Memorandum

J&J 3Q17 – Global Invokana sales drop 19% YOY, US sales fall 25% YOY; LifeScan-Animas sales down 7%, driven by 12% US decline; No comment on Animas exit or portfolio – October 17, 2017

Executive Highlights

  • J&J reported Invokana revenue of $265 million for 3Q17, a 19% YOY decline. US sales of the SGLT-2 inhibitor fell by an even larger margin, plummeting 25% YOY to $220 million. This marks the third consecutive quarter of sluggish Invokana sales.
  • The company’s presentation slides highlighted the Supplemental New Drug Application (sNDA) requesting a new CV indication for Invokana as a key bright spot (concurrently filed in the EU). However, management couldn’t avoid addressing the black box warning for lower limb amputations during Q&A, which has been a significant headwind for the Invokana business since it was FDA-issued in May 2017.
  • There was no mention in the prepared remarks of Animas’ exit from the pump market two weeks ago. During Q&A session, management curtly confirmed there were no new updates regarding strategic options for LifeScan.
  • Global LifeScan/Animas sales totaled $405 million in 3Q17, down 5% as reported and 7% operationally YOY. The business declined 12% in the US ($168 million), while International sales were flat as reported and down 3% operationally YOY ($237 million). 11 out of the past 12 quarters have now seen declines in US business and declines or flat growth in international business.
  • There were no LifeScan/Calibra pipeline updates on the call.

J&J provided its 3Q17 financial update in a call this morning led by CFO Mr. Dominic Caruso. See below for itemized highlights on the company’s diabetes products/pipeline, including illustrative graphs and tables. You can also click here for the company’s presentation slides and here for a replay of the webcast. Overall, 3Q17 was another challenging quarter for both J&J Diabetes businesses, with marked declines on the drug side (SGLT-2 inhibitor Invokana) as well as the device side (including Animas’ exit from the pump business earlier this month). We hope to see continued commitment to diabetes going forward, with the company’s Credo driving its next big moves on the world’s largest public health problem.

Janssen Highlights

1. Invokana sales fell 19% year-over-year (YOY) and 10% sequentially to $265 million in 3Q17, marking a third consecutive quarter of double-digit decline for J&J’s SGLT-2 inhibitor franchise (down 13% in 1Q17, down 23% in 2Q17). This fall was driven by US sales, which dropped 25% YOY to $220 million (down 17% in 1Q17, down 26% in 2Q17). In contrast, ex-US revenue grew 32% YOY to an all-time-high of $45 million. Weak US performance was attributed to (i) increasing patient discounts and (ii) higher utilization in the Medicaid channel.

2. Management mentioned a 1% decline in share of US SGLT-2 inhibitor prescriptions (TRx) for Invokana, citing particular loss in new-to-brand prescriptions (NBRx). We expect the product continues to yield volume to Lilly/BI’s SGLT-2 inhibitor Jardiance, though it remains the category leader in total US prescriptions for now.

3. J&J’s presentation slides highlighted the submission of a Supplemental New Drug Application (sNDA) to the FDA (alongside a Type II Variation application to the EMA) requesting a new CV indication for Invokana based on positive CANVAS results. We imagine a label change, coupled with Invokana’s preferred status over Jardiance on the CVS Health formulary in 2018, could provide a much-needed boost to J&J’s SGLT-2 business in the mid-term future. Management also expressed optimism for CREDENCE results (this trial investigating canagliflozin in diabetic kidney disease is expected to complete in June 2019).

4. There was no mention of Janssen’s diabetes/obesity pipeline during prepared remarks. A new phase 1b study of glucagon/GLP-1 dual agonist JNJ-64565111 was initiated in August, with an expected completion date of January 2018.

LifeScan/Animas Business Highlights

5. There was no mention in prepared remarks of Animas’ disappointing exit from the pump market two weeks ago (read our full report). During Q&A, management confirmed there were no updates regarding the strategic evaluation the business, other than the Animas announcement.

6. Global LifeScan/Animas sales totaled $405 million in 3Q17, down 5% as reported and 7% operationally YOY against a very easy comparison to 3Q16. Revenue has now declined in 19 of the past 20 quarters, and 3Q17 saw the second lowest sales recorded in our model, just edging out $400 million in 1Q17.

