JPM 2020

January 13-16, 2020; San Francisco, CA; Day #2 Highlights – Draft

Executive Highlights

  • In a packed day of diabetes therapy,
    • Lilly CEO Mr. David Ricks led a fireside chat that touched on all aspects of Lilly’s diabetes business, including lots of details on (i) GLP-1 class dynamics and how Trulicity is faring with increased competition from Rybelsus and Ozempic; (ii) growing confidence in tirzepatide’s phase 3 program; (iii) pricing pressures within the diabetes market broadly speaking; and (iv) the early stage diabetes pipeline, headlined by a GLP-1/GIP/glucagon tri-agonist (known as “GGG”) and oral GLP-1, both in phase 1. We also have an update on how many patients are using lower-priced prescriptions.

    • Novo Nordisk leaders also presented today, headlined by CSO Dr. Mads Thomsen and SVP and head of diabetes discovery Dr. Marcus Schindler, who projected optimism about the company’s future in diabetes, obesity, cardiovascular disease, and NASH. Very intriguingly, we picked up on ample discussion during Q&A around the potential of GLP-1 in brain disorders, and Dr. Thomsen appeared quite enthusiastic about what the future may hold here.

    • Meanwhile, Sanofi’s CEO Dr. Paul Hudson outlined the company’s vision for the future, which notably does not include further R&D investment in diabetes/CVD. However, Hudson expressed optimistic about the potential of its existing diabetes therapies (namely Lantus, Toujeo, and Soliqua) in China, which will provide an important revenue source for the company moving forward.

    • We also have coverage of presentations from Roivant, Amgen, Bayer, Goldfinch, Pfizer, Takeda, and GSK – read on below!

  • In diabetes tech:
    • Abbott President and COO Robert Ford gave his first JPM address as incoming CEO, in a more informal fire-side chat-style talk rather than a presentation. Mr. Ford was particularly enthusiastic about FreeStyle Libre, characterizing it as a platform that could reach “80 to 100 million people.” Mr. Ford’s positivity is unsurprising, given how large FreeStyle Libre has become in only the last five years, since it launched in the EU in 2014 and the US in 2017. Notably, Mr. Ford stated an annualized revenue of “$2.0 billion” and “about 2 million” in user base for FreeStyle Libre – these numbers sound approximate, given revenue year to date for FSL was about $1.3 billion exiting 3Q19 and about 1.6 million users.

    • Investors were also keen to see CEO Shacey Petrovic and CCO Bret Christensen answer questions, with particular interest around Insulet’s momentum with Dash and the pharmacy channel.

    • Livongo made its debut at JPM as a public company, also drawing in considerable interest. See below for why Livongo sees itself as the Google/ Amazon/Facebook of healthcare and more!

      Greetings from the Westin St. Francis in our hometown of San Francisco! Our associates have been brushing shoulders with investors and leaders from established and startup healthcare companies and non-profits, bringing you the latest in diabetes!

      Table of Contents 

      Diabetes Therapy Highlights

      1. Lilly: Broad and Sweeping Discussion on GLP-1 Class, Tirzepatide, Pricing in Diabetes, and Early Stage Pipeline

      Lilly CEO Mr. David Ricks led an engaging fireside chat that touched on all aspects of Lilly’s business with a keen eye toward developments in diabetes. Mr. Ricks gave details on how Lilly is viewing Trulicity within an ever more competitive GLP-1 class, how the company is approaching pricing pressures in diabetes, and thoughts on Lilly’s early stage diabetes pipeline. See below for the key takeaways:

      • On Trulicity and the broader GLP-1 class, Mr. Ricks reiterated Lilly’s belief that Trulicity remains a best-in-class molecule and that it will continue to benefit from strong underlying class growth. Very interestingly, Mr. Ricks provided some context for the dynamics between GLP-1 and basal insulin, sharing that for the totality of patients on a first-line injectable, about 1/3 are on a GLP-1 and the remaining 2/3 are on a basal insulin! We were a bit surprised that only about 1/3 were on GLP-1, particularly since GLP-1 is now larger as a market than basal insulin (not surprising, given how much heat the price of insulin has taken). But, for new patients currently entering that category of first-line injectable status, the breakdown is about half on GLP-1 and half on basal insulin. This shift makes sense, given the emergence of robust clinical evidence over the past years for GLP-1, and in light of recent ADA/EASD consensus guidelines (along with other guidelines) that recommend GLP-1 as a first-line injectable over insulin. Mr. Ricks stated that he expects this share of first-line injectable patients using GLP-1 to grow over the next few years (perhaps by 50%!) and he is generally very optimistic about this trend moving forward. Within this broad swell of class growth for GLP-1, he maintained that Trulicity is well positioned as the best-in-class molecule and touted the ease of use and friendly patient experience that has defined the Trulicity product. We would question “the” best in class pentultimate moniker, but would certainly agree with “a” best in class. Further bolstering Trulicity will be the addition of a CV indication based on REWIND data, along with the rollout of a higher dose version of Trulicity, which will allow patients to stay on Trulicity for longer periods of time.

        • Regarding intra-class competition with newly-launched Rybelsus (oral semaglutide) and Ozempic, Mr. Ricks noted that although both products are gaining share, much of this is coming at the expense of Novo Nordisk’s other GLP-1 (Victoza), rather than taking share from Trulicity. Mr. Ricks conceded that while the addition of Rybelsus to the GLP-1 class is an important step for the field and will benefit doctors and patients, he does believe that the “early characterization of the oral pill is overstating where that product really is.” While Trulicity is set up to compete well within the GLP-1 class with Ozempic and Rybelsus, overall, we doubt it will have sales that exceed the Novo Nordisk GLP-1 products overall. Ultimately, we remain far more focused on how the synergy of these innovative products can continue to drive more patients to the GLP-1 market.

      • Mr. Ricks was also as bullish as ever on GLP-1/GIP dual agonist tirzepatide, currently in the phase 3 SURPASS program. When asked if his confidence on tirzepatide has changed at all since last year, Mr. Ricks confirmed that he is now “more confident in the tirzepatide program,” as no off-target side effects have come up even with the ramped up phase 3 exposure (“well on its way” to ~7,000 patients with diabetes). During Q&A, management also emphasized that there is a place and purpose for both the upcoming high-dose version of Trulicity and tirzepatide (at least for the time being – we could see this evolve over time, particularly to reduce potential HCP confusion). For now, Lilly envisions the high dose of Trulicity as a treatment that will be able to reach consumers sooner, giving patients the opportunity to stay on the drug longer, and sees tirzepatide as a real “step change” in treatment paradigms from there. Our sense is that leadership at Lilly is willing, and even eager given the outstanding efficacy, to cannibalize Trulicity sales in favor of tirzepatide in the future. Last we heard, regulatory submission for the compound is expected in 2022, and a head-to-head CVOT against Trulicity is set to complete in 2025. Also on schedule, tirzepatide entered phase 2 trial SYNERGY-NASH for NASH in November 2019 and phase 3 trial SURMOUNT-1 for obesity in December 2019.

