Good morning - it's been a very busy week of earnings and news here and today's email continues the trend! We have news from Sanofi and AZ that just reported this morning, along with our Merck 2Q13 full report, news on Lilly/BI's new Tradjenta CVD plus renal outcomes trial, Adocia/Lilly's terminated licensing agreement on ultra-fast-acting insulin, Flamel's decision not to actively develop an extended release basal, our NeuroMetrix and Neurocrine 2Q13 reports, and news on social media and medication adherence.


Diabetes Drugs

1. Sanofi 2Q13 - Diabetes revenue continues to exceed $2 billion; first reported revenue for Lyxumia (~$1.3 million); Lantus continues double-digit growth (summary below)

2. Merck 2Q13 - Januvia up 5%, though sales in Japan decline; future focus on sulfonylurea utilization; SGLT-2 ertugliflozin with Pfizer on track to begin phase 3 in 2H13

3. Lilly/BI initiate new CV and renal outcomes study for Tradjenta - CARMELINA; first patient has enrolled (summary below)

4. AZ 2Q13 - Onglyza revenue up 29%; exenatide franchise loses share to Victoza (summary below)

5. Adocia and Lilly terminate licensing agreement to develop ultra-fast-acting insulin analog using Adocia's BioChaperone technology; Adocia to conduct clinical trial before year-end in Germany (summary below)

6. Flamel no longer actively developing phase 1 extended release basal insulin (FT-105) (summary below)

7. Neurocrine 2Q13 - Did not receive milestone payments for preclinical GPR119 collaboration with BI during the quarter


8. NeuroMetrix 2Q13 - Shipment of 210 Sensus devices; CMS changes to Medicare Advantage premiums have limited near-term domestic growth potential for NC-stat DPNCheck (summary below)

9. "Social Media in Healthcare" report encourages physicians to connect on social media or risk alienating patients (summary below)

10. NEHI releases six priority actions to improve medication adherence (summary below)



1. Just moments ago, Sanofi's 2Q13 conference call ended; Sanofi reported another strong performance in 2Q13 - see the press release here and slides here. Total Diabetes Division revenue in 2Q13 totaled 1.6 billion Euros ($2.1 billion), up 16% operationally and 13% as reported. As management noted on the call, this represents Sanofi Diabetes' 10th consecutive quarter of double- digit growth. Performance was once again driven by strong Lantus sales, which totaled 1.4 billion Euros ($1.8 billion), up 18% operationally and 15% as reported (a strong increase, though an easier comparison against 10% growth in 2Q12 in US dollars - the comparison was tougher against the Euro as growth increased 27% in 2Q12 in Euros). For the first time, Sanofi reported results for Lyxumia,  its once-daily GLP-1 agonist (Sanofi launched Lyxumia in Germany and the UK in February 2013). In 2Q13, Lyxumia sales totaled 1 million Euros (~$1.3 million). Management noted that 18 weeks after launch in Germany, Lyxumia had captured more than 10% of the GLP-1 market by volume.   According to Sanofi's slides, this nearly matches that of BMS/AZ's once-weekly Bydureon. Lyxumia received approval in Japan in June, and Sanofi is preparing for launch there. In the US, Lyxumia remains under FDA review (based on Sanofi's December 2012 submission, a December 2013 decision is possible). Apidra, Sanofi's rapid-acting insulin, also had a strong quarter with sales reaching 68 million Euros ($89 million), up 25% operationally and up 21% as reported, representing a continuation of Apidra's recovery from supply issues one year ago. From our calculations, BGStar  and iBGStar sales totaled ~12 million euros (~$16 million), up 33% as reported from 2Q12.  The remainder of Sanofi's Diabetes Division sales came from Amaryl and Insuman. Turning towards Sanofi's pipeline, management recapped the EDITION I results for its U300 insulin glargine formulation that were presented at ADA and the topline EDITION II results that were announced at the same time whereby U300 glargine conferred equivalent glycemic control as Lantus with 21% fewer nocturnal hypoglycemic events. Topline results of EDITION III and IV are expected in 2H13. Consistent with management's previous estimates of regulatory submission in 2014, management today announced that it expects to submit its U300 glargine in 1H14 in the US and EU. As a  reminder, Lilly/BI announced in July 2013 that they had submitted their new insulin glargine formulation in the EU as a biosimilar. Disappointingly, management did not mention the Lyxumia/ Lantus combination device, on which it had promised more information on during its ADA Diabetes Update, but disclosed very little save for an expectation for 1H14 phase 3 initiation. Lastly, management confirmed that topline phase 3 data for alirocumab (the company's PCSK9 inhibitor for hypercholesterolemia) are still expected in 3Q13 (it will be the first company with a PCSK9 inhibitor to report phase 3 results). We will return shortly with our full report on the call.

