The Right Mix

While reading through Lilly’s earnings release, we were struck by several items. Having followed Lilly for over 20 years we remember a time long ago when their diabetes franchise appeared to be on the verge of extinction. Back then the company seemed to have lost their way while their rival Novo Nordisk was powering ahead. Today there is little doubt that Lilly has not just regained their mojo but is the undisputed leader in diabetes offering the most comprehensive portfolio of diabetes therapies.

Like Novo Lilly has also become more of a GLP-1 company than an insulin company. While it seemed unthinkable back in the day sales of Trulicity are now nearly twice the sales of Humalog. We wouldn’t say that insulin has become an afterthought for either Lilly or Novo but it’s clear with the growth in the GLP-1 category sales in this category are driving both companies. Insulin has become a volume game while the GLP-1 market continues to expand. Simply put insulin has become a commodity while GLP-1 has YET to commoditize.

Yet Lilly has gone a step further than Novo as they offer the most comprehensive portfolio of diabetes therapies. Jardiance after what was a slow start is powering ahead and the pipeline is full of compounds directed at the Type 2 market. While many ex-Lilly executives have attempted to take credit for this strategy the current team should just be grateful whoever is responsible had the vision to pursue this strategy.

Under new leadership the diabetes franchise cannot sit back and rest on the great job done by the previous leadership. As well as the franchise is performing today there are some concerns. Trulicity is doing very well but is now facing a new threat from the oral GLP-1 just launched by Novo and soon will face another threat when the Intarcia exenatide micropump arrives. It’s way too early to tell if Novo’s new offering will adversely impact Trulicity sales we don’t think it will but only time will tell. However we do see the Intarcia system as a bigger threat assuming of course it gets through the FDA which we think it will.

Turning to the device side the company did note their non-exclusive agreement with Dexcom to integrate the Dexcom CGM into their coming portfolio of connected pens and yes, an insulin pump. Not to get off track here but this agreement is just one more reason why Dexcom has greater opportunities than Abbott. With Libre2 stuck at the FDA and the G7 coming at the end of this year Dexcom is the company everyone wants to dance with. As we have noted many times in the future all the toys will talk with all the other toys but until Libre2 makes it through the FDA, maybe we should start saying IF it makes through the FDA, Dexcom is the only realistic game in town.

Unfortunately there wasn’t an update on when the connected pen, which is really a connected pen cap cover, will get here. We can’t help but think that both Lilly and Novo are letting the Tyler opportunity slip away. That someone else, perhaps Companion will get to market first with a real Tyler. We don’t want to say that the insulin companies don’t care about Tyler more accurately there isn’t a sense of urgency. Tyler will get here and there will be multiple versions of him but given the dynamics of the insulin market the insulin companies aren’t in a rush.

All in all Lilly remains on solid ground, the current portfolio is performing as expected, the pipeline is strong and there were no major surprises today. As we noted earlier there are hurdles to overcome however these hurdles are by no means so high that they cannot be overcome. The key as we see it is to successfully navigate the coming challenges in the GLP-1 market, until reinforcements come likely in 2022.