JPM 2017 (JP Morgan Healthcare Conference)

January 9-12 2017; San Francisco, CA; Days #3-4 Highlights – Draft

Executive Highlights

Hello from San Francisco, where the sun finally peeked out for the last 1.5 days of the 2017 JP Morgan Healthcare Conference. Digital health was all the buzz for the final days of the meeting, headlined by IBM Watson Health GM Deborah DiSanzo (speaking to a P-A-C-K-E-D room). On the diabetes therapy side, we were treated to a very interesting look at Lexicon’s early-stage diabetes pipeline and updates on MannKind’s continued efforts to establish Afrezza within the diabetes market. See below for our top 11 highlights, divided by diabetes technology, diabetes therapy, and obesity sections.

Want a full look at all the top takeaways from this week? Check out our day #1 and day #2 highlights report!

1. JPM 2017 Day #1 Highlights - MiniMed 670G full US launch now in May-October, “training” launch by April; Intarcia unveils new partnership with Calibr to develop combination diabetes/obesity peptide product

2. JPM 2017 Day #2 Highlights - New Lilly CEO on Trulicity, Jardiance, and Basaglar; Dexcom record-high sales, 200K patients; Abbott, mySugr, Livongo, Omada, Bigfoot, Sanofi, Sernova and more; Pricing and future of healthcare

Diabetes Technology

1. IBM Watson Health GM Deborah DiSanzo provided a compelling overview of the business’ priorities, including five enthusiastic mentions of the Medtronic Diabetes partnership. The app is being updated weekly with new features, and we saw a new Watson insight today. This room was P-A-C-K-E-D, and we left blown away with IBM Watson Health’s unparalleled resources: the world’s largest non-governmental data set, 7,000 employees, 10 years doing this. See the slides here and read on for more details and quotes.

2. BD CEO Mr. Vince Forlenza highlighted the new disposable type 2 patch pump in his remarks, which will begin clinical trials this summer and launch in 2H18. Notably, the pump has gotten a “good reception” in initial payer discussions. Boy, does this team know how to manufacture! The SmartSense connected pen needle is also expected to launch in 2H18.

3. Verily Life Sciences’ Jared Josleyn and Qualcomm Life’s Dr. James Mault shared optimism on their diabetes partnerships with Dexcom/Sanofi and Medtronic, respectively. We relished hearing Dr. Mault’s five success factors for digital health: effortless/”magical” devices (does it delight, as IDEO would ask?); medical-grade data; fits into clinical workflow; outcomes data; and someone to pay.

4. Common Sensing President Mr. James White reiterated that the company has raised $4.5 million to date (including Qualcomm Ventures and Sanofi) and anticipates another raise of undisclosed size this summer. The company, developer of a Bluetooth-enabled smart cap for disposable insulin pens (Gocap), may also build out coaching and insulin titration.

Diabetes Therapy

5. Very notably, Lexicon CEO Mr. Lonnel Coats discussed two new additions to its early-stage clinical development pipeline: a phase 1 SGLT-1 inhibitor LX2761 for diabetes and a preclinical AAK1 kinase inhibitor LX9211 for neuropathic pain, entering phase 1 in 2017. Mr. Coats provided more color on the thinking behind the phase 3 program in type 2 diabetes and continued to be extremely positive about the phase 3 data for sotagliflozin in type 1 diabetes thus far. We’d like to see more outcomes #beyondA1c established for type 1 diabetes.

6. MannKind CEO Mr. Matthew Pfeffer announced near- and mid-term plans for Afrezza, including (i) a new contract with Aetna for reimbursement with “light” prior authorization; (ii) more specific timing on upcoming clinical studies (pediatric, dose optimization, and time-in-range); (iii) establishing an in-house sales team by the end of 1Q17; and (iv) expanding Afrezza to ex-US markets. We believe Afrezza can be successful with the right support and although Sanofi wasn’t the right partner, we still believe the compound can be successful.

7. President of OPKO Health Mr. David Okrongly notably shared that the company will initiate a phase 2b trial in 2H17 for GLP-1/glucagon dual agonist TT401 and that the company’s focus is an obesity indication, rather than a type 2 diabetes indication. This was quite fascinating – they’re obviously watching Novo Nordisk’s Saxenda (GLP-1 for obesity) success!

8. Mylan’s presentation took the form of a fireside chat with the company’s controversial CEO, Ms. Heather Bresch. Unsurprisingly, in light of the recent public outcry over the skyrocketing price of Mylan’s EpiPen, the conversation – plus the subsequent breakout Q&A session – focused largely on drug pricing, leaving little room for discussion of Mylan’s diabetes portfolio.

Obesity

9. Orexigen President and CEO Mr. Mike Narachi, in an extremely patient-centric presentation, highlighted the launch of a promising new direct-to-consumer (DTC) advertising campaign for the obesity drug Contrave (naltrexone/bupropion). We’re excited about this, despite the extremely challenging commercial market, sans Saxenda.

10. Led by new CEO Mr. Amit Munshi, Arena’s presentation focused on the company’s plan to “reset and restructure” – primarily by divesting from the “cost burdens” of the Eisai-partnered obesity drug Belviq (lorcaserin).

11. Highly respected CEO of Aspire Bariatrics Dr. Kathy Crothall presented data supporting the efficacy of the AspireAssist endoscopic weight loss device (FDA approved in June 2016) and distinguishing the approach from bariatric surgery. A two-year observational study of AspireAssist was recently published in the journal BioMed Central Obesity, and showed weight loss efficacy, declining A1c, improved quality of life, safety, and minimal side-effects – very impressive data.

Diabetes Technology Highlights

1. IBM Watson Health: Huge Commitment to Medtronic partnership (five mentions), World’s Largest Non-Governmental Data Set, Big Diabetes and Healthcare Potential

In one of the most packed rooms we’ve ever seen at JPM, IBM Watson Health General Manager Deborah DiSanzo provided a compelling overview of the business’ priorities, including five enthusiastic mentions of the Medtronic Diabetes partnership to develop the Sugar.IQ app. IBM’s commitment to this partnership is unquestionably strong, and she said that the app is being updated weekly with new features. She did not share launch timing today, but based on Medtronic’s presentation on Monday, the Sugar.IQ app will conduct a full US launch this May-October. Ms. DiSanzo said that the hypoglycemia prediction feature (2-4 hours in advance) is already built into the app, which is new and exciting news if it’s true – Medtronic told us in September this would be saved for a next-gen version. She did express a belief in Q&A that this prediction feature has been designated as a class I device, which could support inclusion in the initial launch this year. (Note: Medtronic confirmed with us that there is a lot of nuance in how the FDA classifies various features of the app, and this single comment does not capture the whole regulatory story around Sugar.IQ.) In response to a question from Glooko CEO Rick Altinger, we also learned that Medtronic and IBM jointly own Sugar.IQ’s intellectual property, meaning Watson partner Novo Nordisk (and by association, Novo Nordisk’s new partner Glooko) will not be able to leverage the Sugar.IQ algorithms or data – no surprise there. Although the IBM Watson partnership with Novo Nordisk was not listed on any slide or mentioned, we understand that partnership is going very well. ADA’s logo appeared on the partnership slide, but was not discussed.

