Some takeaways

Some takeaways

Yesterday Abbott (NYSE: ABT) reported earnings which when it comes to diabetes is all about Libre, a system which continues to exceed expectations. Frankly the numbers don’t mean all that much as the real news was what we said it would be; when exactly will the FDA approve the Libre. On the that front look at this exchange during yesterday’s call;

“Mike Weinstein

Okay. And then just one quickly follow on Libre. You didn’t give us much of an update on the U.S. I know inter quarter miles and we’ve talked about this; you started a couple of trials to confirm the accuracy of Libre to the FDA. Does that mean that approval is likely more like yearend or early next year? And do you have any sense of whether the FDA has gotten comfortable with the idea of a factory calibrated device?

Miles White-

Well, there’s been a lot of conversation back and forth with the FDA. We’ve explained to the FDA how our factory calibration is done. And I think that conversation has gone well. I never want to predict the FDA. I think we have what we consider to be a fairly proprietary process for this factory calibration. So, it’s not something we are anxious to share widely. And it’s unique. So, I guess I’m not surprised that it needed further discussion. But I think that’s gone well. I don’t know that I can predict at all, Mike, when the FDA will come to a conclusion of its process. It was submitted almost a year ago. So, we are coming up on a date here, an annualized date. But, I don’t have any evidence that says, gee! It’s going to be a year end or longer. So, I don’t know that I could — I certainly wouldn’t say that because that may not be true. So, I don’t have that common indication. And I would say look, there is good, active, ongoing dialogue back and forth. That’s always a good sign. It’s the right kind of dialogue. I just wouldn’t forecast it. I don’t know.”

Bottom line Abbott has no idea when or if the FDA will approve the Libre. We suspect the FDA will eventually get there but just when is an open question.

Right now, this approval isn’t critical for their new partnership with Bigfoot but it could be later. See everyone seems to think this deal between Abbott and Bigfoot is directly linked to the insulin pump market. That is only partially true, the real driver here is the system we’ve been talking about which could dramatically alter the insulin pump market and put a serious dent in Medtronic’s (NYSE: MDT) growth.

All along we have said the biggest threat to the future of the insulin pump market is a system which combines a “smart” cloud enabled insulin pen with a CGM and app. As we have stated in the past such a system could deliver pump like outcomes at a fraction of the cost. This is the driver behind the Abbott/Bigfoot deal.

Now just in case anyone has forgotten Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO) and Sanofi (NYSE: SNY) sell millions of insulin pens and these companies will not merely surrender to Abbott/Bigfoot. No, they will compete fiercely to protect their turf and come out with their own way cool whiz bang system. All three of the major insulin companies are moving in this direction which basically means that this market which hasn’t even officially begun yet is well on its way to commodization.

At this point it’s necessary to reiterate something we also stated previously this deal between Abbott and Bigfoot won’t hurt Dexcom (NASDAQ: DXCM) in any way and could help Dexcom. Here’s why. As everyone knows Dexcom has the best CGM on the planet and even better they can manufacture them on massive scale, something neither Abbott and Medtronic can do. Now if you are any of the insulin companies and see you your pen business threatened would it not make sense to have your way cool system work with the best CGM system there is.

What everyone seems to forget is that when it comes to either a closed loop insulin delivery system or cloud enabled pen system the two critical components are the CGM and insulin dosing algorithm. The pen and pump are merely pieces of hardware. CGM is the chain that makes these systems work, take away that chain and the bike doesn’t ride. Anyone who thinks differently should look at all the patients who are getting the new 670G but are waiting for sensors. Without the sensor, the 670G is just another insulin pump. This is why Dexcom has the edge as they are the only CGM company which has demonstrated they can manufacture accurate sensors on a massive scale and yes, it is that simple.

Moving along to a business Abbott used to be in look at this; per a story from HMENews

“Reps. Diana DeGette, D-Colo., Susan Brooks, R-Ind., and Tom Reed, R-N.Y., have introduced a bill to ensure Medicare beneficiaries have access to their preferred brand of diabetes supplies.

“The Protecting Access to Diabetes Supplies Act,” H.R. 3271, would strengthen protections requiring mail-order contract suppliers to include at least 50% of the types of testing supplies that were available before the implementation of the competitive bidding program. It would also prohibit suppliers from encouraging beneficiaries to switch brands.”

Now we don’t want to sound snarky here but this is like trying to fix the Titanic after it has hit the iceberg. And we find it laughable that our elected officials believe these suppliers would not encourage switching. The reality is competitive bidding was the straw that broke the camel’s back for conventional glucose monitoring and like Humpty Dumpty all the king’s horses and all the king’s men cannot put Humpty Dumpty back together again.

Next on our list was an interesting piece of news from our friends at Insulet (NASDAQ: PODD) who yesterday stated, per a press release;

“Insulet Corporation (NASDAQ: PODD) (Insulet or the Company), the leader in tubeless insulin pump technology with its Omnipod® Insulin Management System (Omnipod System), today announced plans to assume, on July 1, 2018, the distribution, sales, marketing, training and support activities of Insulet’s Omnipod System across Europe following the expiration of the Company’s global distribution agreement with Ypsomed AG (Ypsomed) on June 30, 2018.”

It’s difficult to gauge the impact this move will have as it all comes down to Insulet’s ability to execute. On the positive side, this move could improve margins yet the move does not come without costs. Like so many moves in this wacky world time will tell whether this was the right one. Frankly we believe Insulet has bigger issues to deal with given the dynamics of the US insulin pump market which makes us wonder why they added this to their already full plate. This leads us to believe that this was not done for strategic reasons rather Insulet and Ypsomed were having what we like to call relationship issues.

We’ll end today with this piece of news from Merck (NYSE: MRK) who in press release issued Thursday stated;

“Merck (NYSE:MRK), known as MSD outside of the United States and Canada, today announced that the U.S. Food and Drug Administration (FDA) has granted tentative approval for LUSDUNA™ Nexvue™ (insulin glargine injection) 100 units/mL, a follow-on biologic1 basal insulin in a pre-filled dosing device. LUSDUNA Nexvue is being developed by Merck with funding from Samsung Bioepis.”

Since we have dumped on our wine drinking friends in France and their unique ability to screw up a very good thing let’s reverse course just for a moment. Let’s raise a glass of chardonnay and toast the final nail in the Lantus coffin. That was one great run but just as a bottle of Prisoner will eventually run dry so too must the gravy train provided by Lantus must come to an end. It was sure fun while it lasted but as Momma Kliff always said;

“Nothing great lasts forever especially when you do everything in your power to screw up a great thing.”

Hope everyone has a great weekend.