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Analyst Day
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J&J’s Baby Needs a Makeover as Moms Go Natural With Jessica Alba
May 17, 2016 | Bloomberg
By By Cynthia Koons and Lauren Coleman-Lochner
Nancy Johnson Horn hadn’t been a parent for long when she started hearing things that made her question the safety of the Johnson & Johnson’s baby products the hospital had sent home with her. -
Consumer brands, medical devices poised for growth: J&J CEO
May 18, 2016 | CNBC Online
By Tom DiChristopher
Johnson & Johnson Chairman and CEO Alex Gorsky said Wednesday the company's consumer brands and medical devices businesses are poised for growth following years of efforts to turn around the units. -
J&J To Review Strategies For Growth In Consumer, Medical Device Divisions
May 18, 2016 | RTT News
Johnson & Johnson (JNJ) Wednesday said it will review strategies and opportunities for growth in the Consumer and Medical Device segments. -
Johnson & Johnson (JNJ) Notes from Med Device (MD) and Consumer Analyst Day - Raymond James
May 19, 2016 | Street Insider
Raymond James analyst, Jayson Bedford, thinks Johnson & Johnson (NYSE: JNJ) is at an inflection point. Over the past three years, J&J has generated ~5.5% underlying revenue growth but the vast majority (75%) has been driven by Pharma. -
CNBC J&J Store Interview
May 18, 2016 | CNBC
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8 AM CNBC Clip
May 18, 2016 | CNBC
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Closing Bell Segment
May 18, 2016 | CNBC
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J&J Medical Device Business Review – Finesse renamed OneTouch Via, launch in next 12 months (filing in 2H16); automated insulin delivery launch by November 2017 – May 18, 2016
May 18, 2016 | Close Concerns
By Adam Brown and Kelly Close
J&J has renamed Calibra’s Finesse the “OneTouch Via.” Launch is expected in the “next 12 months,” slightly back of the previous goal to launch in 2016. Unexpectedly, a regulatory filing will now come in 2H16. OneTouch Via was pegged as a ~$1 billion global opportunity (“discreet, wearable, on-demand, mealtime insulin delivery”). -
Will it Work?
May 18, 2016 | Diabetes Investor
By David Kliff
Today Johnson and Johnson (NYSE: JNJ) is holding their Consumer and Medical Device Business review. Although the webcast has had some technical issues the slides used during the presentation tell the story quite nicely. Now before we go into an analysis of what we have seen so far a few points.
Online Coverage
Broadcast Coverage
Diabetes Blog Coverage
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J&J’s Baby Needs a Makeover as Moms Go Natural With Jessica Alba
May 17, 2016 | Bloomberg
By By Cynthia Koons and Lauren Coleman-Lochner
Nancy Johnson Horn hadn’t been a parent for long when she started hearing things that made her question the safety of the Johnson & Johnson’s baby products the hospital had sent home with her.
“When my third child was born, I brought my own soap,” said Horn, a 45-year-old New Yorker whose youngest is now 5 and who blogs about motherhood. “I wanted to make sure that I had the natural products and brands I could trust with my kids.”
Horn’s parenting choices reflect a broader trend that’s hurting one of J&J’s few product lines that still carry the company’s trademark name: Johnson’s baby products. Even after addressing public concerns raised by consumer advocates in recent years, J&J hasn’t been able to shake off perceptions. The latest generation of mothers moved to higher-end organic brands -- many of which didn’t exist a decade ago. The result: J&J’s baby-care business has lost market shares in the U.S., and sales slumped 14 percent in the country last quarter.
“It looks like millennial moms are trying a lot of new organic natural and what we’ll refer to as premium-type brands,” Chief Financial Officer Dominic Caruso said on a conference call with reporters last month. “Our team is very much aware of this and has very, very robust plans to relaunch baby in the latter part of the year.”
J&J plans to unveil the new branding effort on Wednesday at an update on its consumer businesses, according to spokesman Ernie Knewitz, who declined to provide more details or to comment on Horn’s concerns.
Along with other American consumer giants, J&J has been under pressure from consumer advocates who say U.S. efforts to ensure the safety of cosmetics and household cleaners lag behind Europe. The company phased out substances such as formaldehyde, a chemical deemed a “probable human carcinogen” by the U.S. government that used to be included in its baby shampoo. It also pledged to take out parabens, a preservative banned in the European Union, from all of its baby products.
J&J, however, hasn’t been doing what its competitors have -- touting their “natural” designation. The largest baby-care product maker in the U.S. has lost market shares for four consecutive years, to 18.4 percent in 2015, according to Euromonitor International data. J&J missed an opportunity to modernize the label, said Eleanor Dwyer, research associate at Euromonitor International in Chicago.
“Taking out the scary ingredients is obviously the first step,” Dwyer said. “The piece that Johnson & Johnson’s really missing is the emphasis on the ingredients that are there.”
