JNJ Reports, Pfizer “Full Court Press” on Exubera
This morning Johnson and Johnson (NYSE:JNJ) reported fourth quarter and full year 2006 results. For the full year the LifeScan unit reported worldwide sales of slightly above $2 billion a 9% increase over 2005, in the fourth quarter sales reached $542 million a 12% over the comparable quarter in 2005.
While everyone associates JNJ’s primary diabetes focus with their LifeScan unit, the company also has several type 2 drugs under development. It was interesting this morning that JNJ’s Chairman and Chief Executive Officer William C. Weldon specifically noted that the company has made diabetes a focus disease that spreads across several of the companies units. Even with these efforts the LifeScan unit is the most directly connected to diabetes.
Diabetic Investor was not surprised when Mr. Weldon mentioned that with the company’s acquisition of insulin pump maker Animas, they would be moving more aggressively into insulin delivery market and stating specifically they would be pursuing the ultimate in insulin delivery, a closed loop insulin delivery system. The real question is with the insulin pump market becoming more competitive and no continuous glucose monitoring system even close to reaching market how will they achieve this goal. (A continuous glucose monitoring system is a critical component to a closed loop insulin delivery system.) While Animas is number two in the insulin pump market, it is a distant number two as Medtronic is the clear market leader with a 70% share. It is also a fact that Medtronic is well ahead of the field in developing a closed loop system and already has the Paradigm 722 on the market. The Paradigm 722 combines the Paradigm insulin pump with the Guardian RT continuous glucose monitoring system. During their recent call Medtronic stated they should have their first version of a semi-closed loop system ready sometime in 2008. Finally, it is also well known that Medtronic owns the majority of intellectual property in this area which makes all the competitors in this area jump over another hurdle.
Diabetic Investor finds it curious that the company is talking up a closed loop system and not their efforts in developing a competitor to Insulet’s OmniPod system. Some may recall before being purchased by JNJ, Animas spoke often about their efforts here. Back then Diabetic Investor was skeptical Animas had the resources to effectively develop such a product. Based on the actions JNJ is taking it appears our skepticism was warranted.
Based on JNJ’s history it would not surprise Diabetic Investor if the company went out and bought the technology instead of developing it internally. The OmniPod is quickly becoming the main competition to Medtronic and is the only wireless insulin pump on the market. The reality of the market is the OmniPod posses a greater threat to JNJ, Roche and Smiths, all pump companies vying for second place in the market, than Medtronic. If JNJ was truly interested in offering a clear and attractive alternative to the conventional pumps on the market they would pursuing Insulet and Dexcom (NASDAQ:DXCM). By combining Dexcom’s continuous glucose monitoring technology with Insulet’s OmniPod JNJ would have credible competitor to the Paradigm 722. Add in JNJ’s market muscle and we could have a real fight on our hands in the insulin pump market. One day we might look back on the Animas acquisition as being just the first step for JNJ, a process that really began a few years ago when the acquired the diabetes business from Inverness Medical (AMEX:IMA).
Pfizer (NYSE:PFE) is another company looking to be a player in the insulin delivery market with Exubera. Yesterday the company stated even with the many well known problems associated with Exubera they still believe it will reach peak sales of $2 billion, just not as fast as they originally anticipated. The company stated they plan on putting on a “full court press” for Exubera. This full court press includes a direct to consumer advertising campaign and a roll out targeted at primary care physicians and specialists. With all their other problems Diabetic Investor finds it amazing that a company which is focused on cutting costs is publicly committed to spend more on product that is destine to be a huge commercial failure.
The fact of the matter is Pfizer stumbled badly with Exubera and throwing more money at the product will not turn Exubera from a frog to a prince. Diabetic Investor also finds it disturbing that the company is trying to position Exubera as more effective than other medications already on the market. Playing very fast and lose with study data the company showed one slide that implied Exubera was more effective than Metformin, TZD’s, Januvia and Byetta in helping patients reach an A1c of 7% or lower. (The American Diabetes Association defines a patient as well controlled when their A1C is at 7% or less.) Having seen the study data for the treatment options Pfizer compared to Exubera and all the Exubera study data, the company’s implication that Exubera is more effective is a blatant misrepresentation of the facts and shameful.
Diabetic Investor suspects the company will continue to misstate the facts in their upcoming direct to consumer advertising campaign. Hopefully patients and physicians will not be fooled by this transparent effort of data manipulation.
Instead of acknowledging their mistakes with Exubera Pfizer has decided to follow the lead set by politicians who are well known for misrepresenting the facts with their attack ads. Patients, physicians and diabetes educators need to have all the facts when it comes to choosing an effective treatment regimen. There is no question many patients would benefit from insulin therapy. However insulin therapy is not something that should be undertaken without proper education on the benefits and drawbacks of insulin’s effects on the body. This is one reason why Exubera has failed so badly. The fact of the matter is patients are not afraid of insulin injections they are afraid of insulin. It is also true that primary care physicians lack the infrastructure to properly educate their patients on insulin therapy. Finally it does not help Exubera that the deliver device is cumbersome and not very patient friendly. When you add it all up Exubera isn’t the answer patients or physicians are looking for.
Pfizer was once in the enviable position of being one of the world’s premier drug companies. While Diabetic Investor believes the company’s recent troubles will be solved, we are disappointed they have fallen to such a low level when it comes to Exubera. There is no excuse for their actions.