The second day of the 33rd Annual JP Morgan Healthcare Conference continued with high energy, as evidenced by the bustling sea of business attire seen all around downtown San Francisco. (Though, in a show that this is San Francisco and a bit more laid back – there were multiple men in suits at presentations today lounging on the floors in various large ballrooms, literally lying down with their heads propped up on chairs, listening to the speakers – this was in lieu of sitting in chairs, of which there weren’t any extra. It was a bit like a Grateful Dead concert if you only looked at the very front.)
In combination with the Biotech Showcase and OneMedForum, Day #2 featured showings from diabetes and obesity companies big and small along with impressive keynote addresses (from Drs. Ezekiel Emanuel and Francis Collins!) covering discussions from clinical updates to healthcare policy. Please see below for our top ten highlights (along with several honorable mentions) from the day and check out our preview to prep for the rest of the week.
1. Newly appointed Dexcom CEO Kevin Sayer reported extremely high (some would say “blowout”) 4Q14 product revenues of $84 million, a striking 64% year-over-year rise and a 24% sequential increase from 3Q14. Investors seemed a bit mixed on more conservative estimates for 2015. This presentation shared several pipeline tidbits: screenshots of the Gen 5 user interface (submission still expected this quarter, 1Q15), new Gen 6 accuracy data, a new sensor applicator (patients are raving about this on Facebook), and more.
2. Takeda highlighted its commitment to re-fill its currently empty late-stage diabetes pipeline; by contrast, very depressingly, GSK said that it currently has no plans to rebuild a presence in diabetes beyond its new once-weekly GLP-1 agonist albiglutide.
3. Roche CEO Dr. Alan Hippe and COO Mr. Roland Diggelmann shared striking optimism on the company’s Diabetes Care business, an update on its novel CGM (to be filed in the EU before the US), and brief comments on a pathway to an artificial pancreas system.
4. During a JDRF workshop at Biotech Showcase (this is the first time JDRF has ever been in or around JPM as a formal presenter!), discussion turned to the challenges involved in developing oral and glucose responsive insulin as well as the reimbursement prospects for type 1 diabetes cure therapies.
5. Orexigen CEO Mr. Mike Narachi characterized the early launch results for Contrave (naltrexone/bupropion) as encouraging and noted that Orexigen is “talking about creating a great new diabetes drug.”
6. Lilly’s breakout session touched upon the high-stakes nature of single-source formulary contract competition, given that payers that move to single-source are generally reticent to switch. There was heaps of focus on diabetes and diabetes head Mr. Enrique Conterno himself was there.
7. NIH Director Dr. Francis Collins discussed the potential for collaboration between the NIH and the private sector, highlighting the Accelerating Medicines Partnership (AMP) and NIH’s initiatives to “repurpose” drugs as two examples. He also had a notable editorial in JAMA today.
8. In a packed luncheon keynote address, healthcare reform expert Dr. Ezekiel Emanuel (University of Pennsylvania, Philadelphia, PA) discussed the impact of the Affordable Care Act on care delivery and offered his thoughts on how to deliver higher-quality care in “big, heavy diseases” like diabetes. He expressed very cogent views all around; some of his diabetes commentary focused very significantly on standardization, which we believe is difficult given the reliance on generics, especially SFUs, which we believe are harmful to patients over the long run and cause adherence issues.
9. Down the road from JPM, the Biotech Showcase and OneMedForum featured pipeline updates from three emerging small companies: Immunocore (private), Omni Bio (private), and Boston Therapeutics (public).
10. Halozyme President and CEO Dr. Helen Torley confirmed that the company still plans to commercialize Hylenex for use with insulin pumps despite the recent decision not to pursue further development without a partner.
- Executive Highlights
- Top Ten Highlights
- Honorable Mention
- Detailed Discussion and Commentary
Top Ten Highlights
1. Newly appointed Dexcom CEO Kevin Sayer reported blowout 4Q14 product revenues of $84 million, a striking 64% year-over-year rise and a 24% sequential increase from 3Q14. This now marks seven consecutive quarters of 60%+ YOY growth (see graph below to put the exponential rise into perspective). The strong 4Q14 performance brought full-year 2014 sales to $257 million, a 64% rise from 2013 and smashing the $220-$235 million guidance. Mr. Sayer also revealed that Dexcom’s patient base grew 50% in 2014, meaning it totals roughly 90,000 patients right now (60% pumps/40% MDI). Looking ahead, management expects sales of $340 million-$360 million in 2015, representing growth of 32%-40%; the lower growth rate is to some extent expected, given the significantly higher base of sales, although we believe Dexcom can achieve well above this level. To fuel the growth, the sales force will expand ~20-25% this quarter (1Q15), and Dexcom has acquired an additional 90,000 square-foot facility to support expansion. Mr. Sayer also shared several new pipeline details as well: a new screenshot of the Gen 5 user interface (submission still expected this quarter, 1Q15); new Gen 6 accuracy data (MARD 12%, 10-day wear, one startup calibration); news that Dexcom is still in discussions with the FDA to obtain an insulin dosing claim; a picture of a new sensor applicator (single button push insertion) and a new touchscreen receiver with connectivity (as a backup), and news that Glooko is a partner (this is very exciting given both their work on the digital front as well as their combined understanding of what HCPs and patients need). Many more details on the pipeline and business are below, including selected questions and answers.
2. We were impressed to hear how Takeda is making the most out of a relatively challenging time for its diabetes portfolio and pipeline; however, we were disappointed to hear other large companies gloss over or even downplay their roles in diabetes. Depressing! For background, Takeda discontinued its phase 3 GPR40 agonist TAK-875 in late 2013 and announced during its F4Q13 (calendar 1Q14) update that it would not continue developing its phase 3 once-weekly DPP-4 inhibitor trelagliptin in the US and EU due to the high cost of development in those geographies (particularly in terms of CVOTs); these two moves effectively emptied Takeda’s phase 3 diabetes pipeline. In a chart forecasting possible upcoming regulatory approvals across Takeda’s four focus disease areas, cardiovascular/ metabolic was the only area to have zero US/EU submissions expected between FY2018-2022. However, President and COO Mr. Christophe Weber shared that early indicators of the US launch of the Orexigen-partnered obesity drug Contrave (naltrexone/bupropion) have been very positive. Even more notably, Takeda is interested in investigating the combination of its current once-daily DPP-4 inhibitor Nesina (alogliptin) with Contrave or an SGLT-2 inhibitor (see more on this from Orexigen’s presentation below). Although he acknowledged that it will take time for Takeda to build new diabetes franchises to the point of phase 3 and approval, Mr. Weber emphasized that Takeda remains committed to diabetes and is conducting early-stage research to rebuild the pipeline.