  • More broadly, we left this presentation extremely impressed with the resources and potential IBM has to change diabetes care through better use of data – a productivity booster for HCPs, making graded therapy recommendations, driving precision medicine, clinical trial matching, drug discovery, payer analytics, etc. The IBM Watson Health team is a remarkable 7,000 employees (over 1,000 data scientists!), and value-based care (including chronic disease and diabetes) is one of its five core focus areas along with oncology/genomics, government, life sciences, and imaging. Notably, Ms. DiSanzo asserted that IBM has amassed the largest non-governmental data set available in the world, which includes claims data from 200+ million lives (Truven acquisition=brilliant), 100+ million patient EHR records (acquisitions of Phytel and explorys), 30+ billion images (acquisition of Merge healthcare), 1.2 million medical abstracts, 4+ million drug patents, and 40+ million research documents. For Watson, this is a huge competitive advantage – machine learning needs data to crank through, and IBM has a remarkable set to train the cognitive computer on. No revenue details or growth metrics were shared for this business unit (as expected), though she was clear that the business model is purely software-as-a service – we see big potential for Watson to change diabetes care, particularly for HCPs’ workload and payers.
  • More detail and some of our favorite slides and quotes are enclosed below – there was A LOT here. View the full slide deck here (highly recommended).

2. BD Clinical Trial For T2 Patch Pump to Commence this Summer, Launch Expected in 2H18; Smart Pen Needle Also in 2H18

BD CEO Mr. Vince Forlenza highlighted the new disposable type 2 patch pump, which will begin clinical trials this summer and launch in 2H18. Notably, the pump has gotten a “good reception” in initial payer discussions. The SmartSense connected pen needle is also expected to launch in 2H18. Both products were first unveiled at BD’s November Analyst Day and we’re glad to see the timing has stayed pretty consistent for a launch by September 2018 (end of FY18). Medical Segment President Mr. Thomas Polen confirmed Analyst Day plans for the type 2 patch pump to communicate with a wireless receiver, which will relay the information to a smartphone via Bluetooth. Direct transmission from the on-body pump to an app is in the pipeline, and BD’s Boston-based Digital Health unit’s first project is to develop the companion apps for Smart pen needles (see pictures in our BD November Analyst Day report). Management shared confidence that the upcoming study of the type 2 pump (not yet on clinicaltrials.gov) will show higher adherence to insulin therapy vs. MDI, which makes a lot of sense and which of course would translate to cost-savings and reimbursement – the company has already seen “good reception” in talks with “a half a dozen” payer boards. (Wow.) We love seeing this commitment to access, especially more than a year away from launch. Mr. Forlenza alluded to the “best pipeline in our company history” and Mr. Polen later said that there are other upcoming exciting diabetes products – this is in line with Analyst Day plans for one new innovation per year over the next five. Mr. Forlenza emphasized that BD is moving beyond simply a pen needle/syringe company to what it calls an “integrated diabetes management solutions provider,” a move enabled by the nascent Digital Health unit and these new products. (This also sounds a lot like Medtronic Diabetes’ vision to move beyond type 1 pumps and sensors to become a “holistic diabetes management company” though BD is already serving a much broader market.)

  • Mr. Polen referred to the MiniMed Pro Set with FlowSmart technology as a “key launch.” It certainly represents a key foray outside of pens and syringes, though the full launch with exclusive partner Medtronic has been continually delayed following years of product development. A limited launch commenced in September, but closed to new users very quickly. The set was not mentioned on Medtronic’s 3Q16 call and it’s also no longer on Medtronic’s infusion set page; a full launch is now expected in January-March, per BD’s Analyst Day. Read Adam’s test drive for a few specifics like issues with cannula kinking on manual insertion, tubing disconnecting accidentally, etc. – other reports from those like the JDRF Chief Patient Officer and VP of R&D Dr. Aaron Kowalski have been very good.  We’ll be listening for more concrete updates from the companies this year – the limited launch was no doubt designed to get more patient opinions and it will be great to see what happens next with this product.
  • BD will begin hiring on the marketing/commercialization side in preparation for the type 2 pump’s launch “in the back half of this fiscal year” (i.e., April-September 2017). Based on what we’ve heard from the company, the focus of a marketing campaign will likely be on affordability and simplicity. As we noted in November, BD hopes to be near price parity to current MDI therapy – whew! We can’t wait to hear more about what this data looks like, especially on adherence as this is such a major problem for insulin users of every kind.
  • BD anticipates that it will continue to grow faster than the expected market growth rate of 4%-5% via these new Diabetes product introductions. As a reminder, BD’s Analyst Day in November forecasted “mid-single digit growth” per year for the next five years, implying sales would go from $1.0 billion now to roughly ~$1.6 billion three years from now (the end of FY19). The slide below confused us initially – showing sales from $1.0 to $2.5 billion – but BD confirmed with that the latter is the total market size expectation in FY19 that it will compete in (obviously expanding because of the pump introduction).

3. Verily, Qualcomm on Diabetes partnerships; Five Success Factors for digital health: effortless Devices, Medical-Grade Data, Clinical Workflow, Outcomes Data, Someone to Pay

Verily Life Sciences’ Jared Josleyn and Qualcomm Life’s Dr. James Mault riffed on digital health and shared optimism on their diabetes partnerships with Dexcom/Sanofi and Medtronic, respectively. We were excited to learn that Mr. Josleyn has type 1 diabetes and is the Partnerships and Business Development Lead at Verily – a great sign there is patient perspective as the organization continues to partner outside its walls. Mr. Josleyn confirmed the planned 2018 launch timing for the first-gen Verily CGM device with Dexcom (“very, very soon”) and shared commitment with partner Sanofi (Onduo) to drive new outcome-based business models in diabetes. He mentioned the Novartis smart contact lens partnership and said the indication for an accommodating contact lens for presbyopia is now in humans. Unfortunately, there was no update on the glucose monitoring contact lens, which was not a surprise. Charismatic CMO Dr. James Mault also mentioned Qualcomm Life’s partnership with Medtronic – “With Medtronic, much like Verily and Dexcom, we are collaborating and helping Medtronic build out next-gen CGM. We don’t have domain expertise in measuring the glucose molecule – that’s Medtronic. What we bring to the table is know-how when it comes to wireless stuff (Bluetooth and Wi-Fi) and power management (so the battery requirements can last as long as possible). That coalition and collaboration works quite well.”

  • Dr. Mault also shared five critical success factors for digital health and wearables: (i) effortless and “magical” devices (“it cannot have a burden of effort”); (ii) medical grade/reliable data; (iii) fits into clinical workflow; (iv) outcomes data/demonstration of value; and (v) someone to pay for it (“consumers don’t pay for this stuff”). He emphasized the last point with a terrific example: “Raise your hand if you or someone you know has a smartphone. [All hands go up.] Keep your hand up if you have a health app. [All hands stay up.] Keep your hand up if you’re paying $5 a month or more for a health app. [All hands go down except for one person.] Consumers don’t pay for this stuff, or at least they’re not right now, and it’s not likely they will pay in significant amounts. This money is going to come from providers and payers that are now on the hook for outcomes.”
    • We thought this was a very valuable list and a clear sign that digital health overall, and in diabetes, is still early indeed – no devices hit a homerun on all those criteria. In fact, most don’t even hit one! His point about consumers was particularly critical, given the number of products attempting this route. On the other hand, we do see high potential in direct-to-consumer business models that are similar in monthly cash costs to insurance co-pays (e.g., $30-$50) – these should be cost neutral for patients, but save the administrative headache of dealing with payers, going to the pharmacy, etc.
  • Dr. Mault again highlighted UHC’s Motion Program (incentivizing employees with up to $1,500 a year for meeting activity goals measured via a wrist-worn tracker; see our CES coverage), but was clear about the long evidence road: “The UHC Motion program was four years in the making and took millions of records analyzed and a pilot program of 100,000 employees for 18 months before there was enough data and justification to take it to actuaries and a plan to be written.” Last week we hoped similar incentive partnerships could be done with diabetes technology, though this was a reminder that payers will want to see significant evidence.
  • Read more below from this panel, including what impressed Dr. Mault at CES: the move to 5G cellular and clinical-grade wearables (e.g., Omron’s new wrist-worn BP monitor, HeartVue).

