The Early Line

With the annual ADA confab only, a few weeks away an early betting line is emerging as to what the BIG story will be. Should form follow function the biggest story coming out of the show will be a story that happens at the show that no one saw coming. Throwing away these unanticipated/surprise events we do see some stories dominating the news cycle while we’re in steamy Orlando.

Yesterday Novo Nordisk (NYSE: NVO) took a major step to be a headliner when they released data from PIONEER 2, the second phase 3a trial with oral semaglutide. In this head to head trial against Januvia from Lilly (NYSE: LLY) this oral GLP-1 achieved the following per a Novo press release;

“The trial achieved its primary objective according to the primary statistical approach by demonstrating a statistically significant and superior improvement in HbA1c with oral semaglutide compared to empagliflozin at 26 weeks. Difference in weight loss at 26 weeks between oral semaglutide and empagliflozin was not statistically significant when applying the primary statistical approach.”

Already the “experts” and analysts have begun parsing the data noting for example the weight loss between the two drugs was not statistically significant at 26 weeks. What caught our eye was this tidbit from the release; “The proportion of subjects who discontinued treatment due to adverse events was 11% for people treated with 14 mg oral semaglutide compared to 4% for people treated with 25 mg empagliflozin.”

Still as a whole the data was impressive as we don’t see it being an either-or situation with a physician choosing between Januvia or oral semaglutide. Considering how physicians treat Type 2 diabetes its quite possible the two drugs will be used together. From our perspective the real loser here isn’t how this news impacts the market for oral medications rather how it impacts the insulin market.

The fact of the matter is we see this oral GLP-1 hurting insulin usage. In the real-world physicians will use almost any oral medication or non-insulin injectable before adding insulin into the mix. Should oral semaglutide hit the market sometime in 2020 we see this trend continuing. An oral GLP-1 gives physicians another reason to delay moving patients to insulin therapy.

Battling Novo for headlines will Dexcom (NASDAQ: DXCM) who we anticipate will get a far amount of attention due to the launch of the G6. The real story won’t be how the launch is going, to us this is a side story. No, the real story will be how will Abbott (NYSE: ABT) respond to the launch and what’s next for the FreeStyle Libre.

Like the Novo Lilly battle noted above we don’t view this battle between Dexcom and Abbott for CGM supremacy as an either-or situation. As we have consistently stated the CGM market is large enough and growing fast enough so both companies can win. In that regard it reminds us of the early days of the insulin pump market when MiniMed and Disetronic were both successful. Disetronic faltered not because there was anything wrong with their system, they faltered because of mistakes they made running the business.

The key for both Dexcom and Abbott is staying focused and not becoming distracted concentrating just on each other. Both companies must be cognizant of the fact that while they are leading the way today the competition is also making strides. Here we are changing somewhat our view of how Medtronic (NYSE: MDT) will play in this sandbox.

As we have stated previously the Guardian Connect, the company’s stand-alone CGM targeted at patients following multiple daily injection (MDI) therapy, is pretty much dead on arrival as it is configured today. That put side by side against either the G6 or Libre, the Connect just doesn’t measure up. However, given that Medtronic has already spent millions to enter this market we doubt they will just abandon the stand-alone market.

The fact is today Medtronic is in the exact same position Abbott was with the Libre years ago. Back when the Libre first came out it was considered inferior to the Dexcom system. Yet Abbott was committed to the Libre and like Medtronic had the resources to think longer term. Like Abbott Medtronic sees the CGM market growing and knows that any sales are better than nothing. Thanks to their persistence and improvements to the Libre Abbott now is going to head to head with Dexcom.

Medtronic could easily replicate this path understanding that the payoff will come down the road. Like Abbott they could use their resources to improve the Connect making it more competitive. Understanding full well that while they may not become the number one or even number two system there is nothing wrong with capturing 20% of a $2 billion market. Sure, the payoff is better when your horse wins the race but the horse still finishes in the money coming in third.

This same dynamic could also play out in the insulin pump market another story which will garner its share of attention at the show as we anticipate that Tandem (NASDAQ: TNDM) could go into the show fresh off the approval of their new system which offers low glucose suspend. An approval which would lay the ground work for their next move into a full blown closed loop system. A system we see giving the 670G a serious run for its money.

Tandem like Dexcom and Abbott must stay focused and not get ahead of themselves or become delusional thinking they can dethrone Medtronic in the insulin pump market. Just as Medtronic must have realistic expectations in the stand-alone CGM market, Tandem must be realistic about what they can and cannot achieve in the insulin pump market. Frankly Tandem has a much better chance of moving ahead of Insulet (NASDAQ: PODD) then they do knocking off Medtronic.

Insulet who’ll be touting the new DASH system at the show is under more pressure than either Tandem or Medtronic as they have yet to release any major data on their closed loop system. Although we have never believed a closed loop system is the Holy Grail the fact is by default these systems will eventually become commonplace. That just as “smart” insulin pumps are the defacto standard today, closed loop systems will be the standard in the future. That if you want to play in the insulin pump sandbox you must have one.

We’re sure other story lines will develop and can almost guarantee that some story will come out of the blue and surprise everyone. Whatever happens as per usual we’ll be there covering it all. So, stay tuned this could actually be fun.