      • On the ever-relevant issue of pricing, Mr. Ricks maintained that while policy change will be needed to make sustainable improvements in pricing, Lilly is trying to play a short-term role by working with insurance providers and offering specialized programs: “We’ve worked ourselves into a spot that is difficult to get out of. We’ve built insurance designs that make insurance more affordable for more people but have less benefit for those that are sick. That’s particularly true in the area of pharmaceuticals. In an area like diabetes, in many cases, transactions where diabetic patients are processing through insurance and purchasing of a medicine, they are subsidizing people who are well with that purchase. We have to get out of that situation … but it’s hard to do because you’re going to be faced with the tough math of rising premiums. In the meantime, what we need to do as manufacturers is work on our own solutions in the short term. What can we do to plug the holes where people find themselves in difficult circumstances? Where their deductibles or copays are very high, can we help? Of course, in commercial insurance we can do a lot, and we do, but in government programs, that’s more difficult. We’ve also undertaken steps to fill the gaps where people really don’t have insurance – indigent care programs, the Lilly Diabetes Solution Center, [and the half-price insulins].”

        • Timed with the day of their presentation at JPM 2020, Lilly also announced the addition of half-list price versions of the Humalog Mix 75/25 KwikPen and Humalog Junior KwikPen to the already existing Insulin Lispro (half-price generic of Humalog). According to the press release, both new products – the “Insulin Lispro Protamine and Insulin Lispro Injectable Suspension Mix 75/25 KwikPen” and “Insulin Lispro Injection Junior KwikPen,” respectively – will be available by mid-April at $265.20 per package of five pens. The expansion comes as part of the company and Mr. Rick’s ongoing acknowledgement of insulin affordability issues, following the initiation of Insulin Lispro in May 2019. Notably, we learned that 79,000 prescriptions have been filled for Insulin Lispro in December 2019, rising from 67,000 in November 2019. In total, nearly 11% of Humalog patients have transitioned to Lispro so far, and we would expect this number to inch upwards as more patients become aware of the option. 

        • Although Lilly’s half price program has faced its fair share of criticism from Washington and elsewhere, including from Senators Richard Blumenthal (D-CT) and Elizabeth Warren (D-MA, also a 2020 Presidential candidate), who published a report titled “Inaccessible Insulin: The Broken Promise of Eli Lilly’s Authorized Generic” in December 2019, there were 67,000 prescriptions filled for the lower-priced insulin in November and 79,000 prescriptions filled in December for generic lispro, nearly 11% of patients on Humalog having switched to the cheaper alternative. 

        • There are some strong points in the report, which surveyed 386 pharmacies across 50 states, and concluded that Lilly’s authorized generic insulin “Insulin Lispro” (launched in May) is not widely available, that pharmacies are not informing consumers about it, and that Lilly’s efforts have not yet translated to lower costs for patients, we disagree on the latter point as it certainly has translated for some already, although not enough. On that note, Mr. Ricks added during his remarks that “he would like more of [Lilly’s] partners in the supply chain to list and carry those products.” In our view, we have yet to meet pharmacists who have time to hang out and chat with us about diabetes – most of the time, they seem fairly harried so we are not sure about the plausibility of that point, but certainly do think it would be a positive if more pharmacists could advise patients about access programs.

      • Mr. Ricks also made a point in directing attention to a few candidates in Lilly’s early stage diabetes pipeline that he is particularly excited about – namely its phase 1 GLP-1/GIP/glucagon triple agonist (known as “GGG” informally) and oral GLP-1 candidates. This discussion mirrored recent remarks on Lilly’s 3Q19 earnings call, where a similar focus was directed to both of these candidates – see here for further details. Today, he emphasized that the triple agonist (which he believes doesn’t get enough attention from investors) will hopefully show a “step change” improvement over tirzepatide in terms of A1c and weight loss effects. If phase 1 results are positive for the candidate, then it will be immediately advanced into phase 2; however, it will need to meet a high bar for advancing given Lilly’s existing therapies in diabetes as well as Novo Nordisk’s current and future therapies.

      2. Novo Nordisk: Big Upcoming Year w/ Several Major Trial Readouts; Updates on GLP-1 (Including in Brain Disorders), Insulin, Obesity, and More

      Novo Nordisk’s CSO Dr. Mads Thomsen led a fascinating presentation and discussion on the company’s impressive diabetes, obesity, and NASH portfolio. See below for many of the main takeaways:

      • On GLP-1, Dr. Thomsen shared further details on the ongoing launch for Rybelsus and emphasized the centrality of the semaglutide molecule to Novo Nordisk’s business. Dr. Thomsen noted that Rybelsus will be launched into the primary care segment “very soon,” which is set up to be an important area for Rybelsus’ future growth, given the company’s desire for Rybelsus to grow into a first-line oral therapy for people with diabetes. On semaglutide, similarly to information shared at Novo Nordisk’s 2019 Capital Markets Day presentation, Dr. Thomsen underscored the “plethora of therapeutic opportunities” for the molecule in diabetes, obesity, CVD, CKD, NASH, and brain disorders. Overall, he mentioned that early feedback from the US characterized US patients on Rybelsus as “very happy patients very fast.”

      • Optimism for the Novo Nordisk’s future in obesity continues to strengthen further. Again, management re-emphasized that the company plans to double its obesity business by 2025. We were especially impressed with Novo Nordisk’s ambitious stepwise plan to reach efficacy levels only currently seen in bariatric surgery (~12-45% weight loss after three years). Dr. Thomsen anticipates that data from the phase 3 STEP program for semaglutide in obesity will bring weight loss efficacy up to ~15%, followed by semaglutide in a co-injection with the company’s long-acting human amylin analog AM833, which is predicted to bring weight loss “to the tune of 25%” for a once-weekly injection. Following these goals, Dr. Thomsen also noted that the company plans to create oral options for both endeavors – wow! If true, these new formulations could truly shake up a field that has traditionally struggled to gain traction through biopharmaceutical intervention, or really, for that matter, any other intervention at all.

      • On the stem cell front, Mr. Schindler noted that Novo Nordisk feels “extremely confident” in its technological knowledge and believes that the company can produces stem cells of “the highest standards … that are fit for the market.” Interestingly, it seems that the company is not just interested in applying its stem cell technology to type 1 diabetes, but across multiples disease areas including chronic kidney disease, Parkinson’s, dry age-related macular degeneration, and chronic heart failure. Dr. Thomsen further quipped, “I often use the analogy that we’ve actually been producing FDA-compliant, GLP-grade mammalian cells since the 1980s … The only difference now is that we’re using 30+ years of mammalian cell cultivation and nursing in a way where we don’t use the proteins excreted from the cells but the cells themselves, so it’s a wonderful exploitation of the technology that’s been developed in the company for decades.” Excitingly, JPM 2020 slides showed that the company hopes to trial its type 1 stem cells in humans for the first time in 2H21, right around the 100-year anniversary mark of insulin.

      • Excitingly, Dr. Thomsen hinted at “hopefully very good” phase 2 data on the company’s once-weekly basal insulin LAI287 “very, very soon.” Overall, management’s commentary on innovation in insulin echoed many themes heard at Novo Nordisk’s 2019 Capital Markets Day.