For an example of successful branding, Dwyer pointed to Cetaphil, a skin-care line recommended by dermatologists to adults. When the brand, owned by Swiss consumer giant Nestle SA, introduced a baby line in December 2014, it went beyond just saying that the lotions were paraben-free, and emphasized that they contained skin-calming organic calendula extract.
Tom’s of Maine, a unit of Colgate-Palmolive Co. that added a baby-care line in March 2015, also illustrates how the category is developing: products that use a limited number of ingredients and transparency about their origins. Tom’s of Maine lists what it calls its “just what is necessary” ingredients and their sources online.
Many of today’s young parents are millennials, but not all. Some, like Horn, have kids when they are in their late 30s or early 40s. Either way, their choices differ from the generations that have come before them.
“We’re moving quickly to the point where a clean product is the baseline,” said Carl Jorgensen, director of global consumer strategy and wellness for Daymon Worldwide, a consumer-and-retail consulting company in Stamford, Connecticut. Large consumer-products makers are “hyper aware” of these new preferences, but changing production and ingredients is a costly, slow process. “As the legacy brands have been losing market share to new upstart brands, they are having to change.”
Jessica Alba
Actress Jessica Alba’s eco-friendly baby-care brand Honest Co. has capitalized on the trend. The mother of two says she co-founded the business out of frustration trying to find good baby products. The company was valued at $1.7 billion in a funding round last year, and is working with banks on a potential initial public offering to monetize its success, according to a person familiar with the matter.
J&J has been working to turn around its broader consumer business -- which includes over-the-counter medicines, Band-Aid bandages, Listerine oral care and Neutrogena hand cream -- ever since recalling about 8 million bottles of children’s and infant’s Tylenol in 2009 due to potential contamination of ingredients. Within months, the company’s over-the-counter drug recalls expanded to include Tylenol Arthritis Pain caplets, Rolaids, Motrin and Benadryl.
The health-care giant is also fighting more than 1,000 lawsuits in state and federal courts that accuse J&J of ignoring studies linking talc-based products such as its Shower-to-Shower feminine hygiene product and Johnson’s baby powder to ovarian cancer. In February, the company lost a $72 million verdict to the family of a woman who died of the disease. J&J has maintained the product is safe.
‘Tougher Times’
While the baby-care unit’s $2.04 billion in sales last year accounted for only 3 percent of J&J’s global revenue of $70 billion, the business matters because of its namesake labels -- products like Johnson’s baby oil, head-to-toe wash and baby lotion.
“Clearly this part of the business is having a tougher time,” BMO Capital Markets analyst Joanne Wuensch said of J&J’s baby care division. “To me it also seems a little bit lackluster in terms of new products. These are brand names that have been around since we were children.”
Nancy Kelly, a New York City-based, 35-year-old mother of two, epitomizes J&J’s branding challenge. She says she like Alba’s Honest Co., Burt’s Bees and the Aveeno naturals brand -- which is owned by J&J.
Kelly doesn’t use Johnson’s baby products, however, because she thinks they irritate her kids’ skin.
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Consumer brands, medical devices poised for growth: J&J CEO
May 18, 2016 | CNBC Online
By Tom DiChristopher
Johnson & Johnson Chairman and CEO Alex Gorsky said Wednesday the company's consumer brands and medical devices businesses are poised for growth following years of efforts to turn around the units.
Shares of Johnson & Johnson are trading near an all-time high, largely on the strength of J&J's pharmaceutical business, the largest of its three segments.
In January, Johnson & Johnson said it would cut about 3,000 jobs within its medical devices unit over the next two years, or about 4 to 6 percent of the struggling division's global workforce, to generate annual cost savings of up to $1 billion and focus on more innovative products.
Gorsky said Wednesday the company is eyeing growth after a period of divestment in the unit.
"We've been taking a hard look at our portfolio, because while we're very excited about the investments that we've been making in the future in certain areas, we realize that in other areas, frankly we needed to be more effective, more efficient," he told CNBC's "Squawk Box" ahead of the company's analyst meeting.
Gorsky said he believes Johnson & Johnson has "great" platforms for orthopedics and surgery products and an emerging cardiovascular business.
Earlier this month, BTIG downgraded shares of Johnson & Johnson from "buy" to "neutral" due to decreased confidence that it will be able to execute a large, money-making acquisition of a heart disease device company, analyst Dane Leone wrote in a research note.
Gorsky said Johnson & Johnson will continue to fight an order by a U.S. jury to pay $55 million to a woman who said that using the company's talc-powder products for feminine hygiene caused her to develop ovarian cancer.
He added that he was disappointed in recent talc verdict findings, saying he thought they were inconsistent with established research
Johnson & Johnson is seeking to apply the adverse event and reporting procedures it uses in its pharmaceutical unit to its consumer and medical device businesses to assure the company identifies issues early on and better manage them, Gorsky said.
Johnson & Johnson's consumer brands include Band-Aid, Tylenol and Listerine.