7. US Diabetes Care revenue totaled $168 million in 3Q17, decreasing 12% YOY. The decline also came against an easy comparison, as sales fell 7% YOY in 3Q16. 11 of the past 12 quarters have now seen declines in the US Diabetes Care business. As we’ve come to expect, the slide deck cited BGM price declines in the US, as well as category and share softness in EMEA coupled with pump competitive pressure (an understatement) as key drivers. There was no comment regarding the OneTouch Via bolus-only patch insulin delivery device, which worries us about the path to market (it’s also possible LifeScan is considering a buyer).

8. International Diabetes Care revenue totaled just $237 million in 3Q17, flat as reported and down 3% operationally YOY. This came on an easy comparison to 3Q16, when sales declined 11% as reported and operationally. This quarterly performance is one of the lowest we have seen since we began our model in 1Q05, second only to 3Q16, when US revenue totaled $236 million. 11 out of the past 12 quarters have now seen declines or flat OUS growth.   

LifeScan/Animas Pipeline Highlights

9. In September, reps at EASD were unable to provide any timeline details for the OneTouch Via bolus-only insulin delivery patch device, nor were they able to share US launch updates. However, the device was on display and did generate excitement among attendees. OneTouch Via received FDA clearance in June for a new manufacturing process. If Animas’ exit is any sign of what the future holds, however, J&J is presumably considering a buyer.

10. There was no mention of the WellDoc BlueStar integration partnership (including a J&J investment) on today’s call, and we were unable to receive updates at EASD.

Janssen Highlights

1. Invokana Franchise Falls 19% YOY to $265M, Driven by 25% Decline in US Revenue

SGLT-2 Invokana sales fell 19% year-over-year (YOY) and 10% sequentially to $265 million in 3Q17, marking a third consecutive quarter of double-digit decline for J&J’s SGLT-2 inhibitor franchise (down 13% in 1Q17, down 23% in 2Q17). US sales of $220 million dropped 25% YOY (down 17% in 1Q17, down 26% in 2Q17). Head of pharma Mr. In contrast, OUS revenue grew 32% YOY to an all-time-high of $45 million, though from a much smaller base. Management attributed the pricing performance element of the weak US performance to (i) increasing patient discounts; and (ii) higher utilization in the Medicaid channel – we’re actually glad to hear about both of these since they do both point to greater access for patients. Head of pharma Mr. Joaquin Duoato also very clearly acknowledged that the black box warning also contributed to a drop in demand – it was so refreshing to hear this stated so clearly. The FDA has added this safety warning to all canagliflozin medicines, including Invokana, Invokamet (canagliflozin/metformin), and Invokamet XR (canagliflozin/metformin extended-release). Meanwhile, the EMA has applied this warning to all SGLT-2 inhibitors (also including Lilly/BI’s empagliflozin products and AZ’s dapagliflozin products), which could partly explain Invokana’s disappointing US decline while international revenue climbs. That said, pricing pressure is undoubtedly affecting diabetes drug sales in the US, with greater discounts, higher rebates, and more segment mix (a higher proportion of prescriptions going to patients on Medicaid) causing a lower realized price recorded by the manufacturer. We’ve heard such commentary not only from J&J, but also from Merck in explaining a decline in US Januvia sales (DPP-4 inhibitor sitagliptin), from AZ, from Lilly, and from Sanofi. Our 1H17 industry roundup provides additional evidence for these pricing challenges surrounding diabetes drugs: US sales of branded medicines (excluding insulin) fell ~10%-12% YOY in 1Q17-2Q17, while ex-US sales grew ~14%-15%. Similarly, US insulin sales were flat in 1Q17 and declined ~5% YOY in 2Q17, while insulin experienced modest growth in ex-US markets at 3%-4% in the first half of the year.

Figure 1: Invokana Sales (1Q14-3Q17)