      • Dr. Thomsen was also bullish on the future of the company’s glucose-sensitive insulin, now at the preclinical stage. He noted, “After a couple of decades, we’ve now cracked the nut in terms of understanding how to create an insulin molecule that has a glucose sensing moiety built into it, that allows for turning on and off the switch on the molecule in the physiological range of glucose concentrations … that makes us optimistic on that front.” He mentioned in closing comments that he’d know in 2021 what the direction toward phase 2 might be.

      • Also in the pipeline is FSI965, a once-daily insulin specifically geared to providing micro- and macrovascular benefit with blood glucose lowering on par with Tresiba (insulin degludec) with phase 1 data expected in 1H20. This is an interesting approach to have the focus on complications so close.

      • On NASH, management emphasized the need for improved diagnostic tools. Currently, NASH can only be confirmed through a liver biopsy, which is not scalable to large numbers of patients – a huge barrier for any potential therapy in the field.  On this front, Dr. Schindler pointed toward Novo Nordisk’s ongoing collaboration with Gilead in NASH, which also includes significant work to “get a better tool to increase diagnosis rates significantly in NASH.” As a brief overview of Novo Nordisk’s NASH portfolio, the company is currently in separate collaborations with both Gilead and Dicerna to develop NASH therapies, and is also pursuing semaglutide in NASH as well – this is currently in phase 2 and expected completion later this year, along with the Gilead and Dicerna compounds.

      • During the ensuring breakout session, we picked up on considerable interest and enthusiasm regarding Novo Nordisk’s work in investigating GLP-1 as a potential therapy in brain disorders. Dr. Thomsen detailed an ongoing investigator-led study in the UK that will read out in February, 2020 (next month!) and is examining the effect of GLP-1 on cognitive measures. If positive, Novo Nordisk plans to meet with FDA/EMA to determine if there is a “fast and effective path” into pivotal studies for a potential indication in dementia. Very notably, Dr. Thomsen shared that post-hoc analysis of outcomes trials that Novo Nordisk has conducted for liraglutide and semaglutide has shown a statistically significant reduction in dementia diagnosis with GLP-1 treatment (roughly a 50% lower rate, albeit in a small sample size of ~75 total events). This is also consistent with what the company has seen in preclinical models, making Dr. Thomsen quite optimistic about the potential of GLP-1 in this therapeutic area. 

      • As a reminder, looking ahead to next week, we’re expecting to soon hear an FDA decision (PDUFA date = January 20) on potential CV indications for Novo Nordisk’s semaglutide products, Ozempic and Rybelsus. Submissions for these indications were made in March 2019 and are supported by pooled data from both the SUSTAIN 6 and PIONEER 6 trials.  


      3. Sanofi: Touts Ex-US Sales for Diabetes as “Interesting and Efficient” Way of Driving Business in Midst of Tough Pricing Environment in US

      New Sanofi CEO Mr. Paul Hudson closed the company’s presentation with a statement presumably alluding to Sanofi’s recent decision to discontinue R&D in the diabetes and cardiovascular areas: “we are not going to be looking backward but instead looking forward. When it comes to pursuing new therapies, if it’s not first in class or best in class then we will not be very interested. We don’t want to have ‘me too’ drugs.” This sounds very clear and crisp though we point out it’s often challenging to foresee this from early drug development. Still, these comments ring true when put in the context of Sanofi’s departure from diabetes research, as both of the company’s late stage assets (SGLT-1/2 dual inhibitor sotagliflozin and GLP-1 efpeglenatide) could be characterized as drugs in classes where lots of competition already exists that would have been launched into even more crowded, mature, and competitive markets with little chance for meaningful differentiation and best-in-class status based on available clinical data. In this context, the discontinuation of both of these candidates fits into the broader vision Sanofi has for its business moving forward. Sanofi continues to emphasize its “play to win” mindset in terms of hunting out assets that can be true growth drivers for the company. In his presentation, Mr. Hudson underscored Dupixent and Vaccines as current areas of focus for the company in lieu of diabetes/CV and pointed to hemophilia as an area of pipeline interest. We also note that Mr. Hudson’s comments here regarding Sanofi’s strategy reminded us of Vertex’s outgoing CEO Dr. Jeff Leiden, who similarly noted yesterday that “Vertex will only work on transformative medicine. You will never see a ‘me too’ medicine from Vertex – that’s just not what we do. We think transformative medicines have the highest value for patients and for us as a company.”

      • In the ensuing breakout session, Sanofi management did provide additional context on how they are viewing Sanofi’s existing diabetes business both in the US and in international markets. Mr. Hudson noted that volume of Sanofi’s diabetes business is good within the US, but that pricing pressures are very significant and leading to double digit declines in topline growth rates – and presumably profitability as well. More optimistically, however, he noted that outside of the US Sanofi’s diabetes products are actually positioned quite well: “Toujeo is doing great, Lantus is on the essential drug list in China, Soliqua is doing well in China and we have further opportunities with that therapy in that region … overall, with our diabetes business outside of the US, it will actually be an interesting and efficient way of generating revenue and driving our business. We expect this to be a big cash contributor to help reinvest back into other areas of our business.” We’re glad to hear that there will be this continuing commitment to Sanofi’s existing diabetes therapies, especially in emerging products; of course, it would have been better to hear that revenue from these therapies would perhaps be reinvested into digital health R&D or access or something directly related to diabetes ROI. 

      • As a reminder, Sanofi recently presented at the 2019 Capital Markets Day, where it shared that it will be discontinuing R&D in diabetes and cardiovascular. This decision represented the culmination of many factors that had led Sanofi to de-invest in diabetes and CV research over time. Just this past July, Sanofi terminated its partnership with Lexicon to develop and commercialize SGLT-1/2 inhibitor Zynquista (sotagliflozin). Furthermore, in 3Q19, Sanofi announced the discontinuation of its preclinical GLP-1/GIP/glucagon tri-agonist SAR441255, leaving the company with only two diabetes-related candidates, efpeglenatide and rapid-acting insulin SAR341402. By comparison, Sanofi had five clinical diabetes pipeline candidates as of 3Q18, six candidates as of 3Q17, and eight in 3Q16 (just two years ago!). Elsewhere in the diabetes landscape, both Novo Nordisk and Lilly has 15 pipeline candidates as of 3Q19. De-investment is a trend within diabetes, as other major pharma manufacturers, including J&J and Merck, also appear to have dramatically de-prioritized diabetes R&D. Pharma has faced enormous challenges from intense pricing pressure and difficult regulatory requirements as well as marketing requirements that have disincentivized and further discouraged investment in the field. We do believe strongly that far more insulin should be given to many people on basal insulin with type 2 diabetes to help them reach a healthier “Time in Range.”

      4. Roivant/Metavant: Silence on Cardiometabolic Front as CEO Vivek Ramaswamy Focuses on Prostate Cancer, Autoimmune Diseases, and New Ventures in Tech; Potential for Sumitomo Dainippon to Acquire Metavant in the Future?