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J&J To Review Strategies For Growth In Consumer, Medical Device Divisions
May 18, 2016 | RTT News
Johnson & Johnson (JNJ) Wednesday said it will review strategies and opportunities for growth in the Consumer and Medical Device segments.
At a meeting today with the investment community, Johnson & Johnson will highlight the strategic advantages of its broad base in human health care, its holistic approach to innovation and its strategy to achieve above-market growth across the enterprise.
The meeting will also feature new insight into the company's increased focus on leading in the Health-Tech space - the intersection between health care and technology.
Johnson & Johnson has the world's most comprehensive Medical Devices business, with $25.1 billion in total sales for 2015. In its hospital medical device businesses, with plans to file more than 20 major new products through 2018, the company expects to deliver above-market growth within the next year.
The Johnson & Johnson Consumer business has three $1 billion brands today, and expects to expand that to five $1 billion brands by 2020.
The company said its Consumer segment is well positioned to grow sales above the market, while continuing to expand margins to achieve benchmark levels of profitability.
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Johnson & Johnson (JNJ) Notes from Med Device (MD) and Consumer Analyst Day - Raymond James
May 19, 2016 | Street Insider
Raymond James analyst, Jayson Bedford, thinks Johnson & Johnson (NYSE: JNJ) is at an inflection point. Over the past three years, J&J has generated ~5.5% underlying revenue growth but the vast majority (75%) has been driven by Pharma. After an active period of portfolio pruning (these businesses are ~10% smaller vs. two years ago), the analyst believes the MD and Consumer segments are at a turning point and positioned to grow in the 3-5% range over the next few years. The two businesses, account for 55% of sales and 47% of profits.
No change to Outperform rating or $120 PT.
For an analyst ratings summary and ratings history on Johnson & Johnson click here. For more ratings news on Johnson & Johnsonclick here.
Shares of Johnson & Johnson closed at $113.59 yesterday.
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May 18, 2016 | CNBC
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May 18, 2016 | CNBC
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May 18, 2016 | CNBC
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May 18, 2016 | Close Concerns
By Adam Brown and Kelly Close
Executive Highlights
J&J has renamed Calibra’s Finesse the “OneTouch Via.” Launch is expected in the “next 12 months,” slightly back of the previous goal to launch in 2016. Unexpectedly, a regulatory filing will now come in 2H16. OneTouch Via was pegged as a ~$1 billion global opportunity (“discreet, wearable, on-demand, mealtime insulin delivery”).
Launch of J&J’s automated insulin delivery device with Dexcom is expected in the next 18 months. The pivotal trial is being planned and expected to start before the end of the year. This is the most specific launch timing ever given, implying a US launch before November 2017 (meaning it could closely follow Medtronic’s MiniMed 670G).
Management called BGM a “volume play” for J&J and cited success in 2015: J&J is #1 in BGM volume globally, growing 4% last year vs. 2% for the entire category. Animas pumps saw impressive 31% sales growth in 2015 on the strength of the Vibe. J&J estimates it is #2 worldwide in insulin pumps, with an ~11% market share that grew two points in 2015.
J&J’s BGM strategy has focused on simplifying the portfolio: from five strip platforms down to two, from 14 meters to three (One Touch Verio, Verio Flex, and VerioIQ), and moving patients from the legacy Ultra strips to the newer Verio strips.
J&J held a very informative Medical Device Business review this morning, with diabetes discussion led by Ashley McEvoy (Company Group Chairman, Vision Care and Diabetes Care). See the diabetes slides here (25-39), the full five-hour webcast here, and the top highlights below followed by Q&A.
Pipeline Highlights
1. J&J has renamed Calibra’s Finesse the “OneTouch Via.” We really like that name. Launch is expected in the “next 12 months,” slightly back of the previous goal to launch in 2016. Unexpectedly, a regulatory filing will now come in 2H16. J&J is working on design validation and building global scale, suggesting the manufacturing may be a gating factor to launch. OneTouch Via was pegged as a ~$1 billion global opportunity, and was one of only two upcoming diabetes pipeline projects. J&J avoided the terms “patch” or “pump,” calling the Via a “discreet, wearable, on-demand, mealtime insulin delivery solution” – like FreeStyle Libre, the goal is to create a new category. We like that and also see it as a solution for snacks and unexplained high blood glucose!
2. A launch of the long-awaited automated insulin delivery device with Dexcom CGM is expected in the next 18 months. The pivotal is being planned and expected to start before the end of 2016. This is the most specific launch timing ever given, implying a US launch before November 2017 (closely following Medtronic’s MiniMed 670G). We saw the first-ever picture of the planned commercial device, which re-orients the Vibe pump body vertically. The display had a bright green screen (presumably to indicate in-range) with the current CGM value and trend arrow.
3. In the broader overview of “healthcare technology,” Group Worldwide Chairman Sandi Peterson alluded to an end-to-end diabetes ecosystem, showing the WellDoc, Tidepool, and Apple HealthKit logos – this was excellent to hear, even if there were no specifics. Notably, J&J as a company has 450 app releases a year (!), valuable experience as diabetes apps proliferate.
