Sanofi and Verily Life Sciences Launch Onduo, $500 million JV to develop diabetes solutions combining devices, software, medicine, care – September 12, 2016

This morning, Sanofi and Verily Life Sciences (formerly Google Life Sciences) announced the launch of Onduo, a joint venture to develop “comprehensive diabetes solutions that combine devices, software, medicine, and professional care.” The combined investment is a significant $496 million (50% each), and the JV will take a very service-centric, cross-functional (data, devices, medicine) approach to improving diabetes care. The first Onduo product could launch in 2-3 years, according to a WSJ piece that quotes Sanofi’s new Head of Diabetes, Stefan Oelrich. This announcement comes one year after the initial Sanofi/Google collaboration, and we’re glad to now see serious financial commitment.  

A single webpage, www.Onduo.com, succinctly notes the company’s mission: “Onduo is a digital healthcare company that uses data to help people with diabetes live their best life.”

There are no product details to report; we’d speculate 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 (Dexcom/Verily? Novartis/Verily?), 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.

The press release emphasizes Onduo’s service-oriented vision, particularly given new CEO Dr. Joshua Riff’s previous role – SVP of Prevention at Wellbeing at Optum, the health services company of UnitedHealth Group. We include an interview with Dr. Riff below, who also brings impressive previous experience as an ER physician and Medical Director at Target.

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. 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 Dr. Riff echoed in our interview.  

As expected, the JV’s initial focus is on type 2 diabetes, though the announcement explicitly mentions future expansion into type 1 diabetes and even prediabetes – we are particularly glad to hear about the latter. This is appropriate and optimal focus in our view – the challenges and global need are far higher in type 2 than in type 1, the business case is much harder for prediabetes, and type 1 has more advanced work afoot compared to type 2. If Onduo can crack type 2, prediabetes should ideally follow, as well as type 1.

• Today’s partnership is a bold and important bet for Sanofi, given recent sales declines stemming from greater overall pricing pressure and tough competition in diabetes drugs despite exploding prevalence. Sanofi’s sales declined 3% operationally in 2Q16 to ~$2.1 billion, and guidelines forecasted 4%-8% revenue losses each year for the company’s diabetes portfolio through 2018. That’s about the time Onduo may be out with a product, and the pressure will be on at that stage for the new company to drive revenue quickly.
• The focus on services and between-visit care is smart and where the field must move – the current pricing and episodic care models aren’t getting the job done for most patients. Sanofi clearly recognizes the need to move beyond drugs and existing devices, and combined with Verily’s technology (miniaturized electronics, data, apps, user experience), there is clear potential for far more informed, continuous, and predictive diabetes care – as well as care that is asynchronous with doctors and nurses, who haven’t been able to enable sustainable success for most patients.
• Today’s announcement quoted Sanofi EVP of Diabetes and Cardiovascular Peter Guenter, demonstrating attention from the top level of the company. We were particularly interested in his clear interest in improving systems and care at a population level. Though there wasn’t a quote from Sanofi CEO Olivier Brandicourt, who was quoted in the initial Google/Sanofi announcement last year, the quote from Mr. Guenter was very pointed – we were particularly glad to see him reference Onduo’s plans to help HCPs and focus on services. Though it isn’t discussed much, we believe the HCP ecosystem to support diabetes is in crisis, with recruiting and reimbursement representing particularly major stress points:
  
  • “The integration of multiple interventions, such as data-driven patient support and devices in addition to treatment, can help improve outcomes, which is important from the perspective of patients, healthcare professionals and the overall healthcare system,” said Peter Guenter, Executive Vice President, Head, Global Diabetes & Cardiovascular Business Unit, Sanofi. “The new company Sanofi and Verily invested in will adopt a more service-centric approach and support doctors in their efforts to treat their patients more effectively. In addition to developing innovative therapies for diabetes, which will remain a key focus for Sanofi, we see these solutions which combine innovative therapies and services as the future for diabetes care. We believe this will help societies cope with the burden of this epidemic.”
• New CEO Dr. Joshua Riff brings valuable experience as an ER doc, former SVP of Prevention and Wellbeing at Optum, and a former Medical Director at Target – read our interview with him below. Undoubtedly the emergency room experience alone gives him a sense of what is possible at a population level to achieve in terms of much better outcomes and lower costs. We were impressed with his MD/MBA dual degree (from Tufts) and look forward to learning more about his approach to the field – he’s definitely got extensive diabetes experience in light of the ER. We’re not sure who else is on the Onduo management team, though the press release also quotes Verily Chief Medical Officer Dr. Jessica Mega, a very highly regarded cardiologist recruited to Alphabet from Harvard some time ago (peers reported being jealous!). A Forbes piece from last year praised Dr. Mega at length from such notables as FDA Commissioner Dr. Robert Califf.  
• Notably, the joint venture will be based in Kendall Square in Cambridge, MA. Cambridge is of course a life science hub (Lilly’s Cambridge Innovation Center is there and we have the sense sought after entrepreneurs/researchers/academics love the location), though we wonder why this location was chosen over a West Coast location near Verily.

