Beacon of Hope Summer 2013 • No. 115

Some folks, when they want to escape life's stresses, go to Cancun or Bali or Virginia Beach. I found my oasis in downtown Boston. A few weeks ago I took part in BEACON HILL, an outpatient trial for the bihormonal bionic pancreas developed by researchers at Mass General and Boston University. The study participants and I spent five days wearing a system that continuously monitored our glucose levels, delivering insulin or glucagon as necessary to keep us in the normal glucose range for as long as possible, with no effort from us (seriously). I pressed a button to tell the system when I was eating and whether the meal was bigger, larger, or similar relative to my typical schedule, but I didn't count any carbs or consult any nutrition facts or calculate any insulin doses. I looked at my continuous glucose monitor, but I didn't worry about going hypoglycemic or spending hours above 200 mg/dl or waking up at 4 AM with my blood sugar out of whack. In short, I knew that I still had diabetes, but I have never felt so carefree - so much like my 17- year-old, pre-diagnosis self - as during that week of glucose autopilot. I should clarify that the bionic pancreas is still a prototype and that a lot of challenges must still be overcome - especially if the researchers are to meet their ambitious goal of commercial launch in 2017. The system's effectiveness must be proven in longer and larger trials, a stabilized liquid glucagon must be developed, and a bihormonal pump must be built (that is, a pump that delivers both insulin and glucagon). Even the ideal version of the product won't be for everyone. Many patients won't be able to afford it, at least initially; some might not have the technology acumen to use it (though it was about a million times easier than my regular diabetic life). Still, if and when people can use a system like this and have experiences like mine every day, their lives will be changed in a very big way. To be honest, that made me cry about diabetes in a way that I haven't cried in a very long time. Life-changing therapies are also becoming available for type 2 patients. I'm talking about insulin / GLP- 1 coformulations that can give patients the best of both agents with fewer side effects, multi-drug "polypills" that can simplify adherence, glucose meters that help interpret test results in real time, and wearable delivery devices that can transcend the drawbacks of syringes and pens. Are these cures? No; but they can help patients live much healthier and easier lives. My optimism was bolstered by what I saw in Chicago in June during the 73rd Scientific Sessions of the American Diabetes Association, which we write about in this issue. And, as much as I believe in the new therapies and technologies, I hope that researchers can expand their efforts and move to much earlier stage, to include more clinical trials on prevention - especially in key patient groups such as children and the elderly (Leakey et al., Diabetologia 2013). Yes, our therapies are improving, but my hope is that with the help of better screening, targeted therapies, and/or smarter behavioral interventions, we will reach the day when no one will know what it's like to be diagnosed with diabetes at all. Best,

Kelly L. Close P.S. For a more detailed description of my experience with the bionic pancreas, see http://diatribe.org/issues/55/test-drive.

P.P.S. For more on the Diabetologia paper about the distribution of clinical research in diabetes, see this issue’s Literature Review. P.P.P.S. Similar to the last issue of DCU, we have listed in “Major Headlines” and highlighted in light blue the five most popular reports of the issue – including two literature reviews.

Major Headlines Medtronic – US sales down 2%, international up 14% – page 33 Roche – Reportedly considering sale of its blood glucose monitoring business – page 41 WellDoc – Launches BlueStar for type 2 diabetes – page 46 Diabetes Care – Drs. Butler and Nauck debate incretins and pancreatitis – page 72 Diabetes – Dr. Steven Kahn writes critique of Dr. Peter Butler’s incretin study – page 73

In This Issue 1. Quotable Quotes ...... 6 2. diaTribe Fingersticks ...... 7 3. DCU Company Watch ...... 8 • Abbott – Nearly flat Diabetes Care growth • Abbvie – Initiates phase 3 for atrasentan; announces phase 2b data • Alere – Diabetes revenue totals $50 million in 1Q13 • Alkermes – Records $4 million in Bydureon royalties • Amgen - Phase 1 trials terminated for AMG 151 and AMG 876 • Arena – Withdraws MAA for Belviq in the EU • Array – Evaluation of AMG 151 phase 2a results to complete in 2013 • Asante – Partnering with Glooko and Diasend for Asante Snap insulin pump • Aspire Bariatrics – AspireAssist could be approved in Canada this summer • Astellas – Reaffirms ipragliflozin filed in Japan • AZ – Onglyza franchise up 27% • Baxter – EU approval of home hemodialysis device expected in 2013 • Bayer – Contour sales up 2% in 1Q13 • BD/JDRF – Extend collaboration to develop combined insulin infusion/CGM • BD – Phase 1/2 study of second-generation sensor completed • Biocon - Mylan partnership on analogs brings $20 million upfront • Biodel – Developing new glucagon rescue product, NDA filing in 2015 • BMS/AZ – Announce topline results for Onglyza’s SAVOR-TIMI-53 CVOT • Daiichi Sankyo – sNDA for Tenelia combination product filed in Japan • Dexcom – Revenue up 49%, company driving towards profitability • Echo Therapeutics – Receives IRB approval for CE Mark pivotal trial • Edwards – Remains “enthusiastic” about GlucoClear critical-care CGM • Forest – No updates on liver-selective glucokinase activator GK1-399 • GI Dynamics – EndoBarrier offered at 37 commercial centers worldwide • Gilead – Ranolazine for coronary artery disease remains in phase 3 Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 2

• GSK – No updates on albiglutide • Halozyme – PH20 closed-loop study approved by FDA • Insulet – Sales up 20% year-over year; second-gen pod shipments strong • Isis – Plans to initiate phase 3 for apoC-III inhibitor in early 2014 • J&J – Invokana performs strongly in first two months on US market • J&J – Diabetes Care revenue down 10% • Jawbone – Acquires BodyMedia • Lexicon – Presents new type 1 diabetes data for LX4211 • Lexicon – Phase 2 trial in type 1 advances to expansion phase • Ligand – No new updates on diabetes R&D • Lilly/Transition Therapeutics – Lilly retains its rights to phase 2 ready TT-401 • Lilly – Humalog sales up 7% and Humulin sales increase 1% • MannKind – Phase 3 Afrezza trials on schedule, data in mid-August • Medtronic – US sales down 2%, international up 14% • Merck – Januvia franchise sales fall 1% to $1.3 billion • Neurocrine – No updates on GPR119 agonist development program • NeuroMetrix – 145 Sensus devices shipped • Novartis – Galvus on track for blockbuster status • Novo Nordisk – Topline phase 3a SCALE-Obesity and Prediabetes results • Novo Nordisk – Diabetes Care up 13%; Victoza sales increase 35% • Orexigen – European rapporteurs assigned for Contrave • Perrigo – Diabetes over-the-counter segment grows 3% • Pfizer – New candidates added for type 1 diabetes and diabetic nephropathy • Rhythm – Announces positive phase 1b data for RM-131 • Roche – Reportedly considering sale of its blood glucose monitoring business • Roche – Diabetes Care down 4% on a reported basis and 5% operationally in 1Q13 • Sanofi – Diabetes Division sales grow 18% to $2 billion • Santarus – Glumetza sales total $42 million • Takeda – Reports first phase 3 results for GPR40 agonist fasiglifam • Telcare – Receives CE Mark for wireless blood glucose meter • Transition Therapeutics – Ends F3Q12 with $25 million in cash • Vivus – FDA approves Qsymia REMS modification • WellDoc – Launches BlueStar, FDA-cleared, mobile prescription therapy for type 2 diabetes • XOMA – No update on diabetes pipeline • Zealand – No Lyxumia revenue reported yet; ZP2929 remains in phase 1 4. Interview: Diabetes expert Dr. Stefano Del Prato weighs in on incretins and pancreatitis, the role of SGLT-2 inhibitors, pharmacotherapy in prediabetes, and what he learned from ORIGIN ...... 48 5. Conference Pearls: American Diabetes Association – 73rd Annual Scientific Sessions ...... 60 6. Literature Review ...... 71 7. Comings and Goings ...... 86

