Abbott Reports and a Major Blow to Dapagliflozin
With each passing earnings call it’s becoming increasingly obvious that the glucose monitoring business has forever changed as the standards for solid performance continue to erode. Long gone are the days when double digit growth was the norm; today mid-single digit growth is now considered exceptional performance. As we noted yesterday when Johnson and Johnson (NYSE:JNJ) reported, the BGM market is no longer the young darling driving solid growth and is now a mature business segment being managed to maximize profits.
This trend was reinforced today when Abbott (NYSE:ABT) reported results. While Diabetic Investor would not call worldwide growth of 2.7% exceptional, it is in line with expectations.
Another trend reinforced today is the growing importance of the insulin using patient. Like JNJ, Abbott is also launching a new monitor which contains a bolus calculator. The InsuLinx, which Diabetic Investor incorrectly called the InsuCalc in yesterday’s alert, has received CE Mark and will eventually make its way to the US market. Also as we noted yesterday glucose monitors that contain a bolus calculator will become commonplace as no innovation made in BGM remains exclusive for long.
The question that continually surrounds Abbott is just how long they plan to play in this market. While the BGM unit is no longer bleeding share neither is it gaining share. It’s also clear that new products like the InsuLinx while nice will face stiff competition and won’t have any major advantage over the competition. So the question becomes does Abbott who’s other business units are doing well, stick with (excuse the play on words here) a business unit that doesn’t have much of a future or do they jettison the unit.
As Diabetic Investor has noted previously while the unit isn’t what it once was, it does have value to a company like Sanofi-Aventis (NYSE:SNT) who is getting ready to enter the BGM market. Besides the FreeStyle line of meters, which are popular with insulin using patients, Abbot also owns the Navigator continuous glucose monitoring system. Although the Navigator was not discussed today and the unit has more than its share of problems, it does add value for Sanofi who sees BGM and CGM as tools that can help the company sell more insulin.
In the hands of a company like Sanofi, who is committed to becoming dominate in the global diabetes market, a deal makes sense. While Sanofi does have some nice products in their pipeline, it’s difficult if not impossible in today’s market to build the scale necessary to be successful in the BGM market. The simple fact is scale is critical in this market. The reality is the Abbott unit is almost a perfect fit for Sanofi; Abbott brings Sanofi an immediate market presence while Abbott collects nice payout. As we have seen before in the wacky world of diabetes devices anything can, and usually does, happen.
The bigger news to hit the diabetes world was the rejection of Dapagliflozin by an FDA advisory panel. According to a press release from Bristol-Myers Squibb (NYSE:BM\Y) and AstraZeneca (NYSE:AZN):
“On the question: “Do the efficacy and safety data provide substantial evidence to support approval of dapagliflozin as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus?” the Advisory Committee voted 6 yes and 9 no. Bristol-Myers Squibb and AstraZeneca remain committed to the dapagliflozin clinical development program and will continue to work closely with the FDA to support the review of this investigational compound.”
Dapagliflozin is from a new class of diabetes drugs called SGLT2, and Dapagliflozin is the first SGLT2 to face FDA scrutiny.
This decision by the FDA panel to reject the drug also brings up additional concerns for the Lilly (NYSE:LLY) Boehringer Ingelheim partnership. Already off to a rocky start with their me-too DPP-4 Tradjenta, part of this partnership included BI10773, a sodium-dependent glucose co-transporter-2 (SGLT-2) inhibitor, which began enrollment in Phase III clinical trials last year.
As Diabetic Investor has noted in the past many of the Lilly and BI reps have been less than thrilled with the reception their getting from physicians when they present Tradjenta, a third to market, me-too product that adds little, if any, value. Many of these reps have been hoping that while Tradjenta does not offer much, products like BI10773 would offer something they could actually sell. Given the panels vote yesterday it looks like these reps will be waiting a little longer than they anticipated.
It should be noted that Diabetic Investor does not see the panels vote as just another case of the FDA being overly cautious with approving new diabetes drugs. Looking over the data set for Dapagliflozin many respected researchers noted that the drug appeared to have a higher than normal rate of cancer cases. Given the ultra-conservative nature of the FDA these same researchers speculated that the drug may have a difficult time receiving full FDA approval. At minimum they believed the FDA would require additional studies before approving the drug.
One has to wonder how Lilly feels today about their BI partnership, a partnership that up to this point has created more questions than answers. A partnership that forced Amylin (NASDAQ:AMLN), Lilly’s other “partner” to sue the company and could screw up the launch of a truly innovative and potentially paradigm changing drug when Bydureon gets approved.
From the day this partnership was announced Diabetic Investor just didn’t get it, we could not understand why Lilly, who without Bydureon would be in serious danger of becoming irrelevant in diabetes, would push a dog of a drug like Tradjenta and purse a SGLT2, which even without yesterday’s decision, is another me-too second or third to market drug. Perhaps we’ll gain some insight into what Lilly is thinking when they report their earnings tomorrow morning.
The way things stand today it looks more and more like Lilly wasn’t thinking.