Interview with Dr. Joshua Riff, Onduo’s New CEO

We talked to Dr. Riff and heard more about his background and the vision for Onduo: where it will focus its efforts (patient engagement), what its products might look like (to be determined based on patient needs), and his broader thoughts on digital health in diabetes (early days but exciting). Most importantly, Dr. Riff seemed to appreciate the pain points in healthcare and diabetes: a 24/7 self-managed chronic condition; overwhelmed providers that don’t have nearly enough time to care for a growing patient population; and a payment system that disconnects those who cover the bill (insurers) from the people who actually use the products (patients). It is here where Onduo hopes to leverage the best of both companies – combining Sanofi’s clinical and therapeutic expertise with Verily’s (Google’s) experience in user engagement, world-class app and software development, connectivity, rapid prototyping, and data-driven product development. Read on for our interview with Dr. Riff!

KELLY CLOSE: Thank you so much for all you are doing with this new partnership, Josh! You bring a broad perspective to this job from your previous roles at Optum and Target. What do you think about the field right now, broadly speaking? What do you think of digital health in diabetes – the apps and devices to track behavior, data-driven coaching, Bluetooth-enabled meters, and so on?

DR. JOSHUA RIFF: Obviously, there’s a lot in the market, and I think it’s moving in the right direction. It’s still incredibly early for digital solutions, but I also think it’s very much needed, because we need to meet consumers where they are, and consumers are on their phone. If we’re not willing to give them tools through the normal modality that they’re used to, we’re not going to be able to engage with them.

In my job at Target – where I was their medical director – we realized that when it comes to prevention and wellness, you have to go to where the people are. And people are in stores, right? They’re in their community. They’re not in their doctor’s office; they’re in the grocery. We realized we could leverage the retail model in healthcare.

Leveraging the digital model on the phone for diabetes care is going under a similar phenomenon. It’s still very early on, but things will catch up very quickly.

KELLY: What did you learn from your work at Target that we could use in diabetes? What could help improve the way we deliver diabetes care?

DR. RIFF: I had a few roles at Target, including leading the clinical arm of their retail clinics, the safety and quality of their pharmacies, and the health and wellness of the employees. This was a critical role in my career and helped shape my view of the healthcare system. At Target, I learned the power of consumer choice, price transparency, and cost and convenience in healthcare. I began to appreciate how some solutions in healthcare have to be born in other industries. My success at Target was created by bringing great retail solutions into healthcare. I am constantly looking at other industries and trying to figure out how to transition their successes and solutions into healthcare.

KELLY: We love that idea – there is so much untapped learning from other industries. Can you talk more specifically about Onduo’s planned products? How will they combine drugs and devices? What else will they include?

DR.  RIFF: There are hundreds of products – either devices or drugs or apps – that promise to deliver a certain outcome for people living with diabetes. Instead of jumping straight to the product and then a solution, we’re taking a step back and we’re looking at diabetes globally and asking the question, “What are the problems that we need to solve for?” We’re doing a lot of user focus groups, talking to people living with diabetes, and asking, “What is it that we could solve for you?” We need to understand the problem, and we believe that if we could satisfy the end user’s needs, then they’ll be willing to engage with us, and then we’ll be able to drive their outcomes.

KELLY: When might the first product launch?

DR. RIFF: We’re not committing to a time for a product to hit the market. Our partner Verily, formerly Google Life Sciences, has a process of rapid development and rapid iteration. We’re going to keep iterating on a few different ideas until we land on a product that we’re comfortable bringing to market. And by not putting a deadline for when this product is going to hit the market, we’ll make sure that we have the right program or product, and not the product that we promise early on in the process.

KELLY: How will Onduo engage patients and healthcare providers? You have a unique view into the provider, having been one, plus a business leader to boot.

DR. RIFF: We think that patient engagement is the most important feature. We believe that if we could crack that nut of engagement, we will have a successful product. And that’s why it’s so important that Verily is a partner – billions of people use the various Google products across Android, Google Search, Gmail, Chrome, Google Maps, etc. They understand how to get people engaged, particularly with a great user interface and user experience. We’re really trying to understand the patient engagement side, and if we could succeed there, we have an instant homerun.