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Multimedia

Dr. Peter Attia gave a very compelling TED talk on the stigmatization obese patients often face from their physicians – including Dr. Attia before he became overweight and was diagnosed with metabolic syndrome despite being physically active. In sharing his personal story, he challenges the cause-and-effect relationship between insulin resistance and obesity. He hypothesized that insulin resistance might cause obesity and result from a person having high blood glucose levels.

http://www.youtube.com/watch?v=UMhLBPPtlrY

The following link contains audio from an interview with Dr. David Kesseler, former director of the FDA and author of The End of Overeating. In this interview, Dr. Kesseler addresses the clinical implications of the AMA's designation of obesity as a "disease."

http://www.npr.org/templates/story/story.php?storyId=194239969

In the video accessible with the below link, Mr. Ray Allen, NBA player for the Miami Heat, shares his experience about taking care of his six-year old son, who was diagnosed with type 1 diabetes in 2008. Mr. Allen has since lobbied in Congress with the JDRF to advocate for greater funding towards type 1 diabetes research.

http://www.washingtonpost.com/posttv/video/thefold/ray-allens-new-opponent-type-1- diabetes/2013/07/10/7ade3390-e96f-11e2-aa9f-c03a72e2d342_video.html

Coming Soon in DCU… The Fall 2013 issue of Diabetes Close Up will feature the European perspective on current issues in diabetes and obesity, as we bring you Conference Pearls from the 49th Annual Meeting of the European Association for the Study of Diabetes.

Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 4

Diabetes Close Up Staff

Founding Editor: Managing Editor: Contributors: Kelly L. Close Hannah Deming Melissa An Melissa Tjota Adam Brown Gabriella Puente Senior Editor: Eric Chang Phaedra Randolph Editor in Chief: Nina Ran Poonam Daryani Lisa Rotenstein Joseph Shivers Jessica Dong Tony Thaweethai Jennifer Tsai Senior Advisors: Samiul Haque Ellen Ullman James S. Hirsch Stephanie Kahn Manu Venkat Mark Yarchoan Benjamin Kozak Adam Kraus Katrina Verbrugge Tim Maher Vincent Wu Kira Maker John Close Rajiv Narayan

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1. Quotable Quotes

A New Reality “Imagine a world where the artificial pancreas is available to everyone who needs it. A world where when we wake up in the morning, our blood glucose is reset. A world where we don’t have to stop and think all the time. A world where we get a guaranteed A1c in target that will protect us from complications. Imagine the ‘health dividend’ that the artificial pancreas will create that would have an enormous long-term impact on healthcare costs. Imagine equally as much change as we have seen since our last meeting in 2010. We look forward to watching our world, following it, writing about it, and to preparing to live a life that is more normal, healthy, productive, and predictable.”

– Kelly Close (diaTribe, San Francisco, CA) on how an artificial pancreas would be life-changing for people with type 1 diabetes. Her comments were met with a round of applause at the FDA/JDRF/NIH Workshop on Innovation Towards an Artificial Pancreas, Bethesda, MD, April 9-10, 2013.

Perfection, The Enemy of Good “I do not want perfection to be the enemy of the good, but I don’t want incrementalism to be the enemy of the good either. I think we can do this in four years.” – Dr. Edward Damiano (Boston University, Boston, MA) in response to a comment on why research and development for the artificial pancreas have been so slow during a panel discussion at the FDA/JDRF/NIH Workshop on Innovation Towards an Artificial Pancreas, Bethesda, MD, April 9-10, 2013.

Throwing Down the Gauntlet

“I want to throw down the gauntlet to industry. We’re working well with industry, but I would like to see within the next 24 months every pump that is speaking to a sensor have low glucose suspend.”

– Dr. Aaron Kowalski (JDRF, New York City, NY) in a response to what his short-term hopes and expectations are to get an artificial pancreas to patients at the FDA/JDRF/NIH Workshop on Innovation Towards an Artificial Pancreas, Bethesda, MD, April 9-10, 2013.

A Primary Care Physician’s Evolving Role

“I used to be a doctor, now I am a typist.”

– Dr. Christine Sinsky (Medical Associates Clinic and Health Plans Dubuque, IA) commenting on the amount of time physicians spend entering information into electronic health records at the American College of Physicians’ Internal Medicine, San Francisco CA, April 11-13, 2013.

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2. diaTribe Fingersticks

-- By Joseph Shivers

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3. DCU Company Watch • Abbott – Nearly flat Diabetes Care growth

Abbott CEO Miles White led the company’s 1Q13 financial results update on April 17. Worldwide Diabetes Care revenue of $316 million was nearly flat on both a reported basis (down 0.5%) and an operational basis (up 0.2%) from 1Q12, when sales declined 2% and 1%, respectively. Sales fell 13% from 4Q12, when Abbott’s global diabetes care reached an all-time high. By region, the sales decline was steepest in the US, where revenue of $133 million was down 4% on a quite challenging year-over-year comparison (1Q12 growth was 7%). Management mentioned pricing pressures and lower Medicare mail order purchases. Notably, Abbott believes competitive bidding will have less of a negative impact on its sales performance compared to competitors’, as the company does not have a high Medicare share and has a lower relative share of the mail-order market. Internationally, revenue reached $183 million, up 2% as reported and 3% operationally on an easy comparison (1Q12 international revenue fell 9% and 7% as reported and operationally). Emerging markets were important drivers of both international Diabetes Care and company-wide sales: over 40% of Abbott’s overall sales were attributed to these geographies. Looking forward to 2Q13, management expects flat operational growth. Pipeline news focused on the company’s next-generation CGM sensor. The company is on track with the expectations outlined in 4Q12: a pivotal study is expected to start by the end of 2013, and Abbott intends to bring the product to the European market by the end of 2014 (unfortunately, no mention of a US timeline). Improvements with the FreeStyle Navigator II focused primarily on receiver form factor and a smaller transmitter, and we hope that the next-generation sensor will also bring further accuracy improvements. While not mentioned on the call, on April 15 Abbott issued a voluntary recall of its FreeStyle InsuLinx meter for a software issue that caused the meter to react inappropriately at blood glucose values above 1,023 mg/dl. The meter both displays and stores a blood glucose value that is 1,024 mg/dl less than the actual concentration. Patients had the option of returning their meter or remotely downloading the software update. The recall occurred in the wake of J&J’s nearly identical recall of all OneTouch Verio IQ, OneTouch Pro, and OneTouch Verio Pro+ meters. Management commented that Abbott’s Diabetes Care business has increasingly focused on insulin-dependent, frequent testers, and that ongoing research efforts target “a segment of the market that is a lot less cost-sensitive and much more performance-sensitive.” This is a strategic move on Abbott’s part that reflects the realities of an increasingly challenging marketplace, but we also hope that future innovations in diabetes technology will benefit less-profitable patients.

• Abbvie – Initiates phase 3 for atrasentan; announces phase 2b data

On May 20, AbbVie announced phase 2b data for atrasentan (ABT-627) at the European Renal Association-European Dialysis and Transplant Association Congress. As a reminder, atrasentan is an oral, once-daily compound that interferes with endothelin-I, a protein with vasoconstrictive and hypertensive effects. In two parallel, double-blind, multi-national 12-week studies, atrasentan provided a 36% reduction in urinary albumin/creatinine ratio (UACR) at the 0.75 mg dose (n=78) and a 44% reduction at the 1.25 mg dose (n=83) compared to a 2% increase in UACR in the placebo group (n=50; p<0.001). For a secondary endpoint, the study also measured changes in estimated glomerular filtration rate (eGFR); neither dose of atrasentan significantly changed eGFR from baseline: both doses conferred nonsignificant ~1 ml/min/1.73 m2 reductions in eGFR, and this change was not significant compared to placebo. Adverse event rates were similar in the treatment and placebo groups. The most common adverse events were peripheral edema (35% in the 0.75 mg arm, 42% in the 1.25 mg arm, and 42% placebo) and diarrhea and constipation (13% Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 8

