praluent in familial hypercholesterolemia (FH) and pediatric FH in 2020 and 2022+, respectively.

  • The following breakout session focused on market dynamics between Eylea and its top competitor, Roche’s Lucentis. Regeneron management expressed confidence in Eylea in terms of early market dynamics based on its highly competitive profile and the growing prevalence of diabetes as the population ages. Dr. Schleifer emphasized Eylea’s benefits of conferring visual acuity, as well as its favorable safety profile, flexible dosing, multiple indications, and reimbursement scheme. With this, as new VEGF-blockers gain approval (such as Novartis’ competitor Beovu), Regeneron does not believe they are at risk of any new candidates surpassing the safety and efficacy profile of Eylea.

  • Continued rollout of the Eylea pre-filled syringe includes “feathering in” supplies along with vials and working toward the approval of a high-dose formulation. Eylea vials are still available, but management implied their eventual phase-out given the pre-filled syringe’s efficiency, convenience, safety, and sterility. The pre-filled syringe market supply is currently at 25%, but the company intends to work toward full supply by the end of 1Q20.

There was no direct mention of Praluent or anti-VEGF candidate evinacumab during the presentation. Management did cite changes to their collaboration with Sanofi, but primarily in terms of growing Dupixent to treat allergies. As part of their effort to commercialize Dupixent OUS, Regeneron will retain US rights and net sale royalties for Praluent while Sanofi will retain OUS rights. Surprisingly, there was no mention of Praluent’s recent FDA CV indication based on positive results from the ODYSSEY trial, or its 60% price cut. We were also surprised to see no mention of evinacumab despite positive phase 3 trial topline results in August that showed ~50% LDL reduction in patients treated with evinacumab, statins, and PCSK9s.

7. Teva: No Mention of Planned GLP-1 Biosimilars

Teva CEO Mr. Kåre Schultz spent his time on one of JPM’s smaller stages addressing Teva’s past problems and outlining a hopeful plan for the future, eschewing mention of any diabetes-related generics. He started Teva’s story at the 2015 purchase of Allergan’s generics unit, Actavis, for $40.5 billion, which threw the company into ~$34 billion of debt; the debt balance now stands at ~$25 billion and the company will be focused on reducing debt for the foreseeable future. Unfortunately, he said, expectations for company earnings were about 2x higher when Teva acquired the company, prior to a downturn in the generics market. Mr. Schultz described the company’s trajectory in recent years as a “death spiral to the bottom” but was optimistic that the supply and demand situation for generics has stabilized – and that Teva’s revenue and earnings are now more positive and predictable. Indeed, Actavis was one of over 20 companies Teva acquired over two decades, and Mr. Schultz’s focus since taking over the company has been on reducing costs, in part by trimming its excess of offices, research, and manufacturing sites over five continents. Looking to the future, he detailed how Teva has entered the Chinese market for the first time, taking advantage of the fact that many products have never been launched in the region: The company already produces a number of products the Chinese government is seeking, which is even allowing launch without conducting trials in the territory. As a reminder, Teva has been on our radar since filing an ANDA for a generic version of Novo Nordisk’s GLP-1 Victoza back in 2017, and the generics giant has remained bullish on bringing a biosimilar GLP-1 to market – that includes at JPM 2019, where Mr. Schultz stated that the company is reluctant to pursue biosimilar insulins but is all-in on biosimilar GLP-1. While plans for a biosimilar GLP-1 were not addressed today, we can only assume the class is still a draw given the market continues to expand.

8. Vivus Spotlights Advances in Qsymia Marketing

Vivus’ CEO Mr. John Amos provided updates on the company’s plans to expand Qsymia use in the treatment of obesity at both patient and practitioner levels. The presentation focused on Vivus’ plan to restructure their marketing to promote further use of Qsymia in obesity, as well as Pancreaz and Stendra in other diseases. Vivus has now entered the sixth quarter in its ten-quarter turnaround, led by its e-prescription and direct-to-patient distribution program, Qsymia Advantage (launched in 1Q19) and sales team (re-launched in February 2019). Mr. Amos emphasized that Vivus is in transition from a drug development company to becoming a patient-recognized healthcare company. Interestingly, the company is looking to increase market penetration of Qsymia in an evolutionary biology-based marketing approach to patients and physicians. They are attempting to change the narrative around weight management by discussing how obesity is based on a survival instinct to consume calories that became complicated by the creation of high-calorie, nutrient-deficient foods like donuts in recent human history. Vivus hopes that this awareness and change in perception of obesity will encourage patients to try weight loss medication and physicians to prescribe weight loss medication with less associated stigma. Mr. Amos asserted that Qsymia works well, but that the company “messed up” during the therapy’s initial launch because of limited reimbursement, high out-of-pocket costs, and a two-week free trial that ended before patients experienced results. These factors led to low retail pharmacy fulfillment and the subsequent creation of Qsymia Advantage and Vivus Health, contributing to the franchise’s highest refill rates in 3Q19 and 2Q19.

