Memorandum

Abbott 1Q16 – Global sales down 5% operationally, US declines 32%, International rises 11%; Sustained enthusiasm for FreeStyle Libre, no commentary on US timing – April 20, 2016

Executive Highlights

  • Global Diabetes Care revenue totaled $243 million in 1Q16, declining 9% as reported and 5% operationally year-over-year (YOY). US sales plummeted to $69 million, falling 32% as reported YOY. The performance marks all-time lows for both regions. International Diabetes Care had a strong quarter, with revenue of $174 million rising 5% as reported and 11% operationally – there was not a way to assess how much impact Libre had on this result though we assume it was meaningful.
  • Pooled “Big Three” global revenue (J&J, Roche, and Abbott) totaled ~$1.1 billion, falling 13% YOY relative to pooled revenue in 1Q15 (~$1.3 billion). Pooled declines were driven by US weakness where combined sales of ~$297 million fell a whopping ~28% YOY.
  • Abbott CEO Mr. Miles White shared optimism on FreeStyle Libre and commented on the goal of “bringing Libre to new markets, including the US.” There were no updates on the US timing of FreeStyle Libre Pro (retrospective, blinded; slated for mid-2016 US launch) or consumer version (Mr. White said last year that “optimistically” it could be approved in time for an end of 2016 launch). We’re not sure if the consumer version has been submitted to FDA.

Early this morning, Abbott CEO Mr. Miles White led the company’s 1Q16 financial update. Below, we bring you our top financial and pipeline highlights from the call. There was no relevant Q&A.

Financial Highlights

1. Global Diabetes Care revenue totaled $243 million in 1Q16, declining 9% as reported and 5% operationally year-over-year (YOY) and marking the lowest quarterly revenue ever in our Abbott model; the previous low was $267 million a year ago in 1Q15. This quarter’s performance missed the guidance for “mid-single digit growth by a wide margin, which was surprising. Guidance for 2Q16 optimistically called for mid-single digit sales growth driven by sales of FreeStyle Libre – that may strike some as optimistic though since this quarter missed the guidance by so much, it may not be quite as challenging for Abbott to achieve this level – 2Q15 also provides a fairly easy comparison of a 5% decline.

2. US Diabetes Care sales declined an unprecedented 32% YOY, totaling $69 million in 1Q16. This marked the lowest revenue ever recorded in our Abbott model – the previous all-time low was $97 million in 1Q14. Notably, 12 of the past 13 quarters have had negative growth. There seems to be no end in sight to the challenges in the US, and with further CMS pricing cuts, the declines will likely continue until FreeStyle Libre is approved and reimbursed in the US.

3. International Diabetes Care had a strong quarter, with revenue of $174 million growing 5% as reported and a robust 11% operationally. This marks four consecutive quarters of operational growth. Management noted that FreeStyle Libre is driving growth in a major way, though actual sales figured were not shared. Capacity is now unconstrained so we hope this will start reading out soon.

Pooled Financial Highlights

4. Pooled global revenue for J&J, Roche, and Abbott totaled ~$1.1 billion, falling 13% YOY relative to pooled revenue in 1Q15 (~$1.3 billion). Pooled declines were driven by US weakness where combined sales of ~$297 million fell ~28% YOY against a relatively easy comparison to pooled sales in 1Q15 (sales grew 3%). We are very struck that the US percentage of revenue is down to nearly 25% of total revenue. 

Pipeline Highlights

5. Abbott CEO Mr. Miles White again shared significant optimism on FreeStyle Libre and commented on his goal of “bringing Libre to new markets, including the US.” He did not share any specifics, though we assume FreeStyle Libre Pro (retrospective, blinded) is still slated for a ~mid-2016 US launch (submitted in 2Q15). Abbott’s 4Q15 call expressed Mr. White’s hope that it might “optimistically” be possible to bring the real-time FreeStyle Libre (consumer version) to the US by the end of 2016 – presumably this is very “best case scenario”. We’re not sure if it is at FDA.

6. Abbott’s six-month REPLACE study comparing FreeStyle Libre to SMBG in type 2s with a high baseline A1c (8.8%) was not discussed in today’s call. The results from ATTD disappointingly missed their primary endpoint – similar 0.3% A1c reductions in both groups – though the hypoglycemia data show a strong benefit to using the sensor. We are still unclear on what the results mean for the future reimbursement of FreeStyle Libre in type 2. For those who missed it, we include our full coverage below. Overall, we continue to believe that Libre can drive therapeutic change – a randomized controlled trial will not be the best environment to see the impact of Libre since patients who are on “placebo” virtually always do better than they would “in real life.”

7. Abbott has completed its six-month outcomes study that could support reimbursement of FreeStyle Libre in type 1s – IMPACT (n=225 type 1s on MDI or pumps, A1c <7.5%) – and results will report at ADA. We have to think that the hypoglycemia findings from REPLACE mean that the study in type 1s (primary outcome: hypoglycemia) is more likely to be a success.

8. On the clinical studies front, recruiting began for a new accuracy study of FreeStyle Libre in type 1 patients in the UK and for a study investigating FreeStyle Libre in pregnant women with type 1, type 2, or gestational diabetes. We can imagine that the Libre would be incredibly helpful for gestational diabetes in particular – as well as all pregnancy! – and we’re very excited to learn about this study. Abbott’s study examining time-in-range based on different frequencies of FreeStyle Libre Pro wear has been updated to “ongoing” and is no longer recruiting participants.

9. There were no updates on LibreLink – the free Android app for scanning FreeStyle Libre sensors without the need for a separate reader – that launched by invitation only in November 2015 in Sweden. We assume the plan is still to make it more widely available in the EU in 2016.

