Manufacturers of continuous blood glucose monitors and insulin pumps are a part of the successful medical technology industry during the coronavirus pandemic, with patients turning to wearable devices and other health-based care. technology as hospitals fill up and life fades away.
Diabetes tech companies Dexcom, Insulet and Tandem Diabetes Care ended the first half of 2021 much like they closed 2020, beating the previous year’s revenue or sales and increasing the number of users.
With patients flocking to CGMs and insulin pumps in recent years, companies are looking to expand further into existing patient populations, and companies are targeting patients with type 2 diabetes.
Dexcom contributes resources in advertising, including millions of dollars for a Super Bowl commercial, as well as marketing strategies to ensure patients and physicians know CGMs are an option for managing type 2 diabetes.
“It’s all about awareness now. We doubled the size of our sales force at the start of this year, so we have access to more primary care physicians who see a large portion of insulin using type 2 patients, ”CEO Kevin Sayer said during of a call for results on July 29. “We’ve had a huge increase in the number of prescribers for our product over the course of this year. So it’s a big win.”
Sayer added that the insulin-intensive type 2 market will be “just as penetrated as type 1 at some point.”
The Type 2 market could be a crucial driver for a business that is already experiencing steady growth in revenue and profits. Dexcom increases gross margin in the first half of 2021 of 41% and 103% over the first half of 2020 and 2019, respectively. The company made $ 761 million in gross profits in the first two quarters of the year.
Part of the market’s appeal is its size. Estimates from the Centers for Disease Control and Prevention over 34 million people in the United States have diabetes, with 90-95% type 2.
However, not all patients with type 2 diabetes will need to monitor their blood sugar levels as closely as other patients, and many do not need insulin at all. Still, diabetes technology may be an option to help manage their disease, according to the larger group of diabetic patients.
“People who receive multiple daily insulin injections and who have type 2 diabetes also benefit from CGM, as do people with type 1,” said Ruth Weinstock, president of medicine and science to the American Diabetes Association, which receives financial support from several health care providers. companies, including Dexcom, Abbott Laboratories and Eli Lilly.
Although not every patient with type 2 diabetes no need or use a CGM, the population is still so large that it could be an important revenue generator for space companies.
SVB Leerink analyst Danielle Antalffy estimates that around 3 to 4 million patients with type 2 diabetes need insulin, and predicts that CGM companies could capture more than 90% of those patients. Currently, Dexcom estimates that the US market for insulin-intensive type 2 is less than 25% penetrated.
“You don’t have to hit really big penetration or usage numbers to reach … easily $ 5 billion. [total addressable market,] if not closer to 10, ”Antalffy said.
Are devices still needed?
While companies prioritize expansion into the Type 2 market, concerns have been raised as to whether technological devices for diabetes, which can often be expensive and difficult to convince payers to cover, are even necessary for all patients.
According to the GoodRx website, three sensors for Dexcom’s G6 system, a 30-day supply, have an average retail price of around $ 425. Two meters for Abbott’s FreeStyle Libre 2 system, a 28-day supply, have an average retail price of $ 133. The costs can run into the hundreds of dollars for readers or issuers.
The products are covered by commercial payers and Medicare for patients with type 1 and 2 diabetes requiring insulin, reducing out-of-pocket costs for patients. However, getting coverage can be difficult.
Dexcom’s Sayer addressed concerns about the additional costs for patients who already have a disease that is expensive to manage in a recent interview, saying more clinical trials are needed because there is no “field” study. to show to payers and physicians.
Weinstock, an adult endocrinologist, has stated anecdotally that even intermittent use of CGM has improved diabetes management for patients with type 2 diabetes who do not require insulin.
CGMs can be expensive, but the data collected and shared with patients can also raise awareness of better management strategies and potentially help prevent the long-term and costly health degradation that accompanies disease.
“Expensive, not only to society, in real dollars – because of dialysis, etc. – but costly for the individual and their family, in terms of quality of life and loss of work,” Weinstock said.
Pricing has been a key component of competition in the CGM market. Abbott’s FreeStyle Libre products were the cheapest option; however, Dexcom reduced the margin by shifting to the distribution of devices primarily through the drugstore channel rather than the durable medical equipment channel.
The company’s new G7 CGM system, slated for release later this year, is expected to further reduce the margin.
Pricing is not the only strategy. While Abbott is primarily concerned with getting the lowest price, Dexcom has started working directly with commercial payers like UnitedHealthcare to expand coverage by trying to show the benefits of CGM over other treatments, such as reducing drug use and hospitalizations.
A different opportunity for pumps
Tandem and Insulet also favor the type 2 market. However, the opportunity is not as great for pump manufacturers as a significant number of patients with type 2 diabetes do not need insulin or may not. no need for insulin at the levels required for pump use.
“That’s not to say that there aren’t some people with type 2 diabetes who benefit from push-ups, there are. But there are many, many more, I think, who don’t. need an insulin pump because they don’t need a complex insulin delivery system, but can still benefit from CGM, ”Weinstock said.
An SVB Leerink survey conducted in March of endocrinologists and nurse practitioners suggests that insulin pump penetration in patients with type 2 diabetes requiring intensive insulin therapy is expected to peak at around 30%, which which may even be too favorable a rating.
“I’m not sure we’ll get there… I don’t think we’re going to have the majority of Type 2 insulin-intensive [patients] on an insulin pump, but we’ll have them all on a CGM, ”Antalffy said.
The market may still be crucial as competition in the space intensifies.
Insulet CEO Shacey Petrovic said on a conference call Thursday that patients with type 2 diabetes made up about 35-40% of new users in the second trimester. The company also follows Dexcom market leader in type 2 by investing in direct-to-consumer marketing.
Insulet grew up First half gross margin of 30% over the same period last year and 57% over 2019. Gross margin totaled $ 350.2 million in the first six months of 2021.
The company faces unexpected challenges as the Omnipod 5 product release has been pushed back from the first half of 2021 to the end of the fourth quarter. The product has been hyped by analysts, with JP Morgan calling it one of the best product releases of 2021 because it will be cheaper than Tandem’s offerings and can work with CGMs as part of a management system. integrated.
Rival Tandem is also prioritizing the type 2 population. CEO John Sheridan said on a conference call Wednesday that he is starting a clinical study to extend the labeling of Control-IQ technology to patients with type 2. The technology allows Tandem pumps to connect and communicate with CGMs to automatically deliver insulin.
The study will begin in the next few months and will likely be followed by a larger pivotal trial in 2022, according to Sheridan.
Similar to the CGM space, pricing is a big part of the insulin pump market. Pumps offered through the Durable Medical Equipment channel, which Tandem primarily sells, may require an upfront payment of up to $ 5,000.
Meanwhile, Insulet reflects a strategy used by the CGM companies and sells pumps through the pharmacy channel, reducing product costs and enabling a pay-as-you-go system rather than up-front wholesale payments.
As Insulet grows its business, Tandem has in fact increases profits at higher rates over the past two years. The company increased its first-half profits by 58% and 99% compared to 2020 and 2019, respectively, with profits totaling $ 165.7 million in the first two quarters of 2021.
Despite the smaller market opportunity, insulin pump players are still targeting and prioritizing the type 2 population in the future., and they are likely to benefit from the persistence of CGM makers.
“What the CGM companies have done is really dramatically shift blood sugar monitoring in the type 1 population, and now they are targeting the type 2 population,” Petrovic said in February.