Adding to the portfolio

Adding to the portfolio

As expected this morning’s Johnson and Johnson (NYSE:JNJ) earnings announcement was dominated by the issues the company has been having with their over the counter drug manufacturing. While the company tries to contain the damage the issue does not appear to be going away anytime soon. With the issue now affecting the bottom line look for the company to get things straightened out so they can back to business as usual.


Looking at the company’s diabetes units it’s a tale of two worlds. In the device arena LifeScan and Animas continue to plod along. Frankly not much has changed over the past few quarters for LifeScan who continues to hold the top spot in blood glucose monitoring here in the US. You know things have become pretty boring when the biggest announcement the unit has is the introduction of a new lancing device.


The story for Animas is also pretty much the same, while sales have slowed somewhat here in the US; sales overseas continue to grow at a decent rate. It remains to be seen if the mother ship will stand pat with the unit or look to take expand via the acquisition route. As we noted yesterday for all the action in the insulin pump market not much has changed over the past few years. Medtronic (NYSE:MDT) continues to hold the top spot in the market, Animas remains a distant second and Insulet (NASDAQ:PODD) continues to hold the number three spot.


Perhaps realizing that the diabetes device area has reached the point of diminishing returns the company has turned their attention to bolstering their pharmaceutical pipeline. At the ADA conference the company released updated data for their selective sodium-glucose transporter-2 (SGLT2) inhibitor, canagliflozin, plus the company has signed a couple of deals to bolster their diabetes pipeline.


While it would be an overstatement to say that the company has given up on the device area, rather the company realizes that the environment for devices likely won’t improve anytime in the near future and it’s better to allocate resources to the drug arena which has better growth prospects. The real question here becomes can the company develop compounds that are more than me too products.


Looking over the landscape in diabetes drug development Diabetic Investor is beginning to wonder if we have also reached the point of diminishing returns here as well. Shifting through all the data released at last month’s ADA conference there were no new compounds under development that truly stood out. While several compounds looked promising none appeared to be much better than the therapies already on the market.  This is particularly true when it comes to oral medications used to treat type 2 diabetes.


Given the ultra conservative nature of the FDA, Diabetic Investor believes moving forward the agency will place as much emphasis on a drugs adverse event profile as they will on whether or not the drug is actually effective. This is collateral damage from the Avandia controversy but it is the new reality. The fact is it’s just a matter of time before the agency begins looking not just at safety and efficacy but cost effectiveness.


Do we really need new drugs that produce actually the same results as drugs already on the market? Why should the FDA approve any new drug unless it offers a compelling advantage over an existing medication?  This advantage can be a better adverse event profile or more patient friendly delivery option however it seems a waste of time to merely approve a new drug when it produces exactly the same results as something already available, this approach does not improve patient care or outcomes and some would argue actually creates more confusion in the marketplace. The bottom line for both diabetes drugs and devices is that we know appear to be in a phase where the advancements being made are more incremental.


Perhaps there is a silver lining here and people will begin to realize that it’s not for lack of drugs or devices as to why two thirds of all patients are not achieving control. They just might realize that you can have the best devices and drugs around but that means very little if the patients who are supposed to use these drugs and devices don’t take their medications regular or understand how to use the devices. The central fact that seems to be lost on many of the companies in diabetes is you can provide the patient with the how to, but you can’t provide them with the want to.