  • Despite mention of Vivus Health and Qsymia Advantage, few additional details were shared on these programs. Both programs have largely helped Qsymia’s market penetrance: in 3Q19, the Qsymia Advantage program generated 19,000 prescriptions and accounted for 22% of all third quarter prescriptions of Qsymia. This is up 170% sequentially from 8% of prescriptions in 2Q19. Vivus also announced plans to pilot its Vivus Health telemedicine program in 4Q19, with physicians joining the platform by 1Q20. The program’s goal is to increase patient understanding of how diet, exercise, and Qsymia work together to yield weight loss, and it will initially feature four physicians to help patients with BMI management, and we would have enjoyed learning more about the inner workings of this program.

9. Neurocrine Remains Silent on GPR119 Agonist for Type 2; Prioritizes Psychiatric Therapies

After an absence from JPM in 2019, Neurocrine’s CEO Dr. Kevin Gorman shared the company’s updates on their psychiatric pursuits, primarily in Tardive Dyskinesia, Huntington’s Disease, and Parkinson’s Disease. As expected, management provided no mention of their BI-partnered GPR119 agonist, marking a decade of silence (we have not heard updates on the candidate since 2010!). We last reported on Neurocrine’s quarterly updates in 3Q18, when the candidate was removed from the company’s major pipeline and still listed on the company’s “Additional Pipeline Programs.” The candidate is no longer listed as an additional pipeline program, and we are unsure when Neurocrine officially decided to terminate the venture. Given the company’s remarks during main and breakout sessions, it seems they are prioritizing R&D in endometriosis and congenital adrenal hyperplasia, as well as psychiatry, with intention to incorporate precision medicine into future studies.

NASH Highlights

1. Enanta: Phase 2b for FXR Agonist EDP-305 in NASH slated for Early 2Q20; Second Candidate EDP-297 in Development is the “Most Potent FXR Agonist That’s Been Published”

CEO Dr. Jay Luly seemed confident in the future of Enanta’s two FXR agonists in NASH during his presentation, backed by the recent phase 3 success of Intercept’s own FXR agonist obeticholic acid (OCA). Although the majority of Dr. Luly’s remarks and answers during Q&A were centered on pipeline frontrunner EDP-938 in respiratory syncytial virus (RSV), a substantial portion of Dr. Luly’s comments addressed NASH and the two candidates. Pre-JPM 2020, the company put out a press release stating that FDA Fast-Tracked EDP-305’s phase 2b trial ARGON-2 is slated to begin by early 2Q20 and will include an interim readout at 12 weeks to elucidate dose information for potential combination with other NASH drugs. Presentation slides further added that the primary endpoint of the study will be improvement of fibrosis without worsening of NASH and/or NASH resolution without worsening of fibrosis. Two doses will be investigated: (i) 1.5 mg, to demonstrate stronger biomarker signals of efficacy than at 1.0 mg; and (ii) 2.0 mg, to demonstrate less pruritus than seen at the 2.5 mg dose. A phase 1 trial for Enanta’s follow-on FXR agonist EDP-297 is also expected to start mid-2020. Excitingly, Dr. Luly pointed out that EDP-297 is the “most potent FXR that’s been published” (even more so than OCA) and has an excellent target tissue distribution (intestine/plasma ratio of 265 vs. 160 for OCA; liver/plasma ratio of 75 vs. 26 for OCA). Data for the phase 1 trial is expected in 1H21. Slides also stated that Enanta is looking to expand into non-FXR compounds for NASH, though no specific targets were identified. See our NASH/NAFLD landscape to learn more.

  • Mildly-positive results for EDP-305 were announced in September 2019, and while the compound did achieve a 28 U/L reduction in ALT for the 2.5 mg arm vs. a 15 U/L reduction for placebo, a relatively high p-value of 0.049 has left some others unconvinced. A more statistically robust reduction was seen on the secondary endpoint of liver fat at the 2.5 mg dose (p<0.001), with 45% of subjects experiencing a ≥30% fat reduction. As with other NASH candidates, the most common side effects were pruritus (severe itching), GI-related symptoms, headache and dizziness – all seen in ≥5% of participants on EDP-305. Worrisomely, the 2.5 mg arm demonstrated a 20.8% incidence of patient discontinuation due to pruritus.