10. There were no additional pipeline updates on FreeStyle Libre or other Abbott meters.

Financial Highlights

1. Global Diabetes Care revenue totaled $243 million in 1Q16, declining 9% as reported and 5% operationally YOY. The performance came against an easy comparison to reported sales of 6% in 1Q15 [though the operational comparison was tougher – up 3% YOY]. In absolute revenue, 1Q16 now marks the tenth consecutive quarter of reported declines (since 4Q14) and the fifth consecutive quarter of sales below $300 million. Even more concerning, the performance is the lowest quarterly revenue ever recorded in our Abbott model by a significant margin – the previous low was $267 million in 1Q15. Sales have now been under the $300 million mark in five consecutive quarters … and under $280 million in four of those five quarters (4Q15 was the exception with sales of $297 million). The financials reflect the challenging environment in the US, though there is lots of upside with FreeStyle Libre. We assume the business is still profitable and cash-generating, even at the lower prices.

  • On a sequential basis, the picture was equally grim: global sales fell 18% from 4Q15, marking the second-steepest sequential decline we have seen for Abbott since we began reporting quarterly results in 2005.
  • Despite this quarter’s struggles, management shared positive guidance for 2Q16 – mid-single digit sales growth driven by sales of FreeStyle Libre. It is great to see this optimism, though the 4Q15 guidance for 1Q16 stipulated similar growth – instead, this quarter’s performance missed by a wide margin (mid-single-digit decline). Management did not comment on the disparity and we’re not sure what drove the difference though we’ve heard other members of the “Big Three” (J&J, Roche) allude to increasing US pricing pressures as a result of CMS’ new competitive bidding payment amounts. Those don’t take effect until July, though perhaps private payers are making things more difficult too. Management presumably underestimated the impact of these changes in the first quarter of 2016. For more on CMS and the impacts of competitive bidding, please see below.

Figure 1: Global, US, and International Quarterly Sales (1Q08-1Q16)

  • As Figure 1 demonstrates, the US business has driven global sales declines over the past three years, whereas OUS sales have remained relatively steady. Two-thirds of Abbott’s business does now come from outside the US, which has helped buoy the pooled global number – this used to be about 50%. Given the strengthening of the US dollar, Abbott’s underlying OUS business has actually grown more than the chart above would suggest.

2. US Diabetes Care sales declined an unprecedented 32% YOY, totaling just $69 million in 1Q16. This came on a somewhat “tough” comparison to 1Q15 (in this BGM market) when sales grew 5% YOY, but is devastating nonetheless. As it was for the global business, the quarter represents the lowest US revenue ever recorded in our Abbott model by a big margin – the previous all-time low was $97 million in 1Q14. This also marks 12 of the past 13 quarters with negative growth (1Q15 was the lone exception, and it was against a very easy comparison) and three of the past four quarters when stateside sales have come in under $100 million. Sales also fell 32% sequentially against a low base ($101 million in 4Q15).

  • The US has been an incredibly challenging region for all BGM companies, though this quarter saw a particularly striking drop. It was only two years ago (1Q14) that US sales dropped sub-$100 million for the first time since the acquisition of Freestyle manufacturer TheraSense in 2004. At that time, the inability to hit the $100-million mark was seen as an ominous watermark, but we’re now at a “new normal” – Abbott’s US sales have come in under $100 million in five of the past nine quarters. Now, the even starker reality is that lower milestones ($60 million? $50 million?) are very much within reach. Especially with coming CMS pricing cuts, the big question is: When will declines bottom out?
    • CMS recently announced results from the second round of its competitive bidding program, establishing lower payment amounts for mail order and retail blood glucose strips – $8.32 per 50-count box ($0.17 per strip), down 20% from the current allowable payment of $10.41 ($0.21 per strip). The new prices are slated to go into effect on July 1, 2016 and we assume this will continue to downward US trends. For the latest on competitive bidding, see our detailed report here.

3. International Diabetes Care revenue totaled $174 million, growing 5% as reported and 11% operationally YOY – for comparison, sales fell 12% as reported and grew 1% operationally in 1Q15. The 1Q16 performance marks the first reported growth for the segment since 3Q14 and the fourth consecutive quarter of operational improvement. EU sales of FreeStyle Libre drove the positive performance, and we were not surprised to hear management allude to the tremendous upside of the product as it looks to other geographies. We imagine that the recently completed capacity expansion (4Q15) has helped drive growth and more ability to market the product along with a less significant currency impact.

  •  Sales fell 11% sequentially though we would not read too far into this trend. The seasonality of Abbott’s business means that sales pretty much always fall between 4Q and 1Q (negative sequential growth every year since 2008).
  • Abbott did not break out sales for FreeStyle Libre in the EU – here’s some back-of-the-envelope speculation to estimate how big they could be. The table below assumes use of six FreeStyle Libre sensors per quarter (two 14-day sensors per month) at 59.90 euros each ($67 USD each) = $402 USD per quarter for six sensors. This math does not include the handheld reader, which also costs 59.90 euros. These numbers may be understated since we imagine pricing is lower in some areas.

Hypothetical FreeStyle Libre Sales of....

Implies ___ 24/7 users

$5 million
(3% of OUS sales)

~12,000

$15 million
(9% of OUS sales)

~37,000

$25 million
(15% of OUS sales)

~62,000

  • We have been waiting for sales to be broken out for some time and Abbott suggested in 3Q15 that it “won’t be long” till this is disclosed. Presumably Abbott is waiting to have a few quarters of unconstrained sales under its belt before disclosing the numbers. We do hope they will start reading out soon but we do not have any visibility on this.
  • We also wonder at what volume FreeStyle Libre will become profitable for Abbott. Though the fully disposable design uses low-cost NFC, manufacturing factory calibrated sensors cannot be easy or inexpensive. We wonder what the yields looks like and how many patients need to be using the device for the margins to work out.  