- By contrast, during GSK’s breakout session, Chief Strategy Officer Mr. David Redfern explicitly stated that GSK is not looking to become a major diabetes player. Specifically, he cited the company’s lack of diabetes candidates beyond the newly approved once-weekly GLP-1 agonist Tanzeum/Eperzan (albiglutide), lack of a strong R&D presence in diabetes (this was disappointing to hear stated explicitly though not a surprise given all that GSK has gone through with Avandia, only to have it ultimately exonerated), and the degree of competition in diabetes. Back during GSK’s 4Q13 update, management suggested that Tanzeum could be a springboard product to work towards a broader cardiovascular/metabolic franchise, but at least according to Mr. Redfern it appears that type 2 diabetes is no longer a part of the big-picture game plan beyond Tanzeum. Earlier in the day, we were also very disappointed that Pfizer did not feature its exciting, potentially (according to the company) best-in-class Merck-partnered phase 3 SGLT-2 inhibitor ertugliflozin in its list of its top six future growth platforms or its list of ten pipeline candidates to discuss in its presentation.
3. Speaking to a standing room-only audience, Roche CEO Dr. Alan Hippe and COO Mr. Roland Diggelmann provided a series of pipeline updates during the company’s Breakout Session, sharing striking optimism on the Diabetes Care business; Dr. Hippe also alluded to the segment’s strong 3Q14 performance – as a reminder, that was versus a very easy 3Q13 comparison. As expected, management was guarded in discussing the US BGM market – “the environment is still, how do you say, challenging” – but acknowledged the business is moving in the right direction. Given that it is well past one year after the implementation of competitive bidding, it is not surprising to hear about less intense weakness in the US – more telling is the change in tone from management (e.g., “good fundamentals”) who has largely been neutral to slightly negative (e.g., “continued pricing pressures”) on BGM for the past ~18 months. Of course, good fundamentals could reflect only that many more patients are moving into the market but that the market remains challenging in virtually all other aspects. On the pipeline front, Mr. Diggelmann expressed cautious optimism that the Accu-Chek Insight (next gen insulin pump and BGM remote) remains on track for an FDA submission in 2015; as a reminder, the Insight launched in the EU in January 2014. Mr. Diggelmann also acknowledged that the company’s novel CGM is moving forward (“we feel we are in the race”) and while hesitant to provide a strict timeline, confirmed that commercialization is more than 12 months away. Notably, Roche plans to file the device in the EU before bringing it stateside (~18 months later), so we assume US commercialization would not occur before late-2017 at the earliest.
- Prompted to discuss Roche’s pathway to an artificial pancreas system, Mr. Diggelmann commented on the need to develop CGM as a stepping-stone (“very important”), while suggesting that the choice of whether to pursue a “Medtronic-like” step-by-step path vs. an alternative (e.g., straight to closed-loop) remains a topic of internal discussion. Mr. Diggelmann did acknowledge that Medtronic is the sole commercial model and that that path is “probably easier.” That said, he was quick to emphasize that no internal consensus has been reached.
4. During a captivating morning JDRF workshop at the Biotech Showcase on type 1 diabetes therapies (see below for a full transcript), Thermalin’s Mr. Richard Berenson provided a pragmatic take on oral and glucose responsive insulins. He suggested that glucose responsive insulin is unlikely to completely take over the market even if a reasonably safe and effective compound is produced because of difficulties in dosing. He pointed out that smart insulin depends on a depot that only acts when glucose levels are high. If a patient exercises or eats fewer carbohydrates than expected, it will leave a larger depot of insulin on board that will need to be factored into subsequent dosing (we’re not sure how this differs from regular “insulin on board”). Despite the challenges, Mr. Berenson still strongly believes in “smart” insulin’s potential and Thermalin is investigating the possibility. Dosing is also a challenge for oral insulin, given the variability in patients’ microbiome, diet, and other factors that impact absorption. On the whole, Mr. Berenson’s points did not temper our enthusiasm for these two potentially transformational types of insulin, but they did provide the room with a better understanding of the extent of the challenge. Panelists also expressed optimism that payers would be willing to pay for innovation and prevention in type 1 diabetes therapies – read our complete transcript of the discussion below for more.
- At the same workshop, Viacyte CEO Dr. Paul Laikind shared that the company has discussed the idea of studying patients with hypoglycemia unawareness and is considering initiating a new VC-01 trial in that patient population at a later appropriate point in time. This patient group has long been considered a promising target group for cell-based therapies so the move is not altogether surprising. With the FDA’s pervasive focus on orphan indications and small populations with large unmet need, focusing early on severely hypoglycemia-unaware patients may help Viacyte construct a more favorable benefit/risk profile to present to the agency for VC-01’s first approvals.
5. Orexigen CEO Mr. Mike Narachi highlighted that early launch results for its/Takeda’s anti-obesity drug Contrave (naltrexone/bupropion) have been encouraging and noted that Orexigen is “talking about creating a great new diabetes drug.” Providing some more granularity since the company’s 3Q14 update, Mr. Narachi noted that Contrave is having early success in both targeted groups of frequent and infrequent prescribers of obesity medications and that sales reps are experiencing long call times with providers. In addition, he emphasized the increasing awareness surrounding the importance of weight loss in the prediabetes and type 2 diabetes patient populations and devoted significant attention to Orexigen’s goals of pursuing a diabetes indication and fixed-dose combination with a diabetes drug. During the breakout session, management noted that it will be a “tactical decision” on which diabetes project will come first but that selling the Contrave brand to the diabetes population is a “big opportunity” for Orexigen that is “front and center in its partnering process.” We are excited to hear such enthusiasm coming from Orexigen as we believe that an all-encompassing treatment for both diabetes and obesity will be a game changer for the overlapping patient population between the two diseases – especially since the label of Novo Nordisk’s recently approved Saxenda (liraglutide 3.0 mg) has tried to separate the two different indications.
