Big News-Little News

Big News-Little News

Two items caught our eye this morning one which is big news the other not so big. Let’s cover the minor news first as the FDA officially approved semaglutide which will now be called Ozempic. While this is good news for Novo Nordisk (NYSE: NVO) frankly it is a minor event in the diabetes drug world. Ozempic now joins Trulicity from Lilly (NYSE: LLY) and Bydureon from AstraZeneca (NYSE: AZN) in the once-weekly GLP-1 category. Or put simply it’s a commodity.

We don’t to spend too much time on this, but Novo is truly in a pickle. Their two core franchises, insulin and GLP-1, are under siege. Both markets are commoditizing and without any orals, not yet anyway, they must fight not just Lilly and Astra but Sanofi (NYSE: SNY) too. And it won’t be long before they are fighting even harder with a biosimilar short-acting insulin on it’s way. An event that will devastate the short-acting market as Basaglar did the long-acting market.

Everyone is making a big deal as the company seems to be moving more aggressively into the obesity market. Yes, we get that as, excuse the expression, it’s a huge and growing market. But this is Novo Nordisk we are talking about here, a company with roots in diabetes. This is not to say they cannot compete and win in the obesity market, we just aren’t convinced their hearts are in it.

Something tells us that Novo will not go quietly into the night when it comes to diabetes. That just as Lilly and Sanofi are moving more into devices/apps and the like, they too will proceed down this path. The question here is can they move fast enough or will they be typical Novo and over-analyze a simple bowl of chicken soup.

Although it has taken much longer than we anticipated market dynamics are forcing companies to think differently and we are now on the verge of patients being prescribed diabetes management systems rather individual pieces of the system. Here too Lilly is the furthest along as they have the most comprehensive portfolio of diabetes medication and as we have noted are now adding devices to the mix. Whether its an interconnected insulin pen/CGM/App or a way cool whiz bang insulin pump Lilly will soon be able to offer doctors and payors a holistic solution to diabetes management.

Ironically companies like OneDrop and Livongo fit into this mix too. The value of all these interconnected companies is not the toy that collects the data, no the value if there is any comes from converting data into action. This patient coaching is the only thing missing from Lilly’s system.

Two big winners here will be Dexcom (NASDAQ: DXCM) and Abbott (NYSE: ABT) as CGM is the cornerstone of every system, it’s the straw that stirs the drink. What people will need to understand is that CGM is not just for insulin using patients but all patients regardless of their therapy regimen. They need to look beyond what these devices do today. The fact is once included in a system these devices will deliver data just as they do now the difference will be how this data is displayed to the patient.

An intensively managed insulin using patient will get all the bells and whistles, the fancy charts, cool graphs and yes, those annoying yet necessary alarms. However, a non-intensive managed patient will see just zones only, % of time in each zone – something Green Yellow and Red. Now they can if they wish see all the fancy stuff but our guess most will opt for the simple zone percentages. Of course, the coach/doctor/CDE whoever is helping the patient will see all the data as well. The twist will be the better systems will also include data analytics and recommendations based on these analytics.

See diabetes management systems aren’t just to make the patients life easier but also anyone who interacts with the patient. The better systems that physicians do not have time to do nor are they paid for data analytics. Physicians, primary care in particular as they treat 80% of all patients with diabetes, make money by seeing as many patients a day as they can. They do not make money from data analytics. Yes, we some initial resistance from physicians in the beginning but ultimately, they won’t have much say in the matter as this is what payors want.

Now we don’t see Lilly or any current diabetes drug company taking the physician out of the loop completely, but we can see a company like Amazon minimizing their role. The fact of the matter is diabetes management for 80% of the patient population isn’t overly complex. Throw a CGM into the mix and you now can tell two things. First whether a patient is taking their meds and next whether these meds are working. CGM makes all this possible and is the reason why the folks at Dexcom/Google and Abbott are smiling.

Would Lilly partner with Amazon? Or better still would Amazon buy Lilly? It’s a tasty scenario thinking about how disruptive Lilly could be as part of Amazon.

This leads us to the really big news of the day, so far anyway, about the spat between Amazon and Google. While we won’t go into all the details, as it has nothing to do with diabetes, it seems these two tech-titans don’t play well together. Now we could care less who started this spat, but it does have broader implications for the future of diabetes management systems. Our vision is that in the future the patient’s digital device, whether it’s a smartphone, tablet, etc. will become the hub of all their health information.

Which to us means this is battle over platforms. Google, Amazon and Apple all of whom are now making the deep dive in diabetes have a vested interest in getting patients onto their platform. These cash rich techies do not see diabetes management as profit center per see, they see diabetes management expanding their platforms. And let’s be honest IF they wanted to any of these companies could easily buy any of the diabetes drug companies if they wanted to. But as the old saying why buy the cow when you can get the milk for free.

The fact is every diabetes drug company, heck every diabetes company, should know that either they somehow find a way to work with these tech giants or they are history. This is why Dexcom partnered with Google and why Sanofi spent $250 million to do the same thing. It’s also why Merck (NYSE: MRK) is working with Amazon. The reality is diabetes management systems will become a battle over which platform these systems run on.

As we just witnessed with CVS acquiring Aetna, Amazon can turn markets upside down. Something they also did when they acquired Whole Foods. Is there any reason to believe that Amazon, Apple or Google won’t change diabetes management just as they did with every other market they touched? It would be foolish to believe that after these companies made the deep dive into the diabetes pool that they would get out of the water and say they didn’t like getting wet. This is not to say they won’t make their mistakes along the way but that’s one very nice thing about having billions in cash, you can easily buy your way out of a problem.

Most people today will focus on the little news that yet another diabetes drug, another once-weekly GLP-1 has been approved by the FDA. They will miss the bigger picture that these drugs and devices are just pieces of a puzzle, that these pieces are often interchangeable and indistinguishable. It’s only when they are woven together that they make a picture.