December 31, 2015

Executive Highlights

As we look to 2016, we reflect on 2015 to consider what we have learned. What directions has the field of diabetes moved? What were we right about in 2015? What we were wrong about? What was unexpected? Where do the biggest questions and challenges remain and what’s on the horizon in 2016?

This report provides a 2015 year-in-review and predictions for 2016 in four sections – Big Picture, Diabetes Technology, Diabetes Drugs, and Obesity. Within each category, we include themes from the year, a list of our most widely read reports (with links to coverage), and answers to the questions above. You can click on a section in the table of contents below to skip right down to it.

2015 saw new IDF and CDC stats that underscored the need for continued urgency in efforts to combat the global diabetes epidemic. The alarming figures in the IDF’s Seventh Diabetes Atlas (415 million adults with diabetes in 2015, projected to rise to 642 million by 2040) provided an urgent reminder of the epidemic’s global scope.  CDC data showing a significant decline in US diabetes diagnoses from 2009-2014 provided some cause for mild optimism but illustrated the importance of proceeding full steam ahead with prevention efforts. The year also brought evidence of several broader healthcare trends with important implications for diabetes going forward. Consolidation was the name of the game among payers and retailers in 2015, suggesting that pricing pressure from the payer sector is likely only to increase in the coming years as individual entities grow and gain negotiating power. Questions about big data and precision medicine were at the center of the public consciousness throughout the year, though we were also often reminded how far we have to go before these tools are truly relevant for people with diabetes.

In diabetes technology, the closed loop advanced further towards commercialization, led by Medtronic’s MiniMed 670G – more than ever, this year made it clear that closing the loop is now a question of “when” and “how,” not “if.” Google Life Sciences (now a standalone company, Verily) showed big-time commitment to diabetes in 2015, announcing new partnerships with Dexcom (next-gen CGM) and Sanofi (sensors, wearables, software), and continuing to prioritize the glucose-sensing contact lens with partner Novartis. In glucose monitoring, enthusiasm for Abbott’s FreeStyle Libre was sustained throughout the year, while Dexcom had another standout year on the commercial and pipeline front. Medtronic Diabetes also had an eventful year, maintaining leadership in the automated insulin delivery race and broadening into connectivity, type 2 diabetes, and healthcare delivery. More broadly, diabetes device connectivity and data made more solid strides in 2015, with continued proliferation of smartphone- and cloud-connected glucose monitoring devices and meaningful progress for diabetes data aggregation platforms.

The unexpected positive results from EMPA-REG OUTCOME were undoubtedly the highlight of the year in the diabetes drug world, and discussions regarding the mechanism of benefit, the likelihood of an SGLT-2 inhibitor class effect, and the generalizability of the results are bound to occupy much of the field’s attention in 2016. The results added another layer of nuance and questions to the broader CVOT debate, though the overall experience (including the results from TECOS and ELIXA presented at ADA) suggests that the majority of these FDA-mandated trials will still produce neutral results. Pricing pressure and frustration over the rising cost of insulin remained top of mind throughout the year, setting up the impact of biosimilar insulin as one of the biggest questions going into 2016. The future for new branded insulins also remains up for debate following several 2015 launches, while the GLP-1 agonist enters 2016 in a very strong position following the launch of Lilly’s patient-friendly Trulicity (dulaglutide). On the more negative side, the unexpected issue of ketoacidosis with SGLT-2 inhibitors occupied plenty of attention in 2015 and could contribute to the challenges of translating type 2 diabetes therapies to type 1 diabetes.

Finally, looking to obesity, the pharmacotherapy market continued to experience slow growth, with unimpressive revenue for both Arena/Eisai’s Belviq (lorcaserin) and Vivus’ Qsymia (phentermine/topiramate extended-release). The area also experienced its fair share of unexpected pitfalls in 2015 between the drama around Orexigen’s CVOT and the patient deaths in Zafgen’s beloranib program. On a more positive note, we were heartened to see new players like Novo Nordisk and Orexigen/Takeda enter the market and some signs of increased enthusiasm around more obesity treatment options. This enthusiasm also took the form of increased discussion around personalized medicine, new targets in the brain, and the microbiome, as well as a growing appreciation of the dangers of excess sugar. We hope the urgency will only grow in 2016, as new prevalence data showed a continued rise in obesity prevalence, with all US states now having an adult obesity rate above 20%.

Big Picture

1. Themes

New Diabetes Stats from IDF and CDC Underscore Continued Urgency

• IDF came out with alarming stats in its Seventh Diabetes Atlas, providing an urgent reminder of this epidemic’s global scope. An estimated 415 million adults had diabetes in 2015, a 9% increase from 382 million in 2013 (the Sixth Atlas), and an unbelievable trajectory from 30 million people with diabetes in 1985. IDF now estimates 642 million people could have diabetes by 2040, a 55% increase from 2015. In 2015, one in eight global healthcare dollars ($673 billion) were spent on diabetes, rising a remarkable 23% from $548 billion in 2013 (compared to a 9% increase in diabetes cases over that time). Costs are projected to exceed $802 billion in 2040 (19% growth, which seems like a big underestimate given the projected 55% growth in diabetes). One person now dies from diabetes every six seconds (5.1 million deaths per year), which makes diabetes a bigger killer than HIV, tuberculosis and malaria combined. The three countries with the highest number of people with diabetes are still China (110 million, +11% from 2013), India (69 million, +6% from 2013), and the US (29 million, +20% from 2013), and by 2040, IDF projects 151 million diabetes cases in China (+38% from 2015), 124 million in India (a shocking +78% from 2015), and 35 million in the US (+20% from 2015 - a major underestimate in our view). After seeing the data in person at IDF 2015, we realized that the 2040 estimates are far more conservative than we had initially thought: they assume no change in diabetes prevalence or care (e.g., patients living longer), and only reflect expected population growth.
• New CDC data suggested a statistically significant decline in US diabetes diagnoses (2009-2014), though expert takeaways simply underscored the continued urgency: “it’s not yet time to have a parade” (Dr. David Nathan), “we have a long way to go” (Dr. Robert Rizza), and “we cannot and will not let our guard down” (Dr. Robert Ratner). The data suggested that the 1.4 million new cases of diagnosed diabetes in 2014 marked the fifth straight year of decline, and the first statistically significant drop from the peak in 2009 (1.7 million). Surprisingly, a well-written front-page New York Times article (with a misleading title) broke the news, which was not accompanied by any CDC press release. We saw the update as only mildly encouraging, and agreed wholeheartedly with the “urgency” interpretation – 1.4 million new cases per year is still double the number in the early 90s, and puts the US on a very worrying slope. Even if new cases further decline from the current 1.4 million to a hypothetical one million per year in the next decade, that adds ~10 million patients to the US’ already 29 million people with diabetes (minus the deaths). For context, the IDF’s new 2040 estimate for the US is substantially lower at 35 million patients (+6 million) over a longer time horizon.
• To us, the Atlas and the new CDC data, offer the same message: diabetes has been and continues to grow at epidemic levels. It is alarming to think about these trends continuing, and we hope policymakers pay more attention – global healthcare systems are not equipped to take on these challenges, and more must be done to reverse these data!

Growing Power and Dominance Among Payers, Retail Pharmacies, and Pharmacy Benefits Managers

• Plans for mergers among major health insurance companies were quite the trend in 2015. In July, Aetna and Humana announced a deal in which Aetna would acquire Humana for a total of $37 billion in cash and stock. The combined company covers 33 million members and is projected to realize $1.8 billion in annual synergies by 2018. On the heels of this announcement, Anthem then announced it would acquire Cigna for $54 billion, creating a combined company that would cover 53 million members. These mergers are subject to anti-trust regulation, but – if approved – the deals would whittle the number of major insurers in the US from five companies to three companies (United, Aetna/Humana, and Anthem/Cigna). Both mergers are ostensibly aimed at reducing operational costs and maximizing cost savings by improving efficiency, which when thinking optimistically, may allow for more cost-effective and innovative care. Increasing the number of covered lives also spreads the risk of covering each individual among a larger consumer pool. We imagine this is an increasingly attractive option for insurers as the implementation of the Affordable Care Act (ACA) has forced private insurers to cover individuals regardless of pre-existing conditions, shrinking profit margins. Having more members will also give these larger insurers more leverage in negotiations with pharmaceutical and device companies over formulary positioning, presumably allowing insurers to win higher rebates. That said, as these major for-profit payers consolidate and the marketplace has less competition, patients will likely lose out with less choice and potentially have to deal with higher health insurance premiums.
  
  • Retail pharmacies also announced major acquisition and consolidation deals this year. CVS Health acquired Target’s pharmacy and clinic businesses for $1.9 billion in June, making CVS Health the largest retail pharmacy chain in the US for a short period of time with ~10,000 stores. However, Walgreens leapfrogged back to the top with its acquisition of Rite Aid for $17.2 billion in November, resulting in a total of ~13,000 retail pharmacies under Walgreens’ direction. These deals will likely afford these mega-chains greater clout in rebate negotiations with pharmaceutical companies as well. We also hope that such hybrid establishments can provide greater opportunity to expand access to services like diabetes screening and education in a cost-effective and scalable way, as these retailers are generally more incorporated into communities.
• Pharmacy benefits managers (PBMs) continue to wield formulary access as a bargaining chip in negotiations with pharmaceutical companies. As a reminder, the two largest PBMs in the US, Express Scripts and CVS Caremark (a subsidiary of CVS Health), released their 2016 formulary exclusions in August. CVS’ exclusion list now totals 124 products (up from 95 in 2015) and Express Scripts’ list comes in at 80 products (up from 66 in 2015). Novo Nordisk saw a significant impact in 1Q14 after losing major Express Scripts contracts for NovoLog and Victoza for 2014 and we expect we’ll see the impact of the latest exclusions reflected in 2016 sales. J&J’s SGLT-2 inhibitor Invokana (canagliflozin) was notably excluded from CVS’ formulary (while Lilly/BI’s Jardiance [empagliflozin] and AZ’s Farxiga [dapagliflozin] were maintained as preferred alternatives), which we imagine will have a significant impact on Invokana sales in 2016, especially in light of the recent EMPA-REG OUTCOME results demonstrating a cardioprotective benefit for Jardiance.
  
  • Formularies have also become a major battleground for the competing PCSK9 inhibitors for LDL cholesterol lowering: Sanofi’s Praluent (alirocumab) and Amgen’s Repatha (evolocumab). As a reminder, PCSK9 inhibitors are very expensive compared to generic statins (as virtually any pharmaceutical would be) – $14,000+ for an annual supply for a single patient, which isn’t too surprising given the small number of patients with FH (familial hypercholesterolemia) – and reimbursement will be key for their uptake. Express Scripts announced in October that it would cover both products on its National Preferred Formulary for 2016 and shared that it was able to do so based on a combination of rebates from Sanofi and Amgen and use of an intensive clinical documentation process to determine patient eligibility for the drug class. On the other hand, CVS Health announced in November that it has awarded an exclusive formulary contract to Amgen’s Repatha for 2016, presumably in exchange for greater rebates from Amgen. As both Repatha and Praluent share similar clinical data and profiles, we see these formulary developments as potential critical differentiators between the two products.

A Year of CEO Changes in Major Non-Profits and Industry

• This year seemed to have an especially high number of leadership changes at major organizations, including new JDRF CEO Derek Rapp, new ADA CEO Kevin Hagan, new Joslin CEO Peter Amenta, new Sanofi CEO Olivier Brandicourt, new MannKind CEO Duane DeSisto (formerly of Insulet, who had the most senior management changes of any public company this year, by far), and new FDA Acting Commissioner Dr. Stephen Ostroff (widely respected nominee Dr. Robert Califf has not been confirmed yet). Many of these leadership changes were unexpected and sudden (MannKind’s Duane DeSisto, Joslin’s Peter Amenta), while others were not terribly surprising (Sanofi’s Olivier Brandicourt, JDRF’s Derek Rapp). The turnover could reflect any number of factors: an increasingly uncertain and competitive business and fundraising environment, less Board patience and greater expectations out of leaders, bigger disagreements in corporate strategy as traditional business models need to be adapted (or abandoned), or simply standard turnover as the field grows in size and complexity. The opportunity to make people healthier has never been greater, though it’s clear that all companies and organizations will need to adapt like never before (e.g., Affordable Care Act; shrinking US profitability; payer consolidation; greater industry competition; lower odds for disruptive innovation, given what is already available; and more).

A Pressing Need for Better Real-World and Big Data on People with Diabetes

• Throughout 2015, we were reminded of how much valuable real world, population-level data could be gleaned from people with diabetes – and how much that data is currently absent. Presentations on registries (particularly Sweden’s highly comprehensive system), reminded us of the power of Big Data to inform personalized therapy, guidelines, treatment targets, reimbursement, advocacy, testable hypotheses, and more. What therapies work best for which patients at which times? How does real-world efficacy compare to clinical trials? How much waste could be adverted if we knew how specific therapies were working in different populations over time? What models of care are the most effective? What could genetic and microbiome data add to our understanding of disease treatment and progression? The T1D Exchange has made some important early strides, but scalability, automation, and generalizability are still question marks. And of course, there is still a gaping hole for type 2 diabetes. We look forward to seeing what comes out of the Diabetes Collaborative Registry (thediabetesregistry.org), aimed at tracking and improving the quality of diabetes and cardiometabolic care. Built on the ACC’s PINNACLE registry, it is an outpatient registry covering 3,500 providers at 930 office locations. It has access to 20 million records from 5 million patient lives and includes partners AstraZeneca, AACE, ADA, Boehringer Ingelheim, the American College of Cardiology, the American College of Physicians, and Joslin.  Per an ADA 2015 presentation, initial data was expected in late 2015, though we cannot seem to find anything on the registry website.

Growing Conversation On Precision Medicine And Genetic Testing

• 2015 was a big year for genetic testing and precision medicine, beginning with President Obama’s announcement of the new $215 million NIH Precision Medicine Initiative (PMI) during this year’s State of the Union address. The program aims to build a national research cohort of one million people that can facilitate the development of customized treatment plans based on genomics and other participant-level data. Since the January address, we heard speakers at multiple conferences including Obesity Week, IDF, DTM, and Rachmiel Levine highlight ongoing precision medicine initiatives related to diabetes and obesity and express excitement about the future of this field.
• We have also already begun to see industry involvement in this area. In May, AstraZeneca announced a collaboration with the Montreal Heart Institute (MHI) in Quebec, Canada to run genetic screens on 80,000 samples with the primary goal of identifying alleles associated with greater disease risk, complications risk, and different responses to medications. Personal genetics company 23andMe launched a redesigned version of its genetic test in October featuring a “carrier status test” that informs people whether they have a risk variant for one of 36 autosomal recessive disorders such as cystic fibrosis, sickle cell anemia, and Tay-Sachs disease. While the 23andMe test and other similar approaches are still a long way off from being able to determine an individual’s risk for complex chronic diseases like diabetes, the potential is certainly there – see our October interview with Dr. Anne Peters (USC, Los Angeles, CA) for much more.
• The year wrapped up with another exciting announcement from the government in this area: just this month, the FDA launched precisionFDA, a cloud-based online platform for scientific collaboration in testing and developing next-generation sequencing (NGS) genome assays. In our view, precision medicine is an excellent match for diabetes and obesity given the immense heterogeneity of the patient population and the need for treatments to be compatible with a diverse range of lifestyles. However, the genetic links to both diseases are incredibly complex, and understanding them is the first prerequisite towards developing new drugs or targeting existing ones based on specific genetic profiles.

Diabetes Complications: Modest Progress and High Unmet Need

• The first drug treatments for diabetic retinopathy were approved in 2015. Roche/Genentech’s Lucentis (ranibizumab) and Bayer/Regeneron’s Eylea (aflibercept) both received FDA approval for diabetic retinopathy in patients with diabetic macular edema (DME) in the first half of the year. We are very glad to see more treatment options for this debilitating complication, and both demonstrated greater effectiveness compared to laser photocoagulation (previously the standard of care) in phase 3 trials. However, there is still enormous unmet need in this area. The FDA press releases that accompanied both approvals cited data indicating that 33% of adults with diabetes aged 40 years or older had some form of retinopathy as of 2008. This is fairly consistent with the figures in the latest CDC National Diabetes Statistics Report, which indicated that 28.5% of adults over 40 with diabetes had retinopathy in 2005-2008 and 4.4% had advanced retinopathy. Our ultimate hope is that a greater focus on prevention and early intensive control can reduce these rates and eliminate the need for more treatment options.
• Diabetic nephropathy also remains an area of significant unmet need, though the pipeline of new therapies to address it is strong. The CDC report noted that there were 49,677 new cases of diabetic kidney disease in the US in 2011 and that the number of patients on dialysis or with a kidney transplant due to diabetes rose 13% from 2008 (202,290) to 2011 (228,924). There is clearly a huge need for new treatments to reverse this trend, and we are glad to see so many companies with candidates in development. One of the more notable news items in this area in 2015 was the advancement of Bayer’s mineralocorticoid receptor antagonist finerenone into phase 3 trials. Other phase 3 candidates include AbbVie’s atrasentan, J&J’s Invokana (canagliflozin), allopurinol (being investigated in the NIH/JDRF-funded PERL study), and NephroGenex’s pyridorin. Those trials have completion dates in 2018-2019.
• The launch of NeuroMetrix’s Quell was the biggest news of the year in diabetic neuropathy. The over-the-counter wearable pain relief device got off to a strong start with $792,000 in official sales in 2Q15 and 3Q15 (actual sales were higher because NeuroMetrix can only record revenue after the 60-day money back guarantee period). The product also showed strong growth in its second quarter on the market: device shipments increased 73% sequentially to 4,500 and electrode package shipments doubled sequentially to 5,500. Quell has gotten very positive consumer feedback thus far, with Amazon reviewers describing it as “life-changing” and “practically miraculous.” It is not clear what percentage of Quell users have pain due to diabetic neuropathy, but we assume a great deal and we are hopeful that the device can help fill some of the tremendous need in this area. There are still no disease-modifying therapies for diabetic neuropathy, and existing drug therapies to relieve symptoms are often insufficient.