6. Lilly’s presentation closely mirrored last week’s 2015 guidance call but still touched upon some timely topics. Upbeat CEO Mr. John Lechleiter highlighted the wave of approvals and regulatory submissions in 2014 (on schedule) along with the fact that Lilly is poised to have the broadest portfolio in diabetes, especially with two basal insulins (biosimilar insulin glargine Basaglar/Abasaglar and peglispro) arriving to fill a previous void in Lilly’s diabetes offerings. He also discussed fixed dose combinations, expressing great enthusiasm for the branded DPP-4 / SGLT-2 product in development with BI. Lilly Diabetes President Mr. Enrique Conterno confirmed Lilly’s previously stated plan for biosimilar Basaglar to compete as a branded option – he also said it’s not really a biosimilar. He also reminded attendees at the breakout session that peglispro achieved A1c superiority vs. Sanofi’s Lantus across its phase 3 program. Turning to challenges in diabetes, Mr. Conterno noted that the trend towards single-source formularies is a high-stakes game given that payers do not appear to be willing to switch around contracts once they have gone to single-source, in order to avoid significant patient disruption. That dynamic will make the competition for contracts in the coming years particularly important, and might also provide companies with leverage to counteract payer pressure once they have won an exclusive contract.
7. In a “fireside chat,” Dr. Francis Collins (Director, NIH, Bethesda, MD) discussed how the NIH can collaborate with the private sector, highlighting the Accelerating Medicines Partnership (AMP) and NIH’s initiatives to “repurpose” drugs. In commenting on how the pharmaceutical industry “is not exactly rolling,” Dr. Collins first highlighted AMP as an opportunity to work together with the private sector that has so far been “meeting or exceeding expectations.” This partnership is a collaboration between the NIH, biopharmaceutical companies, and nonprofit organizations that focuses on the three disease areas of type 2 diabetes, Alzheimer’s disease, and rheumatoid arthritis. According to Dr. Collins, all of the data within this partnership has been open-access, with industry willing to participate as all research is considered pre-competitive. In addition, Dr. Collins called NIH’s initiatives to “repurpose” drugs an “unprecedented way to work with the private sector” that can be offered to companies. This work aims to reduce the cost and time required to approve drugs as “failed” drugs who don’t make it through its initial pipeline can be applied to other disease areas. We are excited to see the NIH coordinating such efforts as we agree that a broader information dissemination on what candidates have been researched for what conditions can cut down on many wasted resources within the drug development process.
- Dr. Collins also referred to his recently published JAMA editorial on the “exceptional opportunities in medical science,” which include the potential of precision medicine as well as a shout-out to stem cell research in type 1 diabetes. While Dr. Collins mostly focuses on cancer with regards to precision medicine, he commented (both in his editorial and keynote address) that personalized medicine combined with mobile health technology can lead to better prevention and management of chronic diseases. Additionally, his editorial highlighted NIH’s support of stem cell research and pointed to the findings of Dr. Doug Melton’s team (which developed an approach to differentiate stem cells into functional beta cells) as a major advance in type 1 diabetes treatment.
- Notably, Dr. Collins stressed the NIH’s lack of resources, highlighting that its budget has lost almost 25% of its purchasing power over the last decade. In both his keynote address and editorial, he lamented the “throwing away of good science” due to this financial stress. Dr. Collins emphasized that such a position puts the US at risk of “losing our most important resource of the next generation’s talent” and referred to another recently published JAMA editorial that shows the US being outpaced by increasingly more countries in biomedical research. We could not agree more that research hubs like the NIH desperately need more funding and we encourage patients, providers, and industry to all push for such movement.
8. In a packed luncheon keynote address, healthcare reform expert Dr. Ezekiel Emanuel (University of Pennsylvania, Philadelphia, PA) discussed the Affordable Care Act’s (ACA) impacts on care delivery and provided his thoughts on how we can deliver higher-quality care in “big heavy diseases” such as diabetes. An energized Dr. Emanuel opened the keynote by remarking that we have already seen shifts in care delivery inspired by the ACA, commenting that payment structure change inevitably leads to care delivery change. In his eyes, the move away from the fee-for-service system has pushed the field to keep “high-cost users” (such as those with chronic illnesses) out of the hospital and to thus focus more on prevention. In addition, Dr. Emanuel highlighted standardizing care as the challenge we must overcome in the “big heavy diseases” (which he described as diabetes and cancer among others). He notably expressed optimism about these diseases’ guidelines and emphasized that we need to instead work on standardizing the practices to make the patient’s care more “automated and seamless.” This transformation in care, according to Dr. Emanuel, will naturally make care more high-quality and cost-effective.
- Dr. Emanuel also commented that he does not foresee the government regulating drug prices nor does he have confidence in a “value-based” system of drug pricing. He noted that we currently “do not have a pricing scheme that makes sense” and that it is important to differentiate specialty drugs that are very effective from those that are not as effective but very expensive. However from his perspective, the government stepping in to regulate price is not a solution to the system and is “not the American way;” instead, we must develop a “different social compact” among payers, the public, and industry. In addition, when discussing a “value-based” system of drug pricing, Dr. Emanuel expressed concern and skepticism, stating that such a system will likely lead to price increases in drugs for small populations as we move towards personalized medicine. As we have heard so much positive support behind personalized medicine (even from Dr. Francis Collins at this meeting), this is a surprisingly insightful criticism that we believe should be taken into account. Dr. Emanuel also did note that he didn’t think the same drug could be priced differently for different indications; we are interested to ask him about Novo Nordisk’s Saxenda vs. Victoza.
