30 Minutes

30 Minutes

Perhaps the best way to describe the exhibit hall here at the conference is to measure the time it took Diabetic Investor to walk the floor. Unlike in past years when it would take someone a few days to see everything, this year excluding the interruptions, Diabetic Investor was done in 30 minutes. It was a productive 30 minutes nonetheless and here are some observations;

Even though there are far fewer exhibitors than in past years there are still people who believe they can build a mouse trap even though a better mouse isn’t needed and the market for these traps are over saturated already. As unbelievable as it may seem there are still companies who want to be in the conventional glucose monitoring and insulin pump business. Joining them are a host of companies making “smart” insulin pens, yep “smart” insulin pens are the new hot device.

Now we really would like to say something nice about these companies, honestly we would, but sadly we cannot. This continued fascination with whiz bang way cool technology just reminds us of something a wise ex-device executive says with consistency – there is no cure for stupid.

Yes we know that everyone is wondering what we thought of the Sanofi (NYSE:SNY) booth and whether or not Afrezza is garnering any positive buzz. Well based on what we witnessed today it looks like another Diabetic Investor prediction will come true in that for Sanofi  and diabetes Toujeo is the main story, Afrezza a minor, very minor one. It’s not that the company isn’t promoting Afrezza rather Toujeo is being promoted with greater conviction.

The reason for this is something we have written about before, given that Toujeo has a built in market and is far cheaper to make than Afrezza the company can actually make money selling Toujeo. Yes we know this drives the Afrezza and MannKind (NASDAQ:MNKD) supporters crazy as they believe Afrezza is the greatest thing to hit the market since the discovery of insulin. Yet the fact is with Afrezza’s poor formulary position, the fact that patients need additional tests to use the product and the equally real fact that many physicians will not prescribe a growth hormone which is inhaled into the lungs are very real obstacles.

But let’s get back to the cost issue and not what it costs for a patient to use Afrezza but what it costs to make Afrezza. As we have been stating it’s difficult to imagine even a company as mentally challenged as Sanofi continuing to support a product with little or no margin. Consider this, according to people with intimate knowledge of how Afrezza is manufactured it takes 11 units of liquid insulin to manufacturer 1 unit of inhaled insulin. Think about that for a moment 11 units of liquid insulin to make one unit of inhaled insulin. An issue which won’t go away even if Afrezza reaches the unrealistic adoption rates thrown around by Afrezza supporters. Put more simply unlike other business where scale drives costs lower and drives manufacturing efficiencies, scale is meaningless here they still need 11 units of liquid insulin to make one unit of inhaled insulin.

Now if we lived in LaLa land and payors where actually willing to pay a premium for Afrezza, Sanofi might, might be able to make a profit selling Afrezza. However since Diabetic Investor prefers to live in the real world and knows that payors won’t pay a premium for Afrezza, it’s difficult to see Afrezza being commercially viable.

Diabetic Investor remains convinced that it’s just a matter of time before Sanofi starts looking at the numbers and realizes barring a miracle Afrezza is a huge waste of capital. Honestly the last thing Sanofi needs is to experience a Pfizer (NYSE:PFE) moment and suffer another diabetes embarrassment. The way things are going the $4 billion Exubera disaster suffered by Pfizer will look like chump change if Sanofi continues to drink or should we say inhale the kool-aid.

That’s all for now, more later.

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