4. Common Sensing Has Raised $4.5M, Another Round Soon; Exploring Remote Coaching Service

In a panel discussion entitled “CEOs and their VCs,” Common Sensing President Mr. James White reiterated that the company has raised $4.5 million to date (including investors Qualcomm Ventures and Sanofi) and anticipates another raise of undisclosed quantity this summer. After the panel, Mr. White told our team that Common Sensing, developer of a Bluetooth-enabled smart cap for disposable insulin pens (Gocap), is looking to build out a coaching service. This would entail a partnership with glucose monitoring companies (talks underway, and Dexcom is already providing CGM for a Common Sensing trial at Joslin) and remote providers that track injection and dosing information, in conjunction with glucose trends, to assist patients with their glycemic management. Our 2016  + 2017 Reflections piece highlighted this type of business models as a key trend in the field (e.g., Livongo, OneDrop, mySugr), and we wonder if Common Sensing can drive it through the addition of insulin dose data. Mr. White also told us that the Common Sensing team has expanded from seven members in June to 10 today, and that they are exploring open loop (insulin dosing advice) – in which an intelligent algorithm uses fingerstick or CGM data to titrate basal and/or bolus insulin. That is definitely a logical place to go with a connected pen and another trend we see in the field, particularly with the recent FDA clearance of Voluntis Insulia and the new Novo Nordisk/Glooko partnership. Mr. White said it would be “cool” if the LED display on the Gocap could tell users not only how much insulin is left, but also how much they should inject.

Diabetes Therapy Highlights

5. Lexicon Early-Stage Pipeline Updates; Commentary on Sotagliflozin Type 2 Diabetes Program

Very notably, Lexicon CEO Mr. Lonnel Coats discussed two new additions to its early-stage clinical development pipeline: a phase 1 SGLT-1 inhibitor LX2761 for diabetes and an AAK1 kinase inhibitor LX9211 for neuropathic pain. There candidates were first posted on the company’s pipeline page at the time of its 3Q16 update, but were not discussed on the call. Excitingly, Mr. Coats shared that the SGLT-1 inhibitor LX2761 initiated phase 1 studies earlier this week – the double-blind, randomized, placebo-controlled, ascending single dose trial will enroll both patients with type 2 diabetes and healthy volunteers. While the trial is not yet listed on ClinicalTrials.gov, Lexicon shared that initial phase 1 data readouts are expected in 2017. In the breakout session, Mr. Coats characterized the phase 1 trial as largely a proof-of-concept and safety study, designed to determine the optimal maximally-tolerable therapeutic dose (SGLT-1 inhibition can cause diarrhea) and evaluate some unspecified glycemic measures. SGLT-1 occurs primarily in the GI tract and preclinical studies indicate that LX2761’s main effect is in delayed and reducing intestinal glucose absorption and postprandial glucose, while elevating plasma GLP-1. Mr. Coats suggested that LX2761 may be a particularly attractive treatment option for patients with renal impairment, for whom traditional SGLT-2 inhibitors are contraindicated due to a lack of efficacy – as a selective SGLT-1 inhibitor, the glucose-lowering effect of LX2761 is not dependent on increasing urinary glucose excretion. In the phase 1 trial, Mr. Coats hopes to especially confirm that LX2761 is indeed locally-acting and that it may have a postprandial glucose effect. He suggested a number of intriguing potential indications for the candidate: as a monotherapy, in combination with other diabetes medications, and even as a potential obesity or prediabetes treatment. Notably, Sanofi holds the rights of first negotiation for the future development and commercialization of the compound – we expect part of the eventual decision to exercise these rights will be dependent on the performance of Lexicon/Sanofi’s phase 3 SGLT-1/2 dual inhibitor sotagliflozin.

  • Mr. Coats also provided details on the upcoming clinical development program for neuropathic pain candidate LX9211 and on the ongoing Sanofi-partnered phase 3 program for SGLT-1/2 dual inhibitor sotagliflozin in type 2 diabetes. For details on these candidates, plus insights on the ongoing Lexicon-led type 1 diabetes program for sotagliflozin and our thoughts on the new SGLT-1 inhibitor candidate, see our full coverage in the detailed discussion and commentary below.

6. MannKind: Aetna Signs-On to Reimburse; CGM/Time-in-Range Studies Planned; Financial Prospects Looking Up

MannKind CEO Mr. Matthew Pfeffer announced near- and mid-term plans for Afrezza, including (i) a new contract with Aetna for reimbursement with “light” prior authorization (effective January 1); (ii) more specific timing on upcoming clinical studies (pediatric, type 1, type 2); (iii) establishing an in-house sales team by end of 1Q17; and (iv) expanding Afrezza to ex-US markets. Following previous wins with Express Scripts and Medicare Part D (both of which now cover the inhaled insulin with no prior authorization), Mr. Pfeffer shared that Aetna has added Afrezza to its formulary with only a few “light” prior authorization requirements. During a very engaging breakout session, he described reimbursement contracts as an important part of MannKind’s revamped commercialization strategy for Afrezza, especially since previous partner Sanofi was less successful on this front – “they didn’t even file with Medicare, and how could you not, when it’s 40% of the market?” We certainly see good payer coverage as a critical piece of Afrezza’s relaunch, given the competitive pricing environment surrounding insulin products in general; the contract with Aetna will hopefully lead to greater uptake in 2017. Management had previously touched upon three planned clinical trials during the company’s 3Q16 update, and Mr. Pfeffer provided more detail in his JP Morgan presentation. He confirmed that a JDRF-partnered pediatric study will begin in 1Q17, followed by a trial in type 1 participants that he hopes will involve Dexcom CGM measurements and a trial in type 2 participants that he hopes will use Abbott’s Freestyle Libre Pro. While these trial designs aren’t confirmed, Mr. Pfeffer emphasized the value of using CGM and collecting time-in-range data to better inform HCPs on how to optimally dose Afrezza. Doctors tend to be conservative in initiating a new product and prescribe too-low a dose, he explained, which makes patients feel unsuccessful in their first few months on Afrezza. Results from these clinical trials could also lend additional support to the ultra-rapid-acting designation of the agent – a decision from the FDA on this label change (filed in 3Q16) is expected in September 2017. From an insurance perspective, Mr. Pfeffer suggested that an ultra-rapid-acting label would distinguish Afrezza from existing rapid-acting insulins on the market and would push many more payers to reimburse the drug. Mr. Pfeffer shared that MannKind’s contract with an external sales organization expires at the end of January, at which point an internal sales force of twice as many full-time employees will be solidified during a 60-day transition period. Direct-to-consumer ads will launch to targeted audiences in 1H17, and he added that MannKind might sponsor a diabetes-focused reality TV show that prominently features Afrezza (!) – all things to watch for in the year ahead. International expansion is a focal point for the mid-term future. Management is preparing filings for Brazil, Canada, Mexico, Australia, MENA, and UAE, and is evaluating possible submissions to the EMA and other jurisdictions.

  • Mr. Pfeffer appeared genuinely optimistic about an upswing in Afrezza sales in 2017, following a 2016 characterized by sluggish sales and financial uncertainty as MannKind took over all commercialization of Afrezza from Sanofi. As a start, two major agreements with Sanofi and Amphastar in 3Q16 seemed to bolster the company’s financial position to close out the year, and Mr. Pfeffer mentioned that MannKind has since sold its surplus facility in Valencia, CA for $17.3 million. We’re happy to note management’s positive outlook – given the positive patient testimonials we’ve heard on Afrezza, in conjunction with the great potential for inhaled insulin to improve patient lives, our fingers are crossed for an upward trajectory of prescriptions and sales.