      Roivant CEO Mr. Vivek Ramaswamy presented on the company’s fourteen “-vant” subsidiaries, headlined by the $3 billion sale of five branches to Sumitomo Dainippon in September 2019. Under the agreement, which Mr. Ramaswamy confirmed closed pre-end of calendar year, Sumitomo Dainippon has now assumed full ownership of Altavant (respiratory diseases), Enzyvant (rare diseases), Myovant (prostate cancer), Spirovant (cystic fibrosis), and Urovant (urological diseases), as well as a 10% equity stake in Roivant as a whole. Interestingly, Sumitomo also has options to acquire six more of Roivant’s subsidiaries, and we’re keen to see if the company will exercise its rights over the company’s cardiovascular and metabolic disease branch Metavant. Notably, Mr. Ramaswamy’s comments (or lack thereof) on the company’s future in metabolic disorders were far more muted than last year, where he referred to diabetes as an “area of major underinvestment from industry when compared to the magnitude of societal need.” We see particularly strong opportunities for alignment between Roivant and Sumitomo in metabolic diseases, as both companies have separately partnered with Poxel to develop type 2 diabetes treatment imeglimin (Metavant in the US/EU and Sumitomo Dainippon in Japan). Currently, imeglimin is the metabolic team’s only pipeline candidate, as the company announced that it is no longer planning to initiate a proof-of-concept trial for glucagon receptor (GCGR) antagonist RVT-1502 in 1Q19, following the original licensing deal with Ligand in March 2018. Given Mr. Ramaswamy’s comments at JPM 2019, we’d love to see greater investment in early stage cardiometabolic candidates this coming year – any expansion into heart failure, obesity, or NASH could be a huge win in our opinion.

      • As a reminder, Metavant announced positive safety and PK/PD results for imeglimin in type 2 and stage 3b/4 CKD in July 2019. The therapy met the primary objective of the 28-day study, producing a consistent safety and tolerability profile compared to placebo, with no serious adverse events. The company originally licensed imeglimin from Poxel for development and commercialization in the US and EU for $35 million upfront and up to $600 million in development, regulatory, and sales-based milestones, plus double-digit royalties on net sales, in March 2018. Future imeglimin studies for Roivant bode well, as Japanese development led by Sumitomo Dainippon showed positive phase 3 results in type 2 this past December.

      5. Amgen: Repatha an “Affordable and Necessary Medicine” Under New ESC Treatment Guidelines; Management Touts Improved Coverage + Affordability

      Addressing Amgen’s cardiovascular portfolio (one of its three core areas), CEO Mr. Bob Bradway conveyed enthusiasm for PCSK9 Repatha’s future, focusing on its utility within new CV guidelines that take a more aggressive approach to LDL lowering. Paralleling his comments referencing AHA’s 2018 cholesterol guidelines at JPM 2019, Mr. Bradway referenced the new 2019 guidelines from ESC that recommend an LDL-C target of <55 mg/dl for patients with established cardiovascular disease, and even <40 mg/dl for very high risk patients. (Worth noting, when we attended the presentation of those guidelines last September, we perceived more positivity for the role of PCSK9s in clinical practice than ever before. Will other professional societies follow suit?) In Mr. Bradway’s assessment, “What that means is that everybody who is at risk or high risk should be on a PCSK9 inhibitor.” While this may be a bit simplified, Mr. Bradway did offer compelling evidence from FOURIER that PCSK9 inhibitors are very often required to achieve an LDL-C this low. Per Mr. Bradway, in Amgen’s CVOT, <5% of patients in the standard therapy arm (i.e., without Repatha) could achieve LDL-C <55 mg/dl and <1% could get to <40 mg/dl. He echoed an adage becoming more common in the cardiometabolic arena – when it comes to LDL-C, “lower is better” – and we ourselves have been enthused to see aggressive LDL-lowering becoming more accepted over the past few years.

      Of course, any conversation about PCSK9s evokes consideration of affordability and patient access. Mr. Bradway mentioned that broader availability across CV products is a priority and referenced “considerable progress” in 2019 on improving Repatha access for both commercially-insured and Medicare Part D-eligible patients. In fact, ~half of Medicare patients eligible for Repatha now have a fixed copay of $50 or less, and the abandonment rate among Medicare patients dropped from 49% in 1Q18 to 27% in 4Q19 – a considerable improvement. During Q&A, management reminded us of its “bold” October 2018 decision to drop Repatha’s list price by 60%, followed by the very recent decision to only sell Repatha at this lower list price in 2020, which should further lower out-of-pocket costs for Medicare patients and hopefully encourage better coverage of the drug. Management highlighted that between those two time points, commercial insurance access was also “significantly opened up” to reduce burden on prescribers; he referenced a substantial improvement in approval rate without offering numbers. Indeed, Amgen’s narrative around Repatha has shifted considerably over the past year, away from decrying poor coverage and approval and toward optimism over the positive impact of price cuts on coverage and patient access. Independent of Amgen, we’re hearing that approval rates for PCSK9s have been improving for some time, and we’re pleased to see the company’s volume-over-price strategy paying off for patients and Amgen alike.

      • Underscoring the hard-won success and growth of Repatha, Mr. Bradway mentioned the PCSK9 first among Amgen’s new-product growth drivers – this is definitely a new characterization. As outlined in our 3Q19 roundup, Repatha has secured a strong 71% revenue share of the two-member PCSK9 class with $168M in 3Q19 sales, driving most of the 19% YOY growth of the class to $236M. As Amgen has leaned into making Repatha a success, Sanofi in 3Q19 referred to Praluent’s future as a “mixed story” due to ongoing patent litigation with Amgen.

      • In March 2019, Amgen announced a 13,000-participant primary prevention CVOT for Repatha, VESALIUS-CV. The study will enroll patients without prior MI or stroke, but who have significant coronary artery or atherosclerotic cerebrovascular disease, diabetes, or peripheral arterial disease – a higher-risk group, to be sure. This is a massive investment, but one that stands to seriously expand Repatha’s indicated population. While we were initially a bit surprised by the second CVOT, it is becoming increasingly clear that Amgen is highly committed to Repatha’s future success. The trial is now recruiting and scheduled to wrap up in May 2024; we haven’t yet received an update on the study’s progress.

      • There was no mention of AMG 598, a phase 1 monoclonal antibody of unknown target under investigation for obesity. A phase 1 study (n=50) comparing and combining AMG 598 with GLP-1 liraglutide just completed in December 2019, and we’re hoping to hear more on Amgen’s 4Q19 call. At the very least, it’s exciting to see a new company getting involved in obesity drug development though we’d love to see many more discussed.

      6. Bayer Shares Updates on Oral Finerenone for DKD

      While the majority of Bayer’s developmental priorities center cardiovascular health, oncology, and breakthrough innovations, Bayer’s president of pharmaceuticals Mr. Stefan Oelrich did share details on oral finerenone for DKD during the company’s presentation. As announced in 3Q19, FIGARO-DKD and FIDELIO-DKD trials are expected to complete in June 2021 and April 2020, respectively, with a potential first launch in 2021. Mr. Oelrich emphasized the unmet need present in DKD, reaffirming Bayer’s commitment to developing this 3rd generation mineralocorticoid receptor agonist. He expanded upon this in the breakout session, during which he discussed Bayer’s loose plans to either form a partnership or build up their own infrastructure for a successful US launch of finerenone. Bayer currently owns all rights to the candidate and will undergo a large commercial risk if they were to launch independently. Management cited weakness in the US cardiovascular markets, the intended space for finerenone, and are currently brainstorming ideas to build their presence before any novel US CV launch. Regardless, Bayer considers finerenone as one of their strongest assets next to an oncology candidate when upcoming US patent expirations arise.

