Medtronic and MannKind Report- GSK GLP-1 Moves to Phase III
Yesterday Medtronic (NYSE:MDT) announced fiscal third quarter results and their diabetes unit continues to experience slow sales growth. While sales for the unit increased 12% when adjusted for the adverse impact of foreign exchange rates the company acknowledged that the market for new pump placements remain very competitive. According to Gary Ellis, Medtronic’s CFO, “Diabetes revenue of $327 million grew 12% on a constant currency basis. Diabetes growth was driven by strong sales of durable pump systems and continued strength in our CGM franchise, which is annualizing at almost $100 million in revenue. These areas of strength helped partially offset several factors that continue to pressure overall growth, including the negative impact of the macroeconomic environment on new pump penetration, a negative replacement cycle and intensified competition.”
Later during the Q&A session of the conference call Mr. Ellis stated; “On the diabetes business, there too, we are best of market. We think there is still headroom given the fact the market is still under penetrated and with our – the excitement that we have around the continuous glucose monitoring combined with the latest technology in the patch pump, which will be coming out, we see that being a good tailwind for us going forward.”
During his prepared remarks Medtronic Chairman and CEO Bill Hawkins noted “Looking ahead, we remain confident in our plans to protect and extend our market leadership in diabetes via a series of three new product launches over the next several quarters.”
What all this adds up to when you get past all this corporate speak is, the insulin pump market is getting more competitive by the day and Medtronic is losing more battles than their winning. As Diabetic Investor noted after the company reported second quarter results the competition was capturing the majority of new pump placements, these are patients new to pump therapy. We mentioned that should Medtronic experience the same erosion in the replacement market, patients already on a pump who are replacing their existing system with a new one, the company could be in serious trouble as this is the lifeblood of their pump franchise.
Diabetic Investor finds it particularly interesting that Mr. Ellis mentioned the long awaited patch pump which the company is developing. It obvious the folks at Insulet (NASDAQ:PODD), the makers of the only wireless pump on the market, are getting under the skin of the good folks at Medtronic. While sources have indicated the Medtronic is behind schedule, it will be interesting to see how the company plans to compete with Insulet. Insulet already has a second generation pod and PDM set to come to market. Unlike Medtronic’s patch pump which is not completely disposable and does require greater patient interaction with the pump, the new pod from Insulet will be smaller and carry a lower profile. Given that Insulet has an agreement with Dexcom (NASDAQ:DXCM) to integrate their CGM with the OmniPod and that the Dexcom’s CGM is superior to Medtronic’s CGM, Medtronic will have an uphill fight to gain share in the growing wireless pump market.
Add in the fact that Animas, a unit of Johnson and Johnson (NYSE:JNJ), is beefing up their efforts it makes one wonder why anyone would seek to enter the insulin pump market. This market dynamic just adds to what Diabetic Investor has already said about Roche’s lame attempt to reinvigorate their pump unit. The fact is the insulin pump market is a three horse race with Medtronic’s lead shrinking and it will take more than new products to hold off Animas and Insulet.
Also reporting yesterday was MannKind (NASDAQ:MNKD) who continues to believe their inhaled insulin product will somehow succeed where so many others have failed. Frankly the company is beginning to sound like the boy who cried wolf as they with each call they claim they will are in discussions with several potential partners. Either MannKind is asking for too much from potential partners or more likely, potential partners believe as Diabetic Investor does the time for inhaled insulin has come and gone.
The real question here is how long will investors buy into this fairy tale. The company is bleeding cash, has no partner and even if approved their product has limited appeal. Adding to their woes is the changing dynamics of the type 2 market. Inhaled Insulin has always been targeted at poorly controlled type 2 patients who are failing current therapy options and supposedly are afraid of injections. A true fantasy given the strong acceptance of Lantus and Byetta – both delivered via injection. The fact is the future of the type 2 market is GLP-1 therapy which just happens to be delivered by injection.
No matter how good their product is market conditions are changing and not in their favor. The bottom line for MannKind is their time has come and gone.
Finally for anyone who does not believe GLP-1 therapy is the future look at GlaxoSmithKline’s (NYSE:GSK) announcement yesterday that Syncria® their GLP-1 candidate is moving into phase III trials. This phase III program will include more than 4,000 patients.
Like Byetta from Amylin (NASDAQ:AMLN), the only FDA approved GLP-1, and liraglutide from Novo Nordisk (NYSE:NVO), which is awaiting FDA approval, Syncria is also delivered via injection. GSK joins Roche who also has a GLP-1 in late stage trials in the intensifying race to be a player in the critical GLP-1 market. As Diabetic Investor pointed out previously the future is clear, to be a player in the type 2 market having a GLP-1 isn’t just a necessity it’s a must.
This is also the reason that Amylin remains the most valuable commodity in the diabetes sector. Even without Mr. Icahn trying to sell the company, Amylin maintains their edge over the competition. Given the growing importance of GLP-1 the stars are aligning quite nicely for Mr. Icahn thank you very much.