in the 0.75 mg arm, 21% in the 1.25 arm, and 14% placebo). The rate of study discontinuation due to adverse events (AEs) was 8% on the 0.75 mg dose, 15% on the 1.25 mg dose, and 0% on placebo. Edema was the most commonly cited reason for discontinuation due to AEs. The lack of effect on eGFR is disappointing – for comparison, in the 52-week phase 2 BEAM trial for Reata/Abbot’s bardoxolone methyl, the drug provided gains of ~5-9 ml/min/1.73 m2 in eGFR compared to a ~1 ml/min/1.72 m2 reduction on placebo. However, BEAM enrolled patients with relatively low baseline eGFR (~32 ml/min/1.73 m2) and was much longer in duration (as a reminder, bardoxolone’s phase 3 trial was terminated for safety reasons). We are curious if AbbVie will actually measure GFR in its longer phase 3 trial for atrasentan since eGFR is a surrogate measure for actual GFR – currently, only eGFR is listed as an endpoint for SONAR. For reference, eGFR is a calculation that incorporates serum creatinine, age, gender, and race. Atrasentan’s phase 3 trial, SONAR, began in May (in line with management’s forecasts that the phase 3 program would initiate in 1H13). It will investigate the effect of atrasentan 0.75 mg, on top of standard of care (maximum tolerated dose of an ACE inhibitor or ARB, and a diuretic), on progression of CKD in patients with type 2 diabetes and stage 2 to 4 CKD (specifically eGFR 25-75 ml/min/1.73 m2, UACR ≥300 and <5,000 mg/g). It is expected to enroll 4,148 patients and will be a multinational, double-blind, placebo-controlled study. The primary endpoint will be time to doubling of serum creatinine or onset of ESRD (defined as kidney transplant, the need for chronic dialysis, or death due to renal failure). Patients will receive more than four years of atrasentan exposure, placing the completion date in 2017 (ClinicalTrials.gov Identifier: NCT01858532). This could mean that atrasentan may not be approved until 2018. We imagine that this long trial represents a very large investment for AbbVie, and we are glad to see the company’s continued commitment to investigating candidates for advanced CKD by including patients with stage 4 CKD. We are also glad to see AbbVie include patients with less-severe CKD as well, since some believe that Abbott and Reata should have tested bardoxolone methyl in people with CKD stages earlier than stage 4. Since this population is frail, some speculate that spurious correlation led to the increased AEs in the bardoxolone arm leading to the trial’s termination.

• Alere – Diabetes revenue totals $50 million in 1Q13

On May 9th, Alere CEO Ron Zwanziger led the company’s 1Q13 update. Within Alere’s Professional Diagnostics segment, diabetes revenue reached $50 million, up 14% sequentially and up 78% year-over-year. As background, Alere re-entered the diabetes space in 2011). Diabetes revenue includes sales from diabetes mail order supplies, as well as in-hospital point- of-care and laboratory testing. Notably, management believes that Alere is well positioned to be the largest low-cost mail-order supplier in diabetes. Management anticipates that other businesses will exit the Medicare mail-order space when payment amounts from competitive bidding go into effect on July 1; Alere will be able to absorb and support the patients who continue to opt in for mail-order supply. Management remarked that Alere already has ~650,000 direct customers in this arena, largely due its December purchase of Liberty’s Medicare fee-for-service diabetes supply business. Should Alere be able to sustain its gross margins, the company could indeed benefit from economies of scale, pending other companies’ withdrawal from the mail order space. We imagine that this would not be easy, though we have no data as profitability within diabetes is not public information. We have already begun to see signs of withdrawal from the mail-order business. For example, in Insulet’s 1Q13 update, management provided revenue guidance that assumed the company will no longer have a Medicare business for Neighborhood Diabetes after July 1. However, management also noted lobbying efforts ongoing to delay the implementation of competitively bid payment amounts until December.

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Turning to Alere’s laboratory testing business, management noted that Alere had strong overseas growth related to products from its Axis-Shield acquisition. Management remarked that restrictive contracts in the US have recently been lifted and that the company forecasts stronger US performance as a result. As a reminder, Axis-Shield markets point-of-care A1c and laboratory A1c testing products as part of a wider portfolio.

• Alkermes – Records $4 million in Bydureon royalties

On May 23 Alkermes announced its F4Q13 and full-year results on a call led by CEO Richard Pops. Alkermes recorded $4 million in Bydureon royalties from about $50 million in worldwide sales during F4Q13. Fiscal 2013 Bydureon royalties totaled $16.4 million from roughly $200 million in worldwide sales. The F4Q13 results represent a sequential decline from $5 million in royalties from $65 million net worldwide sales in F3Q13 – consistent with BMS/AZ's reports of a sequential decline of about 10% in Bydureon sales in calendar 1Q13. Management remarked that the Bydureon dual-chambered pen was on track for a mid-2013 submission, roughly consistent with BMS/AZ's guidance for a submission in 3Q13 [Editor’s note: we have not heard if the pen has been submitted]. Unfortunately, management did not provide any further updates on timelines for Bydureon line extensions.

• Amgen - Phase 1 trials terminated for AMG 151 and AMG 876

Amgen reported its 1Q13 financial results on April 24 in a call led by CEO Bob Bradway. As a reminder, Amgen has two diabetes candidates in its pipeline: AMG 151 is a phase 2 glucokinase activator (GKA) licensed from Array, and AMG 876 is a phase 1 undisclosed fusion protein (potentially an FGF-21 analog); both candidates are indicated for the treatment of type 2 diabetes. While management did not provide updates on either of these two candidates during the call, we gleaned a couple of updates from ClinicalTrials.gov on the termination of two phase 1 trials by Amgen’s choosing: 1) AMG 876’s phase 1 single ascending dose study in people with type 2 diabetes (ClinicalTrials.gov Identifier: NCT01492465); and 2) AMG 151’s phase 1 safety study on 24-hour ambulatory blood pressure (ClinicalTrials.gov Identifier: NCT01755442). Management did not comment on these developments during the call, and both candidates still appear in Amgen’s online drug pipeline. As a reminder, in early April when Amgen published its 2012 Annual Report, we learned that AMG 151’s phase 2a trial completed in December 2012 (ClinicalTrials.gov Identifier: NCT01464437). This trial examined the dose-effect relationship of AMG 151 compared to placebo on fasting plasma glucose and postprandial glucose in people with type 2 diabetes already on metformin. Amgen has not yet released the results. We recently began following Amgen’s efforts to develop a promising candidate for hypercholesterolemia, AMG 145 (a PCSK9 inhibitor), since many diabetes patients could benefit from more aggressive lipid management. Management noted on the call that Amgen would continue to present further analyses of phase 2 data at scientific meetings throughout 2013. Amgen hosted a 2013 Business Review on February 7 in New York during which the company provided further details on AMG 145 as well as its $415 million acquisition in December of deCODE Genetics, a company that identifies genetic risk markers. We remain curious whether this will have any bearing on the company’s work in diabetes.

• Arena – Withdraws MAA for Belviq in the EU

Arena reported 1Q13 results on May 2 in a call led by President and CEO Jack Lief. Notably, Arena announced that it withdrew its Marketing Authorization Application (MAA) for Belviq (lorcaserin) in the EU. Arena explained that it felt it could not resolve the Committee for Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 10