2. Viking: Touts Oral NASH Candidate VK2809 as Uniquely Differentiated within Competitive NASH Landscape; No Mention of Type 2 Diabetes Candidate VK0612

Viking CEO Dr. Brian Lian gave the company’s update at the Biotech showcase, providing a great deal of context surrounding its leading NASH candidate VK2809 (a once-daily oral, liver-selective thyroid receptor agonist). VK2809 has been officially filed with FDA as of 3Q19 to support further long-term clinical trials following positive phase 2a data for the candidate (presented at EASL 2019 – see our initial coverage of full results here). As a reminder, these phase 2a data further validated the candidate’s potency at reducing liver fat and plasma lipids even at the lowest 5 mg dose without adverse effects. VK2809 also demonstrated a median 57% relative decrease in liver fat compared to a median 9% decrease with placebo in the trial. Dr. Lian overviewed these results in his presentation and closed with intriguing perspective on how Viking sees VK2809 uniquely positioned within the NASH competitive landscape for success. To be sure, the NASH landscape is crowded with multiple phase 2 and phase 3 candidates (>40 currently), and Dr. Lian pointed to the following factors that help differentiate VK2809: (i) it is orally available, compared to many NASH injections that require injections – this is a huge point for chronic conditions for NASH where medication engagement over long periods of time may pose a barrier to effective treatment; (ii) VK2809 is highly specifically liver-targeted, which will reduce the risk of other off-target side effects; (iii) it potentially reduces liver fat, which is important since weight loss and reduced liver fat has been shown to correlate with NASH resolution and improved fibrosis markers; (iv) it reduces systemic lipids and improves the overall metabolic profile, which may bode well for positive cardiovascular outcomes in the long-run; and (v) it is very well-tolerated, with no GI impacts shown to date in clinical trials and no other tolerability issues that have emerged.

  • Dr. Lian also reviewed updates on the 12-month phase 2b VOYAGE trial that was initiated for VK2809 in 4Q19. The double-blind, placebo-controlled, multi-center study will assess the 1.0 mg, 2.5 mg, 5.0 mg, and 10 mg doses of the oral drug for 52 weeks, followed by a four-week off-drug phase. Relative change in liver fat after 12 weeks will be measured as the primary outcome, and NASH CRN fibrosis score at 52-weeks will serve as a secondary outcome. The trial will enroll patients with biopsy-confirmed NASH stages F1-F3. Expected completion is in November 2021.

  • No updates were provided on Viking’s oral fructose-1,6-bisphosphatase inhibitor VK0612 for type 2 diabetes. This candidate was previously Viking’s lead candidate, but had been de-emphasized in recent years given the high costs surrounding development and commercialization of type 2 diabetes drugs. The candidate was initially licensed from Ligand in May 2014 and was supposed to soon after enter into a phase 2b trial (which it is currently still in). In its 4Q18 update, the company had the following to say about the candidate: “We haven't been aggressively developing it. I think when we were starting the company, there was some hesitation on the part of investors for small company to look at type 2 diabetes, but it doesn't diminish our enthusiasm for the mechanism and the prior data and the safety profile of the molecule. And at some point I think it would be worthwhile to explore a 12-week study to really demonstrate that it provides A1c reduction that is predictive from the fasting plasma glucose effects.” The candidate is still in its phase 2b trial.

3. Gilead: Still “Digesting” Mixed Results from Combination Therapy NASH Trial (Phase 2 w/ Cilofexor + Selonsertib + Firsocostat)

Newly appointed Gilead CEO Mr. Daniel O’Day provided an engaging overview of Gilead’s robust pharmaceutical business but withheld meaningful updates on the company’s NASH portfolio. Mr. O’Day’s presenation understandably focused on the company’s expansive antiviral medicines portfolio, including in HIV and HCV. On NASH, Mr. O’Day mentioned in passing that Gilead is still “digesting results” from its recently-completed phase 2 ATLAS trial (n=392) of cilofexor, selonsertib, and firsocostat combo therapies. He noted that next steps will involve discussing potential regulatory paths forward with FDA. As a reminder, Gilead last month announced mixed topline results from this trial of patients with F3 and F4 NASH – in the trial, no regimen reached statistical significance on the primary endpoint of ≥1-stage improvement in fibrosis score without worsening of NASH at Week 48, though all treatments were generally well-tolerated (see our full analysis here). These topline results come after negative phase 3 results for selonsertib monotherapy in NASH that Gilead announced in 2019: disappointingly, the candidate did not meet its primary endpoint in either of its phase 3 trials (STELLAR 3 or STELLAR 4). As a result, the company is no longer investigating selonsertib as a monotherapy. Looking ahead, we’ll be curious to see if results from ATLAS will at all affect the company’s partnership with Novo Nordisk to test cilofexor and firsocostat in combination with GLP-1 semaglutide – a collaboration which generated a lot of buzz when first announced in April 2019. Our understanding is that there is increasing investor pressure on Gilead to reduce its research commitment to NASH, given the company’s recent clinical trial disappointments in the field.