Emerging Focus on Urban Diabetes

• 2015 may have marked the beginning of a conversation about how urban environments can contribute to type 2 diabetes risk. Novo Nordisk’s Cities Changing Diabetes program has certainly propelled people toward this issue, which has not previously been a substantial part of the diabetes conversation. The program hosted its inaugural summit in Copenhagen in November, where researchers presented initial findings from the five participating cities (Houston, Copenhagen, Mexico City, Shanghai, and Tianjin) and discussed how they can help inform a new model of diabetes vulnerability. The organizers have also announced that Vancouver and Johannesburg will be the next participants in the program, and that Novo Nordisk will partner with the C40 Cities Climate Leadership Group to identify solutions that can simultaneously address the challenges of poor health and climate change in cities. The increased attention to urban diabetes was also evident at IDF, where the agenda featured talks by architects on how urban planning can influence healthy lifestyles, a presentation on the IDF’s Diabetes Aware Cities Project, and a talk on the association between city walkability and type 2 diabetes incidence. We expect a great deal from this initiative – we’re as hopeful as we’ve been in some time – and we hope this new approach to addressing type 2 diabetes, and the inclusion of a wide range of sectors in developing solutions, continues in 2016.

2. Most Highly Read Reports

• Close Concerns’ Reflections on 2014 + 2015 – December 24, 2014 – Our comprehensive year-in-review shares themes and our most widely read reports in four categories – Big Picture, Diabetes Technology, Diabetes Drugs, and Obesity. Plus, what’s on the horizon in 2015, our key questions, and what we got right and wrong this year.
• IDF publishes Seventh Edition of Diabetes Atlas, 415 million have diabetes globally, with 642 million projected by 2040 – Worrying slope continues; 47% undiagnosed worldwide; 318 million with impaired glucose tolerance; top three countries China (110 million), India (69 million), and US (29 million); 1 in 8 global healthcare dollars spent on diabetes
• CVS Caremark and Express Scripts release 2016 formulary exclusions – J&J’s Invokana/Invokamet excluded from CVS list; AZ’s Onglyza and Vivus’ Qsymia out on both formularies; CVS continues to favor Novo Nordisk while Express Scripts favors Lilly
• JDRF Board names Derek Rapp permanent CEO – learnings thus far, upcoming priorities, and the future of type 1 diabetes – His biggest areas of excitement, two major worries, what’s most missing in type 1 diabetes care, what JDRF will look like in five years, and how to balance the heroic vs. dangerous nature of T1D
• New ~30-year DCCT/EDIC data shows reduced mortality risk in intensive group – Further evidence of “legacy effect” of early intensive control on long-term outcomes; ~30-year CV outcomes results to be published in near future
• John Brooks resigns as Joslin CEO – Abrupt Board request reportedly came as a shock to Mr. Brooks; CFO Eliot Lurier will serve as interim CEO
• Joslin Diabetes Center appoints Dr. Peter Amenta as President and Chief Executive Officer
• JAMA publishes new diabetes prevalence and trends through 2012 – Diabetes prevalence increased but stabilizing alongside obesity rates; Proportion of undiagnosed diabetes reduced; Major disparities among minority groups (summary below, article)
• UK’s NICE recommends new stringent A1c targets for children and adolescents – A1c guidelines lowered to target of 6.5%, making NICE guidelines the most stringent for pediatric population by any major organization
• Express Scripts releases 2014 Drug Trend Report – Diabetes spending highest of any non-specialty therapy class with 18%-26% increase in total spend in 2014; Increase in unit costs, especially in insulin, significant driver of overall increase

3. What We Got Right/Expected

• Alarming global stats on diabetes that show no sign of abating
• Continued focus on cost
• Growing enthusiasm for precision medicine and individualized therapy, but no tangible progress
• Big data continues to generate buzz, but challenges remain to effectively implementing it in care, reimbursement, and research

4. What We Got Wrong/Did Not Expect

• Drug prices as a major issue in the presidential race
• Significant investments by the federal government in precision medicine
• So many leadership changes in diabetes

5. Key Questions for 2016

• How will the Affordable Care Act impact diabetes care? Will efforts to roll back some of its provisions succeed?
• Will drug prices remain a major mainstream topic of conversation? Will any policies be implemented to address them? What can industry do? Do pharma business models need to change?
• How much progress will the NIH Precision Medicine Initiative make?
• What will NIH funding for diabetes look like in 2016?
• Will the FDA’s drug division make more of an effort to gather patient input?
• What will be the consequences of a few large insurers dominating the sector? Will there be any reversal of the trend toward more and more mergers?
• Will there be efforts to pass soda taxes in other cities/states?
• How can we make primary care and chronic disease-focused specialties more appealing to young physicians?

Diabetes Technology

1. Themes

Closed-Loop Advances Towards Commercialization, led by Medtronic’s MiniMed 670G

• This year made it clear that closing the loop is inevitable – it’s now a question of “WHEN” and “HOW,” not “IF.” JDRF’s Dr. Aaron Kowalski emphasized the field’s progress at ADA, noting that technical feasibility is now proven in all six stages of the original JDRF roadmap – it’s now time for commercial development and regulatory studies to support approval (the “last 100 yards,” as JDRF’s ADA 2015 closed-loop night put it). Moving forward, Dr. Kowalski’s revised AP roadmap (Diabetes Care 2015) has just three steps: (i) low glucose suspend; (ii) predictive low glucose suspend; and (iiia) insulin-only closed loop or (iiib) multi-hormone closed-loop. The real challenges ahead are adoption and reimbursement – or as Dr. Kowalski suggested, appealing to people with diabetes (plus loved ones), clinicians, and payers via three key metrics: glycemic control, “burden”, and value. Encouragingly, the field seems quite comfortable with (and even excited about!) the regulatory path for artificial pancreas systems. This is a major testament to a forward-thinking FDA device division, and light years ahead from where the field stood in 2010! Business model, reimbursement, and product form factor questions, however, continue to perplex many in the field.
• Medtronic had some of the biggest closed-loop news of the year, announcing at ADA that its 150-patient, three-month, single-arm US pivotal study of the MiniMed 670G/Enlite 3 CGM hybrid closed loop (HCL) had begun recruiting. The news puts Medtronic loosely on track to hit the highly ambitious April 2017 launch timeline for the 670G (shared at JPM 2015), assuming the PMA submission and approval take way less than a year. That could be challenging for such a landmark product, and the precursor MiniMed 640G predictive suspend system still hasn’t been submitted to FDA (expected in early 2016). In positive news, however, we learned at DTM 2015 that 670G trial participants have successfully petitioned the FDA for continued access and use of the system, a strong vote of confidence from both the FDA and patients. An open question is how accurate Enlite 3 will be; we have not seen rigorous data on that front.
• Startup Bigfoot Biomedical became a serious closed-loop contender in 2015 under the leadership of CEO Jeffrey Brewer, CTO Bryan Mazlish, Chief Engineer Lane Desborough, CFO Jon Brilliant, and Director of Clinical Innovation Jen Block. Following our breakout interview in February, the company raised $3.5 million and $4.6 million in two separate deals, signed a CGM development agreement with Dexcom, and acquired all of pump-maker Asante’s assets when the latter shut its doors in May. The latter deal gave Bigfoot an FDA-approved pump to use in its automated insulin delivery system and gave real teeth to the goal of building a system, conducting a pivotal study, submitting a PMA, and commercializing an offering in the next few years. We heard a few snippets of product details throughout the year, including plans to leverage smartphones, build a “service” rather than just a “device,” and appeal to the majority of patients that don’t use pumps and CGMs. Very ambitious! As of the latest update, Bigfoot plans to be in a pivotal trial by the end of 2016, meaning it could closely follow Medtronic’s MiniMed 670G and potentially even leapfrog other pump companies.
• Also in major news, the charismatic Dr. Ed Damiano unveiled the iLet at FFL 2015 – the Boston/MGH group's custom-built, dual-chamber, prototype pump and user interface for its fully integrated commercial Bionic Pancreas. Over the following few weeks (which featured presentation’s at AADE and EASD), the team shared a goal to commercialize its closed-loop system in late 2018-early 2019, slightly behind last year’s timeline to launch in ~2017. The plan is to run iLet in a human factors and bridging study in 4Q16 followed by the pivotal trial in early 2017. We’re really looking forward to the team’s head-to-head data in 2016 on the incremental value of adding glucagon in the closed-loop setting – this has been a major missing gap and we’re glad the ongoing and planned glycemic target studies will shed light on what glucagon adds to automated insulin delivery.
• Academic groups shared plans for large-scale closed-loop studies at ADA, and major NIH grants will help bring them to fruition. Notably, the International Diabetes Closed Loop (IDCL) consortium recently announced the receipt of a significant ~$12.7 million NIH grant to fund a six-month, 240-patient trial comparing a commercial-grade version of UVA’s DiAs to sensor-augmented pump therapy. The study is expected to start in 2016 at ten sites. Dr. Frank Doyle’s language at IDF implied this could generate data to support a regulatory approval, and we assume startup TypeZero would commercialize the system. Meanwhile, this fall also shared the winners of the NIH UC4 grant for Advanced Clinical Trials to test artificial pancreas systems: Cambridge, $6.4 million; the DREAM consortium, $2.0 million (algorithm acquired by Medtronic); and Boston University, $1.5 million. It’s unclear if the Cambridge and DREAM studies would test commercial products or generate pivotal data to support a PMA. The $1.5 million given to BU will go towards a bridging study of the iLet device.
  
  • NIH’s commitment to the artificial pancreas will continue in 2016 with its fourth workshop occurring from July 12-13, 2016. The meeting will be held on the NIH campus and the agenda is still in progress. Send us your ideas or contact Dr. Guillermo Arreaza-Rubin for more details.
• The toughest questions surrounding the human and business sides of automating insulin delivery have yet to be answered. What’s the appropriate control group in a pivotal study (e.g., no control group (670G pivotal) vs. MDI vs. sensor-augmented pumps)? What is the incremental benefit of glucagon over insulin alone? How will patients trade off the level of automation (hybrid, full) vs. the level of glycemic control (low average vs. low hypoglycemia) vs. the device form factor (size, hassle factor, smartphone integration)? Will organizations have manufacturing in place to submit a PMA application? What’s the right business model? What do payers think? There’s no question that automated insulin delivery systems are going to look and function differently, and the full extent of the risk vs. benefit tradeoffs may not be answered in carefully controlled clinical studies, but in real world use and reimbursement. For more thoughts on the hard-hitting behavioral questions in closed loop, see Adam and Kelly’s diaTribe test drive following their experience in the DiAs closed-loop study.
• See below for an overview of the automated insulin delivery landscape, as far as we aware. We acknowledge this list may be incomplete, as there may be other stealth startups or academic groups working to commercialize closed-loop technology. The list is ordered based on the expected time to market.

Table 1: Automated Insulin Delivery Competitive Landscape

Google Life Sciences (Verily) triples down on diabetes

• Google Life Sciences (now a standalone company, Verily) showed big-time commitment to diabetes in 2015, announcing new partnerships with Dexcom (next-gen CGM) and Sanofi (sensors, wearables, software), and continuing to prioritize the glucose-sensing contact lens with partner Novartis. The Dexcom and Sanofi partnerships were announced within weeks of each other in August, and the latter made the commitment to diabetes crystal clear: “… diabetes is the first disease we’re focusing on as we become an independent company.” Indeed, now that Google Life Sciences is operating as Verily (a standalone company under the Alphabet holding company), we expect to see all three partnerships receive more focus and advance towards commercialization. As for timing: (i) the Novartis smart contact lens is slated to enter high-volume production and large-scale human trials overseen by the FDA in 2016 (per an August update); (ii) the Dexcom partnership could see the first commercialization in two to three years (~2017-2018; a flexible, low-cost, bandage-like, disposable CGM sensor/transmitter the size of a dime worn for 10-14 days); and (iii) the Sanofi partnership has no timing attached to it, but is focused on new sensors, wearable devices, and software. We’ve been particularly impressed to see Verily’s commitment to the Novartis and Dexcom partnerships – far beyond press releases! – including a prominent contact lens on the new home page, patent filings, and an optimistic public presentation from CEO Dr. Andy Conrad.
• Google appeared in our 2014 Reflections piece under the tenth technology theme – “Big Tech Company Interest in Diabetes” – and we’re elated to see “interest” has matured into “strong commitment.” Verily’s big goals are to detect disease earlier, to understand disease better, and to intervene more precisely at the individual level (“not what makes someone sick, but what makes you sick”). We certainly need all three in diabetes, and with its world-class expertise in both hardware and software, Verily has a lot to offer people with diabetes and industry partners.

Sustained Enthusiasm for Abbott’s FreeStyle Libre

• “FreeStyle Libre fever” has yet to fade despite lapping the one-year mark on the EU market. Abbott kindled the fire strategically with a staggered rollout of new updates in 2015: (i) the under-the-radar launch of the Android LibreLink app for scanning FreeStyle Libre sensors; (ii) new findings from two pivotal trials (EU and China) demonstrating excellent factory-calibrated accuracy vs. both YSI and capillary fingersticks; (iii) the launch of the blinded FreeStyle Libre Pro in India and unexpected submission of the Pro version to FDA in 2Q15; (iv) the filing of the consumer version of Libre with Canadian regulatory authorities in 3Q15; and (v) news that Abbott's two six-month studies – REPLACE and IMPACT will be presented at ATTD and ADA 2016, respectively. It's been impressive to hear Abbott CEO Miles White reiterate “great expectations” and enthusiasm for the device, and it’s evident that internal confidence is high. All in all, it’s been a bold, brave move by Abbott to innovate in such a challenging BGM environment, and we continue to see tremendous global potential for this product. Here are the major questions for FreeStyle Libre in our minds:
  
  • Will Abbott fix the capacity constraints in 2016? The company has maintained that it is “well-along” on an expansion, though scaling a factory-calibrated sensor cannot be easy. Overwhelming demand is a good problem to have early in a product’s launch, though it quickly turns to frustration if it is not fixed. That said, the submission in Canada (consumer) and the US (Pro) suggest at least some internal confidence in fixing the issue.
  • What is FreeStyle Libre’s revenue at this stage? Sales have yet to be reported though recent earnings commentary has suggested that “it won’t be long.” How does FreeStyle Libre’s revenue compare to the CGM market? 
  • When will Abbott submit the FreeStyle Libre consumer version to FDA? Will it obtain a full insulin-dosing claim with no fingersticks required? The FDA submission of FreeStyle Libre Pro is presumably a good sign for the consumer version, though the regulatory bar for a blinded device is far lower. What will FDA require of Abbott to demonstrate the clinical safety of full factory calibration? Dexcom continues to talk to the FDA about an insulin-dosing claim, and G5 has the “safety” benefit of some fingerstick calibrations. Will Abbott be able to plow through this regulatory roadblock, or will it need to make some sacrifices on the user experience to get FreeStyle Libre through FDA (e.g., “safety” calibrations). We’ve heard nothing but silence on this front from day one despite much progress in the EU.
  • When will an Apple iOS-compatible version of LibreLink come to market? Only the iPhone 6 and Apple Watch support NFC at this time, though we’re not even sure these configurations will work with FreeStyle Libre. Abbott told us it will develop an Apple app, and we look forward to seeing what that product looks like and when it comes to market. 