2. Invokana Losing Share within SGLT-2 Class, Primarily to Lilly/BI’s Jardiance

Related to the black box warning, Mr. Duoato noted a 1% decline in share of US SGLT-2 inhibitor prescriptions (TRx) for Invokana, citing particular loss in new-to-brand prescriptions (NBRx). We expect the product continues to yield volume to Lilly/BI’s SGLT-2 inhibitor Jardiance, though it remains the category leader in total US prescriptions for now, partially driven by strong formulary status. (AZ’s Farxiga leads by volume globally, propelled by its first-to-market status in Europe.) This follows a pattern for the class predicted by Dr. Daniel Drucker after CANVAS data was reported in full at ADA 2017: He foreshadowed a slow attrition away from Invokana as new therapy starts begin to favor Jardiance (which has demonstrated cardioprotection without any amputation signal), though like many other thought leaders, he suggested that there’s no need to switch patients off Invokana if they’re doing well on canagliflozin and have no other risk factors for amputation (i.e. prior amputation, peripheral vascular disease, neuropathy, etc.). As a reminder, CANVAS found a 14% risk reduction for three-point MACE (non-fatal MI, non-fatal stroke, or CV death) with canagliflozin vs. placebo, on par with the results seen in EMPA-REG OUTCOME for empagliflozin, but also found a nearly two-fold risk for lower-extremity amputations with canagliflozin, which hasn’t been seen for empagliflozin. We caution against over-comparison given the substantial differences between these two CVOTs, especially in terms of how amputations were adjudicated, the baseline study populations, and the length of each trial. We await DECLARE results on AZ’s dapagliflozin for more insight into SGLT-2 agents and amputations. That said, it’s not hard to imagine why an SGLT-2 inhibitor with a black box warning for amputations (a very visceral diabetes complication, at that) would lose share to an in-class competitor without this labeling. Busy patients/providers in the real world look to product labels to inform treatment decisions, especially for new therapy starts. At CMHC earlier this month, we heard from Dr. Jay Skyler that he’s switched all patients from Invokana over to Jardiance, because “why deal with this concern if you don’t have to?”. We expect many real-world clinicians are thinking similarly.

  • We’ll be back with a pooled class analysis after Lilly reports 3Q17 Jardiance sales on October 24 and AZ reports Farxiga sales on November 9. In 2Q17, pooled SGLT-2 revenue rose 20% YOY to $857 million, driven primarily by a steep 93% YOY climb in Jardiance sales and secondarily by a 19% YOY increase in Farxiga sales (worldwide Invokana sales were down 23% YOY in 2Q17).
  • We continue to expect the SGLT-2 class to expand and we believe education on the “foot front” will help – while we don’t want to downplay the potential risk for patients who have had or are at high risk of amputations, we also believe it’s important to understand how much more rare amputation risk is compared to other risks.

3. Bright Spots for Invokana: Potential CV Indication, CVS Health Formulary Status, CREDENCE

J&J’s presentation slides highlighted the submission of a Supplemental New Drug Application (sNDA) to the FDA (alongside a Type II Variation application to the EMA) requesting a new CV indication for Invokana based on positive CANVAS results. We imagine a label change (an FDA decision is expected in late 3Q18 or early 4Q18), coupled with Invokana’s preferred status over Jardiance on the CVS Health formulary in 2018, could provide a much-needed boost to J&J’s SGLT-2 business in the mid-term future. When asked during Q&A how the Invokana franchise might soon return to growth, management expressed optimism for CREDENCE results, which will reflect canagliflozin’s renal protective effects in diabetic kidney disease. CREDENCE is expected to complete in June 2019, and will be the first trial to read out on an SGLT-2 inhibitor in patients with impaired renal function (low eGFR) – AZ’s Dapa-CKD study is evaluating dapagliflozin in patients with chronic kidney disease with and without diabetes (expected to complete November 2020), while Lilly/BI have announced plans for an empagliflozin trial in patients with CKD with and without diabetes but have not shared timing details. Interest in a CKD indication for SGLT-2 inhibitors has been sparked by positive microvascular outcomes data from CANVAS and EMPA-REG, both of which found risk reduction for their primary renal endpoints. Moreover, CREDENCE could contribute positively to Invokana’s risk/benefit profile (which is currently rather complicated) and could help elucidate the link between canagliflozin and lower limb amputations – on that note, we wonder if/how protocol for this ongoing study has been adjusted in light of the CANVAS amputation data. Despite all these bright spots, it’ll be up to J&J to promote a favorable risk/benefit profile for Invokana, which will take some concerted effort.

