JNJ, Lilly, Amylin Report and Abbott’s New Meter
Before we get into our comments on all the various earnings calls Diabetic Investor would like to express our deepest sympathies to all the families affected by the tragedy at Virginia Tech. As the father of two children in college yesterday’s events hit practically close to home.
Yesterday Amylin announced first quarter results which came in largely as expected. Although sales for the quarter were slightly below Street estimates the company is on track to reach their full year guidance of approximately $800 million in revenues. Having just returned from the AACE meeting in Seattle Diabetic Investor is even more confident in future Byetta sales and the impact the long acting once a week version of Byetta will have once it hits the market. Based on discussions with several endocrinologists at the conference it appears Byetta is falling into the mainstream as treatment option for poorly controlled type 2 patients. At the conference there were several sessions on Byetta and it is clear that endo’s are realizing that Byetta should be introduced earlier into the treatment regimen.
While it is true that the introduction of Januvia initially slowed Byetta sales, it is also true that endo’s see the value of Byetta. As Diabetic Investor pointed out previously it is quite possible that Januvia could actually help Byetta in the long run.
Overall, things are looking up at Amylin. Baring an unforeseen event in the development of Byetta LAR, Amylin has found its grove and continues to be the most valuable property in the diabetes sector.
Try as they might to connivance the Street that they have solved the problems with their insulin franchise, Lilly is still running from behind. Although sales for Humalog increased by 11% for the quarter this growth was primarily driven by price increase and not volume growth. When it comes to the insulin market Lilly must do more than introduce new insulin pens to reinvigorate the growth of insulin sales.
Diabetic Investor also believes Lilly is finally waking up to the fact that their relationship with Amylin is the best thing they have going in diabetes. With Byetta sales back on track, LAR progressing nicely and a host of solid obesity drugs in the pipeline Amylin is becoming even more valuable to Lilly. Diabetic Investor continues to believe that after Lilly digests the ICOS acquisition they will set their sights on Amylin.
Johnson and Johnson (NYSEJNJ)
This morning JNJ announced their first quarter results with their LifeScan unit showing solid growth internationally up nearly 19% while domestically sales barley bugged up just 1%. If you take away the impact of currency worldwide sales grew by just 6%.
Yesterday Abbott received i10(k) clearance from the U.S. Food and Drug Administration for their FreeStyle Lite™ blood glucose monitoring system. The FreeStyle Lite joins a growing list of meters that does not require calibration. As Diabetic Investor reported last week from the AACE meeting instead of focusing on fancy technology that most patients could care less about it’s about time devices became more user friendly. The introduction of the FreeStyle Lite combined with the lackluster results from JNJ signal that Bayer (NYSE:BAY) is taking share with their Contour and Breeze meters.
Diabetic Investor suspects it’s only a matter of time before every meter company offers a meter that does not require calibration. With growth in the market stalled the major players cannot afford to fall behind in any area. This is exactly what happened when alternate site testing first came out and will be the case when all in one device hits the market.
While Diabetic Investor applauds this move by Abbott in the end it will do little to increase testing frequency. Until all the meter companies realize that the only way to increase testing frequency is through better patient education nothing much will change in the meter market. Competitive bidding is here and price is becoming the dominate factor for insurers who realize that all meters do basically the same thing and consumer really don’t care which meter they use as long as it works. This is good news for companies like AgaMatrix and very bad news for the major players JNJ, Roche, Abbott and Bayer. Already we are seeing the major players trim the number of sales people and more cuts are coming.
The world is awash in glucose metes and still patients do not test as frequently as they should. Alternate site and no coding are helpful but as we have seen these innovations do not lead to better patient compliance. Years ago Diabetic Investor predicted that the meter market would become a commodity market where price not innovation would become the most important factor. That day is here and that light the major players see at the end of the tunnel is not a return to double digit growth but a freight train.
The final nail in the coffin would be if consumer product companies like Procter and Gamble (NYSE:PG) decide to enter this market. Besides being experts at marketing to consumers, consumer product companies are used to low margin high volume businesses. This is exactly where the blood glucose monitoring market is headed unless patient education dramatically improves. Given the lack of attention the majors are giving to patient education they will have no one but themselves to blame for a situation that could have been avoided.