Another Spectacular Sales and Pipeline Year for Dexcom

• Our 2014 Reflections piece noted a “standout year” for Dexcom’s business and pipeline, and by every stretch, the company exceeded it in 2015. Sales have now grown 49%+ year-over-year for 12 straight quarters, crossing the $100 million quarterly mark for the first time in 3Q15. Management increased the full-year revenue guidance twice this year, from the original “$340 million-$360 million” to “$350-$375 million” to the most recent “exceeding $375 million.” At the same time, profitability is growing faster than sales: through the first nine months of 2015, sales have increased 55% YOY while cash-based net income has increased 155%.
• Dexcom’s pipeline year was nothing short of outstanding, including the January launch of the Animas Vibe; the unexpected FDA approval and March launch of the G4 Share receiver (plus the critical down-classification of secondary display of CGM data); an Apple Watch app available upon the Watch’s launch in April; the introduction of an Android Follow app; FDA approval in June of a pediatric version of the G4AP algorithm (Software 505); FDA approval and September launch of the Tandem t:slim G4; and the biggest one of all – the landmark FDA submission, approval, and September launch of G5 Mobile (all in the same year!). Dexcom is making significant investments in the future too, headlined by the G6 sensor (~early 2017 launch), the August partnership with Google (first commercialization in 2-3 years), and the ambitious goal to move 70% of the business to the pharmacy benefit channel over the next three years.
• In 2016, Dexcom expects to launch Android G5, a new insertion system, a new lower-profile G5 transmitter, a touchscreen receiver, “next-gen” apps and software, and potentially an insulin-dosing claim. We’ll also see early results from the very important DiaMond study (n=338, 24 months, testing CGM in MDI users) and European reimbursement studies. This company continues to fire on all cylinders, though there is much work to do – CGM is a terrific technology, but not enough have access to it globally, and it is still not easy enough for the broad spectrum of patients or providers out there.

Medtronic Diabetes Broadens Into Connectivity, Type 2 Diabetes, and Services

• Medtronic Diabetes had an eventful year in automated insulin delivery and beyond, including two major product launches (MiniMed 640G, MiniMed Connect), starting the MiniMed 670G US pivotal study, and a string of pipeline announcements (an exclusive commercialization partnership for BD’s FlowSmart infusion set, the acquisition of the Diabeter clinic, the exclusive licensing of DreaMed Diabetes’ closed-loop algorithm, an investment in Glooko, and partnerships with IBM Watson and Samsung). While Medtronic continues to lead the automated insulin delivery race, it was notable to see the start of a broader strategic focus this year. That approach is critical to meet management’s highly ambitious goal to serve 20 million patients by 2020, up from less than one million today.
• In automated insulin delivery, Medtronic started at JPM 2015 with ambitious US timelines that took everyone by surprise: US launch of the MiniMed 640G/Enlite 3 by April 2016 and the MiniMed 670G hybrid closed loop by April 2017. The 640G still has not been submitted to the FDA (early 2016 is the latest expectation, meaning it will miss the April 2016 timeline), and the 670G is starting to look like a long shot to hit its JPM timeline – the 150-patient, single-arm, three-month pivotal study is slated to complete in May 2016, meaning submission and approval would have to take place in less than a year to launch in April 2017. Outside the US, the MiniMed 640G launched in Australia in January and Europe in February to strong patient reviews and encouraging clinical data, and as of Medtronic’s December call, the device drove nearly 40% sales growth in Europe.
• In connectivity and software, Medtronic unexpectedly announced FDA clearance of MiniMed Connect in June (subsequently launched as expected in September), a keychain uploader device for smartphone viewing and remote monitoring of pump/CGM data. Meanwhile, a new partnership with IBM’s Watson aims to take this diabetes data further – in an exploratory analysis shown at DTM, Watson predicted hypoglycemia with 80-90% accuracy three hours following bolus insulin delivery. Other software milestones this year included an investment in Glooko (integration still pending) and a partnership with Samsung (starting with an Android version of MiniMed Connect).
• The year also saw Medtronic’s strongest commitment yet to type 2 diabetes, including the hiring of Dr. Bob Vigersky, plans to build a simple CGM sensor and patch pumps for type 2, the first growth breakouts for the newly created type 2 division (for now, it includes professional CGM and the i-Port Advance injection port), and a distribution agreement with Henry Schein to reach thousands of primary care physicians in the US.
• Reflecting a company-wide focus, Medtronic Diabetes also made moves on healthcare delivery through the acquisition of Diabeter, a clinic with a high-tech care model that it hopes to expand across Europe. Medtronic has had some care delivery success in other therapeutic areas, and we wonder how those learnings will be leveraged in diabetes. As of the December call, Diabeter was generating revenue, though the amount and profitability were not specified.

Diabetes Device Connectivity And Data Make Solid Strides, Led By Glucose Monitoring

• Smartphone- and cloud-connected glucose monitoring devices continued to proliferate in 2015, following solid strides in 2014. This year saw the launch of Dexcom’s landmark G5 mobile system, Medtronic’s MiniMed Connect keychain uploader device, and Abbott’s LibreLink app for scanning the FreeStyle Libre sensor – we had not even heard of the latter two device as the year began. On the BGM front, Roche’s Accu-Chek Connect hit the market in the US in August, featuring the first FDA-approved bolus calculator smartphone app. And just last month, J&J/LifeScan announced that the OneTouch VerioSync meter’s paired Reveal app will now post data to Apple’s HealthKit, the first Big 4 connected meter to do so. These advances bring many user experience advantages: (i) enabling patients to view data on their phones in a better user interface (or use the phone to replace a medical device entirely, in the case of Abbott and Dexcom); (ii) provide automatic data upload to cloud-based platforms, saving patients and providers hassle; (iii) facilitate remote monitoring; and (iv) enable new care delivery models. While connectivity was a theme in our 2014 Reflections piece, we were excited to see it expand markedly this year, and we know more companies are thinking about it in 2016 (particularly in insulin delivery). That said, very few patients (<5%) own connected diabetes devices at this stage – the bar is on companies to maintain low pricing and to demonstrate compelling advantages to patients, providers, and payers. There is also a spectrum of patients views on the value of smartphone integration – see Adam and Kelly’s test drive on the G5 for some of the pros and cons.
• Alongside connected devices, diabetes data aggregation platforms also made meaningful progress this year, including the much-awaited soft launch of Tidepool’s blip, the addition of pump and CGM data to Glooko, broader device compatibility for platforms like Diasend, and the unexpected usefulness of Apple Health for seamlessly sharing device data between apps (e.g., Dexcom data into Meal Memory was one that really impressed us this year). These apps and platforms have a long way to go before they are truly indispensable for more than a fraction of early adopters, but one thing is clear: diabetes device data is getting easier to extract, and that paves the way for potential gamechangers like clinical decision support, precision medicine, and more targeted research.
• A DTM 2015 presentation from Stanford’s Dr. Rajiv Kumar provided a glimpse into the new care models that leverage freely flowing data. He showed patients’ Dexcom G5 CGM data flowing passively and automatically straight into the notoriously criticized electronic health record, EPIC. His group has devised algorithms that run analytics and identify high-risk patients (those with A1c > 9.0%, those with lots of hypoglycemia, etc.). They are flagged in red, making it easy to see who needs follow-up. This is exactly what the field needs in our view – bringing together connected devices and software solutions to inform therapeutic decision-making and reduce the burden on providers. Besides solvable technical challenges (e.g., getting data into the EMR), the field will need to wrestle with the clinical workflow and reimbursement obstacles needed to scale this model of care. We are optimistic, since the trends in providers (shrinking) and patients (growing) will mandate smart use of technology to scale expertise.
• The Helmsley Charitable Trust also sees potential in data through its noteworthy $5 million Diabetes Data Innovation Initiative, aimed at developing advanced decision support software for type 1 diabetes. The goal is to help patients and clinicians take meaningful therapeutic action from disparate data sources. DDII will fund one or more projects over a two-year period, with selected programs to commence in 1Q16 – this Initiative plans to move very fast indeed. It’s a big deal not only that Helmsley is sending $5 million in funds, but that it is stepping into the digital health ring. We’re not sure who has been selected at this stage.

FDA’s Device Division Continues its Patient-FRiendlY, Forward-Thinking Approach

• The FDA’s device division not only maintained its forward-thinking, patient-friendly stance towards new diabetes technology in 2015, but acted on its rhetoric in groundbreaking ways. The year was chock full of instances signaling how far the regulatory environment has come: the January downclassification of secondary display of CGM data to “low to moderate risk” (previously, anything that touched real-time CGM data was a PMA); the approval of Dexcom’s G4 Platinum Share receiver and subsequent 510(k) clearance for MiniMed Connect; the super speedy six-month FDA approval of Dexcom’s landmark G5 mobile system; and the fact that Medtronic’s MiniMed 670G pivotal study has no control group and will only last three months. The FDA’s regulatory bar seems to be moving in the right direction, with less onerous barriers and risk aversion than just a couple years ago, and we have found it even more encouraging to reflect on the way fostering innovation and open data have become centerpieces of the FDA’s mindset. Multiple representatives of the Agency – most notably the Associate Director for Digital Health, Mr. Bakul Patel, and Deputy Commissioner, Dr. Robert Califf – have underscored the Agency's desire to have a more lenient approach to regulating digital health devices that is aimed at faster innovation – particularly with the speedy cycle of consumer electronics. It’s terrific to hear this hands-off approach and increasingly clear that the FDA understands the need not to overregulate apps and software. At the same time, the Agency wants to remain an integral failsafe in the healthcare system, and it's hard to argue with that. The devil is always in the details and there are still many areas of regulatory uncertainty (e.g., “wellness” CGMs, what constitutes “intended use”) to be fleshed out in 2016 and beyond.
• In what may prove very relevant to closed-loop development, the FDA acknowledged on multiple occasions in 2015 that it is open to the idea of an artificial pancreas algorithm residing on a smartphone. A few years ago, no one would have thought this was possible, though both Drs. Courtney Lias and Stayce Beck spoke to this possibility throughout the year. Dr. Lias’ remarks at DTM summed up the Agency’s open perspective well: “It’s obvious we should move that way. It’s ridiculous to require people to carry around multiple computers. There are things to think about, but they are solvable, and people are going ahead with it.” When this will happen and whether smartphones are yet secure enough for such a move remain open questions, though from a product perspective, we expect UVA (Type Zero) and Bigfoot to push this envelope with their closed-loop systems.
• It has been inspirational to see just how much the Agency appreciates the opportunity for mobile devices to facilitate more cost-effective, convenient, and continuous care – the challenge is finding a way to balance that innovation with safety. Dexcom G5 was a landmark approval on that front, and as we move into 2016, perhaps a mobile app controlling an insulin pump is feasible too.

BGM Struggles Continue

• There’s no way to sugarcoat it - the global BGM market remains very, very challenging. Commentary on pricing pressures was a near-certainty in financial updates throughout the year from all of the Big Four (Abbott, Bayer, J&J, Roche). In the US, there’s no question that the short-term cost-saving effort from Medicare has devastated the industry, while international performance has been hampered by big-time currency headwinds. We did entertain some hope in 1Q15 that the market was on the cusp of recovering after pooled sales grew 4%, marking the first quarter of positive YOY BGM growth since 2Q12. That modest growth, though, came against a very easy comparison (down 25% in 1Q14) and the market promptly saw a ~7% decline in 2Q15 (vs. an easy 21% decline in 2Q14) and ~17% decline in 3Q15 (vs. modest ~1-3% YOY growth in 3Q14). The 3Q15 performance actually marks the first time pooled global sales have not broken the ~$1.5 billion plateau in our model (which stretches back to 2009), underscoring the shrinking revenue and profitability for all BGM players. Consequently, it was little surprise when Bayer announced the divestment of its Diabetes Care business to Panasonic Healthcare for ~€1.0 billion (~$1.2 billion) in June 2015. This market does not look like it has yet bottomed out, and with increasingly rapid innovation in glucose monitoring sensors, we wonder where traditional BGM will be in ten or 15 years from now.

Higher Hopes for Digital Health – But Can It Deliver?

• We saw more discussion around digital health in 2015, with rising hope it can address some of the major challenges in diabetes. What’s less clear is how long it will take, whether ideas can scale widely, and what it will cost. Speakers throughout the year (CES, SXSW, Rock Health Summit) continued to characterize the field as “early” and with “high potential,” though this year seemed to bring more attention and more news in diabetes than ever before. One of our favorite interviews of the year was with veteran Chris Bergstrom, who suggested digital health is now at a “pivot point” in need of established pharma and medical device companies to take ideas to scale. Chris believes that the field’s first five years (2010-2015) can be crowned the “era of small companies with big ideas”; the next five years (2015-2020), he says, will be about partnerships, acquisitions, and collaborations between small and large companies.
• Interestingly, 2015 Digital Health funding was actually flat from a record-breaking 2014, though we did see plenty of encouraging news and trends this year: increasing connectivity in diabetes devices and improved diabetes data (see above); big tech players IBM and Verily [Google Life Sciences] partnering with established diabetes drug and device companies (Medtronic, Novo Nordisk, Sanofi, Dexcom); the CDC recognizing three digital versions of the Diabetes Prevention Program (DPS Health, Noom Health, and Omada); JAMA highlighting WellDoc in an article on “App Overload” (among a slew of digital health articles in the respected journal this year); increasing major payer attention and openness to digital health (e.g., Omada and Humana); Fitbit’s successful IPO and outstanding first quarters as a public company; and Apple making a bigger push into digital health through the Watch, HealthKit, and ResearchKit.
• The insulin companies also tiptoed into digital health in 2015, with several notable pharma-tech partnerships. Most recently, Novo Nordisk and IBM Watson Health partnered to develop new diabetes solutions built on the Watson Health Cloud. This was a major move for Novo Nordisk, who hasn’t historically been very active on the partnership front and hasn’t talked about digital health publicly. In August, Sanofi announced a partnership with Google Life Sciences to develop new sensors, wearable devices, and software for diabetes care. The collaboration spans both devices and software, with a focus on helping patients and physicians better collect, analyze, and understand all the data that impacts diabetes. Earlier this year, Lilly led the closing of a $3 million round of Series B financing for Companion Medical, a startup developing a Bluetooth-enabled insulin pen and a smartphone app with a built-in bolus calculator. We see these partnerships as a natural progression to enhance the efficacy of diabetes drugs – as peptide innovations become more challenging and the bar for new drugs rises, there is great potential to improve outcomes through technology and data, and to improve access by providing payers with real world data demonstrating value.
• Where does digital health need to go in 2016 and beyond? Help from established drug and device players to scale concept-stage ideas; studies to validate clinical effectiveness; more passive data acquisition (lower patient burden); more actionable and automatic data analysis for patients and providers; integrating digital health into providers’ clinical workflow; scaling beyond early adopters; saving the system costs and testing new business models; driving clinically meaningful changes in behavior; augmenting the effectiveness of and adherence to traditional drugs and devices; gathering data where none currently exists (e.g., insulin pen doses); and broad reimbursement.

Mixed Fundraising Success for Insulin Delivery Companies: Asante vs. Cellnovo, Valeritas vs. CeQur

• This year brought mixed fundraising success for several insulin delivery companies: Asante, Cellnovo, Valeritas, and CeQur. All reflect the current opportunities and challenges facing companies in insulin delivery: an underpenetrated market, but a highly competitive environment (six players in the full-featured pump market alone); significant room to improve outcomes, but limited clinical data; upside to innovate on current offerings, but limited funds to do so and increasingly better insulins for MDI users; a wide open type 2 market, but limited reimbursement and major scaling challenges for startups; and most importantly, a tough business to profit from.
• Asante had the toughest 2015: the company shut down in May, just 45 days after it withdrew its IPO and a mere five months after the initial S-1 filing last December. On the bright side, Bigfoot Biomedical quickly scooped up the assets, giving it a market-ready pump for its automated insulin delivery system.
• Cellnovo was more successful than Asante, raising 32 million euros in its IPO on the Euronext stock exchange in July. This came at a very early stage in the company’s commercial lifecycle: sales were just €194,00 in 3Q15, and only 122 pump systems have been shipped since 2014 launch in UK and France. Cellnovo is fairly well capitalized (31 million euros and a ~1-2 million euro cash burn during 3Q15), so it’s certainly possible things could scale in the coming quarters. Investors seems to be losing optimism, however: the company’s market cap is down to ~81 million euros from ~139 million shortly following the IPO.
• Valeritas “postponed” its ~$75 million IPO on the NASDAQ just one month after the initial filing in February. The company had a steady trickle of positive data from small studies throughout the year, though there was no fundraising news. Valeritas had $21 million in cash as of December 31, 2014 (the last update), enough for at least 12 months. We assume financing is a big near-term priority, and perhaps the company can go public in 2016 (based on talking to Senseonics management, however, the med device IPO environment looks no better in 2016). We continue to hope this company makes it, as the V-Go has many advantages and clearly helps some patients struggling on MDI.
• By contrast, CeQur raised $100 million in Series C financing in September. Funds will be used to scale up manufacturing, clinical activities, and commercial operations ahead of a limited 2016 EU launch of the cost-optimized, second-gen PaQ insulin delivery patch device. An FDA 510(k) filing is slated for 1Q16, with a full-scale US launch expected in 2017. Valeritas raised $100 million itself back in 2013, so this level of funding is not unheard of. Still, the pressure will be on CeQur to execute a launch, prove the business model, and establish broad reimbursement (particularly as J&J’s somewhat-competitive bolus-only Finesse device comes to market in 2016).

