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While Big Diabetes Stagnates, Smaller Companies Are Moving Faster Than Ever

- By George Ronan

The diabetes space is drawing a lot of attention right now, and the large majority of it is unwanted. Late last month, a group of diabetes patients filed a lawsuit against three of the industry's biggest names, arguing that the systematic price increases of these companies over a number of years amount to a fraudulent pricing scheme.

The suit highlights just one of the many complexities associated with the way drugs are priced and patients charged. The chances of a drug being accepted for coverage by an insurer are increased if the company that makes the drug offers a large discount to said insurer. These discounts are not shouldered by the company however. They are added on to the price the patient pays. The suit alleges the price increases of insulin products over the last decade are rooted in the companies' ability to offer a bigger discount to insurers in an attempt to get the latter to favor their drugs over those of their competitors.

The three companies under investigation are Sanofi SA (SNY), Novo Nordisk A/S (NVO) and Eli Lilly and Co. (LLY). The suit will likely be long and drawn out. The outcome is anyone's guess.

Whatever happens, the situation highlights a wider trend in the diabetes space as whole. That is, the lack of any major innovation or development.

Compared to other subsectors of health care, diabetes is sorely lacking when it comes to advancement over the past 10 to 20 years. Right now, just as they did at the end of the 1980s, diabetes patients use blood tests to measure glucose and self-administer insulin through intramuscular injection.

The big names have control of the space right now, but this control is loosening. Smaller companies are innovating, and the oligopolistic nature of the industry may be coming to an end.

Here are some examples of the cutting edge of this trend.

Before the advent of recombinant DNA technology, which is used to create the artificial insulin that diabetics self-administer today, porcine insulin was the standard-of-care treatment in the space. Now, of course, insulin is synthetic, but the history of using pig-derived material in medicine has given rise to another field of development called a human-pig chimera. In essence, scientists have figured out a way to inject pig embryos with human-derived pluripotent stem cells and have these stem cells survive.

The importance of this? The process can be used to develop artificial organs, one of which is a pancreas. The pancreas is the keystone of diabetes as it secretes insulin to counter a rise in glucose. In diabetics, the detection and secretion is deficient. The production and introduction of a new pancreas could repair the deficiency.

And it has gone further than just a theory. Scientists in Tokyo have genetically modified rats so that they do not have a pancreas, and then used mouse stem cells to essentially grow a mouse pancreas in a rat. As they developed, these rats were able to survive with a mouse pancreas. This science is way off from human application, but the concept is now proven.

What about nearer term, less science fiction-sounding developments?

Oral insulin has long been the holy grail of the diabetes space. The current method is tough on patients as it can be painful, cumbersome and hard to comply with long term. Of course, compliance is essential, so quality of life can be severely impacted by the currently unavoidable self-injectable medication regimen.

If a patient was able to take a pill that would deliver the insulin required, their quality of life would dramatically improve. Unfortunately, the science behind oral insulin makes it a difficult thing to develop. Insulin is quite unstable, and the gastrointestinal system breaks it down easily. As such, any pill form of insulin requires the equivalent of a protective shell and more if it is to reach its target in the body.

One company, Oramed Pharmaceuticals Inc. (ORMP), is spearheading the space right now. Its treatment, an asset called ORMD-0801, is an oral insulin that uses a proprietary technology to create a pill coating that protects the active insulin ingredient. The drug is under investigation in both Type 1 and Type 2 diabetes patients, having completed a phase II study in Type 2 and currently in a phase II study in Type 1.

Data to date have served up significant evidence that the orally delivered insulin that forms the active ingredient of the ORMD-0801 pill can effectively reach its target without too much degradation and, in turn, could be a viable alternative to the current standard-of-care self-injectable insulin that dominates the space.

Oramed put out top line results from its O801 phase II study in mid-2016, detailing the effect of the drug against a primary endpoint of a significant reduction of weighted mean nighttime glucose in patients treated with the drug when compared to a placebo. As the data highlighted, the study showed a statistically significant decrease in the primary endpoint, pooled nighttime glucose mean percentage change of 6.47% from run-in, between placebo and active cohorts (p=0.0268). That means the drug works, and it is now just a case of expanding the patient population in a phase III study in an attempt to collect the data required to underpin a New Drug Application.

Oramed hopes to put its drug through pivotal trials this year, so unlike the chimera-derived treatment, this one could realistically be hitting shelves in the next few years.

Another small company, Caladrius Biosciences Inc. (CLBS), is working to stop Type 1 diabetes from worsening before pancreatic islets are destroyed by the immune system. When people have Type 1 diabetes, their immune system destroys the cells in the pancreas that are responsible for producing insulin. Over time, of course, the condition worsens because the longer the condition develops, the more the cells deteriorate.

At diagnosis, however, the average Type 1 patient has around 20% of their functional insulin-producing cells intact.

Caladrius has developed a process through which it is able to harvest these healthy insulin-producing cells, modify them so that they cannot be destroyed by the immune system and then reintroduce them to the patient. Early studies have shown patients that have their cells protected in this way can exercise considerable control over blood glucose levels without the necessity for exogenous insulin.

Again, this one could realistically be hitting shelves at some point in the next few years. It is currently under investigation as part of a phase II study called T-Rex and has fast-track designation from the FDA, which will speed up the time to approval once the study is complete and regulatory submission gets underway.

Disclosure: The author has no positions in any of the stocks mentioned in this article, and does not intend to buy or sell any discussed stocks for the next 30 days.

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