4Q18 and 2018 Diabetes and Obesity Industry Roundup – Industry grows 5% to $53B in 2018 led by GLP-1s and CGM; SGLT-2s are strong and insulin is negative (but still ~40% of the market) – April 23, 2019

Based on financial results from the nearly 30 public companies that we regularly track, this diabetes/obesity industry roundup provides a bird’s eye view of trends in the second half of 2018 and the year overall.

Please note that in many cases, the data we’ve used for our analysis reflects our best estimates, since a number of companies don’t disclose financial information in great detail (or in the case of BI, at all, except once a year). We’ve made the basis of our assumptions clear in the text below, and we recognize that a number of the estimates may be meaningfully different from the “actual” that is not known! If you have opinions on how an estimate could be improved, please don’t hesitate to reach out and let us know.

Overall Industry Performance

Diabetes Industry Summary for 2018 – Quarterly Sales

Diabetes Industry Summary for 3Q18 and 4Q18

*Does not include estimated revenue for Merck/Pfizer’s Steglatro; ** J&J LifeScan reported $0 in 4Q18 revenue as business became private under deal to Platinum Equity

Diabetes Industry Summary for 2018

Diabetes Therapy

Insulin

The overall insulin market (basal, rapid-acting, and human) dipped 4% YOY to $20 billion in 2018. Revenue fell 7% YOY in both 3Q18 and 4Q18, to $4.9 billion and $4.8 billion, respectively.

• Basal insulin revenue fell 5% YOY to $9.8 billion in 2018. In 4Q18, sales dropped 9% YOY to $2.5 billion and in 3Q18 revenue fell 7% YOY to $2.4 billion. Sanofi’s Lantus continues to hold the top position in the class, claiming 40% of pooled revenue with $991 million in 4Q18, down slightly from 43% in 3Q18. Notably, Lilly/BI’s Basaglar now has second place by value share with 19% of pooled revenue (this is based on our estimate of total Lilly + BI sales – see graph below), followed by Novo Nordisk’s Levemir at 18% (we’re surprised this still has such a big share) and Tresiba at 13%, and Sanofi’s Toujeo at 9%. Overall, Sanofi has 49% share of revenue, followed by Novo Nordisk at 31%, and Lilly at 19%. By volume in US markets, Lantus leads with 38% of total basal insulin prescriptions, followed by Levemir at 21%, Tresiba at 15%, Basaglar at 11%, and Toujeo at 9%.

• The rapid-acting insulin market grew a modest 2% to $6.5 billion. On a yearly scale, the market does seem to have plateaued, though sequential fluctuations remained in 2018: +4% in 1Q18 to $1.7 billion, -3% in 2Q18 to $1.7 billion, -10% in 3Q18 $1.5 billion, and +11% in 4Q18 $1.7 billion, culminating in close to a flat market for the year overall. Trends are primarily driven by Lilly’s Humalog and Novo Nordisk’s NovoLog, which each captured 46% of the market by value in 2018. Next came Sanofi’s Apidra with 7%, then market newcomers Fiasp (introduced 1Q18) and Admelog (2Q18) with 1% each. Pricing pressure abounds, with management from all three major manufacturers citing higher rebates as a major headwind in the class. Volume share is more difficult to ascertain, though most signs (similar list prices and high rebating) indicate it aligns value share breakdowns. In the future, we’ll be interesting to see how Admelog and other biosimilars impact the rapid-acting market – will we see a Lantus-like fall from the first generation of rapid-acting analogs?

• Human insulin sales fell 4% YOY to $2.9 billion in 2018, compared to $3.0 billion in 2019. Revenue totaled $718 million in 3Q18 (-1% YOY) and $698 million in 4Q18 (-12% YOY); this figure considers only human insulin from Novo Nordisk, Lilly, and Sanofi. Revenue for the class has been slowly falling over time: YOY change was -4% in 2018, -5% in 2017, +1% in 2016, -8% in 2015, and +1% in 2014.

