Memorandum

Sanofi partners with Google Life Sciences to improve diabetes care through new sensors, wearable devices, and better software – August 31, 2015

Executive Highlights

  • This morning, Sanofi announced a partnership with Google Life Sciences to improve diabetes care through new sensors, wearable devices, and software. Offerings could include Bluetooth-enabled insulin pens and more holistic data collection and actionable analysis. No deal terms or timing have been disclosed.
  • Diabetes is officially the first therapeutic area of focus as Life Sciences becomes an independent company under Alphabet Inc. This news marks Google Life Sciences’ third diabetes partnership in addition to Novartis last July and Dexcom earlier this month. Google is clearly intent on making an impact in our field.
  • According to a WSJ article this morning, the contact lens with partner Novartis/Alcon is slated to enter high-volume production and large-scale human trials in 2016.

This morning, Sanofi announced a partnership with Google Life Sciences to improve diabetes care through new sensors, wearable devices, and software. The focus is on helping patients and physicians better collect, analyze, and understand all the data that impacts diabetes. The collaboration will span both devices and software. There are no deal terms or launch timelines. In addition to Sanofi’s press release, Google issued a thoughtful advisory to writers and to the WSJ and Bloomberg. Joslin is also mentioned as part of the collaboration, and the announcement quotes CEO John Brooks.

We can imagine a variety of products potentially coming out of this partnership: (i) Bluetooth-enabled insulin pens; (ii) unified data displays that integrate medication, glucose (Novartis? Dexcom?), activity, food, and/or CVD risk information; (iii) pattern recognition and insulin dose titration software for patients and providers; (iv) connected glucose meters (an iBGStar revamp?); (v) new apps for collecting and sharing patient-reported data; and (vi) provider dashboards for population management and patient communication.

The news marks Google Life Sciences’ third diabetes partnership, and this morning’s advisory from Google made the commitment crystal clear: “… diabetes is the first disease we’re focusing on as we become an independent company.” Yes! As a reminder, a partnership with Dexcom to develop next-gen, bandage-like CGM was announced three weeks ago (commercialization in ~2-3 years), and a partnership with Novartis to develop a glucose-sensing contact lens was announced last July. Notably, the WSJ article this morning said that the contact lens is slated to enter high-volume production and large-scale human trials overseen by the FDA in 2016. We believe the trials to date in humans have been quite small.

Today’s partnership comes at an important time for Sanofi, given reimbursement challenges and greater competition in the diabetes business. As a reminder, sales for Sanofi declined 4% in 2Q15 to $2.2 billion, though Google has obviously picked a powerhouse – this revenue result was second only to Novo Nordisk’s $3.1 billion 2Q15 result and more than 40% higher than Merck’s or Lilly’s 2Q15 revenue of $1.6 billion and $1.4 billion. The announcement quotes Sanofi CEO Dr. Olivier Brandicourt and Pascale Witz, Head of the new Diabetes/CV Business Unit, signaling attention at the highest levels of the company. Sanofi clearly recognizes the need to move beyond drugs alone, and combined with Google’s technology (miniaturized electronics, analytics), there is definite potential for more effective dose titration and more predictive diabetes care. Timing and regulatory are of course unknowns. We’re impressed by the speed at which Sanofi must have moved to make this deal happen and are extremely encouraged that Google is moving into diabetes so aggressively.

We see encouraging upside in the combination of Google and Sanofi to bring clinically relevant, cutting-edge devices and more actionable software to meaningfully impact patients and providers. Google clearly wants to impact the spectrum of diabetes (prediabetes, type 2, type 1) in a major way, and is taking thoughtful steps to partner with those who can impact new innovations and help bring them to market. We hope Google also looks to how it can help people with diabetes – the company clearly knows about engagement and we hope for some explicit learnings from technology in our sphere. When we see all the innovation that has happened in the last couple of decades, so incredibly much is from Google – may they bring their thinking to diabetes, and to Sanofi.

