December 31, 2016

Executive Highlights

As we look to 2017 just hours away, we reflect on 2016 to consider what we have learned. In what directions has the field of diabetes moved? What were we right about in 2016? What we were wrong about? What was unexpected? Where do the biggest questions and challenges remain and what’s on the horizon in 2017?

This report provides a 2016 year-in-review across four sections and what we expect for 2017 in the same four sections – Diabetes Therapy, Diabetes Technology, Big Picture, 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 for each section. You can click on a section in the table of contents below to skip right down to it.

Starting with therapy, the year was characterized by a steady rush of news related to cardiovascular outcomes trials (CVOTs) – from the inclusion of the first-ever cardiovascular death indication for a diabetes drug on Lilly/BI’s Jardiance label to positive cardiovascular data from not one but two GLP-1 agonists (Novo Nordisk’s Victoza and semaglutide) to topline cardiovascular safety results from an additional two trials (DEVOTE for Novo Nordisk’s Tresiba and FREEDOM-CVO for Intarcia’s ITCA 650) to unexpected and impressive kidney outcomes data to the slow but steady inclusion of positive CVOT data in diabetes treatment guidelines. Accordingly, the bar for new diabetes therapy rose again – boy did it! –  to new heights in 2016. And, the year was also marked by the approvals of a much-anticipated new class in the US – GLP-1 agonist/basal insulin fixed-ratio combinations (this combo still needs a better name!) – and forward momentum on innovative new therapies (from implantable and oral GLP-1 to an SGLT-1/2 dual inhibitor for type 1 diabetes). On the commercial side, the insulin landscape continued to weaken in 2016 as pricing pressures intensified – Sanofi experienced a particularly challenging year while Novo Nordisk and Lilly’s successes rode on their non-insulin products Saxenda (GLP-1 for obesity) and Trulicity (once-weekly GLP-1). It was a surprise, in fact, when Novo Nordisk’s top-selling product became a GLP-1 (Victoza) and no longer an insulin (Novolog). As we look to 2017, it’s clear that patients with diabetes will encounter an unprecedented number of options for therapy and we hope that HCPs can individualize optimally (or, for many patients, even start to do this). Too, we hope that payers improve access to a broad array of options that show value – efficacy, safety, and cost effectiveness – as guidelines committees offer increasingly nuanced advice for individualizing therapy to patient characteristics. And, of course, we hope for better access overall globally, as NEJM and others emphasized more vigorously this year.

In diabetes technology, the field moved faster this year from a higher base, particularly in automated insulin delivery (AID), CGM, and diabetes data/software. AID saw huge progress, with Medtronic’s MiniMed 670G receiving FDA approval after a remarkable three-month FDA review – faster than ever seen before and certainly faster than anyone expected. Tandem, Bigfoot, Beta Bionics, and Insulet all made meaningful progress in AID this year too, with their systems poised to follow in the next few years. It was also a big year for glucose monitoring, including FDA approval for Dexcom’s non-adjunctive (insulin-dosing) claim for G5; impressive adoption of Abbott’s FreeStyle Libre in Europe (200,000+ users) and progress in the US (Pro version approved, consumer version submitted in 3Q16); several RCTs reporting very positive results (including DiaMonD and  IMPACT); and even an unexpected reimbursement win for CGM in the tough German market. It was another challenging year for BGM companies, but we are excited about meaningful strides in connectivity, partnerships, and several new players entering the field in 2016 and seeing how different business models work. Leaving the year, we’re also reflecting very positively on all the innovation happening in insulin dose capture/titration software and new business and care models. We are even more optimistic about diabetes technology following an eventful 2016, but also acutely aware that cost and access remain big problems in the US and globally – showing value is the new mantra. In the midst of positive strides pointing toward increased value for patients and payers, the decimated BGM market should be considered a source of shame for payers like CMS and we hope fervently that innovation can still continue, and better access can emerge, with a broader set of players.

Zooming out to the diabetes field and larger healthcare landscape as a whole, 2016 was characterized by both positive momentum and worrisome trends. On the positives: the FDA hosted a landmark workshop to discuss outcomes beyond A1c in the development and approval of diabetes therapies, major pharmaceutical companies committed to investments in diabetes-related comorbidities with massive unmet need, Medicare outlined concrete plans to reimburse the Diabetes Prevention Program beginning in 2018, and soda taxes passed in six (!) US cities. On the other hand, public and political frustration and furor over insulin and drug pricing continued to rise throughout 2016, reaching a fever pitch at the end of the year that drove manufacturers to action, with Lilly announcing the launch of a direct-to-patient discount insulin program, Novo Nordisk committing to improving access and affordability, and Sanofi making a major move on pricing for its basal/GLP-1, pricing it exactly the same as the lowest GLP-1 drugs on the market. This is not enough in our view, but it is also not enough to expect only manufactures to shoulder the burden. There continues to be a real lack of understanding about the commercial landscape in our view that we hope will improve substantially in 2017 with some better understanding about the PBMs as well as investment in patient access.

The sobering statistics surrounding diabetes continued: rises in diabetes-related and all-cause mortality in the US led to the first fall in life expectancy since 1993 and the latest numbers from the WHO indicate that global diabetes prevalence reached 8.5% – 422 million adults – in 2014, with an annual cost of more than $827 billion. It makes us sick to think we are nearly at $1.0 trillion and so many patients are doing poorly or not served at all. As we look to 2017, we face an uncertain future, not in the least due to the significant leadership changes we’ll witness in the US and EU in diabetes and beyond, from the retirement of ADA Chief Medical Officer Dr. Robert Ratner and Novo Nordisk CEO Mr. Lars Sørensen and Lilly CEO Mr. John Lechleiter to the inauguration of President-elect Donald Trump, with his newly-appointed Secretary of Health and Human Services Dr. Tom Price and head of CMS Ms. Seema Verma.

Obesity prevalence and costliness continued to climb in 2016, and stigma and misunderstanding of the disease remain significant challenges. 2016 saw a welcome increase in urgency in surrounding the obesity epidemic, with a flurry of commentary in the mainstream media bringing much-needed attention to the systemic problems in obesity management. The year also witnessed the publication of the ACTION study, the first-ever empirical examination of barriers to effective obesity care. On the basic science front, the future trajectory of obesity therapy seems to be pointing toward targets in the brain, near-term, and gut microbiome longer-term. With one major exception, remarkably disappointing performance continued to characterize the obesity pharmacotherapy arena – double-digit sales declines became the norm for Vivus’ Qsymia, Orexigen’s Contrave, and Arena/Eisai’s Belviq, though Novo Nordisk’s Saxenda emerged as an bright spot. Lately, conference talks on the neural regulation of energy balance and the interaction between the microbiome, genes, and metabolism have become standing-room-only events, and we can only hope this foreshadows the emergence of better treatment approaches for this difficult disease, which continues to experience severe unmet need.

Diabetes Therapy

1. Themes

The Year of Cardiovascular Outcomes Trials (CVOTs)

• 2016 saw the first absolutely stunning approval of a cardiovascular indication for a diabetes drug, Lilly/BI’s SGLT-2 inhibitor Jardiance (empagliflozin), ushering in a new era in diabetes. Having a drug that reduces cardiovascular comorbidities is a stunning achievement that we do not think the field – certainly not patients and HCPs – have even begun to wrap their arms around. We can’t wait til our reflections piece in 2025 to see what we have learned from Big Data on this front. Looking back, the beginning of the year saw the FDA submission of the EMPA-REG OUTCOME results demonstrating a cardioprotective benefit for Lilly/BI’s SGLT-2 inhibitor Jardiance (empagliflozin) in January. The partnered companies sought an expanded indication for reduction of cardiovascular death and the diabetes world watched with bated breath throughout 2016 to see if a diabetes drug would garner a cardiovascular indication, an unprecedented move. The expanded indication won a narrow 12-11 vote in favor of approval from an FDA Advisory Committee in June – it was one of our proudest moments as patients and patient advocates that we gave two of the three speeches (that you can see here by Ms. Helen Gao and here by Ms. Emily Regier) that day in support of this important indication. AACE also spoke in favor of the indication, bringing crucial professional support. Following a day of heated debate over whether a single trial designed to demonstrate cardiovascular safety for a 3-point MACE primary endpoint could support a label claim of benefit for the secondary endpoint of cardiovascular death reduction, the close vote came in – and then we waited! Despite the positive vote, the FDA required more time to make a decision on the indication, delaying its decision by three months before finally approving it in a huge win for patients, providers, and the diabetes field in December. BI/Lilly have long looked to an expanded indication for Jardiance as an inflection point that will revitalize the sluggish sales for the product (of course we don’t know the full sales since BI doesn’t report revenue) and for the SGLT-2 inhibitor class as a whole. In its 3Q16 update, it became clear that much of Lilly’s diabetes strategy moving forward relates to promoting the Jardiance franchise through its new cardiovascular indication. The approval also bodes well for other diabetes drugs that are beginning to report positive cardiovascular benefits in CVOTs – Novo Nordisk submitted the positive LEADER data for inclusion on GLP-1 agonist Victoza’s (liraglutide) label in October. CVOTs are hugely expensive undertakings and the FDA mandates that the trials only demonstrate non-inferiority to placebo for cardiovascular safety rather than superiority. We’re optimistic that the FDA’s validation of positive findings through this expanded indication could encourage other diabetes companies to more courageously design CVOTs powered to demonstrate superiority although, of course, it is easier and faster and cheaper to design non-inferiority trials and this approach is also understandable. We hope to see more CVOTs in the future (and/or big kidney trials) that use a variety of different drugs so that they can really be compared; more notably, we look forward to Big Data being able to show the “real world” experience with these important compounds. We are especially interested to understand the impact on type 1 diabetes of GLP-1 and SGLT-2 inhibitors as we believe benefits may emerge for them as well (it is very disappointing currently that we have no idea about long-term complication impact for type 1, particularly since so many are taking off-label).
• On the heels of the EMPA-REG OUTCOME results, two additional CVOTs reported positive cardiovascular benefits for diabetes drugs in 2016: the LEADER and SUSTAIN 6 trials for Novo Nordisk’s GLP-1 agonists Victoza (liraglutide) and semaglutide, respectively. The full results from the LEADER trial (n=9,340) were presented at ADA 2016, with a simultaneous publication in NEJM, and demonstrated a 13% relative reduction in risk of the primary endpoint of three-point MACE (cardiovascular death, non-fatal MI, and non-fatal stroke; p=0.01 for superiority) and a 22% reduction in relative risk for cardiovascular death alone (p=0.007). In the SUSTAIN 6 trial (n=3,297), once-weekly injectable semaglutide demonstrated a 26% relative risk reduction for its primary endpoint of three-point MACE (p=0.02 for superiority) and 39% reduction in risk of non-fatal stroke (p=0.04). Notably, as a pre-approval cardiovascular safety trial, the SUSTAIN 6 trial was not powered to demonstrate cardiovascular superiority and the positive results were a major surprise for virtually everyone in the diabetes field. The full results were presented at EASD 2016 and garnered a simultaneous publication in NEJM as well. SUSTAIN 6 was part of the data package for the regulatory submission of semaglutide and we expect the results will be represented on semaglutide’s label in some form, though the trial is unlikely to support a cardiovascular indication and Novo Nordisk has confirmed that it intends to initiate a larger CVOT in 2018 powered to demonstrate superiority for the drug.
  
  • GLP-1 agonists have long been considered one of the more likely diabetes drug classes to demonstrate a cardioprotective benefit, given their weight loss benefits and other potential benefits on the underlying mechanisms of atherosclerosis – coupled with their potent glycemic efficacy as well. The resoundingly neutral results from the ELIXA CVOT of Sanofi’s Adlyxin/Lyxumia (lixisenatide), reported in full at ADA 2015, deflated the high hopes for the GLP-1 agonist class to some degree and led some to doubt whether any CVOT for a diabetes drug as they are currently conceived would be able to demonstrate cardiovascular benefit. The results from LEADER and SUSTAIN 6 offer renewed confirmation that GLP-1 agonists could serve as a stellar option for many patients with diabetes with complex comorbidities ranging from cardiovascular disease to obesity to even renal complications. We expect these very positive findings will only serve to grow the GLP-1 agonist class further – as it stands, GLP-1 agonists accounted for over a third of the overall growth of the diabetes market (including therapies and technologies) in the first half of 2016, prior to the release of these results.
• The IRIS trial demonstrated a critical – and very under-covered - cardiovascular benefit for TZD pioglitazone in a slightly different population – patients with prediabetes and a history of stroke or transient ischemic attack (TIA). Bottom line, this rigorous trial shows that pioglitazone is now the only drug of any class to reduce both CV events and prevent diabetes in a single trial. The study (n=3,876) found that treatment with the now-generic pioglitazone reduced the relative risk of a combined primary endpoint (fatal and non-fatal stroke and MI) by a very impressive 24% (p=0.007) compared with placebo – 9.0% of patients in the pioglitazone-treated group experienced a stroke or MI during the trial period, compared to 11.8% of those in the placebo-treated group. Furthermore, the secondary outcome of new diabetes diagnosis was reduced by 52% (p<0.001 vs placebo) in the pioglitazone-treated group. The results recall the 2005 PROactive CVOT for pioglitazone that found that the TZD reduced risk of a composite secondary endpoint of all-cause mortality, MI, and stroke in the trial (the trial failed its complex composite primary endpoint consisting of fatal and nonfatal MI, stroke, ACS, endovascular or surgical intervention in the coronary or leg arteries, and amputation above the ankle). We’re pleased to see confirmation of pioglitazone’s atherosclerotic benefit, though its application in diabetes will likely remain limited given the high-profile controversy and lingering concerns over bladder cancer (overstated in our view – several of the bladder cancer analyses were refuted by other larger ones) and cardiovascular safety in the eyes of the public. We see this as unfortunate given the advantages of the class and the fact that the side effect profile can be so much better, reducing weight gain and edema, when taken at a lower dose; of course a major question is whether or not efficacy would be maintained at 15-30 mg, but from our conversations with KOLs, we think it would. That said, we heard positive commentary on pioglitazone from several leaders in the diabetes field in 2016 (with many praising its cardiovascular and NASH benefits, as well as its insulin-sensitizing properties) and we certainly prefer pioglitazone as a cheaper generic alternative to sulfonylureas for virtually all patients. Given the agent’s demonstrated potency, it’s a shame that pioglitazone is clouded by so many high-profile safety/tolerability issues, particularly since many of the risks can be managed for at least some populations. The bar for diabetes drugs is only getting higher as newer agents offer A1c-lowering, cardioprotection, and a more favorable safety/tolerability profile, but TZDs remain the only insulin sensitizing agents available and we remain intrigued by the potential of pioglitazone therapy in combination with newer agents such as SGLT-2 inhibitors, which offers both weight loss benefits and a potential counterbalance to the fluid retention concerns associated with TZDs.
• Additional CVOTs reassuringly demonstrated the cardiovascular safety of a number of extremely promising diabetes drugs in 2016. Intarcia shared topline results from its pre-approval FREEDOM-CVO trial (n=~4,000) for implantable GLP-1 agonist ITCA 650 in May 2016, which supported its submission of the potentially disruptive therapy in November 2016. As a pre-approval trial, the trial was not powered nor expected to demonstrate cardiovascular superiority, though Intarcia has raised the intriguing possibility of conducting a larger CVOT post-approval designed to demonstrate cardiovascular superiority. Certainly, the GLP-1 agonist market that Intarcia hopes to enter has grown more competitive in 2016 with Victoza already on the market offering cardioprotection and semaglutide poised to win approval by the end of 2017. That said, the underlying GLP-1 agonist market grew substantially throughout 2016 – catalyzed by the popularity of Lilly’s very patient-friendly once-weekly Trulicity (dulaglutide) – and we expect ITCA 650’s benefits of dosing burden reduction and built-in adherence as well as its expected lower per-day list price compared to currently available injectable GLP-1 agonists should help further grow the market. Bottom line, the GLP-1 market is poised for enormous growth in our view – it actually grew faster from a larger base in 2015 and 2016 will clearly be another very strong year for the class.
  
  • On the insulin side, Novo Nordisk announced topline results for the DEVOTE trial demonstrating cardiovascular non-inferiority for its next-generation basal insulin Tresiba (insulin degludec). The trial met its primary endpoint by demonstrating non-inferiority of Tresiba to Sanofi’s Lantus (insulin glargine U100) for the composite outcome of three-point MACE (non-fatal MI, non-fatal stroke, and CV death), with a hazard ratio of 0.91 in favor of Tresiba, though the relative risk reduction was not statistically significant. We’re curious if the signal toward cardiovascular benefit may be related to Tresiba’s impact on hypoglycemia risk reduction compared to Lantus and are eager to potentially learn more when full results are presented (at ADA 2017 in San Diego, we’d imagine). These resoundingly neutral results are long-awaited – the DEVOTE trial was initiated in response to the Complete Response Letter issued by the FDA for Tresiba in 2013. The requirement for a cardiovascular outcomes trial delayed Tresiba’s launch to early 2016, following the product’s late 2015 approval on the basis of interim data from DEVOTE. The neutral results from DEVOTE are not unexpected given the product’s earlier approval, but are reassuring nonetheless given the long controversy. Hopefully, these results will put the longstanding concerns about cardiovascular safety related to insulins to rest.

Treatment Guidelines Grapple with Positive CVOT Data

• The treatment of CVOT results in diabetes treatment guidelines and algorithms was a much debated question throughout 2016. The 2016 update to the AACE/ACE diabetes treatment algorithm at the very start of the year took a fairly conservative approach to the EMPA-REG OUTCOME results (other positive CVOT results were not yet available): The algorithm mentions a “possible benefit” of SGLT-2 inhibitors on cardiovascular disease but does not refer to a benefit on specific endpoints like reduced hospitalization for heart failure and does not recommend any prescribing changes, even in the specific population group tested. Thus, in April, the Canadian Diabetes Association became the first to make the bold move of substantially updating its diabetes treatment guidelines to reflect the EMPA-REG OUTCOME results. The 2016 CDA guidelines place Jardiance in a privileged position as a second-line therapy for patients with clinical cardiovascular disease. The guidelines recommend an “SGLT-2 inhibitor with demonstrated CV outcome benefit” for patients with cardiovascular disease if they are not at target on metformin therapy. In the guidelines’ more detailed discussion of diabetes drug classes, the document notes that only empagliflozin has demonstrated a cardiovascular benefit. The guidelines also noted that this recommendation is based on the most rigorous Grade A, Level 1A standard of evidence. Congrats to the Canadian board and thank you, for being a trailblazer on this.
  
  • The December release of the ADA 2017 Standards of Care was the first American set of diabetes guidelines to explicitly encourage the prescription of SGLT-2 Jardiance or GLP-1 Victoza to patients at high-risk for cardiovascular (CV) morbidity and mortality. The ADA guidelines are among the most influential diabetes treatment guidelines in the world (though the much-cited ADA/EASD joint diabetes treatment algorithm has yet to be updated since its last update in 2015) and this new recommendation is a huge win for both drugs. Notably, it came out very recently, on the last official day of Dr. Bob Ratner at ADA, and we imagine there is nothing coincidental about these being updated while he was still leading scientific inquiry at the large non-profit. The consideration of the EMPA-REG OUTCOME results in an increasing number of diabetes treatment guidelines is not surprising, as the diabetes world has had over a year to mull over the results – no doubt, Jardiance’s label being recently expanded with an indication for reduction of cardiovascular death no doubt prompted the update for Jardiance, but we note it was a big deal that Novo Nordisk also got the nod for Victoza since this, while expected to be announced by FDA, hasn’t been announced yet. While the inclusion of a recommendation for liraglutide therapy in patients with cardiovascular disease on the basis of the LEADER results may strike some as a bit surprising, as the results are not yet included on the label for Victoza, we see this is Dr. Ratner’s and others’ “expert opinion” weighing in (now was the best time for this since the guidelines won’t be changed again for some time, most likely, and presumably the panel believes that the lira update is a “when” not “if”, all else equal). Diabetes guideline committees have historically been rather conservative in their recommendations – indeed, the release of the EMPA-REG OUTCOME full results did not significantly affect recommendations for empagliflozin usage in the ADA’s 2016 Standards of Care – and we are happy to see this changing, which will be very important from an access perspective.
  • From hanging out on the conference circuit, one thing is for sure - cardiologists are excited about the EMPA-REG OUTCOME and will be prescribing the SGLT-2 class. From what we know, it feels like endocrinologists are ahead of cardiologists in terms of recognizing the CVD value from GLP-1 though we think they’ll be moving this direction as well with more results like LEADER, if they emerge. Our overall impression from ESC 2016 is that there is overwhelming excitement and interest among cardiologists for the SGLT-2 inhibitor class, and more modest enthusiasm for incretins or other diabetes drugs. Indeed, the Merck-sponsored corporate symposium on TECOS and the Novo Nordisk-sponsored symposium on LEADER (which also demonstrated impressive cardiovascular benefit!) was sparsely attended compared to the absolutely packed, standing-room-only Lilly/BI-sponsored symposia on EMPA-REG OUTCOME (though, to be fair, both the Merck and Novo Nordisk symposia occurred later in the day). As an attendee at the meeting put it, “Cardiologists want to look at empagliflozin as a cardiovascular drug with a glucose-lowering effect.” Indeed, the 2016 update to the ESC guidelines for heart failure recommend the use of empagliflozin to “prevent or delay the onset of heart failure or prolong life” in patients with type 2 diabetes – a much bolder recommendation than we’ve seen in diabetes guidelines to date. The FDA Advisory Committee meeting on EMPA-REG OUTCOME largely dismissed the heart failure benefit observed in the trial as it was an exploratory endpoint and was not adjudicated rigorously enough to warrant any definitive conclusions (as we understand it, that’s fairly hard to do!). Regarding the AACE/ACE guidelines, Dr. Alan Garber (Baylor College of Medicine, Houston, TX) suggested that the reduction in hospitalization for heart failure could not be listed as a benefit because it was not part of the study’s pre-specified primary endpoint – clearly the ESC guidelines writing committee had no such qualms.
  • At EASD 2016, many speakers wondered aloud: how crucial is it that we understand the mechanism of benefit? Several speakers felt that while it’s interesting and important to investigate the mechanism, it’s not so crucial that we must wait for a definitive answer before affecting clinical practice or adding positive CV results to drug labels for Lilly/BI’s Jardiance (empagliflozin) or Novo Nordisk’s Victoza (liraglutide). Dr. Inzucchi urged the committee charged with authoring the next iteration of the ADA/EASD diabetes treatment guidelines to consider EMPA-REG OUTCOME and other recent CVOTs, including LEADER, SUSTAIN 6, and even IRIS, despite lingering mechanism questions. Having data from EMPA-REG OUTCOME and LEADER readily available on the label for these drugs would be hugely helpful for patients and HCPs, and so we agree wholeheartedly with what these renowned thought leaders had to say:
    • “A stone falls today the same way that it fell 200 years ago, but our theory of gravity has changed dramatically. You don’t need to know how a drug works to benefit from it.” – Dr. Hertzel Gerstein
    • “One excuse at the Jardiance Advisory Committee was ‘we’re not quite sure about the mechanism’ – who cares?! While I applaud conservatism, it’s time to take action.” – Dr. Neil Poulter
    • “At a certain point it’s okay to be pragmatic and say even if we don’t know exactly how we’re saving lives, let’s save lives.” – Dr. Juris Meier
  • The point that reduction in death is the most important endpoint is well taken and ultimately convincing for many. Infamous cardiologist Dr. Steve Nissen (Cleveland Clinic, OH) expressed enthusiastic support for treatment with empagliflozin (and liraglutide) at ESC 2016, asserting that the results from EMPA-REG OUTCOME and LEADER are convincing enough to change clinical practice, largely because of their effect on mortality. As he put it: “If it was just an effect on MI, that would be one thing. But when people are actually living longer on the therapy, we better have a good reason not to give it as survival is the most important endpoint.” Indeed, despite the questions surrounding the mechanism of benefit, several members of the FDA Advisory Committee convened to discuss the expanded indication for Jardiance felt that CV death is arguably the most clinically meaningful and the “hardest” of the three outcomes within the 3-point MACE composite and that a reduction in CV death was worth seriously considering regardless of the primary endpoint outcome. At the meeting, highly regarded statistician Dr. Stuart Pocock characterized the cardiovascular death results as providing “overwhelming evidence of benefit” and “proof beyond reasonable doubt” that the benefit is valid.

Microvascular Complication Data in CVOTs

• In addition to the topline cardiovascular benefits, several CVOTs reported impressive renal benefit results as well. Renal results from EMPA-REG OUTCOME were presented at ADA 2016, demonstrating an impressive 39% risk reduction for diabetic nephropathy with Lilly/BI’s Jardiance (empagliflozin). The findings garnered a simultaneous NEJM publication – the second in less than a year associated with EMPA-REG OUTCOME, a very impressive feat. In the LEADER trial, Novo Nordisk’s Victoza (liraglutide) was associated with a 16% statistically improvement in time to first microvascular event (encompassing renal and ophthalmic adverse outcomes; 95% CI: 0.73-0.97, p=0.02), driven entirely by a 22% statistically significant improvement in renal outcomes (95% CI: 0.67-0.92, p=0.003). Novo Nordisk’s once-weekly semaglutide similarly demonstrated an impressive 36% risk reduction for renal complications in SUSTAIN 6. It’s a major understatement, from a patient and from a system perspective to say we are extremely pleased (elated!) to see evidence that certain diabetes drugs are able to address a number of diabetes comorbidities and complications in addition to glucose lowering, from renal complications to cardiovascular risk to obesity – notably, Novo Nordisk is even investigating a potential NASH indication for semaglutide and we believe that particularly with some regulatory guidance, we’ll begin to see more on addressing, managing, reversing, and preventing pre-diabetes.
• At the same time, worrisome increases in retinopathy risk were observed in SUSTAIN 6. In the trial, semaglutide therapy was associated with a 1.2% absolute risk increase and a whopping 76% relative risk increase for retinopathy complications. That said, many experts attributed the increased risk of retinopathy to the rapid glucose lowering associated with the potency of the semaglutide molecule. For context, despite a glycemic equipoise trial design, mean end-of-trial A1c was 1.05% lower among participants treated with 1.0 mg semaglutide compared to placebo. This happened in the early days of DCCT, which few really remember. We’re optimistic that the risk might be managed with more gradual titration, particularly among patients with a history of retinopathy, though we continue to look forward to amassing further expert opinions on this topic.

Bar for New Diabetes Drugs Continue to Rise

• In the context of demonstrated cardiovascular and renal benefit for existing diabetes drugs, the bar for new diabetes drugs reached new heights in 2016. This was a frequent point among presentations and panels featuring industry executives at several conferences that we attended throughout the year. At GTCBio 2016, Janssen’s Dr. James Tobin pointed out that the branded drugs that have demonstrated a cardioprotective benefit (Lilly/BI’s Jardiance [empagliflozin] and Novo Nordisk’s Victoza [liraglutide]) will be generic by the time current early-stage pipeline candidates reach the market, meaning that potential new products will need to be able to demonstrate an even greater value proposition to justify a branded price. In the same panel, Novo Nordisk’s Dr. Tomas Landh suggested that new potential diabetes drugs in this environment must also offer cardiovascular or hepatic benefits. Lilly’s Dr. Brian Bloomquist characterized this general approach to diabetes drug acquisition and development as “glucose-plus,” which he emphasized is absolutely critical to Lilly’s own approach as well. Similar sentiments were echoed by Novo Nordisk Chief Medical Officer Dr. Alan Moses and Sanofi Global Head of Diabetes R&D Dr. Philip Larsen at the Keystone Symposium on New Therapeutics in Diabetes and Obesity as well. At WCTD 2016, BI’s Global Head of Medical Affairs Dr. Maximilian von Eynatten suggested that prospective diabetes drugs may need to demonstrate cardiovascular non-inferiority versus a drug with a proven cardiovascular benefit, such as empagliflozin, in a CVOT – a high bar indeed, and one that we hope does not discourage further investment in the diabetes field.
• In response, Novo Nordisk updated its R&D strategic priorities and its early to mid-stage pipeline experienced a high attrition rate in 2016. The company has updated its R&D strategy to “apply an even higher innovation threshold.” As such, it will focus on (i) developing adjacent indications with high unmet need for its existing products (such as obesity for semaglutide); (ii) developing new diabetes medicines with “distinct differentiation or disruptive potential”; and (iii) developing drugs for new disease indications related to but distinct from diabetes and glucose regulation. We were very excited to see several areas of high unmet need included under this last umbrella: prediabetes, cardiovascular disease, NASH, nephropathy, type 1 diabetes intervention, and type 1 diabetes stem cell therapies. We see the decision to focus on indications beyond glucose management as confirmation of the growing recognition that new drugs in the modern diabetes era must offer benefits beyond glucose lowering. On the other hand, while we were disappointed to learn of the company’s decision to discontinue development of its phase 2 oral insulin candidate OI338GT (NN1953), presumably this was a consequence of the higher innovation threshold cited in the new R&D priorities, according to management. This decision followed management’s 2Q16 characterization of the phase 2a results for OI338GT as “generally encouraging” – the trial (n=50) demonstrated a 2.5 mmol/l (45 mg/dl) fasting plasma glucose reduction with both the oral insulin OI338GT and the Lantus comparator after eight weeks of treatment. That said, Novo Nordisk management acknowledged at the time that value proposition of the oral insulin was less clear than that of oral semaglutide, noting that the less potent oral formulation of insulin required much more peptide to reach sufficient bioavailability and that the target patient profile and positioning of oral insulin relative to injectable insulin and oral semaglutide was less clear. Though not specifically disclosed at this point, the company also noted that its early-stage pipeline would also face a number of additional adjustments to meet this higher innovation threshold. The number of phase 2 and phase 3 trials among Novo Nordisk’s development pipeline is beginning to dwindle as more late-stage products reach the regulatory submission stage and the company continues to cull its mid-stage pipeline prior to phase 3 advancement – the company also discontinued a phase 2 GLP-1/GIP dual agonist and a phase 1 oral insulin in 2Q16.
• Lilly declined to advance Transition Therapeutics’ GLP-1/glucagon dual agonist TT401 (LY2944876) into phase 3 in April. The move followed positive phase 2 results for the candidate and occurred in the context of a robust competitive landscape in which TT401 is the most advanced candidate. The phase 2 results demonstrated similar A1c reductions with TT401 vs. AstraZeneca’s GLP-1 agonist Bydureon (exenatide) and dose-dependent weight loss (up to 3.3 kg; 7.3 lbs) that was statistically superior vs. Bydureon at the highest dose (50 mg). While the weight loss results are somewhat encouraging, we imagine Lilly may have balked at the lack of an A1c-lowering advantage, and the candidate clearly did not meet Lilly’s (likely very high) internal bar for efficacy – the decision further underscores the rising bar for new diabetes drugs. We also wonder to what degree having to “share” the upside of a drug is less attractive to the pharmaceutical giants over time given that there are fewer profits to share. Lilly of course already shares profits for many of its drugs (but not Trulicity) with partner BI.

