Looking for answers

Looking for answers

This week Diabetic Investor has been attending the Cardiometabolic Health Congress in Boston seeking the answer to a critical question – were the results seen in the EMPA-REG outcome study for Jardiance unique to Jardiance or is this a class effect for all SGLT2’s? Before we attempt to answer that question let’s a get a few housekeeping items out of the way as there has been a slew of earnings reports this week.

Both Abbott (NYSE:ABT) and Roche reported this week and as expected their respective diabetes device units continue to circle the bowl. While Abbott continues to live under the delusion that the Libre will save the day, it won’t, Roche barley acknowledges they even have a diabetes device unit. The harsh reality is this when it comes to conventional glucose monitoring Johnson and Johnson (NYSE:JNJ) owns the US market. At the same time international markets are becoming even more competitive.

Although neither company revealed much about their plans for the future it’s obvious that these units once cash cows are running out of milk. That if the right offer came along these units would be jettisoned in a heartbeat. Frankly the longer these units remain part of the parent company the worse this situation will become. Usage is decreasing, prices are contracting and competition is intensifying. The reality is neither Abbott nor Roche is equipped to deal with current market dynamics.

Simply put the conventional glucose monitoring market sucks and without massive scale and preferred formulary status it’s difficult to maintain reasonable margins. JNJ has basically bought preferred formulary status which combined with their scale makes it’s next to impossible for Abbott or Roche to compete here in the US. This same scenario is beginning to play out overseas which basically mean the future for Roche and Abbott is bleak and baring a sale these once proud unit they will die a slow and very painful death.

Now onto that burning question were the cardiovascular results seen in the EMPA study unique to Jardiance or are these results applicable to all SGLT2’s. The simple answer is there is no simple answer. Attendees at the conference generally believe that the cardiovascular benefits seen in the EMPA study will apply to all SGLT2’s yet they are not totally convinced yet. Several noted that Jardiance did not appear to have an impact on bone fractures an issue which prompted the FDA to change the label for Invokana currently the leading SGLT2 from Johnson and Johnson. This fact provides attendees a moment of pause as it could be all SGLT2’s don’t work the same way. Simply put these experts want data on Invokana before calling this a class effect.

Yet it’s possible that physicians aren’t waiting for more data and have already begun using Jardiance over Invokana. Take a look at comments made yesterday by Enrique Conterno, President of Diabetes for Lilly (NYSE:LLY) who reported results yesterday. During the question and answer portion of the call he made the following statement;

“If anything, the EMPA-REG OUTCOME results create differentiation in the marketplace. So from that perspective, we feel very confident in the value proposition that Jardiance offers today, which is very significant.

I would point out that the access that we already have with Jardiance for 2016 is indeed very strong. We will have over 85% commercial access and over 55% Part D access.

Could those numbers improve a bit with some of these results? It is likely. But as you know, that takes time, and there’s a process when it comes to formularies.

We — at this point in time, it’s — there’s no promotion of this data. We are clearly seeing an uptick when it comes to new to brand prescriptions.

Just to frame, we were before the top line, when we look at EMPA, including both Jardiance and Glyxambi, our new to brand share was 15%. That’s creeped up to 17% by the time of EASD. And now we are at 21%.

Probably most relevant is the share shift that we’ve seen post EASD with endocrinologies going from 21% to 31% new to brand share, despite the fact that there is no promotion. As John shared in his prepared remarks, we are planning to have the submission before the end of the year. Now in terms of our positioning, in terms of promotion, that’s something that we do not discuss prior to basically launching our promotion campaign, and our messages in this particular case for EMPA.”

This jump in share is not good news for JNJ who during their earnings call stated they believed the cardiovascular benefits seen in EMPA were applicable to all SGLT2’s. Now this jump in share does not mean that Invokana will regulated to secondary position in this category rather that like other diabetes drug categories it will be a knock down drag out fight. The simple fact is there is enough empirical evidence that this is a class effect yet without hard data from JNJ or AstraZeneca (NYSE:AZN), who also has an SGLT2, no one can say for certain.

Getting back to the Lilly results suffice it to say that the big dog is back in the yard. While all the news wasn’t great the simple fact is Lilly is kicking some serious booty. Trulicity, their once-weekly GLP-1, exceeded expectations with sales reaching $74 million well ahead of analyst estimates of $66 million. Humalog, their short-acting insulin, also beat estimates.

Yet in an ominous sign for our wine drinking friends in France we found the comments on Basaglar, their biosimilar version of Lantus, very interesting. The company stated;

“So on Basaglar, in the three countries where we’ve launched, and I will briefly just highlight what our share is, when we look at the entire market, in Japan, as I mentioned, we are at 5.5%. In the Czech Republic at3%, in Slovakia, it’s a small market but I bring it up because we’re at 11%.

We also launched in Germany, the UK, Sweden, Poland. So we are really in full launch mode.

I think it’s fair to say that the dynamics when it comes to pricing, they vary from country to country. In some cases, there is a very formulaic path in terms of what’s going to be the pricing that we would receive as a result of launching a biosimilar. And that determines the price. And some cases we have discretion in terms of where we price.

It is too early to basically say that the — where these patients are coming from. It is likely that in Slovakia, some of these patients are switches because the reimbursement level in Slovakia was lower when we launched. And in this particular case, patients that are on Lantus, my understanding is that they have to pay the out of pocket on some of the difference relative to the Lantus price.

We have to see this story evolve. But I think it’s fair to say that so far we are pleased with our launch.”

As we anticipated the diabetes drug sector is once again the domain of Lilly and Novo Nordisk (NYSE:NVO). There is no question the EMPA data will be at catalyst for Jardiance and will make JNJ play defense. The harsh reality is doc’s will favor hard data which Jardiance has over the possibility this is a class effect. JNJ can claim all day that it is but until they have hard data they are basically forced to fight using price as a weapon.

Looking at the insulin market it is Sanofi (NYSE:SNY) who’s in the most trouble. Sales of Toujeo and Afrezza continue to lag well behind expectations. Lantus is under assault and they have nothing in the pipeline. Hence the reason they settled the patent litigation with Lilly over Basaglar. It will be interesting to see how Sanofi frames their comments on this market when they report next week. The reality is the ship is taking on water and as hard as they try to bail they cannot prevent the ship from sinking.

AstraZeneca is also taking on water and is a prime example of what happens when a company fails to have a clear well thought out strategy. Looking at the results for Trulicity its obvious physicians are favoring this drug over Bydureon a good drug with an inferior delivery system compared to Trulicity. The simple fact is Astra had an opportunity to own the long-acting GLP-1 category and they blew it. This combined with the problems with their oral diabetes drugs shows that Pascal Soriot isn’t the CEO everyone thought he was.  This unit is in a world of hurt and baring a major overhaul is destine to become a non-factor in the diabetes drug market.

We’ve said it before and we’ll say it again when it comes to the diabetes drug market this is the domain of Lilly and Novo. The more things change the more they stay the same.