Financial and Business Highlights
4. Management was optimistic on the BGM business, calling it a “volume play” for J&J and citing success in 2015: (i) J&J is #1 in BGM volume globally, growing 4% last year vs. 2% for the entire category; (ii) in the US, J&J has a “17-point market share spread,” and volume grew 9% last year in the US (vs. 3% for the category); and (iii) Verio was the fastest growing BGM (volume) in 2015. A slide suggested the estimated ~$7.5 billion BGM field will see a 3% sales decline (CAGR) from 2015-2020, bringing the field to ~$6.0 billion. That was a bit sobering to see since there are well over a million net new patients in the US alone each year.
5. Animas pumps saw high 31% sales growth in 2015 on the strength of the Vibe and from a relatively low base. J&J estimates it is #2 worldwide in insulin pumps, with an ~11% market share that grew two points in 2015. In Q&A, management did not seem terribly concerned about the recent UHC decision to only cover Medtronic pumps, sharing a commitment to fight for patients that want Animas pumps.
6. The call unveiled a new green OneTouch logo that we have not seen before, and it seems like the OneTouch brand will now house Animas and LifeScan products going forward. We like the move to green, which has more personality than the previous black logo and emphasizes the color for in-range blood glucose values.
7. Similar to past analyst days, management highlighted the ability to treat a spectrum from prediabetes (Seven-Minute workout app), to early type 2 (BGM and Invokana), to insulin users (OneTouch Via and Animas pumps), to bariatric surgery device innovation.
8. J&J’s Vision Care business is working on smart contact lenses. There was no mention of glucose monitoring, but like Novartis/Verily, J&J is pursuing an accommodating lens for presbyopia. A subsequent slide mentioned an unmet need in diabetic retinopathy, leaving room for another application. A smart, glucose-sensing contact lens could be a very logical foray for J&J, and would keep it competitive if Novartis/Verily actually come to market with a glucose-sensing lens (to date, Novartis comments have focused more on presbyopia than diabetes).
Pipeline Highlights
1. J&J has renamed Calibra’s Finesse the “OneTouch Via.” Launch is expected in the “next 12 months,” slightly back of the previous goal to launch in 2016. Unexpectedly, a regulatory filing will now come in 2H16. The latter came as a surprise to us, as the Calibra Finesse, bolus-only device received FDA clearance back in 2010 for type 1 and type 2 diabetes (subsequently updated in 2012). Management said it is working on design validation and building global scale, suggesting the manufacturing process may be the gating factor to launch. This will be a 510(k) as far as we know, and given the previous clearances, should hopefully offer a speedy review.OneTouch Via was pegged as a ~$1 billion global opportunity (!), and in Q&A, management shared a ton of excitement for potential in BOTH type 1 and type
2. This product has moved very slowly since J&J acquired the device from Calibra Medical in July 2012, though there is no question that the company is all-in at this point. Via was highlighted as one of only two upcoming diabetes device innovations (the other being automated insulin delivery; see below).Management alluded to two OneTouch Via pipeline products in Q&A: a smart version with connectivity and a larger reservoir version. These have never before been mentioned but both are very logical expansions (to which we would also add a one-unit version for type 1 and non-insulin drug delivery). Valeritas also has a connected V-Go in its pipeline, per the update from earlier this month.
As a reminder, the Finesse is a three-day, extremely slim profile (2 inches long, 1 inch wide, and 0.25 thick), bolus-only wearable insulin delivery device. It holds 200 units and will deliver a two-unit bolus per click at launch. The device is entirely mechanical (no electronics), meaning costs should be very low and manufacturability should be high. The slim profile is unparalleled among currently available insulin delivery devices.Management hopes the ongoing OneTouch Via outcomes study (n=312) will be done in time for filing (expected completion in December). This could help with reimbursement in a big way if outcomes are positive. According to clinicaltrials.gov, J&J is still “currently recruiting” for the 24-week clinical trial (n=312), which still has a December 2016 primary completion date. That timing suggests: (i) the trial will actually finish earlier than December (in time for a 2H16 filing); (ii) the 2H16 filing might come very late in the year; or (iii) J&J will submit this data during the review process. The study will randomize people with type 2 diabetes not achieving glycemic targets (A1c 7.5-10%) to either OneTouch Via or the Novo Nordisk FlexPen to initiate bolus insulin therapy. The primary endpoint is A1c at 24 weeks, with secondary endpoints including time-in-range and treatment satisfaction.J&J is cautiously avoiding the terms “patch” or “pump,” calling the Via a “discreet, wearable, on-demand, mealtime insulin delivery solution” – like FreeStyle Libre, the clear goal is to create a new category. We think this is very smart, given the goals to appeal far more broadly then traditional pumps. For payers, the clear value proposition is better insulin adherence, fewer missed doses, much more discretion enabled, and a lower cost. The slide cited 2010 Diabetes Care data that 57% of type 2s skip mealtime insulin doses on a consistent basis – much of this is due to stigma.Management did not discuss the reason for renaming Finesse, but we have a few hypotheses: (i) “Via” more closely aligns with “Vibe,” making the insulin delivery portfolio naming more consistent; (ii) the word “Via” harkens to a new “route” of insulin delivery (e.g., “on demand”); or (iii) other factors, such as trademarking, international nuances, etc.2. A launch of the long-awaited automated insulin delivery device with Dexcom CGM is expected in the next 18 months. The clinical trial protocol is in progress and expected to start before the end of the year. This is the most specific launch timing ever given, and we’re glad to hear the pivotal timing remained consistent with the March and May updates. The timing implies a US launch before November 2017, meaning it could closely follow Medtronic’s MiniMed 670G (FDA submission before the end of June; launch expected by April 2017). Still, there is definitely some serious ambition here: 18 months to a launch includes planning the pivotal trial (still in progress), running the trial (presumably a three-month trial + time for recruitment), submitting to FDA (we assume at least a 12 month review), and securing approval – not a given considering the pace at which this project has moved since the JDRF partnership was signed in 2010. Comments confirmed this device will minimize both hypoglycemia and hyperglycemia, countering our worry that it would only be a predictive suspend device (per data from ADA 2014). See our updated automated insulin delivery landscape here.