Total Insulin Sales by Type (1Q12-4Q18)

Basal Insulin Sales (1Q05-4Q18)

We have estimated total Basaglar revenue (both Lilly and BI shares) as 2x that reported by Lilly ($232 million in 4Q18); to our knowledge, BI has yet to publicly report Basaglar sales.

Rapid-Acting Insulin Sales (1Q06-4Q18)

GLP-1 Agonists

The GLP-1 agonist class grew 25% YOY to $8.1 billion in 2018. Revenue rose 19% YOY in 4Q18 to $2.3 billion and 30% YOY in 3Q18 to $2.0 billion. The entire class continues to climb remarkably upward from a progressively higher base and drove 38% of industry growth in 2018.

• In terms of 2018 pooled GLP-1 revenue, Novo Nordisk’s Victoza remains in front at 47% of total sales, followed by Lilly’s Trulicity (40%), AZ’s Bydureon + Byetta (9%), Novo Nordisk’s Ozempic (3%), and GSK’s Tanzeum + Sanofi’s Lyxumia (1%). Reflecting gradual and ongoing shifts, 4Q18 revenue breakdown is slightly different: Victoza held 44% of sales, Trulicity 41%, Ozempic 7%, Bydureon + Byetta 8%, and Lyxumia + Tanzeum <1%.

• In terms of US prescription volume, Trulicity maintained its newfound leader position in 4Q18 at 45%, followed by Victoza (35%), Bydureon (12%), and Ozempic (8%). Based on these numbers, it seems possible that Trulicity’s success is being driven by US sales while Victoza holds on better OUS, though pricing/reimbursement certainly also impact these dynamics.  

• We fully expect pooled GLP-1 sales to overtake basal insulin and DPP-4 inhibitor revenue soon. In 4Q18, pooled GLP-1 sales reached $2.3 billion, compared to $2.5 billion for both the basal insulin and DPP-4 inhibitor classes. With DPP-4 inhibitor and basal insulin revenue neck-and-neck at ~$2.5 billion quarterly, and given the trajectory of each class, it’s also possible that DPP-4s will become the highest-selling drug class for a time.

• Guidelines that promote GLP-1 use, along with incoming positive outcomes data, will continue to boost sales in the coming years. 2018 excitingly saw new ADA/EASD guidelines slate GLP-1 as the first-line injectable over basal insulin. Moreover, several recent GLP-1 CVOTs brought encouraging results –REWIND for Lilly’s Trulicity, and PIONEER 6 for Novo Nordisk’s oral semaglutide – supporting cardioprotection as a likely class effect – and even HARMONY-Outcomes for GSK’s Tanzeum.

GLP-1 Agonist Sales (1Q06-4Q18)

Sanofi stopped reporting Lyxumia revenue in 3Q18; we’ve estimated sales at $6 million based on past quarters.

SGLT-2 Inhibitors

The SGLT-2 inhibitor class accelerated in the second half of 2018 after a slow start, totaling $4.3 billion in sales in 2018 (+21% YOY from $3.5 billion). This excludes any estimate for Merck/Pfizer’s Steglatro, as the companies have not reported any revenue for the newcomer.

• While this growth is similar to that of 2017 (+24% YOY from $2.9 billion), 2018 was anything but consistent. The emergence of serious safety concerns (amputations, Fournier’s gangrene) seemed to manifest in a slower first half to the year, after which increasingly-robust evidence of CV and renal protection along with promotion in treatment algorithms appeared to boost sales in 3Q18 (+12% YOY, +5% sequentially to $1.1 billion) and 4Q18 (+17% YOY, +15% sequentially to $1.2 billion). However, true growth is likely a bit higher, given these numbers don’t account for any Steglatro revenue.