The provider angle is also really important. At the end of the day, the provider is often the most trusted resource for people with diabetes. We know diabetes is a 365-day disease, but our patients only see their doctor maybe two to three times a year. How do we supplement the 362 days in-between? Our goal there is, “How do we make those decisions in life easier?” The physicians are very constrained with time. They are somewhat overwhelmed with data. And they are not reimbursed for a lot of the process for weight management, diabetes education, etc. We hope to create solutions that are really patient-centric, but that a physician could also use. Perhaps a quarterly report that the patient could bring in for a physician, or a portal so that the doctor could see what the patient has been doing in between appointments.

KELLY: Got it. Will Onduo’s main customers be health systems and payers, or do you also see going directly to consumers over time?

DR. RIFF: I'm going to be very specific here. My “consumer” is different than my “client.” So, every day we’re building for the “consumer,” and the “consumer is the “user.” The problem is, at least in America, we’ve created a gap between how we pay and how we receive care.

So while the end user is the consumer – patients and providers – our “client” is whoever is paying. From a reimbursement model, we’re going to work with anybody who has the stake in controlling the cost of diabetes together.

KELLY: It is great to hear that dual focus on costs AND user experience – both are critical. What would be a homerun for Onduo in the next year? In the next three years?

DR. RIFF: For us, a complete homerun is going to be high engagement rates leading to great consumer satisfaction and control over their diabetes. That could mean less hyperglycemia or hypoglycemia episodes, less unplanned visits, more regularly scheduled preventive maintenance, diminished or increased medication adherence, and ultimately overall lower cost.

KELLY: Beyond engagement, what are the biggest tools and/or services that are missing in diabetes that Onduo aims to provide?

DR. RIFF: Focused outcome management with active consumer participation.

KELLY: How many patients does Onduo hope to serve by 2021, in five years?

DR. RIFF: That’s going to really depend on the solution we create. Right now, as we develop the product, we’re developing the business model and that will determine how big we think we could get, but my goal is to be able to help anybody who’s living with diabetes. That’s our only shot.

KELLY: Could you say anything about when Sutter Health and Allegheny Health Network will start testing the Onduo platform?

DR. RIFF: In the next few months. We’re identifying what works and what strengths we can leverage.

KELLY: Of all the pieces to this platform, which do you think HCPs and patients and payers will see as the most compelling? 

DR. RIFF: Our results.

KELLY: Which component of the program has been the hardest to develop? 

DR. RIFF: The engagement aspects.

KELLY: To what degree will Onduo leverage Verily’s other diabetes partnerships with Dexcom and Novartis?

DR. RIFF: We are evaluating many partners and will have a path forward soon.

KELLY: How large is the Onduo team – we hope you have LOTS of people to work with!

DR. RIFF: Onduo will create a leadership team with sufficient people to develop the business, build relationships, and create technology to help people with diabetes manage their disease. We are actively expanding the leadership team to meet our clinical, scientific, and business goals.

KELLY: What kind of team are you building?

DR. RIFF: We are looking to create a small team to help direct product development, relationship development, and clinical direction. My top priorities are going to be hiring a clinical growth officer, consumer experience, and product owner. I am trying to keep the team co-located in Boston to keep us nimble and to help foster the culture. 

KELLY: What do you hope Onduo’s legacy will be?

DR. RIFF: To help continue the great work people like you have started and help wage a war against diabetes.

KELLY: Thank you so much from our team for all that is in the works! It is terrific for our entire ecosystem to have your fresh focus and we look forward to reporting more.

DR. RIFF: Thank you so much for all your work in diabetes!

Close Concerns Questions

Q: What will the product/service specifically entail? e.g., apps/devices to track behavior + data-driven coaching + glucose sensing? + Bluetooth-enabled insulin delivery? 

Q: What does the current platform look like for patients and HCPs? How will life improve for both populations with the Onduo products?

Q: Where will the geographic sales focus be? Which payers and health systems will Onduo target?

Q: How long will it take for Onduo to demonstrate outcomes? How cost-effective will this program be relative to other alternatives? 

Q: How will the Onduo team balance experience within and outside of diabetes?

Verily’s Diabetes Partnerships: Dexcom, Sanofi, Novartis, GSK

• At this stage, the next-gen CGM partnership with Dexcom seems the most advanced and most likely to launch first, with a first-gen product on schedule for 2018. The glucose sensing contact lens with Novartis has not had a timing update since a WSJ article last August, and more recently, had no airtime on Novartis’ 2Q16 call; we’re not sure if it will enter clinical trials this year.

--by Adam Brown, Jennifer Zhao, Brian Levine, and Kelly Close