CGM Startups Plow Forward on Implantable and Wellness Applications

• As CGM continues to grow – albeit with limited penetration – startups continue to work on implantable and wellness applications. Senseonics appears closest to market, with a CE Mark expected imminently for its implantable sensor, body-worn transmitter, and mobile app (“Eversense”). The company hopes to launch in early 2016 in Sweden, Norway, and Denmark. San Diego-based GlySens also continues to build a one-year implantable CGM, announcing in August that its ongoing trial has been extended out to twelve months (completion in July 2016).
• Less invasive patch CGMs are also in development (Sano, Echo), with the goal of a “consumer wellness” application requiring limited or no FDA oversight (e.g., informing healthy eating behaviors rather than managing diabetes). Of course, whether an over-the-counter “wellness” glucose sensor will be possible from a regulatory perspective is an open question. Sano is the most interesting near-term player to follow, as the company expects to launch its consumer CGM sensor patch in 2016. We saw a prototype sensor at the Rock Health Summit in September, which reportedly features no calibration, seven day wear, readings sent to a phone, and a MARD ~15-20% vs. fingersticks. Echo Therapeutics has also pivoted towards a wellness application of its minimally invasive CGM (previously for the hospital), though cash is a serious concern at this stage: ~$3,000 on September 30, reflecting a $1.5 million cash burn in 3Q15.
• Startup CGM companies all face similar tough questions on accuracy, reliability, cost, manufacturing, data output, regulatory expertise, and commercialization strategy. Abbott, Dexcom, and Medtronic are moving very quickly on next-gen products, and it’s hard to know how the advantages of these implantable or wellness systems will stack up to increasingly strong competitive offerings from these established players (factory calibration, smartphone connectivity, smaller transmitters, disposable, closing the loop, etc.). We especially wonder if there is a big enough market for a consumer CGM, and whether the FDA will approve one. What price point is the right spot?

2. Most Highly Read Reports

• Abbott launches LibreLink in Sweden, Android app for scanning FreeStyle Libre sensor; further EU launches in 2016 – Updated report from Friday includes new pictures and details on the app from www.librelink.com and the user guide; early comparisons to Dexcom G5 mobile app
• Dexcom and Google collaborate to develop next-gen smaller, less expensive CGM and improved data, with first commercialization in 2-3 years – Low-cost, bandage-like, disposable CGM the size of a dime worn for 10-14 days; clear pathway to expand to type 2; Dexcom responsible for commercialization; what does it mean for Abbott and Medtronic? Does it address the key barriers to CGM use?
• Bigfoot Biomedical acquires Asante’s assets and IP, giving it a market-ready pump – Major de-risk as the startup advances to market, with current goal to be in a pivotal trial by the end of 2016; automated insulin delivery competitive landscape, key questions for field
• Sanofi partners with Google Life Sciences to improve diabetes care through new sensors, wearable devices, and better software – Diabetes officially the first therapeutic area of focus as Life Sciences becomes an independent company; third diabetes partnership in addition to Novartis (last July) and Dexcom (this month)
• FDA approves Dexcom G5 mobile system ahead of schedule; will ship in late September – A major advance for the CGM field; what is the potential impact on patients, HCPs, Dexcom, pump partners, and CGM competitors?
• Why acquire Diabeter? Interview with Medtronic Diabetes President Hooman Hakami and VP Services & Solutions Annette Brüls – Bold vision for Medtronic Diabetes to serve 20 million patients with diabetes by 2020; what makes Diabeter unique, how success will be defined, could it apply to type 2, how it aligns with the recent Glooko investment, and more
• Smartloop rebrands as ‘Bigfoot Biomedical’, interview with Bigfoot (Bryan Mazlish!), Jeffrey Brewer, and Lane Desborough – Simplifying diabetes technology through automated insulin delivery
• FDA approves Dexcom G4 Platinum Share receiver with built-in Bluetooth; secondary display of CGM data downclassified – Begins shipping by March 2015; compatible with Gen 5 means more seamless transition; brilliant pipeline move; what are the implications for Nightscout?
• Bayer sells Diabetes Care business to Panasonic Healthcare for ~$1.2 billion – Closing of the transaction expected to occur in 1Q16; Panasonic looks to grow in healthcare despite small diabetes footprint; SWOT analysis and Close Concerns’ questions 
• Medtronic begins shipping MiniMed Connect for smartphone viewing of pump and CGM data – Great option for patients and caregivers to view pump/CGM data on the go, auto-upload to CareLink every day; How does MiniMed Connect compare to Dexcom’s G5?
• Medtronic begins international launch of MiniMed 640G, starting in Australia – Additional markets are expected over the next several months; new details on pump features, patient marketing; will any other company jump into the game?
• Senseonics reverse merges to go public on OTCBB; CE Mark still pending, EU launch likely pushed to early 2016; US pivotal trial to start in 1Q16 – Pipeline includes FreeStyle Libre-like smartphone “swipe”; Strengths, weaknesses, opportunities, threats analysis; our key questions; predictions for 2020 CGM market size and US penetration

3. What We Got Right/Expected

• An increasingly ardent drive to close the loop
• Continued enthusiasm for FreeStyle Libre as more use the technology
• Dexcom’s continued momentum and regulatory leadership
• Continued fervent debate on the benefits and risks of adding glucagon in the artificial pancreas
• Highly competitive environment for insulin delivery and glucose monitoring startups
• Bayer leaving blood glucose monitoring
• The FDA device division continuing to demonstrate a patient-centered, pro-innovation spirit Greater interest and enthusiasm for digital health

4. What We Got Wrong/Did Not Expect

• Verily (Google Life Sciences) prioritizing diabetes as much as it has
• Bigfoot Biomedical coming on the scene in such a major way
• Persistent capacity constraints for FreeStyle Libre
• Pump companies besides Medtronic – Animas, Insulet, Roche, Tandem – moving fairly slowly on automated insulin delivery
• Insulet’s revenue struggles and complete senior management team turnover
• Asante quickly going out of business after filing for an IPO in December 2014
• Continued revenue struggles for the Big Four BGM companies (Abbott, Bayer, J&J, Roche)
• Confusing outcomes from Dr. Irl Hirsch’s FLAT-SUGAR study
• Flattening of digital health funding
• Many Congressional diabetes caucus members’ failing to co-sponsor the 2015 Medicare CGM Access Act

5. Key Questions for 2016

Glucose Monitoring

• Will Abbott resolve FreeStyle Libre’s capacity constraints?
• Will the FDA approve Abbott’s FreeStyle Libre Pro in 2016? Will Abbott submit a consumer version of FreeStyle Libre to FDA?
• Will we start seeing FreeStyle Libre revenue metrics?
• Will the FDA approve an insulin-dosing claim for Dexcom CGM?
• How will Medtronic’s Enlite 3 accuracy compare to Dexcom and Abbott?
• Will the Verily/Novartis glucose-sensing contact lens enter trials as expected next year?
• Will Roche launch its own CGM?
• Will Sano’s wellness CGM come to market in 2016? Do “wellness” CGMs have a chance? What will the data output need to look like to avoid a regulatory submission?
• Will Senseonics successfully commercialize Eversense in Europe? Do implantable CGMs offer enough advantages in an increasingly competitive CGM marketplace?

Insulin Delivery and Artificial Pancreas

• Will the FDA approve Medtronic’s MiniMed 640G/Enlite 3 in 2016 (assuming it is submitted early in the year)?
• How will patients like BD/Medtronic’s FlowSmart infusion set? Will this commercialization hurt other pump companies?
• What will be learned from the Bionic Pancreas glycemic target studies of insulin only vs. insulin+glucagon? Will we finally know the incremental benefit of insulin+glucagon over insulin alone?
• Will Bigfoot enter a pivotal study as planned next year? What will its system look like?
• What is the appropriate comparator group in a pivotal closed-loop study?
• Should a closed-loop algorithm reside on a smartphone? Is it worth it if patients have to carry an extra stripped down phone?
• How will academic groups go from large-scale studies to regulatory PMA submissions? Will upcoming NIH-funded large-scale trials actually serve as true “pivotal” studies, since regulatory submission requires a final commercial-ready device?
• Will closed-loop systems command a premium price from payers, assuming pivotal trials show reductions in A1c and/or hypoglycemia?
• What is the right revenue model for closed loop systems? Will the traditional pump model work?
• Will Valeritas go public following the postponed IPO?
• Will CeQur successfully launch PaQ in Europe?

Data and Digital Health

• Who will Helmsley fund through the $5 million Diabetes Data Innovation Initiative?
• Will any of the IBM Watson partnerships result in near-term commercialized products?
• Which insulin player will make the biggest investment in digital health? Will 2016 see more investment in digital health from traditional diabetes drug companies?
• Will digital health see improved reimbursement and business models?

6. What’s Coming in 2016?

Below, we enclose the pipeline products we are aware of, though we acknowledge this list is likely not 100% complete. We have done our best to be as comprehensive as possible based on the most recent public updates we’ve heard.  

Insulin Delivery and Artificial Pancreas

Animas (J&J)

• Launch of J&J/Calibra Finesse bolus patch delivery device (A1c and treatment satisfaction trial underway)

Bigfoot Biomedical

• Pivotal trial to commence by the end of 2016

Bionic Pancreas (MGH/BU)

• Completion of glycemic target studies comparing insulin-only to insulin+glucagon bionic pancreas
• Bridging study for dual-chambered iLet device to commence in 4Q16

Cambridge

• Potential large-scale study to begin in 2016; product details and commercialization plans unknown

Cellnovo

• Scandinavian launch of patch pump system in early 2016
• Next-generation handset (glass, capacitive touchscreen, Bluetooth, and run an Android-based user interface)

CeQur

• Limited EU launch of PaQ patch insulin delivery device
• FDA 510(k) filing of PaQ in 1Q16

Insulet

• FDA 510(k) filing of next-gen Bluetooth-enabled PDM in mid-2016, launch expected by end of 2016
• Completion of Lilly U-500 OmniPod study in December

Medtronic

• Launch of BD FlowSmart Infusion Set around March-April 2016
• FDA PMA submission of Medtronic MiniMed 640G in early 2016
• MiniMed 670G hybrid closed loop pivotal study to complete in May 2016
• Potential launch of Glooko data downloading integration?

Tandem

• Feasibility study of predictive low glucose suspend device
• Potential FDA clearance of Project Odyssey (assuming it has been submitted; allows for remote online updating of the t:slim’s pump software)
• Mid-2016 clearance expected for a lower age indication for t:slim G4 (assuming it has been submitted)
• 1H16 launch of special healthcare provider version of t:connect

TypeZero/IDCL Consortium

• International Diabetes Closed-Loop Trial to commence at ten sites (n=240, six months)

Valeritas

• Potential IPO or fundraise?

Ypsomed

• Early 2016 launch of YpsoPump once prefilled insulin cartridge secures approval

CGM and Flash Glucose Monitoring

Abbott

• Two six-month reimbursement studies – REPLACE (n=210 type 2s on MDI, A1c>7.5%) and IMPACT (n=225 type 1s on MDI or pumps, A1c <7.5%) – to be presented at ATTD and ADA 2016, respectively.
• Expected US launch of FreeStyle Libre Pro (submitted to FDA in 2Q15)
• Potential FDA submission of FreeStyle Libre consumer version?
• Potential EU submission of FreeStyle Libre professional version (study ongoing)?

Dexcom

• Launch of G5 Android app
• 2H16 launch of next-gen insertion system, touchscreen receiver, and smaller transmitter
• Potential FDA submission of G6 sensor (initial goal of one calibration per day,  interferent blocking)?
• Potential FDA approval of an insulin-dosing claim?
• Early data from the DiaMond study in 2H16

GlySens

• Completion of 12-month trial in July

Medtronic

• Launch of Enlite 3, pending FDA approval of MiniMed 640G

Roche

• Potential launch of first-gen CGM in Europe

Senseonics

• EU launch of Eversense in early 2016
• US pivotal study of Eversense to begin in 1Q16
• Full results from 180-day EU pivotal trial

Sano

• US launch of wellness CGM patch

Verily (Google Life Sciences)

• Large-scale human trials of smart contact lens to begin in 2016 (with partner, Novartis)

BGM

Ascensia Diabetes Care (formerly Bayer Diabetes Care)

• No publicly disclosed products, but first sales and updates on future plans
• Potential launch of next-generation Bluetooth-enabled BGM

Abbott

• No publicly disclosed BGM products

LabStyle

• Potential US, Italy, Panama, and Costa Rica launches of Dario all-in-one glucose monitoring device (FDA clearance received in December)

LifeScan (J&J)

• Potential updates on OneTouch Ping Verio Insulin Pump with Remote Meter, Next Generation Glucose Testing Platform

Roche

• No publicly disclosed BGM products

Other

NeuroMetrix

• Potential regulatory approval of DPNCheck in China in 2016

Diabetes Drugs

1. Themes

A New Landmark Study? – Positive Results from EMPA-REG OUTCOME

• The unexpected positive results from EMPA-REG OUTCOME were undoubtedly the highlight of the year in the diabetes drug world. The results, presented at EASD and published in the NEJM, demonstrated a significant 14% risk reduction for the primary MACE endpoint (CV death, MI, and stroke) with Lilly/BI’s Jardiance (empagliflozin) vs. placebo, driven by a whopping 38% reduction in CV death. Jardiance also produced a 32% reduction in all-cause mortality and a 35% reduction in hospitalization for heart failure. The results are an enormous win for the diabetes community and could have a profound impact on the standard of care for type 2 diabetes going forward. Big picture, however, the study raised far more questions than it answered (read on for some of the major ones), and the full implications of the results will not become clear for some time, not least of all because future studies that could replicate the results (or not) won’t be reporting for some time.
  
  • What was the mechanism of benefit? Much of the pre-EASD speculation about cardioprotection with Jardiance and other SGLT-2 inhibitors had centered around their beneficial effects on body weight and blood pressure. However, the specific benefits demonstrated in EMPA-REG OUTCOME – dramatic, immediate effects on heart failure and mortality but no effect on MI or stroke – are not consistent with these mechanisms. Therefore, most of the post-EASD speculation has suggested that Jardiance’s diuretic effect was the most likely driver of benefit. That said, much more study is needed to fully answer this question – on this topic, Dr. Sanjay Kaul’s (Cedars-Sinai Medical Center, Los Angeles, CA) statement that “when you see ‘multifactorial’ or ‘multidimensional’ in a journal like NEJM, it’s usually a euphemism for we don’t know ...” certainly resonates.
  • Was it a class effect? Given the homogeneity of the SGLT-2 inhibitor class, we are fairly optimistic that the ongoing trials of other SGLT-2 inhibitors (CANVAS for J&J’s Invokana [canagliflozin] and DECLARE for AZ’s Farxiga [dapagliflozin]) will be able to replicate the EMPA-REG OUTCOME results. Most of the speakers we have heard on the conference circuit since EASD have assumed that an SGLT-2 inhibitor class effect is the most likely explanation, but we expect that payers and guidelines committees will want to wait for confirmation from the other trials before making any broad changes to formularies or treatment recommendations.
  • How generalizable are the results? EMPA-REG OUTCOME enrolled a very high-risk population – those with established cardiovascular disease – and we may never truly know whether the results can be generalized to other patients with type 2 diabetes. The DECLARE trial, which enrolled a broader population than other SGLT-2 inhibitor CVOTs, likely offers the best hope for an answer to this question, as a fully powered outcomes trial in low-risk patients is extremely unlikely. Absent a clear answer, we expect that guidelines committees will limit any changes to their treatment algorithms to the high-risk patients who meet the inclusion criteria for these trials. However, we also expect that many patients and clinicians will err on the side of assuming the results are generalizable to lower-risk patients, particularly based on commentary from clinicians at IDF.