Google Life Sciences – Doubling Down on Diabetes

  • Diabetes is officially the first therapeutic area of focus as Life Sciences becomes an independent company under Alphabet Inc. The new operating structure – announced earlier this month – will spinout “far-afield” divisions like Life Sciences from the traditional Google (e.g., Search, YouTube). Current head of life sciences Dr. Andy Conrad will serve as CEO of the new company, which is unnamed. Alphabet will “rigorously handle” capital allocation and work to make sure each independent business is executing well.
  • The Google Life Sciences team told us that the focus on diabetes “was a natural evolution.” While Life Sciences was part of Google[x] labs, the team was focused on turning ideas into prototypes that held promise for improving the detection and management of disease (e.g., the hardware behind the contact lens). Now the organization is moving into its next natural phase: tackling various diseases head on. We are elated that diabetes will be a major focus – and the first major therapeutic area that Google Life Sciences has chosen.
  • Google Life Sciences hopes to impact the spectrum of diabetes - prediabetes, type 2, type 1. With partners like Sanofi, Dexcom, and Novartis, this is certainly feasible, albeit very challenging! The different patient populations mean that none of the groups is really low-hanging fruit. Of course, if there’s one thing Google is good at, it’s building products that a wide spectrum of people can use – Google search, YouTube, Android, Chrome, and Google Maps each have over 1 billion users. Now that is scale!
  • Now with three diabetes partnerships, Google has demonstrated a clear willingness to combine its in-house efforts with established players. The Google team shared with us a three-pronged goal: make existing technology better (e.g., Dexcom CGM), invent new technology (e.g., Novartis contact lens), and work towards better access to and understanding of data (all three partnerships, but particularly today’s announcement). Google has a history of using data very effectively in its core businesses, particularly to improve the user experience and build much better products. Partner Sanofi can bring clinical expertise to help effectively leverage the data that flows from improved devices.
  • How will Google juggle three diabetes partnerships, which might have overlapping goals (e.g., get better data and use it more effectively)? Will there be conflicts of interest? Did the Dexcom announcement come as a surprise to Novartis? Did the Sanofi announcement come as a surprise to Dexcom and Novartis? Google is of course experienced with multiple partners through its Android mobile operating system, which is used across multiple phone manufacturers across the world. Will that same structure work in medical devices and pharma?
  • In early August, Google announced a collaboration with Dexcom to develop next-generation CGM products. The goal is a flexible, low-cost, bandage-like, disposable CGM sensor/transmitter the size of a dime to be worn on the body for 10-14 days. The partnership leverages Dexcom’s expertise in sensors/algorithms with Google’s capabilities in data analytics, software, and engineering. The companies plan to commercialize the first product in two to three years, with a follow-on product to be commercialized within five years.
    • There were more details on the Dexcom/Google partnership than in today’s Sanofi announcement. For comparison, Dexcom held a conference call, shared the deal structure, and provided a clear commercialization timeline and ultimate product vision. Today’s announcement was less clear on all those fronts. That may reflect differences in company size (Sanofi vs. Dexcom), competitive secrecy, a sign that the ultimate vision is still to-be-determined, or something else.
  • IBM’s Watson Health is partnering with healthcare companies in a similar fashion to Google. Will a divide emerge, pushing diabetes players to work with either Google or IBM on analytics? A twist is that Google is offering hardware and software technology, while IBM is focused on software. As a reminder, IBM has a partnership with Medtronic to advance diabetes care on the data front through better analytics.

Potential Sanofi/Google Product Offerings

Below, we speculate on what products this partnership could bring to market. The companies have not commented specifically on timing or product details.