      • Eylea was cited as one of Bayer’s growth drivers, with similar praise given to Glucobay for its performance in China. As a reminder, Bayer markets Eylea OUS, while Regeneron markets it in the US. When asked about Glucobay’s performance in China during Q&A, management said they could not speculate on future growth with the same portfolio but are still confident in the market and believe that it is “not going anywhere.” This addresses any uncertainties that arose from lack of additional commentary during the company’s 3Q19 update given the market’s changing conditions. Past strong performances for Glucobay have been attributed to strong volume expansion in China, supported by an encouraging signal for diabetes prevention in the ACE trial (Chinese patient population with prediabetes).

      • There was also interesting discussion on how Bayer’s new heart failure candidate, vericiguat, will enter a field which is currently focused on SGLT-2s. Bayer is planning to test this new candidate on top of Novartis’ Entresto to hopefully see a positive signal. There continues to be high medical need in the heart failure space, and Bayer seems to be very interested in testing for benefit in HFpEf and HFrEF outside of the population with diabetes as is standard for SGLT inhibitors. The VITALITY (vericiguat in HFpEF) and VICTORIA (vericiguat in HFrEF) trials completed in 4Q19.

      7. Goldfinch Provides Details on Diabetic Nephropathy Candidates

      Goldfinch Bio’s CEO, Dr. Anthony Johnson, provided an informative update on the progression of two diabetic nephropathy candidates, GFB-887 and GFB-024. As a reminder, Goldfinch announced its partnership with Gilead to develop new DKD therapeutics in May 2019. Since then, Gilead has provided an update on this venture in 3Q19 with initiation of a phase 3 trial in DKD for ASK-1 inhibitor selonsertib. Though Goldfinch did not mention this candidate in their presentation, they did reference being in the discovery phase to treat multiple kidney diseases with a variety of new targets. Management stated that Goldfinch is already looking ahead at more partnerships, especially for OUS commercialization of GFB-887 and GFB-024.

      • Goldfinch identified GFB-887 (TRPC5 inhibitor) as its lead program, highlighting its entrance into clinical-stage development. The candidate is currently in phase 1 for diabetic nephropathy, with preclinical results showing that the candidate reduces proteinuria in “models of diabetic nephropathy.” The candidate is the first-in-class TROC5 inhibitor that reduces urinary Rac1 to reduce proteinuria. With an expected FDA breakthrough designation, Goldfinch expects the candidate to complete phase 2 in 2020 and move into phase 2b and 3 in diabetic nephropathy in 2021+. Specifically, the phase 3 trial is set to begin by 2H21.

      • GFB-024 (CB1 inverse agonist) is also steadily progressing in the pipeline. As a reminder, Goldfinch acquired rights to the CB-1 antibody for diabetic nephropathy from Takeda in 2019. Results from rat studies show the candidate’s ability to decrease proteinuria, comprising enough of an evidence base for Goldfinch to file an IND submission by 2H20. Goldfinch intents to complete the phase 1 trial in 4Q20, a proof-of-concept trial by 2H21, a phase 2a study in people with type 2 diabetes and obesity in 2022, and a phase 3 trial in diabetic nephropathy in 2022+.

      8. Multiple companies ignore diabetes – Pfizer, Takeda, and GSK

      • In a fireside chat, CEO Dr. Albert Bourla made no mention of Pfizer’s diabetes portfolio, instead focusing on the “new Pfizer.” This year, the conversation was dominated by upcoming pre-clinical candidates and the company’s meningococcal portfolio. Nevertheless, we would have loved to hear more the continued rollout of Merck-partnered SGLT-2 inhibitor Steglatro (ertugliflozin) and the drug’s associated CVOT VERTIS CV, which is now behind schedule. Also we know that Pfizer’s metabolic pipeline now includes three NASH candidates and an oral GLP-1 for type 2 diabetes. Given such extensive conversation on the “new Pfizer,” with a stronger pipeline, we also expected to learn more about the company’s newest ANGPTL3 inhibitor AKCEA-ANGPTL3-LRx that is currently in phase 2 with expected completion in November 2019. Pfizer most recently progressed their oral GLP-1 candidate PF-06882961 to phase 2 as well, comprising a solidly diverse diabetes portfolio that was left unaddressed.

      • As at last JPM, Takeda CEO Mr. Christophe Weber’s remarks did not mention diabetes, opting instead to focus on the company’s “core areas” including GI, oncology, neuroscience, vaccines, as well as rare diseases, following the acquisition of Shire in January 2019. In fact, the majority of Mr. Weber’s statements were quite broad, documenting the company’s philosophy of prioritizing patients, trust, and reputation over business, and Takeda’s new initiative to become carbon neutral through buying carbon offsets by 2020. The company’s sole diabetes product DPP-4 inhibibitor Nesina (alogliptin) has become increasingly de-emphasized during any public meetings, though sales for the product are generally stable. In 3Q19, revenue climbed 10% YOY to $129 million from a base of $112 million in 3Q18, but dropped 4% sequentially from $131 million in 2Q19. There has been no diabetes-related content from Takeda at JPM for several years, and we’ve become almost entirely sure that the company no longer sees a future in cardiovascular or metabolic disease.

      • GSK CEO Ms. Emma Walmsley also did not mention diabetes in her presentation early Tuesday morning – this is as expected, as the company has sharply narrowed its focus to its respiratory, HIV/infectious disease, oncology, and vaccines under her leadership. Of course, gaining that focus included the elimination of GSK’s small diabetes portfolio, which included GLP-1 agonist Tanzeum and anti-CD3 otelixizumab for new-onset type 1, though interest in those drugs didn’t end with GSK’s divestment. The HARMONY CVOT for Tanzeum (albiglutide) read out at EASD 2018, revealing impressive CV risk reduction in a high-risk population and renewing interest in the molecule. In fact, GSK’s press release on the results included an indication that it was still exploring opportunities to divest the medicine to another company, leading us to hope it might be re-launched as a low-cost GLP-1. Unfortunately, news on Tanzeum has been virtually nonexistent since the HARMONY readout, and it now seems extremely unlikely that the drug will be acquired and reintroduced at this point – as we understand it, manufacturing costs were particularly high, making it hard to redesign into a low-priced molecule for now.

      • Otelixizumab has been eliminated from the company’s pipeline page, as we noted during the company’s 3Q19 update. GSK completed a phase 1/2 dose-finding study in September 2018, and results were published in December 2018. Given the shift in GSK’s corporate strategy, previous disappointing results for otelixizumab, and over a year without any news, further development of otelixizumab at GSK seems unlikely. See our type 1 immune therapy landscape, now led by Provention’s teplizumab, here.