9. Down the road from JPM, the Biotech Showcase and OneMedForum featured pipeline updates from three emerging small companies: Immunocore (private), Omni Bio (private), and Boston Therapeutics (public). For more detailed discussions of any of these three companies, please see the Appendix.
- Boston Therapeutics: Management provided an overview of the company’s non-systemic chewable polysaccharide-based compound that works to block carbohydrate breakdown in the GI tract. The FDA accepted the company’s Investigational New Drug Application for BTI-320 in December, and a multicenter, “adapted” phase 3 study (n=360) is on track to begin in 1Q15. There is striking internal confidence at the company, and though we remain somewhat skeptical, we appreciate that the company is conducting clinical trials to support its claims.
- Immunocore: The company provided an overview of its novel T cell receptor-based drugs that target tissues that have been subjected to immune attack (e.g., insulin-producing beta cells). A portion of the company’s preclinical work is focused on evaluating the drug’s potential to suppress the immune response responsible for type 1 diabetes, though according to Chief Business Officer Ms. Eva-Lotta Allan, work on this segment is not presently a priority (2015 goals are focused on moving its lead clinical oncology product through phase 2 trials.
- Omni Bio: This small private company based in Colorado brought its whole team to the Biotech Showcase (three people!). The company is engaged in preclinical trials of its recombinant version of alpha-1 antitrypsin that is thought to be a mediator of anti-inflammatory and tissue-protective pathways, including those involved in insulin-producing beta cell protection. The company will require a financial infusion of $5-6 million to complete preclinical development and foresees needing an additional ~$5 million (~$10 million total) to take the product through initial human studies (phase 1) and proof of concept trials (phase 2).
10. Halozyme President and CEO Dr. Helen Torley confirmed that the company still plans to commercialize Hylenex for use with insulin pumps despite the recent decision not to pursue further development without a partner. Dr. Torley explained that the decision to de-prioritize the program was a “question of focus and cost” but that the company still “hopes to monetize the asset” along with a partner. She stressed that the product appears to offer significant value with regard to nocturnal hypoglycemia (based on six-month results from the CONSISTENT-1 trial) and confirmed that Halozyme is actively involved in discussions with the FDA to clarify a regulatory path forward. These comments are consistent with the company’s guidance in a recent Analyst and Investor Meeting as well as its 3Q14 update, and we are pleased to hear further confirmation that Halozyme has not abandoned its efforts in diabetes.
Amgen CEO Mr. Bob Bradway put the US and EU submission of PCSK9 inhibitor evolocumab at the top of the company’s list of 2014 accomplishments and has included the drug in Amgen’s new product launch cycle in 2015. During the company’s presentation, Mr. Bradway noted that Amgen is well on its way to building a strong team for the launch of the molecule; management noted during the breakout session that regulatory approvals are estimated to occur in late summer to early fall in the US (the PDUFA target date is August 27) and in early 2016 in Europe. As a reminder, the PCSK9 inhibitor race is getting tight as Sanofi/Regeneron recently purchased an FDA priority review voucher for its candidate alirocumab, with an estimated potential approval in 2H15. While Amgen did not make any comments on this competition, the company remains confident in evolocumab and its potential to address the significant unmet need in dyslipidemia (which we agree will be potentially gamechanging for both the cardiovascular disease and diabetes patient populations).
Detailed Discussion and Commentary
JP Morgan Healthcare Conference
Kevin Sayer (CEO, Dexcom, San Diego, CA)
Dexcom’s Kevin Sayer gave his first presentation as the company’s CEO following Terry Gregg’s January 5 transition to Executive Chairman. Mr. Sayer was a bit less enthusiastic than Terry Gregg, though he still had plenty of big news to share: Dexcom reported blowout 4Q14 product revenues of $84 million, a striking 64% year-over-year rise and a 24% sequential increase from 3Q14. This now marks seven consecutive quarters of 60%+ YOY growth (see graph below to put the exponential rise into perspective). The strong 4Q14 performance brought full-year 2014 sales to $257 million, a 64% rise from 2013 and smashing the $220-$235 million guidance. Mr. Sayer also revealed that Dexcom’s patient base grew 50% in 2014, meaning it totals roughly 90,000 patients right now (60% pumps/40% MDI). Looking ahead, management expects sales of $340 million-$360 million in 2015, representing growth of 32%-40%; the lower growth rate is of course to be expected given the significantly higher base of sales. To fuel the growth, the sales force will expand ~20-25% this quarter (1Q15), and Dexcom has acquired an additional 90,000 square-foot facility to support expansion. Mr. Sayer also shared several new pipeline details as well: a new screenshot of the Gen 5 user interface (submission still expected this quarter, 1Q15); new Gen 6 accuracy data (MARD 12%, 10-day wear, one startup calibration); news that Dexcom is still in discussions with the FDA to obtain an insulin dosing claim; a picture of a new sensor applicator (single button push insertion) and a new touchscreen receiver with connectivity (as a backup), and news that Glooko is a partner. More details on the pipeline and business are below.
- Dexcom will expand its sales force by ~20-25% this quarter (1Q15). As of the last update, Dexcom had a field sales force of 90 reps, which means the expansion will add ~20 new members to the team. In Q&A, Steve Pacelli highlighted that Medtronic’s force outnumbers Dexcom four or five to one, though the upcoming pump partnerships should help address some of the gap.
- The international business is now responsible for ~13% of sales ($33 million in 2014), more than doubling since 2013. Dexcom has lots of upside on this front, given plans to expand to 10 more countries (not specified). The company has reimbursement studies in Germany and Sweden and hopes to secure Japanese approval in 2015.
- In dialogue with the FDA, Dexcom is still designing the study to support an insulin-dosing claim for the G4 Platinum. Management met with the FDA last fall, and apparently, the Agency looked at the G4AP accuracy data (MARD: 9.0%) and encouraged Dexcom to do a replacement claim study now. Previously, Dexcom had planned to wait until Gen 6 to go for such a claim. We took this as an encouraging sign from the FDA, though the dialogue has been ongoing since at least the 3Q14 call. Management did not give a timeline to begin or complete the study, as the details are still being hammered out (especially the number of required calibrations).