2. We are back from our quick take on the Merck 2Q13 financial results with more detailed coverage - read our full report on the call here. As a reminder, Merck announced that Januvia franchise sales rose 5% year-over-year (YOY) in 2Q13, a significantly more positive result than in 1Q13, when Merck saw its first YOY worldwide reduction for the Januvia franchise. Sales in 2Q13 rose a strong 20% sequentially to $1.55 billion (albeit from a low base) - this is its second best result better for the franchise. As a reminder, 2Q and 4Q are the quarters when revenue from Japan is posted, which distorts global and ex-US growth. Internationally the big news was that Januvia sales declined in Japan - a striking change from just two quarters ago in 4Q12, when Japan was listed with the US as a key driver of growth. See our full report on the call for why Merck thinks 2Q13's results better reflect the franchise's strength than 1Q13's and for more on the future of the class's growth. Management indicated that "all [its] focus now is on the sulfonylurea utilization" and converting patients from SUs to Januvia. That is good news for patients we think, as long as they can pay for the branded drug. Based on our searches on, Merck also appears to be working on two other strategies to expand Januvia's market: strengthening public reimbursement for Januvia in China and securing a pediatric indication. On the partnership with Pfizer for the SGLT-2 inhibitor ertugliflozin, Merck reaffirmed that it remains on track to begin phase 3 in 2H13, and that a fixed-dose combination with Januvia or Janumet remains a goal - for the sake of patients (one pill, one co-pay, presumably better efficacy - the formulation of course will be key in terms of the side effect profile). For more details on all of the above plus more information on the rest of the company's diabetes-related pipeline (including its phase 3 once-weekly DPP-4 inhibitor), see our full report here.

3. Lilly announced yesterday morning that it has enrolled its first patient for a new cardiovascular and renal outcomes study for it/BI's DPP-4 inhibitor Tradjenta (linagliptin) - see the press release. The trial, named CARMELINA, has a primary outcome of time to first MACE+ (CV death, non-fatal myocardial infarction, non-fatal stroke, or hospitalization for unstable angina) and secondary outcomes of time to first occurrence of a composite renal endpoint (renal death, end stage renal disease, or sustained 50% decrease in eGFR) and time to first MACE (CV death, non-fatal myocardial infarction, or non-fatal stroke). The trial plans to enroll 8,300 patients and complete in January 2018 ( Identifier: NCT01897532). Wow! That is a big commitment, particularly given how hard it is becoming to enroll patients in CVOTs (of course the patient population continues to grow prodigeously). As a reminder, Lilly also has an ongoing cardiovascular outcomes trial (CAROLINA) for linagliptin (n=6,000), which is expected to complete in September 2018 ( Identifier: NCT01243424). CAROLINA is the only CVOT for a diabetes drug to use a sulfonylurea (glimepiride) as the comparator, which has led many to speculate that the trial has one of the best chances of showing CV superiority - we are certainly extremely interested to see the results of longer-term SFU use in patients and salute BI/Lilly for using SFUs in the trial - this should elucidate longer-term impact. By contrast, CARMELINA will use a placebo comparator. Drugs in the DPP-4 inhibitor class are very similar overall, though Tradjenta is differentiated in that it does not require dose adjustment in patients with renal impairment, which should impact the prescriber ease of use (they don't have to be concerned about changing doses if renal health changes). CARMELINA is the only ongoing renal outcomes study for a diabetes drug that we are aware of, and BI/Lilly could further differentiate Tradjenta with positive results.