  • In the near term, we expect the boxed warning for amputations to continue having an adverse impact on Invokana uptake in the US (after all, this is already on the product label while a CV indication is not, and won’t be for at least 10-12 months). A post-hoc analysis of CANVAS presented at EASD 2017 found that despite all other risk factors, canagliflozin treatment nearly doubled an individual’s amputation risk. That said, we believe that stronger patient education around foot care (this is sorely lacking in real-world clinical settings right now) and careful monitoring could mitigate this risk while still allowing patients to benefit from Invokana’s profound glycemic, weight loss, and CV efficacy. We’d love to see J&J lead the initiative to improve patient education around foot care in diabetes management. We were pleased to sense general optimism from management regarding future prospects for Invokana (mostly during Q&A, but we acknowledge that J&J is a huge company with many divisions to review in prepared remarks), especially since confidence in this franchise was lukewarm at best during Janssen’s May 2017 Pharmaceutical Business Review. Notably, pooled analysis of other phase 3 canagliflozin trials (not including CANVAS) shows no imbalance in amputations between the active agent vs. placebo groups (Truven observational HR=0.98, 95% CI: 0.68-1.41). Thus, there’s still a chance that this safety signal is not actually inherent to the molecule – further analyses of the CANVAS dataset are needed to truly sort this out. See this recent foot care piece from The diaTribe Foundation on the patient education front – “Steps for Better Foot Care Health – What You Can Do Today” –  which has been viewed several thousand times since it was published in August.

4. No Mention of Early-Stage Diabetes/Obesity Pipeline

There was no mention of Janssen’s diabetes/obesity pipeline during prepared remarks. We’ve been especially curious about the fate of Invokana clinical projects since Janssen’s Dr. James List (Global Therapeutic Head of Cardiovascular & Metabolism) told us at ADA that the company will have to strategically evaluate which of these studies to continue in the aftermath of CANVAS – we’ve heard no further updates since then, besides management’s optimism for CREDENCE results on the 3Q17 call. We’ll watch out for additional research highlights ways to circumvent or mitigate amputation risk with Invokana use in the real world, because we’d love to see forward progress on the CVOT in prediabetes, on the type 1 indication, and on the combination with phentermine for obesity treatment. This will, of course, require J&J to invest further in canagliflozin clinical development, which may depend on a resurgence in commercial sales. Table 1 below summarizes the latest updates, as far as we are aware, on Invokana clinical trials. The global therapeutic head of Janssen emphasized to us earlier today that J&J remains committed as a company to bringing innovative solutions to patients with metabolic diseases including diabetes. This includes their work in bariatric surgery and with canagliflozin, he said, and to Janssen’s exciting expanding pipeline of molecules that have the potential to treat obesity, diabetes, NASH, and diabetic kidney disease. s

  • A new phase 1b study of glucagon/GLP-1 dual agonist JNJ-64565111 was initiated in August, with an expected completion date of January 2018 (see our competitive landscape for the big picture on glucagon/GLP-1 dual agonists in development). Estimated enrollment for this new trial is 56 adults with type 2 diabetes, and the primary endpoint is the proportion of patients in each arm (active agent vs. placebo) experiencing safety/tolerability issues. We were excited to hear this news following more than a year of silence on the candidate, since preclinical findings were featured on a poster at ADA 2016. Table 2 below summarizes the latest updates, as far as we are aware, on Janssen’s early-stage diabetes, obesity, and NASH pipeline products.

LifeScan/Animas Business Highlights

5. No Comment on Animas Exit, No Update in Q&A on Diabetes Care Business Evaluation

There was no mention in prepared remarks of Animas’ disappointing exit from the pump market two weeks ago (read our full report). During the Q&A section, the new medical device head Ms. Sandy Peterson (who also ran Consumer until recently and who used to run Bayer Diabetes Care until that closed) ignored the question when first asked and then, when pressed, indicated that they had no updates regarding diabetes sales other than the Animas announcement (“Any further comment?” “No.”). There was no further color. The Animas announcement two weeks ago specifically noted that strategic evaluation for the LifeScan business is ongoing. The somber Animas news was not a total surprise, especially as the company has been exploring “strategic alternatives” for the diabetes businesses since at least January. However, it serves as an important reminder of the fragility and highly competitive nature of the insulin pump market. Pump supplies and service will continue to be offered to ~90,000 current Animas users for the next ~two years. Medtronic is J&J’s “partner-of-choice,” with a segment of patients to qualify for a free MiniMed 630G – a substantially less attractive option than the MiniMed 670G and truly surprising in our view. Medtronic will also take over supply reordering, and out-of-warranty Animas customer have already received an email encouraging them to move over to Medtronic. While Insulet and Tandem have announced their own generous transition programs, we believe strongly that with a massive write off, J&J could have offered a free move to all three pump companies – with 2016 LifeScan/Animas sales of $1.8 billion and a diabetes asset impairment of $182 million last quarter, offering more patient flexibility would have been doable and would have more strongly aligned with J&J’s credo. There is a blog from The diaTribe Foundation asking J&J to reconsider giving choice to its Animas pumpers and working to arrange for 670G pumps for patients moving to Medtronic not just 630G, which would be the choice of very few (if any) actual patients.