      Diabetes Technology Highlights

      1. FreeStyle Libre Aims (Eventually) toward Annualized Revenue of “$2 Billion,” With About “2 Million” User Base; President and CEO Robert Ford “Confident” in FreeStyle Libre 2 iCGM Approval and Talks Bigfoot Investment

      In his first appearance at JPM since the announcement that he will be named CEO at the end of March, Abbott’s Robert Ford stated that FreeStyle Libre has about  “2 million” users and producing “an [annualized] revenue of $2 billion dollars, growing at 65%.” For 2019, of course, both of these numbers are undoubtedly rounded well upward, based on Abbott’s 3Q19 numbers, but even still represent a massive and rapidly growing franchise. Through 3Q19, FreeStyle Libre revenue was ~$1.3 billion, with a user base of “close to 1.6 million” patients on it at the end of the third quarter. We’ll get the actual 4Q19 FreeStyle Libre revenue number and potentially a user base update when Abbott reports its 4Q19 financial results next week. Today, Mr. Ford highlighted how much progress Abbott has made on the CGM front since 2014, acknowledging how the company went back to the drawing board after pulling its first CGM (Navigator) off the market in 2011 only two years after launch. Although exact numbers were not specified, he expressed confidence that FreeStyle Libre was a “multibillion-dollar” platform all diabetes patients could benefit from. We have reason to see this as true, given Abbott’s 3Q19 numbers of a “50/50” split between types 1 and 2 patients on Libre, up from the “~2/3” type 1s to “~1/3” type 2s at last year’s JPM. Mr. Ford concluded that he sees the potential market size for the FreeStyle Libre to “reach 80 to 100 million” people, adding that while reaching this number was unlikely, it could realistically exceed far what it gives now.  

      • Mr. Ford also spent significant time describing two philosophies which guided the development of the FreeStyle Libre: “Fisher Price-friendly” and “latte-a-day” pricing. The former indicates building a system that was both easy to use and a positive experience not only with the product but also the acquisition process (e.g., making it available in retail pharmacies).

      • The only remarks on FreeStyle Libre 2 (still under FDA review) came in Q&A. Mr. Ford said that Abbott is still “working through a handful of issues” as mentioned in 3Q19 but is “confident” in the data that has been submitted and ability to secure iCGM indication. As a reminder, the FreeStyle Libre 2 has customizable hypoglycemia and hyperglycemia alarms in addition to Bluetooth connectivity, at the same price and form factor as the FreeStyle Libre. The device is already CE-Marked and available in at least Germany and Norway, and possibly other European countries.

        • “Regarding Libre 2: as I said in October on our earnings call, we were working through a handful of issues with the FDA. I see these issues as part of the normal and regulatory process. We do this across all of our businesses. I’m very pleased with the progress that we’ve made with the agency. I’m very confident in the data we’ve submitted and that we’ll see the product approved as an iCGM.” – Mr. Ford

      • During Q&A, Mr. Ford discussed Abbott’s leading a $45 million Series C funding round in Bigfoot, stating that he saw “a similar approach in Bigfoot’s model to how [Abbott] thought about FreeStyle Libre as a CGM.” Mr. Ford also alluded to his belief in Bigfoot’s Unity Diabetes Management Program (smart pen cap + dose decisioning system) becoming a “mass product” as Abbott has done with the FreeStyle Libre. The funding represents Abbott’s continued commitment to Bigfoot, having served as its exclusive CGM partner since 2017. In our interview with Bigfoot CEO Jeffrey Brewer, he characterized Abbott as being “most like [Bigfoot’s] DNA” and the FreeStyle Libre as “the most disruptive of diabetes technologies.”  Other partnerships with the FreeStyle Libre with insulin manufacturers (Novo Nordisk and Sanofi), pump companies (Tandem), and digital health partners (Omada) were not mentioned.

      • Mr. Ford devoted significant time in presentation to describing the company’s guiding philosophy of “aligning with the most pressing medical needs and exciting geographies.” Notably, Mr. Ford cited diabetes and cardiovascular disease as “the two most significant healthcare challenges of our lives” along with issues that have defined how the company views the market going forward. He also emphasized the company’s commitment to focusing on emerging markets.

        • “We’ve said that we believe Libre to be a multibillion-dollar opportunity and a platform that we can develop on top of. When thinking of the value proposition of Libre, everyone gets caught up on the price, quality of product, or if there’s less profit for Libre compared to other types of systems. We approached it thinking type 1s, pumpers, type 2s not on insulin, type 2s on insulin, and type 1s that inject insulin are all important and have the same medical need and benefit from CGM… We want it to be the standard of care and will adopt the same strategy for other areas as well.” – Mr. Ford

      2. Insulet: Omnipod Horizon Enters Pivotal, 2H20 Launch Plan Maintained with Android Smartphone Control; $1 Billion Annual Revenue, 70% Gross Margin Targets by 2021

      Insulet CEO Ms. Shacey Petrovic made her second ever JPM appearance this morning, announcing that Insulet’s hybrid closed loop system Omnipod Horizon began its pivotal trial at the “very end of December.” The 240-person, three-month study is still recruiting participants ages 6-70 with recruitment finishing “by the end of February.” According to, the expected primary completion date is May 2020. We look forward to watching which closed loop systems read out later this year; ADA 2020 is the venue where we learned yesterday Medtronic will read out MiniMed 780G pivotal data. Ms. Petrovic maintained Insulet’s plan to have Horizon on the market in the “second half of the year,” consistent with Insulet’s timelines for the past ~ two years if all goes well. With a broad age range of participants in the pivotal, Insulet expects to have a pediatric indication (6+ years) for Horizon at launch. Watch the webcast of Ms. Petrovic’s presentation here and keep reading below for more on Horizon, Omnipod Dash and the pharmacy channel, Insulet’s 2021 financial targets, and more.

      • During her presentation, Ms. Petrovic hit home on the Horizon’s smartphone control, first on a “mobile Android phone.” Previously, we’ve expected smartphone control to launch on Samsung Galaxy phones first, before expanding to other phones. In today’s slide deck, Horizon was shown running on a Galaxy phone. Presumably, non-Samsung-Galaxy users will be able to use Horizon with the dedicated Dash PDM. During Q&A, Ms. Petrovic stated that getting Horizon control on iOS devices wouldn’t require any “unusual technical hurdle” and was “fully expected to follow” getting smartphone control on Android devices. We got a look at the final version of Horizon’s interface in November.

      • Ms. Petrovic shared a quote from consumer research firm Seagrove Partners on Horizon: Omnipod Horizon is the “single biggest winner as a stand-alone product. Respondents thought that the patch pump design with phone controller was the best embodiment of an [artificial pancreas] pump.” As we’ve heard before, the Omnipod Horizon algorithm is designed for simplicity. Converting MDI users has been a major part of Insulet’s strategy and with Horizon, the company has continued to ensure that Horizon is easy to use for both pump users and pump-naïve patients. Horizon will be embedded on the Omnipod device itself, which can communicate directly with Dexcom G6, meaning a smartphone/handheld device does not need to be in range to stay in closed loop. The algorithm will also include some built-in adaptation: today, Ms. Petrovic highlighted new exercise routines and growth spurts as example situations the algorithm could adapt to.

        • We will be intrigued to see what parameters (e.g., body weight, total daily dose, etc.) will be required to set up Horizon. Mr. Petrovic expressed the “Future Vision” for Insulet’s closed loop offering which would simply require patients to download an app, select their CGM sensor, “enter one parameter, like body weight, and then be off the races.” Beta Bionics’ iLet algorithm only requires body weight as a parameter for set-up.