- Mr. Sayer showed never-before-seen screenshots of the Gen 5 mobile platform. A submission is still expected this quarter (1Q15), “assuming all goes well.” The screenshot showed the CGM value in much larger type than on Share, with an arrow wrapped around it to indicate a rising glucose (as opposed to the arrow off to the side). The screen also more prominently used yellow to indicate hyperglycemia, a nice visual indication of how things are going (we assume hypoglycemia will retain red). It’s definitely a noticeable change from the current trend arrow look and we wonder how patients will like it (of course, Dexcom can always update the app – the power of going mobile!). Similar to the way Share works, Mr. Sayer also showed a notification on the iPhone lock screen: Dexcom – ”High glucose alert.” Gen 5 will incorporate the Share platform, meaning patients can still have followers that receive alerts and notifications.
- Once Gen 5 rolls out, Dexcom will be able to run real-time analytics across its installed base. Mr. Sayer shared one example following the launch of Share, where the Dexcom team was able to query blood sugars on Halloween and Thanksgiving (Halloween is much worse!). The hope is to offer patients better tools using this data (e.g., building better algorithms and products), as well as to bring the data to payers and perhaps support better reimbursement.
- In line with Dexcom’s exhibit at CES, Mr. Sayer revealed that the company is “working with Apple on possibly being a developer for the Apple Watch.” As a reminder, a mockup of Gen 5 data going to the Apple Watch was shown in Dexcom’s booth last week in Las Vegas. We believe this represents a major convenience win for patients and would be very well received. As well, Dexcom would gain a lot of credibility for being an official Apple Watch developer. We wonder if Dexcom could even benefit from the Apple marketing machine – like the iBGStar, perhaps Dexcom CGM could be sold in Apple stores!
- Mr. Sayer also showed a picture of a new simplified insertion system, which can be done with one hand – see a picture on twitter here. This has been a criticism of the G4 and previous generation applicators, and it’s great to see Dexcom innovating in this direction. The slide noted more “consistency,” though the system will require a “major manufacturing change.” As a result, we wonder how Dexcom will prioritize it among the other things it can work on. It’s hard to know how much an improved applicator would benefit the business, relative to the manufacturing and cost hassle it would take to roll out.
- Dexcom is also building a new connected receiver, with a touchscreen and interface similar to the Gen 5 mobile system – see a picture on twitter here. Since Gen 5 will send data directly to the phone, this additional receiver would serve as a secondary backup display for most patients, and perhaps for those who don’t have an iPhone. Mr. Sayer expects the first-gen version to have Wi-Fi connectivity.
- Mr. Sayer showed accuracy data on the Gen 6 sensor in development – a MARD of 12% over 10 days with a single startup calibration. Of course, this is slightly worse accuracy than G4AP (MARD: 9.0% with calibrations per day), but the tradeoff of one single calibration and a longer wear time is unquestionably worth it. Gen 6 will block interfering substances with a new membrane, as well as employ new algorithms to detect more outliers.
- A slide on data management partnerships mentioned Glooko for the first time, alongside existing partners Tidepool and diasend. The addition of Glooko is a logical one and signals yet another encouraging option for patients and providers to choose from. We do wonder if three universal data platforms will remain in the coming years, or if one will emerge as a clear winner. There is clear value in aggregating the disparate data right now, though we also wonder how many “aggregators” are needed...
- There was little notable commentary on Dexcom’s pump partners. Management mentioned that the Animas Vibe is commercially available in the US right now, Tandem is at the FDA (the hope is a mid-2015 launch, assuming things move on the optimistic end of the expected 12-18 month review), and Insulet/Asante will integrate with the Gen 5 app (and in the case of Insulet, the PDM).
- Mr. Sayer brought a supportive tone to discussing the artificial pancreas. Mr. Sayer noted that Dexcom is the preferred partner in AP programs around the world, and the drive for better accuracy will enable further improvements; however, he made it clear that Dexcom will control distribution of sensors, and only the company’s commercially available systems will be used in trials. We assume this was to address concerns that other companies would start distributing Dexcom sensors to sell with their artificial pancreas systems, should they be commercialized.
- Notably, Dexcom is currently exploring the development of decision support tools based upon artificial pancreas algorithms – we assume these could enable smarter open loop therapy.
- In terms of market expansion, a major priority is moving to pharmacy distribution instead of DME. Mr. Sayer noted that good steps were taken in 2014 to establish a “base”, but the process will likely take two to three years. The vision is that patients would pick up their sensors at a local pharmacy, similar to how drugs and test strips are distributed. The advantages are lower patient co-pays and faster processing for patients new to CGM. In addition to pharmacy distribution, Mr. Sayer discussed other market expansion opportunities:
- “Medicare/Medicaid are coming.” As noted above, Dexcom is undertaking a replacement claim study. There are also two bills in Congress for Medicare to cover CGM, though Mr. Sayer said, “we’re not waiting for bills.” Given the challenges of getting legislation passed, we think this is a prudent strategy.
- Clinical and economic evidence: As noted in the 3Q14 call, Dexcom is undertaking the DIaMonD study (ClinicalTrials.gov Identifier: NCT02282397) to quantify the benefits of CGM in a large population of MDI users. “It’s time for us to start spending money on data,” said Mr. Sayer.
- International expansion: Dexcom hopes to add 10 more countries to its current distribution slate. Reimbursement studies are slated for Sweden and Germany.
- Prediabetes, type 2, pregnancy, obesity, etc. Mr. Sayer quipped, “We have a technology we haven’t defined the boundaries for.”
- Mr. Sayer showed Dexcom’s Net Promoter Score (NPS) in the dQ&A panel (3Q14), a striking 68% vs. 8% for Medtronic. For context, Amazon has an NPS of 76, and Apple comes in at 71 – in other words, 68 is excellent.
