Medtronic Rolls, Novo Fights Back and yet another

Medtronic Rolls, Novo Fights Back and yet another

This morning Medtronic (NYSE:MDT) reported results which indicated that their diabetes franchise is back in business. Under new leadership and refocused this franchise demonstrated solid growth, according to a company issued press release;

“The Diabetes Group includes the Intensive Insulin Management (IIM), Non-Intensive Diabetes Therapies (NDT), and Diabetes Service & Solutions (DSS) divisions. Worldwide Group revenue in the quarter of $450 million increased 11 percent, or 5 percent as reported.”

Even better the company’s future looks better than ever. Once a major weakness under the previous management team, the new team is not just refocused on shoring up their core insulin pump unit but the new initiatives put in place are shaping up very nicely too boot.  Although it’s still too early to tell whether the company’s push into the highly competitive Type 2 market will ultimately pay off, the new team has done an excellent job of putting together a well thought out strategy.

As we noted when this strategy was announced we weren’t certain whether it would succeed. Not because we thought the strategy was flawed, on the contrary no the issue we had was whether this unit whose core competency was in the Type 1 market could deal with the complexities of the Type 2 market. These two markets are quite different and rarely have we seen any device company effectively compete in both markets.

What makes Diabetic Investor optimistic here is how the company views the future. As we have been stating for some time now the future does not belong to the company that has the “best” hardware. The future belongs to any company who can drive better patient outcomes. Better outcomes which won’t come from the hardware a patient chooses rather which diabetes management system the patient chooses. A system which not only collects and transmits patient data but takes all this information turning it into patient relevant, actionable information.

As the company correctly noted during this morning’s call outcomes based reimbursement is coming, that if they are to succeed in the future they must show that their systems produce better patient outcomes. Now Medtronic is not the only device company who correctly sees the future yet they are one of the few that has the scale, resources and talent to succeed. The jury is still out as to whether they will ultimately succeed but so far so good.

Another company that has the scale, resources and talent to succeed is Novo Nordisk (NYSE:NVO). And as we anticipated the company will use whatever means they can to protect their product offerings. This was clear when at the World Diabetes Congress of the International Diabetes Federation (IDF) in Vancouver, Canada the company released the results of as new meta-analysis which found that Victoza provides better glycemic control than SGLT2’s. According to a company issued press release;

“The meta-analysis evaluated the relative efficacy of Victoza® to SGLT-2 inhibitors, including canagliflozin, empagliflozin and dapagliflozin. 1 In an analysis of 17 randomized controlled trials (RCTs), Victoza® demonstrated greater reductions in mean HbA1c compared to all SGLT-2 inhibitors (placebo-adjusted mean change -1.01%/-1.18% for Victoza® 1.2 mg/1.8 mg; -0.64/-0.79% for canagliflozin 100 mg/300 mg; -0.32%/- 0.38% for dapagliflozin 5 mg/10 mg; -0.59%/-0.62% for empagliflozin 10 mg/25 mg).”

This meta-analysis is just one more example of how competitive and data driven the diabetes drug market has become. It also confirms for Diabetic Investor that it’s just a matter of time before every diabetes drug company adds additional biomarkers beyond HbA1c to their clinical studies as a way to differentiate their offerings. That while HbA1c may be the gold standard for measuring control it is in an incomplete measure.

Diabetic Investor further suspects that given the cardiovascular data shown by Jardiance payors are caught in a complex vortex. Simply put when it comes to diabetes treatments which data set carries the most weight. Given that there are multiple options in each category what’s more important glycemic control, the traditional definition of what constitutes good control, or cardiovascular outcomes. Or put another way would a payor favor a drug like Jardiance which has shown solid albeit not outstanding glycemic control yet prolific cardiovascular data over Victoza which may not have the same cardiovascular data as Jardiance but according to the meta-analysis produces better glycemic control.

This is the conundrum not just facing payors but physicians who must choose which therapy regimen is most appropriate for their patients.

Looking towards the future Diabetic Investor sees a new standard developing for how we define good control, that good control will not be measured by HbA1c alone. That HbA1c will be combined with additional biomarkers which when looked at collectively will define what constitutes good control.  We further suspect given all the ongoing efforts to apply sophisticated analytics to the mountains of data being collected that the definition of good control will also be segmented by patient group. That in the future the definition of good control will be different for a 25 year old Type 1 than it is for a 54 year old Type 1.

This is both the power and peril of data. Suffice it to say the days of measuring good control by HbA1c alone are coming to an end.

Something that will never end is the quest to build a better mouse trap. We mention this as there is yet another company entering the continuous glucose monitoring market. A crowded market dominated by Dexcom (NASDAQ:DXCM) and Medtronic. Yes we have learned that Nemaura Medical (NASDAQ:NMRD) has raised $10 million to help develop … wait for it … continuous glucose monitoring system that includes a disposable patch, a watch and a smartphone app.”

Now in the interest of full disclosure we really don’t know much about the company or whether or not this system actually works. Looking over the company’s SEC filings and web site about all we can say is like so many other CGM wannabes about the only thing they have done to date is raise money. Some would consider this an accomplishment yet given the history of this space raising money is the easy part. Frankly there are still plenty of fools who will willingly invest in these start-ups. Do we need to remind everyone that GE, yes that GE, invested $8 million in the now defunct C8 MediSensor, another company that claimed they too had a built a better mouse trap.

While we suppose it is possible that Nemaura does actually have something, our experience tells us that they will do what every CGM wannabe company does. Come up with what looks like a way cool whiz bang technology that at least in theory could work. Next put together a slick PowerPoint presentation that shows how diabetes is growing at epidemic rates and how the CGM market is growing too. Point out that Google, yes Google, has just partnered with Dexcom. Take this said PowerPoint to suckers, excuse us, potential investors and get them to invest. This process will continue to repeat itself as the company goes back to the suckers, opps investors, telling them they are oh so close and with a few more millions they will reach the promised land. Eventually like C8, they will run out of suckers, sorry about that, investors to bilk and will fade away. Only to be reincarnated with a new name and the process starts all over again.

Frankly Diabetic Investor has no sympathy for the idiots who invest in these companies and it serves them right that they never see a return on their investment. As Momma Kliff used to say, and she has been quoted by many, there is no cure for stupid.