7. OPKO Health to Initiate Phase 2b Trials for GLP-1/Glucagon in 2H17; Focus on Obesity

President of OPKO Health Mr. David Okrongly notably shared that the company will initiate a phase 2b trial in 2H17 for GLP-1/glucagon dual agonist TT401 and that the company’s focus is an obesity indication, rather than a type 2 diabetes indication. TT401 was added to the pipeline when OPKO Health acquired Transition Therapeutics in July 2016. Mr. Okrongly reviewed phase 2a data for the candidate, which demonstrated non-inferior A1c reductions and superior weight loss for TT401 compared to AZ’s GLP-1 agonist Bydureon (exenatide once-weekly). Despite the statistically significant weight loss, Mr. Okrongly shared that the company will pursue a modified dose in the phase 2b trial in the hopes of more robust weight loss results without intolerable nausea and vomiting. Ultimately, the company hopes to investigate this candidate for an obesity indication rather than type 2 diabetes – Mr. Okrongly emphasized that the obesity trials are smaller than those in diabetes, with endpoints that are easier to meet. OPKO Health’s early-stage pipeline also boasts a phase 1 long-acting GLP-1/glucagon dual agonist (MOD-6031) that is also being investigated for obesity. All in all, the focus on obesity for candidates in this class is an unconventional strategy within the robust competitive landscape – most candidates are seeking a type 2 diabetes indication with weight loss as an added benefit (the “glucose-plus” model of diabetes drug development), whereas OPKO Health appears to be flipping this to develop an obesity medication with added glycemic benefits – this is similar to Novo Nordisk’s Saxenda. The bar for new drugs in type 2 diabetes is certainly incredibly high and rising, given the dozens of diabetes medications that are available, some now with demonstrated cardioprotective benefits. That said, while fewer obesity medications are on the market, uptake in the obesity pharmacotherapy field is extremely challenging given the degree of patient and provider resistance to treating obesity with pharmacotherapies – there is one notable exception, Saxenda! We’ll be watching closely to see if OPKO Health’s bold move pays off.

8. Mylan and the Future of US Drug Pricing

Mylan’s presentation took the form of a fireside chat with the company’s controversial CEO, Ms. Heather Bresch. Unsurprisingly, in light of the recent public outcry over the skyrocketing price of Mylan’s EpiPen, the conversation – plus the subsequent breakout Q&A session – focused largely on drug pricing, leaving little room for discussion of Mylan’s diabetes portfolio. The emphasis on pricing was also fueled by President-elect Donald Trump’s strong commentary (made at a press conference that occurred just an hour before Mylan’s presentation) on the need for bidding on drug prices and that drug companies are “getting away with murder” when it comes to drug pricing. News of this generated a great deal of buzz within the halls of the Westin St. Francis on Wednesday morning. When pressed, Ms. Bresch noted that it would be “premature to respond” to any of these comments, but did acknowledge that “the pricing model has got to change.” She further commented that pledging to keep price increases below 10% per year, as some pharmaceutical companies have done, is “not the answer” and she called for a market-based system instead of the PBM rebate-based system that currently prevails. “If anybody is walking away from this conference thinking ‘business as usual,’” she closed, “it is a mistake.” Given Mylan’s actions, we thought her remarks overall were disingenuous. Drug pricing has been a hot topic throughout this meeting, though several other pharmaceutical executives expressed on Monday and Tuesday (notably, before President-elect Trump’s comments) that they did not expect drug pricing policies to change drastically in 2017 and beyond. Ms. Bresch made no concrete solutions and we’d like to see action steps like those undertaken by Novo Nordisk (no big increases) and Lilly (patient subsidies) and Sanofi (lower prices to start).

  • On the diabetes front, Ms. Bresch very briefly mentioned Mylan’s Biocon-partnered biosimilar insulin glargine (Lantus) program. The product is already available in Japan and was submitted to the EMA in November. According to the company’s 3Q16 update, FDA submission was “on track” to occur by 4Q16, but this has not yet occurred, and we have heard no updates on the program since. We’ll be interested to see how Mylan/Biocon’s product will be competitively priced and positioned relative to Lilly/BI’s similar insulin glargine Basaglar (launched in the US in December) and originator Lantus, especially for the formularies that have excluded Lantus in favor of Basaglar for 2017 (such as CVS Health and UnitedHealthcare). We expect the safety and quality assurance of biosimilar insulin – particularly from companies without longstanding experience and reputations in the insulin market – to remain a question mark for some patients and providers.

Obesity Highlights

9. Orexigen Launches New DTC Campaign for Contrave

Orexigen President and CEO Mr. Mike Narachi, in an extremely patient-centric presentation, highlighted the launch of a promising new direct-to-consumer (DTC) advertising campaign for the obesity drug Contrave (naltrexone/bupropion). Titled “The Brains Behind Weight Loss,” Orexigen’s messaging is uncommonly science-intensive for a DTC campaign, emphasizing the drug’s dual action on the innate neural mechanisms that make losing weight so difficult: the hypothalamic circuitry mediating hunger and the mesolimbic reward circuitry mediating food cravings. The DTC campaign – which management pointed out is the only existing one for an obesity drug – is accompanied by a telemedicine program that allows patients to consult with a physician online and receive Contrave directly in the mail, thereby allowing both convenience and anonymity (an important consideration given the stigma that still surrounds pharmaceutical treatment of obesity). Launched on December 26, the DTC campaign has already produced a promising uptick in Contrave’s TRx share (now at 6.2%) as well as NBRx share (now at 45.4%). Mr. Narachi positioned the DTC campaign as the “key that will unlock more and higher quality conversations” between physicians and patients. Indeed, with the market potential of 110 million patients (only 3% of whom are currently prescribed a weight loss therapy), obesity remains an untapped opportunity. Orexigen management noted in the breakout Q&A session that “the market to date has not focused on the patient” and spreading awareness at the patient level of obesity’s biological basis with DTC campaigns such as this will help normalize the notion of obesity pharmacotherapy and thus reinvigorate the currently slow obesity market. We continue to believe that much of the challenges of the obesity market can be traced to a failure to “lay the groundwork” so to speak in terms of enhancing patient and provider acceptance of obesity as a diagnosis and pharmacotherapies as a treatment. We’re certainly glad to see Orexigen investing in public and patient education about obesity, though we’re unsure if the company has the resources necessary for such a heavy lift – we imagine that the weight of Novo Nordisk’s substantial resources behind Saxenda (liraglutide 3.0 mg) can also help establish the obesity pharmacotherapy market.

  • Consistent with the global scope of the obesity epidemic, expansion into ex-US markets is a key part of Orexigen’s strategy. Contrave was approved and launched in Korea in 2Q16, and commercialization agreements for Spain and Canada were established in 3Q16. 4Q16 saw the drug’s launch in Central/Eastern Europe (under the trade name Mysimba), and commercialization agreements are currently ongoing in the UK/Ireland, Australia/New Zealand, and the Middle East. Orexigen’s OUS partnerships now span 38 countries – up dramatically from only one, South Korea, at this time last year.

10. Arena Continues Divestment of Belviq

Led by new CEO Mr. Amit Munshi, Arena’s presentation focused on the company’s plan to “reset and restructure” – primarily by divesting from the “cost burdens” of the Eisai-partnered obesity drug Belviq (lorcaserin). This de-emphasis on obesity was first introduced in Arena’s 2Q16 update with a statement outlining the strategic shift to streamline operating costs and allocate greater resources toward the development of the company’s non-obesity pipeline products. As discussed in our report from Arena’s 3Q16 earnings update, we are disappointed but not surprised by these developments given the challenges Belviq has faced. Arena’s portion of Belviq revenue fell 36% YOY and 23% sequentially in 3Q16 to $3.3 million, the lowest quarterly revenue for the product since 4Q14 ($3.2 million). The September 2016 launch of once-daily Belviq XR in the US is a small bright spot, but in this increasingly challenging market for small-cap obesity companies, it is unclear how meaningful an impact this more convenient drug will have on the overall Belviq portfolio. The under-diagnosis and under-treatment of obesity, in combination with poor reimbursement for Belviq, make this an extremely challenging product for Arena.