Continued Debate Over the Pros and Cons of Cardiovascular Outcomes Trials

• The positive EMPA-REG OUTCOME results have added another layer of nuance and questions to the CVOT debate. Proponents of the 2008 FDA Guidance can argue that one of the trials conducted under the FDA requirement has revealed an unexpected and clinically meaningful benefit that might have otherwise remained unknown – the assumption, however, that this trial would never have been done were it not for the guidance is not a foregone conclusion in our view. That said, Dr. Hertzel Gerstein (McMaster University, Hamilton, Ontario, Canada) concluded his EASD presentation on the results by describing them as a “perfect case in point” to prove that claims that these trials are not necessary or useful are “really unfounded.” Even more notably, EMPA-REG OUTCOME investigator Dr. Silvio Inzucchi (Yale University, New Haven, CT) suggested that he was prepared to completely revise his previous assessment that these FDA-mandated trials are not worth the investment. We would love to be in a room of KOLs who could speculate on the degree to which the CVOTs would’ve been undertaken without the guidance – few seem willing to go on record, and this is a challenging question but manufacturers surely would have realized the value in such trials if cardioprotective and/or renal-protective, so we doubt that FDA is fully responsible for the knowledge stemming from EMPA-REG OUTCOME.  
• The overall CVOT experience may still suggest that neutrality could be the most likely outcome of these trials and that there is plenty of room for improvement to the paradigm. Amid all the excitement over EMPA-REG OUTCOME, one could be forgiven for forgetting that two other CVOTs – TECOS for Merck’s Januvia (sitagliptin) and ELIXA for Sanofi’s Lyxumia (lixisenatide) – also reported in 2015 and produced completely neutral results. The trial discussants – Dr. Inzucchi for ELIXA and Dr. Allison Goldfine (Joslin Diabetes Center, Boston, MA) for TECOS – both raised questions during their ADA presentations about whether these studies are enrolling the right patients, running for long enough, and asking and answering the most relevant clinical questions. EMPA-REG OUTCOME has demonstrated that the trials in their current form can reveal immediate, profound off-target effects of a diabetes drug on cardiovascular outcomes. However, the argument that the trials are not adequately powered to detect longer-term, subtler effects mediated through glycemic or atherosclerotic mechanisms is still a valid one. We also still believe that there may be other questions, such as the comparative effectiveness of different drug classes or the utility of early combination therapy vs. sequential therapy, that could constitute a more valuable use of limited research resources (on that note, it’s quite depressing from our view that GRADE was not put together as a more “adaptive” trial – the value of looking at GLP-1 and DPP-4 inhibitors as second-line therapy but not having SGLT-2 results in the same trial will limit conclusions). We continue to encourage the FDA and other stakeholders to engage in a broader discussion about potential modifications to the Guidance that can ensure the trials are as cost-effective and clinically relevant as possible.
• The question of heart failure risk with DPP-4 inhibitors remains unresolved, though the TECOS results provided a welcome dose of reassurance. The resoundingly neutral results from TECOS, the most robust of the three DPP-4 inhibitor CVOTs that have reported thus far, have largely ruled out the possibility of a class effect on heart failure. However, the explanation for the divergent results in the three trials (significant increased risk with AZ’s Onglyza [saxagliptin] in SAVOR and a non-significant imbalance with Takeda’s Nesina [alogliptin] in EXAMINE in addition to the neutral TECOS results) remained a subject of much debate throughout 2015. The consensus seems to be that drug-specific effects or a chance finding in SAVOR were the most likely possibilities, but a definitive answer is unlikely to emerge without a head-to-head study of the three agents or a clear mechanistic explanation for the SAVOR results. Absent such clarity (which we see as unlikely), we assume the most likely practical consequence of the results is that more clinicians will opt for Januvia over Onglyza for patients at high risk of heart failure. An April FDA EMDAC meeting on the SAVOR and EXAMINE results (held before TECOS reported) suggested that label updates are likely at some point at least for Onglyza, but we have not heard any updates from the FDA since then. All this said, interesting work from Dr. Dan Drucker’s lab just published in Diabetes did reveal a potential mechanistic link between DPP-4 inhibition and heart failure in a mouse model of type 2 diabetes. The researchers found that DPP-4 inhibition led to increased expression of genes associated with inflammation and fibrosis in the heart, and that the cardioprotective effects seen in young euglycemic mice after experimentally induced heart failure were not present in an older diabetic model. Plenty of food for thought…

Pricing Pressure and the Rising Cost of Insulin

• Speakers expressed their growing frustration with rising insulin costs at several conferences this year. Most notably, Dr. Irl Hirsch (University of Washington, Seattle, WA) provided a comprehensive look at the unprecedented skyrocketing copays and out-of-pocket costs of insulin at ADA 2015, teasing out the history of insulin pricing, the distinction between different metrics for insulin pricing, parallel insulin price increases among different manufacturers, and the geographical differences in insulin pricing. He also railed against manufacturers’ coupon programs as infiltrating the patient population to create pent-up demand, which makes it more difficult for payers to decline paying for certain products. In terms of big picture solutions, he suggested: (i) clinical guidelines that incorporate cost-benefit analyses; (ii) value-based pricing based on panel decisions (though he wouldn’t want providers who work with insulin companies to be excluded); (iii) allowing importation (which he recognized as unrealistic, and probably not in patients’ best interest anyways); (iv) educating more providers about human insulin; and (v) advocacy. As a short-term solution at the individual level, Dr. Hirsch argued in favor of better training for new physicians on human insulin for type 2 diabetes and suggested patients paying cash to purchase insulin from Walmart or Costco. In a similar vein, Dr. Matthew Riddle (Oregon Health and Science University, Portland, OR) noted at IDF 2015 that the 10-factor price differential between human insulins and newer insulin analogs has led some patients in his clinic to return to human insulin due to cost issues. Frustration over insulin costs was also echoed at a Lilly-sponsored dinner during Keystone 2015. In addition, drug pricing made a big impact on the public and political discourse outside of diabetes this year with both Democratic presidential candidates Secretary Hillary Clinton and Senator Bernie Sanders proposing plans to limit patients’ out-of-pocket expenses for prescription drugs. It’s clear that patient, provider, and public discontent over drug prices is reaching a simmering point – though as noted below, pharmaceutical manufacturers have been faced with their own pressures from the payer side in recent years, including increased rebating and a trend toward exclusive formularies.
• Specifically, the 2014 Express Scripts Drug Trend Report, published in March 2015, highlighted the impact of rising insulin costs on overall and diabetes-specific drug spend. The report noted that, for the fourth year in a row, per member drug spending was higher for diabetes than any other traditional, non-specialty area in 2014. Among many other factors, the report pointed to increases in insulin unit costs as a driver of the increased diabetes spend. According to the report, Lantus (insulin glargine) saw an increase in unit cost of 34%, 32%, and 33% in the commercially-insured sector, Medicare, and Medicaid, respectively. Humalog (insulin lispro) unit costs increased by 36% in the commercially-insured sector and 26% in Medicaid; Levemir (insulin detemir) unit cost increased 48% in Medicare. Express Scripts noted that price inflation of Lantus and Levemir, in particular, drove increased spend in the commercial sector. We imagine this is due to the two products’ huge share (85%) of the basal insulin market and correspondingly, the huge number of patients the two products hold in total. The report stated that Humalog saw the highest unit cost increase for an insulin and the highest total spend increase – a whopping 93% increase. While the increased unit cost undoubtedly drove some of this increase, the huge 57% increase in utilization likely played a bigger role. In particular, we imagine awarding of the exclusive Express Scripts contract to Humalog in 2014 likely accounted for this significant boost in Humalog utilization among Express Scripts members. Looking forward, Express Scripts’ recently-released formulary exclusion list for 2016 continues to block out NovoLog in favor of Humalog, so we’d expect the utilization trend for Humalog to stabilize in future reports.
• That said, many pharmaceutical companies struggled with pricing pressure and several directly addressed the public pressure in their 3Q15 updates. We’ve seen payers grow increasingly comfortable wielding formulary access against manufacturers in negotiations, making the cost of insulin or other drugs quite complex. While the list price of insulin has gone up in recent years, rebating has also increased, making it difficult to parse out to what degree insulin costs have changed for payers or insured patients. Sanofi had an extremely challenging year financially as it was forced to accept higher rebates for Lantus – and accept similarly high rebates for its new next-generation product Toujeo (U300 insulin glargine) – in exchange for broad formulary access. In 3Q15, Lantus sales fell 11% year-over-year (YOY) in constant currencies (flat as reported), marking the first quarter in which Lantus sales did not grow as reported and in which the operational decline reached double-digits since we began tracking and forecasting sales in detail in 2005 (ten years ago!) Management largely attributed the sales decline to increased rebates and the fact that a higher proportion of Lantus sales are coming from less-profitable government insurance programs, noting that the Affordable Care Act (and, presumably, Medicaid expansion) is driving this trend. As Lantus accounts for the lion’s share of Sanofi’s diabetes portfolio sales, Sanofi’s diabetes business has faced a tough year overall, leading management to adjust its guidance downward with a 4%-8% expected decline in diabetes sales each year through 2018. Sanofi isn’t the only company feeling the pressure – in 3Q15 alone, Novo Nordisk, Lilly, J&J, Bayer, Roche, Novartis, Zealand, and Dexcom all specifically addressed the challenges posed by pricing pressures in their updates. Pfizer used its 3Q15 update as an opportunity to defend the pharmaceutical industry against the public and political outcry over drug costs, a move that was mirrored in Lilly and J&J’s updates as well. It’s clear to us that the issue of drug pricing is far from black-and-white. However, it appears that the most vulnerable uninsured and under-insured patients are most directly impacted by higher list prices, though many companies do offer patient assistance programs for those in this situation.

Arrival of Biosimilar Insulin

• We heard many commentators express hope that the arrival of Lilly/BI’s biosimilar insulin glargine Basaglar (branded Abasaglar in the EU and other ex-US markets) would offer a reprieve from high insulin prices. CVS Health’s Chief Medical Officer Mr. Troyen Brennan had predicted in March that biosimilar drugs would cut the prices of branded medications by as much 40%-50%. In reality, when Abasaglar launched in several ex-US markets in the second half of the year, it was typically priced at a 15%-20% discount to Lantus in those markets. For comparison, small molecule generics are typically priced at a 50%-80% discount relative to their brand-name counterparts. While this discounting is lower than some had expected, there is evidence that even this modest decrease in price is a welcome reprieve for many patients. In its 3Q15 update, Lilly highlighted that the biosimilar has achieved 6%, 3%, and 11% of the total basal insulin market share in Japan, the Czech Republic, and Slovakia, respectively. Even with the relatively small discount, at IDF 2015, Dr. Riddle suggested that, of all the newly-available formulations of insulin, biosimilar insulin glargine has the potential to help the greatest proportion of patients due to the many patients facing challenges in affording their insulin. In addition, a cogent New York Times op-ed, published in November, noted that it is 100 times more expensive to reverse-engineer a biologic than a small molecule (~$200 million vs. ~$2 million). While the arrival of biosimilar insulin this year has generated some glimmers of hope for patients, it remains clear that insulin manufacturers are facing a variety of pressures. As the insulin-pricing front evolves, we continue to see the need for more innovative, multidisciplinary solutions that engage industry, payers, providers, patients, and policymakers, as we hope that some of the conversations we heard this year can also spill into these other sectors.

Type 2 Diabetes as One Component of Cardiometabolic Risk

• The field appears to be moving toward a more holistic view of type 2 diabetes as one of several components of cardiometabolic risk. This view was particularly evident at cardiology conferences this year. ESC 2015 featured a number of prevention-focused sessions that emphasized the importance of blood pressure and lipids in patients with diabetes and encouraged greater attention to obesity. The agenda at ACC 2015 also included presentations on topics such as bariatric surgery and the role of glycemic control in long-term CV risk, and AHA 2015 had a fairly heavy focus on obesity and hypertension and their intersection with diabetes. The arrival of the first two PCSK9 inhibitors – Sanofi/Regeneron’s Praluent (alirocumab) and Amgen’s Repatha (evolocumab) – has also prompted more discussion about the relevance of LDL lowering for patients with diabetes. While much more progress is needed, we are also glad to see a trend toward viewing obesity and NAFLD/NASH as important comorbidities of diabetes and precursors of CVD. This holistic view of cardiometabolic risk goes in tandem with the rising bar for new type 2 diabetes drugs, as new classes will likely need to demonstrate effects on risk factors beyond glycemia in order to succeed.

GLP-1 Agonist Class Rebound and Dosing Innovations on the Horizon

• After a dip at the end of 2014 and the beginning of 2015, GLP-1 agonist class sales rebounded and have continued to rise ever since.  Year-over-year (YOY) growth for the overall class fell to a low of 12% in 4Q14 but returned to >20% by 2Q15. The class achieved over $1 billion in quarterly sales for the first time in 3Q15. Total sales in the first three quarters of 2015 were $2.8 billion, a 20% rise YOY from $2.4 billion in the first three quarters of 2014. Results by volume support a similar narrative – IMS health data from Novo Nordisk’s 3Q15 update showed US volume growth for the class rebounding to close to 20%, a very strong recovery from the ~8% growth at the beginning of this year and approaching the growth rates seen in 2012-2013. Novo Nordisk’s Victoza (liraglutide) continues to dominate the class with 68% of sales by value in 3Q15, compared to 23% for AZ’s exenatide franchise (Bydureon and Byetta), 7% for Lilly’s Trulicity (dulaglutide), 2% for GSK’s Tanzeum (albiglutide), and 1% for Sanofi’s Lyxumia (lixisenatide). As of August, Victoza held 59% of total prescription market share.
• Lilly’s patient-friendly newcomer Trulicity (dulaglutide) has made a particularly large contribution to the class’s growing popularity. The once-weekly option has received strong positive patient feedback for its ease-of-use, and Lilly management emphasized its role in growing the overall GLP-1 agonist class in the company’s 2Q15 update. Though it launched half a year later than fellow newcomer Tanzeum (GSK’s albiglutide), Trulicity’s launch trajectory has been far stronger in terms of sales: Trulicity posted $74 million in sales in 3Q15 compared to $17 million in sales for Tanzeum. This difference is likely due to Trulicity’s higher price, as Trulicity and Tanzeum held an equal 7% market share in the class by volume in 3Q15. Trulicity sales in 3Q15 also left Sanofi’s GLP-1 agonist Lyxumia (lixisenatide) in the dust (the product posted $10 million in sales, though it has been hampered by lack of access to the US market) and edged out AZ’s Byetta (exenatide twice-daily), the father of the GLP-1 agonist class ($72 million in sales).

Figure 1: GLP-1 Agonist Sales (3Q13-3Q15)

• GLP-1 agonists are increasingly being positioned earlier in the type 2 diabetes treatment algorithm, potentially as a first injectable therapy. AACE/ACE’s updated treatment algorithm, released in May, favored GLP-1 agonists, SGLT-2 inhibitors, and DPP-4 inhibitors over TZDs and sulfonylureas earlier in the treatment intensification process. The AACE/ACE guidelines even went so far as to recommend considering off-label use of GLP-1 agonists for some patients with prediabetes. The updated ADA/EASD guidelines, released in February, positioned GLP-1 agonists as a potential second-line therapy with “high” efficacy.
• The use of GLP-1 agonists as an add-on to basal insulin, rather than MDI, has also gained favor. The updated ADA/EASD guidelines enthusiastically recommend considering the addition of a GLP-1 agonist instead of prandial insulin to basal insulin therapy, especially for patients with obesity, due to its benefits in terms of weight, hypoglycemia, and possibly glucose lowering. We have also heard positive commentary on the use of GLP-1 agonists – especially short-acting GLP-1 agonists – for postprandial glycemic control from speakers at several conferences this year. Dr. Robert Henry (University of California San Diego, CA) gave a ringing endorsement of GLP-1 agonist/basal insulin combination therapy at EASD 2015. The topic came up multiple times at CODHy 2015, with Dr. Bernard Charbonnel (University of Nantes, France), Dr. Jaime Davidson (UT Southwestern, Dallas, TX), and Dr. Ofri Mozenson (Hadassah Medical Center, Jerusalem, Israel) offering their support of GLP-1 agonist use for postprandial control. That said, several speakers still felt that rapid-acting insulins are a better option, most notably due to their known long-term safety profile (with his characteristic candor, Dr. Philip Home [Newcastle University, Newcastle Upon Tyne, UK] called GLP-1 agonists “the untested new boy on the block.”)
• The next-generation of GLP-1 agonists is shaping up to include significant innovation in both delivery methods and dosing schedules. In August, Intarcia released promising phase 3 FREEDOM-2 results demonstrating impressive A1c reductions and weight loss with its implantable exenatide mini-pump ITCA 650 vs. Merck’s Januvia (sitagliptin). The implantable device is meant to deliver a continuous stream of exenatide for six months to one year and promises significant convenience and adherence advantages over current options. Intarcia plans to submit ITCA 650 to the FDA in the first half of 2016. Novo Nordisk also continues to innovate in the GLP-1 agonist field – its next-generation semaglutide is in phase 3 development as an oral formulation. The 10 aptly-named PIONEER studies will all initiate in 2016 and will enroll a total of >9,300 patients. On the dosing schedule side, in November, Sanofi licensed Hanmi Pharmaceutical’s ultra-long-acting phase 2b GLP-1 agonist efpeglenatide, which supports once-weekly to once-monthly dosing. We imagine these delivery method and dosing schedule innovations could fragment the GLP-1 agonist market as therapy becomes increasingly individualized in the future. Depending on price and access, it is also conceivable that more profound innovations like ITCA 650 or oral semaglutide could largely displace the current options.

How Will New Insulins Fare?

• 2015 offered the first indications of how next-generation basal insulins are likely to perform on the market. Novo Nordisk’s Tresiba (insulin degludec) had been launched in 36 ex-US countries as of the company’s 3Q15 update. Its penetration in those countries remains heavily dependent on reimbursement, ranging from 3% of the basal insulin market in the UK and Denmark to 31% in Japan. Sanofi’s Toujeo (insulin glargine U300) had launched in markets including the US, Germany, the UK, Japan and Canada as of the company’s 3Q15 update and held 14% new to brand prescription share in the US. The two products were on fairly equal footing in terms of quarterly sales in 3Q15: combined sales for Tresiba, Ryzodeg (insulin degludec/insulin aspart), and Xultophy (insulin degludec/liraglutide) were ~$56 million and Toujeo sales were ~$51 million in that quarter. This is an obviously unfair comparison though, as Tresiba did not yet have access to the US market, which accounted for 87% of Toujeo’s 3Q15 revenue. 2016 should provide a better indication of how the two products will fare in more direct competition.
  