  • Connected insulin pens. Reliable and comprehensive insulin dosing data is a major missing piece of the diabetes data puzzle for those on insulin (many type 2 patients, of course, would benefit from it but aren’t taking it). Could Google help Sanofi build Bluetooth-enabled pens that send dosing data to a paired smartphone app? From there, it could be seamlessly uploaded to the cloud and analyzed automatically (ideally alongside glucose and other data). In an era where better orals are putting the need for insulin out for many people with type 2, we wonder about whether any help will be provided earlier on for improving diabetes management for people with type 2 diabetes. Sanofi of course has a partnership with Zealand on the GLP-1 front and is making a big bet with its GLP-1/basal combination.
    • Sanofi presumably doesn’t make their own pens, so will its suppliers be included (e.g., Ypsomed)? Also, how will cost-of-goods change once Bluetooth is built into pens? Will pens need to become reusable, like Companion Medical is pursuing?
    • If Sanofi chooses to make connected pens, will they make the data open, allowing others to build software that drive interventions?
  • Unified data displays that integrate medication, glucose (Novartis? Dexcom?), activity, or CVD risk information. Today’s announcement and media advisory allude to sensors and better data collection several times, and Google has lots to choose from here. In addition to the existing glucose monitoring partnerships with Novartis (contact lens) and Dexcom (next-gen, bandage-like CGM), Google has developed a “cardiac and activity sensor” – we assume this is the same device as the clinical-grade wristband (announced in June). A tool focused on CVD risk assessment would be consistent with Sanofi’s recent consolidation of its diabetes business into a joint Diabetes and Cardiovascular unit and help the company expand its cardiovascular presence beyond its likely blockbuster PCSK9 inhibitor Praluent (alirocumab). A big question is how Google and Sanofi will integrate additional device data and displays into routine clinical care. Will these go straight into electronic medical records?
  • Pattern recognition and insulin dose titration software for patients or providers. Today’s media advisory specifically mentions both applications, most notably giving patients “real-time information and specific guidance about diet or insulin dosage.” That would be a major win for patients and within the wheelhouse of Google’s analytics capabilities and Sanofi’s insulin dose titration expertise. Sanofi has been especially successful with dosing basal insulin though not rapid acting insulin, at least not to the same degree, though there could be opportunities with MannKind on the rapid acting front. The regulatory bar for a patient-facing titration product is higher than clinician-facing software, but ultimately, would be much more impactful. Such clinical decision support is the focus of the Helmsley Charitable Trust’s Diabetes Data Innovation Initiative. It seems like a simple Lantus titration algorithm isn’t that hard – e.g., every three days if your BG is higher than X, then increase dose by Z. What is holding that back?
  • Connected glucose meters. Sanofi expanded into connected devices with AgaMatrix’s iBGStar meter. The product launched in the US in 2010 with great fanfare, but was largely rendered obsolete once the iPhone 5 came out with a new charging port design (requiring a clunky adaptor that destroyed the iBGStar’s sleekness – this was poor luck). The meter has also faced reimbursement challenges, and sales totaled just €16 million (~$18 million) in 2Q15. Could Google and Sanofi revamp the iBGStar, either by incorporating Bluetooth, changing to a headphone jack plug-in, or adding a dose titration calculator? Alternatively, Google and Sanofi may elect to leverage continuous glucose data from the emerging Dexcom and Novartis collaborations.
  • New apps for collecting and sharing patient-reported data. Google brings expertise in delivering outstanding user experiences. How might the company leverage existing apps or build new ones to gather new types of data, particularly to minimize the manual entry needed for food information? “Context” is an important next wave in digital innovation, and tech companies like Google and Apple are at the forefront. They know where people are, what they are doing, who is around them, and probably what people intend to do next! That is huge for marketing and huge for managing behavioral/clinical actions – what can Google and Sanofi do here?
  • Provider dashboards for population management and patient communication. The ability to monitor a population of patients will be necessary to move to proactive, value-based diabetes care. What could Google and Sanofi build to aggregate data from connected devices, flag patients at risk, and reach out to those who need help?  

Deal Details

  • The partnership aims to be multidisciplinary, and Joslin is mentioned as a collaboration participant. We appreciated the concluding sentence in CEO John Brooks’ quote: “Ultimately, I truly hope we’re able to turn the Joslin Diabetes Center into a museum.” At the same time, we don’t believe that private conversation with any major researcher today would yield a belief that a cure for type 2 diabetes was in the works in any way. Still, it’s aspirational and various kinds of “cures” are within decades for type 1 patients though what those will look like is still anyone’s guess. We’re not sure what other companies, academic institutions, or advocacy groups will be included in the partnership’s efforts, but Google has clearly become more open to partnerships and looking for those that have had success historically.   
  • It’s unclear how Sanofi and Google will approach the work, though things still seem to be at an early stage. The companies won’t comment on responsibilities for R&D, regulatory, or commercialization. If we had to guess, Sanofi will presumably take products through approval and to market, just as Dexcom is doing. One thing is clear – Google’s various partnerships show that it is in no way interested in working exclusively with any diabetes companies. Presumably there may be overlap with the work of Dexcom, Novartis, and Sanofi.
  • The announcement is clear about the lofty goal: shifting from episodic to continuous, integrated, proactive, value-based diabetes care. More connected technology, better data, and improved software are critical components of that vision, equipping providers/payers with the ability to remotely monitor patients and reach out proactively. It will require a new model of diabetes care, and that seems to be the way the world is going – what the steps will be is where our focus will be in following this partnership. From a comparative perspective, it also appears to be the route Medtronic is steering towards with its new Diabetes Service and Solutions unit.
    • From a comparative perspective, this is the route Medtronic is steering towards with its new Diabetes Service and Solutions unit. By contrast, the Big 4 BGM players appear to be moving more slowly on digital health and new care delivery models. Aside from two connected meters – Roche’s Accu-Chek Connect and J&J’s OneTouch VerioSync – we wonder why more hasn’t been done to make the data more useful and drive interventions. BGM companies seem like the best candidates to lead the charge into digital health – what’s holding them back?