4. AstraZeneca CEO Pascal Soriot led the company's 2Q13 financial update earlier this morning - read the press release here and our initial quick report here (we will be back soon with a full report). AZ's worldwide Onglyza (saxagliptin) revenue increased 29% year-over-year (28% at constant exchange rates) and rose 13% sequentially. Management noted that Onglyza's share of the US DPP-4 inhibitor market stabilized in 2Q13 (at around 16%) after the slight loss in share that occurred in 1Q13 stemming from declines in managed care formularies. Management said that the  US DPP-4 market appears to stabilizing, as the effects of the availability of generic TZDs have run their course. The impact of SGLT-2 inhibitors, of course, is unknown as yet; AZ, of course, has dapagliflozin approved in the EU and should have it approved in the US in early 2014, so it has a nice hedge against this new class that could be quite competitive against DPP-4 inhibitors, before the branded fixed dose combination is created. Management acknowledged that the exenatide franchise lost share to Novo Nordisk's Victoza (liraglutide) in 2Q13, noting that Novo Nordisk also had more marketing funds to devote to Victoza since degludec was delayed in the US. Sales for the Amylin portfolio of products were on the weaker side, contributing $72 million to total diabetes product sales. Domestic Bydureon (exenatide once-weekly) sales were flat sequentially at $27 million despite a growth in TRx share, while Byetta (exenatide once-daily) sales fell to $36 million, down 14% sequentially to $36 million. AZ recognized $17 million in Byetta sales and $5 million in Bydureon sales outside the US. AZ management indicated during the call that they plan on increasing investments in sales and marketing for the exenatide franchise to compete more effectively. They also expressed hope that the dual-chambered Bydureon pen - still slated for US submission in 3Q13 and EU submission in 4Q13 - will reinvigorate the franchise. Symlin sales totaled $10 million during 2Q13. Forxiga (BMS/AZs SGLT-2 inhibitor) sales reached $3 million in 2Q13, the second quarter of reported sales for the product  this was up from $1 million in 1Q13). Reimbursement challenges sound omnipresent in the EU, particularly in Germany. As a reminder, the drug was recently resubmitted to the FDA, with a new PDUFA date set for January 11, 2014.

5. Since we reported on Flamel's 2Q13 update, we learned that Flamel's phase 1 extended release basal insulin (FT-105) is no longer an active project - see our original Flamel 2Q13 coverage here. Flamel's preclinical extended release GLP-1 agonist (CLP-1 XL) is still in development. Both products use Flamel's Medusa technology, a nanogel drug delivery system that extends the half-life of the agent without altering the molecule. Flamel believes this method increases a drug's efficacy and decreases its side-effect profile. In addition to further details on the quarter, our Flamel 2Q13 report includes a competitive landscape overview of the GLP-1 agonist and basal insulin fields.

6. On Monday, Adocia announced the termination of its agreement with Lilly to develop an ultra-fast-acting insulin analog - read the press release. The licensing agreement, originally signed in December 2011, concerned the use of Adocia's BioChaperone technology. Monday's release quotes Adocia's CEO Gerard Soula, who notes, "We intend to pursue more actively this project by ourselves as the phase 1 clinical trial met the predefined clinical endpoints..." With this in mind, we wonder about the speed with which Lilly was moving on the project, whether there was a disagreement about how to move forward, or perhaps that Lilly is moving forward with its own proprietary ultra-fast platform. Adocia plans to conduct a clinical trial of an ultra-fast-acting BioChaperone insulin analog before the end of the year in Germany; the press release does not specify size or study design, but we assume this would be a phase 2 trial. The company's pipeline highlights two other diabetes products: 1) HinsBet (a fast-acting human insulin that in a previous phase 2a study (n=20) was reportedly comparable to Novolog; a second-gen version will be tested in another phase 2a trial); and 2) a "fast and slow" premixed insulin (to be tested this year in a phase 1/2 trial). New data on HinsBet and the ultra-fast-acting analog is expected by the end of 2013 or early 2014. For background, the company had its IPO in February 2012 on the NYSE Euronext Paris. As of April 2013, cash resources totaled 27 million euros (~$35 million), and cash burn was 3.7 million euros ($4.9 million) in 1Q13. The company believes it has enough resources to last untilmid-2015. Given the need for ultra-fast insulin, especially for the artificial pancreas, we will be watching Adocia closely.

7. Neurocrine's 2Q13 financial results call last week provided no updates on its preclinical GPR119 agonist development program, beyond that the drop in collaboration payments drove a reduction in the company's revenue - read our report here. Neurocrine posted revenue of $0.7 million in 2Q13 compared to $11 million in 2Q12. According to the accompanying 10-Q, Neurocine did not receive any milestone payments for the program in 1Q13; however, the company is still eligible for additional preclinical milestone payments that could total ~$3 million. These statements are consistent with Neurocrine's 2Q12 guidance that the  company would not receive milestone payments from the program in 2012, but that it might in 2013. For more background on Neurocrine and BI's partnership, see our full report on the call here.