11. Evidence Points to Efficacy and Safety of AspireAssist vs. Bariatric Surgery

Distinguished Aspire Bariatrics CEO Dr. Kathy Crothall reviewed data to support the efficacy of the AspireAssist endoscopic weight loss device (FDA approved in June 2016) and to distinguish the approach from bariatric surgery. A substantial portion of her presentation emphasized the recent pivotal trial results for AspireAssist – participants on the device experienced a mean 32% excess body weight loss vs. 10% excess body weight loss for participants receiving lifestyle counseling alone (p<0.001), and 59% of individuals in the AspireAssist-treated group lost ≥25% of their excess body weight. There were few adverse events in the treatment arm of the study, and there was no evidence of adverse eating behaviors. Dr. Crothall expanded on this latter point in her JP Morgan remarks: She described lifestyle change as a secondary mechanism of action for AspireAssist, responsible for 20%-50% of total weight loss. Of patients surveyed (a little >600 individuals were on the device as of end of 2016), 78% say they eat fewer daily calories following insertion of the device and 91% say they chew food more thoroughly. As Dr. Crothall emphasizes, mindful eating is crucial for successful weight loss. She positioned AspireAssist as a more favorable, patient-friendly option for many patients compared to bariatric surgery. According to Dr. Crothall, 10%-15% of bariatric surgery patients experience wound site infections, 2%-5% experience a staple-line leak, 3.5% experience gastric strictures, 70% experience recurrent vomiting, 46% experience severe reflux, 80% experience dumping syndrome, and 98% experience nutritional deficiencies. In contrast, serious adverse events occurred in <4% of AspireAssist-treated patients in the pivotal trial, the most common being perioperative abdominal pain/discomfort and postoperative peristomal irritation, both of which are generally, expectedly associated with PEG tube placement. While we think there’s a long road ahead still for AspireAssist – along the way, the device will have to see greater uptake and better reimbursement prospects – Aspire Bariatrics seems well-positioned to pursue these goals and carry the obesity intervention forward. Dr. Crothall spoke to the reimbursement piece ­– the newest member of the Aspire Bariatrics management team is Vice President of Reimbursement Toni Harp, who brings great experience in healthcare policy.

  • A two-year observational study of AspireAssist was recently published in the journal BioMed Central Obesity, and showed weight loss efficacy, declining A1c, improved quality of life, safety, and minimal side-effects. The single-center study (n=25) conducted at the Blekinge County Hospital in Sweden found ~54% excess body weight loss and a 0.15 increase in quality of life as measured by the EQ-5D after one year. After two years, excess body weight loss was a remarkable ~62% (p<0.01 for all comparisons). There were no serious adverse events or electrolyte imbalances noted during the trial. This adds to the body of evidence demonstrating the safety and efficacy of aspiration as a weight loss technique.

Detailed Discussion and Commentary

Diabetes Technology

IBM Watson Health

Deborah DiSanzo (General Manager, IBM Watson Health)

In one of the most packed rooms we’ve ever seen at JPM, IBM Watson Health General Manager Deborah DiSanzo provided a compelling overview of the business’ priorities, including five enthusiastic mentions of the Medtronic Diabetes partnership to develop the Sugar.IQ app. IBM’s commitment to this partnership is unquestionably strong, and she said that the app is being updated weekly with new features. She did not share launch timing today, but based on Medtronic’s presentation on Monday, the Sugar.IQ app will conduct a full US launch this May-October. Ms. DiSanzo said that the hypoglycemia prediction feature (2-4 hours in advance) is already built into the app, which is new and exciting news if it’s true – Medtronic told us in September this would be saved for a next-gen version. She did express a belief in Q&A that this prediction feature has been designated as a class I device, which could support inclusion in the initial launch this year. (Note: Medtronic confirmed with us that there is a lot of nuance in how the FDA classifies various features of the app, and this single comment does not capture the whole regulatory story around Sugar.IQ.) In response to a question from Glooko CEO Rick Altinger, we also learned that Medtronic and IBM jointly own Sugar.IQ’s intellectual property, meaning Watson partner Novo Nordisk (and by association, Novo Nordisk’s new partner Glooko) will not be able to leverage the Sugar.IQ algorithms or data – no surprise there. Although the IBM Watson partnership with Novo Nordisk was not listed on any slide or mentioned, we understand the partnership is going very well. ADA’s logo appeared on the partnership slide, but was not discussed.

More broadly, we left this presentation extremely impressed with the resources and potential IBM has to change diabetes care through better use of data. The IBM Watson Health team is a remarkable 7,000 employees (over 1,000 data scientists!), and value-based care (including chronic disease and diabetes) is one of its five core focus areas along with oncology/genomics, government, life sciences, and imaging. Ms. DiSanzo believes IBM has amassed the largest non-governmental data set available in the world, which includes claims data from 200+ million lives (Truven acquisition), 100+ million patient EHR records (acquisitions of Phytel and explorys), 30+ billion images (acquisition of Merge healthcare), 1.2 million medical abstracts, 4+ million drug patents, and 40+ million research documents. For Watson, this is a huge competitive advantage – machine learning needs data to crank through, and IBM has a remarkable set to train the cognitive computer on. No revenue details or growth metrics were shared for this business unit (as expected), though she was clear that the business model is purely software-as-a service – we see big potential for Watson to change diabetes care, particularly for HCPs’ workload and payers. Notably, an IBM Watson Health partnership was announced today with the FDA (!) to study the use of “blockchain” technology for secure exchange of healthcare data; the initial focus is in oncology, though wearables are mentioned in the press release. More detail and some of our favorite slides and quotes are below; view the full slide deck here (highly recommended).

  • In Q&A, Ms. DiSanzo immediately mentioned Medtronic in response to a question about IBM Watson Health’s “largest customer.” Her response: “We don’t disclose revenues for anything. In terms of largest customer, we like to think about it as ‘clients’ and ‘partners.’ It’s hard to think who is the largest. Medtronic is a very important client for us. What Watson has been able to do in diabetes is really fundamental. After looking through 10,000 patients in the Medtronic CareLink database, Watson identified we could predict within 2-4 hours the onset of hypoglycemia. That is built into Sugar.IQ, which Medtronic is now selling. We’re updating it with new features every month. This helps diabetes patients with their disease. Medtronic is a huge client, and diabetes is a huge disease that we need to get a handle on.”
    • This differs slightly from what Medtronic has said publicly on a few fronts: (i) Earlier this week at JPM, CEO Omar Ishrak pushed back the full Sugar.IQ launch to May-October of this year (it beta launched to 100 MiniMed Connect users last September), meaning it is not truly available yet; (ii) Medtronic told us in September that the initial version of Sugar.IQ is not expected to include this hypoglycemia prediction feature, though that may have changed since then; and (iii) Sugar.IQ was expected to be free at launch to Medtronic pump/CGM users, so we’re not sure if “selling” is accurate. (Medtronic confirmed with us that it will be a “companion app” for current pump/CGM users, suggesting it will be free.)
  • Ms. DiSanzo highlighted the Sugar.IQ app a number of times – it was called out notably on the partnership slide, mentioned in prepared remarks, and even the talk’s last slide showed a Watson insight we’ve never seen: “Correction boluses of 2-2.25 units were usually followed by lows. Here’s a 3-step process to rescuing lows.” We’ve included the two slides below:

  • She did note that the Sugar.IQ app is being updated weekly with new features, and she believes the FDA has designated the hypoglycemia prediction feature as a Class I medical device. Medtronic later confirmed with us that there is a lot of nuance in how the FDA classifies various features of the app, and this single comment does not capture the whole regulatory story around Sugar.IQ. Here is what she said in response to a broader question on working with the FDA: “We are working with the FDA; it is vitally important. Today, we announced an IBM and FDA partnership with blockchain technology and securely exchanging healthcare data. In the cognitive application with Medtronic, because we are alerting patients way ahead of time [of hypoglycemia] and what a patient could do or what blood glucose could do (or walk or eat something), FDA was comfortable giving that, I believe, a Class I designation. In other things, that will constantly change. For retrospective review of images, we think those could be class II. We have to work carefully with the FDA.”
  • Glooko CEO Rick Altinger asked about the Sugar.IQ intellectual property in Q&A, and Ms. DiSanzo confirmed Medtronic and IBM jointly own it. The de-identified data and algorithms will not be shared with other IBM partners: “The de-identified data can be put in the Watson Health cloud. That data, and the cognitive technology, is for use with collaborators, clients, and partners. Medtronic brought their 10,000 patient data set, and that’s Medtronic data. They may choose to put in the Watson Health Cloud, though Medtronic chose not to. It stays Medtronic’s data. The Sugar.IQ app is joint intellectual property between Medtronic and IBM. If someone else wants to develop a diabetes app with Watson, they could, but they don’t have access to this IP.”
  • “We have an insane amount of data. We believe we have amassed the largest non-governmental data set available.” It is indeed impressive to see IBM Watson’s data repository, including claims data (200+ million lives), EHR records (100+ million), imaging (30+ billion), medical abstracts (1.2 million), and drug patents (4+ million):

  • Many questioners wondered if IBM Watson could put healthcare providers out of business. Ms. DiSanzo persuasively positioned Watson as “augmented intelligence” and a productivity booster. We see tremendous potential here in diabetes, particularly for reading glucose traces, making graded therapy recommendations, and clinical trial matching. The examples were very compelling, showing how Watson can save time, crank through hard-to-understand data (unstructured notes, images), incorporate far more data than any human can (EHR, clinical trials, etc.), rank order what is most important, and even bring intelligence into rural areas where there aren’t enough healthcare providers (India, China).
    • “Watson for Oncology reads EHRs and understands what is happening with patients. From this information, Watson creates a treatment schedule: red, green, yellow. What treatments could be used? Does Watson get it right? Manipal hospital in India conducted a double-blinded clinical trial of 938 patients. In 99% of cases, Watson for Oncology agreed with the experts. And for those 300 other patients, Watson identified drug treatments that could work, but were newer than the board was aware of ... Watson doesn’t diagnose and doesn’t treat; it is augmented intelligence to help clinicians care for patients. But Watson can help match the tumor with a particular therapy... Clinical trial matching also takes an enormous amount of time, and Watson can help in looking at inclusion and exclusion criteria.”
    • “If a radiologist is going to look at CT scan, it’s many images. Most of those images don’t need to be read, which wastes time. Watson can prioritize the images in the stack by simply looking at them first. Watson can also look at the EHR text with it. “Look at this first.” That will speed up radiology reading time, help get to a definitive diagnosis faster, and increase workflow. Even with that, the amount of images will go up and up. Watson will help improve workflow.”
    • “In an 800 stack CT study, you really don’t have to look at 780 images. There is nothing on them. I think radiologists’ jobs are really hard, and imaging studies are getting more complex. Machine learning absolutely helps. It can handle the simpler things – the workflow of what images to look at first. It can also annotate the image. There is a lot of information in the EHR, and what Watson does is machine learning on the image and EHR. There is a lot of improvement in workflow in radiology that can happen.”
    • “People ask me all the time – can Watson do this? If there is a data source, Watson can do it. But Watson needs to be trained. So if we’re training on ALS for Watson, we’re not training on something else. We have focused on five pillars. We are very large in governments, oncology, value based care (understanding the cost of chronic disease, care pathways), life sciences, and imaging. We then prioritize within those.”
    • “We have clients in China and India, and they say, ‘We are hopelessly short of oncologists.’ You could imagine some cognitive technology helping tremendously, enabling them to understand what disease patients are facing.”
  • IBM Watson can also be used for drug discovery. Ms. DiSanzo provided a compelling example from ALS, where Watson rank-ordered potential genes from 1-1,500. Barrow looked at the top 10 genes, and found Watson had got it right: 8/10 of those genes did affect ALS, and five of those had never been identified in ALS before. Ms. DiSanzo emphasized Watson’s speed – the analysis was done within months, whereas humans by hand would have taken years. We wonder what potential this has in diabetes to sort through heaps of genomic and health data and identifying better targeted therapies, much like cancer has done.
  • “We have a sustainable competitive advantage. We started ten years ago. If you’re going to teach a computer something, to learn on its own, time matters. We started in machine learning in imaging a decade ago. We know how hard it is. We’ve done it and have been successful at it. We started with EHRs five years ago. We know how hard it is to read structured and unstructured text. We have acquired the best assets in the industry that we can build on top of (including Truven and explorys). There are startup companies in machine learning, and it’s going to take them time. We are an integrated business unit within IBM solely focused on health; 76% of my team is from healthcare, and the other 24% are super smart data scientists. We’ve done this for a while.”
  • IBM estimates the total Watson Health market opportunity as $360 billion. The slide showed total world healthcare spend of $8 trillion, of which 25% is estimated to be waste! This includes imaging (unnecessary tests), oncology (variability of care), life sciences (failed clinical trials), government (fraud, waste, abuse), and value based care (cost of chronic disease).

Biotech Showcase: Partnership and Alliance Models with Tech, Pharma, and Medical Devices

Panel Summary

Verily Life Sciences’ Jared Josleyn and Qualcomm Life’s Dr. James Mault riffed on digital health and shared optimism on their diabetes partnerships with Dexcom/Sanofi and Medtronic, respectively. We were excited to learn that Mr. Josleyn has type 1 diabetes and is the Partnerships and Business Development Lead at Verily – a great sign there is patient perspective as the organization continues to partner outside its walls. Mr. Josleyn confirmed the planned 2018 launch timing for the first-gen Verily CGM device with Dexcom (“very, very soon”) and shared commitment with partner Sanofi (Onduo) to drive new outcome-based business models in diabetes. He mentioned the Novartis smart contact lens partnership and said the indication for an accommodating contact lens for presbyopia is now in humans. Unfortunately, there was no update on the glucose monitoring contact lens, which was not a surprise. Charismatic CMO Dr. James Mault also mentioned Qualcomm Life’s partnership with Medtronic – “With Medtronic, much like Verily and Dexcom, we are collaborating and helping Medtronic build out next-gen CGM. We don’t have domain expertise in measuring the glucose molecule – that’s Medtronic. What we bring to the table is know-how when it comes to wireless stuff (Bluetooth and Wi-Fi) and power management (so the battery requirements can last as long as possible). That coalition and collaboration works quite well.”