Diabetes Drugs Face Regulatory Challenges with the FDA

• 2016 was characterized by several regulatory delays and other challenges at the FDA: three month delays on the decisions to approve the label update for Lilly/BI’s SGLT-2 inhibitor Jardiance and the approval of GLP-1 agonist/basal insulin combinations Soliqua (insulin glargine/lixisenatide) from Sanofi and Xultophy (insulin degludec/liraglutide) from Novo Nordisk, plus a Complete Response Letter (CRL) for Novo Nordisk’s faster-acting insulin aspart. These frustrating events are underscored by a recent Tufts University study illustrating that diabetes drug development is now more challenging than ever; only 13% of diabetes drugs that begin clinical testing make it into phase 3 vs. 21% of drugs overall, and only 15% of diabetes drugs received FDA priority review in the past 10 years, versus 46% of non-diabetes, non-endocrine candidates. We continue to believe that under-resourcing at the FDA is a major driver of these delays though it is, of course, also under-resourced manufactures.
  
  • In August, the FDA announced that it would delay its decision on the indication expansion reflecting a cardiovascular mortality benefit for the SGLT-2 inhibitor Jardiance. The supplemental New Drug Application (sNDA) for the indicated was submitted on the basis of results from the EMPA-REG OUTCOME trial, which demonstrated an impressive 38% risk reduction for cardiovascular death and a significant 14% risk reduction in the three-point MACE primary outcome (non-fatal MI, non-fatal stroke, and CV death). A June 28th FDA Advisory Committee narrowly voted 12-11 vote in favor of the additional indication. with comments in favor of this expanded indication from our very own Ms. Helen Gao and Ms. Emily Regier, as well as from AACE. We initially speculated that this delay was due to the unprecedented nature of the indication and, as we hoped, the label update was ultimately approved 90 days later. Ultimately, we don’t think this delay was associated with any “real” problems, but only with the fact that the FDA is also extremely busy these days, given their larger volume of work.  
  • The FDA additionally requested three month delays for its decisions on the approval of the two GLP-1 agonist/basal insulin co-formulation candidates, Sanofi’s Soliqua (insulin glargine/lixisenatide) and Novo Nordisk’s Xultophy (insulin degludec/liraglutide). These announcements of delays came very close together, with the delay for Soliqua announced in late August and the delay for Xultophy announced in early September. Though some headlines positioned it as a loss for Sanofi to have spent funds on moving faster through FDA, it certainly turned out to be a smart move, since both products were ultimately approved in November within hours of each other! This was another win for FDA in our view. Soliqua’s delay was related somewhat to the product’s pen delivery device. Though Soliqua received a 12-2 vote in favor of approval at the FDA Advisory Committee meeting in May, with panelists expressing nearly unanimous confidence in its A1c-lowering ability and the importance of the reduced injection burden that comes with a combination drug, a number of concerns were raised surrounding Sanofi’s proposed pen delivery device - a yellow pen providing medications in a 2:1 ratio (with 10-40 units of insulin glargine and 5-20 ug of lixisenatide) and a green pen providing medications in a 3:1 ratio (with 30-60 units of insulin glargine and 10-20 ug of lixisenatide). Panelists focused on (i) use of color as the primary point of differentiation between the 2:1 and 3:1 dose ratio pens (a challenge, they said, for patients who are colorblind or have poor eyesight – in our view this wasn’t a very big deal since no patients would have both pens around at any given time); (ii) (apparently) confusing early pen labeling; and (iii) dosing nomenclature in “units” that describe the number of insulin glargine units without explicitly referring to the amount of lixisenatide to be dosed; we agree that could be confusing but this was ultimately addressed and approved it. The rationale for Xultophy’s delay (at this time the product had already been approved in Europe) was less clear, with Novo Nordisk management sharing only that it was “due to a technicality” and that no additional data or trials would be necessary. Ultimately, it won’t be as big a race to market as we had expected, since Novo Nordisk has decided to price Xultophy higher and focus on a smaller launch addressing the drug at a specific group, while Soliqua will be priced lower and aimed at a broader market. We are extremely excited for this new class to hit the streets! While there are no head-to-head studies yet, we would expect Xultophy to do better in a head-to-head – we would, however, expect both drugs to do significantly better than single agents.
  • In a disappointing and surprising turn of events, Novo Nordisk’s next-generation faster-acting insulin aspart (Fiasp) received a Complete Response Letter (CRL) from the FDA in October. Specifically, the FDA requested additional information related to the immunogenicity and pharmacology assay. Novo Nordisk is currently evaluating the contents of the letter to determine next steps. It’s unclear at this point whether Novo Nordisk will be required to conduct additional clinical studies for the resubmission, and the company has not yet provided any specific updates on the timeline for resubmission of the drug. Optimistically, Fiasp recently received a positive CHMP opinion from the EMA with a final decision expected in 1Q17 – we hope that the FDA’s concerns regarding faster-acting insulin aspart may be resolved in short order. If that happens, even though this generation isn’t expected to be the “be-all, end-all” we imagine lots of US patients will still try to get their hands on it if it is approved in the EMA.

Combination Therapies Charge Full Steam Ahead

• As noted, both Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) were approved by the FDA on November 21, within hours of each other. The race to market between these two basal insulin/GLP-1 agonist fixed-ratio combinations has been a nail-biter throughout 2016: The FDA held back-to-back Advisory Committee meetings in May 2016 (Xultophy; Soliqua) and then issued a three-month delay for each product in the fall (Xultophy; Soliqua), before finally approving both in the same afternoon. Of course the more interesting story now is not “who’s first?” but rather “how will this impact US diabetes care?” We’re very impressed that the ADA’s 2017 Standards of Care incorporate both products in the algorithm for type 2 diabetes combination therapy (thank you SO much to the ambitious team there as it is so hard for patients when this takes forever for commercial products to be reflected in guidelines), as these ADA guidelines were published less than a month after Xultophy and Soliqua approval. The ADA has enormous influence in both the US and abroad. Coupled with the tremendous clinical benefits that have been touted for this class – effective glycemic control, meaningful weight loss, and fewer side-effects compared to each drug as monotherapy – we’re hopeful that uptake of these advanced agents will proceed at a brisk pace. This class of basal insulin/GLP-1 agonist combinations has been one of the most highly-anticipated in our recent memory of the field, generating plenty of buzz at EASD 2016 and other conferences. We’ve also heard extremely positive endorsements of Xultophy and Soliqua post-approval: Dr. Bernard Zinman (Mount Sinai Hospital, Toronto, Canada) spoke to the unique synergy between a basal insulin and a GLP-1 agonist, which paves the way for superior efficacy and a milder side-effect profile; Dr. Phillip Home (Newcastle Diabetes Center, UK) pointed out that positive clinical results have been replicated several times for both combinations; and Dr. John Buse (University of North Carolina, Chapel Hill, NC) went so far as to say that it no longer makes sense to prescribe basal insulin without a GLP-1 agonist (the exception being price, more on that below). We’ve been excited about this class of agents – it really needs its own name, doesn’t it? – for quite a while, and our excitement is only amplified by the long-awaited FDA approvals of Xultophy and Soliqua.
  
  • In our research on pricing for both compounds, we learned that Sanofi plans to price Soliqua on par with other GLP-1 agonists (~$20-25/day), while Novo Nordisk plans to price Xultophy at a premium ($31/day). This $6-11 difference for every therapy day would amount to quite a lot of money saved over time with Sanofi’s fixed-ratio combination vs. Novo Nordisk’s though of course it is challenging to even estimate anything related to comparisons since it’s hard to know if the doses will be consistent between the two – also, we note the major caveat that these prices don’t reflect dosing or rebates or other patient assistance help. Still, these distinct pricing strategies are interesting in the context of clinical data – most evidence suggests there would be at least some clinical advantage for Xultophy due to the 24-hour nature of both Tresiba and Victoza. Many diabetes thought leaders have corroborated this opinion, though of course no head-to-head study has been done – from our view, it is more a question about how much better Soliqua will be in the “real world” than single agents, and we’re guessing the answer is quite a lot (as suggested by trials). Price and project cost-savings with Soliqua and Xultophy could hold major sway with payers, patients and providers – especially as diabetes care short-term costs continue to rise and more and more patients find themselves in health plans with high deductibles or other cost-sharing features. Sanofi may be trying to win access to formularies among PBMs by listing Soliqua at the same benchmark as already-available GLP-1 agonists – having the same price will certainly simplify matters for confused HCPs and patients and should be persuasive to payers who do not want to start patients on combo therapy due to single agents being cheaper. To be sure, Sanofi has a history of sacrificing net price for access, as demonstrated by the Lantus experience in recent years. In our view, patient access should be a priority given the tremendous benefits offered by these combination drugs – not only to A1c and body weight, but also quality of life (fewer side-effects, lower required insulin dose and risk of hypoglycemia). We’d love to see greater patient advocacy on this front to ensure that basal insulin/GLP-1 agonist combinations are well-reimbursed, and soon.
  • We must say, we’re thrilled that this class has gone from “gathering steam” to “full steam ahead” between 2015 (see last year’s reflections) and 2016. This has been quite the plot to follow, and we can’t wait to see what awaits these promising basal insulin/GLP-1 agonist fixed-ratio combinations in 2017. The first test will be to see if patient experience data from real treatment settings matches clinical trial data, and if it demonstrates superiority to injectable diabetes therapies currently on the market. While of course we understand that these combinations will not be the optimal choice for everyone, we’re optimistic that Xultophy and Soliqua will move ahead with flying colors. This may present more challenges than expected for Lilly’s once-weekly Trulicity and AZ’s Bydureon or all the GLP-1s and GLP-1 combos may continue to grow – we suspect the latter will be the case.
• 2016 also witnessed progress for SGLT-2 inhibitor/DPP-4 inhibitor fixed-dose combinations – namely AZ’s saxagliptin/dapagliflozin and Merck/Pfizer’s sitagliptin/ertugliflozin. AZ’s saxagliptin/dapagliflozin was approved by the EMA in 2Q16 under brand name Qtern. AZ’s also resubmitted the combination in the US in 2Q16, with an FDA decision slated for 1H17 – the product received a very surprising Complete Response Letter (CRL) from the FDA in late 2015. Our fingers are very crossed for an approval this time around, as AZ’s product has thus far shown a very favorable clinical profile and we know for many patients, taking merely a single very well-tolerated pill is much easier than more complicated regimens. Positive phase 3 results for Merck/Pfizer’s SGLT-2 inhibitor ertugliflozin were presented at EASD 2016, and the companies will be submitting three New Drug Applications (NDA) to the FDA: (i) ertugliflozin, (ii) ertugliflozin/metformin, and (iii) ertugliflozin/sitagliptin (Merck’s Januvia). It’s terrific to see Merck/Pfizer expanding this particular class of combination therapy with another option for patients, particularly given the expertise of both with PCPs and other HCPs. Forward momentum aside, Lilly/BI’s Glyxambi (empagliflozin/linagliptin) has been available in the US since March 2015 and yet Lilly has been fairly quiet about the first-in-class product, which raises concerns about the commercial environment surrounding this class. In rare commentary on Glyxambi during Lilly’s 3Q16 call, management cited low commercial coverage of the drug (~20%) as one reason for underwhelming uptake so far and acknowledged that investment in promoting the product has been limited since its launch, though the company planned to revisit its strategy following the approval of an expanded cardiovascular indication for standalone empagliflozin (Jardiance). We imagine saxagliptin/dapagliflozin and ertugliflozin/sitagliptin will face similar reimbursement challenges if approved, given the intensifying pricing pressures in the US and abroad. That said, these FDCs are most definitely products to watch out for in 2017. The superior A1c-lowering efficacy of these combos and the lower burden of a single pill and single co-pay could make these an extremely attractive oral option for patients as long as payers and HCPs don’t overly complicate the landscape by forcing patients to start on single agents (we hope to see data on this early). We also expect that AZ and Merck/Pfizer, especially, will invest much more heavily in establishing their combination products given that these companies have fewer other products competing for their diabetes-related resources and that DPP-4 inhibitor Januvia is a cornerstone of Merck’s business. Indeed, we’ve noticed that combination products are really driving DPP-4 inhibitor franchises and DPP-4 inhibitor class growth – we’re curious to see if and how new FDCs contribute to this trend.
• Beyond single-administration combinations, we also saw the first prospective clinical data for the co-administration of a GLP-1 agonist (AZ’s Bydureon [exenatide once-weekly]) and an SGLT-2 inhibitor (AZ’s Farxiga [dapagliflozin]) in DURATION-8. Dual therapy in DURATION-8 led to significantly greater A1c-lowering and weight loss vs. Bydureon or Farxiga alone. Investigators also found superiority for dual therapy vs. either monotherapy in terms of fasting plasma glucose, postprandial glucose, and systolic blood pressure. Perhaps the most exciting aspect of treatment that doses a GLP-1 agonist alongside an SGLT-2 inhibitor is the potential for additive or event synergistic cardiovascular (CV) benefit – Lilly/BI’s SGLT-2 inhibitor Jardiance (empagliflozin) is now indicated for the reduction of CV death, and Novo Nordisk has submitted a Supplemental New Drug Application (sNDA) to add a similar CV indication to the label for GLP-1 agonist Victoza (liraglutide). As more CVOT data is published for SGLT-2 inhibitors and GLP-1 agonists, we’ll likely be hearing even more on the potential CV super-benefits of SGLT-2 inhibitor/GLP-1 agonist combination therapy, but we know this is extremely early. What’s more imminent is that studies of two or more drugs in combination will be become an even bigger part of diabetes research – advanced agents with distinct mechanisms of action are set up well for synergy, so that we can attack this chronic condition from multiple angles and help patients achieve optimal health outcomes. As was true in 2015, many thought leaders are firmly in the camp of initiating combination therapy earlier in the course of diabetes progression – this was a major theme at EASD 2016, with compelling arguments made by Drs. Stefano Del Prato (University of Pisa, Italy) and Julio Rosenstock (UT Southwestern, Dallas, TX), among others. Of course, we remain intrigued by the possibility of a co-formulation of a GLP-1 agonist and an SGLT-2 inhibitor, though the different administration methods pose a challenge. We’re optimistic that perhaps Novo Nordisk’s oral formulation of GLP-1 agonist semaglutide or vTv Therapeutics’ small molecule oral GLP-1 agonist TTP273 may be combined with an SGLT-2 inhibitor in the future – though this of course is purely speculative and would be many years away.

Forward Progress in GLP-1 Agonist Innovations: Less or Eliminated Injection Burden with Implantable and Oral

• Innovative extended-release and oral GLP-1 agonists have made strides forward in 2016, with the potential to reduce or eliminate injection burden for some patients in the near future. In November, Intarcia announced the submission of a New Drug Application (NDA) for ITCA 650 (implantable exenatide mini-pump), a continuous, subcutaneous release of GLP-1 agonist exenatide for three or six months (the initiation and maintenance doses, respectively). Assuming a standard review process, we’d expect to see this product approved by the end of 2017. Given the novelty of implantable mini-pump drug delivery, we anticipate an FDA Advisory Committee meeting on ITCA 650 prior to a regulatory decision – we’ll be keeping an eye out for this. Clinical studies of ITCA 650 (all detailed in the whopping 1.3 million-page NDA) have shown the drug candidate’s superior A1c-lowering and weight loss vs. placebo, its superior A1c-lowering and weight loss vs. Merck’s DPP-4 inhibitor Januvia (sitagliptin, presented at ADA 2016), and cardiovascular (CV) safety in FREEDOM-CVO topline results (we’re very keen to see full results from this CVOT). Intarcia CEO Mr. Kurt Graves suggested that the continuous release of exenatide will be a critical selling point for ITCA 650 – the drug/device platform ensures that patients are getting the medicine, guaranteeing adherence and eliminating the need for daily or weekly injections. Many have characterized ITCA 650 as a disruptive technology and we’re extremely eager to see if the product will meet the market’s high expectations – we’re also extremely eager to see a therapy that if all goes well will actually address the adherence challenge, which has been a pervasive issue for all diabetes therapies since time began. We expect this implantable mini-pump device will be attractive for patients who seek to avoid frequent injections, and we continue to look forward to hearing more “real-world” HCP experiences on the implantation procedure (does it hurt? Can patients “feel” the pump after insertion? How frequent and troublesome are adverse events associated with implantation?). Disruptive technologies hold enormous promise and potential, but patient and provider reluctance to adopt new therapies in the absence of proper education and promotion can also pose significant challenges – we saw this with Sanofi/MannKind’s inhaled insulin Afrezza. Intarcia is a small company that has been intent on developing and commercializing ITCA 650 – its lead pipeline candidate – independently and thus, although some may emphasize that it does not have the same depth of resources as a multi-billion dollar company, we would also point out that it has the ability to be nimble and can avoid the pressure that can come at larger manufactures. Indeed, Intarcia has conducted a number of very favorable financing rounds (most recently $215 million in a first close of major equity financing in September and $206 million in a second close in December); the submission of ITCA 650 also triggered a $100 million milestone payment to the company. Additionally, as a smaller, entrepreneurial biotech firm, we expect Intarcia will be able to navigate the increasing complex diabetes and payer landscape with more flexibility than a larger, more established player that must divide its resources among many products and indications. All in all, we’re eager to see that a new, very different option will be available to patients very soon and we hope that the launch of ITCA 650 will expand the number of patients with diabetes who are on a GLP-1 agonist. On that note, we were also happy to hear from Mr. Graves that Intarcia plans to price ITCA 650 responsibly, somewhere in-between DPP-4 inhibitors and SGLT-2 inhibitors. – we’ll be expecting this in 2017.
  
  • We also look forward to further progress on the oral GLP-1 agonist front, led by Novo Nordisk’s oral semaglutide. The phase 3 PIONEER program for this oral GLP-1 agonist candidate is ambitious, to say the least: 10 studies, of which five had started recruiting participants as of the company’s 3Q16 update, with the rest scheduled to start soon (hopefully in 1H17). We were extremely impressed by the A1c efficacy and weight loss results from the phase 2 dose-ranging study for oral semaglutide, presented at EASD 2016. We expect that an oral formulation of a GLP-1 agonist will push the class to earlier use in the treatment algorithm. The strong A1c efficacy coupled with weight loss benefits and relatively low risk of hypoglycemia have contributed to the fast growth of the class, which has accelerated in the 11 years since AZ’s Byetta (exenatide twice-daily) first launched as new agents offer reductions in injection burden (the launch of Lilly’s patient-friendly once-weekly Trulicity catalyzed a renaissance of sorts in the overall GLP-1 agonist market when it launched in 2014). Still, GLP-1 agonists are currently largely introduced as a third-line option, following metformin and at least one oral agent, due to patient (and provider!) reluctance to initiate an injectable therapy. We expect oral semaglutide could be a very strong contender for a second-line option, as an alternative to a DPP-4 inhibitor or even an SGLT-2 inhibitor – the PIONEER development program certainly supports this with head-to-head trials of oral semaglutide with Lilly/BI’s SGLT-2 inhibitor Jardiance and Merck’s DPP-4 inhibitor Januvia. Oral GLP-1 agonist seems a more realistic proposition than oral insulin (which, notably, Novo Nordisk discontinued in 3Q16) mainly because GLP-1 agonists aren’t restricted by the same complex requirements for titration, therapeutic range, and bioavailability. Oramed illustrates this point well: The company’s oral GLP-1 candidate, which recently completed a phase 1b study, shows some promise, while its oral insulin showed mixed results in phase 2. Looking to an alternative approach, we were also pleased to see the continued progress of vTv Therapeutics’ oral small molecule GLP-1 agonist in 2016, with promising phase 1 data. The LOGRA phase 2 trial for the candidate recently reported positive (and quite promising!) topline results. Our ears will be peeled for the full results from vTv at ADA 2017, as we keep a close watch on oral GLP-1 agonists and their potential to shake up the field.
• GLP-1 agonists on the market are growing incredibly fast from an already-high base. Pooled revenue from the six big players – Novo Nordisk’s Victoza (liraglutide), Lilly’s Trulicity (dulaglutide), AZ’s Bydureon (exenatide once-weekly), AZ’s Byetta (exenatide twice-daily), GSK’s Tanzeum (albiglutide), and Sanofi’s Lyxumia (lixisenatide) – is rising substantially and consistently, up 26% year-over-year (YOY) in 1Q16, 29% YOY in 2Q16, and 22% YOY in 3Q16. We fully expect the class to surpass $4 billion in total sales for 2016. What this rapid growth indicates is that despite an increasingly robust commercial landscape, there’s plenty of room for many GLP-1 agonist products to do well commercially – and for patients to do better on this therapy (many already have but there also have been many adherence problems). In our view, ITCA 650 and oral semaglutide aren’t poised to grow stemming from stealing market share from competitors as much as enter the class at at a time when the compounds can spur further growth. A Diabetes Care paper published in October reported that only 5% of type 2 diabetes patients were using a GLP-1 agonist in 2013 – only 5%! From a cost/benefit perspective, this percentage is far too low considering the immense therapeutic potential  of GLP-1 agonists – that said, they need to be prescribed and taken optimally. We imagine in a decade from now, the market will be multiple billions of dollars larger and a significant percentage of patients using GLP-1 will be taking in combination with basal insulin and/or with SGLT-2s, or they will have it implanted, or will be taking it orally.

Sluggish Performance for Basal and Rapid-Acting Insulins

• Both the basal and rapid-acting insulin markets experienced underwhelming growth in 2016. This is disappointing but not surprising, as competitive pricing in the US remains the major obstacle. In 3Q16, the basal insulin market reached ~$2.6 billion (a 2% YOY increase). Sanofi’s Lantus (insulin glargine U100) remains the forerunner with 60% market share by value, followed by Novo Nordisk’s Levemir (insulin detemir; 25%), the next-generation basal insulins, Sanofi’s Toujeo (insulin glargine U300) and Novo Nordisk’s Tresiba (insulin degludec), both at 7%, and Lilly’s Basaglar (biosimilar insulin glargine; ~1%). The rapid-acting insulin market stood at ~$1.5 billion in 3Q16 (a 6% YOY decrease). By value, NovoLog remains in the lead with 50% of sales in the rapid-acting insulin market. Revenue for Lilly’s Humalog (insulin lispro) was close behind with 43% of the market, and sales of Sanofi’s Apidra (insulin glulisine) accounted for 7%.
• 2016 saw increasing market share gains from the next-generation basal insulins, Sanofi’s Toujeo (U300 insulin glargine) and Novo Nordisk’s Tresiba (insulin degludec). Toujeo has held a steady 14%-16% new-to-brand prescription (NBRx) share throughout 2016, and Tresiba has climbed to 12% NBRx share as of 3Q16, from essentially 0% at the start of the year. Old faithful Lantus’ NBRx share has held steady in 2016, leading the market with 45% NBRx share despite its patent expiry and declining revenue, and next-generation basal insulins appear to be largely drawing market share from Levemir. As of 3Q16, Levemir held 19% NBRx share, down markedly from 28% in January 2016. We expect the presence of next-generation basal insulins to increase even more in 2017, especially if the Tresiba receives a hypoglycemia indication on the basis of the SWITCH 1 and 2 trials.
  • Tresiba offers a slightly differentiated clinical profile to Toujeo and its predecessor basal insulins with a flexible dosing claim and a potential hypoglycemia benefit. Tresiba’s label currently contains a flexible dosing claim that is not present on Toujeo’s – we heard several leaders in the diabetes field praise this feature of Tresiba throughout the year, particularly for patients who may have more unpredictable schedules (such as shift workers). The phase 3b SWITCH 1 and 2 trials demonstrated significant reductions in severe or blood glucose-confirmed symptomatic hypoglycemia and nocturnal hypoglycemia with Tresiba therapy compared to Sanofi’s Lantus (insulin glargine) in patients with type 1 and type 2 diabetes, respectively. Novo Nordisk has submitted a supplemental application to both the FDA and the EMA for the inclusion of this data on Tresiba’s label. Decisions are expected by September 2017 and November 2017, respectively. The potential addition of a hypoglycemia benefit to the label would be a major boon as Novo Nordisk continues to negotiate the product’s formulary positioning and reimbursement with payers. Although FDA has long had trouble engaging patients on the “label front,” a hypoglcyemia indication would be a wonderful way to do so. While we strongly believe, based on personal experience as well as anecdotal discussions as well as dQ&A data (please write Richard.Wood@d-qa.com for details), that Toujeo offers a “real-world” hypoglycemia benefit due to its long and flat profile of action, the FDA’s standards for such a label claim are notoriously high and Sanofi has not yet conducted a dedicated study designed to demonstrate a hypoglycemia benefit for regulatory submission. We would have thought that real-time CGM use throughout its phase 3 trials may have showed the hypoglycemia benefit (although randomized controlled trials are renowned for everyone doing better) – we continue to want to see FDA Guidance evolve so that manufacturers use CGM routinely in trials.
  • It remains to be seen how Tresiba and Toujeo stack up against each other in terms of clinical value. Both products offer flatter action profiles and less hypoglycemia compared to current gold standard Lantus – although we were very doubtful historically that the advantages are as great as those of the first insulin analogs over NPH, having much more patient data today suggests that the benefits are indeed on that level. 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, it has been demonstrated in the phase 3b SWITCH 1 and 2 trials to significantly reduce hypoglycemia, and its label includes a flexible dosing claim. For us, it’s less about which is technically “better” of the two and more about how much better they both are compared to Lantus, Levemir, and particularly NPH. Having a “true” 24-hour insulin makes an incredible difference as a patient and we suspect that hypoglycemia improvements vary by patients, largely related to patient baselines. While Tresiba could overtake Toujeo in terms of NBRx share, we think much of these dynamics relate far more to formulary negotiation rather than RCT results. Tresiba did launch a full year beyond Toujeo in the US and progress on the commercial front has been fascinating to witness with both compounds and we expect high growth for 2016 as a whole. We’ll be watching closely to see how these dynamics shake out in 2017, especially following the exclusion of Lantus and Toujeo from both the CVS Health and UnitedHealthcare formularies; UnitedHealthcare is also excluding Tresiba. We think these payers who are banning use of next-gen insulins are missing the forest for the trees; some patients will benefit enormously from “better” basal insulin if they are at high risk for ambulance use and hospital use associated with severe hypoglcyemia. The payers should do more work in our view to figure out who that is – as we understand it, in the US alone, there were claims exceeding $7 billion in 2015 on severe hypoglcyemia in the hospital – more of the claims were for type 2 vs. type 1 patients.
• The rapid-acting insulin market has been slowing in recent quarters due to competition from the increasing popularity of the GLP-1 agonist class as an option for basal insulin therapy intensification and the growing use of SGLT-2 inhibitors to address postprandial excursions. Indeed, all three major rapid-acting insulin products experienced modest to negative growth as of the most recent earnings update in 3Q16: Humalog fell 9%, NovoLog fell 3%, and Apidra grew by 7% YOY as reported and the 2016 results will also reflect movement away from MDI we believe for type 2 patients. Time will tell whether this trend continues; we look forward to learning whether the launch of new products like Novo Nordisk’s faster-acting insulin aspart, Lilly/Adocia’s BioChaperone Lispro, and Sanofi’s biosimilar insulin lispro can revitalize the rapid-acting insulin market in future quarters, though based on data at ADA 2016 it appears that these upcoming products offer only modest improvements over current rapid-acting insulin analogs. From our view, it’s much more about what greater use of GLP-1 and SGLT-2 inhibitors are prompting – we believe that as a result of taking much better therapy earlier, the average lifespan will increase and ultimately after several “bolus” years (we aren’t, admittedly, sure how many), MDI will experience greater growth from a larger base.
• 2016 was a dramatic year for MannKind’s Afrezza (inhaled insulin) with a continued saga of changes in management. After an unexpectedly slow launch for the Sanofi/MannKind-partnered drug last year, early in January Sanofi terminated the partnership following lower-than-expected 2015 sales and larger-than-expected market challenges (largely due to reimbursement issues and many patient’s need for prior authorizations). On July 25, MannKind resumed full responsibility for marketing and distributing Afrezza, relaunching the drug with a copay assistance program and streamlined prior authorization program intended to overcome the access obstacles that had inhibited Afrezza sales thus far. As of MannKind’s 3Q16 update, there have been 200 new prescribers since the relaunch, nearly 4,000 unique prescribers, and a steady increase in sample requests, although new-to-brand prescriptions are down. To accelerate volume growth, management has launched several strategies to increase awareness of Afrezza’s benefits among patients and HCPs, filing with the FDA for a label change to put Afrezza into the category of “ultra-rapid-acting insulin” (a regulatory decision is expected in 4Q17) and moving ahead with several clinical studies including: (i) a phase 3, JDRF-partnered pediatric study slated to begin in 1Q17, (ii) a post-marketing safety study scheduled to start in 2H17, and (iii) dose optimization studies that will use CGM or Abbott’s Freestyle Libre Pro. We hope these strategies will help solidify the benefits of Afrezza for patients, and give the drug the uptick in sales that it has been waiting for since its launch in 2014 (MannKind has not reported Afrezza sales since 4Q15). This would need to happen fast, as it’s a race against time and MannKind’s cash reserves. In the meantime, the story is yet another illustration of the challenges for new products entering a crowded market amidst growing concerns about cost and a lesson on the need for thoughtful, well-executed launch plans that can address reimbursement and education challenges before they become major barriers to success.
• Adocia’s Lilly-partnered BioChaperone portfolio of insulin products continue to make progress. Results are expected in 4Q16 for ongoing clinical trials for two innovative new insulin formulations: a phase 1b trial for BioChaperone Lispro, a rapid-acting formulation of insulin lispro, and a phase 1/2 study of HinsBet, a rapid-acting formulation of human insulin. Also ongoing is a new phase 1 trial for BioChaperone Combo (insulin glargine/insulin lispro) in people with type 2 diabetes.  Assuming positive results from the present study, we’re curious to see whether BioChaperone Combo could eventually be included in Adocia’s partnership with Lilly.