  • Novo Nordisk and Sanofi have pursued different reimbursement strategies for their new insulins. Sanofi has generally prioritized broad access over price premiums over the past year, beginning with its decision to accept a high level of rebates for Lantus (insulin glargine U100) in the US in 2015 in part to preserve a strong prescription base for Toujeo. While that decision has hurt Sanofi financially this year, it appears to have succeeded in supporting a fairly strong US launch for Toujeo. In contrast, Novo Nordisk has repeatedly prioritized value over access for Tresiba and other new products like Saxenda (liraglutide 3.0 mg). It has priced Tresiba at a significant premium in European markets, which has likely contributed to some of the reimbursement challenges it has faced. Novo Nordisk plans to price Tresiba at a more modest 10% premium over Levemir (insulin detemir) in the US, but even this could lead to friction with increasingly cost-conscious payers. The company has acknowledged that this strategy will lead to more gradual initial uptake of new products but firmly believes it is the smartest long-term approach.
  • It remains to be seen how Tresiba and Toujeo stack up against their predecessors and against each other in terms of clinical value. Both products offer flatter action profiles and potentially less hypoglycemia compared to current gold standard Lantus, but it is unclear whether the advantages are as great as those of the first insulin analogs over NPH. The hypoglycemia question is particularly complicated: both companies have used subsets of clinical data to argue that the new products offer a hypoglycemia benefit, but neither dataset met the FDA’s standards for an official label claim. This may be a case where real-world experience differs from clinical trial results, as hypoglycemia rates are generally much lower in clinical trial settings. While Toujeo and Tresiba have not been studied head to head (though a head-to-head PK/PD trial is ongoing), Tresiba appears to have a slight clinical edge based on the available data: it matched Lantus’ efficacy at lower doses in phase 3 trials (whereas Toujeo required dose increases to equal Lantus), it has a longer duration of action, and its label includes a flexible dosing claim. However, these differences are minor enough that they could easily be outweighed by differences in access, or by the larger patient base for Lantus compared to Levemir.
• The unexpectedly slow launch of Sanofi/MannKind’s Afrezza (inhaled insulin) was the biggest story of the year in the rapid-acting insulin arena. Afrezza’s approval was one of the biggest diabetes-related highlights of 2014, and we expected that its rapid action profile and the simplicity of a needle-free insulin regimen would bode well for its success in 2015. However, the drug has struggled to take off since its launch in 1Q15, posting sales of only $1-$2 million each quarter. MannKind management has cited reimbursement as the biggest factor holding Afrezza back, noting in the company’s 3Q15 update that insurance companies have taken a “strict stance” on the product and that the need for prior authorizations can cause some patients and providers to give up on getting Afrezza. The lack of an ultra-rapid-acting claim in the label and the hassle of the pulmonary function testing requirement also contributed significantly to the slow uptake. We continue to believe that Afrezza’s performance could improve in 2016 and beyond, as it has received very positive reviews from patients who have used it, particularly with aggressive new CEO Duane DeSisto starting – and more importantly, it is abundantly clear to anyone analyzing the market that the current prandial mealtime insulin options are not working sufficiently, so from a population perspective, whatever the initial barriers that exist with Afrezza, more alternatives are needed. For Afrezza’s fate to change, however, multiple barriers need to be addressed, including a primary care and endocrinologist community accepting that patients need alternatives and being able to spend time navigating the “prior auth” issues – while we do believe “physician resistance” to any kind of mealtime insulin is too big, we also acknowledge that system problems have made it far more difficult than it used to be for HCPs to advocate easily and effectively on behalf of patients. Still, the fact that such a larger number of patients are not at their glycemic targets would seem to bode well for Afrezza as its label improves, as we will assume it will over time if given the chance. Indeed, without more alternatives, the number of patients out of control on traditional MDI will simply continue to compound, as well as the number of patients who should be on more aggressive therapy and are not. In the meantime, the story is yet another illustration of the challenges for new products entering a crowded market amidst growing concerns about cost.

Combination Therapies Gathering Steam

• Fixed-ratio combinations of GLP-1 agonists and basal insulins progressed significantly in 2015. We were impressed by the DUAL V results presented at ADA 2015 comparing Novo Nordisk’s Xultophy (insulin degludec/liraglutide) to Sanofi’s Lantus (insulin glargine). Following the long-awaited FDA approval of Tresiba (insulin degludec), Novo Nordisk (finally!) submitted Xultophy for US approval in September – we continue to believe that the Tresiba delay by FDA that delayed Xultophy represents an unfortunate decision by FDA – and one that benefited competitors in likely a bigger way than had been expected. LixiLan (lixisenatide/insulin glargine) was submitted for US approval this month with a priority review voucher and will be submitted for EU approval in 1Q16.
• In 2015, Lilly/BI launched both the SGLT-2 inhibitor/metformin combination Synjardy (empagliflozin/metformin) and the SGLT-2 inhibitor/DPP-4 inhibitor fixed-dose combination Glyxambi (empagliflozin/linagliptin). Glyxambi is the first SGLT-2 inhibitor/DPP-4 inhibitor combination on the market. This class generated a lot of buzz over the past few years as phase 3 trials demonstrated impressive efficacy for an oral medication (A1c reductions >1%), improvements in blood pressure and body weight, and a mild side effect profile. However, Glyxambi has received very little commentary from Lilly management since its launch in March, its sales have not been broken out in Lilly’s quarterly updates, and it has been notably absent from exhibit hall booths. AZ recently received a Complete Response Letter from the FDA for its saxagliptin/dapagliflozin fixed-dose combination. The specific reasons were not disclosed but appeared to be relatively minor based on commentary in the company’s 3Q15 update. At IDF 2015, Dr. Julio Rosenstock (UT Southwestern Medical Center, Dallas, TX) advocated for the use of SGLT-2 inhibitor/metformin and DPP-4 inhibitor/metformin combinations over Glyxambi due to metformin’s low cost. Lilly/BI’s Synjardy is the third SGLT-2 inhibitor/metformin combination to market, after J&J’s Invokamet (canagliflozin/metformin) and AZ’s Xigduo (dapagliflozin/metformin), but it could benefit from the recent EMPA-REG OUTCOME results demonstrating a cardioprotective benefit with empagliflozin.
• Dr. Ralph DeFronzo presented three-year data from his landmark triple therapy trial at Keystone 2015, EASD 2015, and CODHy 2015, adding to the strength of evidence for early initiation of combination therapy. The data showed impressive and sustained A1c reductions in patients who initiated combination therapy with metformin, pioglitazone, and exenatide soon after being diagnosed with type 2 diabetes. Dr. DeFronzo’s rationale for targeting multiple pathophysiologies of type 2 diabetes with combination therapy appears to be gaining further support – at the start of a debate at EASD 2015, the vast majority of attendees in the very large room agreed with the necessity of triple and quadruple therapies. Other prominent KOLs, such as Dr. Stefano Del Prato (University of Pisa, Italy), are also firmly in the combination therapy camp.

Surprising Safety Concerns (DKA and SGLT-2 Inhibitors)

• The diabetes drug world was faced with several surprising safety concerns in 2015, headlined by the SGLT-2 inhibitor/DKA controversy and the discontinuation of Lilly’s basal insulin peglispro.
  
  • Ketoacidosis with SGLT-2 inhibitors: The possibility of a relationship between SGLT-2 inhibitors and DKA emerged seemingly out of nowhere when Dr. Anne Peters (USC, Los Angeles, CA) first drew attention to it early in the year – the first public mention we heard was at ENDO in March. It went on to become a central topic of discussion at virtually every major diabetes conference in the following months and attracted broader attention during the summer following warnings from the FDA and EMA and the publication of a case series in Diabetes Care. AACE/ACE hosted a meeting in November that reviewed the available evidence on the risk and led to a set of clinical recommendations. Most recently, the FDA added new warnings about the risk to the labels of all approved SGLT-2 inhibitors this past month. The most important takeaways from the controversy in our view are (i) that it is crucial to educate patients and HCPs about the risk, particularly the fact that ketoacidosis can occur in the context of normal blood glucose levels and that this needs to be managed consistently and carefully; and (ii) that the risk in type 2 diabetes is quite low and significant changes in prescribing patterns are not warranted.
    • There does appear to be cause for more caution with SGLT-2 inhibitors in type 1 diabetes until official trial results are seen; ultimately, we believe the tradeoff between the benefits to type 1 patients outweigh the risk, but much more education is likely going to be needed for patients. While officially until trial results are seen, we believe it’s uncertain whether the risk will pose a major obstacle to expanded indications for the class – we suspect it won’t if the right learning and action is taken on very aggressively by all the stakeholders. A sidenote – it will perhaps never be known if this class is cardioprotective or renal protective for type 1 patients, but the prospects of this as a possibility certainly increase the attractiveness of the class. We believe the impact of greater “time in zone” will be shown for patients and that this will ultimately be important in making good diabetes management easier and more attainable to patients, particularly with type 1. That said, the DKA risk is present and we hope to see it addressed very proactively – we think education with both patients and HCPs must go far beyond “it can be managed,” since few patients regularly test ketones or know much about the arena. The diabetes market research company dQ&A has just finished an extensive survey on this front – contact Richard Wood for more information on the insights gleaned.   
  • Safety concerns with Lilly’s peglispro: While it was not as  unexpected as the SGLT-2 inhibitor/DKA controversy, we were still surprised to see Lilly’s basal insulin peglispro fall so fast in 2015. The company announced phase 3 results in late 2014 showing impressive efficacy but worrisome elevations in liver enzymes and lipids with peglispro, along with an increase in daytime hypoglycemia. Lilly remained bullish on the product early in the year despite announcing a significant delay in the submission timeline to conduct additional safety studies. However, the company ultimately discontinued it earlier this month based on what was likely an accurate assessment that the regulatory path forward would be challenging. We have always seen peglispro as a high-risk, high-reward candidate, and we are not surprised the company concluded that the rewards were not sufficient to meet the increasingly high bar for new insulins. Indeed – due to the number of compounds that “work” (at least in artificial settings) for type 2 patients, we’ve basically come to the conclusion that any whiff of a safety issue that is challenging to manage basically means a non-starter for manufacturers.

Industry Investment in Multiple Agonists

• Novo Nordisk’s acquisition of Dr. Richard DiMarchi’s (Indiana University, Bloomington, IN) companies Calibrium and MB2 in September will likely continue Dr. DiMarchi’s research on a GLP-1/GIP/glucagon triagonist. The candidate demonstrated impressive metabolic benefits in a preclinical setting, published in February. Novo Nordisk management stated at the time of the acquisition that the company also intends to evaluate the GLP-1/GIP dual agonist RG7697, developed by Dr. DiMarchi, after Roche completes the ongoing phase 2 trials for the candidate (Roche is discontinuing development after phase 2 due to a shift in company resources as we understand it). We think Novo Nordisk got the absolute prize in being able to work on an ongoing basis with Dr. DiMarchi and his group – this is a major A team without a doubt.  
• Sanofi expressed marked interest in the dual agonists in its pipeline during its “Meet Sanofi Management” seminar in November. The company announced a licensing agreement for Lexicon’s phase 3 SGLT-1/SGLT-2 dual inhibitor sotagliflozin just before that meeting. The candidate will likely be the first SGLT-1/SGLT-2 dual inhibitor to market. Lexicon management is very optimistic about its potential for differentiation in the already fairly crowded SGLT-2 inhibitor market, particularly with regards to its cardioprotective potential. Sanofi also highlighted its phase 1 GLP-1/glucagon dual agonist SAR425899, noting that animal studies of the candidate demonstrated a similar glucose-lowering effect and superior weight-loss benefit compared to liraglutide. In addition, Sanofi added a GLP-1/GIP receptor dual agonist (SAR438335) to its pipeline in 3Q15.
• The competitive landscape for GLP-1/glucagon dual agonists is heating up. Several major players in the diabetes field in addition to Sanofi invested in early-stage candidates in this class in 2015. Lilly, in partnership with Transition Therapeutics, has a GLP-1/glucagon dual agonist (LY2944876) in phase 2. Janssen licensed Hanmi Pharmaceutical’s phase 1 GLP-1/glucagon dual agonist HM12525A in November. Novo Nordisk indicated that it eventually intends to co-formulate its phase 1 glucagon analog with liraglutide. Other companies with GLP-1/glucagon agonists in their early-stage pipelines include AZ (phase 1), Xenetic Biosciences (phase 1), Zealand (preclinical), Zealand/BI (preclinical), and OPKO Health (preclinical).

Setbacks and Questions for Type 2 Diabetes Drugs in Type 1 Diabetes

• Several type 2 diabetes drug classes demonstrated unclear risk/benefit profiles in type 1 diabetes. Going into 2015, there was a great deal of interest in repurposing SGLT-2 inhibitors, GLP-1 agonists, and metformin as adjunct therapies for type 1 diabetes. While interest certainly remains, results from clinical trials this year have raised questions about whether the benefits outweigh the risks and how success should be defined.
  
  • GLP-1 agonists: Novo Nordisk announced in August that it would not pursue a type 1 diabetes indication for Victoza (liraglutide) following modest results (~0.2-0.3% placebo-adjusted A1c reductions, 2-5 kg placebo-adjusted weight loss, and no significant hypoglycemia benefit) from the ADJUNCT ONE and ADJUNCT TWO phase 3 trials. Results from the Steno Diabetes Center’s smaller Lira-1 trial presented at ADA were similarly modest. Several trials of other GLP-1 agonists, including AZ’s Byetta (exenatide twice daily), AZ’s Bydureon (exenatide once weekly), and GSK’s Tanzeum (albiglutide), in type 1 diabetes are ongoing. However, we expect that Novo Nordisk’s decision will deter many other GLP-1 agonist manufacturers from pursuing expanded indications. We will be watching closely to see the extent to which results could be better with Intarcia’s ITCA 650 (implantable exenatide mini-pump) due to the built-in adherence advantage. We also wonder whether studies with more unconventional designs (such as real-world registry studies or CGM studies) might be able to demonstrate benefits that are less apparent in an RCT designed to support regulatory approval.
  • SGLT-2 inhibitors: This class still holds significant promise in type 1 diabetes, but the unexpected concerns about DKA that emerged this year could present a stumbling block. The most robust study of an SGLT-2 inhibitor in type 1 diabetes thus far was the phase 2 trial of J&J’s Invokana (canagliflozin) presented at EASD. That study found reductions in A1c, body weight, and insulin doses but a dose-dependent increased risk of ketoacidosis with Invokana. While it is debatable whether the benefit/risk profile would meet the FDA’s standards for approval based on these results alone, we suspect that with some alterations in study design (such as lower doses or a higher-BMI study population), the benefits might more clearly outweigh the risks in phase 3. Lilly/BI and AZ are both conducting phase 3 trials of their SGLT-2 inhibitors in type 1 diabetes. Those trials are expected to complete in 2017 and should provide a much more complete picture of the class’ risk/benefit profile. Lexicon is also developing its SGLT-1/2 dual inhibitor sotagliflozin (recently licensed by Sanofi) for type 1 diabetes.
  • Metformin: Recently published results from a T1D Exchange- and JDRF-sponsored trial demonstrated no significant change in A1c or time in range with metformin as an adjunct to insulin in overweight adolescents with type 1 diabetes. Metformin did lead to less weight gain (0 vs. +4 lbs) and lower insulin doses compared to placebo, but it also doubled the rate of GI adverse events. We do not see a clear regulatory path forward for metformin in type 1 diabetes based on these results, though they (like those for other classes) raise questions about what the bar should be for approval of an adjunct therapy for type 1 diabetes.

