10 firms on solid ground
Three big pharmaceutical giants and a handful of medtech companies control the global diabetes care market. That can make it difficult for newcomers to needle their way in.
By Bertrand Beauté
"Our FreeStyle Libre will be a $10 billion-a-year business within the next five years," announced Robert Ford, the CEO of Abbott Laboratories, at the J.P. Morgan Healthcare Conference in early January. He made no secret of the high hopes he has for the group’s third-generation sensor-based glucose monitoring system, Freestyle Libre 3. FDA-approved in 2008, the first device changed the lives of millions of diabetics around the world. Patients no longer had to prick their fingertips several times a day to check their blood sugar levels.
It could all be done, easily and automatically, by applying a simple patch. This third iteration of the device was cleared by the FDA in June 2022. Its improvements include a feature that transfers data to the user’s smartphone in real time, on the guidance of a useful app. Due to its long history in the market, Abbott has the largest patient community, with more than four million diabetics using the Freestyle system. But the US company is up against fierce competition encroaching on its territory, from Roche Diabetes Care with its Eversense E3 sensor and especially Dexcom with its G7 sensor. Still, most analysts recommend buying Abbott shares, which have risen 70% in the past five years. However, it is worth noting that medical devices, including the Freestyle, account for only 33.6% of the company’s revenue. Abbott is also active in nutrition, diagnostics and pharmacology.
A million units a year for the next four years. That is Biocorp’s sales target for its Maylla smart sensor. The device attaches to insulin injection pens, transforming them into connected objects. At €50 apiece, the solution could generate €50 million in revenue by 2027 for the French company, with a gross margin of 55% to 60%. The two analysts who cover the firm agree with this forecast, and both recommend buying the stock. To grow, Biocorp can count on its partnerships with industry giants (Sanofi, Novo Nordisk and Roche Diabetes Care). The Maylla sensor is compatible with most disposable insulin injection pens, including Sanofi’s Solostar, the Eli Lilly Kwikpen and the Flexpen by Novo Nordisk. But the SME still has to contend with mass industrialisation to achieve its goals. The company has invested €2 million in its manufacturing system, which will increase its production as of June 2023. In doing so, it will be able to supply the European market and especially the United States – the world’s largest diabetes market in value – where its device has just been cleared to market. If successful, Biocorp could end up being swallowed by a giant pharmaceutical firm. "A takeover could eventually turn into an opportunity for the company," says Eric Dessertenne, Biocorp’s CEO.
Unlike many of its competitors, such as Abbott, Medtronic or Roche Diabetes Care, the US company Dexcom is unique in that it focuses on a single area: continuous glucose monitoring (CGM) using a sensor placed under the skin. The experts we talked to say that the new Dexcom G7 device has the most advanced technology of any CGM system currently on the market. And that has won over analysts, who resoundingly recommend buying shares. The stock has sky-rocketed more than 640% over the past five years. The company now boasts 1.7 million customers, and that base is growing rapidly. The company’s revenue increased almost 20% in 2022, with an operating margin of 16%. Compared to the best-selling CGM sensor on the market, the Freestyle from Abbott Laboratories, Dexcom’s star has the advantage of being approved for use within a "closed-loop" system, by linking with the leading insulin delivery systems developed by Tandem Diabetes and Insulet.
One tweet, nine words, $15 billion up in smoke. That actually happened to Eli Lilly. An unfortunate mishap. Created by stealing the US firm’s identity, a fake account certified by Twitter announced on 10 November, "We are excited to announce insulin is free now." Immediately, the Twitter account of the real Eli Lilly reacted, apologising to "those who received an incorrect message from a fake Lilly account". But the damage had been done. Eli Lilly’s shares plunged 4% that day, a reminder of the US lab’s dependence on insulin. The various insulin formulations commercialised by Eli Lilly account for nearly 20% of its revenue. However, the little stock market scare should not mask the company’s auspicious outlook in diabetes management, which is expected to soon be less dependent on insulin. In 2016, Eli Lilly launched the GLP-1 analogue Trulicity to treat type 2 diabetes. The drug quickly became the company’s star product, with sales hitting a record high of $7.4 billion last year. Analysts expect Mounjaro, another GLP-1 analogue developed by Eli Lilly, to be an even bigger hit. After clearing the drug for type 2 diabetes in May 2022, the FDA is expected to approve Mounjaro in 2023 to treat obesity. In a note published in early January, Goldman Sachs analyst Chris Shibutani estimates that Mounjaro could generate $2.3 billion in 2023 and $27 billion in 2032. Like most analysts, he recommends buying the stock.
Insulet’s story is almost too good to be true. It began in the late 1990s when the American entrepreneur John Brooks III received the heart-wrenching news that his three-year-old son Robert had type 1 diabetes. Brooks then looked at the various options on the market for insulin injections for his child, but none of them satisfied him. So what did he do? Just like in a Hollywood film, the business man rolled up his sleeves and got to work.
Since the device he wanted for his son did not exist, he created it himself! He cofounded the company Insulet, which developed an insulin pump called Omnipod. The first version of the device was approved by the FDA in 2003. After a rocky first few years, Insulet really took off in 2015. Today, the company’s revenue tops $1 billion dollars, turns out 20% annual growth and is at its fifth-generation Omnipod. Most analysts recommend buying the stock, which has climbed 275% in the last five years.