  • Dr. Mault also shared five critical success factors for digital health and wearables: (i) effortless and “magical” devices (“it cannot have a burden of effort”); (ii) medical grade/reliable data; (iii) fits into clinical workflow; (iv) outcomes data/demonstration of value; and (v) someone to pay for it (“consumers don’t pay for this stuff”). He emphasized the last point with a terrific example: “Raise your hand if you or someone you know has a smartphone. [All hands go up.] Keep your hand up if you have a health app. [All hands stay up.] Keep your hand up if you’re paying $5 a month or more for a health app. [All hands go down except for one person.] Consumers don’t pay for this stuff, or at least they’re not right now, and it’s not likely they will pay in significant amounts. This money is going to come from providers and payers that are now on the hook for outcomes.”
    • We thought this was a fantastic list and a clear sign that digital health overall, and in diabetes, is still early indeed – no devices hit a homerun on all those criteria. In fact, most don’t even hit one! His point about consumers was particularly critical, given the number of products attempting this route. On the other hand, we do see high potential in direct-to-consumer business models that are similar in monthly cash costs to insurance co-pays (e.g., $30-$50) – these should be cost neutral for patients, but save the administrative headache of dealing with payers, going to the pharmacy, etc.
  • Dr. Mault again highlighted UHC’s Motion Program (incentivizing employees with up to $1,500 a year for meeting activity goals measured via a wrist-worn tracker; see our CES coverage), but was clear about the long evidence road: “The UHC Motion program was four years in the making and took millions of records analyzed and a pilot program of 100,000 employees for 18 months before there was enough data and justification to take it to actuaries and a plan to be written.” Last week we hoped similar incentive partnerships could be done with diabetes technology, though this was a reminder that payers will want to see significant evidence.
  • Dr. Mault noted two other key trends from CES: the move to 5G cellular and clinical-grade wearables (e.g., Omron’s new wrist-worn BP monitor, HeartVue). Qualcomm CEO Steve Mollenkopf’s keynote address on 5G cellular was fascinating and we’ll have more on that soon; watch the full keynote address here. Dr. Mault called it “as profound as the introduction of electricity and the telephone 150 years ago...The potential impact to the global economy, once it is fully implemented, is an estimated $13 trillion. It will create 20 million new jobs. And it’s not the 5G itself, but 5G is enabling everything that we are talking about, and vastly more – self-driving cars, robotics, virtual reality/augmented reality, the Internet of Things.” In terms of interesting new devices, Omron’s new clinical-grade wrist-worn blood pressure monitor, HeartVue, impressed Dr. Mault: “The accuracy of these things is going to matter. We’re starting to see the market realize this, and clinically validated wearable devices are coming to fruition.”

Quotable Quotes

Jared Josleyn (Partnerships and Business Development Lead, Verily):

  • “The Dexcom device will be out in 2018 – so very, very soon. We are also working on an accommodating contact lens for presbyopia that is also coming very, very soon. It’s now in humans.” [No timing was shared on the smart contact lens application for glucose monitoring.]
  • When you move into new business models, it does take time for the industry to catch up and accept the new model. In our partnership with Sanofi, they clearly have that model in mind. We still need innovators to make products, and they cannot go away from that. Sanofi’s role in the development of new molecules that benefits patients still exists. But the new direction that is coming is relative to managing to an outcome.”
  • “Google has seven different apps that have 1 billion-plus users. The methodology from a software perspective is iteration, learning from the user base, and building better and better products. When we build for the user, we start with the user first. But that’s not just the patient. Who are the players in the system? It changes depending on the indication, whether it’s mental health, diabetes, CVD, or other major chronic conditions. There are different nodes and care delivery mechanisms. We start with the user, which could mean the provider, patient, and in some cases the payers. By understanding the landscape holistically, we want to bring the data through the system to provide the right information to the right person at the right time. We also want to make it actionable and useful to manage disease and affect behavior in a positive way. That could be preventing type 2 diabetes patients going from orals to insulin, or move them back to better lifestyle choices and food. That’s how we tend to view it – through the prism of the user first and building backwards, rather than starting with what’s broken in the system.”
  •  “I’m a type 1 diabetic and I came over from Lilly to Verily. I had a passion to move over to Verily following the partnerships with Dexcom and Novartis for glucose monitoring, as well as the Sanofi partnership. I get the best of both worlds – watching all the innovation in the space, contributing to behavioral management programs, and to a certain extent, being a guinea pig to try out apps and the next greatest Dexcom device prior to it coming out to market. It’s a real life application. It’s great to be at a company that is impressively innovative. It’s also wonderful to work with a team to advance new models, especially in diabetes, to change the outcomes for patients.”

Dr. James Mault (Chief Medical Officer, Qualcomm):

  • “We have to be introspective and look at ourselves as technologists and put the Kool-Aid down. We must identify what we need to do, to bring this to reality and ubiquity. Here is my list of five:
  1. We need to make devices and technology effortless – the word I use is “magical.” In terms of usability, it cannot have a burden of effort.
  2. It needs to be a medical grade level of data and delivery. We have to be mindful and recognize privacy, security, and the unique aspects of healthcare. Clinicians must be able to rely on the data, so integrity has to be sound and not transposed. If a glucose of 108 reads 180, you might start giving insulin you shouldn’t be getting.
  3. Clinical workflow: if we build it and everyone’s blood pressure is coming at me – 1,000 measurements to look at – it’s just not going to happen. We cannot just say “We have a great device, let’s send all the information.” We need the workflow with the downstream systems. The algorithms to look at the data have yet to be brought to fruition. We must also retrain our healthcare system – you don’t have to examine a patient face to face. I’m going to take care of thousands of patients I haven’t touched.
  4. Outcomes data and demonstration of value. If you cannot demonstrate the value of a gadget or software, it’s not going to get adopted by physicians. There is a burden of proof on the technology community. Show us that this works. That doesn’t mean a 15-year prospective trial. But for context, the UHC Motion program was four years in the making and took millions of records analyzed and a pilot program of 100,000 employees for 18 months before there was enough data and justification to take it to actuaries and a plan to be written.
  5. Once you do 1-4, then you have to find someone to pay for it. Raise your hand if you or someone you know has a smartphone. [All hands go up.] Keep your hand up if you have a health app. [All hands stay up.] Keep your hand up if you’re paying $5 a month or more for a health app. [All hands go down except for one person.] Consumers don’t pay for this stuff, or at least they’re not right now, and it’s not likely they will pay in significant amounts. This money is going to come from providers and payers that are now on the hook for outcomes. We’ve got to have outcomes data, workflow, medical grade systems, and usability before we see payment.
  6. “[On partnerships], it comes back to recognizing what your strengths are for pharma and med tech. With Medtronic, much like Verily and Dexcom, we are collaborating and helping Medtronic build out next-gen CGM. We don’t have domain expertise in measuring the glucose molecule – that’s Medtronic. What we bring to the table is know-how when it comes to wireless stuff (Bluetooth and Wi-Fi) and power management (so the battery requirements can last as long as possible). That coalition and collaboration works quite well. We also have a connected inhaler in our work with Novartis. Novartis is the same thing – they are great at molecules, but not so great at wireless chips and communication. We build out a reference design and do the electronics and engineering – it’s the model we use in the mobile industry and everything else. Partners also benefit from our knowing what’s going to be in your phone next year and five years from now. It’s a royalty arrangement. Then you take this reference design and go find a contract manufacturer. We give you FDA quality system design docs and off you go. We are a Switzerland type of player. You saw the announcement of us doing the connected inhaler with Novartis, and we announced later last year a similar partnership with BI. That’s how we elevate an open ecosystem.”
  7. “We will potentially look back at CES last week as a moment in history. It sounds grandiose, but it has potential of being as profound as the introduction of electricity and the telephone 150 years ago. It relates directly to what all of us will come to know as 5G [cellular]. 5G really had its coming out party last week. [Watch the full one-hour keynote address here.] The potential impact, once it is fully implemented, to the global economy is an estimated $13 trillion. It will create 20 million new jobs. And it’s not the 5G itself, but 5G is enabling everything that we are talking about, and vastly more – self-driving cars, robotics, virtual reality/augmented reality, the Internet of Things. It’s all predicated on this enabling capability with faster bandwidth. I encourage you to start looking at and studying 5G as we enter into the invention revolution [Qualcomm’s term] of the next 30 years with this capability. The device that I loved seeing was the first fully clinically validated wrist-worn blood pressure monitor from Omron. The accuracy of these things is going to matter. We’re starting to see the market realize this, and clinically validated wearable devices are coming to fruition.”