  • During the company’s breakout session, Mr. O’Day provided additional commentary on the ATLAS trial and the company’s NASH strategy. He noted that Gilead is strongly encouraged by the secondary endpoints from ATLAS (combination firsocostat/cilexor treatment conferred statistically significant improvements in a number of secondary endpoints vs. placebo, including ≥2-point reduction in NAFLD Activity Score (NAS) and ≥1-point reduction in steatosis, hepatocellular ballooning, and lobular inflammation). Moreover, he emphasized that Gilead is focused on the most severe NASH patients with F4 fibrosis and that this is the area that Gilead “wants to win” – nevertheless, he conceded that the company will need to be “smart and focused on how we do this.” Given the results that have emerged for Gilead’s NASH portfolio so far, it’s clear that the company may have to develop a more focused strategy in NASH, and therefore targeting F4 patients may be the strongest strategy to pursue. Full data from the ATLAS trial is expected to be presented at EASL 2020.

Big Picture Highlights

1. CEO Jamie Dimon Decrees “We Need to Double Down and Make America a Healthy Place”; JPM’s Own Amazon/Berkshire Hathaway Healthcare Venture Goes Unmentioned

In one of his only direct references to healthcare, CEO Mr. Jamie Dimon gave a rousing call to continue striving for medical innovation, despite record declines in cancer and increasing longevity in the US. In his response to Fox Anchor Ms. Maria Bartiromo, Mr. Dimon reflected, “[The innovation at JPM Healthcare] is amazing. The market cap here is almost six trillion dollars. If we go back 12 years ago, it was five million…I remember coming here in 2007-2010, in all those dark days, you were still innovating, still building, still growing – that is the magic of America, right there. Now, you see some of the benefits – of cancer rates down to 2%. What we’re talking about is hugely positive. A lot of it is smoking, some is new treatment and detection, but I have to caution this. America is getting sicker. People are dying. There’s too much depression and drugs, too much obesity, too much Alzheimer’s, so we have to double down and make America a healthy place. So that it’s not just 2%, it will be 5%.” We were especially thrilled to hear that obesity remains on Mr. Dimon’s radar, given that US adult obesity prevalence is expected to rise to nearly 50% by 2030. In regard to JPM’s growing investments in technology, Mr. Dimon also quickly highlighted the company’s July 2019 acquisition of Instamed – a cloud-based, healthcare payment platform. We would have loved to hear more of the ever-insightful Mr. Dimon’s thoughts on how to shake-up the healthcare industry, but the majority of his remarks focused on the possibility of a US-China trade war (not too likely), his predictions for a Democratic nominee in the US 2020 Presidential Elections (too early to judge; a candidate who can rally Democratic moderates), and what he thinks is negatively affecting the market (manipulated negative rates).

  • Disappointingly, no update was given on the JPM/Amazon/Berkshire Hathaway joint, non-profit healthcare venture Haven, which was a focal point of Mr. Dimon’s fireside chat at JPM 2019. The partnership was first announced in January 2018, and audience members seemed on the lookout for any further details. Last year, Mr. Dimon quipped that he would like to try telling his employees that if they don’t get annual physicals and check-ups, they won’t receive employer-sponsored insurance. As far as we can tell, no measures as stringent as this have been implemented, but Haven’s November 2019 partnership with Cigna and CVS Health’s Aetna does feature a wellness plan that offers monthly financial rewards for meeting fitness or health goals. 30,000 JPM workers in Ohio and Arizona were offered 2020 health plans through the November deal, along with an unspecified number of Amazon workers in Connecticut, North Carolina, Utah, and Wisconsin under collaboration with unknown payers.

 

--by Albert Cai, Ani Gururaj, Ursula Biba, Rhea Teng, Ann Carracher, Martin Kurian, and Kelly Close