Pooled Financial Highlights

4. Pooled global revenue for J&J, Roche, and Abbott totaled ~$1.1 billion, falling 13% YOY relative to pooled revenue in 1Q15 (~$1.3 billion). This comes against an easy comparison as combined revenue declined 8% a year ago. Declines in the US have driven the weakness – no surprise considering that all three companies saw all-time lows in US/North America quarterly sales in 1Q16. This region has been tremendously challenging for all the big BGM players – YOY sales have declined in fourteen of the past fifteen quarters (1Q15 was the exception with 3% growth), and the outlook for 2016 continues to look grim with Medicare cutting prices even lower.

  • Combined US sales of ~$297 million fell ~28% YOY against a relatively easy comparison to pooled sales in 1Q15 (sales grew 3%). Roche was the biggest driver of weakness (down 49%, declining $74 million in actual revenue) though there were striking declines across the board: Abbott down 30% ($32 million); J&J down 15% ($22 million). The pooled sales marks an all-time low for a quarter by a significant margin – quite unbelievably, the previous low was $375 million (!) in 3Q15 – and mark only the second quarter in our model (which stretches back to 2004) in which pooled sales have come under $400 million. A closer look at the financials is even more troubling and demonstrates that the Big Three BGM companies pulled in ~$125 million less in 1Q16 than they did a year ago. Yikes! The exact impact on innovation is hard to assess; in the meantime, we’re glad to see Roche and J&J  partnering with app companies externally (mySugr and WellDoc).
  • In addition to pricing pressures, we believe that growth in the oral drug market (SGLT-2s and GLP-1s) has also likely contributed to lower BGM sales. It seems likely that some type 2 patients are experiencing less hypoglycemia and therefore testing less frequently … as well, with more “frequent testing” patients moving to CGM, this is also likely impacting BGM sales negatively. Coupled with pricing pressure and higher deductibles and higher co-pays that are likely driving patients to drugstore brands, the newer and better drugs certainly cannot be helping. For more on the impressive growth of the oral drug market and CGM,  and the factors surrounding the embattled BGM sector, see our 4Q15 and 2015 Industry Roundup.
  • Pooled international sales also declined as combined sales of $821 million fell 6% in 1Q16 against an easy comparison to pooled revenue in 1Q15 (down 13%). Depressed revenues as a result of a strengthening US dollar have characterized these businesses for several quarters now, though our sense is that the effect of foreign exchange may be tapering slightly. The 6% YOY reported decline actually represents the strongest pooled quarterly performance since 3Q14 (4Q14: down 7%; 1Q15: down 13%; 2Q15: down 13%; 3Q15: down 16%; 4Q15: down 12%).
  • Ascensia Diabetes Care (formerly Bayer) has no near-term plans to issue quarterly earnings reports, making it impossible to track “Big Four” pooled revenue. We considered various workarounds (e.g., assuming 0% YOY growth for Ascensia) though we decided that such an estimation would only distort pooled numbers. We do believe that an accurate “Big Three” analysis is more valuable than an approximate Big Four analysis – let us know if you have other thoughts! We assume Ascensia will not report these numbers going forward unless it chooses to go public, which we believe is unlikely.
  • As a reminder, direct comparisons between J&J, Abbott, and Roche are difficult because each company’s Diabetes Care business includes a fraction of non-BGM revenue. J&J and Roche have global insulin delivery, and Abbott has continuous glucose monitoring outside of the US. In addition, Roche only reports North America revenue, which bundles the US and Canada.

Pipeline Highlights

5. Abbott CEO Mr. Miles White shared significant optimism on FreeStyle Libre and commented on his goal of “bringing Libre to new markets, including the US.” This was the only mention of US commercialization plans in the call and Mr. White did not share specific timing updates. We assume FreeStyle Libre Pro (retrospective, blinded) is still slated for a mid-2016 US launch (it was submitted to the FDA in 2Q15), presumably at ADA. Regarding the consumer version, the 4Q15 call “optimistically” aimed to bring the real-time FreeStyle Libre to the US by the end of 2016. On the latter, there has been no news yet of an FDA submission though we had been hoping to hear some good news in today’s call – after all, a filing would have to come very soon to meet this timing. Perhaps the company is waiting for the lower-risk Pro version to be approved before submitting the consumer version, but as far as we know, both submissions can be in at the same time.

  • We have not heard an update on the FreeStyle Libre Pro (retrospective, blinded) FDA submission since it was submitted to the Agency in 2Q15. Management has slated a US launch for mid-2016. The company’s US pilot study of the Pro – which began recruiting type 2 participants in April 2015 (n=132) – wrapped up in August though results still have not yet been posted.
  • Broadly speaking, FreeStyle Libre continues to receive high-level recognition in Abbott’s earnings materials. Two notable mentions stuck out today: (i) the EU pediatric indication for Libre (see our ATTD 2016 coverage) was highlighted as one of two major “Milestones in Innovation” in a one-page infographic on Abbott’s quarter; and (ii) FreeStyle Libre was referenced twice in the first page of Abbott’s 1Q16 press release – impressive prominence for the diabetes franchise! We imagine that hours and hours go into crafting every last word in these documents, and it’s terrific to see Abbott prioritizing Libre’s visibility. We think there must be a great deal of internal confidence for management to highlight the product line so publically, even if it was not mentioned much on the call.

6. Abbott’s six-month REPLACE study (ClinicalTrials.gov Identifier: NCT02082184) comparing FreeStyle Libre to SMBG in type 2s with a high baseline A1c (8.8%) was not mentioned on the call despite the long-awaited presentation of results at ATTD 2016. REPLACE missed its primary endpoint, showing similar 0.3% A1c reductions in both groups though A1c significantly improved with FreeStyle Libre in users <65 years old (-0.5% vs. -0.2%) and prompted highly significant reductions in hypoglycemia (particularly <55 mg/dl). We are still unclear on what the results mean for the future reimbursement of FreeStyle Libre in type 2 and would have loved to hear Abbott’s commentary on this front. What have payers been saying about this data? How will Abbott proceed with this data? Certainly, there is a high EU bar for cost-effectiveness and added benefit … though we’ve seen some diabetes devices getting more positive recognition from NICE in recent months: Medtronic’s MiniMed Veo in February and CGM more broadly in NICE’s August 2015 recommendations

  • Ultimately, we had very high expectations coming in to REPLACE – it seemed like a slam dunk to improve A1c in insulin-using type 2s (baseline A1c: 8.8%) testing ~four times per day. While we were disappointed that the trial missed its primary endpoint in all patients, we were pleased to see it showed profound and meaningful reductions in hypoglycemia – particularly the ~75% reduction in time spent at the highly dangerous level <45 mg/dl. All things considered, we salute Abbott for conducting this ambitious, long-term outcomes study of FreeStyle Libre. The ultimate mark of any technology is whether patients will buy it, and with FreeStyle Libre, they are paying out of pocket and have been demanding it faster than Abbott can make sensors.
  • For detailed thoughts on REPLACE, please see our full coverage from ATTD, also included in our Appendix below.