      • Investors were particularly excited about Insulet’s momentum with Dash (launched ~1Q19) and the pharmacy channel. Dash and pharmacy took up much of Q&A; Ms. Petrovic and CCO Bret Christensen were very sharp and prepared for all the  analysts’ questions. As we heard in Insulet’s 3Q19 call, “over 20%” of Insulet’s total business volume is coming through pharmacy, driven by Dash. During Q&A, one analyst asked whether any patients would get Omnipod through DME after the percentage of pharmacy covered lives reaches 100%. Mr. Christensen answered that not all patients would move from DME to pharmacy, but the company has seen, and expects continue seeing, the percentage of new starts coming through the pharmacy channel mirroring the percentage of covered lives. Indeed, this would be consistent with Dash’s 3Q19 numbers: Dash made up “approximately 50%” of new patient starts and had coverage with “more than 50%” of covered lives.

        • Ms. Petrovic highlighted three issues with traditional, tubed pumps that Insulet tried to solve with Omnipod: cost, complexity, and discretion. As a patch pump, Omnipod enables Insulet to reduce upfront cost, and in the case of Dash, completely eliminate upfront cost to try pump therapy. While some patients may prefer using tubed pumps, Mr. McMillan highlighted the simple form factor for Omnipod, while Ms. Petrovic noted that growing CGM adoption has helped make people with diabetes more comfortable with the idea of on-body wearable devices.  

        • With a recurring pay-as-you-go model, as one investor asked, and as Ms. Petrovic confirmed, Insulet is not as affected by the same seasonality and choppiness faced by traditional pump manufacturers. Tandem and Medtronic have both made efforts to reduce the effect of any market “pause” due to anticipated upgrades by making upgrades accessible. In the case of Tandem, the hybrid closed loop Control-IQ is offered as a free software upgrade. While Insulet is not able to recognize the full value of a new patient add right when that patient begins pump therapy, the pay-as-you-go model also provides more predictable revenue numbers.

      • Insulet is continuing to do an excellent job of expanding the pump market by converting MDI users. Today, the company stated that “~75%-80%” of new Omnipod users were coming from MDI – right in line with numbers we’ve heard for several quarters now. Omnipod’s lower-risk and simpler, fully disposable form factor has specific appeal to MDI users; Ms. Petrovic shared internal Insulet data that showed 66% of Omnipod users would not have moved to pump therapy if it weren’t for Omnipod. Like Dexcom yesterday, Insulet emphasized the size of the diabetes market; Insulet estimated a total addressable market of ~10 million (3.5-4 million type 1s and 5-6 million insulin-using type 2s) in its existing markets alone (US, Canada, Israel, and select countries in Europe).

      • Insulet shared its financial goals for 2021: revenue of $1 billion, gross margin of 70% and a “positive mid-teens” operating margin. Insulet has not per-announced its 4Q20 results, but guided for a $722-$730 million FY19 (+28%-29% YOY) on its 3Q19 call. Reaching $1 billion in annual revenue will certainly be a milestone for Insulet, though based on the company’s current pace of growth may actually be a slightly conservative goal. Using the conservative end of FY19 guidance ($722 million), Insulet would need to post ~18% YOY growth in both 2020 and 2021 to hit the $1 billion mark – Insulet posted 39%, 26%, and 22% YOY growth in 2016, 2017, and 2018, respectively, and is guiding for +28%-29% growth in 2019. Gross margin for FY19 is expected to be ~65% for FY19, facing headwinds from investment in automated manufacturing lines for Omnipod. The first highly automated line came online in 2Q19; a second is expected to begin production in mid-2020 with a third coming later this year. As we’ve heard before, Ms. Petrovic noted that each one of these lines would be able of producing 50% of the capacity of Insulet’s current manufacturing operation in China with just 10% of the headcount. Getting these lines fully up and running will be a key factor in reaching >70% gross margin by 2021. Lastly, Insulet reported operating income of $17 million and operating margin of ~9% in 3Q19. By 2021, the company is aiming to have an operating margin in the “mid-teens.” The graphs below really tell the story of how far Insulet has come, from a financial perspective, since 2013.

      • In 2020, Insulet is expecting to roll out Omnipod into five new markets. As expected, these new markets are not expect to have any meaningful impact on revenue in 2020. Ms. Petrovic also confirmed that Dash began its first OUS launches in December, but specific markets were not shared. Given how well Insulet’s OUS business is doing, we have to imagine Dash will only boost sales – especially as Tandem expands internationally with Basal-IQ.

      3. Livongo Makes JPM Debut as a Public Company: Livongo is to Care What Google is to Content, Amazon is to Commerce, and Facebook is to Community

      Livongo made its first appearance at JPM as a public company, amidst comparisons of tech giants like Google, Amazon, and Facebook. Livongo founder and chairman Glen Tullman made the comparison during opening remarks, explaining that Livongo was bringing the same internet and data science-driven approach that allowed Google to revolutionize content, Facebook to revolutionize communities, and Amazon to revolutionize commerce to healthcare. These tech giants made content, community, and commerce available 24/7 and analyze data to present the most relevant and personalized offerings to users. Similarly, Livongo aims to make healthcare available to its members 24/7, using data science to present personalized and relevant equipment and guidance. We completely agree about data for patients and are very excited about the differences that data is making for patients and doctors in other respects as well – for example, it’s so easy now for HCPs to see patient CGM summaries, which makes it easier for doctors themselves to engage.  

      Unsurprisingly, diabetes, where so much of outcomes are driven by the countless number of decisions made every day by people with diabetes, is a natural place for digital health services like Livongo to begin. And, both Mr. Tullman and CEO Zane Burke focused on Livongo’s “whole-person approach,” highlighting offerings outside of diabetes, i.e., hypertension, weight management/diabetes prevention, and behavioral health. This has been an incredibly valuable shift for the field, which is now beginning to highlight mental and behavioral health as such rick areas for improvement for patients (and society). Said Mr. Burke: “Our [non-Livongo for Diabetes] solutions all launched in the last 12-18 months. We’re seeing existing clients who have already seen the benefits [from Livongo for Diabetes] – the ROI generated – trust us to deliver on the other programs. We’re a little ahead of where I thought we’d be with the whole-person approach.” For context, “over 20%” of new agreements in 3Q19 came from non-Diabetes offerings.

      • Livongo reiterated its 3Q19 operational and financial results throughout the presentation. In 3Q19, Livongo reported revenue of $47 million (+149% YOY), driven by ~208,000 Livongo for Diabetes members from 771 different clients. We continue to be very impressed by the breadth of clients, and though some may still be on Pilots, there looks to be incredible engagement by employers – we’d love to see more aggregate data on patients in various industries and who are the most engaged and using the most services. As a reminder, Livongo reported a robust gross margin of 74% and net loss of $20 million in the quarter. In Q&A, CFO Lee Shapiro stated that 2020 would be a year in which Livongo continues to invest in its business, and that the company will also continue to focus on improving both its gross and operating margins. Getting to operating margins over 20% is the long-term goal, which will require significantly more operating leverage, particularly pushing down sales and marketing spending, along with R&D and G&A, though all saw strong progress throughout 2019. R&D is the area on which Livongo is closest, while there’s the most progress ahead to be made on sales and marketing and G&A, as shown on the slide. We are very curious what the “highest-margin” revenue is and how employers are viewing value – we imagine there are certain metrics like Time in Range that employers can see huge progress on ahead if that data is summarized for employers.