Slides showed the first-ever picture of the planned commercial device, which re-orients the Vibe pump vertically. The display showed a bright green screen (presumably to indicate in-range) with the current CGM value and trend arrow. The vertical orientation follows the MiniMed 670G, though this home screen looks simpler and far more glanceable – of course, it’s hard to know until we see the device in more detail. We hope to hear more details on this long-awaited product at J&J’s ADA 2016 symposium.
3. In the broader overview of “healthcare technology,” Group Worldwide Chairman Sandi Peterson alluded to an end-to-end diabetes ecosystem, showing the WellDoc, Tidepool, and Apple HealthKit logos – this was excellent to see, though she did not comment on these further (nor did the deeper diabetes discussion). The slide showed a variety of touch-points to interact with patients, including behavior modification, on meter messaging (e.g., WellDoc/Verio partnership), and payer/pharmacist interactions. These were not further detailed.Ms. Peterson made it clear that J&J has a pulse on the digital side of healthcare, including artificial intelligence, cloud computing, apps, analytics, 3D printing. How J&J will leverage these capabilities in diabetes remains to be seen, though we do expect more investment in apps and software going forward.Notably, J&J as a company has 450 app releases a year (!), valuable experience as diabetes apps continue to improve, collect more data passively, and arm patients with better insights. We think the new Reveal app for the OneTouch Verio Flex made some key improvements (HealthKit integration, Android), and we see high upside for the WellDoc partnership to make this data more meaningful. J&J’s work with Tidepool has been very under the radar since the partnership was announced in August 2015. Looking ahead, we expect J&J’s automated insulin delivery system will add Bluetooth into the pump (to connect to Dexcom G5 or G6), potentially enabling a paired smartphone app to monitor the system’s status without having to pull out the pump.Financial and Business Highlights
4. Management was impressively optimistic on the BGM business, calling it a “volume play” for J&J and citing success in 2015: (i) J&J is #1 in BGM volume globally, growing 4% last year vs. 2% for the entire category; (ii) in the US, J&J has a “17-point market share spread,” and volume grew 9% last year in the US (vs. 3% for the category); and (iii) Verio was the fastest growing BGM in terms of volume in 2015. Management only lightly alluded to pricing pressures, though the slide suggested the estimated ~$7.5 billion BGM field will see a 3% sales decline (CAGR) from 2015-2020 (bringing the field to ~$6.0 billion). As a reminder, J&J’s 2015 sales declined 4% operationally in 2015, which was only shown on an appendix slide. Still, remarks highlighted the capital efficiency of the business, suggesting it is still profitable at high volumes, even as the pricing pressures continue. The sources for these estimates were “2015 data, IMS Health, and proprietary third-party research.”
J&J’s BGM strategy has focused on simplifying the portfolio: from five strip platforms down to two, from 14 meters to three (One Touch Verio, Verio Flex, and VerioIQ), and moving patients from the legacy Ultra strips to the newer Verio strips.
Management estimates that over 80 million patients globally are using BGM. We had not ever heard this stat before, but it seems reasonable: 80+ million using BGM of the ~220 million diagnosed with diabetes globally (i.e., 36% penetration in diagnosed patients; ~220 million diagnosed = 415 million with diabetes worldwide, and only ~53% diagnosed).
