Welcome to the Trick or Treat Awards

Welcome to the Trick or Treat Awards

It seems appropriate that on Halloween, a holiday known for ghosts, goblins, candy and costumes that Diabetic Investor introduce our latest Awards which appropriately enough on Halloween will be given out as either a Trick – awarded to companies or organizations for being overly wacky or a Treat – awarded to companies or organizations who’ve avoided the general wackiness of this wacky business. Given the very nature of the diabetes business it is possible, even likely, that a company can earn both a trick and a treat for as we all know when it comes to the wacky world of diabetes anything can and usually does happen. So let’s get started ….

A perfect example of an organization to earn both a trick and a treat is none other than the Food and Drug Administration, yes our beloved FDA. The agency earns a well-deserved Treat for the guidelines they issued for mobile health apps. This agency which is rarely known for clarity issued guidelines which for all practical purposes where not just clear but actually understandable.  Reading these guidelines one might actually come away with the impression that the agency is moving into the computer age and understands that in the future mobile devices will become standard to this generation as the rotary telephone was to a past generation.

Yet just when it seems like the agency is making progress along comes a stark reminder that the more things change the more they stay the same. Therefore the agency also earns a Trick for their continued ultra-conservative nonsensical approach to approving new diabetes drugs and devices. Here are just two examples, Tresiba and the new Personal Diabetes Manager (PDM) which controls the OmniPod insulin pump. As we all know by now Novo Nordisk (NYSE:NVO) was basically blind-sided when the FDA failed to approve their new much anticipated long-acting insulin, Tresiba. Yes once again the Avandia controversy reared its ugly head as cardiovascular concerns have derailed what must believe is a solid drug. Now Diabetic Investor never believed Tresiba was a game changer nor did we see the drug unseating long-acting behemoth Lantus, but that’s no excuses for the FDA’s line of reasoning here which makes sense only to the FDA and no one else, not even Novo’s competitors.

Yet new drugs aren’t the only area where the agency replaces common sense with nonsense, just take a look at the new PDM for the OmniPod. One of the most annoying aspects of the PDM comes directly from the agency as Insulet (NASDAQ:PODD) was told to add confirmation questions to each step performed by the patient. For example each time an OmniPod users turns on the device it ask the patient if this is there actual device, as if the patient would use someone else’s  PDM who just so happens has the exact same settings as they do. Simply put extra steps were added to what was a very simple, user-friendly device. Leave it to the FDA to over complicate simplicity using patient safety as an excuse for these extra and very unnecessary steps.

A very well deserved Treat goes to the folks at Lilly (NYSE:LLY) mostly because they are one of the few, perhaps the only diabetes company who sees where the market is going and is actually building a strategy that should fit very nicely into the future. By building a comprehensive portfolio of diabetes drugs, even with many being late to market copycats of existing drugs, the company can offer payors, what they want most, lower overall prices which in turn will give Lilly drugs preferred formulary status which in turn nearly guarantees solid sales. The beauty of this strategy is not just that Lilly can offer lower prices, something everyone wants but it also places the onerous on the competition. Either they must match these price reductions or risk losing market share.

Lilly basically understands as Diabetic Investor does that the diabetes drug market is becoming a commodity market. That the pipelines of the major diabetes drug companies are devoid of anything all that spectacular and that any progress being made is incremental at best. They also see the cost of developing unproven drugs rising with the ultimate payoff, if successful, declining. Add in the regulatory risk from the FDA and you have an environment where it really doesn’t pay to be innovative. In Lilly’s case better to transform the existing diabetes infrastructure and solid brand name awareness into a leaner organization that can produce and support a stable of drugs which can made economically and priced competitively.

A shared Treat goes to the folks at Novo Nordisk and LifeScan, a unit of Johnson and Johnson (NYSE:JNJ), while everyone else in diabetes seems committed to marketing strategies that are worn out and don’t work, these two companies are actually doing something different as both are testing programs which … wait for it … reward the patient for getting educated and actually being more compliant with their diabetes management. As everyone knows Diabetic Investor has long complained that when it comes to patient education most companies just don’t get it even though it is the most effective tool at producing better outcomes. Kudos to both Novo and LifeScan for taking a chance on these programs, hopefully this is one area where there will be many imitators.

Perhaps the biggest Trick goes to our French friends the good folks at Sanofi (NYSE:SNY) or as some call them the diabetes company that can’t. Yes they have the world’s number selling insulin Lantus but just as the Chicago Cubs are worthless without Wrigley Field, in diabetes Sanofi is worthless without Lantus. This company has tried and failed at nearly every attempt to make the diabetes franchise, if you can call it that, less reliant on Lantus sales. Sales which will be greatly impacted when the drug loses patent protection.

The list of failures is long, distinguished and well chronicled by Diabetic Investor so there is no need to review them yet again as we really don’t like rubbing salt in an open wound. But one does have to question the sanity of any organization that thinks selling special launch bags will somehow translate into greater sales. Or why they are spending capital to target just 0.26% of the diabetes market. Diabetic Investor has seen many wacky things over the years but rarely have we witnessed an organization so committed to misunderstanding where the market is, where it is going and what to do about it. Yes there was time when it looked like the company was on the right track but that train left the station long ago.

The fact is for the company the dream of selling a complete diabetes management system, a system which included not just the drugs and devices a patient uses but also helped the patient better manage their diabetes using multiple education and coaching initiatives has turned into a nightmare. Their dream of overtaking Novo Nordisk as the dominate global diabetes company has now become nothing more than a house of horrors.

Diabetic Investor does not relish in this award as we truly had hoped the original strategy would work as it was a sound one that is in-line with where diabetes management is going. The key as we noted on many occasions would be the company’s ability to execute. Sadly the only thing that got executed was the strategy itself which is now as dead as the zombies that roam the cemetery.

Trick or Treat everyone.