Formulary Exclusions Extend into the Basal Insulin Arena for the First Time as First Biosimilar Insulin Launches in US

• 2016 ushered in a new era of formulary exclusions in the basal insulin field, with two of the largest pharmacy benefits managers (PBMs), CVS Health and UnitedHealthcare, announcing the exclusion Sanofi’s Lantus (insulin glargine) and Toujeo (U300 insulin glargine) from their 2017 formularies in favor of Lilly/BI’s biosimilar insulin glargine Basaglar. Basaglar launched in the US in mid-December with a list price 15% below that of Lantus – we’d venture that the rebates to secure exclusive formulary positioning were much higher. Express Scripts’ formulary list, by contrast, includes both Lantus and Basaglar. Lantus has faced increasing competitive and pricing pressures since its patent expiry in early 2015 so, with the launch of a biosimilar glargine option, CVS Health’s and United Healthcare’s formulary exclusions are not altogether surprising. That said, these decisions are potentially very disruptive to many patients as Lantus remains the unequivocal market leader within the basal insulin market, both in terms of value as measured by sales (64% as of 1Q16) and volume as measured by new-to-branch prescription (NBRx) market share (45% as of 1Q16). Unlike generics, biosimilar insulins are a new beast and some have expressed concerns about safety and quality control for these products, given the complexity and delicacy of the insulin manufacturing process – it remains to be seen how providers and patients will understand biosimilars. Formularies have typically not excluded any of the basal insulins, though previous formulary exclusions have significantly shifted the rapid-acting insulin landscape (with Express Scripts’ favoring Lilly’s Humalog [insulin lispro] and CVS Health favoring Novo Nordisk’s NovoLog [insulin aspart], to name a few examples). This new era of basal insulin formulary exclusions signals that the intense pricing pressures of the last few years in the insulin field are unlikely to abate and that we may begin to see a period of significant net price erosion – echoing the rapid-acting insulin field – as excluded products compete to regain positioning.

SGLT-2 Inhibitors: Complicated Story with Steady Stream of Safety Warnings

• Despite the unprecedented cardiovascular benefit data for SGLT-2 inhibitor Jardiance (empagliflozin), the SGLT-2 inhibitor class experienced slightly underwhelming sales in 2016. Overall year-over-year class growth totaled 47%, 49%, and 33% in 1Q16, 2Q16, and 3Q16, reaching $692 million in 3Q16. While management at both AZ and J&J remained staunchly positive about their SGLT-2 inhibitor franchises in their 3Q16 updates, Lilly management did express some disappointment at lower-than-expected volume growth. The 33% YOY class growth in 3Q16 is the lowest quarterly YOY increase since the launch of the class in 2012, though a flattening of growth is not entirely unexpected for a new drug class now in its third year. On the other hand, many forecasted that the EMPA-REG OUTCOME data (which showed a CV benefit to Lilly/BI’s Jardiance [empagliflozin]), alongside the possibility of a cardioprotective class effect, would catalyze a significant jump in SGLT-2 inhibitor uptake and sales. We’re curious if this relatively modest growth may be attributed to a degree of reluctance in the diabetes field to fully embrace the CV benefit found in EMPA-REG OUTCOME due to the uncertainty surrounding the mechanism of benefit. If so, presumably that will be a short-term issue. We imagine for much for 2016, this discomfort translated into fewer HCPs prescribing SGLT-2 inhibitors or recommending them whole-heartedly, despite the high number of patients who would greatly benefit from a drug that lowers glucose, promotes weight loss, and lowers risk for CV events. We expect that the FDA approval of an expanded indication for cardiovascular death reduction at the very end of the year will help increase awareness of the CV benefits and increase uptake of the drug – and likely boost the performance of the class as a whole. The inclusion of the CV benefit in the ADA 2017 Standards of Care should improve comfort and familiarity with the cardiovascular benefits of the class among endocrinologists and primary care physicians as well. We look forward to findings from the DECLARE trial for AZ’s Farxiga (dapagliflozin, scheduled to complete in April 2019) and the CANVAS trial for J&J’s Invokana (canagliflozin, scheduled to report at ADA 2017 in San Diego) to potentially confirm a cardioprotective class effect.
• Safety warnings for the SGLT-2 inhibitor class continued to emerge throughout 2016, which likely further contributed to wariness of the class among some patients and providers. In May, the FDA initiated an investigation into a potential increased risk of lower limb amputations associated with J&J’s Invokana (canagliflozin) and Invokamet (canagliflozin/metformin), based on an interim analysis of the CANVAS CVOT (we look forward to learning more when results from CANVAS are reported at ADA 2017 in San Diego). In June, the FDA strengthened the acute kidney injury warnings for Invokana and AZ’s Farxiga (dapagliflozin). Notably, neither of these additional warnings apply to Jardiance – indeed, the positive renal data from EMPA-REG OUTCOME suggests that empagliflozin confers a long-term renal benefit. This string of safety concerns for SGLT-2 inhibitors follows the high-profile DKA controversy associated with the class in the second half of 2015 – culminating in the addition of warnings of DKA risk to labels of all three drugs by the FDA in December 2015 – and the addition of a bone fracture risk warning to Invokana’s label in September 2015. The seemingly steady stream of safety concerns that have emerged for the class in the few years since its approval in 2012 have led some to urge caution with the “new kid on the block.” On the other hand, we’re optimistic that the DKA risk at the very least is manageable with dedicated patient and provider education efforts, particularly regarding their use in patients on insulin. We do think education must be far better than it currently is; the dQ&A data on this front that we reported last year was quite shocking (contact richard.wood@d-qa.com for more information). The other safety concerns appear to be less well understood and we hope that results from the CANVAS CVOT for Invokana (expected to report at ADA 2017) and the DECLARE CVOT for Farxiga (expected to complete in April 2019) will help further characterize the level of risk – see our CVOT timeline for an overview of ongoing trials. In the meantime, we expect Jardiance may see a boost in performance within the class in 2017, given its unique new cardiovascular indication and its lack of safety warnings for lower limb amputation, acute kidney injury, or bone fracture risk.

Uncertainty Remains in Type 2 Drugs for Type 1

• While 2016 featured promising presentations of data on the use of SGLT-2 inhibitors in type 1 diabetes, the field is still far from consensus on their utility. At ADA 2016, Janssen’s Dr. Maria Alba presented additional results from a study of Invokana in type 1 diabetes patients, which found that the agent significantly reduces glycemic variability – most notable was a 15% improvement in time-in-range. We were happy that Janssen made use of CGM in this study, and also that patient satisfaction data was collected and analyzed. Due to safety concerns over euglycemic DKA and severe hypoglycemia, a lower dose of SGLT-2 inhibitor is recommended for patients with type 1, but fortunately, this trial showed striking benefits even in the lower dose (100 mg) canagliflozin arm. We’re optimistic from our end that there’s potential for SGLT-2 inhibitors to enhance type 1 diabetes care – the highly-respected Dr. Anne Peters has been one of the foremost proponents of their use and has outlined her personal protocol to minimize the DKA risk in type 1 patients. On the flip side, we’ve heard some opposition as well. Dr. Mick Kumwenda (NHS Trust, North Wales, UK) has voiced concerns over the DKA risk and lack of sufficient evidence on SGLT-2 inhibitors in type 1, ultimately arguing that the risks outweigh the possible benefits. On the other hand, a major theme at ADA 2016 was the dearth of adequate type 1 diabetes drugs: Dr. Jeremy Pettus (University of California San Diego, CA) shared that SGLT-2 inhibitors improve quality of life for his type 1 patients by “taking away some of the chaos.” Separately, at ADA Postgrad, Dr. Anne Peters (USC, Los Angeles, CA) shared an extremely positive testimonial from a patient in Janssen’s Invokana in type 1 study: The takeaway? Reduced glycemic variability and a lower required insulin dose meaningfully affect patient satisfaction. So, despite ongoing controversy and criticism, we look forward to further explorations of how this relatively new drug class can make an impact in type 1 diabetes. Proponents in the field aren’t giving up either. We heard a very interesting presentation at CMHC 2016, in which Dr. Cres Miranda (University of Nevada, Reno, NV) suggested that one reason Invokana may work well as a type 1 therapy is that in addition to inhibiting SGLT-2, it is also a partial inhibitor of SGLT-1.
• Sanofi/Lexicon’s sotagliflozin is leading the charge of SGLT-1/SGLT-2 dual inhibition, with Lexicon conducting studies in a type 1 patient population, and seeing promising results. There are few companies with such dedicated investment in a type 1 diabetes drug right now, so we’re excited by sotagliflozin’s prospects following a string of positive clinical data in last quarter of the year. Two pivotal phase 3 studies of the dual inhibitor in type 1 participants have made headlines – topline results from inTandem2 were released just recently, while inTandem1 released topline results in September. The data points to sotagliflozin as an effective A1c-lowering agent on top of optimized insulin therapy with no significant increase in hypoglycemia (but no decrease in hypoglycemia either). Additionally, the inTandem4 phase 2 dose-ranging trial and a JDRF-partnered phase 2 trial of sotagliflozin in younger, less-well managed patients demonstrated improvements to postprandial glucose and time-in-range (though the latter trial failed to meet its primary endpoint). DKA is of course a primary concern with SGLT-2 inhibition in type 1 diabetes, but sotagliflozin has shown low DKA event rates thus far and Lexicon management has been pleased with the drug candidate’s safety profile – nonetheless, as noted, we continue to believe that thoughtful presentation of the benefit-risk profile, including the DKA risk, and concerted education efforts will be necessary for both the FDA and the public. Citing clinically-meaningful reductions in systolic blood pressure, management has also expressed optimism at the possibility of a CV benefit stemming from sotagliflozin, though a CV outcomes study would be much, much further down the line. Lexicon will definitely be presenting more clinical findings on sotagliflozin at ADA 2017, which ideally will include full results from inTandem1 and inTandem2. We also look forward to results from the larger phase 3 inTandem3 exposure study, which is expected to report in mid-2017. Sotagliflozin is our major hope when we think about next-generation pharmacotherapies for type 1 diabetes. We also think the compound is a textbook case of the importance of outcomes #beyondA1c as described in our piece written on the recent phase 2 results.
• Prospects seem bleak for GLP-1 agonists in type 1 diabetes management. We had a sense of this heading into 2016, following Novo Nordisk’s decision not to pursue a type 1 diabetes indication for Victoza (liraglutide), and the notion was only confirmed by presentations of ADJUNCT ONE and ADJUNCT TWO at EASD 2016. Liraglutide did produce modest reductions in A1c, body weight, and insulin dose requirements, but there was also a worryingly high incidence of adverse events ranging from dose-dependent nausea, to vomiting, to symptomatic hypoglycemia, to hyperglycemia with ketosis and DKA. We’re disappointed that these trials didn’t make use of CGM the way J&J’s trial did for canagliflozin in type 1 (CGM tools perhaps weren’t available or as widely-used when the ADJUNCT program began) and believe that could well have been a major downfall. We are also unsure about the decision to test the same dosing as is indicated for type 2 patients – 0.6, 1.2, and 1.8 may not have been the best rates. To boot, we do not think the field in general really “gets” the complexity of changing insulin dosing when taking on new type 2 drugs for type 1 patients. It’s not impossible, but it’s lot different from someone on metformin starting GLP-1 who doesn’t have to deal with the changes in insulin dosing required. We maintain that CGM and time-in-range data could have made insulin dosing easier to optimize, which for many patients may have addressed the severity of hypoglycemia-related safety concerns. GLP-1 agonists could be incredibly useful treatments for some type 1 diabetes patients, so in our view, more research to identify which patients stand to benefit the most from the risk/benefit trade-off would be great to see. Early indications suggest that patients with some level of C-peptide did better on liraglutide than those without. That said, we have little confidence that industry will invest in this research any time soon – it’s likely that companies will follow Novo Nordisk and decline to seek type 1 diabetes indications for their GLP-1 agonist products, at least in the near-term. That’s also driven by the small size of the type 1 market and the prevailing (and incorrect) view that type 1 patients do not need too much help on the new therapy front.

Another Big Year for Novo Nordisk

• As in years past, Novo Nordisk was a recurring name in diabetes headlines throughout 2016. Perhaps most notable are the company’s two major CVOT presentations, which stole the show at ADA and EASD. The 13% risk reduction for three-point MACE (non-fatal MI, non-fatal stroke, and CV death) shown in the LEADER trial was met with resounding applause at ADA 2016, and the company has since filed a Supplemental New Drug Application (sNDA) with the FDA for an expanded Victoza (liraglutide) indication that reflects CV benefit. Adding to this victory, the ADA has recommended liraglutide for type 2 diabetes patients at high-risk for CV death in its 2017 Standards of Care, even before the FDA has granted the label change. Full results from SUSTAIN 6 were a highlight of EASD 2016 – semaglutide showed a whopping 26% risk reduction for three-point MACE. Other newsworthy moments for Novo Nordisk include: The FDA approval of Xultophy (insulin degludec/liraglutide); The long-awaited launch of Tresiba; Topline results from the DEVOTE CVOT indicating non-inferiority for Tresiba (insulin degludec) vs. Sanofi’s Lantus (insulin glargine), with full results expected at ADA 2017; Submission of hypoglycemia data from SWITCH 1 and SWITCH 2 for the Tresiba label, and; A steady stream of data from the phase 3 SUSTAIN program for once-weekly GLP-1 agonist semaglutide, culminating in the presentation of the full program at EASD 2016; Submission of once-weekly GLP-1 agonist semaglutide to the FDA and EMA. Fiasp, or faster-acting insulin aspart, received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP). This endorsement bodes well for the next-generation prandial insulin’s EMA approval (to be decided in 1Q17), despite a disappointing Complete Response Letter (CRL) from the FDA. Lastly, we were happy to read Novo Nordisk’s position statement on the affordability of diabetes drugs in America – this hot-button issue is reaching a boiling point, especially as it pertains to insulin costs, and we’re pleased to see industry step forward to take action toward increasing price transparency. Listing some of Novo Nordisk’s 2016 milestones reminds us of progress made in diabetes therapy these past 12 months – many of these milestones are reasons for the field to celebrate, and we look forward to more progress in 2017. With Mr. Lars Rebien Sørensen stepping down as Novo Nordisk CEO, we wish incoming CEO Mr. Lars Fruergaard Jørgensen and the new management team best of luck in the year ahead – we believe the company is extraordinarily lucky to have leader Mr. Jakob Riis running North America, which is a much harder position in our view than CEO. We expect to see great collaboration between the two leaders.

Lilly Hits Jackpot with Trulicity, On the Grind to Establish Jardiance

• GLP-1 agonist Trulicity (once-weekly dulaglutide) was an indisputable bright spot for Lilly in 2016. Trulicity sales hit $144 million in 1Q16, marking an eight-fold year-over-year (YOY) increase from 1Q15, $201 million in 2Q16 (a five-fold YOY increase), and $244 million in 3Q16 (a three-fold YOY increase). Excluding Trulicity revenue, Lilly’s diabetes portfolio grew <1% YOY in 3Q16, but with Trulicity boosting business, the overall portfolio grew 14% YOY to $1.4 billion. Clearly, the GLP-1 agonist is a key growth driver for the company. With its more patient-friendly pen designed by IDEO and once-weekly dosing, Trulicity is making inroads within the GLP-1 agonist class – its market share by value was 13% in 1Q16, 16% in 2Q16, and 19% in 3Q16 ­compared to only 6% in 2015 – and is also catalyzing growth for the class as a whole. We expect Trulicity’s upward trajectory to continue to benefit from enthusiasm regarding the application (if less so from the actual molecule) though we do believe basal/GLP-1 combinations may slow growth onto Trulicity (while it is unlikely people would go off Trulity, patients going on it may slow with new choices). Notably, Lilly’s 2017 financial guidance lists the GLP-1 agonist product as an important growth driver, alongside newly-launched biosimilar insulin glargine Basaglar (which was already marketed ex-US as Abasaglar), BI-partnered SGLT-2 inhibitor Jardiance (empagliflozin), and flagship product Humalog (insulin lispro).
• The company continues to work toward establishing the Jardiance franchise, and the recent FDA approval of a CV indication should be a great boost in 2017. While prescriptions and sales of the SGLT-2 inhibitor did not increase as much as expected following the surprise cardioprotection shown in EMPA-REG OUTCOME, we expect this will change in 2017 given that throughout 2016, the CV benefit was not yet included on the drug label. Now that Jardiance has become the first type 2 diabetes drug indicated for the reduction of CV death, and now that Lilly/BI are making a dedicated effort to educate patients and providers (including cardiologists along with endocrinologists and primary care physicians) on the product’s CV benefits, we’re expecting greater uptake in 2017. While providers depend on drug labels and professional guidelines to make treatment decisions, especially for a chronic condition as complicated as diabetes, we think most patients are very unaware of label changes and we think this potential improvement for greater patient awareness could drive greater use as well – though this would have to be very intelligently done. The ADA recommending empagliflozin for type 2 diabetes patients at high-risk for CV death in its 2017 Standards of Care is another big win for Jardiance, for BI/Lilly, as is the FDA approval of Synjardy XR, which is a combination of Jardiance and extended-release metformin. We look for Synjardy and Synjardy XR to soon join Jardiance as diabetes drugs also indicated for their CV benefit although we do not know what the exact timing will be.

A Challenging Year for Sanofi

• Sanofi experienced a challenging year in 2016, with overall year-over-year (YOY) diabetes sales falling each quarter (-5% in 1Q16, -7% in 2Q16, and -2% in 3Q16 as reported). During the company’s 2016 earnings updates management framed these decreasing sales in relatively optimistic terms as “only modest decline,” since Sanofi’s financial guidance (revised in 3Q15) forecasted declining sales for the company’s diabetes portfolio of 4%-8% each year through 2018. The continued downward trend of Sanofi’s diabetes portfolio is largely attributable to the fall of flagship basal insulin Lantus following its 2015 patent expiry: Lantus sales have experienced double digit negative YOY growth for the past three quarters of the year (-12% in 1Q16, -14% in 2Q16 and -11% YOY in 3Q16 as reported). We believe that Sanofi/Regeneron’s PCSK9 inhibitor Praluent will eventually achieve better sales for the company’s now-combined diabetes and cardiovascular disease business unit, though the product’s uptake has been slow thus far, primarily due to reimbursement challenges and a relatively narrow indication ahead of cardiovascular outcomes trial results. We look very forward to seeing how patients with diabetes do in this CVOT - there should be reports on thousands of people with diabetes. As a reminder, people with diabetes have so many challenges on the cardiovascular, especially cholesterol, front and many cannot take traditional statins. That said, even people with familial hypercholesterolemia have had a very hard time getting the drug despite an incredibly strong, motivated, coordinated advocacy population. Another significant bright spot is the recently-approved GLP-1 agonist/basal insulin co-formulation Soliqua (lixisenatide/insulin glargine; Suliqua in Europe), perhaps one of the most highly-anticipated new classes in diabetes. Soliqua/Suliqua will be priced at parity to other GLP-1 agonists on the market, foreshadowing great potential for market growth once the product hits US and EU markets in the coming weeks; while it remains to been seen how the product will fare against Xultophy (liraglutide/insulin degludec), its competitor from Novo Nordisk (FDA-approved the very same day!), we believe the pricing strategy that Sanofi has taken will bode well for the drug, broadly speaking. Novo Nordisk has essentially said that it is not focusing on substantial early sales of Xultophy – it may be able to garner a cardiovascular benefit label eventually, or, due to the 24-hour nature of both compounds in Xultophy (Tresiba and Victoza), it may be able to garner results that could prompt a higher assessment in value. For now, we are enthusiastic about both compounds relative to either “just” GLP-1 or basal insulin and believe that both could do well commercially, though the pricing strategy for Xultophy seems to imply that early sales will be relatively low and that Novo Nordisk is just fine with that.  
• In very positive news, this September Sanofi announced the launch of Onduo, a joint venture with Verily Life Sciences (formerly Google Life Sciences) to develop “comprehensive diabetes solutions that combine devices, software, medicine, and professional care.” The combined investment is a whopping ~$496 million, with 50% of the funds coming from each company. As of yet there are no product details to report, but the company’s focus, according to www.Onduo.com, is to “use data to help people with diabetes live their best life.” There is so much potential on this front, and we speculate that Onduo products could include: (i) Bluetooth-enabled insulin pens/delivery devices; (ii) diabetes and lifestyle coaching apps; (iii) pattern recognition and insulin dose titration software; (iv) novel data displays that integrate medication, glucose, activity, food, CVD risk information; and (v) provider dashboards for population management, patient communication, and clinical decision support. The announcement lists an array of potential avenues, but with few specifics: providing tools to make dealing with diabetes less burdensome; data-driven patient support and devices; improved medication management; improved habits and goals; and connecting the dots for HCPs on the ‘moments of truth’ that happen outside of the clinical setting. Sutter Health of Northern California and Allegheny Health Network of Western Pennsylvania are among the first healthcare networks to test the “Onduo platform” with HCPs and people with type 2 diabetes in a clinical care setting. The platform hopes to expand to type 1 diabetes in the near future. Both organizations bring some scale, sporting 3+ million patients and 1,100+ physicians, respectively. This suggests an enterprise business model where payers, health systems, employers, and governments are Onduo’s key clients, something that was confirmed in our interview with Onduo’s intense, impressive new CEO Dr. Joshua Riff.  This partnership is a bold but important bet for Sanofi, given recent sales declines stemming from greater pricing pressure and tough competition in diabetes drugs despite the explosion in prevalence. We think Onduo’s focus on services and between-visit care is smart and absolutely where the field must move – there is simply no other option, given the trends in patients (growing) and the trends in providers and their time (shrinking).

Roadblocks Decelerate PCSK9 Inhibitors

• Reimbursement and access challenges for PCSK9 inhibitors led to underwhelming sales for a class widely touted as having blockbuster potential. The PCKS9 inhibitor story is largely defined by the incredibly fast progression from gene discovery, to drug development, to commercially-available therapies. Now, market challenges are slowing down progress for PCSK9 inhibitors. During 2016, the class sales were widely characterized as tepid; specifically, the “class” sales totaled $29 million, followed by 2Q sales of $51 million, and 3Q sales of $79 million. Although in absolute terms these are low, the growth is positive and we do think CVOT results could be transformative. Amgen first broke out Repatha (evolocumab) sales in 1Q16, when the PCSK9 inhibitor posted $16 million. This revenue grew 69% sequentially to $27 million in 2Q16, and 48% sequentially to $40 million in 3Q16. Sanofi/Regeneron’s Praluent (alirocumab) posted $13 million in 1Q16, which rose 75% sequentially to $24 million in 2Q16, and 67% sequentially to $39 million in 3Q16 – the sales have been truly neck and neck of late! Still, we might’ve expected steeper sales growth from agents so new, and so exciting in their LDL-lowering capability. The high prices and very poor reimbursement of PCSK9 inhibitors are two stalwart obstacles. Indeed, this was a major point of discussion during Sanofi’s 3Q16 earnings call, and it was cited by Pfizer management as one contributing factor in the decision to discontinue phase 3 bococizumab; this was severely disappointing news. Although safety concerns that arose in the phase 3 program contributed as well, we believe the weak commercial environment drove the decision. We learned at CMHC 2016 that 80-90% of requests for PCSK9 inhibitor coverage are denied – even after extensive appeals, only ~27% of patients with private insurance and ~46% of Medicare beneficiaries are reimbursed. Amgen and Sanofi/Regeneron will have to get more payers on board if they want to see sustainable sales growth for their products – we believe this will happen once there are better indications on the CVD front. We believe that more advocacy from patients and providers could help influence better coverage of PCSK9 inhibitors though the advocacy community within familial hypercholesterolemia is very impressive already as well as very well coordinated (diabetes nonprofits could benefit from watching this smaller population though they do not have so much heterogeneity within the patient troops that makes the job challenging). With their demonstrated potent LDL reduction efficacy, we’re optimistic in the potential of these agents to address residual cardiovascular in many patients with diabetes (though of course cardiovascular outcomes data will need to corroborate their benefit), and the question now is how to exponentially expand access.
• We’re waiting eagerly for CVOT results from both Repatha and Praluent. At AHA 2016, we learned that the FOURIER study for Amgen’s Repatha is wrapping-up and will likely report at ACC 2017. This will be the first CVOT to report for a PCSK9 inhibitor, and we’re expecting very positive results. In a recent interim analysis of Sanofi/Regeneron’s ODYSSEY Outcomes trial, an independent data monitoring committee suggested that ODYSSEY Outcomes continue as planned, which was somewhat disappointing because Sanofi management had hinted at the possibility that the trial would end early contingent overwhelming evidence of benefit from the interim analysis. Clinically-meaningful LDL reduction, in conjunction with pooled ODYSSEY data that has shown Praluent to decrease CV risk factors, led us to believe that alirocumab might have a clear cardioprotective benefit – of course, some experts would point out that LDL cholesterol is still just a surrogate endpoint and advise caution. We’ll have to wait a little longer now for a conclusive answer…ODYSSEY Outcomes is scheduled to complete in February 2018. The termination of SPIRE-1 and SPIRE-2 (CVOTs for Pfizer’s now-discontinued bococizumab) was another disappointment in the PCSK9 inhibitor world. Unlike FOURIER and ODYSSEY Outcomes, Pfizer’s trials were designed to investigate both primary and secondary CV prevention, enrolling a subgroup of participants at lower-risk for CV events. Without this trial, and given the existing reimbursement challenges for this very-expensive class, we imagine that widespread use in patients with high cardiovascular risk but no pre-existing cardiovascular disease is many years away.

