Turn out the lights the party is over

Turn out the lights the party is over

As usual the annual American Diabetes Association conference which just wrapped up in San Francisco brought with it a host of news.  Not surprisingly the main stream media continues to be fascinated by the bionic pancreas, which is better known as the quest to develop an artificial pancreas. This fascination was heightened by data presented at the conference which seem to indicate we are closer than ever to a true closed loop delivery system.

Since Diabetic Investors views on this quest are well documented here is a quote from Anne Peters, director of the clinical diabetes program at the University of Southern California after seeing the data; “It’s a leap ahead in treating diabetes, but it’s a research leap—not a leap where patients can now use this.” All we will add at this point even with this data our view hasn’t changed we continue to believe that this product is still many years away and that even if it gets here it will help only a handful of patients.

Perhaps more interesting was an announcement made by Medtronic (NYSE:MDT) the leader in the insulin pump market and Sanofi (NYSE:SNY). According to jointly issued press release back on the 14th; – “Sanofi (EURONEXT: SAN and NYSE: SNY) and Medtronic, Inc. (NYSE: MDT) today announced that they have signed a memorandum of understanding to enter into a global strategic alliance in diabetes, aimed at improving patient experience and outcomes for people with diabetes around the world. The alliance will initially focus on two key priorities: the development of drug-device combinations and delivery of care management services to improve adherence, simplify insulin treatment, and help people with diabetes better manage their condition.

The alliance will be structured as an open-innovation model, leveraging the capabilities, as well as the human and financial resources, of both companies. Based on the success of the two initial priorities, the companies may explore other areas for potential collaboration”

Diabetic Investor takes this as sign that yet another Sanofi diabetes device has run into issues. In what is becoming a reoccurring theme for Sanofi, the company was attempting to develop an insulin pen which – wait for it – communicated with a smartphone. The theory was patients using the now dead iBGStar along with this way cool pen plus the way cool app would better manage their diabetes. The thought was patients would be able to make better insulin dosing decision armed with all this information. Perhaps this agreement with Medtronic is signal that Sanofi has finally awakened to the fact that about the only thing they did well in diabetes was Lantus.

Diabetic Investor suspects somewhere along the line the two companies will talk about insulin pumps that come with prefilled insulin cartridges. This is hardly a new idea but would make using an insulin pump somewhat easier to use.  We further suspect we’ll see a host of way cool whiz bang apps that fall into the much discussed area of interconnected diabetes management.

Another collaboration was announced by Dexcom (NASDAQ:DXCM) and Insulet (NASDAQ:PODD), which may seem odd given that at one time it seemed like the two companies didn’t exactly like each other.  Under the terms of this collaboration the two companies announced their intention to integrate data from Insulet’s OmniPod System into DexCom’s mobile App platform. As per usual the two companies believe that patients will be able to better manage their diabetes armed with all this information. If this is beginning to sound like a broken record get used to it; as we noted earlier in this piece and earlier today the world of interconnected diabetes management is upon us.

What makes this collaboration so odd is that the two companies once had an agreement to integrate the Dexcom system into the OmniPod system. An agreement which was terminated as Insulet for reasons only they seem to understand decided they could develop their own continuous glucose monitor. An effort which to date has generated lots of talk from Insulet but so far nothing other than talk. One just might think given that Dexcom has the best CGM system on the market and the complexities of developing such a system Insulet would have stuck with what they know best and let the original agreement stand.  Yet only in the wacky world of diabetes devices do we see companies let greed and hubris get in the way of good business.

News also came that Lilly’s (NYSE:LLY) biosimilar version of Lantus is just as good as Lantus. Again this is not really news but it does reinforce Diabetic Investor’s view that the diabetes drug market is inching closer and closer to becoming a commodity market. Who knows perhaps this is why Sanofi started working with Medtronic as maybe just maybe they are awakening to the fact that generic Lantus is coming and they have nothing in their pipeline that will come remotely close to replacing the revenue they will lose when this happens. And mark our words it’s not a matter of if a generic Lantus gets here but when it will get here, that’s when the real fun will begin.

Sorry to stick with the interconnected diabetes management theme but as we said get used to this, but another device making news last week. The iHealth Align which – wait for it- attaches to patients smartphone.  Thankfully the folks at iHealth live in the real world as the Align works not just with the way cool iPhone but also Android based smartphones.  The Align will retail for $16.95 while a box of 50 test strips will cost just $12.50 ($.25 per strip) for patients in the company’s Simple Savings program.

The Align joins a growing list of ultra-cheap monitors and marks the beginning of the end for the major brands. The majors may have scale but these ultra-cheap systems are chipping away at share. Is it any wonder why every major BGM company wants out of this market and wants out like yesterday?  Just wait until there is a generic test strip on the market, again something that will happen in the future. The majors who have been cutting costs with reckless abandon understand no amount of cost cutting will save them from their fate. The fat lady is singing for BGM as we once knew it and singing very loud.

Yes there was a smattering of news on some interesting early stage drugs and the usual avalanche of data from the various studies for existing drugs. For understandable reasons Diabetic Investor will refrain from commenting on the early stage drugs. Far too often in the diabetes drug space early stage data which looks good at the time turns out to be mirage as the drug moves into late stage trials which involve greater number of patients. We will watch these drugs closely but we aren’t holding our breath.

The truth is there really nothing earth-shattering that came out of this conference. Something Diabetic Investor actually anticipated. For years now this conference has been losing relevance. Booths are getting smaller, some companies aren’t presenting at all while attendance is declining. Frankly Diabetic Investor can’t blame some of these companies given how the diabetes market is changing.  With margins shrinking, competition is increasing and cost control being the order of the day it really doesn’t pay to spend a small fortune to attend. Several industry executives noted to Diabetic Investor the return on investment is just not there.

The party is not just over in San Francisco but may well be over for this conference unless major changes are made. The ADA can no longer ignore what is going on; changes are needed to make this conference fit within the new dynamics of the diabetes market. It’s well known that the ADA and industry don’t get along all that well; however with the way things are going perhaps it’s time these children learn how to play nicely with each other.