7. Abbott has completed its six-month outcomes study that could support reimbursement of FreeStyle Libre in type 1s – IMPACT (n=225 type 1s on MDI or pumps, A1c <7.5%) – and results will be reported at ADA 2016 in June. It will be interesting to see how the type 1 data complement the type 2 findings. After all, we have to think that the positive hypoglycemia findings from REPLACE make the type 1 study (primary outcome: hypoglycemia) even more likely to be a success. Indeed, we’ve now seen that type 2 patients acting on their data can reduce A1c (slightly) and make for “higher quality” A1cs, and we certainly expect to see this trend borne out in type 1s. That FreeStyle Libre was able to achieve a hypoglycemia improvement in the much tougher type 2 population without alarms bodes well for IMPACT – as a reminder, patients in IMPACT have an A1c <7.5% (vs. >7.5% in REPLACE).

8. A number of FreeStyle Libre studies have been updated on ClinicalTrials.gov: (i) a new accuracy study of the FreeStyle Libre consumer version in type 1 patients is now recruiting (ii) a recently initiated study investigating FreeStyle Libre in pregnant women is now recruiting; and (iii) an ongoing study of the utility of FreeStyle Libre Pro based on the frequency of wear has completed recruiting.

  • Abbott has begun recruiting for an accuracy study of FreeStyle Libre in type 1 patients in the UK (Clinicaltrials.gov Identifier: NCT02734745). The single-center trial is aiming to enroll 24 patients, who will wear Libre for 14 days at home. During the study period, patients will perform at least seven fingersticks per day and will return to the clinical center on two separate occasions: (i) to assess accuracy vs. YSI during a meal test; and (ii) to assess accuracy vs. YSI during induced moderate hyperglycemia and subsequent hypoglycemia. The primary endpoint will be accuracy at 14 days; the study’s estimated completion is May 2016. We wonder if this is testing a new algorithm or changes to the sensor.
  • A study investigating FreeStyle Libre in pregnant women with type 1, type 2, or gestational diabetes is now recruiting participants (ClinicalTrials.gov Identifier: NCT02665455). The trial will enroll approximately 80 patients who will wear FreeStyle Libre for 14 days at home. The primary endpoint is point accuracy judged using the Clarke Error Grid, and study completion is slated for September 2016. We appreciate Abbott’s strong push to emphasize the utility of Libre across various age groups (pediatrics, adults), diabetes types (type 1, type 2, gestational), and CGM varieties (consumer, professional). Expanding the footprint in alternative populations is critical as Abbott faces increasing sensor competition from Dexcom and Medtronic.
  • Abbott’s study examining time-in-range based on different frequencies of FreeStyle Libre Pro wear is now listed as “ongoing” and is no longer recruiting participants (ClinicalTrials.gov Identifier: NCT02434315). The trial will evaluate the glycemic impact of retrospective data review for patients with insulin-dependent diabetes (n = 170). The two intervention arms will randomize patients to wear the sensor for either four or six 14-day periods (i.e., 56 or 84 days total) and will allow patients to retrospectively review their results. Time-in-range during the penultimate period of sensor wear will be compared to time-in-range over three 14-day periods in a comparator group that will not (at any point) be allowed to retrospectively review data. The study’s estimated completion is May 2016.
    • We assume this study could inform best practices for providers and payers, who might wonder, “How often should someone wear a blinded sensor to get maximum benefit?” We see major value in FreeStyle Libre Pro for intermittent, diagnostic purposes– drug titration, newly diagnosed patients, those resistant to testing often or wearing a device all the time, etc. Though real-time glucose data is obviously optimal for patients, not every person is willing to or financially able to use wear a sensor 24/7. We especially like that Pro can make providers’ lives easier.

9. There were no updates on LibreLink – the free Android app for scanning FreeStyle Libre sensors without the need for a separate reader – that launched by invitation only in November 2015 in Sweden. At the time, further EU expansion was expected in 2016, and we assume that is still the case. The launch marks Abbott’s first foray into connected glucose monitoring devices, matches the no-receiver-needed marketing of Dexcom’s G5 and Medtronic’s soon-to-launch Guardian Connect in the EU (~May-July of this year), and improves the Libre user experience and cost profile. An unknown is how Abbott will expand LibreLink beyond Android devices and enhance its connectivity moving forward.