• The revenue pattern for the SGLT-2 class in 2018 was very similar to that of the GLP-1 class (see graphs below), suggesting broader currents in sales of novel diabetes treatment that truly drove market dynamics, rather than factors specific to the SGLT-2 class. On balance, it could also be that some factors affected both the SGLT-2 and GLP-1 classes (e.g., treatment algorithm wins). For now, the future of the SGLT-2 class looks bright, with majorly positive full results from Invokana’s CREDENCE trial in DKD and approval of AZ’s Forxiga for type 1 in Europe the biggest highlights so far in 2019. In total, the class accounted for 17% of total diabetes industry revenue and drove 8% of growth.

• By value in 2018, Jardiance claimed 47% of the market, Farxiga 33%, Invokana 21%. Again, this ignores unreported Steglatro sales.

SGLT-2 Inhibitor Sales (1Q13-4Q18)

Total Jardiance sales (Lilly + BI) have been estimated based on previously-reported sales from BI indicating share breakdown of ~33% of sales for Lilly; Steglatro revenue is estimated based on current market (Merck/Pfizer have reported no figures for Steglatro).

DPP-4 Inhibitors

The DPP-4 inhibitor class was steady in 2018, slightly increasing 1% YOY to $9.8 billion and even driving 2% of industry growth. Notably, the class experienced its first quarterly YOY decline since 2Q17 in 3Q18 (-3% YOY) and also dropped 1% YOY in 4Q17, but still sold $2.5 billion for the quarter. By product, Merck’s Januvia continues to hold the lion’s share of market value share (60%), followed by Lilly/BI’s Tradjenta (16%), Novartis’ Galvus (13%), AZ’s Onglyza (6%), and Takeda’s Nesina (5%). The class had major news come out in 4Q18 in the form of topline results from the CAROLINA CVOT, which indicated that Tradjenta did not achieve superiority to sulfonylurea on a primary endpoint of three-point MACE.

DPP-4 Inhibitor Sales (1Q07-4Q18)

Total Tradjenta sales (Lilly + BI) have been estimated based on previously-reported sales from BI indicating share breakdown of ~36% of sales for Lilly.

Basal Insulin/GLP-1 Agonist Fixed Ratio Combinations

In their second full year on the market, basal insulin/GLP-1 agonist fixed-ratio combinations collected $339 million, more than doubling (+140%) from $143 million in 2017. The class continued its steady ascent in both 3Q18 (+146% YOY, +15% sequentially to $92 million) and 4Q18 (+85% YOY, +9% sequentially to $100 million), with Novo Nordisk’s Xultophy (liraglutide/insulin degludec) claiming a 75% value share on the year and Sanofi’s Soliqua (lixisenatide/insulin glargine) the balance. To be sure, growth for this highly promising class (in terms of glucose-lowering, milder side-effects, and greater patient convenience) could be stronger, though US label restrictions (only available to patients already on a component of the combination) and reimbursement barriers posed significant challenges in 2018. However, the recent removal of label restrictions for both Xultophy and Soliqua bodes well for what could be a breakthrough year in 2019.

GLP-1/Basal Combination Sales (1Q17-4Q18)

Diabetes Technology

Quarterly Sales – BGM, CGM, Pumps

J&J LifeScan reported $0 in 4Q18 sales, having completed its sale to Platinum Equity. The graph below uses “$0” for J&J LifeScan in 4Q18 – hence the big red-line drop and artificial decline for the field. See the BGM section further below for graphs that assume a similar historical sales trajectory for J&J. Assuming LifeScan kept on a similar trajectory of just over $300 million in quarterly sales, we still estimate the CGM field (~$923 million) actually grew larger, for the first time, than the Big Three BGM sales in 4Q18 (~$919 million including what previously would have been J&J revenue).

