A Step Closer

A Step Closer

For years we’ve been claiming that while HbA1C may be the gold standard for measuring outcomes, it’s an incomplete measurement. Yes, it’s true that HbA1C is the easiest number for a patient to understand, anything below 7 is considered good control, this biomarker fails to consider other factors such as glycemic variability. Thanks to CGM we now know that time in range is just as important as HbA1C and it seems finally the diabetes world is coming around to this same view.

According to an article in the recent issue of Diabetes Care;

“The Steering Committee recommends use of the defined clinically meaningful outcomes beyond HbA1c in the research, development, and evaluation of type 1 diabetes therapies.”

The statement is a joint effort by the American Association of Clinical Endocrinologists, American Association of Diabetes Educators, American Diabetes Association (ADA), Endocrine Society, JDRF International, Leona M and Harry B Helmsley Charitable Trust, Pediatric Endocrine Society, and T1D Exchange.

Now many will see this as good news for Dexcom (NASDAQ: DXCM), Abbott (NYSE: ABT) and Medtronic (NYSE: MDT) the three leading CGM companies. And to certain extent it is as CGM is the most efficient method for measuring glycemic variability. It also helps that there is a growing body of evidence that CGM usage not only helps patients with Type 1 diabetes but all patients with diabetes, something else we have been saying for years.

However, the problem as we see it is that no one yet has found a way to bring CGM to the masses, to expand the market beyond insulin using patients. Again, as we have been writing insulin using patients are the low hanging fruit when it comes to CGM adoption. These patients value the information CGM provides and use this information to make insulin dosing decisions. Yet the information provided by CGM is just as valuable to non-insulin using patients which as everyone knows is far larger group of patients. Any company that can successfully penetrate this group of patients will dominate the CGM market.

Prior to the Thanksgiving holiday Dexcom and Lilly (NYSE: LLY) announced a collaboration which would integrate Dexcom’s CGM with Lilly’s new insulin delivery systems. Per a joint press release;

“DexCom, Inc. (NASDAQ: DXCM), the leader in continuous glucose monitoring (CGM) for people with diabetes, today announced a development agreement with Eli Lilly and Company (NYSE: LLY) to include Dexcom CGM into Lilly’s Connected Diabetes Ecosystem. The companies expect to combine Lilly’s smart insulin delivery devices and Dexcom CGM to improve the future of diabetes management.”

There was also an article in the Wall Street Journal article about Lilly’s push into the device market which contained the following;

“Enrique Conterno, head of Lilly’s diabetes business, said he believed Lilly’s insulin business would become “obsolete” if the company remained largely an insulin provider without delivery systems.

“Do we want to be just an insulin provider that just goes into a system, or do we want to be the integrator of the system?” he said at the Cambridge lab this month. “To me, it’s clear where the business is going.” Lilly’s insulin products currently generate about 20% of the company’s total revenue.”

Well it seems that Enrique is coming around to another one of our predictions that in the future patients with diabetes will be prescribed a diabetes management system and not individual pieces of the system. A system which will incorporate CGM technology at it’s core. While we agree 100% with Enrique that Lilly’s insulin franchise will become obsolete without such a system, he failed to mention that Lilly’s other diabetes therapies will also benefit from CGM technology.

Besides the statement in Diabetes Care which notes that HbA1c is an incomplete measurement of control, the biggest obstacle standing in the way of better outcomes is therapy adherence. This is not just true for insulin using patients but all patients with diabetes regardless of their therapy regimen. What everyone fails to recognize is that CGM data can reveal whether patients are therapy adherent plus if they are adherent whether their therapy is working.

Think of what this could mean to Lilly. With a slap it on turn it on CGM the company could determine whether patients are adherent with Jardiance. Additionally, this information could reveal that a patient should add insulin to their therapy regimen. A regimen which could be dumbed down as with CGM data Lilly could provide the patient with simple dosing options. Dosing options which with a “smart” insulin pen could also be tracked.

While it’s possible that Lilly could venture into the insulin pump arena a more cost-efficient system would be a CGM/ “smart” insulin pen/App. A system which payors would embrace as it would produce pump like outcomes at a much cheaper price point. A system payors would also embrace as it would give them the leverage they need against Medtronic who as we know is about to control over 80% of the insulin pump market.

This sets up some very intriguing possibilities as to what Novo Nordisk (NYSE: NVO) and Sanofi (NYSE: SNY) will do. Now Sanofi is already connected to Dexcom as they are partnered with Google who also is partnered with Dexcom. Sanofi also has a biosimilar short-acting insulin on the way which would make a CGM/ “smart” insulin pen/App system even cheaper. Novo who had some of the best pens on the market could be forced to go outside the company for a “smart” pen and do a deal so they too can play in this sandbox.

See Novo and Sanofi like Lilly must realize that their core insulin franchises are at risk. That with the introduction of biosimilars they can no longer survive selling branded insulin alone. That they must show that their insulins produce better outcomes and the easiest way to do this is sell insulin delivery systems which incorporate CGM technology. And while we hate to be redundant the most cost-effective insulin delivery system is a CGM/ “smart” insulin pen/ App.

With the Libre Abbott stands to be part of the mix. While the Libre isn’t a full blown CGM it can easily be turned into one. Even with no enhancements the Libre can added into a system. As we have stated previously in the future there will be multiple CGM options from basic versions for non-insulin users to enhanced versions.

Not to be left out of the mix Medtronic will also play in this sandbox just for different reasons. Medtronic could use a CGM/ “smart” insulin pen/App system not just to protect their turf but also a transitional system. Although there are some key differences between multiple daily injection (MDI) therapy and insulin pump therapy many of the factors are the same. Medtronic could start a patient on the CGM/ “smart” insulin pen/App system and then convert them to a pump. Either way Medtronic captures the patient.

What’s becoming more and more obvious is that at long last both device and drug companies are waking up to the fact that selling individual pieces of a diabetes management system won’t work. That in the future it will be the system itself that matters.

Here are some additional takeaways from all this;

1. The rumors of Dexcom’s death have been greatly exaggerated.

2. Yes, a price war is coming in CGM, but price alone will not determine the winner.

3. Abbott will likely make enhancements to the Libre, so they too will become part of a system. It should be noted Abbott is partnered with Bigfoot who has a “smart” pen.

4. Organic growth in the insulin pump market already anemic will slow even further.

5. Novo and Sanofi will play in this sandbox for they cannot afford not to play.

6. Medtronic will not sit ideally by and will also play in this sandbox.

7. For all practical purposes SMBG is history.

8. Google. Apple, Samsung and the rest of the cash rich techies are also going to play in the sandbox.

The fact is the commodization of drugs and devices has forced companies to look outside their comfort zones. They see that they cannot exist selling the individual pieces of the system, that technology has made it possible to prove their drugs and/or devices positively influence outcomes. The changing definition of outcomes, thanks to technology, is a positive step forward. We aren’t there just yet and it’s taken much longer than we anticipated to get here but the day of diabetes management systems is dawning.