Flurry of Early-Stage Type 1 Diabetes Cure Research

• We saw a burst of industry investment in early-stage type 1 diabetes cure approaches in 2015. In March, the startup Semma Therapeutics – which Dr. Doug Melton (Harvard Stem Cell Institute, Cambridge, MA) co-founded to translate his beta cell differentiation protocol into a clinical therapy – raised $44 million in Series A financing and formed an agreement with Novartis to advance beta cell replacement therapy for type 1 diabetes. In April, AZ announced a collaboration with the Melton group and the Harvard Stem Cell Institute to use the stem cell-derived beta cells produced under this new protocol for drug discovery and research into beta cell functioning. Also in April, JDRF and Pfizer joined forces with Tokyo-based biotech company REGiMMUNE to develop its regulatory T-cell (Treg)-based immunomodulatory therapy for type 1 diabetes. Astellas Pharma and Anokion partnered to form Kanyos Bio in July, which will focus on immune tolerance therapies for autoimmune disorders including type 1 diabetes and celiac disease. In August, Sanofi announced a partnership with Evotec to develop novel beta cell replacement therapies using functional stem-cell derived human beta cells. (Incidentally, Dr. Melton is also partnered with Evotec on a separate, but similar, initiative and we wonder if his group will be involved in the Sanofi/Evotec partnership as well.) Selecta, another JDRF and Sanofi partner in the type 1 cure field, received $38 million in Series E financing to develop its immune tolerance therapies in September. While all of the therapies in the pipeline are very, very early-stage, we’re glad to see industry players double down on their investment toward a type 1 diabetes cure.
• Positive developments on the research front included two-year data from the phase 2 T1DAL trial of alefacept and promising phase 1 results for Dr. Jeffrey Bluestone’s (UCSF, San Francisco, CA Treg-based immunotherapy. The T1DAL data, presented at ADA, demonstrated that alefacept significantly slowed the decline in C-peptide compared to placebo in 49 patients diagnosed with type 1 diabetes in the last 100 days. The alefacept group required significantly less insulin to achieve the same A1c as the placebo group (~0.4 U/kg/day vs. ~0.6 U/kg/day) and experienced significantly fewer major hypoglycemic events (~9 vs. ~19 episodes/participant years). The results of Dr. Bluestone’s dose-ranging trial demonstrated that the Treg infusion was well tolerated, with 25% of the peak Treg level remaining in the circulation after one year. In addition, C-peptide levels did not decrease up to two years after the Treg infusion in the cohorts with the two lowest doses. The study authors thus concluded that the results support advancement of the treatment into phase 2 trials. These findings are reassuring with regards to safety and tolerability and with Dr. Bluestone’s leadership in the type 1 cure field, we’ll be watching closely to see how development of this therapy progresses and the magnitude of its efficacy. The philanthropist Sean Parker recently gave Dr. Bluestone’s work a vote of confidence in the form of a $10 million donation to establish the Sean N. Parker Autoimmune Research Laboratory, led by Dr. Bluestone.

An EXTREMELY Successful Year for Novo Nordisk

• The news flow from Novo Nordisk was particularly impressive in 2015. The company’s R&D and regulatory milestones this year include the US and EU launches of Saxenda (liraglutide 3.0 mg), US approval of Tresiba (insulin degludec) and Ryzodeg (insulin degludec/insulin aspart), final phase 3 results and regulatory submissions for faster-acting insulin aspart, topline results from four phase 3 SUSTAIN trials for semaglutide, advancement of oral semaglutide to phase 3 after positive phase 2 results, and the initiation of a phase 2 trial of an anti-IL-21 antibody and Victoza (liraglutide 1.8 mg) in type 1 diabetes. Novo Nordisk also announced a number of new acquisitions and collaborations in 2015, perhaps representing a shift toward more M&A activity for a company that has historically shied away from partnerships. The list includes a partnership with IBM Watson Health on digital health, the acquisition of Calibrium and MB2 (two young companies founded by Dr. Richard DiMarchi), early-stage research collaborations with MIT and the University of Washington, and license agreements with Emisphere and XOMA. The company also invested $2 billion in a new manufacturing facility in Clayton, NC and announced several developments related to its Cities Changing Diabetes program. Here’s to an equally productive year in 2016!

2. Most Highly Read Reports

• Lilly/BI announce topline results from EMPA-REG OUTCOME demonstrating CV risk reduction with Jardiance (empagliflozin) – First CVOT for type 2 diabetes drug to demonstrate cardioprotection; Full results to be presented September 17 at EASD
• FDA approves Sanofi’s Toujeo (U300 insulin glargine) – Launch expected by the beginning of 2Q15 (!); No hypoglycemia claims acknowledged in label
• FDA EMDAC Meeting on SAVOR and EXAMINE – Expanded full report with themes and details on voting opinions; Acceptable cardiovascular risk profile for both AZ’s Onglyza (saxagliptin) and Takeda’s Nesina (alogliptin) with strong recommendations for new safety data to be added to labels
• Lilly hosts investor update on EMPA-REG OUTCOME results – Additional commentary on implications of EMPA-REG OUTCOME results; Full transcription of Q&A (summary below; webcast)
• Intarcia releases positive topline phase 3 FREEDOM-2 results for ITCA 650 vs. Merck’s Januvia (sitagliptin) – Superior A1c reductions (1.5% vs. 0.8%) and weight loss (4 kg vs. 1.3 kg); Superiority on several secondary efficacy endpoints (A1c <7%, composite of >0.5% A1c reduction and ≥2 kg weight loss)
• Sanofi announces new organizational structure including combined Diabetes and Cardiovascular business unit – New structure to take effect early January 2016; Combined Diabetes/CV unit to be led by current Executive BP Ms. Pascale Witz, headlined by PCSK9 inhibitor Praluent (alirocumab)
• J&J Pharmaceutical Business Review – Emphasis on Invokana’s dominance; No interest in DPP-4 inhibitor FDC; New type 2 diabetes candidate to enter clinic this year – Emphasis on Invokana’s US dominance; No interest in DPP-4 inhibitor FDC but potential for prediabetes indication; New GPR40 agonist for type 2 diabetes to enter clinic this year
• FDA releases briefing documents for Advisory Committee meeting on SAVOR and EXAMINE – Focus on heart failure and possible increase in all-cause mortality with saxagliptin; labeling revision and marketing authorization are all on the table
• Novo Nordisk declines to pursue type 1 diabetes indication for Victoza (liraglutide) following modest results from ADJUNCT ONE trial – ~0.2% placebo-adjusted A1c reductions, 4-5 kg weight loss, and no significant hypoglycemia benefit with liraglutide vs. placebo as adjunct to insulin in type 1 diabetes
• End-of-day update from EMDAC meeting on SAVOR and EXAMINE –confidence in Onglyza and Nesina’s CV risk profile with label updates recommended – Acceptable cardiovascular risk profile for both AZ’s Onglyza (saxagliptin) and Takeda’s Nesina (alogliptin); panelists strongly recommend new safety data be added to the drugs’ labels

3. What We Got Right/Expected

• GLP-1 agonist class growth with Lilly’s Trulicity (dulaglutide) as a key driver
• Increasing enthusiasm for combination therapies
• Neutral results from TECOS and ELIXA
• Continued pricing pressure and cost concerns for diabetes drugs, especially insulin
• Continued debate over DPP-4 inhibitors and heart failure

4. What We Got Wrong/Did Not Expect

• Positive EMPA-REG OUTCOME results
• Slow start for Afrezza
• SGLT-2 inhibitor/DPP-4 inhibitor combinations not a major factor
• SGLT-2 inhibitor/DKA controversy
• Modest results for type 2 diabetes drugs in type 1 diabetes

5. Key Questions for 2016

• Will Sanofi’s revived diabetes pipeline be sufficient to maintain its position in the diabetes field?
• Will the LEADER CVOT for Novo Nordisk’s Victoza (liraglutide) demonstrate cardioprotection?
• What will be the commercial and clinical implications of the EMPA-REG OUTCOME results?
• What is the mechanism of benefit in EMPA-REG OUTCOME?
• Will there be label updates based on the SAVOR and EXAMINE heart failure results?
• Will there be revisions to FDA guidance around interim data disclosure from CVOTs?
• Will Afrezza and SGLT-2 inhibitor/DPP-4 inhibitor combinations have a better year?
• How much of an impact will Lilly/BI’s Abasaglar (biosimilar insulin glargine) have on the ex-US basal insulin market?
• Will Novo Nordisk’s Tresiba (insulin degludec) live up to the hype in the US?
• What is the future of Tresiba and Xultophy (insulin degludec/liraglutide) in Germany?
• How much will the basal insulin market fragment with the arrival of next-generation products and biosimilars?
• How will GLP-1 agonist/basal insulin combinations perform in the US?
• Will Lyxumia find a niche in the US?
• Will the outcry over high drug prices continue?
• Will pricing pressures abate?

6. What’s Coming in 2016?

Below we list the status of late-stage pipeline products we are aware of, though we acknowledge the list may not be 100% complete. We have attempted to be as comprehensive as possible based on the most recent public updates we have heard.

Basal Insulins

• Novo Nordisk’s Tresiba (insulin degludec): US launch 1Q16, DEVOTE CVOT completion mid-2016
• Lilly/BI’s Basaglar (“biosimilar” insulin glargine): US launch December 2016
• Biocon/Mylan’s biosimilar insulin glargine: US and EU submissions 2016

Rapid-Acting Insulins

• Novo Nordisk’s faster-acting insulin aspart: US and EU decisions fall 2016

GLP-1 Agonists

• Sanofi’s Lyxumia (lixisenatide): US decision mid-2016
• Intarcia’s ITCA 650: US submission 1H16
• Novo Nordisk’s Victoza (liraglutide): LEADER CVOT results 1H16
• Novo Nordisk’s semaglutide: SUSTAIN 5 and SUSTAIN 6 (CVOT) results early 2016

DPP-4 Inhibitors

• Merck’s omarigliptin: US submission by end of 2015

SGLT-2 Inhibitors

• Merck/Pfizer’s ertugliflozin: Phase 3 data throughout 2016
• Sanofi/Lexicon’s SGLT-1/2 dual inhibitor sotagliflozin: Phase 3 data in type 1 diabetes throughout 2016

Combination Therapies

• Sanofi’s LixiLan (lixisenatide/insulin glargine): US decision mid-2016, EU submission 1Q16
• Novo Nordisk’s Xultophy (insulin degludec/liraglutide): US decision mid-2016
• AZ’s saxagliptin/dapagliflozin: EU decision 2H16, potential US resubmission

Obesity

1. Themes

Obesity Pharmacotherapy Market Remains Slow

• The obesity pharmacotherapy market continues to experience slow growth, as revenues of both Arena/Eisai’s Belviq (lorcaserin) and Vivus’ Qsymia (phentermine/topiramate extended-release) remained unimpressive. Total revenues through 3Q15 were $34.1 million for Belviq and $40.6 million for Qsymia. Sequential growth rates for the two drugs in 2015 were the lowest for both products’ time on the market. Specifically, Belviq experienced a 28% sequential growth in 1Q15 but fell into a sharp decline for 2Q15 and 3Q15, declining sequentially 6% and 24% respectively. Similarly, Vivus remained flat or slightly declined in 2015, with the exception of a minor sequential growth of 11% in 2Q15. See table 1 and figure 1 below for a more detailed breakdown of the past year. Clearly, the obesity pharmacotherapy market continues to face significant obstacles, including the historically low third party coverage of obesity drugs, providers’ concerns stemming from the safety baggage of previous medications, stigma towards individuals with obesity, and the common use of generic drugs. There is an inherent lack of education that we desperately need to address before we are going to see much movement in this arena. We are hopeful that changes are on the way in the new year.
  
  • This slowdown translated into disappointing company decisions for Arena and Vivus, as both companies announced cost reduction plans this year. As a reminder, Vivus announced corporate restructuring plans in its 2Q15 update, reducing headcount and expenses to achieve neutral or positive cash flows; the company also shared that it is discussing with the FDA on how to modify its CVOT, AQCLAIM, to cut costs of the trial. Similarly, Arena recently announced a new cost reduction plan to reduce its US workforce by 35% and to our huge disappointment, also discontinue Belviq’s lifecycle management programs, which include the lorcaserin/phentermine combination as well as the smoking cessation indication. We had high hopes for the lorcaserin/phentermine combination as a promising alternative therapy for obesity. It is a hugely complex disease and evidence has shown that combination therapy for the treatment of obesity can be highly effective.  The discontinuation of this combination therapy is a stark reminder of the need for a thriving market to further innovation in this field.

Table 2: Obesity Pharmacotherapy Revenue Comparison 3Q14-3Q15

*Sales of Novo Nordisk’s Saxenda have not been reported yet

Figure 2: Obesity Pharmacotherapy Revenue Since Product Launch

• The obesity pharmacotherapy area has also experienced its fair share of unexpected pitfalls this past year, with Orexigen’s CVOT drama as well as the patient deaths in Zafgen’s beloranib program. While these events may not have directly contributed to the market’s slowdown, these unfortunate headlines have certainly brought some negative attention to obesity therapies. First, Orexigen’s disclosure of interim CVOT (Light Study) data on Contrave (naltrexone/bupropion extended-release) showing a possible cardiovascular benefit caused quite the uproar earlier this year, as FDA’s Dr. John Jenkins (Director of the Office of New Drugs, FDA, Silver Spring, MD) publicly admonished the company, as featured in both Forbes and the Wall Street Journal. Amidst tension around the disclosure of the final data set (which showed a non-statistically-significant 0.88 hazard ratio), the CVOT was later terminated due to concerns of the trial’s compromised integrity. See our coverage for more on the two sides of the story, but this ensuing drama emphasizes again the complexity surrounding interim data disclosure and the need for these data to remain blinded. The media’s portrayal has unfortunately not painted Orexigen rosily in this scenario.
  
  • In addition, while we saw Zafgen pick up momentum this year with its severe obesity candidate beloranib, the recent patient deaths and clinical hold has slowed down the company’s efforts. As a reminder, following two patient deaths in the active arm of Zafgen’s phase 3 ZAF-311 trial of beloranib in Prader-Willi syndrome (PWS), the FDA has most recently placed the beloranib IND application on complete clinical hold – safety signals of pulmonary embolism have since become of top concern for the candidate. Zafgen will, however, continue to expect topline results of this trial in 1Q16 as the company assesses its next steps. We certainly see this significant delay in beloranib’s progress as disappointing in the context of the unmet need in severe obesity, but agree that great caution will need to be taken in light of these important safety concerns. As many questions regarding this safety signal remain unanswered, we will be paying close attention on how to analyze this risk in the drug’s risk/benefit profile in 2016.

New Players Join the Market (Novo Nordisk, Orexigen/Takeda), with Some Signs of Increased Enthusiasm

• Novo Nordisk has taken lead of the obesity drug market’s presence with Saxenda (liraglutide 3.0 mg), but has not yet made an impact revenue-wise. As we expected, the company’s wealth of resources has made it a leading force within the market, as Novo Nordisk has typically been the majority or the sole commercial presence on the obesity front at major meetings this past year – see our exhibit hall coverage from ADA and IDF for more. With regards to revenue, however, Saxenda continues to show very gradual uptake and limited access in the US, likely due to its extremely high cost of ~$1,068/month; Novo Nordisk has not yet broken out the product’s revenues. According to the company’s 3Q15 update, TRx data for Saxenda remains far behind that of Contrave and Belviq at comparable points post-launch. Thus in our eyes, payer coverage will be critical for Saxenda’s growth in the context of its high list price and we hope that Novo Nordisk can utilize its resources to push forward and advocate on the payer front for obesity drugs, which will hopefully also benefit the rest of the market.
• Despite Orexigen’s CVOT challenges, its/Takeda’s Contrave has made a big splash in the obesity drug market, with 33% of the market share as of 3Q15. Throughout 2015, Orexigen’s management has expressed positivity surrounding Contrave as the company’s 4Q14 update emphasized that the product already hit 27% of the prescription share after only 17 weeks on the market. Contrave revenues then grew an impressive 77% and 40% sequentially in 1Q15 and 2Q15, respectively. The product also hit the milestone of being the branded obesity market leader with 34% of the market share in June. While the 3Q15 update saw its first sequential decline of 20% to $13 million, Orexigen has remained enthusiastic, expressing interest in co-promoting the product with Takeda and partnering in regions including Europe, Latin America, and Australia. As a reminder, Contrave was launched last October with support and savings/loyalty programs – we believe that its unique Contrave Direct Save program that encourages refills may have helped boost the product’s prescription rates. With this new player on the market, the noise around obesity drugs has certainly grown and even with some of the negative news surrounding the CVOT, we look forward to seeing how Orexigen/Takeda can spread this internationally in its future plans.
• Both Novo Nordisk’s Saxenda and Orexigen/Takeda’s Mysimba (known as Contrave in the US) were approved in the European Union (EU) in 2015, marking the region’s first obesity drug approvals since orlistat in 1998. These regulatory successes suggest that the tide seems to have finally turned for some obesity drugs in Europe, and we are grateful that patients will have access to more treatment options as obesity rates continue to rise – although we expect reimbursement in the EU to be broadly quite poor at the start and quite possibly for the foreseeable future. See our coverage from ECO for KOLs’ not so optimistic thoughts on this.
• Excitingly, Rhythm raised $40 million in oversubscribed financing earlier this year in its pursuit to develop setmelanotide (RM-493) for specific obesity indications in Prader-Willi syndrome (PWS) and POMC deficiency. It is terrific to see the momentum behind (and funding of) developing treatments for severe obesity indications picking up (including obesity caused by genetic deficiencies for which there are no approved treatments), as this patient population continues to grow with limited treatment options. This enthusiasm for severe obesity marks a continued trend from what we saw at the end of last year when both Zafgen and Rhythm filed to go public. While Zafgen has run into some unforeseen safety issues (see above), we continue to hope that this greater focus on severe obesity indications will provide greater innovation to general obesity, especially as more severe forms of general obesity become more prevalent. Assuming these medications are able to move forward with regulatory approval in the US, we will be curious to see if they will show effectiveness in the general obesity population.
• We have been glad to see momentum in Congress pushing forward the Treat & Reduce Obesity Act, whose passage would help increase access to obesity treatment options. This political movement likely is partly driven by the greater public attention toward the medical and financial consequences of the obesity epidemic, of which we noted at the end of last year. As background, the Treat & Reduce Obesity Act was introduced in the Senate in June and as of August, has been backed by more than 100 members of Congress. Specifically, the legislation would provide CMS with the power to expand the Medicare intensive behavioral counseling benefit (allowing additional providers to offer the services) and would importantly remove the Part D coverage exclusion of obesity drugs. While certainly a significant step in the right direction, we are skeptical of how far this bill will move forward in the near future in the midst of an election season. We thus see this as another advocacy opportunity – to learn more about how you can join the Obesity Action Coalition’s efforts in supporting the Act, please see its webpage to contact your local legislators.