J&J called the ~$7.5 billion BGM field “foundational,” while CGM was characterized as a “high growth” platform (20% CAGR expected from 2015-2020). The slide estimated CGM as a “~$1.0 billion” field in 2015, which struck us as a bit high – our 2015 roundup estimated CGM sales at ~$744 million (up 41% YOY) based on: (i) Dexcom’s reported sales; and (ii) 20% of Medtronic Diabetes sales (confirmed with Medtronic’s PR team. Perhaps J&J was including an estimate for Abbott Navigator and FreeStyle Libre sales.Management alluded to the partnership with Dexcom a few times, and said two things need to happen for CGM to become standard-of-care: (i) more evidence; (ii) lower cost. To hedge worries about CGM cannibalizing J&J’s BGM business, management added that episodic blood glucose is still “extremely affordable.” BGM is here to stay for some time, though the trends are not in J&J’s favor mid- to long-term: (i) sensors will become lower cost (e.g., FreeStyle Libre, Dexcom/Verily, many startups); (ii) more high-frequency testers will move to sensors as the technology gets easier to use and cheaper; (iii) Dexcom and Abbott already have insulin dosing claims in Europe, and Dexcom could get one in the US following its July 21 FDA meeting; and (iv) automated insulin delivery will further reduce the number of fingersticks patients need to take.
5. Animas pumps saw impressive 31% sales growth in 2015 on the strength of Vibe sales. J&J estimates it is #2 worldwide in insulin pumps, with an ~11% market share that grew two points in 2015. “We’re very bullish,” said management. As a reminder, the Vibe launched in the US in January 2015 and did see good growth throughout the year; J&J’s 1Q16 update, on the other hand, cited competitive pumps that slowed sales (presumably Tandem’s t:slim G4 and Insulet OmniPod, which both had solid 1Q16 sales growth).
J&J estimates the pump market was ~$1.05 billion in 2015, including $1 billion in durable sales and ~$50 million in patch pump sales. The slide broke out another ~$1 billion for consumable sales, which comprise “about half” of Animas’ sales and grew double digits in 2015. Expected 2015-2020 growth (CAGR) estimates were as follows: +8% for durable pumps, +50% for wearable patch pumps, and +8% for “universal” consumables (we assume infusion sets; a separate category called “proprietary” consumables did not cite sales or growth expectations). The ~$3 billion pen and syringe business was called high volume, expected to grow +3% from 2015-2020. See the slide above. Our 2015 roundup put the pump field at ~$2.2 billion (+1% growth), which included both durable and consumable sales. Our Roche and J&J estimates are guesses, and actual Animas sales were probably higher than what we estimated for 2015 (~$200 million).
In Q&A, management did not seem terribly concerned about the recent UHC decision to only cover Medtronic pumps. When pressed, management shared a commitment to fight for patients that want Animas pumps. The initial answer to this question was factually incorrect, suggesting current Animas patients won’t be affected by the decision (they will be starting July 1, once their warranties expire and UHC only cover Medtronic pumps). Management did correctly point out that the decision only affects adults (18+ years), an advantage for Animas, who is historically strong in pediatrics (and now approved down to age two). Analyst Mike Weinstein pressed management further, who replied, “What we hope to do is work with HCPs, providers, and payers – when patients really want our product, we want them to get it. It’s certainly not a done deal that we will keep those patients, but it’s our commitment to certainly try. Brand selection and HCP endorsement is going to help us a lot.” We’re not sure how this will work in practice, but look forward to seeing if Animas can overturn the policy on a case-by-case basis.
6. The call unveiled a new green OneTouch logo that we have not seen before, and it seems like the OneTouch brand will now house Animas and LifeScan products going forward. The move makes sense, as three different brands is confusing, and J&J can presumably maximize marketing dollars and brand building with one consistent family name. OneTouch also implies ease of use, a clear goal for any diabetes device company. We like the move to green, which has more personality than the previous black logo and emphasizes the color for in-range blood glucose values. The “Animas Vibe” is now characterized with a sub-slogan – “part of the OneTouch family” – though the name has otherwise not changed. The OneTouch website has not been updated with the new logo yet.
7. Similar to past analyst days, management highlighted the ability to treat a spectrum from prediabetes (Seven-Minute workout app), to early type 2 (BGM and Invokana), to insulin users (OneTouch Via and Animas pumps), to bariatric surgery device innovation. The slide overlapped the portfolio with “integrated, connected patient engagement,” which is more of a theory than something J&J has right now – these products are pretty siloed, particularly because the Seven-Minute Workout app is a free consumer app for exercise (not a formal prediabetes program), BGM and insulin delivery sit under consumer medical devices, Invokana is under Janssen, and bariatric surgery falls under Ethicon. The arrow also implied patients advance along the continuum, which is not true for most type 1s or type 2s (most end at insulin, not bariatric surgery). Still, J&J could certainly do more to integrate these products, and perhaps payers would purchase a bundled suite of services from J&J. The breadth and diversity of the portfolio is certainly impressive and unique from any other company in diabetes.