Medicinal Products for Human Use’s (CHMP’s) “major objections” related to the results of “non- clinical studies” before the CHMP made its recommendation to the European Medicines Agency (EMA). We believe that the preclinical concern pertains to the drug's association with teratomas in rats. In Arena’s 4Q12 call, the company stated that CHMP’s Day 180 List of Outstanding Issues cited four concerns: 1) tumors found in rats during Belviq’s carcinogenicity study; 2) valvulopathy events; 3) psychiatric events; and 4) Belviq’s overall benefit-risk ratio, given these issues. Arena’s 1Q13 report indicates that the company is “currently evaluating the best approach” for a resubmission; we imagine that Arena would need to conduct additional studies to address the CHMP concerns. On the domestic front, Arena did not provide an update on the Drug Enforcement Agency’s (DEA) scheduling of Belviq during the call; however, on May 8, Arena and Eisai issued joint press releases announcing that the DEA designated Belviq a Schedule IV substance effective June 7 (following a 30-day hold). During Eisai’s May 11 F4Q12 call, the company stated that it would launch Belviq immediately after the scheduling goes into effect and expects the drug to be available by June 11 [Editor’s note: Belviq was launched on June 11]. With this timeline, Belviq will be launched nearly a year after its approval on June 27, 2012. Scheduling took almost two-to- three times longer than the four-to-six months Arena guided for at the time of Belviq’s approval. During the 1Q13 call, management remarked that the delay provided a silver lining in that it gave Eisai additional time to hone its launch plan and build reimbursement. According to Arena (we have not heard the same from Eisai), Eisai estimates that ~33% of patient-covered lives (i.e., lives covered by commercial insurance) are currently covered for Belviq. We believe this number reflects the market average, since our understanding is that Eisai cannot run a claim to a payer until Belviq is scheduled. Similar to Vivus, Orexigen, and Eisai, Arena highlighted the inclusion of obesity medications in AACE’s new guidelines and stated that the new guidelines will support the expansion of reimbursement, increase awareness among HCPs, and impact use. On the pipeline front, Arena and Eisai have agreed on a development plan for a phentermine/lorcaserin fixed-dose combination. Arena had a meeting scheduled with the FDA for later in 2Q13 to discuss the drug’s development [Editor’s note: we have not heard if this meeting has been held or how it went]. We note that this combination is similar to phentermine/fenfluramine, as both fenfluramine and lorcaserin are serotonin agonists; however – and quite importantly – lorcaserin is highly selective for serotonin-2C while fenfluramine interacted with several serotonin receptors. (We remember that while lorcaserin’s selectivity was an initial concern of the FDA’s, Arena appeared to address this issue adequately with additional studies.) On the financial front, Arena had cash and cash equivalents of $136 million on March 31, 2013, down from $156 million on December 31, 2012.

• Array – Evaluation of AMG 151 phase 2a results to complete in 2013

Array BioPharma reported F3Q13 financial results in a call led by CEO Ron Squarer on May 7. As Amgen previously announced, Array confirmed that its/Amgen’s glucokinase activator (GKA) AMG 151 completed its phase 2a trial (for details see the Amgen entry above). The call made no other mention of diabetes, emphasizing Array’s shift in focus to oncology. As a reminder, Array’s diabetes pipeline includes one other candidate: a phase-1 ready GPR119 agonist, ARRY-981. At GTCBio 2013, Senior Research Investigator Mr. Brad Fell presented preclinical data on the compound in hopes of catching the eye of a sourcing director in the audience. Array management had previously suggested that partnering discussions began in 1H12 and that potential partners had expressed “keen interest,” making the company’s continued search discouraging. With Array focusing on oncology, the company will not bring ARRY-981 to phase 1 without a partner. Mr. Fell highlighted the difficulties that other GPR119 agonists have Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 11

faced in clinical trials, remarking that ARRY-981 could be differentiated based on its structure, physiochemical properties (Mr. Fell stated that “poor physiochemical properties have plagued this field”), and preclinical efficacy.

• Asante – Partnering with Glooko and Diasend for Asante Snap insulin pump

On June 6, Asante announced a partnership with Glooko to make the Asante Snap insulin pump compatible with Glooko’s diabetes management system (iPhone app, universal MeterSync cable, and web dashboard). Asante expects to integrate the Snap with Glooko's software in time to release a downloadable insulin pump as early as 4Q13; the controller upgrade will be available for $99. The Glooko partnership is a very smart one in our view – it will work with an existing system and will support a vast array of glucose meter integrations. As a reminder, Glooko's product is compatible with an impressive 19 popular glucose meters. Certainly, the industry is moving towards more seamless and simpler data downloading, and this partnership is an important step for Asante in that regard. We also expect that CDEs will appreciate that the Snap won’t require learning a new proprietary software program. Building on this partnership, Asante announced a second encouraging collaboration for data downloading on June 18 – the company will partner with Diasend to allow the transmission of Snap data to Diasend's universal online data management system. Diasend’s downloading capability will be available through the same controller upgrade that integrates the Snap pump with Glooko's software. As we understand it, data transmission will initially require a cable connection as currently required by Glooko and Diasend-integrated products; however, Asante’s next-generation downloadable pump will have a wireless interface. The second partnership further demonstrates Asante's intention to build data-downloading capabilities into its pump and to rely on established software systems. We look forward to seeing the new downloadable pump on the market and are curious which software system, Diasend or Glooko, will receive more traffic from Asante Snap users. We expect that patients and providers will appreciate having two options so that they can adopt the data management system that better fits their needs.

• Aspire Bariatrics – AspireAssist could be approved in Canada this summer

Aspire Bariatrics anticipates that its AspireAssist Aspiration Therapy System for the treatment of morbid obesity (BMI ≥35 kg/m2) could be approved in Canada this summer. The system consists of an endoscopically-implanted tube (a percutaneous endoscopic gastronomy [PEG] tube) that connects the inside of the stomach to a port on the surface of the skin. Users are to wait ~20 minutes after eating before connecting a handheld device to the Skin-Port to “aspirate” (i.e., drain) ~30% of the calories within their stomach into the toilet, a process that takes five to 10 minutes. Notably, one of Aspire Bariatrics’ founders, Dr. Sam Klein (Washington University School of Medicine in St Louis, St Louis, MI) stated “people do not compensate by eating more food later.” The AspireAssist received CE Mark in the EU in 2011 and is available in Sweden and the Czech Republic; Aspire plans to extend the controlled launch into Italy, Belgium, Israel, Portugal, New Zealand, Finland, United Kingdom, UAE, Kuwait, Mexico, and Saudi Arabia. The device has been filed with regulatory authorities in both Canada and Australia. Further, a 10- center, 175-patient US pivotal study is recruiting participants (ClinicalTrials.gov Identifier: NCT01766037) and expected to complete in July 2014. To date, 54 patients have had a tube implanted, and the safety profile has been positive. Management noted that the AspireAssist has had 100% implantation success, and only one patient had difficulty tolerating the tube (PEG tubes have been used in other medical applications for over 30 years). No serious adverse events have occurred. Turning to efficacy data, in 2011 Aspire Bariatrics announced that in its 52-week US trial comparing AspireAssist to lifestyle Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 12

intervention, the 10 people who completed the trial on AspireAssist with lifestyle intervention (11 were randomized to this arm) experienced ~22% body weight loss (49% excess weight loss). Those receiving lifestyle intervention alone had 15% excess weight loss. Additionally, the study found comparable results at 104 weeks (n=7). According to Aspire Bariatrics, similar results were seen in their US pilot study. Dr. Klein stated that if endoscopic therapies, such as the AspireAssist, are proven to be as effective as bariatric surgeries, then they could “replace bariatric surgery…because they are less expensive, less invasive, easily reversible, general anesthesia is typically not required for placement.” Aspire Bariatrics acknowledges that the AspireAssist’s concept might be considered unappealing to some. However, Aspire Bariatrics contends that obese people need more options, particularly ones that are reversible, appropriate as a chronic therapy, have fewer complications, and are perceived as cost-effective. We agree that expanded options will benefit patients, given the multitude of factors that can cause and perpetuate obesity. Looking forward, we are interested to have more clarity on the mechanism of action of the system, as well as whether the system and accompanying lifestyle therapy produce lasting behavioral changes.

• Astellas – Reaffirms ipragliflozin filed in Japan

Astellas announced F4Q12 financial results in a call led by President and CEO Yoshihiko Hatanaka on May 13. The company reaffirmed that it filed its SGLT-2 inhibitor ipragliflozin in Japan in March. As a reminder, Astellas developed ipragliflozin through its research collaboration with Kotobuki Pharmaceutical. Astellas has previously indicated that it is also looking to file the drug in other Asian countries, including South Korea and Taiwan, though it has not announced timelines for these potential submissions. The company had originally intended to submit ipragliflozin in the US and EU; however, in its F2Q12 update it announced that it decided to discontinue development in these regions, partially due to increased competition from BMS/AZ’s dapagliflozin (Forxiga), which was approved in the EU last November, and J&J’s canagliflozin, which was approved in the US in late March and is currently under EU review. As a reminder, Astellas reported at EASD 2012 that in two double-blind studies, 24 weeks of treatment with ipragliflozin in combination with either a sulfonylurea (SU; n=242) or pioglitazone (PIO; n=151) resulted in significantA1c reductions compared to placebo (SU: 1.14%, PIO: 0.88%). The company has also completed a 52-week trial in people with long-term renal impairment, as well as add-on studies with metformin, alpha-glucosidase inhibitors, and DPP-4 inhibitors. We are particularly curious to see how the SGLT-2 inhibitor/DPP-4 inhibitor combination works, since these data could lead to a better understanding of how a fixed-dose combination (FDC) of the two drugs would perform. As background, Pfizer and Merck are pursuing a FDC of ertugliflozin and sitagliptin (Merck’s Januvia). On the financial front, Astellas had cash and cash equivalents totaling ¥265 billion ($2.6 billion) on March 31, 2013, up 5% year-over-year.