- Dexcom holds a 70% market share in the dQ&A panel’s CGM users vs. 30% for Medtronic. The slide showed trended brand share over time, making it clear (via an arrow labeled “530G Launch”) that Medtronic’s new pump/CGM has not changed Dexcom’s market share over the past year. For more information, contact Richard.Wood@d-qa.com.
- Mr. Sayer concluded with a slide, “Imagine a world where..,” providing a good reminder of Dexcom’s major priorities: “CGM is the first tool prescribed for all newly diagnosed patients; fingersticks are completely eliminated; and meaningful data is freely available to patients, caregivers, and payers.”
Selected Questions and Answers
Mr. Sayer (jokingly): Terry, do you want to ask the first question?
Terry Gregg [from the audience]: $360 million? That’s all? Sandbagger!
Q: Revenues were 12% above consensus in 4Q – extremely strong. What can you tell us about what you saw this quarter?
A: 4Q was a very, very strong quarter for new patient adds. We added more this quarter than in any other quarter. That drove a lot of growth. And the rest was very similar to previous fourth quarters. Patients load up at the end of the year – they bought a lot of sensors and transmitters. We hit everything we thought we’d hit. It was steady volume.
Q: So you’re running two fingerstick replacement trials?
A: We have a couple studies. One study is the DIaMonD study – that’s a trial to really gauge the effectiveness of CGM. We’re taking several hundred MDI patients and putting them on CGM. We’re going to watch them for six months and see what outcomes are. It’s more than 20 centers. They will be compared to a fingerstick cohort. We will track cost data and everything you can think of.
There’s another study that we haven’t run. We are still figuring it out. It’s a fingerstick replacement study. Our device is adjunctive to fingersticks right now. We want to eliminate that. Our regulatory team met with the FDA. They told us, “Your G4 Platinum system with the new algorithm is good enough to do this.” We were originally going to wait until Gen 6. But they told us “No – let’s get this done.”
Q: When did FDA say that?
A: Last fall.
Q: You still haven’t figured it out?
A: No we have not.
Q: So you will get rid of calibration?
A: That’s the tradeoff. That type of claim demands a level of accuracy and consistency all the time. If you get rid of calibrations, you’re making a tradeoff. That’s why this is still under negotiation. We want to make sure we get it right.
Q: On the Vibe launch, you have a big opportunity. We estimate 70-90,000 Animas patients.
A: I cannot comment on the Animas patient base. They don’t give those numbers. The Vibe launch has been a long time coming. It launched in Europe 2-3 years ago and has done quite well for Animas. We are very excited. We got approval in late Q4, and as of this month, J&J is commercially shipping the pump. They have a nice upgrade program to current Animas pump patients. But the pump market is not growing at a particularly rapid rate. For context, 60% of our installed base is pumpers, and 40% is MDI. There is some overlap between our base and the Vibe upgrades. In aggregate, the Vibe is launching, and Tandem’s optimistic projections are for a mid-year launch. We also have the relationships with Insulet and Asante – you may hear from Asante since it sounds like they are attempting to go public. But if you take the size of the Animas, Tandem, Insulet, and Asante sales forces, that will help us. Where we’ve faced big challenges is Medtronic outnumbers us in the field 4-5 to 1. The collective key messaging will be, “We have a differentiated pump also paired with best in class sensing.” So Dexcom will be in front of providers on a more frequent basis; it will be additive.
Q: What do you think of the type 2 opportunity and FreeStyle Libre?
A: We’re almost 100% focused on type 1. It’s primarily reimbursement driven. We’re seeing some signs of reimbursement in type 2 diabetes, but it’s primarily insulin-using type 2 diabetes. In the US, there are somewhere between 3-5 million type 2 insulin users on top of 1.5 million type 1s. The vast majority of type 2s are seen not by endocrinologists, but primary care internal medicine doctors. We don’t have a sales force to call on that group. We’ve talked publicly about Abbott Libre. It’s an interesting product for the type 2 market. It’s not a direct competitor, since it’s not a true CGM – it’s missing the key component of CGM, which is alerts and alarms for impending hypoglycemia. It may be an interesting product for type 2 – more as a diagnostic tool or a behavior modification tool. There is an enormous market opportunity – where we sit today, there is so much low hanging fruit in type 1.
Q: It feels like you are trying to accomplish too much with Gen 6 – like you are trying to make it the perfect product with better accuracy, factory calibration, etc.
A: The first version of G6 will be not factory calibrated. The dosing study for the G4 Platinum will largely determine that with respect to the calibration scheme. How many we reduce? It’s a tradeoff, and we’re still evaluating that in-house in small studies. For the hardware portion, you saw the picture of the new applicator. We can burn that in with Gen 6 or Gen 4. We will probably wait a little longer and do it with Gen 6. We’ve left options. You can do several filings with the FDA, or put them all in one bucket. Sometimes it’s less risk to do them together. Look at the pediatric filing. We got Gen 4 approved in 177 days. The pediatric indication took us 13 months. So we evaluate each feature as a separate or combined submission. We had two launches unplanned last year. We replaced the G4 transmitter with a 2mm thinner version. We didn’t say a word when we filed it. It’s also lower cost. Patients are very happy. We also launched a new algorithm and let the FDA approve it. “When do we go? Do we wait for Gen 5 or go now?” A lot of our strategy going forward is along those lines. I don’t think it will be factory calibration. But it will be a new sensor, a new algorithm, and new membranes; everything else is optional.
Takeda: Breakout Session
Q: Does the decision to develop trelagliptin in Japan but not the US or EU reflect the possible strategy Takeda may take for future diabetes drugs, if and when they come down the pipeline? Is there any way that trelagliptin might find its way to the market in the US or EU?
A: The decision on trelagliptin was not illustrative of the future, and more illustrative of the past. Our development operation used to be more regional. If you take a weekly DPP-4 inhibitor, the reimbursement challenge is different in Japan, the US, and Europe. Japan is still a market in which you can get a good return on incremental innovation; the situation in the US and Europe is much more difficult. That will change in Japan because of the introduction of new cost control policies. For trelagliptin, we’re looking at how we can leverage the product outside of Japan. We need to identify patients in whom you can demonstrate cost effectiveness and superior efficacy vs. existing therapy. Otherwise, it’s difficult to get reimbursement.
