Off and running

Off and running

With 2014 officially behind us and this being the first official work Monday of the New Year a few thoughts about what lies ahead in 2015. As per usual the year begins with two conferences which have become part of the Diabetic Investor tour, first is the Consumer Electronics Show in Las Vegas, followed immediately by the J P Morgan Healthcare Conference in that beautiful city by the bay, San Francisco. Later on in 2015 we’ll attend yet another American Diabetes Association (ADA) Scientific Sessions held this year in Beantown followed by the American Association of Diabetes Educators (AADE) annual conference which always seems to be held in the hottest city in America at the worst possible time of the year and with the conference being held in New Orleans this year will be no different.

Mixed into these domestic conferences are of course a few notable foreign conferences the most notable being the European Association for the Study of Diabetes (EASD) which for 2015 will take place in the beautiful city of Stockholm.

Besides these “major” conferences will be hundreds more on nearly every conceivable subject, everything from mHealth to Corporate Health and Wellness to Nanotechnology and everything in between. The fact is if Diabetic Investor wanted we could spend over 70% of time attending shows that have a diabetes connection. A fact which demonstrates just how deeply diabetes impacts nearly aspect of not just our healthcare system but our economy as well.

Looking ahead we see several trends developing that could transform this wacky world making it even wackier still. So before we begin our pilgrimage to Sin City and then to San Francisco, let’s examine a few of the more important trends that will emerge in 2015.

Blood Glucose Monitoring Meets Shave Club for Men

Over the past few years we’ve written often on how payors have been shifting a greater share of the cost to their patients with diabetes. This usually comes in two forms, higher co-payments and more stringent controls on the number of test strips allowed for reimbursement. Add in the fact that competitive bidding has cut 72% from Medicare reimbursement, stores such as Wal Mart are offering ultra-low priced meter and test strips and the coming of generic test strips; it’s easy to understand why this once thriving hugely profitable market is now a mere shell of its former self.

Yet all is not lost on those brave enough to experiment with a new concept that just might work, rather than go the conventional reimbursement route, offer a pricing model similar to what the consumer is used to with their cellular service or what we like to call the Shave Club for Men concept were the consumer pays a flat monthly fee for an unlimited amount of test strips which are automatically shipped when the consumer needs. No more trips to the pharmacy, no more co-payments, no more worries about getting a prescription renewed and best of all these systems will do more than just measure glucose but actually serve as a diabetes management tool. Or put simply, they will turn this data set into actionable information which will help the patient better manage their diabetes and ultimately lead to better outcomes.

Diabetic Investor is aware of several companies getting set to launch this concept and believes they stand a better than 50% chance of not just being successful but thriving.

What’s old is new again.

When it comes to the diabetes drug sector 2015 will see the return of the Lilly (NYSE:LLY) Novo Nordisk (NYSE:NVO) rivalry, with AstraZeneca (NYSE:AZN) thrown into the mix. Gone from this fight is that soap opera once known as Sanofi (NYSE:SNY), who will do what they do best when it comes to diabetes drugs that aren’t named Lantus, nothing. The Afrezza launch, if it takes place, will fail to meet expectations while it’s likely the FDA will ask for a panel meeting to review the Lantus replacement, Toujeo®.

Looking over this space it’s basically a three horse race with Lilly having the most comprehensive portfolio, Novo having greater international presence and Astra gaining a toehold in the market. Merck (NYSE:MRK) Januvia franchise will continue to see share erosion while GlaxoSmithKline (NYSE:GSK) is unlikely to recapture their diabetes glory years with Tanzeum.

Consolidation will come in the insulin pump space.

Although Johnson and Johnson (NYSE:JNJ) still hasn’t quite figured out what to do with Animas (hopefully we’ll learn more about their intentions at JPM), one thing seems certain this could be the year we see not one but two insulin pump companies acquired.  The two leadings takeover candidates being Insulet (NASDAQ:PODD) and Tandem (NASDAQ:TNDM), although there are many who believe that Asante is in the mix as well.

The fact is this market continues to follow the path towards commodization and like the BGM market scale is becoming ever more critical. It’s also evident that like BGM this is becoming a copy-cat me-too market where innovation does not equate to greater sales.  Lastly the current crop of players are beginning to understand that they must do more than just sell products of they are to survive over the long-term.

Insulin pump companies will be among the first in diabetes who transform themselves from sellers of products to sellers of diabetes management systems.

The Not Quite Ready for Prime Time Players.

As much as we believe that companies like Apple, Google, Samsung, Panasonic, Qualcomm and Phillips Electronics will have a major impact in the diabetes market their day has not yet arrived. While none of the companies would publicly acknowledge this, the fact is they are not yet ready for prime time and are still in the learning phase. Yes they have gobs of money, tons of talent and a plethora of way cool whiz bang products and/or systems under development, they lack a fundamental understanding of how this market actually functions.

There is no question in our minds they will get there but we just don’t see 2015 being that year.

Out of the blue.

If there is one thing Diabetic Investor has learned from covering this wacky world for over 20 years it’s to expect the unexpected. Yes it seems each year something that no one anticipated comes along and just makes everyone standup and take notice. This year it was the ongoing soap opera at Sanofi, next year who knows. All we do know is that when it comes to the wacky world of diabetes anything can and usually does happen.

So off to Sin City we go ……….