2. Most Highly Read Reports

• ADA 2016 Full LEADER Results – Themes on mechanism of benefit, clinical and drug development implications, and the broader FDA CVOT requirement; Full coverage of results and discussant presentations
• FDA approves new indication for Lilly/BI's Jardiance (empagliflozin) for the reduction of cardiovascular death – Jardiance is the first diabetes medication to receive a cardiovascular indication on its label
• FDA approves Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) within hours of each other – Both approvals follow three-month delays; Xultophy and Soliqua to share first-to-market status within highly-anticipated class of basal insulin/GLP-1 agonist combinations; Only one of two SoloStar pens for Soliqua approved
• Early pricing strategies for Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) ­– Sanofi will price Soliqua at parity to other GLP-1 agonists; Novo Nordisk will price Xultophy at a premium; New basal insulin/GLP-1 agonist market expected to reach $1-3 billion over the near- to medium-term and higher long-term
• Novo Nordisk announces topline SUSTAIN 6 results demonstrating a cardioprotective benefit for semaglutide – Semaglutide significantly reduced the risk of the primary three-point MACE endpoint (cardiovascular death, non-fatal MI, and non-fatal stroke); Safety and tolerability consistent with previous findings
• FDA Advisory Committee Meeting: Label Update for Lilly/BI’s Jardiance (empagliflozin) and Synjardy (empagliflozin/metformin) – Expanded report with Close Concerns’ questions on the implications of the vote – where do we go from here?
• AACE/ACE publish updated type 2 diabetes management algorithm – Updated with comments from committee members Drs. Timothy Garvey and Alan Garber on Lifestyle Therapy section and other changes to the guidelines
• FREEDOM-CVO demonstrates CV non-inferiority for Intarcia’s implantable GLP-1 agonist ITCA 650 – Non-inferior effect on four-point MACE (CV death, non-fatal MI, non-fatal stroke, and hospitalization for unstable angina) with ITCA 650 vs. placebo in ~4,000 patient, 1.2-year trial
• Novo Nordisk receives FDA Complete Response Letter for faster-acting insulin aspart – CRL cites concerns with assays for immunogenicity and clinical pharmacology data; Unclear at this point whether additional trials might be necessary and what updated resubmission timeline might be
• FDA strengthens acute kidney injury warnings for J&J’s Invokana and AZ’s Farxiga – Search of Adverse Event Reporting System found 101 cases of acute kidney injury with both drugs from March 2013-October 2015; No sign of increased risk in EMPA-REG OUTCOME

3. What We Got Right/Expected

• An expanded indication for Lilly/BI’s Jardiance (empagliflozin) reflecting the CV benefits shown in EMPA-REG OUTCOME
• Persistent and growing interest in combination therapy, especially fixed-ratio combinations (i.e. Xultophy and Soliqua)
• Rising bar for new diabetes drugs, going beyond glucose-lowering effects
• Continued pricing pressure in the US, especially surrounding insulin
• Impressive GLP-1 agonist class growth, driven by Lilly’s Trulicity
• Continued SGLT-2 inhibitor class growth, though at perhaps a more sluggish rate than expected following EMPA-REG OUTCOME
• Increasing traction for CVOTs and larger emphasis on CV outcomes in diabetes
• Decreased momentum for type 2 drugs in type 1 diabetes care
• Ongoing struggles/sluggish sales for Afrezza

4. What We Got Wrong/Did Not Expect

• Cardioprotection shown in both LEADER and SUSTAIN 6
• ADA guidelines so quickly recommending  SGLT-2 Jardiance and GLP-1 Victoza for type 2 diabetes patients at high-risk for CV death and incorporating basal insulin/GLP-1 agonist fixed-ratio combinations into treatment algorithms
• Rather measured initial sales of Jardiance, perhaps stemming from delay in getting EMPA-REG OUTCOME among diabetes guidelines
• Extremely strong enthusiasm among cardiologists for EMPA-REG OUTCOME results
• FDA roadblock/delay for Novo Nordisk’s faster-acting insulin aspart
• Multiple FDA delays like the three-month delays on the decisions for the Jardiance expanded indication, Xultophy, and Soliqua; upon further thought, we believe this reflects how under-resourced the agency is)
• Exclusion of Lantus on major US formularies
• Sanofi/Verily partner and invest $500 million to establish Onduo
• Novo Nordisk’s discontinuation of oral insulin from phase 2
• Pfizer’s discontinuation of PCSK9 inhibitor bococizumab from phase 3
• The degree of anti-industry furor against multiple Big Pharma companies
• PBMs moving toward Lilly’s biosimilar basal insulin before it launched and moving away from not only next-gen insulins Tresiba and Toujeo but also Lantus
• Novo Nordisk CEO Lars Sorensen stepping down far earlier than planned
• Little public movement on digital health/Big Pharma partnerships announced in 2015 (e.g., Novo Nordisk/IBM, and others)
• Little acknowledgement of value brought by new therapies vs. focus on spending only, regardless of how many costs could be prevented by the therapies
• Retraction of hyped potential betatrophin “cure” for type 1 diabetes by Harvard’s Dr. Doug Melton (this is so new we haven’t yet reported on it)
• Sanofi suing Novo Nordisk over PBM-related claims (this is so new we haven’t reported on it)

5. Key Questions for 2017

• What will full results show for CANVAS (J&J’s Invokana), DEVOTE (Novo Nordisk’s Tresiba), and FOURIER (Amgen’s Repatha)?
• How will the expanded Jardiance indication impact prescription volume and sales? How will it involve cardiologists in diabetes care?
• Will the FDA approve an expanded CV indication for Victoza?
• What is the mechanism of CV benefit for empagliflozin, liraglutide, and semaglutide? Will further data reveal cardioprotective class effects (for SGLT-2 or GLP-1 agonists)?
• Will Intarcia’s innovative GLP-1 option in ITCA 650 be approved by the FDA?
• What’s next for Xultophy and Soliqua, now that these much-anticipated fixed-ratio combinations have finally been approved for the US market? What role will price play?
• Will we see any renewal of interest in SGLT-2 inhibitor/DPP-4 inhibitor combinations? Will Lilly/BI invest more in promoting Glyxambi (empagliflozin/linagliptin)? What’s in store for AZ’s dapagliflozin/saxagliptin and Merck’s ertugliflozin/sitagliptin?
• How will biosimilar insulins advance in the marketplace?
• How will the exclusion of Lantus from major US formularies affect the commercial landscape of insulin?
• How will companies boost sales of their rapid-acting insulin products?
• What major pipeline changes will we see as Novo Nordisk shifts its R&D strategy to more diabetes-adjacent indications?
• What will be the biggest advances on possible type 1 cures?

6. What’s Coming in 2017?

Below, we list the status of late-stage pipeline products with expected milestones in 2017. We acknowledge the list may not be 100% complete, though we’ve tried to be as comprehensive as possible based on the most recent public updates. Please let us know what we have missed!

Insulins

• Novo Nordisk’s Fiasp (faster-acting insulin aspart): EMA decision expected 1Q17; Possible US resubmission following FDA Complete Response Letter, though no specific timing has been shared
• Merck’s MK-1293 (biosimilar insulin glargine): FDA decision expected mid-2017; Possible delay depending on outcome of Sanofi’s patent infringement lawsuit
• Novo Nordisk’s Tresiba (insulin degludec): Full results from DEVOTE CVOT expected at ADA 2017

GLP-1 Agonists

• Intarcia’s ITCA 650 (implantable exenatide mini-pump): FDA decision expected 4Q17; Possible presentation of full results from FREEDOM-CVO
• Novo Nordisk’s semaglutide: FDA and EMA decisions expected 4Q17
• Novo Nordisk’s Victoza (liraglutide): FDA decision on expanded CV indication expected 3Q17

SGLT-2 Inhibitors

• J&J’s Invokana (canagliflozin): Full results from CANVAS CVOT expected at ADA 2017
• Merck/Pfizer’s ertugliflozin: FDA submission said to be on track for end of 2016; Companies plan to submit ertugliflozin monotherapy, ertugliflozin/sitagliptin (Merck’s DPP-4 inhibitor Januvia), and ertugliflozin/metformin
• AZ’s saxagliptin/dapagliflozin: FDA decision on fixed-dose combination expected 1H17
• Sanofi/Lexicon’s sotagliflozin (SGLT-1/SGLT-2 dual inhibitor): More phase 3 data expected at ADA 2017; Possible submission for type 1 indication ahead of type 2

Competitive Landscapes

Here we list our full collection of therapy-related competitive landscapes to date, listing all of the candidates in development for each category to the best of our knowledge. These are frequently updated as new developments arise.

• Insulin
• Glucagon
• GLP-1/glucagon dual agonist
• NAFLD/NASH
• Diabetic Nephropathy
• CVOT Timeline

Diabetes Technology

1. Themes

A Pivotal Year for Automated Insulin Delivery: FDA Approves MiniMed 670G, At least Five Players Vying to be Second to Market

• 2016 was a pivotal year for automated insulin delivery (AID), headlined by earlier-than-expected FDA approval of Medtronic’s MiniMed 670G hybrid closed loop and Guardian Sensor 3. The device will launch in Spring 2017 in the US, and international approval is expected in Summer 2017. The 670G approval in September (in 14+ year olds) came a remarkable ~3 months following FDA submission, blowing away expectations for the first commercial AID device in the US. The approval means Medtronic will actually hit the April 2017 US launch timing shared nearly two years ago – timing that we characterized as “highly ambitious” and even “challenging” in last year’s Reflections piece. The 670G represents a major milestone for diabetes technology; a testament to the hard work of thousands of committed people; a serious win for JDRF, Helmsley Charitable Trust, and Medtronic; and a spectacular showing of FDA CDRH’s patient centricity and insanely hard work ethic (Drs. Courtney Lias, Stayce Beck, and team worked many weekends to get this approved so quickly).
• With the 670G, 2016 also marked the first pivotal data for a commercial hybrid closed loop device. Medtronic’s three-month, single-arm 670G pivotal study reported at ADA 2016 in June (just four months prior to FDA approval!), demonstrating: (i) a 0.5% reduction in A1c from a low baseline (7.4%); (ii) a 44% decline in time <70 mg/dl (6% to 3%); and (iii) a 40% decline in time <50 mg/dl (1% to 0.6%). Time-in-range (71-180 mg/dl) improved from 67% during the baseline run-in to 72% during the study, with time >180 declining moderately (27% to 25%). That improvement does not sound so significant, but it was clear from the glucose profiles that the MiniMed 670G made extreme highs (e.g., 300 mg/dl) more moderate (e.g., ~200 mg/dl) – a highly valuable improvement, but not showing up as a change to time in 70-180 mg/dl. Glucose profiles showed clearly how the 670G shined at night, shrinking glucose variability in both adults and adolescents. The pivotal data was subsequently published as a two-page JAMA research letter during EASD. Some criticized the study at the July NIH Workshop for its single-arm design, though we thought this was somewhat unfair (Medtronic worked with FDA to choose the fastest path to market; more data will be collected in an expected ~1,000-patient post-market study).  
  
  • To us, the big takeaway from the 670G pivotal data is that the hybrid closed loop system is safe and effective (even in a motivated patient population), and it will be a good first-generation starting point to learn and improve upon. Patients in the pivotal clearly loved the system (80% chose to continue using it), a sign that these first-gen products should at least appeal to many current pumpers. This single-arm, uncontrolled study was clearly designed for speed and to prove safety to the FDA, so it’s hard to read too much into the efficacy results, where there were not pre-specified endpoints. Still, reducing A1c 0.5% in well-controlled patients at the same time hypoglycemia declining 44% is a definite win – and the results were consistent in adolescents and adults. Though we’ve heard the 670G requires a fair amount of setup and the user interface needs improvement, it should reduce burden from what many are currently doing every day, and it certainly gives strong peace of mind overnight and a great morning glucose to start the day. Type 1 parent Angie Platt shared very enthusiastic commentary in the JDRF Webinar following the approval.
• Meanwhile, at least five players are vying to be second to market and launch meaningfully differentiated AID products. The field took on a more commercial feel this year, with several previous academic algorithms pushing towards products: (i) Tandem will now commercialize the TypeZero algorithm (previously UVA’s DiAs algorithm); (ii) Insulet will commercialize the Harvard/UCSB algorithm (licensed from startup Mode AGC); and (iii) the newly created public benefit corporation Beta Bionics will commercialize the MGH/BU algorithm. Looking back at our 2015 Reflections piece offers a clear update of how far each player in the field moved in 2016:
  
  • Tandem meaningfully advanced its AID pipeline this year, with a PLGS launch still slated for end of 2017 and a hybrid closed loop now expected in 2018. Tandem’s predictive low glucose suspend device moved into a feasibility study in August, with a pivotal expected in 1Q17 and launch timing on track with 2015 expectations. Meanwhile, Tandem’s second-gen AID product was not even on the radar last year, but saw huge updates in 2016: the company licensed TypeZero’s inControl hybrid closed loop algorithm, which will enter a major pivotal study in 2017 (International Diabetes Closed Loop Trial) funded by NIH – what a win! Tandem also launched the important t:slim X2 pump in November (also not on the radar until this year), enabling users to software update their pumps from home and add AID algorithms without new hardware.
  • After debuting in 2015, Bigfoot secured $35.5 million in funding in October, showed compelling prototypes of its smartphone-focused system, and started its first clinical study. A pivotal trial is expected in mid-2017, followed by FDA submission in early 2018. We saw Bigfoot’s system at JPM 2016 for the first time in detail: an Asante pump body (disposable) married to a custom built, reusable, Bluetooth-enabled controller (without a screen or buttons) that talks to Dexcom CGM and includes a control algorithm. Notably, a smartphone app will serve as the window to the system and complete user interface, a big advantage over other systems that will require using the pump itself or a dedicated handheld controller. What is highly compelling about Bigfoot, in our view, is the plan to offer automated insulin delivery as a service: one monthly fee and one prescription – this business model is a huge win for both payers and patients, and assuming the company can make it happen, could be disruptive for the field. Relative to 2015, the pivotal timing has been pushed back by roughly half a year, though Bigfoot passed very critical milestones this year (first clinical study, major funding, several product demos). We also like that Bigfoot thinks broadly about an easy-to-prescribe system that could even be ported over to those using injections. 2017 will be a pivotal year for the company and the pressure will be on to execute, though this is a team we would definitely bet on.
  • Following years of being on the fence, Insulet finally committed to AID in 2016. Its OmniPod Horizon AP (hybrid closed loop) is expected to launch in late 2019. Insulet’s February call shared the major news of the year: the licensing of a proven hybrid closed loop algorithm from startup Mode AGC (originally developed at UCSB/Harvard). The system entered a feasibility study in 3Q16, and pivotal trials are expected in late 2018-early 2019. The company recently hired  AID powerhouse Dr. Trang Ly as its Medical Director, and the November Investor Day shared clear commitment to this pipeline project. Insulet will build Bluetooth into directly into the pod and launch its new Dash PDM next year (a locked down Android phone), building a foundation for its future OmniPod Horizon AP device. All of this was big progress relative to 2015, where Insulet hadn’t shared any timelines or product details.
  • Dr. Ed Damiano announced Beta Bionics earlier in 2016, a public benefit corporation to commercialize the iLet Bionic Pancreas (insulin-only version launching in roughly late 2018 or 2019). The team secured $5 million in funding from Lilly (a big vote of confidence), raised another $1 million in a very successful crowdfunding campaign, and, notably, recently secured $12 million in NIH funding to fund the bihormonal pivotal study. Quelling critics of the insulin+glucagon approach, Beta Bionics first plans to launch an insulin-only version of its system – a pivotal is expected to start in 2H17, followed by a PMA submission by mid-2018. The bihormonal pivotal is expected much later in 1H18 (FDA submission timing unclear). Zealand also announced a partnership with Beta Bionics this year, giving Dr. Damiano and team a proven protein chemistry partner for developing a pumpable, stable liquid glucagon – a phase 2 study with the iLet began earlier this month. On the publication front, MGH/BU secured a major win when the multi-center Bionic Pancreas study was published in the Lancet earlier this month.
  • J&J/Animas finally shared timelines on its Hypoglycemia-Hyperglycemia Minimizer in May, and then pushed them back as the year closed out. Launch is now expected in late 2018-early 2019, and a pivotal study is still under discussion with the FDA. At the Medical Device Business Review in May, management said an AID launch would occur in the “next 18 months,” implying Animas’ device with Dexcom would be out by November 2017. At the time, a pivotal trial was expected to start before the end of 2016. We confirmed in late November, however, that Animas’ pivotal is still under discussion with the FDA, and launch is now expected in “late 2018-early 2019” – about a year behind the Medical Device Business Review timeline. On a positive note, J&J received FDA and Health Canada approval this month for the “OneTouch Vibe Plus” pump with Dexcom G5 integration (same form factor as the Vibe/G4), a key step on its way to an automated product. J&J has not commented on the Vibe Plus launch timing, but we might guess it is coming in 2017.
• With all this competition (see landscape below) and ongoing pricing pressure, a word we have been using to describe the insulin pump market is “fragile.” We saw this theme in several ways in 2016: Medtronic’s exclusive deal with UnitedHealthcare to become a preferred pump supplier (effective July 1); a very challenging third quarter for Tandem and even Medtronic (disruption following the 670G approval); what we assume was a challenging year for both J&J/Animas and Roche (though neither shares revenue on their respective pump businesses); continued sluggish sales for Cellnovo in Europe; and pretty much the same discussion of challenges and questions we’re heard for years (“Why aren’t more patients on pumps – what are the barriers?” “Why are pumps so expensive?” “Why are pumps so hard to prescribe and teach?” “Do pumps offer clinically meaningful value over MDI?”). Even with a very full competitive landscape, new companies and products continue to enter the field, including Ypsomed’s own in-house Ypsopump, BD’s plans to build a type 2 patch pump (see below), and several other smaller players (Kaleido, EOFlow). Perhaps the company that is best insulated from the fragility is Insulet, who has seen record-high OmniPod sales in two straight quarters. Will the field continue to expand? What will the pump reimbursement landscape look like in the coming years, particularly as automated insulin delivery comes to market? Can anyone compete with Medtronic?

Automated Insulin Delivery Competitive Landscape

Automated Insulin Delivery: Big Unknowns for the Field, DIY and Other populations, and Next-Gen Systems

• On the cusp of AID commercialization, the field faces many questions: What advantages will these systems add for different patient groups, providers, and payers? How will value be demonstrated? What drawbacks will be sticking points for the field? Are there enough potential users to support so many players? Like so many other products (e.g., cell phones, CGM), we expect those automating insulin delivery will improve with time, and the key will be in consistently improving the benefit vs. burden or usefulness vs. hassle balance to expand the market. As we approach the first hybrid closed loop (Medtronic’s 670G) launch in Spring 2017, here are some of the unknowns:
  
  • Patient adoption – who is going to get on AID? How quickly will current Medtronic pumpers, non-Medtronic pumpers, and the majority of patients on MDI and fingersticks (for whom adding a pump and CGM may be a big jump) go for the 670G and similar systems? Read our speculation on the various segments here. Will automated insulin delivery dramatically expand the market, or will it mostly upgrade current pumpers to smarter technology? We believe like any other device, hybrid closed loop systems could well follow a typical adoption curve – slow at first and limited to early adopters, and subsequently expanding as more devices come out, experience grows, and new generations improve the form factor and burden (e.g., smaller on the body, easier to train and use, automated correction boluses, etc.). But ultimately, it’s hard to know how far AID penetration will go – what percentage of type 1s will be wearing automated systems in five years? To what degree will patients see AID as the “killer app”? How much more time (or less) will training take of AID early on and later? Current pump penetration (~25%-30% of type 1 patients in the US, far lower elsewhere, very low in prandial insulin-using type 2s) seems like a possible minimum for AID in several years, assuming (which is far from a given) reimbursement is established.
    • Patient expectations – will AID live up to the hype? Will manufactures be able to manage patient expectations for first-gen AID products? One example is Medtronic in the 670G approval announcement, noting the system “automate(s) basal insulin delivery,” is a “hybrid closed loop,” and represents the “latest innovation in Medtronic's phased approach toward developing a fully automated, closed loop system.” Still, the popular press and patients themselves may have other expectations about what these systems can and cannot do – for example, we are not sure how many patients interested in the 670G realize that automation is limited to basal only at this stage. Overall, how big will the perception vs. reality gap be? Will early adopters be frustrated by conservative algorithms that only modulate basal insulin or frustrated by the inability to “tinker” with insulin delivery during the day? How will patients weigh better overnight management versus less improvement during the day?
    • On a related note, there is ongoing debate on the right terminology to use: “hybrid closed loop,” “automated insulin delivery (AID),” “automated basal insulin,” “automated glucose control,” “treat-to-range,” “treat-to-target,” etc. Many seem to agree that “artificial pancreas” is NOT the right term, though JDRF used it after the 670G was approved. Will artificial pancreas remain in the lexicon? How will the terminology evolve?
  • Payer views – who is going to cover the AID? How will insurers view the MiniMed 670G and similar products? Medtronic told us the 670G will be commercially available at currently offered pump system pricing, meaning a retail price of nearly $8,000. With the current durable insulin pump business model, this is truly expensive technology for payers – will they deem it worth it for much broader use and for more expensive use overall, given likely greater use of sensors in most patients? Will they make it hard to access automated insulin delivery or limit use to certain sub-populations (e.g., hypoglycemia unaware)? How will payers value the A1c, hypoglycemia, time-in-range, and quality of life improvements with hybrid closed loop (established studies show less hypoglcyemia, greater time in range, better sleep, less worry and lower stress for caregivers and patients)? Will hybrid closed loop be cost-effective relative to best-in-class MDI + CGM + decision support software? How will payers view those two technologies? Can closed loop algorithms make a commercial transition to help MDI users titrate doses and is there a good business model there? Will Bigfoot gain traction with payers by offering automated insulin delivery as a service (and will other companies go that route)? How low will the cost need to be (or how high will the efficacy need to be and how will it be measured) for AID to penetrate into type 2?
  • HCP bandwidth and training burden – who is going to support AID? What will the average endocrinologist think of systems like the MiniMed 670G? Which companies’ devices will be the easiest to prescribe? Will PCPs participate at all? How much training and support will clinicians need for the 670G? (Our sense is quite a bit, since it’s got a standard insulin pump setup, plus CGM and the hybrid closed loop algorithm added on top.) How quickly will the 670G’s usability and prescribing and startup improve with subsequent product generations? How will the early experiences “read” on later models from Medtronic and others? How much additional time with HCPs have to spend on reimbursement? How much will patients try supporting each other online and otherwise?
• Outside of the commercial field, the do-it-yourself, open-source, AID community had several milestones in 2016, reaching an estimated 100+ users globally, driving to multiple systems and smaller form factors, and presenting positive self-reported data in a late-breaking ADA 2016 poster (self-reported median A1c dropped from 7.1% to 6.2%; self-reported median percent time-in-range [80-180 mg/dl] increased from 58% to 81%). Some DIY approaches use a tiny dedicated device to bridge communications between a pump and CGM (e.g., OpenAPS), while others rely on a small radio bridge and are driven by a phone app (Loop, AndroidAPS, etc.). We saw the iPhone app, Loop, up close at the fall Diabetes Mine D-Data Exchange for the first time – the iOS app provides a user interface for closed loop on the iPhone and requires just one small relay device (a “RileyLink,” about a Tic-Tac box in size), an old Medtronic pump, and Dexcom G4/G5 CGM. Like other DIY systems, Loop only automates basal insulin delivery based on CGM data (it uses temporary basals), though the lower setup burden has driven some on-the-fence potential OpenAPS users to get on a DIY system. Adam characterizes Loop as “excellent” overnight, similar to the JDRF’s Dr. Aaron Kowalski: Adam wakes up nearly every morning at 100 mg/dl, and just as importantly, can go to bed feeling safe at 85 mg/dl and not need to eat. This improvement in sleep quality was also a big takeaway of the OpenAPS ADA 2016 poster.
  
  • There are some advantages that DIY systems may add over first-gen commercial products like the 670G: the ability to customize an algorithm’s target and aggressiveness; the ability to bolus from the iPhone (with fingerprint authentication); the ability to leverage a smartphone’s user experience (touchscreen, color, Apple’s Health Kit); viewing system status on a smart phone or watch; and the ability to see what the algorithm is actually doing at a more nuanced level (e.g., upcoming glucose prediction, change in basal insulin relative to pre-programmed rate, carb absorption).
  • The DIY community remains relatively small (we estimate at ~100 – 150 globally), given the hassles of setting up these systems combined with lack of awareness and absence of access or ability to get the key materials. Although most may be on Ebay, not everyone wants to use a pump or CGM bought on Ebay. Broadly speaking, we think there are some key lessons for the field:
    • A lot of real-life learning is happening in the DIY community that should make it into commercial products;
    • Automated insulin delivery can make a huge difference at night to patients and partners and caregivers and during the day, even for well-controlled early adopter patients;
    • The FDA should (hopefully) be motivated to be move faster, given growing use of unapproved open-source DIY systems;
    • Integration with a wide array of consumer electronics is critical for uptake (and a huge challenge for hardware companies building class III medical devices with companion software);
    • The watch form factor for viewing data and interacting with systems is characterized as outstanding by many patients; and
    • There is no one-size-fits-all, even in closed loop – some level of customization will be important, particularly an algorithm’s set point. Of course, too much customization is also negative, since it adds complexity and training burden.
• Automated insulin delivery also saw meaningful research on other key populations this year, including Cambridge studies in both pregnancy (published in NEJM!) and inpatient type 2 diabetes (ADA 2016), and the Bionics Pancreas team testing glucagon-only closed loop (ADA 2016). We continue to hope for more data on AID in very high A1c patients, those at high risk of severe hypoglycemia, and those on MDI.
• An important paper was published in Diabetes Care this year, “Outcome Measures for Artificial Pancreas Clinical Trials: A Consensus Report.” The paper is focused on standardizing a short set of basic, easily interpreted outcomes in artificial pancreas studies, enabling interpretation and basic comparison between studies – e.g., % time in 70-140 mg/dl, % time in 70-180 mg/dl, % time <50, <60, <70 mg/dl, % time >180, >250, >300, etc. We hope the outcomes are not only used widely in AID research going forward, but make it into broader areas of diabetes care (drug development) and even routine clinical practice.
  
  • A big remaining need with CGM-based outcomes is benchmarking. A <7% or <6.5% A1c is common benchmark goals, but there is no consensus yet on what time-in-range “should” be (e.g., 60%? 75%?), and whether it should be 70-140 or 70-180 mg/dl. Similarly, a 0.5% reduction in A1c is often considered meaningful, but what is the corollary meaningful improvement in time-in-range (e.g., +5 or +10%)? What is an acceptable time <70 mg/dl, and what is a meaningful reduction (-30%? -50%?)? Some would argue that “any improvement in time-in-range or reduction in hypoglycemia is meaningful,” which is true, but it might help the field – particularly HCPs, payers, and FDA – if clearer benchmarks were determined and standardized.
• Many are already wondering – what will second and third and fourth generation AID systems look like? Aside from cost, what feature(s) will be the killer app(s) for AID that help it cross the chasm from early adopters to the majority – Cost? Smaller devices on the body? Burden of use and interface? Better algorithms (automatic correction boluses, more adaptive, more personalized)? Factory calibrated CGM? Dramatically better infusion sets? Other hormones? JDRF is already focusing on next-gen systems, including a new opportunity for up to $7 million (!) in funding for AID systems that can reduce on-body burden and improve usability. The T1D Exchange also announced a multi-million dollar investment to advance AID in October. Medtronic’s 2016 Analyst Day offered the furthest in-the-future glance of commercial AID systems: its planned next-next gen system (launch after 2020) will include a smaller-on-the-body, touchscreen pump, smartphone control, automatic bolus corrections, and “biometric,” “multi-parameter” sensing. For context, the nearer term MiniMed 690G will add automatic correction boluses (via DreaMed’s algorithm), but still resemble the 670G hybrid closed loop in terms of form factor – as far as we know.

CGM Sales, sensor pipelines, and Competition Accelerate in 2016; What will Define the field in the coming years?

• The CGM market and sensor pipelines advanced notably this year, but this technology still remains highly underpenetrated in the US and even more so globally. What will define the field in the next five years? Abbott (included here even though it is not traditional “CGM with alarms”), Dexcom, Medtronic, Roche, and Senseonics all made meaningful progress in 2016, increasing competition in the field and the bar for what new hardware and software has to achieve (see a yearly recap below). Still, it is worth emphasizing that CGM is a highly underpenetrated technology – an estimated ~10%-15% of type 1s in the US, fewer type 1s outside the US, and almost no type 2s anywhere historically though we expect this to change in the future. Can the field cross the chasm from early adopters to the majority? And if so, what product features will expand adoption over the coming years? Now that the entire CGM field is improving on sensor accuracy (e.g., MARDs ~9%-12%), the future battle ground for sensors will be fought on other dimensions in our view: (i) cost and pricing; (ii) form factor (e.g., size on body, look, ease of insertion, receiver/phone/watch integration); (iii) calibration (Abbott is clearly the leader here, but Dexcom is coming up close behind); (iv) drive meaningful clinical outcomes (e.g., with paired dose titration software, pattern recognition, and behavior change); and (iv) ease of prescribing and training. We believe the most successful sensors will be accurate and reliable enough, but also far less expensive for users and payers; far smaller on the body and less intrusive to wear and use; improve patients’ quality of life; drive meaningful clinical outcomes with effective use of the data; and make providers’ lives easier. Which companies will best nail the composite profile and make the right design tradeoffs? Immediately below we’ve included a SWOT analysis comparing Abbott, Dexcom, and Medtronic (the three companies with significant sales right now), followed by a year in review that also adds in Roche and Senseonics.

• According to Abbott CEO Mr. Miles White, FreeStyle Libre went “gangbusters” in Europe in 2016, as the user base crossed the 200,000-patient threshold. This figure, reported in October, suggests that in just two years, Abbott has matched or even exceeded Dexcom’s global installed base (~170,000-180,000 as of Dexcom’s last installed base update in 2Q16). Impressively, Libre’s striking adoption in Europe has occurred with largely out-of-pocket payment, a strong vote in a European market where patients do not typically pay for supplies. Libre also expanded outside of the EU in 2016, launching in Australia in June, followed by Israel, Brazil, and Argentina in July. Belgium reimbursed Libre this year (fully for type 1s, “partially” for type 2s), though the device was notably excluded from Germany’s national decision to reimburse CGM in June (though we have heard Libre has regional reimbursement in Germany). In the US, FreeStyle Libre Pro (blinded, retrospective) was approved in late September, and we learned the real-time consumer version was finally filed with the FDA in 3Q16. Management guided in July for a 1Q17 launch of the consumer version, which sounds ambitious to us, but possibly achievable if all goes well with the FDA. Last, Abbott launched two mobile apps in Europe in 2016, LibreLink and LibreLinkUp, boosting the convenience factor of Libre. LibreLink, officially introduced in the Netherlands in June, allows Android users to scan FreeStyle Libre sensors directly with their phones, a critical competitive move to keep up with Dexcom’s G5. LibreLinkUp, which launched across Europe in November, allows caregivers to remotely monitor sensor readings by following the patients’ LibreLink app. An iOS version of LibreLinkUp for remote monitoring is coming in 2017. We’re not sure if either app was part of the 3Q16 FreeStyle Libre FDA submission package.
  
