Lilly Begins To Make Their Move
This morning we learned that Lilly (NYSE:LLY) who earlier this month announced plans to establish a new drug delivery and device innovation center in Cambridge, Massachusetts, has also made an investment in medical device maker Companion Medical. According to a press release from Companion Lilly has become the lead investor in their Series B financing round.
The release states;
“Lilly’s investment, along with other investors, could potentially enable Companion to complete testing and 510(k) submission to the Food and Drug Administration of its Bluetooth-enabled insulin pen and associated smartphone app, which could address a significant unmet need in the diabetes space.”
Besides this way cool whiz bang insulin pen the Companion web site states;
“Companion Medical intends to bring the benefits of insulin pumps to the 93% of the market that currently won’t use pumps”
As we have noted before this move by Lilly into devices is not surprising and if well executed could help drive sales of their diabetes drug portfolio. While Lilly and Novo Nordisk (NYSE:NVO) would beg to differ when it comes to short-acting insulin there is little difference between Humalog and Novolog. Up until now one area where Novo had a leg up on Lilly was their superior insulin delivery systems. This investment in Companion and others to follow is meant to level the playing field and help sell more insulin.
It’s also not surprising that Lilly like everyone else in this space is embracing interconnected diabetes management (IDM), that they see IDM as a tool to sell more insulin. It’s well known that insulin pen usage has been steadily increasing. It’s also well known that Companion isn’t the only company with a “smart” insulin pen. Our wine drinking friends in France have been sniffing around this area but in typical Sanofi (NYSE:SNY) fashion has been unable to pull the trigger on any deals. Novo has also looked around and we suspect will become more aggressive now that Lilly is invading their turf.
The one thing we wouldn’t expect out of this deal is an insulin pump from Companion. Their statement on bringing the benefits of insulin pumps to the masses does not mean they want to compete with Medtronic (NYSE:MDT) or Animas. Rather by using their way cool smart pen patients will more effectively dose their insulin.
We can however envision Lilly doing a deal with either Medtronic or Animas as another avenue to increase insulin sales. For years insulin makers have been talking about either pre-filled insulin pump cartridges or pre-filed insulin cartridges which can fill a pump reservoir. In fact way back in the day Lilly and Medtronic actually had such an agreement to develop such a system. Well don’t be surprised with Medtronic under new leadership and Lilly looking to sell more insulin, if this deal is not resurrected.
The fact is another Diabetic Investor prediction is coming true, in that, in the future physicians will prescribe diabetes management systems rather than individual parts. This is why Lilly is moving not just into the device space but embracing IDM, they know that in the future it will be outcomes that matter and when used as intended IDM can improve outcomes. Lilly, like everyone else, sees that when it comes to diabetes therapies this is becoming a commodity style market. If Lilly, or any drug company for that matter, is going to prosper in this new environment they must transform themselves from selling drugs to selling systems and patient solutions.
Given this set of circumstances don’t be surprised if Lilly makes some additional investments in the glucose monitoring space. The fact is any way cool smart insulin pen is worthless without glucose data so why not add in a way cool whiz bang glucose meter say from TelCare, Livongo or iHealth. These systems already communicate with the cloud, are approved by the FDA and are in the hands of patients right now.
Some may say that Lilly would prefer to work with someone like Johnson and Johnson (NYSE:JNJ) or perhaps their Indianapolis neighbors Roche and this possibility does exist. However Diabetic Investor sees TelCare, Livongo or iHealth a much better fit as their goals are aligned with Lilly’s goals; namely they are patient solution companies not a seller of test strips.
Quite frankly this is one time when scale works against a JNJ or Roche. The harsh reality is these newcomers to glucose monitoring are better equipped as we move towards outcomes based reimbursement as they we’re built for this environment. JNJ, Roche and Abbott (NYSE:ABT) can talk all they want about being IDM ready but the reality is they are still living in the past and not equipped to handle the future.
It’s taken longer than Diabetic Investor anticipated to get to this point where systems are more important than the individual parts and quite honestly we’re not there yet. However this is the future and everyone in diabetes knows it. This is going to get very interesting so fashion your seat belts everyone this is going to be one heck of a ride.