  • At ATTD, we learned that the LibreLink Apple platform expansion is “coming soon” though may require an iPhone adapter to power the NFC-reading capability. As a reminder, the iPhone franchise (up to and including iPhone 5S) has not had NFC built-in and it sounds like this solution would work for both existing iPhones and the iPhone 6 (that, in fact, does support NFC but – according to the rep – does not have the ability to read data from Libre.) As we understand it, the adapter would be plugged into the headphone jack, would scan data from the sensor, and would then send the data straight to the app. We applaud management for identifying a workaround though it is a less-than-deal solution – requiring an adapter negates the seamlessness and patient convenience of scanning with just a phone alone. And certainly, Sanofi’s iBGStar was killed with the move to an adaptor. We’ve long wondered if Abbott would develop a Bluetooth-enabled FreeStyle Libre sensor, though there are manufacturing and potentially cost tradeoffs to doing so (a digital health expert recently told us NFC was cheaper than Bluetooth a few years ago, but now Bluetooth might be cheaper). The mobile experience is increasingly critical to stay competitive with Dexcom’s already-launched G5 and Medtronic’s upcoming standalone mobile CGM, Guardian Connect (EU launch expected in ~May-July of this year).
  • Following Dexcom’s partnership with Verily and Medtronic’s partnership with IBM Watson, we’re curious what Abbott has in mind for further improving FreeStyle Libre’s form factor, cost, or data analytics. Dexcom and Medtronic are both innovating on the data front through their respective partnerships, and we wonder what Abbott can do to make Libre glucose data more actionable for patients and providers. How could AGP be augmented to provide more pattern recognition or clinical decision support? Dexcom is also working hard with Verily to improve the on-body form factor, and we wonder if Abbott is planning to make FreeStyle Libre even smaller or less obtrusive – while FreeStyle Libre has major on-body size and cost advantages now, if Dexcom and Verily eventually come to market as intended (disposable, bandage-like CGM the size of a penny), it could represent very compelling competition. [Dexcom 4Q15 call clarified that the first-gen product from this partnership (~2018) won’t be as small as a penny, though we assume it will be smaller than the current product, which is not as small or flat as the FreeStyle Libre.] On the cost front, could Abbott further drive down FreeStyle Libre sensor costs as volumes grow? How low can the cost of sensors go from the current ~120 euros per month (four euros per day)? And from a payer perspective, could LibreLink facilitate continuous population-level data in type 2s, bringing potential for prioritized care or even new business models?

10. There were no additional pipeline updates on FreeStyle Libre or other Abbott meters. Abbott’s newest BGM (the FreeStyle Precision Neo) launched in April 2015. Management has alluded in the past to expanding the Flash Glucose Monitoring category to other areas, and the Pro version is the first of these. We wonder if a continuous version of FreeStyle Libre will ever be developed, though that could increase the cost, potentially increase the on-body size, and go against some of the principles that governed the original design of FreeStyle Libre. A tough call, and obviously, more SKUs add manufacturing complexity and could reduce margins.

Appendix: ATTD Coverage of REPLACE

Use of Novel Flash Glucose-Sensing Technology to Optimize Glucose Control in Individuals with Type 2 Diabetes on Intensive Insulin Therapy (REPLACE)

Thomas Haak, MD (Diabetes Center Mergentheim, Germany)

Dr. Thomas Haak shared long-awaited results from Abbott’s FreeStyle Libre REPLACE study, a randomized six-month trial comparing Abbott’s new flash glucose monitoring (the FreeStyle Abbott Libre) to SMBG in type 2 patients on basal/bolus therapy in poor control (baseline A1c: 8.8%) on insulin therapy. The session was jam packed (they stopped letting people in), and we have all the data and Close Concerns’ own analysis below. Patients were 2:1 randomized to either use capillary blood glucose testing (n=75; FreeStyle Lite ~ 4 times per day) or real-time use of FreeStyle Libre (n=149) for self-management and review at regular clinician visits. The trial’s primary outcome was not met at six months – from a baseline of 8.8%, both the SMBG and FreeStyle Libre groups experienced a 0.3% reduction in A1c (p=0.82). A pre-specified secondary analysis did reveal an A1c advantage in the subgroup <65 years old: -0.5% vs. -0.2% (p=0.03). The opposite was true in patients ≥65 years, who actually performed far better in the control group (-0.1% vs. -0.5%; p=0.008), which we believe was probably due to HCP caution over having these patients “too” well controlled and risking hypoglycemia.

Overall, the most compelling takeaway from this trial was the hypoglycemia data (measured via masked Libre Pro in the SMBG arm) improved markedly with FreeStyle Libre overall, overnight, and particularly for dangerous hypoglycemia. Had hypoglycemia been the primary outcome, the trial would presumably easily have been a success. Relative to the control group, patients using FreeStyle Libre spent ~30 minutes fewer per day <70 mg/dl (p<0.001), ~13 minutes fewer per day <55 mg/dl (p=0.001), and ~8.5 minutes fewer per day <45 mg/dl (p=0.001) – remarkably strong in our view, especially since any time spent at 45-55 mg/dl is very dangerous and can easily result in an ambulance call or hospital visit or stay. For the FreeStyle Libre group, these reductions equated to major 55%, 68%, and 75% reductions in those respective zones from baseline to six months (based on the limited data given, it was not possible to calculate these percentages for the control group). All measures of nocturnal hypoglycemia were also significantly lower with FreeStyle Libre, countering the criticism that the device’s lack of alarms poses a nighttime danger - presumably, the retrospective glucose data helped identify nocturnal hypoglycemia. There were no device-related serious adverse events and nine instances of minimal adverse events (e.g., infection, allergy) from six subjects.

Ultimately, we had high expectations coming in to this trial – it seemed like slam dunk to improve A1c in insulin-using type 2s (baseline A1c: 8.8%) testing ~ four times per day though we note those are highly engaged patients (the average person with type 2 tests less than once a day and plenty even on mealtime insulin test less). We are extremely disappointed that the trial missed its primary endpoint in all patients. That said, it showed profound and meaningful reductions in hypoglycemia – particularly the ~75% reduction in time spent <45 mg/dl – and patients <65 years did see a 0.3% benefit on A1c while simultaneously reducing severe hypoglycemia – a clear win! A1c is the most devilish of outcomes for diabetes technology, as devices typically profoundly reduce hypoglycemia, often at the expense of raising average glucose.