• AZ – Onglyza franchise up 27%

AstraZeneca reported 1Q13 financial results on April 25 in a call led by CFO Simon Lowth. AstraZeneca’s worldwide Onglyza franchise revenue totaled $90 million, up 27% in constant currencies and up 25% as reported. US Onglyza franchise sales totaled $64 million (up 19% in constant currencies), and rest-of-world revenue reached $26 million (up 53% in constant currencies). The call and Q&A session featured lengthy discussion on the slowdown of the DPP-4 inhibitor market. Total prescriptions (TRx) for the Onglyza franchise grew 9%, falling just below the overall DPP-4 inhibitor market TRx growth of 10%. Onglyza lost market share during 1Q13,

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with the franchise’s share of TRx decreasing 1.7 percentage points from December 2012 to 16.1% in March 2013. Management attributed this share loss primarily to the loss of preferred reimbursement status on some managed care formularies (most notably Caremark), as well as to intensifying market competition within the DPP-4 inhibitor class. Management attributed the overall slowdown of the DPP-4 inhibitor market to the availability of generic TZDs in the second half of 2012, as well as to the continued growth of the GLP-1 agonist market. Management did not mention any expectations regarding the entry of the SGLT-2 inhibitor class into the market. In 1Q13, AZ received $42 million for Byetta (down 11% sequentially) and $27 million for Bydureon (up 4% sequentially). AZ reported 15% growth in new to brand volume (NBRx) for Bydureon since BMS/AZ “re-launched” the drug in October 2012, with a 1.5-point increase in NBRx share. The 15% growth in NBRx includes switches from Byetta to Bydureon, which management conceded made up a “fair chunk” of the NBRx volume, though it also noted that the overall net exenatide franchise has grown year-on-year in TRx by ~7%. Consistent with Lilly’s remarks on April 24, BMS/AZ have assumed ex-US rights for Byetta and Bydureon starting from April 2013. AZ reported Forxiga (dapagliflozin) revenue for the first time – AZ recorded just $1 million after a full quarter on the market (we are unsure how BMS/AZ split Forxiga revenue). This seems slightly disappointing after AZ presented initial 10-week volume numbers during its Investor Day in March, suggesting that Forxiga’s performance was trending just under that of Januvia’s first 10- week performance. For reference, Januvia brought in $42 million in 4Q06, its first quarter on the market. As a reminder, Forxiga launched mid-December 2012. Of course, the EU is not where we would expect to see the strongest demand for Forxiga given the austerity measures there; we will be very interested to see what happens on the US regulatory landscape for Forxiga; AZ reiterated intentions to re-file the compound mid-2013. With a shortened six-month review cycle, it could receive a decision prior to the end of the year. Notably, during Q&A management reaffirmed that BMS/AZ expect to file the Bydureon dual- chambered pen in the US in 3Q12 and announced that an EU submission is expected in 4Q13. The dual-chambered pen could increase demand significantly in our view. There was no news on exenatide-once-monthly development, disappointingly, nor on any other elements of the metabolic pipeline, though it is clear from management that diabetes and metabolic disease are a primary area of focus for AZ.

• Baxter – EU approval of home hemodialysis device expected in 2013

Baxter reported 1Q13 financial results on April 18 in a call led by CEO Robert Parkinson. As background, Baxter provides in-home hemodialysis (HD) and peritoneal dialysis (PD) treatments for people with chronic kidney disease (CKD) and end-stage renal disease. While discussing Baxter’s “recent achievements,” management highlighted the progress of its home hemodialysis device, Vivia, noting that Baxter has completed the first clinical trial of the device in the US and has initiated a second trial in Canada focused on nocturnal hemodialysis. Baxter expected to complete the Canadian trial in 2Q13 [Editor’s note: we have not heard if this trial was completed] and to use the data to support Vivia’s filing in Europe later this year; the company expected to receive CE Mark approval by the end of 2013. During Q&A, management clarified that in the US, Baxter is still in discussions with the FDA regarding the clinical trial requirements; the company plans to file Vivia for a nocturnal hemodialysis indication in 2014. Management announced that Baxter received US regulatory clearance for its acquisition of Gambro, a Swedish company that provides hemodialysis and continuous renal replacement therapy (CRRT) products to people with both acute and chronic kidney disease. As background, Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 14

Baxter announced the planned transaction last December, and will purchase Gambro for 26.5 billion SEK ($4 billion). During the 1Q13 update, management reiterated that this purchase will strengthen Baxter’s competitive position by creating a “global renal therapies business” with product offerings for acute and chronic dialysis patients. Baxter still expects to close the acquisition at the end of 2Q13 and to receive a half-year sales contribution from Gambro of approximately $830 million. Sales of renal products in 1Q13 totaled $590 million, flat on a reported basis and up 1% operationally from 1Q12. Management noted that sales in 1Q13 were impacted by austerity measures in China (due to price reductions), as well as lower HD sales, which offset the contribution from patient gains in the US and emerging markets. Sequentially, renal product sales declined 13%, though 4Q-to-1Q decline in sales appears typical for Baxter, as sales dropped 11% sequentially in 1Q12 and 6% sequentially in 1Q11. In 4Q12, international sales of $492 million were flat year-over-year and down 13% sequentially. Overseas sales accounted for 83% of total renal product sales, consistent with 84% in both 4Q12 and 1Q12. US sales totaled $98 million, up 1% year-over-year but down 10% sequentially. The sequential comparison was relatively challenging as sales in 4Q12 grew 9% from 3Q12. Baxter also confirmed its full-year 2013 financial outlook, first provided during its 4Q12 earnings update in late January. Sales of renal products are still expected to achieve growth in the low single digits – management provided less detail compared to the 4Q12 call, when Baxter forecasted mid-single digit growth in PD and lower HD revenues.

• Bayer – Contour sales up 2% in 1Q13

Bayer CEO Marijn Dekkers led the company’s 1Q13 financial update on April 25. Revenue for Contour, Bayer’s lead blood glucose monitor (BGM) franchise, totaled €170 million ($225 million), up 2% as reported and up 3% operationally on a challenging year-over-year (YOY) comparison: 1Q12 saw 9% reported growth and 7% operational growth. Sequentially, revenue fell 12%; however, 4Q12 Contour revenue had reached its highest single-quarter result in over five years. We roughly estimate that overall Diabetes Care revenue was €235-241 million ($311-320 million) in 1Q13, down ~4% as reported from 1Q12 when revenue was up 2-4%. Management noted both pricing and reimbursement pressures in the market. However, despite these challenges, management made clear that they were “committed to this business” and remarked that despite the slight decline in the first quarter, Bayer was doing “quite well” compared to competitors. Turning to pipeline updates, in April Bayer launched in the US its remaining two Contour Next platform products: the Contour Next and Contour Next USB blood glucose meters. The Contour Next also launched internationally (Contour Next USB launched outside of the US in June 2012). No updates were given on Bayer’s in-house continuous glucose monitor. On the pharmaceutical front, sales of Bayer’s alpha-glucosidase inhibitor Glucobay (acarbose) totaled €101 million ($133 million), up ~20% on a reported and operational basis from 1Q12, when growth was down 5% and 10%, respectively. Aflibercept (marketed as Eylea for wet age- related macular degeneration) remains in phase 3 for a diabetic macular edema indication. Notably, in February Bayer/Regeneron initiated an additional safety and efficacy trial as part of their phase 3 program (ClinicalTrials.gov Identifier: NCT01783886; called VIVID-EAST).