Personalized Medicine, The Brain, and The Microbiome Become the Buzz in Obesity

• Personalized approaches to obesity treatment appear to be increasingly discussed, although we do not see significant momentum moving this forward. Specifically, within pharmacotherapy options, we have heard more and more speakers emphasize the heterogeneity of patients with obesity and the wide range of treatment responses, thus encouraging providers to shy away from only following the average results of clinical data. While we have seen increased talk on this topic, we have not yet seen many actionable items on this front. Identifying responders and non-responders to different drugs remains a significant obstacle in prescribing obesity drugs, as the only predictor at the moment seems to be early weight loss. But we were glad to see one new study this year suggest that predictors of weight loss with phentermine may include greater hunger and less restraint at baseline – although a very small trial, this is the kind of work that we see the field needing more of to better guide individualized obesity treatment. For more of the discussion around these efforts, please see our obesity themes from IDF.
  
  • In the same vein, we were excited to see the Endocrine Society release its Clinical Practice Guideline for obesity pharmacotherapy, which helps outline obesity care in the context of other comorbidities. Most notably, this guideline seems to be paving the way for use of the newer diabetes medications that are weight neutral or promote weight loss – indeed, while there are more options available for treating patient with both diabetes and obesity, effective and successful treatment remains a challenge. This may be due to the heterogeneity of the disease, making it challenging for physicians to identify solutions that will work for an individual, whether they be lifestyle modification, pharmacotherapy, or bariatric surgery. As many patients with obesity also live with other comorbidities, we are glad to see more guidance on how to treat other conditions without exacerbating obesity and vice versa.
  • Additionally, on the basic science front this year, we heard some exciting research on identifying different phenotypes of obesity. Specifically, EASD featured a couple award lectures on the latest work in understanding the different phenotypes of prediabetes and obesity (metabolically healthy vs. metabolically unhealthy) in relation to genes, adipose tissue, the brain, fatty liver, and more. For more on this, please see our coverage from EASD.
• Similarly, the conversation around new obesity targets has been increasing, specifically with a focus on the role of the brain and the microbiome within obesity. Novo Nordisk, in particular, has taken much of the lead in discussing neural pathways within obesity, as we have seen many presentations on the new research behind Saxenda’s mechanisms of action within the brain at the company’s corporate symposia – see our coverage from IDF, EASD, and ECO for more on this. Specifically, we were excited to recently learn that Novo Nordisk has established a research collaboration with Dr. Michael Schwartz, director of The Diabetes and Obesity Center of Excellence at the University of Washington, with a focus on understanding how the brain regulates blood glucose and appetite. In addition, the microbiome remains a hot topic within obesity – changes in the gut have been increasingly emphasized as important mechanisms in bariatric surgery and even work on genetically engineering the gut microbiome for obesity prevention and treatment has been discussed. Overall, the microbiome has been presented as a potential link to many different conditions, as shown by a recent UCSF meeting on the topic. While certainly an intriguing area to explore, we believe its complexity will keep this field’s movement relatively slow with regards to providing any concrete treatment options in the near future.

Market Challenges for Obesity Devices

• GI Dynamics’ EndoBarrier experienced a rough year in 2015 with the ENDO Trial termination, although we will be interested to see if the trial’s preliminary results paint a slightly more positive picture for the device. As background, the company terminated its trial this past July (after it was put on hold in March) due to the study exceeding the 2% tolerance threshold for the occurrence of liver abscesses (3.2% in intervention group vs. 0% in sham [control] group). Adding onto these challenges, the company’s Chief Medical Officer was terminated “for cause” in June. The company’s 3Q15 update shared relatively drastic declines in revenue, with a 67% drop year-over-year and a 36% sequential drop to $0.2 million. However perhaps one source of optimism is the German Diabetes Society’s statement on the termination, which shared that the interim results of the trial show a statistically significant A1c reduction in the intervention group and that such abscesses can possibly be prevented with specific clinical guidance. The company’s management similarly expressed confidence that the final data report (which is currently under review) can demonstrate the device’s statistically significant benefit – we thus look forward to gaining a more comprehensive understanding of the device’s risk-benefit profile come 2016, which will likely guide much of GI Dynamics’ steps moving forward.
• The year 2015 also marked some movement on obesity devices, as the FDA approved EnteroMedics’ Maestro Rechargeable System/VBLOC Therapy and ReShape Medical’s ReShape Integrated Dual Balloon System; in addition, the FDA accepted Aspire Bariatrics’ PMA application for its AspireAssist Aspiration Therapy System, the latter which has some very timely cost advantages. Notably, earlier this spring, the FDA waived the Advisory Committee meeting for ReShape Duo – a positive sign for the device relative to others. These other regulatory milestones, however, do not come without controversy. Specifically, the VBLOC Therapy won approval mostly due to safety, in our view, as its data failed to meet the original efficacy endpoint. Notably, the company’s decision to do a patient preference study may well have made the difference between approval and rejection. Either way, however, with its less than stellar efficacy and high price tag ($15,000-$30,000), we do not foresee the device generating much uptake in the near future and its recent reverse stock split seems to be reaffirming our suspicions. We believe prospects bode much better for AspireAssist, with its unique mechanism of action of directly removing excess food from the stomach – although many may complain that it is not appetizing, the incredibly high number of patients who need therapy combined with the clear ROI on the device bodes well for conversations with payers. Despite this, its data has seemed to quell malnutrition concerns and the fact it shows greater than expected patient acceptance of the device certainly present positives. That said – good marketing will be essential and this challenge is going to be more than tricky.
  
  • One theme from both of these devices is the importance of patient feedback – the VBLOC Therapy’s approval process uniquely took into account input from patients stating that they were willing to take more risks in exchange for weight loss. Similarly, patient feedback around the AspireAssist seems to be a highlight for the device moving forward, especially as those with severe obesity have expressed positivity for the device in the fact that its convenience can help remove the stigma around food consumption with obesity. Indeed, with such limited treatment options, devices fit a particular niche for patients, although we do not foresee these interventions as a widespread option in the near future.

Obesity Prevalence Remains On the Rise

• This year’s prevalence data demonstrate a continued rise in obesity, as the greater scientific community has also directed more attention to the epidemic. Specifically, the CDC’s latest data from NHANES show obesity prevalence at 37% among US adults between 2011-2014, with prevalence higher in women than in men and higher in blacks and Hispanics than in whites and Asians. These findings mark a slight increase from 35% to 38% between 2011-2012 and 2013-2014; while not statistically significant, this increase remains quite the disappointment for many in public health in the midst of greater pushes for obesity prevention and hopeful data around lower calorie consumption. In addition, state-by-state obesity data from the CDC showed similarly depressing results, with every state having an adult obesity rate greater than 20%, with three states (Arkansas, Mississippi, and West Virginia) having rates of at least 35%. The epidemic has not been limited to the US either, as 2030 projections from the WHO Regional Office for Europe earlier this year show a 1.3- to 2.2-fold increase in obesity prevalence for several EU countries. The greater scientific community appears to be taking notice, as the cancer field over the summer claimed that obesity is taking over smoking as the main cause of cancer mortality. In addition, earlier this year, The Lancet devoted an entire series to obesity, with a particular focus on calling upon governments, industry, and civil society to take action. We hope that with greater noise such as this, the obesity market (both in drugs and devices) can gradually take down its obstacles in convincing governments and payers to better collaborate. These increased rates of obesity are not showing any signs of slowing down, so we hope that the government and policy makers take note, and begin to make much needed changes.

Sugar Consumption In The Spotlight

• This year saw a growing appreciation of the dangers of excess sugar and its potential impact on obesity/diabetes, both on a regional and national level. Close to home, we were extremely happy from a public health perspective to see San Francisco lawmakers introduce and unanimously pass legislation requiring warning labels on soda and other sugary beverages. The passage marked the first such requirement in the US and, in recent conferences, has been widely heralded as a step in the right direction by a number of KOLs – UPenn’s Dr. Christina Roberto, UC Berkeley’s Dr. Jen Falbe, and Partnership for a Healthier America CEO Mr. Larry Soler. In the same vein, UCSF threw its hat in the fight vs. sugar as well, launching a healthy beverage initiative that will phase out the sale of sugar-sweetened beverages (SSBs) on campus. The university joined other schools (e.g., University of Wisconsin-Madison, University of Michigan) that also phased out the sale of SSBs in 2015, and hopefully, sets an example for more institutions to follow in the coming year – we suspect this issue is really going to take off in the coming year and as we understand it, it will be on the ballot in multiple cities. UCSF’s Dr. Robert Lustig also published a high-profile article this past year on the benefits of reducing sugar consumption in children with obesity – the new research demonstrating the impressive improvements in metabolic parameters of fructose restriction also notably received a great deal of media attention, with reporting from The New York Times, Washington Post, and more.
  
  • On a national scale, too, we appreciated the more nuanced conversation that developed around sugar consumption, involving players in Big Food and Soda as well as the FDA. Fast food chain Wendy’s stole headlines in January by dropping soda from its children’s menus, a move that was rightly applauded. The year also featured growing criticisms of Coca-Cola on a number of fronts, most prominently for its part in funding research aimed at downplaying the role of SSBs in the obesity epidemic. Things came to head when Coca-Cola Chief Science and Health Officer, Dr. Rhona Applebaum, actually stepped down from the company in late November, and we see the resignation as part of a broader effort to crack down on unethical financial ties in the food industry – a statement that we hope all those in Big Food can hear. In addition, the FDA made waves in its proposal this past summer to add the daily value for added sugars in the Nutrition Facts label – a headline that garnered support from several KOLs, but we will have to wait to see how accessible this public health messaging comes through.
  • Ultimately, the changes we have seen represent just a fraction of what is needed to change consumer behavior and the choices offered by Big Food companies. We believe that more significant resources and influence will need to be brought to bear to educate consumers about the dangers of sugar and push more franchises to reform their products. We hope that greater movement on the scientific research front, similar to Dr. Lustig’s recent article, will help accelerate the momentum from policymakers. Change has been slow though, which is to be expected considering the food industry’s deep roots. For now, we applaud the many efforts we observed in 2015 to raise the level of conversation on this front and certainly see the conversation on healthier food/beverages trending in the right direction.

2. Most Highly Read Reports

• Novo Nordisk launches Saxenda in US; Interview with Novo Nordisk US President Mr. Jesper Høiland – High list price of $1,068/month consistent per-unit with Victoza; US President Mr. Jesper Høiland on reimbursement, LEADER CVOT, and US vs. EU indications
• CDC releases state-by-state obesity data for 2014 – Obesity prevalence rates remained high in all states; Arkansas, Mississippi, and West Virginia having rates of 35% or more
• Orexigen and Takeda announce termination of Light Study, related developments – Cleveland Clinic statement admonishes Orexigen for disclosing interim data and damaging trial integrity; Orexigen issues second statement in defense; Takeda initiates dispute process
• FDA’s Dr. John Jenkins raises concerns of CVOT completion from Orexigen’s interim data disclosure – Harsh language with the threat of fines or withdrawal in the case of the unsuccessful completion of Contrave’s second CVOT; lack of clear FDA guidance on interim data disclosure remains a major issue
• Endocrine Society releases Clinical Practice Guideline for obesity pharmacotherapy – Includes treatment plans for obese/overweight patients with type 2 diabetes; first guideline to name specific obesity drugs and doses
• Novo Nordisk hosts investor update on US launch of Saxenda (liraglutide 3.0 mg) – Plans for focused launch and emphasis on reimbursement – Plans for focused launch (500 fully dedicated reps and ~50,000 prescribers); Emphasis on reimbursement; Optimistic commentary on potential for cardioprotection in LEADER CVOT
• Novo Nordisk’s Saxenda receives positive CHMP opinion in Europe – Final decision expected within 2-3 months; second positive CHMP opinion for an obesity drug in two months following positive ruling for Orexigen’s Mysimba in December 
• Medtronic launches new bariatric surgery tool GastriSail gastric positioning system – Device helps promote sleeve gastrectomy’s consistency and efficiency; Insights from Drs. Francesco Rubino and Donna Ryan
• Aspire Bariatrics submits PMA application to FDA for AspireAssist Aspiration Therapy System – Application includes one-year pivotal trial data; Endoscopic alternative to weight loss surgery for BMIs 35 kg/m2-55 kg/m2
• FDA approves EnteroMedics’ Maestro Rechargeable System and VBLOC Therapy – First obesity device targeting brain-stomach nerve pathway; approved for ages 18 and older with BMI 35-45 kg/m₂ and one obesity-related condition

3. What We Got Right / Expected

• EU approvals of Orexigen/Takeda’s Mysimba and Novo Nordisk’s Saxenda
• Novo Nordisk leading the commercial presence in obesity drugs
• Continued appreciation from the scientific community of the medical risks of obesity
• Greater discussion in new therapy targets such as the brain and microbiome
• Continued enthusiasm for severe obesity drugs

4. What We Got Wrong / Did Not Expect

• Continued decline for obesity drug companies and discontinuation of clinical programs
• Orexigen’s CVOT interim data disclosure and following trial termination
• Zafgen’s pulmonary embolism safety signal and patient deaths with beloranib
• GI Dynamics’ challenges with EndoBarrier’s safety signals of liver abscesses
• Slow momentum of Saxenda’s revenues

5. Key Questions for 2016

• Soda tax legislation? Berkeley, CA successfully passed its sugar-sweetened beverage (SSB) tax at the end of last year and we have so far gotten a small glimpse of early reports from the policy. Findings so far, although within smaller studies, appear positive with a 16% reduction in SSB consumption post-tax. We will be keeping a look out in 2016 for more results from the intervention, as we hope that greater literature on this will help fuel other regions to follow suit. On the national stage, the Sugar-Sweetened Beverages Tax (SWEET) Act seems to have had no movement since it was introduced in the House of Representatives last summer. The backlash from Big Soda has certainly slowed down some of this progress, although public opinion against the beverage industry (after some of its controversial behavior) seems to be gradually siding with public health advocates.
• Bariatric surgery in type 2 diabetes? We have heard greater discussion around the use of bariatric surgery in type 2 diabetes, given the almost unanimous positive glycemic data of the intervention. Additionally, many members of the field have increasingly advocated for earlier use of surgery in diabetes and obesity. However, the lack of long-term data continues to keep the field at a standstill in actionably moving forward. For more of the debate around widespread use of bariatric surgery, please see our coverage of WCITT2D.
• Genetics in obesity? This year, we saw some focus on the role of genetics in obesity, as obesity-related genetics tests have grown in popularity among employers and the New England Journal of Medicine published new research on the role of the FTO gene in obesity. Similarly, we heard various presentations on genetics’ link to obesity prevention and treatment in relation to factors including diet and cognitive traits. Ultimately, this area seems to remain too vast for any nuanced understanding, with obesity’s complex genomic profile and interaction with the environment.
• Relationship to NAFLD and NASH? Non-alcoholic fatty liver disease (NAFLD) and nonalcoholic steatohepatitis (NASH) have interestingly emerged in conversations around obesity this past year, as an award lecture at EASD pointed out that those with metabolically unhealthy obesity (vs. metabolically healthy obesity) are much more likely to have fatty livers. We have also seen greater noise around these conditions within industry (see updates from Regulus Therapeutics/AstraZeneca and NuSirt). As obesity rates continue to rise, we will be interested to see how the science on the link to NAFLD/NASH progresses and whether more attention will paid to this potential connection regarding therapies.

6. What’s Coming in 2016?

Below, we enclose the pipeline products we are aware of, though we acknowledge this list is not 100% complete. We have done our best to be as comprehensive as possible based on the most recent public updates we’ve heard.

• Arena/Eisai’s Belviq: Filing of once-daily extended release formulation (Belviq XR); Eisai to discuss Belviq’s potential in Mexico, Brazil, and Israel
• Novo Nordisk’s Saxenda: Possible breakout of revenues for Saxenda
• Orexigen/Takeda’s Contrave: Orexigen to possibly co-promote Contrave with Takeda; Possible partnering in Europe, Latin America, and Australia; Possible approval of Contrave in South Korea with partner Kwang Dong Pharmaceuticals; Possible publication of Light Study results
• Vivus’ Qsymia: Meeting with FDA on redesigning CVOT ACQLAIM; Evaluation of specialty sales force pilot program targeted toward liver disease specialists
• Zafgen’s beloranib: Top-line results of ZAF-311 clinical trial in 1Q16

--by Melissa An, Adam Brown, Helen Gao, Varun Iyengar, Sarah Odeh, Emily Regier, Ava Runge, and Kelly Close