      • Mr. Burke hinted at the potential for further collaboration between Livongo and Dexcom, calling the data integration partnership announced yesterday an “opportunity to build on.” Yesterday, Livongo shared with us that 10%-20% of Livongo for Diabetes members use CGM, though we don’t know the breakdown between G6, FreeStyle Libre, and other CGM users.  In the past, Livongo’s tendency to rely on proprietary digital health measures (e.g., “AI+AI,” “Applied Health Signals,” etc.) that we don’t believe are yet mainstream – there is huge opportunity for the field to continue to understand and comprehend progress over time. Investors seemed pleased to see Livongo share more specific insights into its long-term business strategy in a world of declining fingersticks. Make sure to see our report on the Dexcom/Livongo partnership for our speculation on where the partnership could go and Livongo’s responses to some of the questions we had.

        • On an exciting note, Mr. Tullman stated during Q&A that the data integration from Dexcom would allow Livongo to gather data in “real-time.” Livongo confirmed with us yesterday that the data from G6 would be ingested into Livongo’s platform via Dexcom’s API and although per the API documentation, data is only available on a three-hour delay at present, that’s still going to be valuable, though more in retrospect. To our knowledge, interacting with CGM data in actual real-time (like in a closed loop system) would require FDA review.

        • As the field moves toward more people using CGM, we believe employers might be very interested in seeing aggregate Time in Range data – we’re doing some field checks on this now, but we think it would be an incredible way for those patients on real-time and professional CGM to track progress. And, it could be great for CEOs to be more knowledgeable about and boast about Time in Range increases for their patients, and everyone could understand this metric. Even for those not using real-time CGM, using professional CGM once a year would be an incredible learning opportunity. We look so forward to talking to more about that.  

      • During Livongo’s standing-room only Q&A, it was evident that many in the room, and perhaps around Wall Street more broadly, were still sharpening their understanding of healthcare and digital health companies – that’s been one of the bigger benefits from our view, to the field, that so many are learning so much more about the lives of people with diabetes. Livongo has made many investors smarter and brought many to the field – including those at the very start of their learning. At one point, an investor asked, “If you’re making most of your money from [BGM] strips, how will you transition to CGM? A lot of enterprise companies have had trouble going from legacy systems to the cloud without cannibalizing their main business.” All four Livongo representatives (Founder Glen Tullman, CEO Zane Burke, President Jennifer Schneider, and CFO Lee Shapiro) quickly jumped to their microphones, with Mr. Burke explaining that Livongo was a subscription-based service and that CGMs would “do nothing but improve margins.”

      4. BD’s Diabetes Business Foreseeably Stable; No Updates on Type 2 Patch Pump (Still in R&D) or Diabetes Care App

      The only mention of BD’s diabetes business came during its Q&A session. Management stated that it expects to see the business as stable but not as a major driver of growth in the foreseeable future. BD also has no plans to invest in the type 1 patch pump or CGM arenas. Among many other failed diabetes-related pipeline projects, BD had a CGM project that was discontinued in July 2014. However, the company stated, “two-thirds of insulin delivered on the planet” is still done through BD devices and expects the business to stay stable going forward.

      • No updates were provided on the company’s Type 2 Patch Pump (“Swatch”) or its BD Diabetes Care app (App Store; Google Play). BD is presumably still working on the patch pump, though it has hit many roadblocks including a withdrawal of FDA submission. From what we last heard in 3Q19, it is continuing to advance the patch pump in its pipeline with a “third-party R&D partner.” As of ADA 2019, BD’s app had 30,000-40,000 users and had undergone an update in 3Q19 which included a redesigned user interface, blood glucose and insulin reminders, a find a CDE tool, AI-powered resources, and educational articles.

        Big Picture Highlights

        1. CVS: Larry Merlo Highlights Home Hemodialysis Trial + CKD Intervention Efforts; HealthHUB Scaling Continues with Focus on Screening, Prevention, and Low-Cost Care

        In a combination presentation/fireside chat, CVS Health CEO Mr. Larry Merlo highlighted CVS Health’s efforts in CKD, including the implementation of home dialysis and use of predictive analytics to improve outcomes and lower costs. CKD was an unexpectedly exciting focus of the session and an area that Mr. Merlo sees as ripe for innovation and cost savings. He outlined two programs now underway: First, CVS has launched a home dialysis clinical trial (n=70) intended to enable approval and launch of a home hemodialysis device, with hopes to be on the market by 2H21 – wow! This is exciting new territory for the company, and it has the potential to seriously improve quality of life for people with CKD – and also to improve outcomes through more frequent use of and better adherence to dialysis, which management emphasized as key for the Aetna business. Also in CKD, CVS is working on analyzing the abundance of data available across the CVS-Aetna business to help identify patients at risk of CKD, with the ultimate goal of developing programs that can slow the onset of disease and ultimately delay or avoid the need for dialysis. Given the high prevalence, underdiagnosis, and morbidity and mortality associated with CKD, there’s no doubt room for improvement in kidney care is expansive. We could hardly be more excited to see what CVS is able to do with its expansive resources and unparalleled access to patients in the coming years, and we continue to be impressed by the company’s commitment to innovating in and tackling chronic cardiometabolic disease.

        • Mr. Merlo offered updates on the company’s ambitious expansion into a one-stop-shop for health and wellness as its concludes its period of integration with Aetna. Of note, JPM’s Ms. Lisa Gill (Head, Healthcare Technology and Distribution) made a point to note the positivity and certainty of Mr. Merlo’s presentation compared to 2019 – “What a difference a year makes – it sure feels a lot better than it did last year!” (Mr. Merlo heartily agreed with this sentiment.) His aim is for CVS to become “the most consumer-centric health company” by making healthcare simple and affordable and meeting people where they are – that latter being at the company’s thousands of existing community touch-points nationwide. Central to this plan are HealthHUBs, and he doubled down on the company’s commitment to turn 1,500 CVS locations into HealthHUBs by the end of 2021, including 600 this year. Particularly impressive? At this point, MinuteClinic providers (to our understanding, nurse practitioners) can address ~80% of what a PCP can treat, from acute illness to chronic disease management. Further, the company is committed to making MinuteClinics low-to-no copay options for CVS/Aetna clients and expanding the breadth and quantity of patient care they provide. Mr. Merlo emphasized that HealthHUBs will be able to provide preventive care and treatment in a lower cost setting than traditional healthcare, saving expenditures in high-cost settings (e.g., the ER). Further, he noted that in pilot cities – Houston, Tampa, Atlanta, and Philadelphia – conversion of locations into HealthHUBs increased MinuteClinic visits, prescriptions, and overall store traffic and sales,


        --by Ani Gururaj, Albert Cai, Ursula Biba, Rhea Teng, Ann Carracher, Martin Kurian, and Kelly Close