• BD/JDRF – Extend collaboration to develop combined insulin infusion/CGM

On June 19, BD announced an extended collaboration with JDRF to develop a combined insulin infusion and CGM device, eliminating the need for two separate catheters. The partnership builds on the existing BD-JDRF collaborations to advance microneedle insulin delivery and to develop a

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more accurate and reliable CGM (the latter is through the JDRF-Helmsley Charitable Trust Sensor Initiative). The new collaboration is a three-year commitment on the part of JDRF to enable additional research; no further details were provided in BD’s press release. We are encouraged to see another exciting partnership spearheaded by JDRF, as a combined insulin infusion-CGM device stands to reduce care burden in the near term and streamline artificial pancreas development in the long term by reducing the number of separate on-body devices. Given that sensors tend to have longer wear indications than infusion sets (e.g., seven days vs. three days), we will be interested to see how BD, Medtronic, and other companies pursue an integrated device that will marry the discordant lifespans. We wonder whether BD’s microneedle technology could perhaps have a longer lifespan than current infusion sets if it results in a smaller foreign body response than that caused by traditional cannula insertion. Alternatively, if the entire integrated sensor/catheter were required to be replaced every three days, then we think that first-day sensor accuracy would become increasingly important. (Sensor accuracy tends to be lowest on the first day of wear; some have hypothesized the lower day-one accuracy is linked to the foreign body response upon insertion.)

• BD – Phase 1/2 study of second-generation sensor completed

On May 2 Becton Dickinson CEO Vincent Forlenza led the company’s F2Q13 financial update. Worldwide Diabetes Care revenue for the quarter totaled $232 million, up 6% as reported and 7% operationally. The year-over-year (YOY) comparison was challenging as sales grew similarly in F2Q12 (up 6% and 7%, respectively). By geographical breakdown, US revenue reached $107 million in F2Q13, growing 1% from F2Q12 on a challenging comparison (F2Q12 growth was 10%). Internationally, Diabetes Care revenue totaled $125 million, up 11% on a reported basis and 12% on an operational basis from F2Q12 when sales grew 2% and 3%, respectively. Sequentially, sales fell 4% worldwide from F1Q13, when revenue reached its highest quarterly total since F2Q07. This reflected a 5% US sequential decline and a 4% international sequential decline. Management noted strong sales of pen needles, which included PentaPoint Comfort (five-bevel pen needle tip) and Ultra-Fine Nano pen needle (4 mm x 32G; uses the PentaPoint technology); however, management remarked that the timing of orders in the retail business and a challenging YOY comparison negatively impacted Diabetes Care performance. Looking forward, BD expects stronger Diabetes Care results in the second half of fiscal year 2013. Turning to the pipeline, management recently launched the Nano with EasyFlow technology; we are following up with the company for greater detail. Neither BD’s glucose binding protein (GBP)-based optical CGM sensor nor insulin infusion product were discussed on the call. The company displayed results from a 24-hour ambulatory pilot study of its first-generation sensor in a poster at Advanced Technologies & Treatment in Diabetes (ATTD) (n=15 patients). The sensor had a median absolute relative difference of 12.4% (ClinicalTrials.gov Identifier: NCT01469715). The company also discussed its sensor at the April FDA-JDRF-NIH Innovation Towards an Artificial Pancreas: the system is currently in its second generation, and management said that the most immediate development challenge going forward is to further miniaturize the optical device. Of note, according to a ClinicalTrials.gov update on April 19, the company has completed a trial of its second-generation sensor (Identifier: NCT01645696). This phase 1/2 study compared BD’s new subcutaneous glucose binding protein- based CGM (GBP-CGM with outer layer) and BD’s first-generation glucose binding protein-based CGM (GBP- CGM without outer layer) to Medtronic’s iPro 2 Professional CGM. Turning to insulin infusion, as of the JP Morgan Healthcare conference in January, BD expected to enter the insulin infusion set market with its own product line in fiscal year 2014 (calendar:

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October 2013-September 2014). We understand that the first-generation infusion set would not incorporate BD’s microneedle technology, but the second-generation would.

• Biocon - Mylan partnership on analogs brings $20 million upfront

Biocon sent out its press release announcing F4Q13 results on April 25. Most notably, Dan Bradbury, the former CEO of Amylin Pharmaceuticals, has joined the board of Biocon. We see this as a significant win for Biocon, as Mr. Bradbury is a well-established and high-profile leader. As a reminder, Biocon and Amylin had previously partnered on a fusion peptide therapy for the treatment of type 2 diabetes (AC165198); this partnership was discontinued following BMS/AZ's acquisition of Amylin. The press release gave more information on Biocon's insulin portfolio than past announcements. Biocon’s insulin franchise continues to garner market share across India and emerging markets and now accounts for more than 10% of the company’s sales. Financial details on the Mylan partnership for generic insulin analogs were also disclosed for the first time: Biocon received $20 million as an upfront payment for further development. On the pipeline side, Biocon has planned meetings with the FDA to discuss the strategy for starting phase 3 trials for generic insulin glargine. The company’s oral insulin candidate, IN-105, “continues to make progress” – Biocon intends to commence pre-phase 2 bridging trials shortly, subject to approval from regulators. According to the press release, the partnership with Bristol Myers-Squibb has enabled Biocon to better structure the bridging trials. Last, Biocon intends to commence clinical and regulatory development of generic recombinant human insulin in the US this fiscal year, under an existing US IND. Based on discussions with the FDA, Biocon will take sole development responsibility. The company continues to engage with the EMA prior to its dossier filing for generic recombinant human insulin in the EU.

• Biodel – Developing new glucagon rescue product, NDA filing in 2015

On June 6, Biodel announced plans to develop a new glucagon rescue product using a dual chamber, automatic reconstitution device – pictures of the device can be found at http://www.biodel.com/glucagondevicee/. The pen contains a lyophilized cake of glucagon, which can be delivered in three steps: 1) remove a cover and twist (reconstitutes the glucagon and unlocks the front needle cover); 2) remove the needle shield; and 3) push plunger to give the dose (the needle automatically retracts into the barrel following completion of a full dose). Biodel has signed a 15-year supply agreement with Unilife Corporation for the customized proprietary device, which provides Biodel with worldwide exclusivity for use with glucagon. During 2Q13, Biodel expects to select a final formulation of this lyophilized glucagon and appoint a contract-manufacturing partner. The submission of an Investigational New Drug (IND) application to the FDA is expected during the next 12 months, and the company anticipates that a pivotal clinical study will start during the second half of 2014. This paves the way for a potential NDA filing under the 505(b)(2) regulatory pathway in 2015. From a patient perspective, the timeline strikes us as somewhat lengthy given that this only represents a novel device (automated reconstitution), not a novel formulation of glucagon that is stable in solution; however, we are encouraged to see that Biodel is pursuing an easier and less hassle-filled method of glucagon administration using the aforementioned dual-chamber device. Given the low penetration of current glucagon rescue kits and widely acknowledged difficulties with the current reconstitution process, we think this would be a very important step forward, particularly if the market looks as it currently does, with a number of other competitive offerings in development.

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Biodel is still separately developing a stable solubilized glucagon preparation for pump usage (six days of stability at body temperature and 1.5-2 years of refrigerated stability) and potentially emergency usage (1.5-2 years of room temperature stability). This product has been delayed over the past year, presumably reflecting Biodel’s prioritization of ultra-fast-acting insulin and the difficulty of stabilizing the glucagon molecule in solution. For context, during the August F3Q12 earnings call, management guided for an NDA submission for the stabilized glucagon in early 2014; we expect this stabilized product to fall behind the 2015 filing of the aforementioned pen device. In Biodel’s recent F2Q13 call, management said that the company was “close to finalizing” stabilized glucagon formulations that achieve desired room temperature characteristics and user- friendly applications.