We do wonder what could have been done differently. Most importantly, the study design did not use a per-protocol mandatory insulin adjustment (i.e., not treat-to-target), which would have unquestionably, in our view (and other smart people) improved the magnitude of A1c benefit. In this trial, providers and patients could decide what to do with the data at their regular visits, a deliberate decision to ensure a real-world trial – that said, it’s been clear for some time that if people do not take action on data, A1c will not improve! We wonder if providers were drawn to the red traffic light on AGP that identifies hypoglycemia – particularly in the older type 2 patients! – and backed off therapy as a result (and too much?). Of course, it is also much easier to fix hypoglycemia (reduce insulin) than to safely bring mean glucose down (“Is it correction or food bolus? Or is it basal?”)

We also wonder about the study population, as these were patients far from A1c goal and already testing four times per day. Within that framework, the full results have to be interpreted in the proper context – not a smashing success and not a success in terms of primary outcome, but clearly a major success in terms of safety. Notably, this trial could have met its primary endpoint with a hypothetical 0.5% reduction in A1c for all patients, and could’ve reduced hypoglycemia at the same – that would have been a clear success but we still consider this directionally very strong, as we think with the right advice from doctors or nurses, patients will be able to drop their A1c.

All things considered, we salute Abbott for conducting this ambitious, long-term outcomes study of FreeStyle Libre. The ultimate mark of any technology is whether patients will buy it, and with FreeStyle Libre, they are paying out of pocket and demanding it faster than Abbott can make sensors. In the immortal words of highly regarded Dr. Jane Seley, whom we saw during ATTD, “and patients will do this – they WANT this!” Of course, reimbursement will open access for far more patients, and we hope this study and subsequent studies make a strong case that more frequent, actionable glucose data is beneficial. An A1c impact will make things more clear – this is also a reminder that A1c is isolation just isn’t the best metric – and we question why hypoglycemia wasn’t included as a primary outcome. Last, it will be extremely important to see how the type 1 data from IMPACT (to be shown at ADA 2016) will impact these results – since we know that patients acting on data can reduce A1c and make for “higher quality” A1cs, we hope we see that. Since patients in that trial have an A1c <7.5%, there may well be room for an even bigger impact on the hypoglycemia front.  

Study Design

  • REPLACE (ClinicalTrials.gov Identifier: NCT02082184) randomly assigned 224 type 2 patients on insulin therapy to six months of either capillary blood glucose testing (n=75; FreeStyle Lite) or sensor glucose data (n=149; FreeStyle Libre) for optimization of glucose levels. All patients entered the study as regular blood glucose testers (≥10 fingersticks/week, averaging to roughly four per day). During the study phase, patients in the intervention arm reviewed FreeStyle Libre Software summary reports (Ambulatory Glucose Profiles) with their clinician at regular intervals in order to make therapy adjustments, while those in the control arm reviewed diary readings with their clinician at similar intervals.
  • Notably, insulin dose adjustments were made on an intention-to-treat basis. Providers were instructed to optimize therapy as they saw fit, but there were no A1c targets or previously mandated dose adjustments.
  • Patients at baseline had a mean age of 59 years, a mean 17 year duration of diabetes, a mean A1c of 8.8%, a mean BMI of 33 kg/m2, and a mean self-reported blood glucose frequency of ~3.7 per day. Roughly 95% of patients (n=212) were on MDI. In short, this was a challenging population in which to show benefit (not at goal but testing four times per day), but also one with high potential to reduce A1c meaningfully if they were acting on data.

Results

  • Use of FreeStyle Libre was associated with significantly improved A1c in subjects <65 years but not for the entire population. Mean A1c improvement in the total population was a similar 0.3% for both groups (p=0.82), who started with baseline A1c values of 8.8% (control) and 8.7% (intervention), respectively. In the younger subgroup (<65 years old), A1c improved more in the intervention arm (-0.5% vs. -0.2%, p=0.03) though the reverse was seen in patients ≥ 65 who actually performed better in the control group (-0.1% vs. -0.5%, p=0.008). The latter could have been because HCPs are so worried about hypoglycemia that they are backing off too much from appropriate therapy.

Change in A1c

Group

N

Baseline Mean

Change in A1c at six months

P-value

Control

75

8.8%

-0.3%

p=0.82

Intervention

149

8.7%

-0.3%

Change in A1c for Age Subgroups

Age (years)

Group

N

Baseline Mean

Change in A1c at six months

P-value

<65

Control

47

8.8%

-0.2%

p=0.03

Intervention

95

8.8%

-0.5%

≥65

Control

28

8.4%

-0.5%

p=0.008

Intervention

54

8.3%

-0.05%

  • Notably, all measures of hypoglycemia were significantly lower following intervention with FreeStyle Libre vs. SMBG. Specifically, patients: (i) spent ~30 minutes fewer/day < 70 mg/dl (p<0.001); spent ~13 minutes fewer/day < 55 mg/dl (p=0.001); and (iii) spent ~8.5 minutes fewer/day <45 mg/dl (p=0.001). These are very important data given the costs associate with hypoglycemia, particularly severe hypoglycemia.
    • All measures of nocturnal hypoglycemia, too, were significantly lower following intervention with FreeStyle Libre vs. SMBG. For context, patients: (i) spent ~17 minutes fewer < 70 mg/dl (p=0.0001); spent roughly seven minutes fewer < 55 mg/dl (p=0.003); and (iii) spent roughly five minutes fewer < 45 mg/dl (p=0.004). While some may question these numbers and “lower” overall – we stress that any time at all not spent in severe hypoglycemia is a big win.

Table: Time in Hypoglycemia (hours per 24-hour day)

Glucose Level

Intervention Group Baseline (days 1-15)

Intervention Group Final (days 194-208)** ^

Difference (vs. control) in change from baseline

P-value

<70 mg/dl

1.30

0.59

-0.47

P=0.001

<55 mg/dl

0.59

0.19

-0.22

P=0.001

<45 mg/dl

0.32

0.08

-0.14

P=0.001

* Note: Abbott did not report the time in nocturnal hypoglycemia for the control group at either baseline or final study period. **Similar baseline and final results were not reported for the control group. ^ The study had a 15-day run-in with blinded CGM to determine baseline control, followed by a 180-day study period (SMBG vs. FreeStyle Libre), and then a 15-day masked CGM phase in the control group vs. 15 more days of FreeStyle Libre.