A: Another question is whether an outcomes study would be required in the US – that would alter the economics of filing in the US.
Q: Could you provide your initial thoughts on the Contrave launch?
A: Contrave has just been launched in the US market. It is an anti-obesity drug that we have in partnership with Orexigen. It’s a bit early to say, but the first feedback we have received has been very positive and the first update has been above our expectations. This is an interesting case because we have combined the product with a strong program to help patients with their ability to lose weight. We’re not just providing the product, but a lifestyle effort around the product as well. I think we need to wait about six months to understand the real trajectory – right now there are lots of people trying the drug but we will have to see about their willingness to stay on.
Q: Is Contrave’s Direct Save program on hold?
A: We have a program to support changes to change their lifestyles beyond taking the medication. Recruitment is going well. The Direct Save program helps patients identify what financial support or coverage is available to them. That program is underway.
Q: Do you have plans to test the DPP-4 inhibitor in combination with Contrave?
A: We’re looking at it – rather, we’re thinking about it. We’re thinking about the combination with SGLT-2 inhibitors potentially, and potentially with Contrave as well. There could be some synergistic effects.
Q: In the diabetes franchise, you seem to have de-emphasized the existing DPP-4 inhibitor. Is that correct, and does it reflect any reprioritization?
A: At the moment, in the medium-term, we have less growth potential in diabetes than in GI and oncology. However, we are still committed to diabetes. We have an existing DPP-4 inhibitor, we have a once-weekly DPP-4 inhibitor, and we are doing earlier stage research. At the moment we don’t have a landmark product like we do in other areas. It will take more time to create a competitive franchise in diabetes, but we’re working on it. The geographic situations are very different as well. Nesina, quite frankly, has been struggling in the US. When you arrive fifth in class, it’s not easy. The US market has also changed a lot in the past few years. On the other hand, Nesina has been very successful in Japan. Even though we don’t have a standout franchise on the agenda like we do in GI or oncology, we’re still committed to diabetes.
GSK: Breakout Session
Q: Could you provide your thoughts on the Tanzeum launch?
A: It’s early days and only a US launch at the moment. We think we’ve got a good data package, with reasonable positioning ahead of the need to take prandial insulin. We’re not a major diabetes player so we recognize that our aspirations have to take that into account. We’re building coverage and starting to move, but it’s too early to really judge. Ask your question around 3Q15 and we’ll have a more informed answer.
Q: Is the long-term strategy to stay within GLP-1 or to expand more broadly into diabetes?
A: Tanzeum is all we really have in diabetes, so we’re not seeking to become a major diabetes player. We don’t have an enormous amount of R&D behind diabetes. Tanzeum is a product we’ve developed with a comprehensive data package, and we’ll see how we do. We’re realistic and a little bit optimistic. We think we’ve got good positioning and a product with a good tolerability profile in particular, as well as a smaller needle, so we’ll see where we go. We’re not trying to build a whole diabetes franchise – we think that area is competitive enough.
Q: In late 2013, you made changes to your sales practices to stop direct payments to doctors and to implement a new compensation program for sales representatives. Could you discuss whether that may have contributed to some of the softer launches we have seen in respiratory?
A: I think that’s too simplistic. The principles and policies of how we run our sales force are constant across disease areas, and we’ve been successful in oncology and HIV. There are other factors at play in respiratory.
Workshop and Panel Discussion: Type 1 Diabetes – Novel Therapies, Devices, and Diagnostics on the Horizon
Dr. Richard Insel (JDRF, New York, NY): One challenge we all face is reimbursement and finding support for innovation. What are your thoughts on reimbursement?
Dr. Werner Cautreels (Selecta Biosciences, Watertown, MA): Prevention is always better than treatment in terms of societal and financial aspects. The hope with our therapy would be to give everyone some sort of type 1 diabetes vaccine, but that is way out there. We have been working with beta cell homogenates and the dendritic cells can pick out the signal that they need to induce tolerance to. If we can target a use like preventing the rejection of transplant therapies, that would be a no-brainer in terms of reimbursement and price would be a secondary question. Prevention is decades away, but perhaps we can get there.
Dr. Insel: Will we be willing to pay a premium for prevention eventually?
Dr. Cautreels: I think so. We’re working more in emerging markets, which have historically been behind in healthcare, but today they are changing their mind and realize that prevention is an investment rather than a cost. I hope we can catch up to that way of thinking.
Dr. Paul Laikind (Viacyte, San Diego, CA): Reimbursement is something that, in industry, you have to think about early on. In our case it will depend on how the product performs. If it performs the way we hope it will as a functional cure for the disease, there is a compelling argument for reimbursement given the impact of poorly controlled diabetes on outcomes and lifespan.
Dr. Insel: It would also be a replacement for the expensive transplantation of cadaveric islets.
Dr. Laikind: Yes, but those transplants are not done often. The value is most pronounced in populations with higher unmet need, like type 1 diabetes patients with a higher degree of hypoglycemia unawareness. We have spoken with the FDA about initiating a trial in patients with hypoglycemia unawareness.
Mr. Richard Berenson (Thermalin Diabetes, Newton, MA): Before starting Thermalin I talked with payers. What’s happening to insulin now is that commercial insulins are going off-patent. With biogenerics you can expect average prices to come down. The question is whether new proprietary insulins will receive a premium. The answer I got from the payers was that tight glycemic control makes such a different in the disease long-term that if you can show tighter control, they would be willing to pay a premium. Finding ways to provide patients with better control while we wait for our dreams for artificial and bio-artificial pancreases to come true is critical to overall healthcare.
Q: What are the prospects for oral insulin and non-invasive glucose monitoring?