• BMS/AZ – Announce topline results for Onglyza’s SAVOR-TIMI-53 CVOT

BMS and AZ announced on June 19 that Onglyza’s (saxagliptin’s) SAVOR-TIMI-53 trial achieved its primary safety endpoint of non-inferiority for MACE (CV death, non-fatal MI, non-fatal ischemic stroke) compared to placebo and did not achieve the primary efficacy endpoint of superiority. BMS and AZ have previously stated that even a neutral outcome would be viewed as a positive, since Onglyza is now the only DPP-4 inhibitor that can claim CV safety based on a CVOT. The next DPP-4 inhibitor to report CVOT results will be Januvia in December 2014. Had the result showed superiority, we would have expected a substantial shift towards Onglyza. However, since DPP-4 inhibitors’ CV safety was never quite in question (and since prescribers have now had a great deal of experience with the various agents in this class), we would speculate that a neutral result will be unlikely to significantly change prescribing practices. As of the end of 1Q13, the Onglyza franchise made up 10% of the DPP-4 inhibitor market by value (up slightly from 9% in 1Q12), compared to the Januvia franchise’s 67% global share, Galvus’ 14% share, Nesina’s 7% share, and the Tradjenta franchise’s 2% share. SAVOR-TIMI is the first type 2 diabetes drug CVOT to report results since the FDA’s implementation of the 2008 CV guidance for type 2 diabetes drugs. The trial enrolled 16,500 patients in 25 countries with type 2 diabetes and either a history of cardiovascular disease (CVD) or multiple CV risk factors. Patients were randomized to Onglyza 2.5 mg or 5 mg once daily or placebo in addition to standard of care (with or without other anti-diabetes medications). We are curious to see, when the full results are released, whether BMS will perform a sub-analysis of people with relatively lower CV risk in the trial to determine if they derived any CV benefit from Onglyza – i.e., we wonder if the CV risk-enriched population may have masked benefit for those who are earlier in the disease progression. Of course, this is a risk that all CVOTs take when trying to balance accelerating data collection and enrolling a representative patient population. While the ClinicalTrials.gov listing for SAVOR-TIMI estimated that four years would be needed to accrue the necessary events, the results have become available only three years after the trial began in 2010 (Identifier: NCT01107886). BMS previously indicated that this was due to quicker- than-expected enrollment. We also wonder whether the CV event rate was higher than expected. We view this neutral outcome as slightly disappointing, though not entirely unexpected. Due to differences in trial enrollment and design, these results for Onglyza are not directly applicable for making predictions about whether other incretin-based therapies will or will not show cardioprotection. Full results will be submitted for presentation at the European Society of Cardiology (ESC) Congress, which takes place in Amsterdam August 31-September 4.

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• Daiichi Sankyo – sNDA for Tenelia combination product filed in Japan

Daiichi Sankyo reported F4Q12 and fiscal 2012 financial results on May 13 in a call led by President and CEO Joji Nakayama. Consistent with the F3Q12 update, no updates were provided on the DPP-4 inhibitor Tenelia (teneligliptin), which Daiichi Sankyo and partner Mitsubishi Tanabe Pharma launched in Japan last September. We have not heard details on its market progress since the F2Q12 update last November, when management noted that sales were “moving better” than expectations. Mitsubishi Tanabe Pharma’s online pipeline (updated May 8, 2013) indicates that the candidate remains in phase 2 in Europe, in phase 1 in the US, and in phase 3 in Korea (where it is licensed to Handok Pharmaceuticals). In Japan, an sNDA application was filed in February 2013 for an undisclosed combination product (perhaps several products; this was unclear). We presume that this application refers to a teneligliptin/metformin combination, though we speculate that it could also pertain to a teneligliptin/SGLT-2 inhibitor combination, since Daiichi Sankyo and Mitsubishi have partnered to market canagliflozin (the SGLT-2 inhibitor that Mitsubishi is developing with J&J) in Japan. No updates were provided on canagliflozin, and Mitsubishi’s pipeline indicates that it is still in phase 3 development in Japan. In Europe, J&J submitted a marketing authorization application for canagliflozin and the canagliflozin/metformin FDC in June 2012 and March 2013, respectively, placing approvals in 2013 and 2014. Daiichi Sankyo reported no change in its diabetes-related pipeline, which includes four candidates in early-stage development. The DGAT1 inhibitor DS-7250 remains in phase 2 development in Japan for diabetes and in phase 1 development in the US and EU for diabetes and obesity. Daiichi Sankyo is also developing a GPR119 agonist (DS-8500), a selective PPAR-gamma modulator (DS-6930), and a glucokinase activator (DS-7309), all in phase 1 for diabetes. For the second time, Daiichi Sankyo broke out sales for its cholesterol medication Welchol (colesevelam; a bile acid sequestrant): sales in F4Q12 totaled $101 million, bringing full-year fiscal 2012 sales to $399 million, up 17% from fiscal 2011 and just over the company’s $388 million annual target (given during the F2Q12 update). As background, Welchol was the first product approved by the FDA to improve both glycemic control and LDL cholesterol in adults with type 2 diabetes and high LDL cholesterol. The drug is available in tablets and in an oral suspension form that is approved for mixing with water, fruit juice, or diet soft drinks.

• Dexcom – Revenue up 49%, company driving towards profitability

Dexcom reported 1Q13 financial results in early May in a call led by CEO Terry Gregg and President Kevin Sayer. Product revenue grew to $28 million, a 49% increase from 1Q12 – this was impressive and represents an acceleration in growth (1Q12 was 42%) from a higher base of sales. Sequentially, product revenue fell 12% from 4Q12, consistent with the 11% sequential decline observed between 4Q11 and 1Q12. (This seasonality was expected as deductibles reset and patients must pay more out of pocket.) Mr. Sayer emphasized the progress in driving the company towards profitability – though net loss was $11 million in 1Q13, cash-operating loss was just ~$4 million, down substantially from ~$10 million in 1Q12. Put differently, this means that the $9 million jump in sales from 1Q12 brought $6 million to the bottom line on a cash basis (also a big deal, and Mr. Sayer’s favorite number of the call). Indeed, gross margin was 55% in 1Q13, up from 49% in 1Q12,a big gain. Management expects gross margin to rise to 70-75% on disposables, with durables remaining steady at around 50%. The international business was “consistent” and continues to represent 5-10% of product revenue. Management stated that it was “somewhat overshadowed by strong domestic growth.” We assume this means the ex-US business grew along with the US, just not as much. Notably, Dexcom expects to be commercialized in 30 countries by

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the end of 2013, a 50% increase over 20 countries at the end of 2012. The company also just secured G4 Platinum approval in Canada, with launch expected in 3Q13. China and Japan were also specifically mentioned as two countries where several potential opportunities are being evaluated. Last, we were very encouraged to hear that 20 payers are now covering CGM for people with type 2 diabetes, representing 20 million covered lives. Management maintained the 2013 product revenue guidance of $120-$130 million (a 29%-40% increase over 2012 performance). On the pipeline front, Dexcom has five (!) products slated to launch in the next 12-18 months: 1) a pediatric indication for the G4 Platinum (under FDA review; the 4Q12 call guided for a 2H13 approval); 2) the Animas Vibe (under FDA review, with potential launch in 4Q13 or early 2014 at Animas’ discretion); 3) the Dexcom Share remote monitoring product (FDA filing still slated for 3Q13; this was characterized as a baby step towards Gen 5); 4) a G4 Platinum-integrated Tandem t:slim pump (FDA filing before year-end); and 5) an updated algorithm for the G4 Platinum (FDA filing in late 2013/early 2014). The latter originally began as a special version of the G4 Platinum for the artificial pancreas, but we hope will now be available to patients by next year; notably, this algorithm is expected to improve MARD by a full two percentage points, meaning the G4 should have some days during the week with a sub-10% MARD. We expect the new algorithm to be a software upgrade. We loved hearing management's commentary on the new product pipeline strategy; in a departure from the multi-year drought of new products between the Seven Plus and G4 Platinum, the new goal is to provide a steady stream of incremental improvements. Given the current regulatory environment, this appears to be a very smart approach, and we’re excited for patients on this front.