Table: Time in Nocturnal Hypoglycemia (hour between 11 PM and 6 AM)

Glucose Levels

Time in Nocturnal Hypoglycemia (hours between 11 PM and 6 AM)

P-value

Intervention Group Baseline (days 1-15)

Intervention Group Final (days 194-208)

Difference (vs. control) in change from baseline

<70 mg/dl

0.55

0.49

-0.29

P=0.0001

<55 mg/dl

0.27

0.18

-0.12

P=0.003

<45 mg/dl

0.16

0.08

-0.08

P=0.004

* Note: Abbott did not report the time in nocturnal hypoglycemia for the control group at either baseline or final study period

  • FreeStyle Libre pretty much completely replaced blood glucose testing, suggesting a high level of confidence in the factory-calibrated sensor. SMBG frequency with FreeStyle Libre fell from a mean of 3.8 tests/day at baseline to 0.3 tests/day (one every three days) at six months. Patients in the FreeStyle Libre arm scanned for glucose 8.3 times per day, which is once every two waking hours (Certainly more real-time glucose data than they were getting with SMBG, but probably not as much as type 1s will scan). The trend is a testament to the real-world accuracy of FreeStyle Libre in patients on insulin therapy. As a reminder, FreeStyle Libre’s label recommends confirmatory fingersticks : (i) during times of rapidly changing glucose; (ii) when hypoglycemia or impending hypoglycemia is reported by the system; or (iii) when symptoms do not match the system readings. However, these data are a reminder that patients don’t do fingersticks with FreeStyle Libre in the real world, something we’ve hear since the system launched.
    • The control group maintained their level of blood glucose testing through the study – baseline: 4.0 test/day; six months: 3.0 tests/day.

Figure 2: Number of FreeStyle Libre Scans and Blood Glucose Tests Per Day

  • FreeStyle Libre improved quality of life and patient-reported outcome measures, per two separate metrics. Diabetes-Treatment-Satisfaction Questionnaire results showed an increased overall treatment satisfaction for FreeStyle Libre vs. SMBG (13.1 vs. 9.0; p<0.001), while the Diabetes Quality of Life (DQoL) survey also showed increased treatment satisfaction for FreeStyle Libre vs. SMBG (-0.2 vs. 0.0; p=0.03). We absolutely loved how Abbott reported these outcomes and would urge the field to decide together on how to report this data and move toward standardized reporting.
  • No device-related serious adverse events were reported. Overall, 520 adverse events were reported during the course of the study; of these, only nine (reported by 6 subjects) were related to the device. According to Abbott, all nine events were related to an adhesive reaction, allergy, rash, or local infection at the sensor site and quickly resolved. This corroborates some patient reports on Twitter complaining about the adhesive – this is to be expected with any technology like this, and we assume Abbott is thinking about how to improve the adhesive in next generations although there’s not really a lot they have to do as most patients are not experiencing problems.