CGM

CGM had a breakout 2018: We estimate global sales hit a record-smashing ~$3 billion in 2018 (+74% YOY), driven by ~$923 million in 4Q18 sales (+77% YOY – note that 4Q grew faster from a higher base). This was significant acceleration from 2017’s 48% CGM growth on sales of ~$1.7 billion – a testament to four excellent sensors on the global market, two CGM franchises accelerating to over $1 billion in 2018 revenue (Abbott’s FreeStyle Libre and Dexcom), and rising awareness and reimbursement. Notably, the CGM category is now larger than insulin pumps in our model, quite a milestone! By geography, US and international CGM sales were evenly split – each had ~$1.5 billion in 2018 sales, with rapid growth both OUS (+85% YOY) and in the US (+63% YOY). Compared to 2017, international growth in 2018 was pretty identical (+85% vs. +88%), while the US grew significantly faster (+63% vs. +24%) –reflecting a much stronger 2018 for Dexcom (G6) and a full year with FreeStyle Libre real-time on the market. FreeStyle Libre provided an estimated ~55% of global CGM category growth in 2018, followed by an estimated 25% for Dexcom, 20% for Medtronic, and 1% for Senseonics. As in past roundups, FreeStyle Libre carried most of the OUS market (70% share of growth), while Dexcom was strongest in the US (39% share of growth). The field is also closing in on over 2 million global users, given almost 1.5 million users for FreeStyle Libre, and an estimated ~400,000 global users for Dexcom, likely over 200,000 users for Medtronic, and likely over 6,000 users for Senseonics. What a banner year for CGM! The momentum seems poised to continue in 2019 – with a big focus on when we’ll see FreeStyle Libre 2 iCGM in the US.

CGM Sales by Geography, Estimated (1Q12-4Q18)

Abbott (estimated), Dexcom, Medtronic (estimated), Senseonics

CGM Sales by Company, Estimated (1Q12-4Q18)

Abbott (estimated), Dexcom, Medtronic (estimated), Senseonics; assumptions below chart

• Abbott FreeStyle Libre sales assumptions: Abbott did not break out FreeStyle Libre sales in 4Q18, but did share in 3Q18 that FreeStyle Libre sales exceeded $300 million, and shared in 1Q19 that sales were $379 million. To calculate 4Q18 sales, we used two base assumptions in our model: 3Q18 sales and Abbott Diabetes’ overall sequential growth in the US and OUS. We assumed FreeStyle Libre’s actual Q3-to-Q4 sequential growth was higher than the overall business, given declines in BGM. Therefore, we modeled FreeStyle Libre at 20% US sequential growth and 10% international sequential growth. This may over- or under-estimate actual FreeStyle Libre sales in 4Q18, but it is quite close to FreeStyle Libre’s revenue run rate.

• Medtronic shared in 3Q18 that its CGM sales were larger than its pump sales, though specifics were not shared. The company last shared in mid-2017 that its CGM sales were ~25% of its Diabetes sales, up from ~20% in 2015. In the chart above, we have modeled Medtronic CGM sales as a gradual rise from 25% in mid-2017 to ~35% leaving 2018. This seems very reasonable, given much faster growth in CGM than pumps. Still, it could be an over- or under-estimate, depending on how Medtronic “counts” the various components of its revenue. 

BGM

Global BGM-only revenue for Roche, J&J, and Abbott totaled an estimated ~$3.6 billion in 2018, declining 16% YOY and driven by a 45% decline in 4Q18 sales – J&J LifeScan reported no revenue in 4Q18 as it closed the deal to sell its BGM business to Platinum Equity. Assuming similar LifeScan BGM sales in 3Q18 carried to 4Q18 (~$315 million), Big Three BGM sales still fell 9% in 2018 and down 17% in 4Q18. International BGM sales declined 44% YOY to ~$479 million in 4Q18, and sales fell 14% YOY to ~$2.7 billion for the full-year 2018. In the US, estimated Big Three revenue was down 48% YOY in 4Q18 (~$130 million) and down 22% YOY in 2018 (~$890 million). Roche had the steadiest BGM performance by our estimates: sales were ~$449 million in 4Q18 (-2% YOY) and ~$1.8 billion in 2018 (+2% YOY). Over 60% of Abbott’s business is now FreeStyle Libre (~$1.1-$1.2 billion in sales), and we have modeled a ~19% decline for its BGM business in 2018 (~$750 million).