  • It is unclear if Abbott is pursuing a non-adjunctive insulin-dosing claim for FreeStyle Libre, and it’s hard to know what the Dexcom G5 approval means for Abbott (see some speculation here). On one hand, Abbott has the REPLACE and IMPACT RCT outcome studies (both reported this year, and the latter was published in The Lancet in September), plus 200,000+ users on the system with a non-adjunctive indication – those data show clearly that patients dose insulin using the device and pretty much stop taking fingersticks. (In fact, Abbott has much more real-world data on non-adjunctive use of FreeStyle Libre than Dexcom brought to FDA.) However, Libre is a bit less accurate overall than G5, particularly in hypoglycemia – per the Libre Pro US label (see page 45 here), only 53%-58% of Libre Pro points are within 15%/15 mg/dl of YSI at <80 mg/dl vs. 89%-91% for Dexcom’s G5/G4 with Software 505 (see page 240 here). We assume this accuracy is similar to the real-time consumer version, but we’ll have to wait until that is approved in the US to see what the FDA label looks like. Libre also does not have alarms (an argument in favor of the safety of a dosing claim at Dexcom’s July FDA meeting), and it cannot take fingerstick calibrations as a sensor accuracy “check.” Abbott also has a less positive history with FDA (going back to Navigator’s attempt to get non-adjunctive labeling and the company’s consent decree in the late 1990s), and the Pro approval alone for a retrospective, blinded sensor took more than a year. It’s a tough one to call!
• Dexcom had a spectacular sales and pipeline year once again, marking three straight in our year-end Reflections after 2014 and 2015. The company saw continued strong 41%-60% YOY growth in the first three quarters of 2016 (now marking record sales in six out of the past eight quarters); achieved landmark FDA approval of a non-adjunctive (insulin-dosing) label claim in December; drove strong near-term innovation with at least four products currently under FDA review (next-gen one-button inserter, smaller transmitter, Android G5, touchscreen receiver); presented positive results from the DIaMonD study at ADA (showing CGM works very well in MDIs); advanced the G6 sensor into a pivotal study (expected launch in 2018; compelling pre-pivotal data shared at DTM); invested significantly in its Big Data platform (under new SVP of Data Annika Jimenez) and continued to blaze a trail in fostering an open data ecosystem (e.g., the upcoming open APIs to launch at developer.dexcom.com); and meaningfully progressed the Verily partnership to build a low-cost, disposable, bandage-like CGM (first gen expected to launch in 2H18; second version as early as 2020; impressive pictures shown at DTM). Dexcom saw many business wins too, including securing German reimbursement, establishing an international headquarters in Scotland, Canadian approval of G5, investing in a new manufacturing facility in Arizona, and hiring patient innovators Ben West and Chris Hannemann. Still, as the company expands, inevitable challenges have come too – customer service bandwidth issues and a receiver recall in 1Q16; lower-than-expected profitability and slower international sales in 3Q16; not much progress on the pharmacy distribution front; and extremely high patient expectations for the G5 app (many reviews have been critical of the new mute override feature – something patients asked for!). But on balance, 2016 was another outstanding year for Dexcom, with sales on pace to exceed half a billion dollars and the worldwide installed base likely exceeding 200,000 by the end of 2016. We expect continued product launches and strong sales in 2017, though definitely higher competition in the standalone AND pump-integrated CGM markets (both in the US and Europe).
• Medtronic doubled down on CGM this year, headlined by plans at its 2016 Analyst Meeting to launch four new personal CGMs and three professional CGMs in the next five years, including Enlite 3 by April 2017 (670G, Guardian Connect); iPro 3 by April 2018 (single-use, blinded); Harmony 1 by April 2019 (10% MARD, 10-day wear, one calibration per day); and iPro 4 by April 2019 (adding real-time data). Most surprising to us has been the clear move to build a type 2 business in CGM and not insulin delivery – as we learned in 2016, the type 2 business’ mission statement is to “make glucose a vital sign” (key as part of its ambitious goal to reach 20 million patients in five years). On the pipeline front, Medtronic secured FDA approval in September of its new and much-improved Guardian Sensor 3 as part of the MiniMed 670G hybrid closed loop (launching in Spring 2017 in the US), while the standalone, Bluetooth enabled, mobile version (Guardian Connect) remains under FDA review (submitted in March and expected to launch by April 2017). Meanwhile, the international business saw the Guardian Connect mobile CGM launch in select OUS countries with the Enlite Enhanced sensor – this standalone CGM is a clear example of Medtronic’s commitment to glucose monitoring (beyond CGM paired with pumps) and a response to competitive products like Dexcom’s G5 and Abbott’s LibreLink. Progress with Medtronic’s data partners was also meaningful: (i) the high potential IBM Watson partnership finally showed off the commercial version of the Sugar.IQ app in September and commenced a beta launch (though we do not believe the full launch has begun as expected by end of year); (ii) Glooko compatibility launched in 3Q16, marking a major opening of Medtronic’s historically siloed data; and (iii) the Android version of MiniMed Connect with partner Samsung launched in late October. New CGM-related partnerships were also signed during the year: (i) a Qualcomm partnership to develop single-use, disposable professional CGM; (ii) a Fitbit partnership to integrate activity data and other events in a logbook app while wearing the iPro2 professional blinded CGM; and (iii) a partnership with mySugr to integrate pump and CGM data automatically into the popular diabetes app. Some partnerships haven’t worked for Medtronic (Sanofi) and we are eager to see what activity looks like and sounds like.
• Roche tiptoed into CGM in 2016, debuting the first-gen Accu-Chek Insight CGM late this year. In the 36-patient CE Mark approval study, the device performed with an overall MARD of 10.6% (presented at EASD). The sensor performed very well in the ≤70 mg/dl range – MARD of 9.5% – with performance in the euglycemic and hyperglycemic ranges on par (10.6% and 10.7%, respectively). At EASD, reps told us that the initial launch will be limited to “specialized diabetes centers” in the Netherlands, Sweden, Norway, and Denmark by the end of 2016 (which is right this second), though we haven’t heard any progress updates since. This initial data-collection period is expected to last six to nine months (until mid- to late-2017). The preliminary accuracy is very solid, though the Insight does require two fingerstick calibrations per day and has a fairly large on-body size. The competition has never been higher in CGM, though Roche’s core competencies in manufacturing, distribution, and EU payer relationships will certainly be assets. Roche also signed deals in 2016 to distribute Senseonics’ Eversense CGM – a nice diversification move if Senseonics is successful.
• Senseonics kept busy in 2016, going public in March, launching its implantable Eversense CGM, on-body transmitter, and mobile app in a controlled fashion in Europe, and submitting a PMA to FDA for the system following a successful, 90-day US pivotal trial (PRECISE II; MARD = 8.8% vs. YSI). As of 3Q16, the controlled launch had commenced in “about a dozen” clinics in Sweden, Germany, and Norway. Launches in the Netherlands and Italy were projected to follow by the end of 2016. As noted above, Roche delivered a nice vote of confidence by forging a distribution agreement to bring Eversense to the majority of European territories, the Middle East, and Africa (the initial deal was struck in May but expanded meaningfully in early December). Commercially speaking, Senseonics is still very early, recording revenue of just $37,000 in 3Q16 and guiding for 2016 revenue of $250,000-$300,000. The company’s cash balance was ~$27 million at third quarter’s end, and 2017 will be key for showing investors it can scale the business. Near-term, Senseonics expects a 180-day indication and 55% smaller next-gen transmitter to receive CE Marks in 1Q17. A US launch could also occur late in the year, assuming things go well at the FDA.

Another Tough Year for BGM Companies, but Signs of Innovation in Connectivity and PArtnerships

• BGM struggles continued into 2016, marking three straight years in our Reflections (see 2015 and 2014). Through three quarters, pooled global revenue for the “Big Three” BGM companies (Roche, J&J, and Abbott) totaled ~$3.7 billion, falling 5% YOY against a very easy comparison (-13% YOY for the first nine months of 2015). The US market continues to plague all three companies (an estimate -16% YOY through three quarters), no doubt a continued byproduct of pricing pressures and CMS’ competitive bidding program. Internationally, pooled three-quarter revenue fell just ~0.3%, though this number is worse in reality since it technically includes Abbot’s FreeStyle Libre sales in international revenue (Abbott does not break it out). There is no way to sugarcoat it: the field is not doing well, and with market headwinds (frequent testers moving to CGM, more use of professional CGM as better products come out, type 2 drugs with low hypoglycemia risk, etc.), we might not have reached the bottom.
  
  • The second round of CMS’ competitive bidding program – sending strip prices down 20% from the previous allowable payment, and a striking 76% reduction from the pre-competitive bidding price– added fuel to the fire and drew criticism from the community. Not only did it contribute to tough US sales for manufacturers, but a March Diabetes Care paper concluded that it also resulted in an increase in mortality due to reduced access to testing supplies. Yikes! Said former ADA President Dr. Des Schatz: “This move was not bad in intent, which was to reduce overall costs and co-pays, but education was lacking and suddenly patients couldn’t get strips because they and providers didn’t know how to get them. Many of the families just quit doing it.” We are very moved by how challenging it is to get broader attention here.
• While the BGM industry has challenges overall, there are some notable bright spots in connectivity, partnerships, and novel players. The name of the game, in this tough BGM climate, is to add value to glucose data– to help patients and HCPs extract greater insights and use them to drive therapeutic or behavior change. Some are doing this through software partners, while others are adding connectivity or new business models. Who will do it best? Can smaller companies survive in this environment?
  
  • J&J and Roche forged important partnerships with WellDoc and mySugr, respectively, in 2016. The J&J-WellDoc arrangement, set to launch in the US in 1Q17, integrates WellDoc’s type 2 diabetes management software, BlueStar (iOS and Android), and LifeScan’s OneTouch Verio Flex Bluetooth-enabled BGM and Reveal app. We think the WellDoc/J&J partnership has a lot of potential on this front: giving type 2s more actionable, in-the-moment feedback on BGM values, and bringing providers some clinical decision support. Meanwhile, the Roche-mySugr partnership integrates the Bluetooth-enabled Accu-Chek Connect meter into the world’s most popular diabetes app, mySugr Logbook (>850,000 users).
  • Livongo continued to grow its cellular-enabled BGM and coaching service, now used by “tens of thousands of people” thanks in part to a $49.5 million Series C Round earlier in 2016. It recently added over-the-air software update ability to its repertoire, allowing iterative improvements without the hassle and cost of having to obtain new hardware.
  • OneDrop announced in early December 2016 the FDA clearance and CE Mark approval of its Bluetooth-enabled Chrome meter, along with the launch of its Premium service, offering unlimited strips and in-app CDE support for $39.99 or less per month.
  • Intuity Medical received FDA 510(k) clearance for its discrete POGO automatic BGM in April and raised $40 million in series 3 financing in November, setting the stage for a 2017 launch.
  • Ascensia also moved forward with its Bluetooth meter portfolio, introducing the Contour Next One BGM in 14 European markets and receiving FDA clearance last month on its way to an “early 2017 launch” in the US. The similar Contour Plus One system, using the Contour Plus test strips, received a CE mark and is available in Poland. Ascensia also renewed its exclusive partnership with Medtronic, meaning it will continue to supply its Contour Next Link and Next Link 2.4 BGMs that wirelessly pair with MiniMed pumps.

Is CGM on its Way to Standard of Care? Covered in Germany, Support for Use in MDIs, and Positive Votes from Professional Associations

• In one of the biggest wins of the year for CGM, Germany’s usually stringent Federal Joint Committee (G-BA) decided to reimburse CGM for all people with diabetes requiring intensive insulin therapy – type 1s and type 2s of all ages. This was five years in the making and a tremendous win for patients in one of the toughest reimbursement markets in the world. The coverage decision is also a clear marker of CGM’s strong publication base, clinical efficacy, and improved cost-effectiveness (see below). Dexcom expects a revenue impact from this positive decision in 2017, and we’ll be especially interested to see how it expands CGM adoption in the type 2 population. Assuming type 2s on intensive insulin therapy do not have to jump through many hoops, this decision represents broader CGM reimbursement than many US private payers! Abbott’s FreeStyle Libre was notably not included in the current recommendation, presumably because it (intentionally) lacks alarms (though Navigator II is covered). We hope this changes over time, though Dr. Lutz Heinemann said at EASD that there is some reimbursement for Libre, which we have to assume is on a regional level.
• Numerous trials supporting the use of CGM – particularly in MDIs – were published in 2016. Dexcom’s DIaMonD study showed that MDI users not at glycemic target can definitely benefit from CGM – getting a meaningful reduction in A1c (-0.9% from an 8.6% baseline), shaving off highs, cutting their time in mild and dangerous hypoglycemia, and improving variability. Publication is still pending, but we have to assume this could appear in a major journal. The small COMISAIR study confirmed the DIaMonD findings in a 52-week, four-arm trial (n=65; Soupal et al., DT&T 2016 –  adding CGM to MDI drove a similar A1c reduction as adding CGM and a pump (-1.2%; baseline: 8.3%). In Abbott’s two major outcomes trials, REPLACE (95% of participants on MDI) and IMPACT (67% on MDI), FreeStyle Libre dramatically improved time in hypoglycemia in type 2s and type 1s, particularly dangerous hypoglycemia <55 mg/dl. IMPACT was published in The Lancet in September; REPLACE has not been published yet. At EASD, we also learned of a small randomized crossover trial (n=26; van Beers et al., Lancet Diabetes and Endocrinology 2016) in type 1s with impaired hypo awareness that demonstrated a significant 53% fewer severe hypoglycemia events with CGM vs. SMBG – a long sought after endpoint and a huge cost-effectiveness win for this technology. We hope this improved evidence base has a meaningful impact on the payer landscape, both in the US and globally.
• With the Endocrine Society’s Clinical Practice Guidelines and the AACE/ACE Consensus Conference on CGM, professional associations are also speaking more clearly: CGM is useful and cost-effective. In the Endocrine Society Guidelines, CGM received the highest grade in the guideline – a “1” recommendation with “high quality” evidence – and is recommended in adults with type 1 diabetes regardless of A1c level. The Society’s press release went so far as to call CGM the “gold standard of care for adults with type 1 diabetes.” The February AACE/ACE Consensus Conference brought together a who’s-who of CGM thought leaders to under a simple premise: CGM is a beneficial technology, but few patients are using it – why? Everyone at the meeting agreed that CGM can be beneficial for anyone with diabetes (high or low A1c’s), but uptake and coverage will ultimately be determined by value (no surprise there). The points of debate were much more in the weeds: Is there a role for blinded CGM? Is AGP the ideal one-page standardized report? We saw this as a positive: the position statement writers have moved past the “is CGM necessary” phase and into the “how can we get more people to use CGM, and how can we help them to use it optimally?” phase.
• Calls for wider CGM use in drug trials are getting slightly louder too. We discuss the outcomes beyond A1c theme separately in the Big Picture section of this report, but it’s worth repeating here: a next-gen therapy or technology that cuts highs and lows but does not change the average (A1c) is still highly desirable, and CGM is the only tool that can measure such an outcome. August’s unprecedented FDA CDER Workshop on diabetes outcomes beyond A1c amplified calls for CGM use in diabetes drug trials, and we hope to see more trials using CGM effectively in 2017. The big gap is that FDA’s drug division needs to value the data, and for that, guidance probably has to change. We are optimistic but assume this will be a long road ahead. Ahead of new guidance, we wonder if industry can start collecting the data to better inform regulators on drugs’ risks and benefits.

What are the Business Models of the Future in Diabetes Technology – Monthly Subscriptions and Service Models?

• This year we noticed a growing trend of subscription or service business models in diabetes technology, either launched or in the works: One Drop Premium’s unlimited strips and coaching (launched in US and EU), DarioHealth’s BGM subscription service (launched in US), mySugr’s Coaching service (soft launched in US), Yes Health’s all-mobile diabetes prevention program (launched in US), and others. Meanwhile, the year started off with Bigfoot Biomedical sharing the most details ever on its planned business model: offering automated insulin delivery for a monthly subscription price (one prescription, one copay for the pump, sensors, infusion sets, app, BGM). Livongo has been doing this for more than a year now with its own cellular-enabled meter and coaching service, sold to payers on a per-patient monthly basis. Even bigger players alluded to plans on this front: (i) Medtronic talked about subscription CGM/pumps at its Advocate Forum in April, and alluded to integrated service models in its quarterly calls and Analyst Day; (ii) Dexcom management briefly mentioned subscription models in its 2Q16 call (though noted less progress on pharmacy distribution); and (iii) Sanofi/Verily’s $496 million joint venture Onduo has plans from the get-go to take on diabetes care with service models. Other companies have de-facto subscription models (Abbott’s FreeStyle Libre) or could presumably switch to them (Insulet’s OmniPod). Perhaps we will see more of these models in 2017...
  
  • While the specifics of each platform and product are different, the purported advantages of these new business models are largely similar: offering more/improved products at a lower price with better incentives to keep patients healthy. Some models will sell directly to patients, saving insurance hassles and higher costs with growing deductibles (e.g., One Drop Premium). Other models will sell diabetes care in a different way to payers (e.g., all-in-one bundled offerings; Bigfoot Biomedical, Medtronic, Onduo), potentially offering lower costs and putting more diabetes care onto industry’s plate. The upside of lower costs and better outcomes would be a fantastic win for patients and the system, and we see high potential for these service models to shift payments into an outcomes-based world – a company only gets paid if its product/service delivers results (something Omada has been doing in diabetes prevention for years now). We especially like these business models in the historically expensive realm of diabetes technology, as they can dramatically reduce startup costs for patients. However, new tech-enabled business models can also align incentives for population health, allowing providers and payers to look at data remotely and make better decisions: Who should receive care urgently? Who is doing well? What is happening between clinic visits? Still, there are a lot of questions about these business models, which we cover in the questions for 2017 section below.

Continued big tech company Interest in diabetes – Could Any Change the Game and How Soon?

• We saw even more big tech company interest in diabetes in 2016: Verily and IBM Watson Health continued their commitment, though we also saw announcements from Qualcomm Life, Samsung, and Fitbit. We’re glad to see the cross-pollination here and hope it continues to drive more consumer-friendly and engaging products that offer meaningful clinical benefits to patients and HCPs – this is a tough balance to strike and the two sectors (diabetes + consumer tech) can hopefully learn a lot from each other.
  
  • Verily had a solid 2016 following its “tripling down on diabetes” last year (as we called it in our 2015 Reflections piece): moving the Dexcom next-gen CGM partnership forward and showing progress in a public forum at DTM (we are fairly confident a meaningful product will come to market here), hiring Dr. Howard Zisser as its Diabetes Clinical Lead (who also spoke on behalf of Verily at several diabetes tech conferences this year), and formally announcing the $496 million joint venture with Sanofi Diabetes (Onduo) about a year after the initial collaboration. Though earlier stage (preclinical), Verily’s new jointly owned company with GSK, Galvani Bioelectronics, also has potential for diabetes and other chronic diseases. Unfortunately, the Verily/Novartis partnership to build a glucose-sensing contact lens did not move forward publicly this year, something we’ll be watching closely in 2017.
  • IBM made progress in its partnership with Medtronic this year, speaking at several diabetes conferences and advancing the first-gen Sugar.IQ app into a beta launch. We know there are several generations of this app on the roadmap, but we expect even the first version will be well received. At ADA, IBM Watson also announced three diabetes partnerships with: (i) ADA to create a sophisticated diabetes advisor to help inform treatment decisions; (ii) HelpAround to provide crowd-sourced, on-demand help to people with diabetes who need it; and (iii) a predictive model to predict retinopathy risk (since published in JAMA; see below). There was no public update on the year-old IBM Watson partnership with Novo Nordisk, though we expect things are happening behind the scenes there.
  • Qualcomm Life and Fitbit also announced diabetes partnerships with Medtronic this year (both related to professional CGM). We see high potential in both, since professional CGM is such an immature market with some potential to improve clinical care.
  • Samsung helped Medtronic bring MiniMed Connect on Android to market, and we wonder if it has deeper plans in diabetes.
• Apple is a potential dark horse in our view – could the company get more involved in diabetes? The company’s September Special Event showed a strong commitment to health and fitness, and One Drop’s new Chrome meter will actually be sold at store.apple.com in the US. Does Apple have more up its sleeves in diabetes going into 2017? Apple’s Health Kit has been great for the diabetes app field, and while the open-source Care Kit framework looked encouraging when it launched, we don’t see many diabetes or health apps using it right now.

Many Insulin Dose Titration & Smart Pen Proucts in the Pipeline

• The insulin dosing “advice” landscape is heating up, promising provider and patient time savings, facilitating safer and more cost-effective use of insulin, and offering scalable guidance to people with low access to care.
  
  • Voluntis’ basal insulin titration software, Insulia, received FDA clearance (basal only) and CE Mark approval (basal only and basal-bolus). The prescription-only software is the first of its kind to receive 510(k) clearance from FDA, and is expected to launch in the US and EU in 1H17 (the basal-bolus version is already available in France).
  • Other players in the dosing advice field include: Sanofi’s MyStar Dose Coach BGM (available in Europe), Glooko’s mobile insulin dosing system (FDA submission expected by end of 2016), DreaMed’s MD Logic Pump Advisor with Glooko (beginning a study soon), TypeZero’s inControl Advice (shown at DTM), Glytec (Glucommander Outpatient, compelling late-breaking poster at ADA 2016), Hygieia’s d-Nav service (reimbursement study with BCBS ongoing in Michigan), and many others that have alluded to this area (e.g. Bigfoot Biomedical, Sanofi/Verily’s Onduo, etc.). Insulin dose titration represents one of the lowest hanging fruits in diabetes – it’s impossible for most patients and HCPs to continuously and accurately titrate basal insulin, leading to significant under-treatment and clinical inertia. The benefits of dose titration are plenty:.
• There was significant movement on the smart pen/cap front too, headlined by FDA clearance of Companion Medical’s reusable InPen (smart pen + app) in August. The product is expected to launch in the US in 2017, with a CE Mark possible in the coming months. Companion has an investment from Lilly and we’ll be interested to see how this comes to market – though reusable vs. disposable pens are a debate in the field, the hassle of Companion’s InPen doesn’t sound too high.
• Other companies with dose capture projects include BD, Patients Pending (Timesulin), and Gocap. BD, who announced during its November Analyst Day its Smart Sense dose capture technology (launch expected by September 2018); Patients Pending’s Timesulin Dose Capture (in final R&D phase, with a regulatory filing expected in 2017); and Common Sensing, which has begun a 125-patient study of its reusable smart pen cap (Gocap) at Joslin (the device is currently 510(k)-exempt, presumably until a dose calculator or other ambitious advice is included). See our competitive landscape here.

FDA Device Division Impresses Yet Again: Reviews 670G in 3 Months, Continued Open Dialogue with the Diabetes Community

• For evidence of FDA’s flexibility and dedication to getting impactful diabetes technology to market fast, look no further than the unprecedented three-month priority review of the MiniMed 670G. At the 2016 DiabetesMine Innovation Summit, Dr. Courtney Lias shared that her team had monthly meetings with Medtronic for 2.5 years leading up to the 670G submission (speeding up availability by an estimated three years!). Rewinding even to the pivotal study design shows FDA’s openness: a three-month, single-arm study. FDA’s Dr. Stayce Beck shared that the FDA team worked nights and weekends to make the review happen so quickly, a testament to the division’s tremendous desire to bring products to market quickly – and with so few resources to boot and in an election year!
• FDA’s Drs. Courtney Lias, Stayce Beck, and colleagues gave optimistic and typically quite valuable presentations at conferences throughout the year, including DiabetesMine’s ADA and November events, DTM, AADE, JDRF/NIH’s artificial pancreas workshop, and ATTD. We love how accessible this team is trying to make CDRH with meme-filled presentations, repeated calls for pre-submission discussions, and open requests to email with more questions. Some of the comments even surprised us, with Dr. Lias making repeated strong calls for interoperability and component artificial pancreas systems. Her talks showed a clear understanding of how currently regulatory paradigms may slow innovation, and just as importantly, she called on the community to help the FDA move ahead. This humility is a trend we’ve seen for the past few years but one that continues to impress us – to be less of a gatekeeper and more of a partner requires a lot more upfront effort on FDA’s part, and that can’t be easy from a resources perspective. Other FDA heavyweights, especially Drs. Robert Califf (Commissioner) and Jeffrey Shuren (CDRH Director), pushed for a shift from the artificial construct of a strict pre-market/post-market regulatory construct to one that allows benefit/risk assessments to dictate patient access over a whole product life cycle. FDA has also committed to NEST (National Evaluation System for Health Technologies), for which collection of patient-reported outcomes in real-world use is a priority.
• FDA also published its long-awaited final BGM guidances in October, tightening accuracy requirements for consumer and point-of-care BGMs following a trove of patient and industry comments. The final guidance was mostly unchanged from the draft, and though some have mixed views on the innovation impact, we do believe FDA took the hundreds of patient comments very seriously.
• The Agency reiterated its patient-friendly outlook up until the end of the year, giving Dexcom’s G5 approval for non-adjunctive use. At the time of the  FDA Advisory Committee meeting, we noticed a very supportive and open-minded FDA – at several points when the panel went off track, Dr. Lias defended Dexcom’s choice of using modeling and simulation to support approval. Despite the positive FDA take, the seemingly unprepared panel was a wild card up until the most compelling open public hearing we’ve ever heard. Over 35 patient advocates and clinicians took to the podium in the 90-minute period, unanimously (with the exception of one parent) arguing in favor of the label update. This overwhelming patient support unquestionably helped, though FDA deserves a lot of credit for approving this label – they worked with Dexcom for two years to get this approved, did not require Dexcom to do a clinical trial, expanded the open public hearing time to accommodate more patient advocates, etc. The approval in December but a cherry on top of another great year for this division.

DIGITAL Health: More Interoperability, DATA LIBERATION, & Partnerships

• In a big merger, Glooko and Diasend combined in September to form a joint company under the Glooko name. Combined, the two companies cover 95% of the device market and are currently deployed at 4,000+ health systems in 23 countries and 15 languages. We saw this as excellent news for patients, HCPs, industry, and payers – both companies bring complementary strengths to the table, and we believe they will move faster by combining efforts. Diabetes data has needed a single go-to global repository that works with every device; enables easy zero-hassle upload (in clinic, at home, in real-time); and gives patients and providers lightning quick, actionable analysis. We expect big things from the combined company in 2017.
• In a major move, Dexcom announced plans to open up its APIs in 2017, allowing developers to create and manage pre-commercial (prototype) apps, play with simulated (sandbox) data, learn how to become a Dexcom data partner, and even submit an app for commercial approval (all at developer.dexcom.com). Though access is just for three-hour-old retrospective data initially, this is a huge step in the right direction. Developers will have access to quite a bit of information to develop novel retrospective data apps, including glucose data, statistics, device info, and calibrations. Like Dexcom Clarity, this platform is a class I medical device (retrospective CGM data), and Dexcom will support data partners and share best practices through the developer portal. Dexcom’s very strong SVP of Data Annika Jimenez brings significant Big Data experience from Silicon Valley (she spent years at Yahoo!), and noted that these are “OAuth2” and “restful APIs” – exactly what open data proponents like Tidepool’s Howard Look have desired for years. Dexcom has always been open to partnering on the data front, and this move to expose its APIs sets a new standard for the field.
• Medtronic and Abbott announced several data partnerships too, recognizing they cannot and should not build everything on their own. Medtronic launched its integration with Glooko (a long time coming – Medtronic invested in Glooko in March 2015), partnered with mySugr, continued to move its IBM Watson partnership forward, and announced a Fitbit partnership for a professional CGM Logbook app towards the end of the year. Meanwhile, Abbott fully launched LibreLink (Android app) with partner Airstrip and LibreLinkUp (remote monitoring) with partner Newyu, plus announced partnerships at EASD with mySugr and Social Diabetes.
• Consumer electronics integrations and software-updatable hardware also saw key strides in 2016, though the bar is very high. In March, Dexcom updated its G5 app to include Apple Watch compatibility, along with a Today widget for the lock screen – both updates were designed to show patients critical CGM information without having to unlock their phone. We think Dexcom has done a great job with the G5 iOS and Watch apps, though its experience shares some key lessons for the field: it’s easy to underestimate how much work building and supporting a class III medical device app is; patient expectations are insanely high; and fixing one patient complaint may introduce others (e.g., the recent mute override feature). Following in Dexcom’s footsteps with Software 505, we also saw Tandem and Livongo making their devices remote updateable this year. Tandem launched its Device Updater after receiving FDA approval in July. Customers are currently able to purchase the new t:slim X2 pump, which was built under class III (PMA) controls and therefore allows remote software upgrade from a personal computer and, eventually, the addition of Dexcom G5/G6 CGM integration and automated insulin delivery algorithms (PLGS, TypeZero). Livongo released its next-gen cellular-enabled BGM with over-the-air software update ability soon after. It is our hope that more companies move toward this model – software updates within the lifetime of a device is easier for both sides and allows for faster rollouts of innovative technology.
• DIYers received mainstream attention (and legitimacy) from news outlets, journals, and even industry. The New York Times published a valuable article on the DIY Revolution early in the year. The piece highlighted Nightscout (John Costik and Bigfoot’s Lane Desborough, in particular), OpenAPS, and Counter Culture labs, an Oakland, CA-based patient-led initiative trying to make generic insulin. Two months later, JAMA published a two-page viewpoint by University of Michigan’s Dr. Joyce Lee on the history and challenges posed by the Nightscout project. The article ponders how patients can be more involved in design and highlights key challenges in patient innovation. Dr. Lee offered a solution to her own question at DTM, where she spoke about the Nightscout Study, a new initiative “to develop a patient-designed research collaborative innovation network for T1D.” OpenAPS, the DIY automated insulin delivery project made possible through the work of Ben West, Dana Lewis, Scott Leibrand, and others, even had a late-breaking abstract at ADA (see theme above). The intelligence of this community has not gone unnoticed by industry – Dexcom hired OpenAPS innovators Ben West and Chris Hannemann in September.
• A JAMA study from March shows that diabetes apps remain a “wild, wild West” (to quote Michigan’s Dr. Joyce Lee) with respect to data privacy. The research letter scrutinized 211 diabetes apps and concluded that 81% don’t have privacy policies and, of the 19% that do, 49% share user data with third parties or partners. The line between medical and wellness apps remains blurry, the barriers to launching an app are low, and policing this area seems challenging. Several talks at AADE discussed app quality too: TypeZero’s Molly McElwee-Malloy highlighted the dangers of unregulated bolus calculator apps like RapidCalc. There are 83 unregulated apps that currently offer insulin dosing advice, she said, but call themselves “wellness apps” (and are thus illegally marketed). We wonder if most patients would be concerned with these findings, since many diabetes app users – Kelly and Adam included – skip over privacy policies in an effort to download apps quickly and try them out. Patient data must absolutely be protected and apps should be safe, though we wonder what can and should be done in this domain. Will the market correct the problem? Who should be responsible for validating health apps and making sure they are secure and safe to use? The lack of a standardized assessment, combined with the vast quantity of apps that would require assessing, places the burden on clinicians and patients. FDA’s risk-based approach to app evaluation is right on the mark, but the under-resourced Agency will struggle to keep up with the avalanche of new apps that don’t seek approval.
• Machine learning and AI in healthcare is no longer a “thing of the future.” But which companies and products will use this technology most effectively? Sugar.IQ, from Medtronic/IBM Watson, shows what is possible. As we’ve noted, the app identifies hidden patterns based on retrospective CGM and pump data and logged meals – “Having Tuna salad? Be aware that you tend to go low when you eat this meal.” But what is more exciting are the planned next-gen versions of the app, featuring hypoglycemia prediction (~85% accuracy 2-3 hours in advance) and even a therapy dialogue (“Watson, how much insulin should I take?”). In a JAMA paper published in December from Google researchers, an automated deep learning algorithm learned to detect retinopathy and macular edema in retinal fundus photographs with remarkable sensitivity and specificity (>90% for both). The application of deep learning to medical imaging analysis is an exciting prospect, promising faster, cheaper, more consistent, more accessible, and more accurate screening, and this is just the beginning for machine learning/AI. For a terrific background article on where machine learning is at, read this recent outstanding NYT piece, “The Great AI Awakening” (not focused on healthcare, but very good insights).