  • Medtronic was named the partner of choice for J&J, but Insulet and Tandem also came forward with generous welcome offers. Despite new technologies entering the market, patient choice has narrowed. Animas directing patients to Medtronic alone certainly doesn’t help. In addition, while a free 630G may be tempting to some, offering the 670G should have been a no-brainer, and we expect that many customers (particularly Dexcom users) will go to Tandem and Insulet. Get full details on all the programs and warranty specifics here. Patient pump choice has been severely cut down in the past year – especially in the US – with just three of the five major companies active last year still around. As a reminder, Roche halted pump sales in January. In the words of Dr. Roy Beck, “Fewer pump companies in the US is not good for patients.”
  • It will be interesting to see how other pump companies learn from Animas, Roche, and Asante (closed in 2015 before being hastily snatched up by Bigfoot), if at all. Animas lagged behind on innovation, failing to launch a product after the promising artificial pancreas partnership with JDRF – we believe it could have been first to market, ahead of the MiniMed 670G. Animas also did not rollout the OneTouch Vibe Plus with Dexcom G5 integration, which secured approval last December. Moving forward, we business model AND product innovation will be critical in developing sustainable, profitable insulin pump businesses. Is a monthly subscription model for insulin pumps the way to go – i.e., similar to Bigfoot’s approach and in line with Insulet’s general business model? Can the costs of running an insulin pump business come down, or can companies demonstrate more value to obtain better margins? The traditional durable pump model of a large upfront hardware payment followed by continuous lower payments for monthly supplies may simply not be sustainable, and it make even less sense from a short-term-focused payer perspective. While there continues to be a lot of startups in the BGM and CGM domains, there isn’t nearly the same level of interest in insulin pumps – we hope patient choice and innovation remain high, particularly as Medtronic grows stronger with Animas’ exit. More on competitive dynamics here.

6. Global LifeScan/Animas Sales Drop 5% YOY, Driven by 12% Decline in US

Global LifeScan/Animas sales totaled $405 million in 3Q17, down 5% as reported and 7% operationally YOY against a rather easy comparison to 3Q16, when sales declined 9% as reported and operationally YOY. Global LifeScan/Animas reported revenue has now declined in 19 of the past 20 quarters, and this quarterly performance is the second lowest recorded in our model, just edging out $400 million in 1Q17. Weak global sales were driven by a 12% decline in US Diabetes Care revenue (see below). The press release actually cites declines in the Diabetes Care business as responsible for partially offsetting growth in J&J’s overall worldwide operational results. Otherwise the press release has no references to diabetes; it is clear that J&J is investing in infographics about its business – see the one for 3Q17 here. It’s notable that there is literally nothing on diabetes in it, even though CEO Alex Gorsky emphasized as recently as 1Q17 how devoted J&J is as a company to diabetes.

  • As we’ve come to expect, the slide deck cited three factors for the challenging performance: (i) BGM price declines in the US; (ii) category and share softness in EMEA; and (iii) pump competitive pressure (an understatement). J&J has potential with the Verio Flex-WellDoc integration and the OneTouch Via insulin delivery device. Can these help stem the sinking sales? Then again, the value-added WellDoc+Verio BGM will need to address declining prices – perhaps with alternative pricing strategies or bundles.

Figure 2: Global, US, International LifeScan/Animas Quarterly Sales (1Q12-3Q17)

  • Despite devices taking a major hit with the Animas exit, 3Q17 marks the third quarter in which the decline in the Invokana franchise (-19% YOY), was actually larger than that of LifeScan/Animas. While we consistently hear of pricing and competitive pressures in BGM and insulin delivery, Invokana sales are notably struggling due to patient discounts and increasing utilization of Medicaid, plus coming after a period of monumental franchise growth from 1Q14 to 1Q16. Of course, the LifeScan/Animas business have easier YOY comparisons at this point, as they’ve been declining for the past five years now. 