BGM Sales by Geography, Estimated (1Q12-4Q18)

Abbott (estimated), J&J LifeScan (estimated), Roche (estimated)

Big Three BGM, using the actual reported $0 for J&J LifeScan in 4Q18:

Big Three BGM, assuming J&J LifeScan continued on a similar growth trajectory:

BGM Sales by Company, Estimated (1Q12-4Q18)

Abbott (estimated, BGM-only), J&J LifeScan (estimated), Roche (estimated, BGM-only)

Using the actual reported $0 for J&J LifeScan in 4Q18:

Assuming J&J LifeScan continued on a similar growth trajectory in 4Q18:

Insulin Pumps & Delivery Devices

Insulin pumps/delivery device sales rose a steady 6% YOY in 4Q18 to an estimated ~$682 million; sales rose a robust 13% in 2018 to ~$2.6 billion. If our estimates are correct, 4Q18 set an industry revenue record (~$682 million), just edging out the previous 1Q18 record (~$660 million). US pump sales were an estimated ~$1.5 billion in 2018, rising 14% YOY. International pump sales were an estimated ~$1.1 billion in 2018, up 11% YOY. We estimate the US provided 64% of the pump industry’s growth in 2018, a strong return to growth after a ~6% sales decline in 2017. By company, we estimate Medtronic provided ~45% of the pump field’s growth in 2018, driven by strong 1H18 sales that tapered off to 0% growth contribution in 4Q18. The remaining 2018 pump industry growth was driven by Insulet (30% of growth), Tandem (23%), Valeritas (8%), and Cellnovo (0.5%). Tandem and Insulet saw very strong finishes to 2018, each providing 49% of category growth in 4Q18; Medtronic provided no growth in 4Q18.

Insulin Pump & Delivery Device Sales by Geography, Estimated (1Q12-4Q18)

Insulin Pump & Delivery Device Sales by Company, Estimated (1Q12-4Q18)

Medtronic pump-only sales (estimated); excludes CGM sales estimates (see above)

Insulet, Tandem, Roche (estimated), Valeritas, Cellnovo, Animas

Obesity

The obesity market brought in $763 million in 2018, up 40% YOY from $567 million in 2017 and driven almost entirely by Novo Nordisk’s Saxenda. The product claimed 77% of the branded market by value for the year, followed by Contrave (to be sold imminently by the now-bankrupt Pernix) with 12%, Arena/Eisai’s Belviq with 6%, and Vivus’ Qsymia with 5%. Market revenue was $190 million in 3Q18 (+36% YOY, +2% sequentially) and $241 million in 4Q18 (+53% YOY, +27% sequentially). Despite its strong commercial performance, Saxenda’s total obesity prescription share in the US was only 4% in 4Q18, making volume dynamics within the class a little more difficult to decipher. However, with Novo Nordisk reinforcing its commitment to Saxenda as Arena/Eisai deprioritized Belviq and Pernix filed for bankruptcy, we would expect both volume and value share of Saxenda to increase in 2019. In 3Q18, Pernix management asserted that Contrave was the most prescribed branded obesity drug for the quarter, though it is clear that generic oral medications still dominate the class, according to Novo Nordisk’s 4Q18 slide deck. 

Branded Obesity Therapy Sales (1Q13-4Q18)

Revenue for Contrave has been estimated since Orexigen filed for bankruptcy; the last full quarter of reported Contrave revenue came in 3Q17 ($19 million).

--by Adam Brown, Ann Carracher, Martin Kurian, Brian Levine, Peter Rentzepis, Maeve Serino, and Kelly Close