Type 2 Insulin Delivery Devices: Lots in the Pipeline, but Little Commercial Progress

• The ever-promising type 2 insulin delivery field – both full-featured pumps and simple on-body devices – did not see significant commercial progress in 2016. However, a lot of companies are pursuing this field and we hope at least one product can scale and come to market with broad reimbursement.
  
  • BD: The big news of the year was BD’s Analyst Day announcement: expectations to launch a disposable, three-day-wear, basal-bolus patch pump for type 2 diabetes by September 2018 (FY18). The plan is for a 300-unit pump to communicate with a wireless handheld controller, which has Bluetooth and can further send the data to a smartphone. Affordability is a major goal, approximating the cost of basal-bolus MDI.
  • Insulet: The only tubeless pump player kept up its own efforts to move into type 2, announcing a new U200 OmniPod partnership with Lilly (at JPM 2016) and completed enrollment in Lilly’s U500 OmniPod trial (primary completion by April 2017). Insulet’s November Investor Day guided for expected launches in 1H19 (U500) and late 2019-early 2020 (U200).
  • J&J’s OneTouch Via (formerly Calibra Finesse) was expected to launch outside the US in 4Q16 and in the US in early 2017, but the company moved the timing back when we inquired in December: a focused US launch is now expected in 1H17 (no timing on an international launch). OneTouch Via was resubmitted to the FDA on November 29 for new 510(k) clearance of an updated manufacturing process – this product has been many years in the making and we truly hope it comes to market next year.
  • Valeritas had the most eventful business year in this area, reverse merging to go public on the NASDAQ, but then downsizing its sales force by >50% and saw just $4.9 million in sales in 3Q16; the company has just $15.5 million in cash remaining.
  • CeQur announced a significant facility expansion in April and did raised $100 million in 2015, but still has not filed PAQ with the FDA to our knowledge.

More Interest in Infusion Set Innovation; Can Anyone Hit a Design and Clinical Home Run?

• A limited launch of the MiniMed Pro-set with BD’s FlowSmart technology commenced in September, but closed to new users very quickly. The set was not even mentioned on Medtronic’s 3Q16 call, and a full launch is now expected in January-March (per BD’s Analyst Day). We saw the lack of 3Q16 discussion and the very rapid limited launch closing as potential red flags, particularly given the issues some diaTribe readers have shared following Adam’s test drive (e.g., issues with cannula kinking on manual insertion, tubing disconnecting accidentally, etc.). These are anecdotal reports and we’ll be listening for more concrete updates from the companies in 2017. Still, if there are issues in this limited launch, it serves as a reminder that infusion sets are very difficult to design and manufacture (even for big companies like BD) – a challenge since the field needs a lot more innovation with automated insulin delivery on the horizon. We like that BD has focused on both clinical improvements (two cannula holes) and form factor improvements (less painful insertion), and we wonder how other companies will be pursue infusion set innovation going forward.
• Medtronic’s June 2016 Analyst Meeting shared plans to launch five other infusion set products over the next three years, including an extended wear set and two different CGM-insulin delivery combo sets.
• The most exciting early-stage infusion set technology we saw in 2016 came from Capillary Biomedical, who received JDRF funding in August to develop a novel subcutaneous insulin infusion catheter that: (i) can be worn for seven days or more; (ii) infuses insulin from multiple small holes along the catheter (like a sprinkler); (iii) uses a “non-cutting,” lower trauma design to reduce site inflammation; and (iv) adds a vibration and warming device on top of the catheter to increase local circulation. The company expects more rapid and consistent insulin absorption. Capillary targets a first commercial device by 2020, and believes the focus on biomechanical design changes (multiple holes, atraumatic insertion, heating, vibration) reduces the project complexity and timeline relative to other approaches (coatings, excipient
• Unomedical does have a single-touch, fully automatic serter (completely hides the insertion needle and retracts it) in the pipeline. This was first shared in the ATTD 2016 exhibit hall and was expected to launch this year; we have not heard an update since, though we suspect they have plenty in the works.

Earlier Stage Implantables Slog Forward; Less Invasive Patch CGMs Have A Tough Year

• Glysens, a fully implantable CGM, kicked off 2016 by securing $20 million in Series D funding. In a conversation at AADE, we learned that Glysens has two, small, ongoing clinical studies, which have demonstrated good signal stability and minimal monthly drift over the 12-months of use (one calibration per month). CEO Mr. Bill Markle also told us that bringing the MARD down into the low teens with an improved algorithm is the company’s main priority. It things go well, a CE approval trial (n=30) is expected to start in 1Q17; we haven’t been in touch with the company since then. We’re glad to see Glysens pushing forward with its fully implantable CGM, but even if things go exactly as planned, the device will still not be market-ready for quite some time (we assume over 1.5 years, since a one-year study will take that long to compete). In late 2018, the competition in traditional CGM will likely be much stiffer though it may also be a far bigger market.
• In the very early stage arena, we were quite impressed with Profusa on Day #1 of DTM. The company’s micro hydrogel sensor is extremely tiny (500 microns in diameter x 5 mm long), flexible, tissue integrating (capillaries can grow into it), lasts over two years, and can sense multiple analytes (oxygen, glucose, lactate, and more). A first-in-human glucose sensing trial is expected to start in early 2017, and its oxygen sensor (Lumee) received a CE Mark in 3Q16. CEO William McMillan shared plans to secure a CE Mark for glucose sensing in type 2 diabetes and prediabetes in 2018, followed by an expected launch in the top three EU countries later that year. A type 1 diabetes trial is also expected to start in 2018. The company has serious military funding and we think they are one to watch.
• Less invasive patch CGMs (Echo Therapeutics, Glucovation, and Sano), aimed at “consumer wellness” applications requiring little to no FDA oversight, saw no meaningful progress in 2016. Echo Therapeutics was delisted from the Nasdaq in July, unable to meet the minimum stockholder’s equity requirement of $2.5 million. Meanwhile, Glucovation settled its intellectual property (IP) lawsuit with Dexcom in May. The company seeks to develop a non-enzymatic, factory calibrated, very low-cost, MARD <10% CGM for type 1 and type 2 diabetes. The highly ambitious goal is to be ~50% cheaper than current products (including FreeStyle Libre). According to the May update, human trials will begin in early 2017, with a CE Mark submission in 2H17. Launch is expected in late 2017 in China or Europe through partnership. Sano, which said in July 2015 that it planned a launch of its CGM sensor patch in 2016, did not provide further updates this year and has not responded to our questions via email. We see potential for these technologies to expand access to glucose data, though accuracy, reliability, cost, manufacturing, data output, regulatory expertise (if required), and commercialization are among many questions. We especially wonder if there is a big enough market for a consumer CGM, whether it would have some FDA oversight, and what the right price point is for a direct-to-consumer offering.

2. Most Highly Read Reports

• FDA approves non-adjunctive (insulin-dosing) label claim for Dexcom G5 CGM in ages two and up; win for patient access, adoption, safety, and hassle AND Positive 8-2 vote at FDA Advisory Committee Meeting for non-adjunctive (insulin-dosing) label claim for Dexcom G5 CGM
• J&J Medical Device Business Review – Finesse renamed OneTouch Via, launch in next 12 months (filing in 2H16); automated insulin delivery launch by November 2017
• FDA approves MiniMed 670G hybrid closed loop in unprecedented 3 months; Medtronic launching in spring 2017 in US; International approval expected in summer 2017
• Abbott FreeStyle Libre Pro receives FDA approval, launch in coming weeks; real-time consumer version submitted to FDA in 3Q16
• Sanofi and Verily Life Sciences Launch Onduo, $500 million JV to develop diabetes solutions combining devices, software, medicine, care
• UnitedHealthcare selects Medtronic as its preferred provider of insulin pumps, effective July 1; negative for patient choice; what’s the broader impact?
• Medtronic begins limited launch of MiniMed Pro-set with BD’s FlowSmart; same price as mio set and available in Luer Lock & Test Drive: Medtronic-BD MiniMed Pro-set with FlowSmart – less painful insertion, great needle retraction, form factor improvements but questions remain
• Medtronic demos Sugar.IQ app with IBM Watson at Health 2.0; initial launch in coming days, broad launch in late 2016
• Medtronic 2016 Analyst Meeting – Seven new CGMs to launch in next five years; 670G, Guardian Connect in US by April 2017, Watson app this summer; 20 million patients by 2020 via new care and payer model
• Lilly invests $5 million in Beta Bionics, new public benefit corporation to commercialize BU’s iLet Bionic Pancreas; interview with CEO Dr. Ed Damiano and Lilly’s Deirdre Ibsen
• FDA publishes final guidance updating SMBG, point-of-care BGM accuracy and study requirements; SMBG accuracy unchanged from draft, POC loosened
• BD 2016 Analyst Day – Type 2 patch pump and smart pen needle technology to launch by September 2018; one new innovation per year for next five; digital health focus

3. What We Got Right/Expected

• Automated insulin delivery making big strides
• A positive FDA advisory committee and approval for non-adjunctive (insulin dosing) use of Dexcom’s G5.
• Strong, sustained enthusiasm for FreeStyle Libre in Europe
• Positive outcomes for glucose sensors in Dexcom’s DiaMonD study (CGM in MDIs) and Abbott’s IMPACT (FreeStyle Libre in type 1s with lots of hypoglycemia)
• BGM struggles continuing
• Greater focus on using better technology to help get insulin delivery right – e.g., smart caps/pens and insulin dose titration software
• More competitive and reimbursement pressure in insulin pumps
• More partnership in digital health and diabetes software
• Bigfoot Biomedical to be taken seriously by investors
• No public movement on Verily/Novartis contact lens

4. What We Got Wrong/Did Not Expect

• How quickly the MiniMed 670G would be approved
• CGM reimbursement approved in Germany for intensive insulin users.
• The very long FDA review of FreeStyle Libre Pro
• Abbott’s REPLACE study in type 2 missing its primary endpoint
• The massive commitment ($496 million) behind Sanofi/Verily’s joint venture, Onduo.
• Little progress in type 2 simple insulin delivery devices
• Diasend and Glooko merging into one company
• Senseonics going public and hitting all of its timelines
• Medtronic’s agreement with UnitedHealthcare to become a preferred provider of insulin pumps
• Smaller BGM players getting tremendous funding

5. Key Questions for 2017

Glucose Monitoring

• Will CGM see accelerated growth in 2017 as new players come to market and improved products come out? Will reimbursement continue to improve? Where will US CGM penetration in type 1 stand at the end of 2017? (Right now, most say it’s at about 15%.)
• Will the FDA approve FreeStyle Libre early in 2017? Will Abbott receive a non-adjunctive insulin-dosing claim? Will FreeStyle Libre consumer version uptake be as significant in the US as it has overseas?
• How will Dexcom’s non-adjunctive insulin-dosing claim influence sales? If Libre is approved, will it negatively impact Dexcom and Medtronic’s CGM growth, or will it raise awareness for the entire field?
• How will Medtronic’s new Guardian Sensor 3 perform in the real world? Will its standalone Guardian Connect system receive FDA approval? What will uptake look like, given the higher CGM competition we expect to see in 2017?
• How will J&J/WellDoc come to market with their integrated product?
• Will Intuity Medical’s Pogo, OneDrop Premium, and Livongo see encouraging uptake in 2017? Should the Big BGM players be worried? Are any of these companies a target for acquisition?
• Will we hear any updates on the Verily/Novartis glucose-sensing contact lens? Has the project hit a snag?
• Will Senseonics Eversense sales take off in Europe (particularly with a 180-day indication and smaller transmitter slated for 1Q17 CE Marking)? Will it be approved in the US in 2017?
• How “IN” is Roche on CGM? Will it invest significantly, cannibalizing its own BGM business?  

Automated Insulin Delivery, Pumps, and Devices

• Will automated insulin delivery dramatically expand the market, or will it mostly upgrade current pumpers to smarter technology? Are there enough potential users to support so many players? Will these systems have good reimbursement at launch?
• How quickly will current Medtronic pumpers, non-Medtronic pumpers, and the majority of patients on MDI and fingersticks (for whom adding a pump and CGM may be a big jump) go for the 670G and similar systems in gen one, gen two, gen three, etc.?
• Will we see more deals like the Medtronic/UnitedHealthcare agreement? Is the pump market saturated or does it still have plenty of runway now that automation is here?
• Will BD/Medtronic’s MiniMed Pro-set with FlowSmart fully launch in early 2017? Will this commercialization hurt other pump companies, particularly in light of the set’s luer lock compatibility? How will Unomedical respond?
• Will J&J finally launch the OneTouch Via bolus-only insulin delivery device? What will uptake look like? Will Valeritas be acquired? Will CeQur launch in the US?
• What is the right revenue model for closed loop systems? Will companies switch to a subscription/service model?

Data, Software, and Digital Health

• How will Voluntis’ Insulia (insulin titration software) fare once it launches in 2017? What is the go-to market strategy in the US?
• How will big tech companies impact the diabetes digital health landscape in 2017 – will we see more investment and actual products from Verily, IBM Watson, Samsung, Fitbit, etc.?
• Will other CGM companies follow Dexcom’s lead by opening APIs?
• Which insulin player will make the biggest investment and commitment to digital health? Will 2017 see more investment in digital health from traditional diabetes drug companies?
• Will digital health in diabetes see reimbursement and engagement?

Business Models

• Can companies scale these models, and will they truly deliver better care at lower costs?
• How long will this take? Is this a “five-year” kind of a change, a “15-year” kind of change, or a “never” kind of change?
• Can more traditional business models still exist (DME, product-based), or will most diabetes device business models need to dramatically adapt in the coming five years?
• How much are patients willing to pay for diabetes care, technology, and services? How much of these new business models will be patient vs. payer-driven?
• Which companies will drive this change and in what areas – BGM, CGM, pumps/AID, broader all-in-one bundled diabetes care services, etc.?
• Can small companies make a big splash, or are the reimbursement barriers to entry too significant? Can big companies change their business models quickly and in big ways?
• How long will it take payers and health systems and providers to adapt to these models?
• Who will best scale coaches, and what is right balance between humans and automated algorithms?

6. What’s Coming in 2017?

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.  

Automated Insulin Delivery, Pumps, Delivery Devices, Pens and Caps

Animas OneTouch (J&J)

• Focused 1H17 US Launch of OneTouch Via (formerly Calibra Finesse) bolus patch delivery device (re-submitted to FDA in November). International timing unknown.
• Potential launch of OneTouch Vibe Plus insulin pump with Dexcom G5 integration
• Potential 2017 pivotal study of Hypoglycemia-Hyperglycemia Minimizer?

BD

• Full launch of the MiniMed Pro infusion set with BD FlowSmart Technology expected in “early Q2” (roughly January-February 2017)
• Potentially one new innovation in 2017, given management’s Investor Day comments (one new innovation per year for next five)

Bigfoot Biomedical

• Pivotal trial of smartloop automated insulin delivery system expected to start in mid-2017

Beta Bionics

• Insulin-only bridging study and bihormonal bridging study are both planned to begin in mid-2017
• Insulin only pivotal trial expected to start in 2H17

Cellnovo

• Potential US launch of patch pump system (submitted to FDA in November 2016)
• Potential 2017 launch of a type 2 insulin delivery device (1Q16; not mentioned in later updates)

Common Sensing

• Ongoing Joslin GoCap study, which will run through 2018
• Potential partnerships?

Companion Medical

• US launch of Bluetooth-enabled InPen
• Possible CE Mark in the coming months

CeQur

• Possible launch of PAQ patch insulin delivery device in US (though the device has yet to be filed with FDA, as far as we know)

Insulet

• Bluetooth-enabled pod and touchscreen PDM, OmniPod Dash, is expected to launch by the end of 2017 (510(k) to be submitted in mid-2017)
• Lilly U-500 OmniPod study to run through April (according to ClinicalTrials.gov)

Medtronic

• Full launch of the MiniMed Pro infusion set with BD FlowSmart Technology expected in “early Q2” (roughly January-February 2017)
• MiniMed 670G hybrid closed loop to ship in US in Spring 2017, with international approval expected in summer 2017 

Patients Pending (Timesulin)

• Regulatory filing for dose capture technology expected in 2017

Tandem

• Mid-2017 US launch expected for t:slim X2/Dexcom G5 integration
• 1Q17 pivotal trial of t:slim X2 with predictive low glucose suspend, enabling an expected US launch by the end of 2017.
• Pivotal trial for second-gen AP product (TypeZero treat-to-target algorithm), supporting an expected launch in 2018

Valeritas

• Potential fundraise in the next 9 months?
• Will add ~10-20 sales reps (following a >50% reduction in February)

Ypsomed

• Regulatory submissions for YpsoPump in Sweden, Norway, Denmark, and Italy by March
• Ypsopump lower age indication (<12 years) and manual reservoir fill option

CGM and Flash Glucose Monitoring

Abbott

• Potential FDA approval of FreeStyle Libre consumer version (ambitiously expected in 1Q17, per 2Q16 call)
• Apple iOS Version of LibreLinkUp app for remote monitoring

Dexcom

• More details on non-adjunctive (insulin-dosing) indication, training, etc.
• Likely launch of touchscreen receiver (under FDA review)
• Likely launch of G5x (50% smaller transmitter and one-button inserter; under FDA review)
• Potential US launch of Android G5 (under FDA review)
• Developer.dexcom.com to be fully available in “early 2017”

GlySens

• Potential for initiation of CE approval trial (n=30)

Medtronic

• Spring 2017 US launch of Guardian Sensor 3 with MiniMed 670G hybrid closed loop
• US launch of Bluetooth-enabled, standalone, Guardian Connect mobile CGM expected by April 2017 (under FDA review)

Roche

• Broader European rollout of Accu-Chek Insight CGM

Senseonics

• Potential US launch of Eversense in late 2017 (under FDA review)
• CE Marks expected in 1Q17 for both (i) a 180-day Eversense indication (submitted in 2Q16) and (ii) a 55% smaller next-gen transmitter
• Further clinical testing of second-gen sensor, which has a “key design goal” of eliminating fingerstick calibration
• Real-time, single glucose readings by swiping smartphone over sensor intended to enter a clinical trial
• Pediatric clinical trial of Eversense in Canada

BGM

Ascensia Diabetes Care (formerly Bayer Diabetes Care)

• US launch of Bluetooth-enabled Contour Next One BGM system

Abbott

• No publicly disclosed BGM products

DarioHealth

• App integration with Apple Health
• Potential FDA submission of lightning adapter for iPhone 7

Intuity Medical

• US launch of POGO Automatic all-in-one BGM

LifeScan (J&J)

• 1Q17 launch of WellDoc BlueStar integration with Verio BGM and Reveal App

Roche

• Accu-Chek Guide BGM expected to launch in US

Other

NeuroMetrix

• Initiation of second-gen Quell sales in EU
• Possible new product launch at CES 2017
• Broader market launch of DPNCheck in China in 1H17
• Preliminary results from Brigham and Women’s Hospital study to assess utility of Quell in patients with chronic low back pain expected in late 2017

Big Picture

1. Themes

Calls For Outcomes Beyond A1c Hit Fever Pitch With FDA Workshop

• In August, FDA CDER hosted a landmark workshop to discuss outcomes beyond A1c: What else should be measured? What are the next steps? There is now a consensus in the field summed up nicely by Dr. Rich Bergenstal during a webinar on CGM in Clinical Trials: “A1c is a great population health measure, but not great at discriminating how a patient is doing at a given time.” At the FDA workshop, a compelling speaker lineup supported time-in-range, hypoglycemia, and patient-reported outcomes (e.g., quality of life, burden) to supplement A1c in regulatory decision making. The Agency was far more positive than we had dared to expect, as Drs. Robert Califf and Francis Kalush delivered very thoughtful and positive perspectives on the prospects of outcomes beyond A1c. Even the FDA’s historically tough Dr. Jean-Marc Guettier expressed interest throughout. The diaTribe Foundation (who requested the meeting and represented one of the organizers) and dQ&A presented impactful data (slides here) supporting the importance of time-in-range and patient-reported-outcomes – both largely disregarded by industry and regulatory – in a patient’s day-to-day wellbeing. We are hopeful that proposed next steps will come to fruition: Dr. Robert Ratner asked for at least two more FDA workshops in the next nine months (i.e. before May) to more specifically discuss what metrics for hypoglycemia and time-in-range (e.g., <55 mg/dl, <70 mg/dl, 70-180 mg/dl, etc.) and for patient-reported-outcome measures (which specific quality of life instruments) should be used in clinical trials and ultimately drug labels. The meeting was widely regarded as a successful step – to get everyone on the same page – before pursuing change head on. The diaTribe Foundation asked for a change in guidance to reflect CGM use in drug trials and reporting time in zone (or another measure to be decided). It is no doubt a very exciting time to be a patient advocate and/or involved in the regulatory science of diabetes! We do believe there is a high cost to coordination of gatherings like these and hope the groups can be even more coordinated in the future.

Growing Interest in Diabetes-Adjacent Indications

• Companies are making progress in treatments for NASH, prediabetes, and other indications related to diabetes. Diabetes is a complex disease in and of itself, but is further complicated by the range of comorbidities and complications. Most of these “diabetes-adjacent” conditions sorely lack treatment options. That said, as the number of treatments and drug classes available for glucose lowering balloons and the bar for strictly diabetes drugs rises ever higher, we’ve noticed a brewing interest in the development innovative therapies for diabetes-adjacent indications with high unmet need.
  
  • Most notably, Novo Nordisk unveiled a revamped R&D strategy in its 3Q16 update to “apply an even higher innovation threshold.” As such, the company will focus on (i) developing adjacent indications with high unmet need for its existing products (such as obesity for highly potent GLP-1 agonist semaglutide); (ii) developing new diabetes medicines with “distinct differentiation or disruptive potential”; and (iii) developing drugs for new disease indications related to but distinct from diabetes and glucose regulation. We were very excited to see several areas of high unmet need included under this last umbrella: prediabetes, cardiovascular disease, NASH, nephropathy, type 1 diabetes intervention, and type 1 diabetes stem cell therapies. We see the decision to focus on indications beyond glucose management as confirmation of the growing recognition that new drugs in the modern diabetes era must offer benefits beyond glucose lowering. We’re especially intrigued to see Novo Nordisk potentially expand into prediabetes – Saxenda previously demonstrated an impressive ~80% reduction in risk of developing type 2 diabetes in the three-year SCALE trial extension and we’re curious to see if the company will pursue a prediabetes indication for Saxenda or for either the injectable or oral semaglutide formulation (injectable semaglutide is already in a phase 2 trial for obesity).
• We were especially pleased to see several trends in 2016 toward the development of pharmacotherapies for prediabetes. We’re extremely enthused by the prospect of treating diabetes and its complications before either begin. In particular, we’re intrigued by J&J’s planned cardiovascular outcomes trial (CVOT) of SGLT-2 inhibitor Invokana (canagliflozin) in a prediabetes population. J&J has yet to provide details on the trial design or timing of a prediabetes CVOT, and CANVAS (which investigates Invokana in a type 2 diabetes population at high-risk for CV events) won’t report until ADA 2017 – given the lack of any positive cardiovascular outcomes data associated with the drug at this point, the announcement of the planned trial is an indication of the substantial confidence J&J has in canagliflozin’s benefit potential. That said, we’d expect the weight loss benefit of canagliflozin and other SGLT-2 inhibitors could be beneficial in addressing prediabetes and for CV prevention from an earlier stage.
  
  • Looking to a much older medication, we’ve also heard that the ADA and other collaborators are petitioning the FDA to get a prediabetes indication on the metformin label. Unfortunately, it doesn’t seem that the FDA is responding with much enthusiasm as we understand it. Until prediabetes is more explicitly defined as a disease, it will be difficult to get therapies approved. Many thought leaders in the field have endorsed metformin for the treatment of prediabetes, including Drs. John Buse (University of North Carolina, Chapel Hill, NC), Guillermo Umpierrez (Emory University, Atlanta, GA), and Anne Peters (USC, Los Angeles, CA) – despite the professional enthusiasm, this doesn’t appear to be enough to drive regulatory action yet. Hopefully we will see more movement on this front in 2017.
• Of all our drug-focused competitive landscapes, the one for NASH (nonalcoholic steatohepatitis) has been updated most frequently in 2016. Gilead initiated a phase 3 trial investigating selonsertib as a NASH therapy in 3Q16, while also moving two candidates – ACC inhibitor GS-0976 and FXR agonist GS-9674 – into phase 2 for NASH. Novo Nordisk is pushing forward with GLP-1 agonist semaglutide for NASH (currently in phase 2). Avolynt announced the FDA acceptance of its Investigational New Drug Application for SGLT-2 inhibitor remogliflozin etabonate in August, and the company has a pivotal study planned in NASH participants. Novartis just recently launched a partnership with Conatus Pharmaceuticals, and together the two companies will develop phase 2 oral pan-capase inhibitor emricasan for NASH. Emricasan joins several FXR agonists already in Novartis’ NASH pipeline. Allergan has really doubled down on its NASH investments: The company acquired Tobira Therapeutics and took on DPP-4 inhibitor evogliptin for NASH, and then days later acquired Akarna Therapeutics and took on AKN-083, an FXR agonist for NASH. The NASH competitive landscape is certainly becoming more heated, and we see new additions as a victory. NASH persists as an area of high unmet need – no therapies are yet FDA-approved, and prevalence of the condition is only rising – so we welcome innovation and keep our fingers crossed for more progress in 2017. We aren’t sure how the commercial landscape will evolve and we look forward to understanding more about the landscape.

Updates to the AACE/ACE Treatment Algorithms and ADA Standards of Care

• To kick off the year, AACE/ACE published an updated version of its type 2 diabetes management algorithm in the journal Endocrine Practice in early January, featuring the addition of a brand-new Lifestyle Therapy section. This section provides specific recommendations for five categories of lifestyle interventions, stratified by burden of obesity and related complications: (i) nutrition; (ii) physical activity; (iii) sleep; (iv) behavioral support; and (v) smoking cessation. Lifestyle intervention is often underemphasized in clinical practice and in the discussion at conferences, so we applaud AACE/ACE for addressing and giving visibility to this important therapeutic approach, particularly in terms of aspects such as sleep and mental health which are rarely a feature of traditional lifestyle modification programs.
  