Mr. Berenson: There are several big challenges with any non-subcutaneous delivery of insulin. With oral insulin, the challenge is in getting the dose right. When you take a protein and ingest it, it will be digested. Strategies to address this have been two-fold: you encapsulate the drug so that it makes it farther into the GI tract, and you also use a much higher dose. The challenge is variability, in the microbiome, sickness, and other factors that can impact absorption. The result is that it is difficult to get the dose right if you take insulin orally. The benefit of oral insulin is that it would go straight through the intestine into the portal circulation and to the liver, which is more physiologic. However, this is more of a benefit for mealtime insulin and is somewhat less important for basal insulin. Oral insulin is a challenging space.
Mr. Howard Look (Tidepool, Palo Alto, CA): Glucose monitoring technology is not my area of expertise, but non-invasive monitoring is something that patients want. There are interesting ongoing studies on using CGM to make insulin dosing decisions. There has been work on optical methods for non-invasive glucose monitoring but none have yet made it out of the lab. Google got press last year for its glucose sensing contact lens project. I sure hope it works – there is not much data on it but I’m guessing that it will not be accurate enough to dose insulin, though I hope they could get there. What I can talk about is interoperability of data, which is what I am working on. There is very little device interoperability now, but things are changing. We’re building an open platform that will normalize data coming off different devices. This is critical to achieving a closed loop system, because if you have devices that can’t talk to each other they can’t be integrated. Device interoperability, when it happens, will enable ecosystems like iPhone and Android, which will change everything.
Dr. Insel: Another type of insulin is the concept of glucose responsive insulin. What is the potential for that?
Mr. Berenson: With glucose responsive insulin, you inject it to form a depot, either under the skin or in a circulating depot. Normal insulin releases in a predictable format with a pharmacokinetic curve that goes up then comes down over the course of two to four hours, but with glucose responsive insulin the insulin remains in the depot while glucose levels are low. If glucose is high, the insulin will be released at a faster rate. The idea is to avoid hypoglycemia if you don’t eat as big a meal as you expected or if you exercise. It is a good way to have a mini temporary artificial pancreas that has some adjustability of release. Merck has a product that is being developed from work initially done by SmartCells, putting a moiety on insulin that is glucose mimetic and binds to lectins under the skin. The insulin peels off when glucose levels are high. I believe glucose responsive insulin will be an important contribution to overall therapy but won’t take over the market. The reason is that dosing glucose responsive insulin is challenging. With normal insulin you dose based on current glucose levels and the number of carbs you plan on eating. With glucose responsive insulin you’ve created a depot, so if you ingest fewer carbs than expected you’ll have a larger depot on board. When it comes time to introduce the next depot, you don’t know how much is on board unless you include previously consumed carbs into the calculation – it’s a complicated dosing scheme. There is great potential for reducing hypoglycemia, but dosing is challenging. Thermalin has a program looking at strategies for glucose responsive insulin. We think it is an important segment, and we have ongoing efforts to try and identify ways to achieve it.
Dr. Insel: What will the therapy landscape look like ten years from now?
Mr. Look: I’m most excited about the artificial pancreas. My hope for my daughter and everyone with type 1 diabetes is that we reduce the burden of managing the disease. It has been said that patients make 300 decisions per day when managing their diabetes. We already have closed loop technology today, but in ten years I hope everyone has the chance to be on it.
Dr. Laikind: I would agree with you but change it to bio-artificial pancreas, which is what we’re working on.
Dr. Joseph Hedrick (Janssen, Raritan, NJ): Until we reach the full diabetes interception solution, we should look for things that could have a significant impact on delaying insulin dependence. It could be simple things like nutriceuticals that give beta cells a bit more life and keep them around longer. A critical component is developing biomarkers, imaging, and developing a deeper understanding of the interception space so that we can apply these new therapies and know who to treat.
Dr. Cautreels: I think the solution will be to bring all these things together.
Mr. Berenson: My two takeaways are: first, patients are different, and we will need to customize solutions to patients. In ten years, I hope we have a diversity of more sophisticated therapies for different people. Second, the pancreas is a pretty smart organ when functioning well. Whatever therapy we use will need to have bio-intelligence or artificial intelligence that is able to make smart decisions about when to dose or not dose insulin.
Dr. Richard Insel (JDRF, New York, NY): Could the Viacyte solution work for type 2 diabetes?
Dr. Laikind: Conceivably yes, but type 1 diabetes and type 2 diabetes are very different. Our therapy probably would not work for early type 2 diabetes because those patients are hypersecreting insulin, but once the beta cells burn out then possibly yes.
Mr. Berenson: I’m going to disagree slightly with that remark. In type 2 diabetes, there is increased pressure on the pancreas. People think that earlier introduction of insulin could reduce the burden on the pancreas and help it last longer. Transplanted biological pancreases could slow the progression of the disease, as could the early introduction of insulin.
Dr. Laikind: That’s a good point – it shows the power of collaboration between all of us.
Dr. Joseph Hedrick (Janssen, Raritan, NJ): We should keep in mind that in the progression of type 1 diabetes before the insulin dependent phase, there can be a long period where patients have dysglycemia, elevated A1cs, and increasing metabolic pressure on their beta cells that may not be dissimilar from the situation with type 2 diabetes. I envision a scenario in which you could successfully address the immune angle, but because you no longer have sufficient beta cell mass you end up at insulin dependence anyways. The Viacyte solution could be the solution for the disease interception space.
Q: Is the type 1 diabetes community worried about pancreatic cancer with new therapies?
Dr. Insel: There is an increased risk of pancreatic cancer in diabetes. We are trying to learn the mechanisms by which tumors involving beta cell insulinomas expand beta cell mass, as this may be applicable to regenerating beta cells. Beta cell regeneration needs to be paired with immune tolerance strategies. Interestingly, some type 1 diabetes patients have residual beta cell capacity a long time after diagnosis.
Mr. Berenson: Insulin is a growth hormone, which is one reason why you see increased cancer rates in those on insulin because they’re chronically hyperinsulinemic. We’re working on insulin that is less mitogenic even than regular human insulin.
-- by Melissa An, Adam Brown, Varun Iyengar, Emily Regier, Manu Venkat, and Kelly Close