7. US LifeScan/Animas Revenue Drops 12% to $168M on Easy COmparison

US Diabetes Care revenue totaled $168 million in 3Q17, declining 12% YOY. The decline came against an easy comparison, as sales fell 7% YOY in 3Q16. 11 of the past 12 quarters have now seen declines in the US Diabetes Care business. For the second consecutive quarter, LifeScan/Animas reported sequential growth, increasing 5% from a weak $160 million last quarter. However, given that 1Q17 saw a record low US LifeScan/Animas revenue of $154 million, this sequential growth is to be expected. Overall, it’s hard to find anything positive in the US business right now, and we wonder what J&J’s realistic options are going forward – is there a buyer for the BGM business, given the US market dynamics?

8. International LifeScan/Animas Revenue of $237M Declines 3% Operationally

International Diabetes Care revenue totaled just $237 million in 3Q17, flat as reported and down 3% operationally YOY. This also came on an easy comparison to 3Q16, when sales declined 11% as reported and operationally. This quarterly performance is one of the lowest we have seen since we began our model in 1Q05, second only to 3Q16, when US revenue totaled $236 million. 11 out of the past 12 quarters have now seen declines or flat growth in the international business. The large revenue gap between US and international observed in 2Q17 has narrowed, with international sales just $69 million above those in the US.  

  • Notably, Animas hasn’t yet exited geographies outside of the US and Canada yet. Timing is pending, but we expect this will come soon. See our full report from two weeks ago for more.

LifeScan/Animas Pipeline Highlights

9. No Mention of OneTouch Via; Last Patient Completes Multi-center Clinical Trial Investigating OneTouch Via

In September, J&J reps at EASD were unable to provide any timeline details for the OneTouch Via bolus-only insulin delivery patch device, nor were they able to share updates regarding the US launch. However, it was on display and did generate excitement among attendees. OneTouch Via received FDA clearance in June for the new manufacturing process, but has yet to launch in the US. The timeline for the device has been delayed meaningfully, first from “early 2017” (ADA 2016), then from 1H17 (per a November email exchange, and lastly in May, when a rep at told us that the OneTouch Via was expected to roll out in a focused US launch in the coming months. It’s hard to be optimistic at this stage about a J&J launch, but who knows…

  • In the wake of the Animas exit, is a divestment of OneTouch Via more likely? (See our previous report on who might be interested.) The device is, to us, the asset with the highest upside in the diabetes device portfolio. As a side note, though not specifically mentioned, the Calibra plant in Puerto Rico – where OneTouch Via is manufactured – may not be at full capacity. Said CFO Mr. Dominic Caruso on the call: “We have six manufacturing sites on the island of Puerto Rico, and considering the magnitude of the storm, our facilities fared well. All of our sites are open with reliable generator power, operating in various stages of capacity, while the work continues to ramp up to full operations in Puerto Rico.”
  • We did learn at EASD that the last patient has completed the major multi-center clinical trial investigating changes in A1c, glycemic variability, and patient-reported quality of life in type 2 patients using the OneTouch Via for boluses vs. bolus insulin pens. A publication is anticipated in the coming year. It’s unclear what this means for divestment, since the study was presumably signed off and funded before J&J’s strategic evaluation was underway. Assuming results are positive, they will certainly bode well for reimbursement and for J&J to divest this asset or launch itself. The slim device could be quite popular among type 2 insulin users, though the cost impact will be a major question to answer for MDIs – Via will require a basal injection AND a bolus insulin, in addition to the new device. In other words, OneTouch Via will start out by adding cost to the system, meaning it needs to drive higher adherence (likely with easier mealtime boluses), better A1c outcomes (likely), less glycemic variability (likely), and/or improvements in quality of life. We think a strong case is possible, but we’ll have to wait for full results.  

10. WellDoc Blue Star Integration Live but Not Yet Rolled Out To Patients

There was no mention of the WellDoc BlueStar integration partnership (including a J&J investment) on today’s call, and we weren’t given updates at EASD. Our most recent update is from ADA, when we were told that it hasn’t quite rolled out to patients yet. The technical integration – Bluetooth connectivity between the BlueStar app and J&J’s OneTouch Verio Flex meter – formally went live mid-March, three months after receiving FDA clearance in December. We see potential in this combination to augment traditional BGM and scale BlueStar’s education, feedback, bolus calculator, and provider relationship-building. Will J&J invest in the right way here?