8. Outside of diabetes, J&J’s Vision Care business is also working on smart contact lenses. There was no mention of glucose monitoring, but like Novartis/Verily, J&J is working on an accommodating lens for presbyopia. A subsequent Vision Care slide mentioned an unmet need in diabetic retinopathy, leaving room for another diabetes application. A smart, glucose-sensing contact lens could be a very logical foray for J&J, combining its BGM expertise with its status as the world leader in contact lenses. Could it move in this direction or partner? What is the IP landscape on this front?Questions and Answers
Q: How do you get payers to pay for Via? What data will you need? And what is your reaction to UNH selecting Medtronic as its preferred provider for insulin pumps?
A: One Touch Via is such a unique product and a really unique opportunity. There are current codes that are sufficient for reimbursement. We think Via offers an opportunity, to insurers to improve compliance to mealtime and snacking dosing. Today, we are in clinical trials to prove just that, and we’re also working with payers to figure out how to use Via as a vehicle to improve compliance and improve patient outcomes. We’re working through that to hopefully differentiate, and we’ll update you.
On UNH, there are a couple things to think about. First, and most comforting, is that our current patient base is not affected. We intend to keep them very happy. They love our brand. [Editor’s Note: This is not correct, as we understand it. Current Animas patients will be affected starting in July once their pump warranty expires; UNH will only cover Medtronic pumps, meaning if a patient wants Animas, they will presumably need to appeal the policy. See our coverage here.]
The other aspect is that this affects patients over the age 18, so it doesn’t address pediatrics. We have the most competitive indication for pediatrics, going down to age two years. We have a great opportunity to compete. If we pause and think about pumps in general, they are really personal, and people wear a pump 24/7. Pumps are also a system of products, with unique features and benefits, and people should be able to choose the pump and system that meets their needs. Our brands in OneTouch have a lot of unique advantages. Our intent is to ensure that for any HCP or patient that wants our pump, we will work tirelessly to ensure they have access.
Q: On Via, you plan to file in 2H16. Will you have data showing clinical events, reductions in adverse events, and reduced costs? And to clarify, on UNH, as I understand it, as patients come up for renewal on their four-year warranties, they will have to switch to Medtronic or pay out of pocket.
A: We are in a clinical trial with Via to show improved adherence. We want to help people not skip their mealtime doses. We do hope it will show that improved compliance enhances patient outcomes. We hope to have that by the time we file. We’re in middle, but I hope to have that.
With UNH, pumps are approved for four years. As those pumps go through the new cycle, they will be considering the new guidelines as an option. Patient choice and HCP prescribing has a lot to do in terms of choice. What we hope to do is work with HCPs, providers, and payers – when patients really want our product, we want them to get it. It’s certainly not a done deal that we will keep those patients, but it’s our commitment to certainly try. Brand selection and HCP endorsement is going to help us a lot.
Q: In 2015, you had dramatic success in durable pumps and took share. The 1Q16 commentary was the opposite – you cited competitive pressures. What changed from 2015 strengths to 1Q softness? What gives you confidence that in the next five years, you will double the business?
A: 1Q was a tough quarter. There was some competitive launch activity that has given some momentum to the competition. We needed to think about how to focus on execution. We have developed strong strategies to win in the market, near-term and dial up the competitiveness. We will be targeting the right physicians, and dial up the features of our pump, more importantly. We’ve got very unique attributes in the Vibe, and we will highlight those. Those advantages include the precision and accuracy of the pump, benefits that people love so much. It’s also waterproof and we have the partnership with Dexcom. So it’s about those attributes of the pump in the short-term. We are dialing up innovation for a faster growing category. For longer term, new innovation will keep us competitive. The next-gen pump is going to meet the unmet needs that are not available in the marketplace today. That should really help us be very competitive long-term, and really grow that volume.
Q: You said OneTouch Via is a $1 billion category opportunity. How does that breakdown to products on the market vs. pure expansion?
A: This is a new market creation opportunity that this mealtime insulin, on-the-go, anytime, anywhere delivery device should create. There are 57%-60% skipping mealtime or snack time insulin dosing – this is an enormous market opportunity. That figure is limited to expansion with OneTouch Via: the opportunity we can create globally with the launch of that product.
We think of durable pumps for people with type 1 diabetes. There is low penetration, with ~30% of people with type 1 diabetes using durable pump. OneTouch Via will be for type 1 or type 2 insulin using patients. That’s the MDI market and people on pens, from what we’ve found in our patient experience data. Dr. Brian Levy, one of our endocrinologists, is the doing clinical data and experience studies, and patients really prefer this wearable, discreet, on-demand mealtime delivery device as a superior experience for them.
Q: For OneTouch Via, which patient populations are you targeting? What is your go-to-market strategy?
A: It’s too early for a go-to-market strategy. We’ll bring more on that when we’re closer. For the patient population, it is largely type 2, but people with type 1 diabetes will want this product too – even those on pumps. It is such a unique market creation opportunity: a discreet, bolus only, device for better managing diabetes. So it is largely type 2, but we’re going to see type 1s and type 2s are both interested.