8. NeuroMetrix CEO Dr. Shai Gozani led the company's 2Q13 results update last week - read the press release here. As a reminder, NeuroMetrix markets two devices for diabetic peripheral neuropathy (DPN): the NC-Stat DPNCheck diagnostic device and the recently launched (in 1Q13) Sensus Pain Management device. In 2Q13, NeuroMetrix shipped 210 Sensus devices, up from 145 devices in 1Q13. Sales in 2Q13, at $32,000, however, were slightly lower than 1Q13 sales of $33,000, suggesting that the company may have implemented a free trial, rebate, or price reduction program. Management emphasized that the upcoming 3Q13 and 4Q13 would be "foundational" quarters for establishing a national distribution network as the essential building block for growing sales. Management did not mention its earlier goal (shared during the 1Q13 update) of shipping 2,000 units in 2013; it seems strong progress during 2H13 will be required for this goal to remain in sight. The company has pilot programs scheduled with national distributors, which will begin in 3Q13 and have the potential to greatly accelerate growth. As a reminder, in 2Q13 Sensus received 510(k) clearance from the FDA for use during sleep, a valuable new indication. In addition, NeuroMetrix completed a $5 million equity offering to gain additional resources for Sensus commercialization. Turning to the NC-stat DPN Check, sales were down 59% sequentially to $129,000 against a fairly easy comparison (1Q13 sales were down 11% sequentially). Management stated that these results reflect CMS' changes to the Medicare Advantage premium structure for 2014 (proposed in 1Q13 and finalized in 2Q13) that narrow financial benefits for the early diagnosis of DPN. As a result, NeuroMetrix does not see domestic growth potential for the brand in the near future. Management indicated that the greatest near-term potential for the NC-stat DPNCheck lies outside the US - the company continues to work on early-stage partnerships in nations such as Japan, where it has partnered with Omron on seeking regulatory approval and distributing the product. At the end of the quarter, NeuroMetrix had $9.6 million in cash and cash equivalents, providing a runway into 3Q13.

9. A new paper from HP, "Social Media in Healthcare," encourages physicians to practice using social media - read the June report here. It starts strong on the first page, noting, "Healthcare providers of all sizes need to act now to mitigate risks and put the power of social networks to work to increase revenue, cut costs, and enhance the quality of patient care." The report has several interesting sections that support use of social media in healthcare, including "A new patient-caregiver relationship," "Risks of doing nothing," and "Obstacles to social media in healthcare." Notably, the report cites three risks to ignoring social media: 1) risks to patients (e.g., HCPs failing to correct misleading information); 2) risks to reputation (e.g., doctors without a social media presence are more likely to be unaware of negative reviews by their patients); and 3) liability/ HIPAA (e.g., without policies in place, HCPs are more likely to violate HIPAA). The American Medical Association also has a set of recommendations for physicians using social media (read it here). We strongly encourage HCPs, healthcare organizations, and industry to further build their social media presence - in our social media round-up of ADA 2013, we found doctors to generally be the least represented group among conference tweeters (see our report here). However, we believe that online patient communities can be an especially rich space for HCP engagement. For example, the weekly Diabetes Social Media Advocacy (#DSMA) tweetchat sees an average of 784 tweets each week and is one of our favorite sources of information for how patients are thinking, learning, and feeling. Additionally, a 2012 survey by PricewaterhouseCoopers found that 40% of respondents reported that social media would affect how they cope with a chronic condition or their approach to diet and exercise. We hope to see many more healthcare groups and organizations further jumping on board in the coming years - it has been terrific to see so much movement in this area by some of the key players that we will be discussing at IDF where we've been asked to give a presentation on social media (IDF in Melbourne is 122 days away!)

10. The health policy institute NEHI released a report detailing six priorities to improve medication adherence - download the report here. NEHI recommends 1) promoting best practices and lessons learned from pilots of new medication management techniques; 2) supporting the collective implementation of evidence-based tactics for medication management; 3) continuing development of medication adherence metrics that spur medication management strategies; 4) adopting electronic record systems that support evidence-based interventions for improved adherence; 5) improving and expanding Medication Therapy Management services in Medicare Part D; and 6) integrating research, policy, and advocacy to improve the use of medicines. There's no doubt in our minds that there is a profound need for more work on medication adherence - a June 2013 report (read it here) from the IMS Institute found Americans spend $105 billion (!) in avoidable costs stemming from medication nonadherence. Meanwhile, a November 2012 report  (read it here) from the Congressional Budget Office announced its assumption moving forward that a 5% increase in prescriptions used by patients on Medicare would result in a 1% decrease in medical and hospital spending. Talk about return on investment! We always look forward to hearing more about adherence at AADE - we're certainly eager to absorb new learnings next week in Philadelphia...

Good day for now - we'll return with some quarterly report updates on BD and Arena, our full reports on Bayer and Lexicon, as well as our initial coverage of the Payor Strategies for Emerging Markets meeting in Philly - see more about our meeting here and (see the first link for our preview). Last, Takeda just got approval for DPP-4 inhibitor Nesina in China - we'll have more on that too.

very best, kelly


Kelly L. Close


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