  • We assume payers might be interested in this combination approach, as it should theoretically be far more efficacious than BGM alone. We’re still not sure what the business model will look like. It’s possible that the two will initially be sold separately, with the J&J meter simply feeding data into BlueStar. Eventually we imagine a prescribed-as-a-drug model with a bundle including BGM, strips, and WellDoc’s BlueStar app. Is J&J ready for that kind of commitment and market building? What kind of risk-/value-based contracting could the two companies engage in? Would either move to provide real-time access to diabetes educators and coaches? WellDoc has expanded its portfolio to three products – prescription-only BlueStar Rx, a new non-prescription version (without an insulin calculator), BlueStar C consumer version (non-regulated) – but it still needs scale and marketing awareness. How committed is J&J as a partner moving forward? Separately ,WellDoc also entered into a commercial agreement with Samsung in April.

Invokana Trials + Janssen Pipeline Summary

Table 1: Invokana Clinical Trials

Trial/Indication

Status

Timeline

Diabetic kidney disease (CREDENCE)

Ongoing; Fully-enrolled

Expected to complete in June 2019

Investigating mechanism of weight loss (CARAT trial)

Ongoing; Recruiting

Expected to complete in July 2018

CVOT for prediabetes

Planned as of J&J’s 3Q16 financial update

No timing information shared

Type 1 diabetes

Phase 2 trial completed

Phase 2 results presented at ADA 2016

Canagliflozin/phentermine co-administration for obesity

Phase 2 trial completed

Phase 2 results presented at ADA 2016

Table 2: Janssen Diabetes/Obesity Pipeline Summary

Candidate

Indication

Phase

Timeline/Notes

JNJ-64565111 (glucagon/GLP-1 dual agonist)

Type 2 diabetes, obesity, NASH

Phase 1

Phase 1b study in type 2 diabetes initiated August 2017, expected to complete January 2018; Phase 1 results presented at ADA 2015; Preclinical data presented on ADA 2016 poster; Licensed from Hanmi November 2015

JNJ-2463 (CB1 inverse agonist)

NASH

Phase 1

Phase 1 study underway; Collaboration with BirdRock Bio

JNJ-54728518 (glucagon/GLP-1 dual agonist)

Type 2 diabetes

Preclinical

Data presented on ADA 2016 poster showing efficacy vs. Novo Nordisk’s Victoza (liraglutide)

JNJ-9321 (once-weekly PYY agonist)

Type 2 diabetes, obesity

Not listed

No timing information shared

Select Questions and Answers

Q: Glenn Navarro, RBC: I know you’re strategically looking at diabetes, so I was wondering if you could give an update beyond what you’ve said most recently.

A: Ms. Sandy Peterson, EVP and Worldwide Chair, Head of Medical Devices & Diagnostics: Over time, when we make choices about our portfolio, we’ll let you know about those choices.

Q: So, no update on diabetes other than the announcement on Animas?

A: Right.

Q: On Invokana, the quarterly performance was noticeably weak. How much of the sequential drop was really due to pricing, and what will that look like going forward? Now that CANVAS data has been out there for a few months since ADA, how is that having an impact on the business?

EVP and Worldwide Chair, Pharma: Mr. Joaquin Duoato: Invokana continues to be the leader in prescriptions within the SGLT-2 category. We did see a decline this quarter, driven mainly by price, and we also saw an impact of the black box warning on our label. So, it was a combination of price and some share decline due to the black box warning. Moving forward, we see opportunities with Invokana: First, we just filed for a MACE indication, which will be important moving into 2018. Second, we continue to progress with the CREDENCE study in order to evaluate how a patient’s kidney function progresses with Invokana treatment. This also makes us confident about the future of Invokana moving into 2018.

Q: What are you seeing in the SGLT-2 inhibitor class? Are you losing share to Jardiance? With Invokana, it seems like we saw such a spectacular launch, but now it’s a negative product. Will price continue to be a thorn?

A: Yes, we are losing share to other SGLT-2 agents since we introduced the boxed warning on our label. We remain the category leader, but we are losing share, particularly in new patients. Certainly, price has been an even bigger driver in the step decline you’ve seen this quarter. Our belief in Invokana moving forward is based on very positive data that has been submitted for CV risk reduction. Also, we believe in the CREDENCE study for diabetic nephropathy. Overall, we see Invokana bringing important benefits to patients, and we see it as an important brand for us moving into 2018.

Appendix

See below for the full J&J Credo:

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.”

 

-- by Payal Marathe, Maeve Serino, Brian Levine, Adam Brown, and Kelly Close