OneTouch Via is disposable, three-day wearable. The first-gen is two unit delivery, and we’re looking at a smarter devices and those with a larger reservoir. This is just the first-gen we plan to launch.
Q: The US strip and meter industry really took a hit in the first quarter. What triggered the decline, and what changes that trend. Of the businesses highlighted this morning, diabetes is clearly the most challenging for you guys. When do you expect this business to grow, and is it primarily dependent on Via and the new predictive pump?
A: Yes, the US business has seen pricing declines. What we’ve been focusing our energy on, and we enjoy the leadership position, is making sure we have a very efficient, scalable model. It’s a capital efficient business for us, with lots of volume and lots of patients, and it’s still the standard of care. So it’s making sure that we’re using the #1 doctor recommended brand to get into patients’ arms. We’ve done a lot of reengineering to meet those volume needs and to really diversify and expand into some of the faster growing areas to expand. Insulin delivery is one, and then we have the new creation of a market segment with OneTouch Via. Consumables play a nice role, because they are half of our pump business.
In terms of volume growth, we are very healthy in the US, growing twice the category. And innovation like Verio, Verio Flex, have been wonderful additions to engage patients and HCPs. We’re seeing very, very healthy volume growth and expect that to continue.
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May 18, 2016 | Diabetes Investor
By David Kliff
Today Johnson and Johnson (NYSE: JNJ) is holding their Consumer and Medical Device Business review. Although the webcast has had some technical issues the slides used during the presentation tell the story quite nicely. Now before we go into an analysis of what we have seen so far a few points.
When it comes to diabetes JNJ is no longer just a device company as they now have the number one SGLT2 with Invokana. The company is also making an aggressive push into the health and wellness arena. Finally, few companies have what we like to call the vision thing, understanding not just where the market is today but more importantly where the market will be in the future. To their credit JNJ sees things as they are not where they would like to be.
Too often the companies in this space just can’t break from the past, they cannot accept how things have changed and worse they seem incapable of change. So kudos to JNJ for being realistic.
Now onto where the company is going in diabetes and in move that should shock no one the company sees … wait for it .. interconnected diabetes management (IDM) as the future. Our as they call it connecting the dots. The question is, will connecting the dots actually work or put another way can connecting these dots offset some of the negative dynamics of the diabetes market.
Like everyone else in diabetes the company believes that it’s just a matter of time before outcomes really matter. That reimbursement and formulary position will be linked to patient outcomes. Additionally, the company also is moving ever closer to being a provider of not just drugs and devices but diabetes management systems. Systems that will not just include devices and drugs but include apps which connect all the dots. Apps which will transform data into patient relevant patient actionable information.
Frankly it would not surprise Diabetic Investor if in the future the company moves move aggressively into the insulin market and we don’t mean just insulin delivery systems. Again like everyone else they see the coming of not just biosimilar long-acting insulin but also biosimilar short-acting insulin. It would not surprise us if the company in the future the company comes out with a pre-filled OneTouch Via™, this is the name they have given the Calibra patch pump, or pre-filled reservoirs for Animas insulin pumps. Nor would be it shocking if they rounded out their insulin delivery portfolio with the addition of .. wait for it .. a cloud enabled insulin pen.
Nor would be it shocking given the growth in the category that the company would move into the GLP-1 arena.
As a side note Diabetic Investor isn’t quite sure what the company will do in the CGM arena. Given that the success of the Animas Vibe is directly tied to the fact that it works with the Dexcom (NASDAQ: DXCM) sensor one just might think the company would buy Dexcom. However, Dexcom just might hold out for a better offer from their other well healed partner who is also moving aggressively into diabetes, the good people in Mountain View. No question Dexcom is the hottest commodity in diabetes these days and we imagine it won’t be long before someone makes a play for the company.
Nor will we discount the possibility that the company could acquire Tandem (NASDAQ: TNDM) and/or Insulet (NASDAQ: PODD), although we would view Tandem as a stronger and more cost effective possibility. JNJ knows that Medtronic (NYSE: MDT) the insulin pump market leader is moving more aggressively into alternate insulin delivery systems as well as targeting patients with Type 2 diabetes. Given where both companies appear to going this could set up as battle between two heavyweights and create one of the more interesting dynamics in diabetes.
As we have been stating for some time the reality is scale, massive scale is critical in the diabetes space. That data analytics combined with scale will be transformative. The goal going forward is not to have the best drugs or devices, the goal now is having the best diabetes management system. Systems which transform all this data into patient relevant patient actionable information which ultimately should translate into better patient outcomes.
JNJ seems to be on the right track, the question now is can they execute. One thing is certain things in this wacky world are getting more interesting by the day. For the first time in a long time we’re actually looking forward to the annual ADA confab in just a few weeks. No it won’t be like the old days but it will be quite interesting to see the dynamic develop between the old guard and the new kids on the block.
As Momma Kliff was fond of saying; “Just when you think you have seen it all, something comes along that blows your mind.” This is getting very interesting indeed.
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