  • Overall the 2016 algorithm is an endorsement of a more holistic, intensive combination therapy approach to diabetes (where lifestyle is a form of therapy) which also encompasses the management of diabetes-related complications, namely cardiovascular disease. This is exemplified by three subtle modifications from the 2015 version of the diabetes treatment algorithm. First, the updated algorithm mentions a “possible benefit” of SGLT-2 inhibitors on cardiovascular disease following the positive EMPA-REG OUTCOME results for Lilly/BI’s Jardiance (empagliflozin). Second, the algorithm takes a more flexible approach to insulin intensification, now providing guidelines for “basal plus one, plus two, plus three” therapy in addition to basal bolus therapy. Finally, it addresses the management of other cardiovascular risk factors like blood pressure and lipids more explicitly than in the past and includes PCSK9 inhibitors as a new option for LDL lowering in patients with type 2 diabetes. This is certainly a step in the right direction, and we anticipate that these recommendations will improve the quality of care for many patients with diabetes with complex comorbidities who are often managed by a range of physicians from endocrinologists to primary care physicians to cardiologists and nephrologists. Indeed, the influence of the AACE/ACE guidelines is difficult to overstate: along with the ADA/EASD position statement, the AACE/ACE algorithm is one of the most widely referenced sets of guidelines for type 2 diabetes management in the US.
• Notably, 2016 marks the first year AACE/ACE published dedicated guidelines for the treatment of obesity. Though obesity has typically been addressed in a BMI-centric framework (whereby an individuals’ BMI determines what type of therapy – lifestyle, medications, and/or surgery – is most appropriate), the AACE/ACE obesity treatment algorithm takes a complications-centric approach, where instead physicians and patients agree upon a personalized treatment strategy together based on the individual’s unique obesity complications (sleep apnea, cardiovascular disease, diabetes/prediabetes, etc.) and how they impact their daily life.
  
  • The AACE/ACE obesity algorithm utilizes the following four diagnostic categories, all centered on an individual’s complication burden: (i) Normal Weight (no obesity); (ii) Stage 0: BMI≥25 and no complications; (iii) Stage 1: BMI≥25 and one or more mild-to-moderate complications; and (iv) Stage 2: BMI≥25 and at least one severe complication. Primary prevention (i.e. maintenance of healthy weight) is recommended for individuals at Stage 0, secondary prevention (i.e. weight loss to avoid obesity complications) is recommended for individuals at Stage 1, and tertiary prevention (i.e. weight loss sufficient to ameliorate ongoing complications and suspend the development of further ones) is recommended for individuals at Stages 2 and 3.
  • According to the algorithm, lifestyle modification is the cornerstone of all of these treatment approaches, in combination with pharmacotherapy or surgery according to careful consideration of efficacy, safety, and cost. We hope that this complications-centric approach to obesity management can help patients and the public better understand and address the health risks associated with obesity, while also separating these risks from the aesthetic evaluation of body weight, thus combating obesity stigma.
• Bookending the other side of 2016, the ADA released its 2017 Standards of Care in December. The 2017 edition featured several notable updates, responding to a number of the most notable themes in diabetes in 2016. Most notably, 2017 Standards of Care explicitly encourage the prescription of empagliflozin (Lilly/BI’s SGLT-2 inhibitor, Jardiance) or liraglutide (Novo Nordisk’s GLP-1 agonist, Victoza) to patients at high-risk for cardiovascular (CV) morbidity and mortality – a huge win for these compounds. Data from the EMPA-REG OUTCOME and LEADER trials is now included in the section on CV disease and risk management. Fixed-ratio combinations of basal insulin/GLP-1 agonists are also now considered in the recommended algorithm for combination therapy, very swiftly following the approvals of Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) in the US in November. As part of a greater emphasis on the high cost of insulin in the US, tables have been added to the 2017 Standards of Care to display the cost of insulin products (as well as non-insulin pharmacotherapies). A figure outlining recommendations for antihyperglycemic therapy in type 2 diabetes has been updated to acknowledge rising insulin prices. Another new section describes the role of biosimilar insulins in diabetes care. Based on recommendations from the International Hypoglycemia Study Group, the ADA Standards of Care also feature a new classification for hypoglycemia: clinically-significant hypoglycemia is now defined at blood glucose <54 mg/dl, while blood glucose <70 mg/dl should be used as an “alert value.” We are very glad to see the field moving away from the “mild to moderate” terminology. The 2017 Standards of Care feature a sharpened emphasis on type 2 diabetes prevention, starting with a push for better, more frequent prediabetes screenings. We’re also very glad to see this and wonder how the field will actually make these screenings happen. And finally, the need for psychosocial support in diabetes care is an overarching theme throughout the document, with particularly strong recommendations for psychosocial treatment in pediatric patients. Overall, we were pleased to see these significant updates to the Standards of Care, which we believe will better help guide healthcare providers in a rapidly evolving diabetes field.

Drug Price Frustration Culminates in Political Outcry and Steps Toward Change

• The pricing controversy over insulin and other drugs in the US, which has been brewing some time, reached a fever pitch in 2016. The first half of 2016 was marked by frequent publications in medical journals (The Lancet, Diabetes Spectrum) and the mainstream media (New York Times, which also published letters to the editor in response, Washington Post, and Medscape) drawing attention to barriers to insulin access and calling for change to relieve the burden on patients. Public frustration over drug pricing extended far beyond the insulin and diabetes field as well: 2016 witnessed a high-profile media storm and outcry against Mylan for its EpiPen pricing practices. In an election year, US drug pricing became a political issue, with presidential candidate Secretary Hillary Clinton outlining a plan to drive down consumer drug prices in September (a plan that echoed many of her proposals from September 2015). In our own home state of California, ballot Proposition 61 – a proposition that would have required state agencies pay the same prices that the US Department of Veterans Affairs (VA) pays for prescription drugs – was met with staunch, public opposition from Lilly, Merck, J&J, and Pfizer in their 3Q16 earnings updates. Supporters of a similar proposal in Ohio hope to press the issue in the November 2017 election, as the proposal did not receive enough signatures to make it on the ballot of November 2016. While it is unlikely that new legislation or policy changes to curb drug prices will be implemented in the near future – especially given the presidential election of Donald Trump – it became clear as 2016 progressed that the public and political frustration over drug pricing was untenable and something had to change. Senator Bernie Sanders went to far as to call for a Department of Justice investigation into possible insulin price fixing – leading us to wonder how did we get here and urge manufacturers to come together and take action to help patients in need. Professional societies took up the call as well in 2016, with the ADA issuing a resolution and petition calling for increased transparency and access solutions from all stakeholders in the insulin supply chain and the Endocrine Society calling for collaboration among stakeholders to address the diabetes drug pricing crisis.
• Insulin manufacturers are listening, and a number are beginning to take action. We were extremely impressed by Lilly’s December announcement of a new program to provide discounted insulin directly to patients, in a collaboration with online platform Blink Health. Beginning on January 1, 2017, patients will be able to purchase all Lilly insulins at up to a 40% discount through Blink Health – a move that Lilly hopes to provide relief for patients who are uninsured or who have high deductible health plans who have been most impacted as insulin list prices rise in response to rising rebates to pharmacy benefits managers (PBMs) and payers. Importantly, this program occurs outside of and separate from the insurance industry, and it will be up to individual health plans whether or not the costs of insulin purchased through this program will count toward patients’ deductibles – nonetheless, we see this program as a positive, innovative, action-oriented move forward and hope that we’ll eventually see the program extended to Lilly’s non-insulin diabetes medications as well. Lilly is the first pharmaceutical company in the diabetes field to take make such a bold move, and we hope that other companies will soon follow. As a first step, also in December, Novo Nordisk released a position statement to address diabetes drug affordability in America. Notably, the company committed to only single-digit price increases annually for its drugs, in addition to working toward transforming the complex pricing system and reducing out-of-pocket costs for patients.

Diabetes Prevalence & Cost Continues to Rise, Payers Respond

• The WHO published its first-ever Global Report on Diabetes in honor of World Health Day 2016 (April 7). The topline numbers are extremely unsettling: global diabetes prevalence reached 8.5% (422 million adults) in 2014 compared to 4.7% (108 million) in 1980. Increases in the Middle East and Southeast Asia were by far the most disturbing, though flat or increased prevalence was seen in every region. Indeed, even in the least hard hit region overall (Africa), the increases are extraordinarily high – diabetes is up five times in Africa today versus the 1980 base. The report attributes the global rise in diabetes to three factors: (i) global population growth; (ii) the increase in the average age of the global population; and (iii) the rise in diabetes prevalence at all ages. The document reports that the direct annual cost of diabetes to the world is more than $827 billion, with hospital and outpatient care representing the major drivers. In 2015’s reflections piece, we wrote about IDF’s Seventh Diabetes Atlas, which estimated that 415 million adults had diabetes in 2015. The WHO and IDF estimates are quite similar, and convey the same message: Diabetes is a global epidemic, and one that is gaining steam quickly.
• In response to rising diabetes costs, pharmacy benefits managers Express Scripts and CVS Health announced a Diabetes Care Value program and a Transform Diabetes Care program, respectively. Both programs are aimed at reducing diabetes care costs for insurers that are clients of the two largest PBMs in the US, with Express Scripts committing to reducing diabetes cost growth to at least half of the industry rate for participating employers and insurers and CVS Health committing to a single-digit cost growth guarantee – both programs would cap growth at about 9%. Both programs also offer a number of patient support and convenience programs intended to improve adherence to diabetes medications, thus hopefully reducing diabetes complications and the overall cost of care. It’s unclear to what extent care cost savings will be passed on to individual patients – and we continue to believe that PBMs play a not-insignificant role in driving diabetes drug list price increases. All in all, the launch of these programs in 2017 indicate that concerns over overall healthcare costs and pricing pressures are unlikely to abate in the coming years.

CDC Mortality Statistics Rise, Partly Driven by Diabetes Deaths

• The final CDC mortality statistics for 2015, released in December 2016, demonstrated a sobering rise in overall and diabetes-related mortality. The rise in all-cause mortality was the first increase observed in a decade and contributed to the first decrease in life expectancy in the US in over two decades, since 1993 (the year many of our associates at Close Concerns were born!) The age-adjusted mortality rate in 2015 reached 733.1 deaths per 100,000 people in 2015, up from 724.6 deaths per 100,000 people in 2014. This represents a statistically significant 1.2% increase in mortality. Life expectancy at birth in 2015 in the US was 78.8 years, a 0.1 year decrease from the life expectancy in 2014. Diabetes was the seventh leading cause of death in 2015 and age-adjusted diabetes mortality rates experienced a statistically significant increase to 21.3 deaths per 100,000 people in 2015, up from 20.9 deaths per 100,000 people in 2014. This news is particularly disappointing in the context of the provisional estimates for 2015 mortality, released in June, that indicated a numerical but not statistically significant increase in age-adjusted diabetes death for 2015. Several diabetes-related comorbidities ranked in the top ten leading causes of death and also experienced statistically significant increases in mortality rate in 2015. Heart disease was the number one leading cause of death for 2015 and deaths attributable to heart disease reached 168.5 per 100,000 people, compared to 167 in 2014. Stroke was the fifth leading cause of death, with 37.6 deaths per 100,000 people in 2015, compared to 36.5 in 2014. Kidney disease was ranked the ninth leading cause of death, with 13.4 deaths attributable to this cause in 2015, compared to 13.2 in 2014.
• We expect that diabetes is an underlying driver of the increase in cardiovascular deaths. A JAMA Cardiology article published in June showed that the once-steep rate of decline of cardiovascular death in the US has significantly slowed since 2011, which we imagine is at least partly attributable to a continuing rise in diabetes prevalence. An earlier JAMA article found that declines in death rates for diabetes, heart disease, and stroke slowed between 1969 and 2013 and attributed this trend to increasing obesity prevalence. It’s clear that current diabetes and cardiovascular treatments and clinical practice are not doing enough to address residual cardiovascular risk in patients with diabetes. We sincerely hope that growing use of diabetes drugs with cardiovascular benefits – such as Lilly/BI’s SGLT-2 inhibitor Jardiance (empagliflozin) and Novo Nordisk’s GLP-1 agonists Victoza (liraglutide) and semaglutide – as well as PCSK9 inhibitors for LDL cholesterol management (that is, if anyone can get access to these drugs – we’re still awaiting CVOT data) can drive cardiovascular mortality rates toward a downward trend again. We hope that regulatory agencies and payers recognize the important potential role of these agents in impacting cardiovascular and overall mortality and hope that labels will continue to be appropriately updated with cardiovascular indications and that payers take these benefits into account when determining coverage and reimbursement. Additionally, we hope that guidelines committees take seriously their role in raising awareness of cardiovascular benefits associated with new drugs especially, particularly to help guide primary care physicians who may be overwhelmed by the variety of diabetes drug options otherwise.
• Despite the worrisome results, early indications from 2016 suggest that the 2015 findings may be a one-time blip rather than a sustained trend. Quarterly provisional estimates for mortality rates in the first quarter of 2016 report a decrease in both diabetes mortality rate and overall mortality rate, in terms of both crude and age-adjusted numbers. We’re hopeful that full year statistics from 2016 could indicate a return to mortality declines, though we do not expect this; we won’t have final full year statistics for 2016 available until the end of 2017.

Payers Make Moves to Reimburse Diabetes Prevention Program (DPP)

• With Medicare’s decision to launch coverage of the Diabetes Prevention Program (DPP) in 2018, and with the AMA calling on private payers to do the same, we’re starting to envision effective, widely-accessible prevention programs. To be sure, we have a long way to go on the accessibility front, but we also want to recognize the progress made in 2016. According to the final rule, Medicare will begin approving DPP providers in January 2018, will reimburse up to $450 for the 16 core sessions of the program, and will reimburse up to $180 for maintenance sessions. Of note, the Centers for Medicare and Medicaid Services (CMS) received ~700 letters of DPP-related correspondence following its proposed 2017 Medicare Physician Fee Schedule, reflecting tremendous support for diabetes prevention efforts and interest in ensuring that the program is implemented well. We know the DPP works and we’re thrilled that payers are starting to acknowledge the long-term cost-savings. The AMA’s advocacy that payers should be willing to invest in prevention is also incredibly valuable, as the professional organization holds strong influence in the US and abroad. Notably, virtual DPP is not yet included in Medicare’s plans for reimbursement, which is unfortunate in light of research demonstrating its efficacy. Online platforms are one example of how the DPP might be translated to be lower-cost and more convenient for participants, and we hope to see more evidence that works toward optimal cost-effectiveness so that prevention can be well-reimbursed and broadly implemented at the population level. We’ve noticed an uptick in conversation about type 2 prevention at diabetes and obesity meetings this year, and we so hope this trend continues. Prevention is an area where exchanging insights is particularly helpful as we try to distill which aspects of the DPP make it effective and as we look for feasible ways to extend prevention initiatives to hard-to-reach pockets of the population.

Major Medical Journals Feature Diabetes Data

• In 2016, we saw a sharp rise in the simultaneous publication of diabetes clinical trial results in respected scientific journals, concurrent with their presentation at major conferences. This simultaneous timing is rare, and the number of concurrent presentations/publications in 2016 was unprecedented. On the therapy side, this includes Novo Nordisk’s LEADER trial for GLP-1 agonist Victoza (liraglutide, published in NEJM), Novo Nordisk’s SUSTAIN 6 trial for GLP-1 agonist candidate semaglutide (published in NEJM), AZ’s DURATION-8 study of GLP-1 agonist Bydureon (exenatide once-weekly) and SGLT-2 inhibitor Farxiga (dapagliflozin) co-administration (published in The Lancet Diabetes and Endocrinology), and full renal results from Lilly/BI’s EMPA-REG OUTCOME trial for SGLT-2 inhibitor Jardiance (empagliflozin, published in in NEJM – of course, the cardiovascular results from EMPA-REG OUTCOME also won a NEJM publication concurrent with their presentation at EASD 2015). In technology, JAMA published Medtronic’s MiniMed 670G US pivotal trial as a research letter and published a viewpoint on Nightscout from Dr. Joyce Lee et al., the Lancet published Abbott’s IMPACT study and the MGH-BU Bionic Pancreas multicenter study, and NEJM published a Cambridge study of closed loop in pregnant women. We’re pleased to see an increase in timely publications of important diabetes data and perspectives, so that information on glycemic, cardioprotective, and other health benefits is more swiftly disseminated throughout the field. The results of these trials have real implications for daily clinical practice and we’re glad to see that the many tens of thousands of providers who are unable to attend a particular scientific meeting are able to access the full results nonetheless. Furthermore, the release of supplementary data associated with these trials alongside publication is invaluable in spurring additional research efforts in diabetes. The publication of these clinical trials by highly-regarded medical journals also hints at the growing recognition of the importance of diabetes research.

Inequality and Heterogeneity in Diabetes Care and Outcomes Highlighted in Medical Journals

• In April, the Journal of Managed Care and Specialty Pharmacy published a Novo Nordisk-funded study conducted by the Lewin Group that found large state-level variations in medication adherence and glycemic management in patients with type 2 diabetes across the US. The study found that a higher proportion of patients with commercial insurance achieved glycemic targets (69%) compared to those with Medicare (54%) or Medicaid (53%). In terms of adherence, 71% of Medicare patients were adherent to their medication regimes, compared to 60% of commercially-insured patients and just 53% of Medicaid patients. Even more striking was the geographic variation in both adherence rates and outcomes: the states with the lowest rates of adherence and diabetes control were largely concentrated in the south and southwest regions of the US. Arizona, Georgia, New Mexico, Texas, and Washington DC had low rates of both adherence and diabetes control. Mississippi, Louisiana, and South Carolina had low rates of adherence while Maryland, Florida, and Nevada (along with California and New Jersey) had low rates of diabetes control. The study found that inter-state variation in adherence was particularly pronounced in Medicaid patients – 71% of Medicaid patients in Montana were adherent while only 33% were in Kentucky. Together, the findings underscored the vast variation in diabetes outcomes that patients in the US experience depending on their type of health insurance and their geographic location – we continue to assume that much of this heterogeneity stems from disparities in adequate access to medications and comprehensive healthcare. The US healthcare system is marked by a patchwork quilt of insurance plans – some private, some publicly-funded by state or federal governments – large geographic, socioeconomic, and ethnic diversity, and significant heterogeneity in state-level policy and politics. Given this, the results of this study were not altogether surprising, but sobering in their implications for American patients with diabetes nonetheless.
• A biting NEJM editorial, published in mid-December, depicted stark inequities in global diabetes care and called for an end to “discriminatory design.” According to Dr. Amy Moran-Thomas, a highly-regarded medical anthropologist from MIT, the diabetes drug and device industries are a case study of a sector in need of “equitable design” improvements – that is, opportunities to design therapies and technologies that expand access for everyone globally. The author argued that improved diabetes drugs and devices can actually backfire on patients because the higher prices make them less accessible. As examples, she pointed out that many makes and models of glucose meters can make maintaining consistent diabetes supplies an expensive and complicated process and that even basic forms of insulin remain surprisingly expensive for many patients globally. Pointedly, Dr. Moran-Thomas noted that 80% of all people with diabetes live in low- or middle-income countries where even the most basic drugs and devices are not easily accessible. From next-generation insulin to the promise of an artificial pancreas, Dr. Moran-Thomas acknowledged that scientific innovation in diabetes drug and device development is impressive, but she remains pessimistic about what these advances actually mean for most patients, especially as many products are poorly designed for the needs of many. Overall, she remained critical of an “unjust system” that is imperiling lives every day: “Global diabetes-related mortality,” she writes, “reveals that the ‘trickle down’ model of technology design and hardware development is failing large portions of the world.” Dr. Moran-Thomas’ editorial underscored that, despite the recent progress we’re making toward easing access concerns in the diabetes field in the US, much more action is needed to reduce inequities globally. We would like to see industry’s commitment to narrow the existing disparities grow stronger and more importantly, we would like to demonstrate to major philanthropic efforts that investment in preventing and managing diabetes would be money very well invested. 

A Year of Leadership Changes

• Perhaps most notable in a string of leadership change this year was Dr. Robert Ratner’s retirement as ADA’s Chief Scientific and Medical Officer. Effective December 2016, this news came earlier than Dr. Ratner’s initial announcement that he would be leaving this post after ADA 2017 in San Diego, when his current contract expires. After 35 years with the ADA (five of which were spent in his current position), Dr. Ratner had an immeasurable impact on the diabetes community, broadening the scope of the ADA’s influence and making significant contributions to research to support the next breakthrough discoveries in diabetes. He will be deeply missed, and we hope his successor will continue these meaningful strides in the way we think about, prevent, and treat diabetes. We’re very eager to know who will follow in this very important position –there has yet to be a public announcement.
• In September, Novo Nordisk announced the surprise retirement of CEO Mr. Lars Sørensen after 34 years with the company and 16 as CEO. Mr. Sørensen’s tenure oversaw the establishment of several crucial Novo Nordisk products as power players in the diabetes market, including GLP-1 agonist Victoza (liraglutide) and insulin analogs NovoLog (insulin aspart) and Levemir (insulin detemir). Mr. Sørensen also presided over the company’s development and launch of next-generation products Tresiba (insulin degludec) and Xultophy (insulin degludec/liraglutide) and expansion into the obesity arena with Saxenda (liraglutide 3.0 mg).  Novo Nordisk’s “deep engagement with social and environmental issues” under Mr. Sørensen’s tenure as well as the company’s exclusive focus on diabetes and its corresponding strong financial position won him the #1 spot on Harvard Business Review’s 2015 Top Performing CEOs ranking. Effective January 1, 2017, Mr. Sørensen will be succeeded by Mr. Lars Fruergaard Jørgensen, the company’s current executive vice president and head of Corporate Development. Concurrent with this announcement, Novo Nordisk appointed Mr. Jakob Riis President of Novo Nordisk in the US, effective immediately on September 1. Mr. Riis formerly served as the company’s Executive VP for China, the Pacific, and marketing. Under his new position, he heads all North American operations, including Canada. Former head of US, Mr. Jesper Høiland, was relieved of his duties on the executive committee following this announcement. Other leadership changes emerging from the shuffle included expanded responsibility for Mr. Mike Doustdar, Executive VP and head of International Operations, through an expanded definition of “international operations” to include Europe, Africa, Asia, the Middle East and Oceania, China, Japan, Korea, and Latin America – pretty much the rest of the world outside of the US. Former head of Europe, Mr. Jerzy Gruhn, is also no longer a member of the executive team as a result.
• Sanofi also experienced a shakeup in company management at the head of its Diabetes and Cardiovascular business unit. Ms. Pascale Witz assumed the position on January 1, 2016, following a reshuffling announced in July 2015 that ousted longtime diabetes head Mr. Pierre Chancel (who held the position since 2009), only to have the position turned over to Mr. Peter Guenter the following June, suggesting some conflict between Ms. Witz and the board or other members of the senior management team. This was one of several management changes the company announced in support of its recently-released 2020 Strategic Roadmap. Mr. Guenter previously served as Sanofi’s head of General Medicines and Emerging Markets and boasts over 30 years of experience within the pharmaceutical industry, beginning his career at SmithKline, though he does not appear to have any specific diabetes-related background. Beginning in June, Mr. Stefan Oelrich stepped into the role of Senior Vice President Head of Global Diabetes Franchise at Sanofi as well – Mr. Oelrich previous headed up Sanofi’s diabetes efforts in Europe and spent over a decade at Bayer prior to joining Sanofi in 2011.
• GSK made history when it announced that Ms. Emma Walmsley become not only the first female chief executive of GSK, but also the first female CEO of a major global pharmaceutical company. This is an important step forward for the pharmaceutical industry – to date, we’ve been underwhelmed by gender or racial diversity in Big Pharma at the highest levels of management, a point that is illustrated all too clearly in our recent assessment of female leadership among the boards of directors of top public diabetes companies.

Novo Nordisk’s Cities Changing Diabetes Program Continues to Battle Urban Diabetes

• Novo Nordisk continued to expand the Cities Changing Diabetes program, adding Johannesburg as the sixth city in the initiative in April 2016. Johannesburg is the first African city to sign on to the initiative and joins Mexico City, Copenhagen, Houston, Tianjin, and Shanghai. Novo Nordisk launched the initiative in 2014, which seeks to convene multiple stakeholders in partner cities to collect data on urban diabetes, develop and share best practices, and encourage coordination in efforts to combat the epidemic. The expansion of Cities Changing Diabetes into a new continent represents an important milestone and underscores Novo Nordisk’s commitment to creating a truly global network of cities combating diabetes. We are excited to see Cities Changing Diabetes tackling diabetes within the unique social and cultural milieu of Johannesburg and we imagine the insights from this new collaboration will serve as a starting point for other sub-Saharan African cities looking to combat urban diabetes. The Cities Changing Diabetes initiative is clearly a centerpiece program for Novo Nordisk, underscored by its spotlight in an issue of its Triple Bottom Line quarterly newsletter. The issue offered a fantastic discussion of the importance of addressing urban diabetes – with commentary from top thought leaders including our very own Ms. Kelly Close and Ms. Emily Regier (now a first-year medical school student at BU) – and a glimpse at early successes in Mexico City, China, and Copenhagen. The initiative also hosted a Houston Town Hall event in June and published a “Wake Up Call for Urban Health” open letter coinciding with the UN Conference on Housing and Sustainable Urban Development in October.

Soda Tax Successes in California and Colorado

• In 2016, Chicago, Philadelphia, Boulder, CO, Albany, CA, Oakland, CA and (our home) San Francisco, CA voted to pass per-ounce taxes on sugar-sweetened beverages. Mexico (2014) and Berkeley, CA (2015) pioneered the movement, implementing similar taxes in the past couple of years. We are astounded by the power of the movement to tax soda, the number one vehicle for added sugar in Americans’ diet. Many major health organizations support taxation: In October, the WHO (World Health Organization) published a 36-page report on fiscal policy and diet in which it urges countries to tax sugary beverages. It is a huge deal to have this recommendation come straight from the UN health agency and picked up by major media outlets such as the Washington Post. Just four months after the nation’s first soda tax (penny-per-ounce) went into effect last year in Berkeley, CA, there was an encouraging >20% drop in sugary beverage consumption in the city’s low-income neighborhoods, according to a study released in August. In addition, the tax had generated $1.5 million to be allocated to community nutrition and health efforts by March 2016. An observational study published in early January found positive reductions in purchases of sugar-sweetened beverages in Mexico following the implementation of its soda tax, though Coca-Cola bottlers and data services reported a new rise in soda sales in Mexico in May despite the tax. The Wall Street Journal picked up on this latter story and we were relieved that ambivalence regarding the soda tax within the mainstream media did not hinder efforts to get soda taxes passed in November. That said, there is clearly much more work to be done – the city council of Davis, CA, in our very own backyard, rejected a soda tax proposal earlier this year. We hope to see more cities embrace this movement in the coming years – Santa Fe is the latest one we have heard of assessing it, along with the entire state of Massachusetts.
  
  • Community organization and grassroots movements were extremely influential in the passing of soda taxes. These often-underrated tactics helped to overcome strong anti-pushes from the American Beverage Association (which spent $2.4 million alone in Berkeley). Parents, teachers, healthcare providers, and organizers came together to raise awareness and educate the public (i.e. the proceeds actually go back into community health, the tax is actually paid by the distributors of the beverage, who then have the option to pass a portion down to consumers, etc.). We applaud everyone who got their hands dirty to make this happen (including our very own teams at The diaTribe Foundation and Close Concerns!) – where else can potent grassroots movements facilitate change in public health?

Lots of Talk About Personalized Medicine, but No Visible Progress Yet

• In the second year following President Obama’s announcement of the $215 million NIH Precision Medicine Initiative (PMI), there was significant chatter on the need for and promise of personalized medicine, but we saw very little (visible) progress on this front. A highlight for the diabetes tech community was seeing Tidepool CEO Mr. Howard Look honored by Mr. Obama in February with an invitation to the White House to discuss the potential to improve therapies through the liberation of data. IDEO’s Dennis Boyle, a member of The diaTribe Foundation’s Board of Directors, was also at that meeting. We also heard discussion of personalized medicine at ADA (ADA/IBM Watson partnership; dialogue on how to treat diabetes in different populations; Dr. Fradkin on the NIH PMI Cohort Program), EASD (Dr. Andrew Hattersley and disciple Dr. Angus Jones on tailoring diabetes treatment to the root cause; Dr. William Cefalu – we are “not quite yet” at precision medicine), AHA (FDA’s Dr. Robert Califf and Verily’s Dr. Jessica Mega perspectives), and others. A special collection of articles in Diabetes Care explored the potential impacts of precision medicine in diabetes, and there was no shortage of major journal publications elucidating the genetics of diabetes and obesity (Porta et al., Dooley et al., Fuchsberger et al., Segerstolpe et al.). Personalized medicine is at a very early stage in diabetes, but we have long-term optimism with the creation of patient registries, collecting tremendous amounts of data through cloud-connected devices, leveraging machine learning to sort through that data, and developing an understanding of the genetic and microbiome underpinnings of diabetes. How long will it take to get there?

