Prolonging the pain

Prolonging the pain

Senseonics may have been the first causality of the coronavirus crisis but it certainly won’t be the last. The fact is several smaller less well capitalized companies are on the verge of collapse and with venture money drying up it’s only a matter of time before more of these companies join Senseonics. The one saving grace for these companies is the $2 Trillion stimulus package passed by Congress. In the near term these smaller companies will be able to take advantage of the Paycheck Protection Program, the $360 Billion set aside for small businesses.

While this funding will keep these players going temporarily the fact is even when this crisis is over these players face a daunting task. As we all know the world will be a much different place when this is all over and the changes coming will not favor these companies. To fully appreciate the task that lies ahead let’s look at some med-tech companies facing an uncertain fate.

As everyone knows we’re big fans of Tyler – an insulin delivery system which consists of a connected insulin pen, CGM and app. Just as a refresher Tyler’s main benefit is helping the patient more effectively dose their insulin. The CGM gathers glucose data, the connected pen adds in the insulin data while the insulin dosing algorithm contained within the app does the analytics and makes recommendations to the patient. Tyler has multiple benefits the biggest being it’s much cheaper than a sensor augmented insulin pump.

Prior to the crisis Companion Medical was the closet company to having a real Tyler. The InPen and its app works with the Dexcom CGM. Earlier this week Companion launched their improved version of the InPen app and seems to be about the only connected pen company with all the pieces for a Tyler. Companion has another advantage as they are actually selling the InPen, this is not a concept this is a real FDA approved product that’s in the hands of patients today.

Lilly has their version of Tyler coming while Novo Nordisk also has one coming. As we have said from day one all things being equal the insulin companies should own the Tyler market. Here’s why. Insulin both short and long acting has become a commodity. Simply put insulin has become a volume business. Lilly and Novo see Tyler as their method for maintaining insulin sales volume. Both Lilly and Novo have indicated they plan to give away the hardware, the connected pen or connected cap cover which fits over a disposable insulin pen.

The fact is neither the Lilly or Novo hardware has to be as good as the InPen or any of the other systems under development. The fact is Companion and the many Companion wannabes cannot give away their hardware for free. Lilly and Novo see Tyler as tool to sell more insulin or at minimum as a tool to maintain formulary position. Given their huge installed user bases they can afford to give away the hardware for free, the other players can’t.

The biggest reason Tyler hasn’t arrived, other than the InPen system, is neither Lilly nor Novo have a sense of urgency. The fact is these “insulin” companies make more money selling GLP-1’s then they do selling insulin. Insulin sales are still important but given that insulin has become a commodity it’s all about volume, making the same by selling more. This is in direct contrast to the GLP-1 market which continues to grow and does not yet face any biosimilar competition.

What Companion and all the companion wannabes are hoping for is that Lilly or Novo adopts their technology believing it gives them an advantage over the other. The Achilles Heel for Lilly or Novo is that Companion teams up with their CGM partner Dexcom and finds an insulin partner, likely a biosimilar and begins selling a system that includes insulin. Just as Lilly and Novo want to sell more insulin Dexcom wants to sell more sensors.

This is reason Abbott invested in Bigfoot seeing this as way to sell more Libre’s. Abbott like Dexcom could also partner with a biosimilar insulin company. However Abbott seems less committed to Bigfoot as they have become aggressive signing on insulin partners, i.e. Sanofi who like Lilly and Novo have their version of Tyler. Novo for their part is being agnostic when it comes to CGM partners allowing their system to work with any CGM. Lilly seems headed in this direction yet for the moment is only working with Dexcom.

This is one reason we don’t see much of a future for Bigfoot. The company has been beset by delays and while they continue to insist, they will come to market in 2021 with their system it may be too late by then, assuming of course they meet this deadline which based on their history seems problematic. Abbott did invest an additional $45 million in Bigfoot, but our sources note Abbott is just kicking the can down the road.

Frankly with all the various of Tyler floating around it makes little sense for Abbott to invest more while at same time signing on more insulin partners. Throw in the fact that Libre2 still isn’t here yet and this additional investment in Bigfoot makes even less sense. Hence the reason we believe Abbott won’t invest more or put more bluntly they are basically telling Bigfoot it’s time to put up or shut up.

Even if by some miracle Bigfoot gets to market in 2021, they will be well behind everyone and will face the same issue as Companion when it comes to competing with Lilly, Novo and Sanofi. Companion has the best hope for the reasons we already mentioned yet beyond Companion we don’t see much hope for the many connected pen companies.