Close Concerns’ Analysis

  • The A1c results are underwhelming in terms of the primary outcome of A1c, given the 8.8% baseline and given the enormous patient and HCP enthusiasm associated with the device. We had been hoping for population-wide improvement and it’s disappointing that patients ≥65 years old saw improved glycemic control on SMBG, though as noted – unless patients are working with HCPs to respond appropriately to date, of course their A1cs will not necessarily improve – that is not to detract at all from the importance of hypoglycemia reduction! The small incremental A1c advantage (0.3%) in FreeStyle Libre patients <65 years was also lower than we would have expected overall and raises the case whether Libre might be more apt to focus patients on avoiding hypoglycemia rather than hyperglycemia – that is addressable without a doubt in our view.
    • The study design did not use a per-protocol mandatory insulin adjustment (i.e., not treat-to-target), which would have unquestionably improved the magnitude of A1c benefit. Providers and patients could decide what to do with the data at their regular visits, a deliberate decision to ensure a “real-world trial”. That was a very tough call, and given the A1c endpoint, we believe it would have been smart to include a treat-to-target component.
    • As we have been doing for multiple years, we point out the limitations of A1c as a yardstick for real-world value. A1c is of course an incomplete metric and one that is obscured by changes in hypoglycemia. Glucose control for many patients is not defined just in terms of this measurement but in terms of time-in-range, averages as well as standard deviation glucose data, quality of life, fear, hospitalizations, etc. The most successful therapies will improve value across the board and FreeStyle Libre is definitely passing the ultimate test of a product: demand has exceeded supply! Indeed, last year’s capacity constraint speaks to the way Libre is absolutely helping patients, and we imagine we are likely not seeing the real-world efficacy of Libre in the RCT setting. As a side note – we’ve heard here in Milan that patients who have Libre can now order up to six sensors at once and the elation we’ve heard associated with this change has been quite compelling.
    • Medtronic’s OpT2mise trial of pumps in type 2 is an interesting comparator on the A1c and hypoglycemia fronts. That study enrolled a population with a baseline A1c of 9.0% and doing 2.5 SMBG tests per day (slightly worse than this trial, but not by much). The trial showed an A1c reduction of 1.1% with an insulin pump vs. 0.4% in the MDI group (p<0.001) after six months, though hypoglycemia was not improved in the pump group.
    • What would the A1c outcome have looked like in REPLACE if hypoglycemia was unchanged? Put differently, what is a bigger success? A 1% decline in A1c and no change in hypoglycemia, or no change in A1c but a 50% reduction in hypoglycemia? For payers, arguably the latter has better short-term payoff.
    • Was hypoglycemia in older patients + provider bias at work? We wonder whether clinicians were discovering a lot of undocumented hypoglycemia with FreeStyle Libre in the elderly and backing off treatment. We would point out that Abbott’s Ambulatory Glucose Profile does draw attention with red traffic lights to problem areas, and it’s certainly easier to improve hypoglycemia (back off insulin, eat more) than to improve hyperglycemia. Were providers drawn to the hypoglycemia? Did they prioritize fixing that over reducing mean blood glucose? That certainly seems like a likely explanation to explain the lack of an A1c improvement in the older group – and we see this as addressable.
    • Did older patient scan less frequently? This was our first thought, but the opposite was actually true: older patients scanned more often than those in the younger cohort (8.4 times/day vs. 8.0 times/day). We do wonder whether patients’ perception of success is more associated with avoiding hypoglycemia than hyperglycemia – probably!
    • To better understand REPLACE’s A1c data, we would love to know what proportion of patients improved their A1c by 0.5% or more? BY 1% or more? By 2% or more? What percentage of patients improved their A1c by 0.5% or more or reduced hypoglycemia by 30% or more? Were there “responders” and “non-responders” to FreeStyle Libre? Or was the small magnitude of A1c improvement consistent across the board?
  • Despite the underwhelming A1c findings, the hypoglycemia improvement lived up to its billing. All measures of hypoglycemia (day+night and nocturnal) were significantly lower with FreeStyle Libre, and it’s quite evident that these results are clinically meaningful – minutes of hypoglycemia saved daily translate to YEARS of healthy complication-free life later, particularly in the <45 mg/dl zone. For context, we the results seem somewhat comparable to those of the ASPIRE in-home study of the MiniMed 530G – and that device was taking action by suspending insulin! That trial showed a 32% reduction in nocturnal hypoglycemic events and a 38% reduction in mean area under the curve of nocturnal hypoglycemia events without an increase in A1c levels.
    • We found the significant reduction in time spent < 45 mg/dl particularly striking given how dangerous that range is. Even changes in a small number of minutes spent in that low range there could mean many healthcare dollars saved annually – we have to imagine that that is one of the most compelling takeaways for Abbott and would form the crux of any payer pitch.
    • We were impressed, too, to see the improvement in overnight hypoglycemia improvement – even without alarms with FreeStyle Libre! The finding implies that patients don’t have to have alerts to improve the overnight period … they just need the data, and then they can adjust therapy to create success. 
  • In summary, Abbott’s full results strike us as quite solid – not a smashing success but certainly not a failure. Our gut reaction was disappointment (as we’re sure it was for many) but some perspective is needed; the data could have been worse (imagine if Abbott had hit its primary endpoint with a 0.4% reduction in A1c but increased hypoglycemia?) and could have been better (imagine if Abbott had picked hypoglycemia as the primary endpoint?). In the big scheme of things, these results likely fall somewhere in the middle of the road – we think it’s more likely that the long-term implications will be defined by the questions Abbott asked and lessons the company (and others) learn rather than missing the primary outcome. While we very much would’ve loved to have seen a 1% A1c reduction or at least the 0.5% A1c reduction that usually implies success, this is a more complicated story and given the enormous enthusiasm surrounding the product, we believe those are the design front will be diving in
    • Speaking of the long-term implications, we are unclear what the results mean for future reimbursement of FreeStyle Libre in type 2. What would payers say about this data? Certainly, there is a high EU bar for cost-effectiveness and added benefit, though CGM is getting some reimbursement in Europe (and FreeStyle Libre is cheaper than CGM – about half the price). How will Abbott proceed with this data? When combined with the results fro IMPACT in type 1, could it form the basis for reimbursement in some major markets? Or will the company need to pursue additional studies to supplement these findings? And speaking of additional studies, we can’t help but wonder what FreeStyle Libre might look like in the real world, complemented by the right drugs and the right behavior. It could do so, so much!
    • We also have to think that the reasonably positive findings here mean that Abbott’s six-month study in type 1s (primary outcome: hypoglycemia) is even more likely to be a smashing success. That FreeStyle Libre was able to achieve a hypoglycemia improvement and partial A1c improvement in the much tougher type 2 population bodes well for type 1. As a reminder, Abbott will present findings from IMPACT at ADA 2016.
  • Ultimately, we salute Abbott for ambitiously pursuing an outcomes study and testing these uncharted waters. A1c remains the metric-of-choice in the eyes of payers and despite the surface-level disappointing results, it’s not clear that less-ambitious-but-more-impressive results would have delivered a no-brainer decision. Instead, we think the results serve as an important lesson and valuable learning experience as companies begin thinking about study design and about engaging with reimbursement bodies. The ultimate goal is to increase the increase the number of people who would benefit from this technology, and moving forward, it’s absolutely critical to think about what is best for different populations.

Close Concerns’ Questions

  • Were there “responders” and “non-responders”? What proportion of patients improved their A1c by at least 0.5% OR reduced time in hypoglycemia by 30%+? Was there anyone in the trial that saw no benefit on A1c or hypoglycemia?
  • What would the A1c outcome have looked like in REPLACE if hypoglycemia was unchanged? What is a bigger success from a payer perspective? A 1% decline in A1c and no change in hypoglycemia, or no change in A1c but a 50% reduction in hypoglycemia? Which would a payer prefer? Which would a provider prefer? Which would a patient prefer?
  • How would these results have looked with FreeStyle Libre Pro used intermittently instead of real-time data?
  • In retrospect, what would Abbott change about the study design? Should sites have been mandated to make insulin adjustments based on the data? Should the study have enrolled patients who weren’t already checking their blood glucose so regularly?
  • What are the implications for reimbursement? How will payers receive the data? Will the magnitude of the benefit be enough to show cost-benefit? What will Abbott do going forward?
  • What are the implications for IMPACT in type 1? Should these results raise our expectations for what we’ll see in terms of hypoglycemia reduction in type 1 patients?
  • What can be learned from this trial for future studies? How should the diabetes technology field think about designing outcomes studies for reimbursement? What should closed-loop investigators take away from this trial?

 

-- by Varun Iyengar, Ava Runge, Adam Brown, and Kelly Close