Diabetes Therapy

Lexicon

Lonnel Coats (CEO, Lexicon, The Woodlands, TX)

Very notably, Lexicon CEO Mr. Lonnel Coats discussed two new additions to its early-stage clinical development pipeline: a phase 1 SGLT-1 inhibitor LX2761 for diabetes and an AAK1 kinase inhibitor LX9211 for neuropathic pain. There candidates were first posted on the company’s pipeline page at the time of its 3Q16 update, but were not discussed on the call. Excitingly, Mr. Coats shared that the SGLT-1 inhibitor LX2761 initiated phase 1 studies earlier this week – the double-blind, randomized, placebo-controlled, ascending single dose trial will enroll both patients with type 2 diabetes and healthy volunteers. While the trial is not yet listed on ClinicalTrials.gov, Lexicon shared that initial phase 1 data readouts are expected in 2017. In the breakout session, Mr. Coats characterized the phase 1 trial as largely a proof-of-concept and safety study, designed to determine the optimal maximally-tolerable therapeutic dose (SGLT-1 inhibition can cause diarrhea) and evaluate some unspecified glycemic measures. SGLT-1 occurs primarily in the GI tract and preclinical studies indicate that LX2761’s main effect is in delayed and reducing intestinal glucose absorption and postprandial glucose, while elevating plasma GLP-1. Mr. Coats suggested that LX2761 may be a particularly attractive treatment option for patients with renal impairment, for whom traditional SGLT-2 inhibitors are contraindicated due to a lack of efficacy – as a selective SGLT-1 inhibitor, the glucose-lowering effect of LX2761 is not dependent on increasing urinary glucose excretion. In the phase 1 trial, Mr. Coats hopes to especially confirm that LX2761 is indeed locally-acting and that it may have a postprandial glucose effect. He suggested a number of intriguing potential indications for the candidate: as a monotherapy, in combination with other diabetes medications, and even as a potential obesity or prediabetes treatment. Notably, Sanofi holds the rights of first negotiation for the future development and commercialization of the compound – we expect part of the eventual decision to exercise these rights may be dependent on the performance of Lexicon/Sanofi’s phase 3 SGLT-1/2 dual inhibitor sotagliflozin.

  • We’re curious if Lexicon and/or Sanofi may eventually evaluate LX2761 in type 1 diabetes patients as well – the currently listed indication in the pipeline is just “diabetes” and we certainly hope Lexicon continues its commitment to developing adjunct therapies for type 1 diabetes. Additionally, we wonder  if the selective SGLT-1 inhibition mechanism can mitigate some of the DKA concerns associated with SGLT-2 inhibition in type 1 diabetes – the high profile concerns and incomplete understanding of SGLT-2 inhibitor-associated DKA risk in type 1 diabetes is one of the larger barriers to indication expansion and uptake for this class in our view and we expect many patients and providers would welcome an adjunct therapy to insulin for type 1 diabetes that minimizes this risk.
  • Lexicon shared that IND-enabling studies for its LX9211 neuropathic pain candidate are complete, with phase 1 trials expected to initiate in 2017. We also learned that the candidate is an AAK1 kinase inhibitor and that Lexicon has acquired exclusive development and commercialization rights for this candidate. For background, LX9211 was selected though a neuroscience drug candidate discovery partnership between Lexicon and BMS – the alliance was formed in 2003 and the selection announcement of this first candidate was made in April 2015. At the time, the announcement shared that both Lexicon and BMS would undertake IND-enabling for the candidate and that BMS has the first option for exclusive clinical development and commercialization rights upon the commencement of phase 1 trials. We’re not too surprised that BMS declined to exercise this option, given its much-publicized decision to discontinue discovery research in diabetes followed by its high-profile exit from the diabetes field in 2013 (“this is too much of a pain.”). Neuropathic pain is an area of tremendous unmet need, but development of neuropathic pain treatments often involves lengthy and costly clinical trials – we imagine that Lexicon either hopes to eventually seek a development and commercialization partner for this candidate or hopes to fund its clinical development through sales of sotagliflozin and its carcinoid syndrome candidate (telotristat ethyl, submitted to FDA).
  • Mr. Coats provided more color on the thinking behind the phase 3 program in type 2 diabetes. He emphasized that the goals of the type 2 diabetes program differ from the type 1 diabetes program. In type 1 diabetes, sotagliflozin hopes to be the first adjunct therapy to insulin and offer the first option to potentially address severe hypoglycemia and DKA in patients with type 1 diabetes who are already on insulin. On the other hand, in type 2 diabetes, differentiation from the dozens of other drugs on the market will be key for sotagliflozin. Thus, Mr. Coats shared that the type 2 diabetes program is constructed around three major goals: (i) demonstrating efficacy and safety across the spectrum of patients with type 2 diabetes, both against appropriate comparators and in combinations; (ii) demonstrating efficacy and safety in patients with renal impairments; and (iii) demonstrating cardiovascular benefit. As such, the phase 3 program is expected to include a number of head-t0-head studies, as well as the required cardiovascular outcomes trial. We’re curious if Sanofi will plan to do a quick, small pre-approval outcome trial to meet the 1.8 hazard ratio for cardiovascular safety for approval before conducting a larger post-approval study designed to demonstrate cardiovascular superiority. This strategy would certainly allow sotagliflozin to reach the market for type 2 diabetes more quickly, though a small trial likely wouldn’t support a cardiovascular indication and Lexicon appears to be counting on a cardioprotective benefit for sotagliflozin. Indeed, in the breakout session, Mr. Coats characterized the blood pressure reductions produced by sotagliflozin as “quite phenomenal” and “one of the most exciting pieces that people should pay attention to.” In fact, he shared that the blood pressure reduction data was one of the reasons that convinced him to accept the CEO role in 2014 (“I was shocked by it – you just don’t see that type of reduction”).
    • Currently, ClinicalTrials.gov lists just two phase 3 trials for sotagliflozin in type 2 diabetes – one as a monotherapy and one as an add-on to metformin. The remaining trials in the program are expected to initiate in 2017 and we’re eager to learn precisely which comparators and combinations will be evaluated – we’re particularly curious if Sanofi will conduct a head-to-head trial against a selective SGLT-2 inhibitor or against a GLP-1 agonist.
  • Mr. Coats remained extremely positive about the data for sotagliflozin in type 1 diabetes thus far. He reviewed the topline results from the phase 3 inTandem1 and inTandem2 results, sharing that additional data readouts – including time in range (from CGM sub-studies), body weight, and blood pressure findings – from these trials are expected in 2017. Previously, Lexicon shared that some additional data may be available at ADA 2017. Additionally, Mr. Coats reiterated the results from the third and last phase 3 trial in the type 1 diabetes program – inTandem3 – is expected in mid-2017. Mr. Coats also boldly implied that sotagliflozin may actually demonstrate a comparable or reduced DKA rate to placebo in inTandem3 or in the real world – he suggested that the low DKA rates seen in the placebo groups of inTandem1 and inTandem2 was due to the optimized insulin design of the trial and that DKA rates in the placebo group of inTandem3 may be closer to the 5%-8% recorded by the T1D Exchange.

 

-- by Adam Brown, Abigail Dove, Helen Gao, Brian Levine, Payal Marathe, Kelly Close