21^st Century Cures Act Becomes Law

• President Obama signed the 21^st Century Cures Act into law in mid-December, following its passage by decisive margins in both the House of Representatives (392-26) and the Senate (94-5) earlier in the month. This bill, which revamps medical research funding and the FDA’s drug and medical device approval process, has been long-awaited and much-anticipated; since its introduction two years ago, many (including us) were skeptical that such a sweeping and transformative bill would ever become law.
• In terms of medical research funding, the bill dedicates more than $6 billion in discretionary funding to key research initiatives, including $4.8 billion to the NIH (encompassing support for programs such as the Obama administration’s Precision Medicine Initiative, the BRAIN Initiative, and the Cancer Moonshot) and $500 million to the FDA. We view this as a major win for these currently under-resourced departments, as well as for patients awaiting better treatment and overall care. That said, this version of the bill is markedly different from the original one (which passed the House in July 2015 but was subsequently voted down by the Senate). Compared to the current $4.8 billion allocated to the NIH over 10 years (with the stipulation that these funds must be reauthorized by a congressional vote each year), this earlier iteration instead provided $10 million in guaranteed, mandatory funding. The discretionary nature of the current bill’s funding is one troubling element, in our view, especially in light of the uncertainty surrounding President-elect Trump’s plans for healthcare broadly speaking. 
• The Act should shorten the time it takes new drugs and devices to reach the market. Provisions of the bill encourage FDA approval of breakthrough therapies to be based on early-stage safety and effectiveness data, allowing additional clinical trials to occur after the drug or device is already available to real-world patients. The Act further allows drug companies to submit “summary-level reviews” instead of raw data for new indication approvals. On the plus side, these provisions will bridge the gap between innovative research and patients in-need – as we see it, this gap is far too wide currently for many disease areas and definitely in diabetes. In type 1, for example, there is great potential for stem-cell based therapies and artificial pancreas devices, and we’d certainly be happy to see faster patient access to advanced treatments as long as due diligence is undertaken on the safety front, of course.
  • We acknowledge the concern that the FDA may loosen standards to make this happen, but we’re overall optimistic regarding the bill’s ability to incentivize more investment in promising drug development and, ultimately, lead to better drugs and more real-world learning. In a recent JAMA editorial, noted cardiologist Dr. Rita Redberg presents the trade-off: “In our rush to find new effective treatments, we should not harm our patients with ineffective toxic ones.” Members of congress, most notably Elizabeth Warren (D-MA) and Bernie Sanders (D-VT), have also expressed worry that these provisions give too much power to drug and device companies by limiting FDA access to primary data, and voted against the bill on these grounds. Importantly, though, the Act promotes faster approvals with the end goal of better drugs. Drug and device developers play an undeniably vital role in healthcare by bringing the next generation of therapies to market, and a shorter approval process for the US market could incentivize and maybe even accelerate innovation. Furthermore, since the Act also gives the FDA more resources, there is less reason to suspect that evidence standards will fall.
• The Act calls for a structured framework for consideration of patient experience data in the review process. We’ve been waiting on a patient-centered approach to the drug development and review process for a long time and couldn’t be more excited about this aspect of the new law. In the context of diabetes, the recent FDA workshop on Outcomes Beyond A1c was an excellent step in the right direction – so many players, spanning from regulatory to industry, acknowledged that we need to more systematically consider what patients care about most (including quality of life measures) in evaluating therapies. Now that the 21st Century Cures Act has become the law of the land, we are optimistic that the future holds even more discussion of patient-centered outcomes.

Uncertainty Surrounding the Impending Healthcare Transition Under Trump

• The shocking and poll-defying election of Donald Trump to the US presidency has left us in uncharted territory when it comes to healthcare (not to mention other large-scale social challenges such as education and the environment). Our healthcare system is complicated, and diabetes is complicated. Clearly the multi-layered global problem of diabetes cannot be solved by a single presidential administration, but President-elect Trump’s decisions once in office will have a marked impact on patient’s lives and healthcare access. In the aftermath of Election Day, we published a “Survival Guide” to understanding the healthcare transition under Trump, outlining our key questions, concerns, and future recommendations for the transition, much of which centered on what Mr. Trump truly meant by his statements during the campaign about dismantling the Affordable Care Act (ACA), a critical legacy of the Obama administration. The resumes of his HHS and CMS appointments, Dr. Tom Price and Ms. Seema Verma, seem to answer this question, spelling trouble for the future of ACA.
• Donald Trump has characterized his HHS and CMS appointees a “dream team” to repeal and replace the ACA. Future HHS Secretary Dr. Tom Price, a former orthopedic surgeon and current House Representative (R-GA), has been a vocal opponent of the Affordable Care Act and is known for authoring the Empowering Patients First Act, one of the most detailed proposals to repeal the ACA (the proposal is written in legislative language and clocks in at 242 pages, in comparison to the white paper format of other proposals to repeal the ACA). Future head of the CMS Ms. Seema Verma, currently the president of the healthcare consulting company SVC, Inc., is best known for her collaboration with Vice President-elect Mike Pence during his tenure as Indiana governor to reshape the state’s Medicaid program by requiring recipients to pay premiums and engage in other cost-sharing practices and monitoring their adherence. 
• Although it is unclear what specific actions Dr. Price and Ms. Verma will take once the Trump administration transitions into power, their records are harsh toward Medicare and Medicaid – crucially important programs for many people with diabetes and obesity. According to the New York Times, as leader of the House Budget Committee Dr. Price published a budget proposal that would convert Medicaid into a block grant to state governments, thus reducing federal Medicaid spending by 34% by 2025 and forcing states to make the difficult – and unpopular – coverage decisions. On the Medicare front, Dr. Price proposed a plan alongside House speaker Paul Ryan which would turn Medicare into a voucher program, limiting federal spending but forcing seniors to bear more of the cost. This proposed model is similar to the one Ms. Verma helped VP-elect Mike Pence implement while governor of Indiana. According to the Washington Post, this plan required even the state’s poorest residents to contribute money into a health savings account in order to purchase their own insurance. Such cuts and cost increases, if implemented on a national scale, would reduce the number of people covered under Medicare and Medicaid, reduce the benefits these programs currently offer, and potentially discourage patients from seeking care to avoid high co-pays and deductibles. We find the concept of shifting additional cost-sharing to the most vulnerable of patients – many of whom are disproportionately affected by diabetes and obesity – completely untenable. That said, we could envision the new administration punting the day-to-day management of Medicaid to the state level and we hope that many states will be able to avoid shifting costs to patients.
• Both the American Medical Association (AMA) and the American Association of Medical Colleges (AAMC) offered swift endorsements within hours of the choice of Dr. Price as Secretary of HHS. In particular, both organizations praised Dr. Price’s physician background (he would only be the third physician to hold the Secretary of HHS position in its history). That said, the endorsements have angered many physicians and medical school students, and two open letters, one signed by practicing physicians and one signed by current medical students, condemning and protesting these endorsements have been circulating widely since the announcement. The physician letter currently contains 5,802 signatures and the medical student letter contains 2,389 signatures and counting, including several of our very own former associates from Close Concerns, The diaTribe Foundation, and dQ&A. While we are moved that, as it stands now, millions of diabetes patients who rely on Medicare and Medicaid may suffer reduced coverage come Donald Trump’s inauguration in January, it is also true that the ACA is not currently an initiative that has worked well for . The irony has not escaped us that the very geographic areas most reliant on these services align very closely with Mr. Trump’s support base on the electoral map.

2. Most Highly Read Reports

• A Tribute to Al Mann: Units of Insulin, Gallons of Hope – A personal memory and memories from friends
• 1Q16 and 2Q16 Diabetes and Obesity Industry Roundup – Record sales growth in SGLT-2s, GLP-1s, CGM, and pumps; pressure in BGM and insulin
• ADA publishes 2017 Standards of Care – Notable revisions include recommendations for SGLT-2 Jardiance or GLP-1 Victoza in patients with high CV risk, inclusion of basal insulin/GLP-1 fixed-ratio combos, emphasis on high insulin costs, revised hypoglycemia scheme
• Survival Guide to Understanding the Healthcare Transition Under Trump – Following election night in the US, our take on what to look out for in healthcare policy; Recommendations and major questions
• JAMA publishes review concluding A1c targets of 7.5%-9% are most appropriate for the majority of older adults – Review by Dr. Kasia Lipska et al. discusses lag time for outcomes benefits vs. immediate risk of hypoglycemia with intensive control, emphasizes importance of individualized targets
• Diabetes Spectrum publishes editorial by Dr. Irl Hirsch on “insulin in America” – Insulin is a “right, not a privilege”; Dr. Hirsch reviews history of pricing, US’ disproportionate burden, and complexity of system, calls for regulation of insulin distribution
• Dr. Robert Ratner to retire as ADA’s Chief Medical Officer in December 2016 – Decision comes earlier than expected (originally planned to retire after ADA 2017); Will be greatly missed!
• FDA Diabetes Outcome Measures Beyond Hemoglobin A1c Workshop – A fairly positive FDA; calls for follow-up meetings on hypoglycemia/time-in-range, and quality of life; FDA needs education on CGM, standardization of outcomes still needed; industry on board
• WHO publishes first-ever Global Report on Diabetes showing global diabetes prevalence of 8.5% – First-ever WHO report on state of diabetes pandemic; Number of people with diabetes has quadrupled in past 25 years to >400 million; Direct costs soar to $827 billion
• Adults with type 2 diabetes far more willing to achieve A1c targets earlier than providers perceive, according to unsettling AACE survey – Providers underestimate patient willingness to take action toward earlier, lower A1c targets; Not meeting A1c goals shows substantial impact on emotional well-being

3. What We Got Right/Expected

• Rates of diabetes, diabetes-related mortality, and cardiovascular mortality continue to climb out of control
• Focus on drug prices and diabetes care costs escalate
• More cities follow Berkeley in passing the soda tax
• 21st Century Cures Act finally passed by both houses of Congress; Quickly thereafter signed into law by President Obama
• Cost-effectiveness becomes the center of many arguments for better diabetes prevention and earlier intervention
• Continued buzz surrounding precision medicine, but no visible progress yet
• Continued conversation on stigma, especially pertaining to type 2 diabetes and obesity, but no real progress made

4. What We Got Wrong/Did Not Expect

• Broad consensus at FDA Outcomes Beyond A1c workshop, with a very open-minded and accessible FDA
• Drug pricing frustrations reach a fever pitch, coalescing in political action, statements from the ADA and the Endocrine Society, and concrete efforts from Novo Nordisk and Lilly
• Medicare announces specific plans to begin covering the DPP
• Flurry of investment in NASH therapies and other “diabetes-adjacent” indications
• Dr. Robert Ratner leaving the ADA and Mr. Lars Sørensen leaving Novo Nordisk earlier than expected
• Donald Trump winning the US presidential election

5. Key Questions for 2017

• Who will assume the position of Chief Scientific and Medical Officer at the ADA?
• What will happen to the Affordable Care Act and the 21st Century Cures Act under President-Elect Trump? What will change at the FDA, at the NIH, and in the health policy landscape as we know it?
• What further progress will be made on outcomes beyond A1c – will this be meaningfully incorporated into the regulatory process for therapies and devices? Will the FDA hold follow-up workshops and be open to modifying guidance?
• How will the patient perspective be incorporated into the FDA’s regulatory process (as promised by the 21st Century Cures Act)?
• Will we see more actionable steps taken to make diabetes drugs more affordable in the US?
• Will we see increased enrollment in the diabetes prevention program (DPP), including virtual DPP platforms?
• Will more private payers offer reimbursement for DPPs?
• Will precision medicine move closer to reality in diabetes care next year? What is the biggest gap and who could help solve it?
• How many more cities will pass a tax on sugar-sweetened beverages?
• What progress will be made to reduce inequality in diabetes care, especially under new industry-led initiatives (i.e. Lilly’s promise to offer insulin discounts up to 40%, the Merck Foundation’s $10 million “Bridging the Gap” initiative)?

6. What’s Coming in 2017?

• New leadership in diabetes and beyond: at the ADA, at Novo Nordisk, in the US executive office and cabinet
• The launch of Lilly’s discount insulin program, perhaps ushering in a new discourse among pharmaceutical companies and other stakeholders regarding drug prices
• Changes to US healthcare – breadth and depth of changes remains to be seen

Obesity

1. Themes

Obesity Continues to Rise in Prevalence and Costliness

• Obesity prevalence continues to rise, affecting 37% of American adults and 17% of American youth per the CDC’s latest NHANES data from 2011-2014. The Robert Wood Johnson (RWJ) Foundation’s most recent analysis of national obesity prevalence, updated in September 2016, elaborates that obesity affects 36% of whites, 43% of Latinos, 48% of Blacks, 13% of Asians, and 42% of American Indians. By geography, RWJ reports that adult obesity rates now are above 20% in all US states, exceeding 30% in 25 states and exceeding 35% in four states (Louisiana, Alabama, Mississippi, and West Virginia).
  
  • On the economic front, the Milken Institute estimates that the direct and indirect costs of obesity in the US total $1.42 trillion – equivalent to over 8% of the country’s GDP. These costs are largely attributable to obesity-related comorbidities, the lion’s share of which are accounted for by type 2 diabetes (~$320 billion), hypertension (~$345 billion), and chronic back pain (~$215 billion).
• Obesity stigma and misunderstanding surrounding the nature of the disease remain significant barriers to obesity management. This was powerfully illustrated in the  ACTION study, the main event of Obesity Week 2016 and the first-ever study exploring the factors underlying barriers to weight management. The study revealed that while most stakeholders – 63% of people with obesity, 80% of healthcare providers, and 62% of employers – agree that obesity is a serious disease, serious gaps exist in care. For instance, only 55% of Americans with obesity have been formally diagnosed, and a startling 95% feel that they bear personal responsibility for their weight. To this end, we were also encouraged to see increasing emphasis on obesity stigma in mainstream media, most notably a series of articles describing systemic flaws in US obesity care and a New York Times article illuminating the heterogeneity of obesity. We hope these publications spark greater public awareness of obesity’s complexity and greater empathy for people with the disease who face immense difficultly in obesity treatment and long-term weight maintenance. Meaningfully combatting the obesity epidemic will require communication and cooperation between employers, government officials, healthcare providers, insurers, pharmaceutical companies, the food and beverage industry, and individual communities.

Saxenda Forges Ahead as Indisputable Leader in Obesity Pharmacotherapy

• Saxenda (liraglutide 3.0 mg) has seen remarkable success in 2016, more than even its most avid proponents could have expected. One year ago, Novo Nordisk had yet to break out Saxenda sales, and although the company was establishing its leading presence in obesity, we were unable to note a revenue impact of the high-dose liraglutide agent. Boy has that changed – there’s no questioning now that Saxenda is making a huge revenue impact and leading the obesity drug market by value, that it’s driving sales for the whole class, and that it will likely cement Novo Nordisk as the frontrunner in obesity pharmacotherapy. Saxenda posted $36 million in sales in 1Q16, which grew 55% sequentially to $57 million in 2Q16, and another 11% sequentially to $63 million in 3Q16. The numbers for pooled revenue from all obesity drugs are quite telling: Excluding Saxenda, sales fell 13% year-over-year (YOY) in 1Q16, 20% YOY in 2Q16, and 19% YOY in 3Q16. When bringing Saxenda back into the equation, pooled revenue rose 2% YOY in 3Q16, with Saxenda capturing 69% of the whole market by value. This value share has been on the rise since Saxenda’s US launch in 2Q15, and we expect further upswing in 2017 (why? See below for our thoughts on sluggish sales of all other obesity therapies on the market). Although Novo Nordisk has yet to split Saxenda sales by geography, management has attributed overall growth in the company’s US diabetes/obesity business during the first nine months of 2016 to this obesity treatment. We see this as another terrific sign of success for Saxenda, that it was a most valuable player within Novo Nordisk’s portfolio.
• Novo Nordisk management has expressed confidence in Saxenda and has demonstrated commitment to developing the product further, which sharpens our expectation that Saxenda’s stronghold of the obesity drug market will continue in 2017. Data from the SCALE program was presented at major conferences this year, including ADA, EASD, and Obesity Week. Cumulatively, SCALE presentations and publications have shown that liraglutide 3.0 mg leads to clinically-meaningful weight loss, maintenance of weight loss over at least three years, improved quality of life, and reduced incidence of new-onset type 2 diabetes. Together, these are tremendously valuable outcomes from both an individual and a broader public health perspective. It’s unsurprising given the dollars Saxenda has been bringing in, but we’re happy that Novo Nordisk’s overarching commentary on the product has been positive. Management has cited Saxenda as a key driver of US growth and has stated the company’s intention to grow Saxenda in the short- and long-term. It’s comforting, given the challenges that plague the obesity drug arena and the persistent lack of adequate treatment options for people with obesity, to see a chronic weight management agent doing well commercially.
• But we’re not cheering just yet – pricing and reimbursement on Saxenda are two tall hurdles that remain. Until these are knocked down, patient access to the obesity therapy will be restricted. Obesity drugs across the board are not well-reimbursed in the US and as we learned from Dr. Ken Fujioka (Scripps Health, San Diego, CA), ~one-third of patients taking Saxenda are reimbursed through their insurance plan. We assume the rest – a two-thirds majority – are self-pay. Saxenda is priced proportionally to the dose of liraglutide, which makes it much more expensive than type 2 diabetes medicine Victoza (lower-dose liraglutide), and prohibitively expensive for many. Saxenda’s share of total prescriptions (TRx) remains low at 18% in the US vs. Contrave’s 55%, Qsymia’s 39%, and Belviq’s 35% (as per Novo Nordisk’s 3Q16 presentation), which points to the very high cost of every dose of Saxenda (this is the only way the drug could be last in terms of volume, but a clear first in terms of revenue). That said, Saxenda is rapidly catching up in TRx and experienced the greatest YOY volume growth within its class in 3Q16 (see slide 82 of the company’s roadshow presentation). We can tack affordability onto a long list of barriers to adequate obesity care: societal stigma, clinical inertia, patient/provider reluctance to consider pharmacological interventions for weight management rather than sticking strictly to lifestyle modification, to name a few.

Struggles Continue for BELVIQ, Contrave, Qsymia

• Saxenda aside, the other big players on the obesity drug scene did not inspire confidence in 2016, with flat or declining sales. Vivus’ Qsymia (phentermine/topiramate extended-release) experienced its first-ever year-over-year (YOY) drop in 1Q16, falling 2% YOY, and this decline was only amplified across quarters – Qysmia sales fell 9% YOY in 2Q16 and 12% YOY in 3Q16. Orexigen completed acquisition of Contrave (naltrexone/bupropion extended-release) from Takeda in 3Q16 and has elaborated on plans to market the product more aggressively in the US and to accelerate roll-out in ex-US markets. While we appreciate the enthusiasm, we also note that revenue from Contrave in the first nine months of 2016 was down 11% YOY compared to the first nine months of 2015. Sales of Arena/Eisai’s Belviq (lorcaserin) fell an astounding 49% YOY in 1Q16, 24% YOY in 2Q16, and 24% YOY in 3Q16. This market as a whole is not faring well – without Saxenda, pooled revenue fell 13% YOY in 1Q16, 20% YOY in 2Q16, and 19% YOY in 3Q16. We hesitate to suggest that these downward sales trends will continue in 2017, because there has been a push from thought leaders encouraging providers to be more open-minded about pharmacotherapies for chronic weight management – lifestyle intervention won’t suit everyone, and even when it works can be supplemented by an effective obesity medication. That said, there are many obstacles that will have to be addressed in order to see greater uptake of all available medications for obesity. 
• What’s working against Belviq, Contrave, and Qsymia? Poor reimbursement of obesity therapies, stigma, under-diagnosis, patient/provider reluctance to consider non-lifestyle intervention approaches, and the list goes on… We’ve heard incredible insights from obesity experts including Dr. Donna Ryan (Pennington Biomedical Research Center, Baton Rouge, LA) and Dr. Bartolome Burguera (Cleveland Clinic, OH) on how to capitalize on available therapies, how to overcome the provider bias that obesity is “too difficult to treat,” and how to circumvent some of the other challenges in obesity care. But we have yet to see solutions take root. At Obesity Week 2016, Pittsburgh’s Mr. Ted Kyle (ConscienHealth, PA) presented compelling data to show how few people think obesity care will be covered by their insurance, which demotivates people from seeking treatment in the first place. It seems that many of these obstacles are interconnected – better reimbursement won’t come until patients and providers are advocating to payers about the benefits of obesity products, advocacy won’t come until we tackle societal stigma, and stigma won’t disappear until we spread greater awareness of the genetic/environmental causes for obesity as well as the available treatment options endorsed by healthcare professionals (don’t worry, we’re overwhelmed by this complex web, too). Ultimately, this terribly complicated challenge in obesity care will require a deliberate and multifaceted solution – this is absolutely worth pursuing, despite our low success rate so far. Obesity rates are only rising, and the associated health complications are spiraling. Given that successful diabetes prevention has been correlated with effective initial weight loss (within the first year), and that several approved weight loss medications have demonstrated successful prevention of diabetes (see data on Saxenda and Qsymia as prevention strategies), we’re also interested in how these products might prove useful in reducing type 2 diabetes progression and overall incidence in the US.

Zafgen Discontinues Development of Flagship Beloranib

• Perhaps the most unfortunate news in the stagnant obesity market was Zafgen’s decision to terminate the development of the methionine aminopeptidase-2 (MetAP2) inhibitor beloranib, the most advanced drug in the company’s pipeline which would have been the first available treatment for people with the genetic obesity condition Prader-Willi Syndrome (PWS). This decision, announced in July 2016, came on the heels of the FDA’s complete clinical hold on beloranib’s IND application in December 2015 following the thrombosis-related deaths of two beloranib-treated subjects in a phase 3 clinical trial. Zafgen held a Type A meeting with the FDA following the clinical hold, where it underscored beloranib’s impressive efficacy thus far in clinical trials for the treatment of both PWS and severe obesity complicated by type 2 diabetes. Zafgen also proposed a risk evaluation mitigation strategy (REMS) for beloranib which would involve prophylaxis with anticoagulants to prevent future cases of thrombosis, and a new phase 3 clinical trial in PWS designed to confirm the efficacy of this REMS. However, after much discussion, Zafgen concluded that the costs timelines, and other obstacles required to obtain FDA marketing approval for beloranib were simply too high to justify – an unfortunate testament to the difficulty of drug development in the obesity arena, especially as it relates to rare obesity syndromes such as PWS. While we were certainly disappointed to see the termination of the beloranib program, this did not come as a complete surprise; indeed, the risk of thrombosis did not outweigh the drug’s observed benefits.
• Zafgen has moved ahead in its pursuit of therapies for obesity and metabolic disorders and will now focus on advancing a preclinical second-generation MetAP2 inhibitor, ZGN-1061. Although a phase 1 ascending dose trial is ongoing to evaluate the safety, tolerability, and weight loss efficacy of this new agent (which has a similar efficacy and potency profile as beloranib but with improved safety margins) this research is very early stage, and it will be several years even under the most optimistic circumstances before a MetAP2 inhibitor is available for people with obesity.

AspireAssist: Exciting Approval, but Long Road Ahead

• Aspire Bariatrics’ endoscopic alternative to bariatric surgery, the AspireAssist device, was FDA-approved in June 2016 – an advance for the obesity field, no doubt, although opinions are mixed. Approximately 600 people are currently using AspireAssist, and Aspire Bariatrics CEO Dr. Kathy Crothall discussed plans to market the product to physicians as well as directly to patients through social media and digital advertising. She also suggested that expanding reimbursement of the device will be a company priority moving forward – this will be crucial, in our view, to increase uptake, especially considering somewhat negative perceptions of the device from some thought leaders and from mainstream media. That said, results from a pivotal trial of AspireAssist published recently in the American Journal of Gastroenterology show promise – the device was associated with 32% excess body weight loss at 52 weeks vs. 10% excess body weight loss for individuals on lifestyle counseling alone (p<0.001), and 59% of individuals on AspireAssist lost at least 25% of their excess body weight. Moreover, AspireAssist was associated with improvements on several cardiometabolic risk factors, including triglyceride levels, HDL levels, and A1c. While we maintain healthy skepticism on the outlook for AspireAssist – the device was, after all, approved only recently, and obesity devices have experienced a tough 2016 and 2015 – we’re happy to see one more evidence-based treatment option available for obesity, which will hopefully fill some of the unmet therapeutic need in this area.

Continued Buzz Surrounding The Brain and the Microbiome

• Phylum-level changes in gut microbiota are being increasingly emphasized as an important mechanism driving the effectiveness of bariatric surgery, offering the hopeful suggestion that modification of the microbiome could be a viable way to treat and prevent obesity. Of note, in addition to continued learning about the high-level interaction between the microbiome, genes, and metabolism, this year we saw the first emergence of microbiome-based therapies in humans: a group in the Netherlands found that transferring intestinal microbiota from lean subjects into those with obesity and type 2 diabetes via fecal microbial transplantation (FMT) increased patients’ peripheral insulin sensitivity with efficacy equal to that of oral diabetic medications. There is no doubt that the microbiome is a hot topic: conference talks on the subject consistently draw standing-room-only crowds (as evidenced by ADA, AADE, and Obesity Week) and 2016 saw the launch of the National Microbiome Initiative, an Obama administration project which will involve the investment of $121 million in federal funding and $400 million in private and nonprofit funding to promote research into the microbiome as it relates to healthcare. While certainly an area of great intrigue, it is important to appreciate that our understanding of the microbiome remains very early stage. We believe the complexity of this new frontier in biology will keep this field’s movement relatively slow, with concrete treatment options remaining several years away.
• Neural regulation of energy balance and weight management continues to take the lead on the obesity basic science front. Gut hormones are perhaps the best understood players in hunger regulation, with Novo Nordisk taking much of the lead in investigating the mechanisms of action of existing drug targets such as GLP-1 and also similar appetite-inhibiting hormones such as PYY. Furthermore, we continue to hear intriguing updates on the role of AgRP neurons and the melanocortin pathway in appetite regulation, and the pleasure and reward of eating has become an increasing point of emphasis as we witnessed at the European Obesity Summit. To this end, food (particularly sugar) addiction formed the basis of an entire conference here in San Francisco, the Sugar, Stress, Environment, and Weight Symposium (SSEW). Compared to the microbiome, we see the brain and its neural circuitry as the nearer-term target area for emerging obesity therapies. Indeed, the obesity drug competitive landscape is filled with candidates that impinge on the neural mechanisms of hunger regulation.

2. Most Highly Read Reports

• Novo Nordisk investigating GLP-1/glucagon dual agonist as therapeutic agent for obesity – Phase 1 trial will combine glucagon analog NNC9204-0530 with liraglutide 1.8 or 3.0 mg; Candidate joins semaglutide and two other products in company’s obesity pipeline
• FDA approves Aspire Bariatrics’ AspireAssist for people with moderate to severe obesity – Indicated for adults with BMI of 35-55 kg/m2 who have not succeeded with more conservative therapies; “Best-in-class weight loss”
• WHO Commission presents final report on childhood obesity, calling for governmental action – Outlines six main recommendations for governments including promotion of healthy foods and physical activity, preconception and pregnancy care, and more; Explicitly calls for taxation of sugar-sweetened beverages; Thoughts from KOLs
• CROSSROADS trial results find that bariatric surgery yields greater type 2 diabetes remission compared to intensive lifestyle and medical intervention – Expanded interview with Dr. David Cummings on long-term follow-up, progress of guideline changes, and more
• Tedx Talk by Dr. Arya Sharma positions stigma as major hurdle in obesity epidemic – Stressed that obesity is a chronic disease requiring social support and long-term management
• Zafgen terminates development of Beloranib – Zafgen suspends development of Beloranib, citing safety obstacles in phase 3 trials; Company restructures in hopes of advancing a pre-clinical MetAP2 inhibitor, ZGN-1061
• New research finds persistent metabolic adaptation in “Biggest Loser” competitors – Findings demonstrate significant metabolic slowdown and hormone level changes from 14 former competitors; Metabolic adaptation proportional, but incomplete, response to weight loss efforts
• Takeda moves out of Contrave; Orexigen announces acquisition of US rights to Contrave (naltrexone/bupropion extended-release) and new agreement with Valeant in Europe – Orexigen + Takeda agree to terminate Amended and Restated Collaboration Agreement, after which Orexigen will be entitled to 100% of net sales and expenses; Valeant now partnered to commercialize/distribute Mysimba (Contrave in US) in 19 European countries
• Topline results of ENDO Trial demonstrate that GI Dynamics’ EndoBarrier Therapy failed to meet primary efficacy and safety endpoints – Company developing revised clinical treatment algorithm; Seeking FDA approval of investigational device exemption to conduct new US clinical trial
• Seres Therapeutics to collaborate with Massachusetts General Hospital in the development of new microbiome therapies for obesity and metabolic syndrome – Seres will fund proof-of-concept clinical trial investigating fecal microbiota transplantation; Investigation of genomic signatures and biomarkers will inform future microbiome therapeutics

3. What We Got Right/Expected

• Novo Nordisk begins breaking out Saxenda sales, and the drug dominates the market
• Unimpressive performance by GI Dynamics’ EndoBarrier therapy
• Ongoing delay of Vivus’ post-market CVOT for Qsymia
• Early termination of CONVENE CVOT for Orexigen’s Contrave
• Continued discussion of the brain and microbiome in the context of obesity
• Rising prevalence of global obesity and childhood obesity
• AspireAssist FDA approval but slow uptake
•  

4. What We Got Wrong/Did Not Expect

• Strong commercial environment and financial success of Saxenda
• Novo Nordisk’s piqued interest in developing innovative obesity therapies, with new GLP-1/glucagon dual agonist in its early-stage pipeline
• AACE includes obesity treatments in guidelines for the first time
• Termination of Zafgen’s flagship product, beloranib

5. Key Questions for 2017

• Will Novo Nordisk become the sole player in obesity drugs?
• Will we see any improvement in reimbursement of obesity drugs and devices?
• Will we see meaningful uptake of Aspire Bariatrics’ AspireAssist device?
• Will microbiome research lead to a new therapeutic approach?
• How will policymakers get involved to change the obesogenic environment?
• Will stigma abate?

6. What’s Coming in 2017?

Our obesity competitive landscape contains a full overview of therapies under development, to the best of our knowledge. We acknowledge the list may not be 100% complete, though we’ve tried to be as comprehensive as possible based on the most recent public updates.

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