It’s that time again
As we transition from conference mode to earnings season some key questions remain unanswered. Tomorrow morning earnings season kicks off when Abbott reports full year and fourth quarter results. We have no doubt that Libre sales continue to progress well, that really isn’t an issue. The issue that’s on everyone’s mind is just when Libre2 will make it through the FDA.
Just to recap a little from JPM the company didn’t provide any additional clarity as to what the holdup is for Libre2. They confirmed the FDA has asked for and received additional information but no indication as to just when the FDA will act on this information. Baring a surprise announcement from the FDA it will be interesting to see what if anything the company says about the status of Libre2. Should they continue to be radio silent on this question, adding no new information we suspect that the reports from CES about the Libre2 not being here for another year are looking more and more accurate.
Given that Dexcom pre-released results at JPM the question now becomes one of who gets their new product through the FDA first. Will the G7 hit the market before Libre2, will they come to market at the same time or will Libre2 come first. As interesting as this question is, we honestly don’t think it’s as material as everyone thinks it is. The fact is no matter what happens neither company is likely to make any major changes to their respective strategies.
Abbott will continue their value strategy while Dexcom will continue to become more cost competitive. Thankfully for both companies the CGM market continues to expand allowing both companies to offset pricing pressure with increases in volume. At JPM both companies noted that the CGM market even with its tremendous growth has barely scratched the surface and this is just when it comes to diabetes. Simply put while CGM is becoming the standard for glucose measurement there are still millions of patients who prick their fingers and will be converted to CGM in the future.
We have already moved beyond the diabetes applications for CGM and begun to look at the much larger untapped markets for CGM. We’ve said it before and will say it again what everyone sees now is the iceberg above the waterline, the larger much larger market is what lies below the waterline.
One earnings call that should provide a better, yet somewhat clouded view of the future will be when Tandem reports. The Control IQ was approved too late in the quarter to have any material impact, but you can take it to the bank that everyone will want to know how things are progressing. Based on what we have heard there is a strong level of interest in the Control IQ and the early reviews we have seen have been favorable. However as positive as this looks, we believe the company will try to temper all the excitement. Better to under promise and over deliver than vice versa.
Although we don’t yet see any signs that Control IQ is slowing down Insulet, there are some signs emerging that it’s presence could slow sales of OmniPod. Let’s be very clear here these are very early reports and the Horizon Insulet’s entry in the hybrid closed loop segment will be here soon. However with all the buzz surrounding Control IQ it’s understandable that patients once set on the OmniPod are taking a serious look at the Control IQ. Again we don’t see this having a material impact on Insulet, but it is something we are keeping our eye on.
It goes without saying that Medtronic is the most adversely impacted by the arrival of the Control IQ, but they were already in trouble before and its arrival only made things worse. The fact is when formulary is taken out of the equation Medtronic is now the third choice when it comes to insulin pump therapy. Even with their formulary advantage Medtronic is having a difficult time combating Insulet’s pay as you go model and the strong buzz for Control IQ.
The real question is can the company prevent these factors from impacting their installed base, should patients start to leave for competing systems this could deal a crippling blow.
Just as the arrival of the Control IQ came too late to help Tandem in the quarter the same is true for Novo Nordisk and their oral GLP-1 Rybelsus. At JPM the company noted they like what they have seen so far but again it’s way too early to gage whether Rybelsus will become the blockbuster so many analysts expect it to be. We remain skeptical but time will tell.
We don’t expect much in the way of surprises from Lilly either. Although we suspect many will ask whether Rybelsus is impacting sales of Trulicity. Just as we are watching how the arrival of Control IQ impacts the insulin pump market, we are also keeping an eye of how Rybelsus impacts the GLP-1 market.
So off we go to earnings season with lots of questions but the feeling that the answers won’t become clear until later in the year.