Sanofi Diabetes – A Challenging Time

  • Sanofi has faced challenges over the past year, with 2Q15 diabetes sales declining 4% operationally on continued challenges for Lantus (insulin glargine). Lantus sales totaled ~$1.9 billion in 2Q15, declining 6% in constant currencies year-over-year (down 15% in the US). The company was forced to accept higher rebates for Lantus among US payers in 2015 in order to maintain broad access (and a broad base of potential switches to new flagship Toujeo [insulin glargine U300]). Though Sanofi retained a ~72% market share of the global basal insulin market as of 2Q15, Lantus’ patent expires this year and competition is looming. Looking forward, sales will be under further pressure as biosimilar insulin glargine (Lilly/BI’s Basaglar) and next-generation insulin degludec (Novo Nordisk’s Tresiba) arrive on the US market. BI/Lilly’s glargine has already launched in several European countries and Japan and has so far been priced at a ~15-20% discount vs. Lantus.
  • Sanofi will ideally leverage this partnership to expand beyond pharmaceutical products. The current portfolio consists almost entirely of insulin, but given the competitive pressures on Lantus, diversification must be top of mind to stay competitive with Novo Nordisk, Lilly, and others. The partnership to bring MannKind’s inhaled rapid-acting insulin Afrezza to market has seen slow uptake to date, with sales totaling just $2 million in 2Q15, although many have pointed out Lantus sales themselves in the first year were on the slower side – the many challenges (reimbursement, lung function tests, etc.) could be offset in our view by focusing on certain patient groups like those new to insulin or those that should try insulin but don’t. The company’s GLP-1 agonist/basal insulin combination LixiLan (insulin glargine/lixisenatide) may be first-to-market in the US, but it will face stiff competition from Xultophy (Novo Nordisk’s insulin degludec/liraglutide combination that we think will be approved relatively shortly), which is already available in Europe and expected to file for FDA approval in 4Q15. We imagine Google’s expertise could help on targeting patients toward different therapies already developed and/or marketed by Sanofi – it will be interesting to watch how much help Sanofi requests. .
  • How Sanofi will combine medicines is another major question – will PCSK9s be possible to combine with basal insulin? And could any help be given on this front? Could help from Google get patients to move to biologics more quickly? What will be the impact of oral GLP-1?
  • An unknown is how quickly Sanofi can move – consumer tech companies like Google seem to operate at a faster clip than Big Pharma in many respects – not having regulatory to slow them down certainly helps. The cultures are also very different – Paris-based Sanofi and Silicon Valley-based Google, at least! Still, the combined expertise is a major plus, and we imagine both partners will learn significantly from each other.  
  • The Medtronic/Sanofi partnership was unexpectedly called off earlier this year. What will be learned from that deal structure? As a reminder, that partnership was announced at ADA 2014 as a “memorandum of understanding to enter into a global strategic alliance” – in essence, an agreement to pursue an agreement. The goals were two-fold: drug-device combinations and care management services. In a Bloomberg article today, Sanofi’s Ms. Pascale Witz said the partnership is not being pursued because Sanofi “did not feel that it was going far enough” – this partnership was called off months ago, of course, and is hardly new news. Can anything be learned from that deal? The Sanofi/Google partnership does seem to be going beyond the scope of that partnership, presumably by combining work on both devices and software.
  • Sanofi recently announced a new organizational structure that will create a combined Diabetes and Cardiovascular business unit. The new structure will go into effect in early January 2016. We expect a cardiovascular drug – Sanofi’s recently-approved PCSK9 inhibitor Praluent (alirocumab) for LDL cholesterol lowering – will headline this unit, and although ultimately this will be combined with basal insulin, how that formulation would work remains a major question. There are high hopes, of course, for Toujeo, Sanofi’s new basal insulin – we hear very strong approval from clinicians though we believe the payers will continue to be conservative. Ms. Pascale Witz will lead the combined unit (she was quoted in today’s Google announcement), though she does not yet have a substantial background in diabetes. Global Diabetes head Mr. Pierre Chancel will step down from the company, effective January 1, 2016 – we’ve yet to hear who will replace him as the global head of diabetes.

Close Concerns Questions

Q: What specific products will emerge from this collaboration?

Q: How will R&D be approached in this partnership?

Q: What is the timeline to commercialization?

Q: Who is responsible for any regulatory activities? Who is responsible for commercialization?

Q: How can this collaboration leverage the Dexcom and Novartis glucose monitoring partnerships?

Q: Did Google consider partnering with Novo Nordisk or Lilly?

Q: What will Apple do in diabetes? Will the company beef up its efforts or choose to compete in a different area?

 

-- by Adam Brown, Varun Iyengar, Helen Gao, Emily Regier, and Kelly Close