Medtronic, a US company based in Dublin, is known worldwide for its cardiovascular devices (pacemakers, defibrillators, stents and valves), but it is also active in diabetes management. In 2017, Medtronic dominated industry headlines as the first company to receive clearance from the US Food & Drug Administration (FDA) to bring to market a closed-loop system for type 1 diabetes. The MiniMed 670G pairs a continuous glucose sensor with an insulin pump, and the system is managed by an algorithm that automatically delivers insulin according to the patient’s needs. Since then, however, many competitors have entered the market, nibbling away at the company’s market share. For the financial year ended August 2022, Medtronic’s revenue from diabetes care fell by 3%. However, that revenue represents a mere 7% of the company’s total. To reinvigorate the sale of diabetes products, the company has recently come out with the MiniMed 780G, a next-generation system to follow up on its illustrious predecessor. Most analysts recommend holding the stock.
The Novo Nordisk stock has risen more than 200% over the past five years. That trend is likely to persist, as most analysts uphold a buy recommendation. Celebrating its 100-year anniversary this year, the Danish company has skilfully reinvented itself over the past century. Novo Nordisk’s story begins in 1923, when Nobel Prize winner for Medicine August Krogh and his wife Marie, herself a diabetic, returned from Canada with the patent for insulin They founded Nordisk Insulinlaboratorium, which later became Novo Nordisk, to manufacture and commercialise the precious hormone in Europe.
Over the years, the company has developed a wide range of insulins for different treatments (long-acting, rapid-acting, ultra-rapid), evolving into the undisputed leader of diabetes management. Novo Nordisk currently dominates over 40% of the market, ahead of the French firm Sanofi and the US pharmaceutical company Eli Lilly. But it has not stopped at this surefire revenue stream. The group has instead expanded while remaining focused on diabetes. In 1985, the company introduced the first insulin pen and in 1999 one of the first continuous glucose monitoring device approved by the US Food and Drug Administration (FDA), which, however, required a needle to monitor blood glucose levels. The company now sells its own connected systems. In a context of mounting pressure on insulin prices, Novo Nordisk has also reduced its reliance on the hormone by launching a new class of type 2 diabetes drugs. These GLP-1 analogues are now its biggest money-maker, ahead of insulin. In 2021, the FDA approved one of Novo Nordisk’s GLP-1s, Wegovy, as a weight loss treatment. This is expected to open up an even bigger market for the Danish pharma than diabetes, considering that the World Health Organization (WHO) estimates there are almost one billion obese adults and teens worldwide.
Sanofi has accumulated a string of setbacks in recent years. Despite being the world’s leading vaccine manufacturer, the French pharmaceutical group lost the race for a COVID-19 vaccine. Its formulation did not get the green light from European authorities until November 2022, almost two years after the release of vaccines by its competitors Moderna and Pfizer- BioNTech. In cancer treatment, the company announced in August 2022 that it would discontinue development of amcenestrant after disappointing results in a phase 3 trial. That was quite a blow, as amcenestrant, the flagship drug in Sanofi’s pipeline, had reached its final development phase prior to market launch. Making matters worse, the outlook is not so bright in diabetes care. Sanofi, the world’s No. 3 insulin leader, is facing increasing pressure from authorities to lower the price of this life-saving drug.
Sales of Lantus, Sanofi’s best- selling insulin, fell from €3 billion in 2019 to €2.66 billion in 2020 and €2.49 billion in 2021. Revenue for its Diabetes division overall came to €4.5 billion in 2021, down 1% from a year earlier. Unlike its competitors Eli Lilly and Novo Nordisk, Sanofi has no drugs in its pipeline to boost sales from diabetes solutions. Despite all that, most analysts recommend buying shares, particularly due to the performance of its best-seller, Dupixent (prescribed for the treatment of dermatitis). The drug’s sales reached €5.249 billion in 2021, up 52.7% in one year.
In a mere 15 years, the US med-tech company Tandem has established itself as a key player in diabetes care, boasting nearly 400,000 customers worldwide. How? By developing one game-changing product. The t:slim insulin pump considerably improves quality of life for patients with type 1 diabetes, who represent 90% of Tandem’s customers. For diabetics, insulin is a life-saving drug that must be injected several times a day. Since the 1980s, they have been administering injections with an insulin pen, a procedure that can leave them feeling stigmatised. The pump, like the one developed by Tandem, is a small device that attaches to the body, usually on the upper buttock or stomach, and delivers insulin automatically or on demand. When connected to Dexcom’s continuous glucose monitoring system via Bluetooth, the Tandem insulin pump creates a kind of artificial pancreas that uses an algorithm to adjust insulin release based on the patient’s glucose level.
While not yet fully automated – patients still have to adjust insulin dosage according to their food intake and physical activity – the resulting system has empowered people with type 1 diabetes towards greater autonomy. Most analysts recommend buying Tandem stock, which has shot up more than 1,400% in the past five years.
Founded in 1984 by brothers Willy and Peter Michel from Bern, Switzerland, Disetronic was one of the first companies in the world to launch a micro insulin pump to market. In 2003, the two founders sold Disetronic to pharma giant Roche but kept the injection division, renaming it Ypsomed. Listed on the SIX Swiss Exchange since 2004, Ypsomed remains active in diabetes solutions, offering an insulin pump (YpsoPump), a blood glucose monitoring system (Unio Cara) and therapy management software (mylife). Ypsomed has also entered into partnership with the US firm Dexcom to commercialise a closed-loop system that combines Dexcom G6 glucose sensors with Ypsomed’s pump and application. The three analysts covering Ypsomed recommend buying the stock.