• Echo Therapeutics – Receives IRB approval for CE Mark pivotal trial

In a call on May 10 led by CEO Dr. Patrick Mooney, Echo Therapeutics reported 1Q13 financial results. The focus was on Echo’s numerous upcoming milestones on the road to European and US approval of its non-invasive, transdermal, critical care CGM, Symphony. Europe is the clear near- term focus – notably, Echo announced on May 21st that the four-site, ~30-patient CE Mark trial received institutional review board approval. The study commenced in following weeks under PIs Drs. Jeffrey Joseph (Jefferson Hospital), Stanley Nasraway (Tufts), Anthony Furnary (Starr- Wood Cardiac Group), and Marc Torjman (Cooper University Hospital). At roughly two patients per week and roughly eight patients per center, it is expected to wrap up in July. Management feels “very good” that a study design has been agreed upon with EU regulators. A CE Mark filing will follow completion of the pivotal study – no timing specifics were given in this call, though in the 4Q12 call, a filing was expected in June/August and approval was estimated in mid- to late 3Q13 [Editor’s note: Echo Therapeutics initiated the CE Mark pivotal trial of its Symphony CGM system on June 5. Results from the study are expected in the third quarter of 2013.] Management maintained that Echo is actively preparing for product launch in EU target markets later this year. In the US, Echo planned to submit a pre-submission package to the FDA in 1Q13 for its Symphony CGM System for use in the hospital critical care environment [Editor’s note: Echo has submitted a pre-submission package to the FDA]. The company will then have a meeting with the FDA (“if necessary”) to “work cooperatively” on a plan to initiate the US pivotal trial [Editor’s note: The company plans to meet with the Agency this summer to further define the regulatory pathway in the US]. Echo still anticipated that the US study would start once the EU study completes and the CE Mark technical file is submitted to its notified body. Importantly, the same four sites that are running the EU study will be the primary sites in the US pivotal study (“a seamless transition”), plus an additional two to four sites. The US study will be largely similar to the EU study, but with two exceptions: much larger (~150 patients vs. ~30 patients for Europe) and endpoints that focus on both safety and performance (vs. just safety for Europe).

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The design of Symphony has been finalized at this time, and as noted in the 4Q12 call, Echo was granted International Standards Organization (ISO) 13485: 2003 certification of its quality system on March 15 (an important step towards CE Mark). As of March 31, Echo had $5 million in cash, up slightly from $4 million at the end of 2012. A public stock offering in February raised net proceeds of $11 million, and Echo used $3 million to prepay the outstanding balance from a $20 million credit line with Platinum-Montaur Life Sciences. This means that the company no longer has any material debt outstanding. Still, operating cash flow burn was ~$6 million in the quarter, meaning that Echo will need to explore additional financing options. The company is “trying very hard to garner a corporate partnership” – in Q&A, management referred to “pretty significant interest on the part of several entities.” No further details were shared, though comments implied that Echo is seeking a licensing agreement of some type.

• Edwards – Remains “enthusiastic” about GlucoClear critical-care CGM

Edwards CEO Michael Mussallem led the company’s 1Q13 financial update on April 23. Said management, “we remain enthusiastic about the significant opportunity represented by our GlucoClear system.” As a reminder, the company’s second-generation GlucoClear critical-care continuous glucose monitor, developed in partnership with Dexcom, received CE Mark earlier this year. Using the same language as in the 4Q12 update, Mr. Mussallem characterized 2013 as a “pivotal” year for GlucoClear: the company plans to complete additional studies in Europe and gain greater clarity on the path towards approval in the US. Certainly, with respect to defining a US pathway, Dexcom’s open and communicative relationship with the Agency should bode well for Edwards. Edwards did not provide additional detail on GlucoClear pricing or the company’s marketing strategy. Dexcom sells sensors to Edwards at an undisclosed transfer price, and Edwards sells them commercially. As of the company’s 4Q12 update, management did not expect “significant sales” of GlucoClear in the year. The hospital space has seen two recent EU approvals: Edwards/Dexcom’s CE Mark followed closely by Medtronic’s. Medtronic received CE Mark for its Sentrino critical care CGM in December 2012. As we understood it from Medtronic sales representatives at the 6th International Conference on Advanced Technologies & Treatment for Diabetes (ATTD 2013), Medtronic had yet to gain reimbursement for its Sentrino system. We are curious about Edwards’ reimbursement outlook and strategy for GlucoClear. A more competitive in-hospital CGM marketplace would be a positive on this front with respect to generating data and forging a pathway for reimbursement. There is certainly space as well for a range of CGM devices, given that certain systems may be more appropriate for different areas of the hospital or different patient populations. Broadly, we feel that in-hospital CGM would represent a marked improvement over blood glucose testing every two to four hours, the current standard of care in US critical care environments. Real-time data, trending information, and alerts have the potential to address much of the fear associated with hypoglycemia (a major barrier to treating hyperglycemia), reduce glycemic variability, and help clarify insulin infusion guidelines by showing the moment-to-moment effects of insulin therapies in specific critical care populations. Many KOLs have pointed out that nurses will be the ones who drive ultimate adoption of the product, similar to how pulse oximeters achieved widespread use. We look forward to greater real-world experience with in-hospital CGM to determine its effects on nursing time and care delivery.

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• Forest – No updates on liver-selective glucokinase activator GK1-399

On April 23, Forest Laboratories CFO Francis Perier, Jr., led the company’s financial update for F4Q13. Similar to the F3Q13 update, the company management did not provide any updates on its liver-selective glucokinase activator (GKA) GK1-399 (formerly TTP399). We note that currently CliniclTrials.gov does not list any recruiting or ongoing phase 2 clinical trials for GK1- 399.. It is our understanding that other companies currently developing liver-specific GKAs include Pfizer (PF-04937319; phase 2), Advinus Therapeutics (GKM-001; phase 2a trial expected to complete in 2013), and Ligand (undisclosed name and phase, appears to be preclinical). Meanwhile, Amgen (AMG 151; phase 2) and Zydus Cadila (ZYGK1; phase 1) are developing candidates that act on glucokinase in both the liver and the pancreas. We believe that hypoglycemia will be a bigger risk with Amgen’s and Zydus’ candidates. Takeda is also developing a GKA Takeda (TAK-329, phase 1) and has not indicated if the compound is liver selective or not. Forest had ~$3.0 billion of cash and marketable securities as of March 31, up ~2% from December 31, 2013.

• GI Dynamics – EndoBarrier offered at 37 commercial centers worldwide

On May 20, CEO Stuart Randle led GI Dynamics’ Annual General Meeting. GI Dynamics continues to advance its US pivotal trial (the ENDO trial) of the EndoBarrier Gastrointestinal Liner for obese patients with uncontrolled type 2 diabetes. GI Dynamics recently reported that seven sites are actively enrolling subjects for the trial; the company is targeting ~500 patients across 25 sites. GI Dynamics expects to complete enrollment in mid-to-late 2014. Topline results are expected in late 2015, enabling PMA filing at the end of 2015 and possible FDA approval at the end of 2016. This would set the stage for a 2017 US launch. Given that the FDA previously granted GI Dynamics approval to bypass an expected US pilot study and that the EndoBarrier has now been used in over 1,000 patients worldwide, we think GI Dynamics will encounter a fairly positive regulatory environment should its pivotal trial produce results similar to trials conducted outside the US. EndoBarrier was available at 37 commercial centers at the end of 1Q13, an increase of nine centers from the end of 4Q12. Looking forward, management expects to reach 50 centers by the end of 2013. GI Dynamics continues to outline a commercial strategy focused on self-pay markets in the short term. Notably, the company filed for regulatory approval in Brazil, which management describes as having a culture of out-of-pocket pay; GI Dynamics expects approval in 2014. EndoBarrier is also under regulatory purview in India and some countries in the Middle East (previous earnings calls specified Qatar and Saudi Arabia). Looking longer term, the company seeks to expand reimbursement. Management believes that national reimbursement is a key driver to increase device utilization and to become cash flow positive. Excluding ENDO trial costs, the company forecasts that it can reach cash flow break even at a device utilization rate of 1,000 to 1,500 units per month. Financial details were not discussed on the call; however, the company’s 4C Quarterly Report indicated that EndoBarrier sales totaled ~$400,000 in 1Q13, up from ~$300,000 in 4Q12 and ~$100,000 in 1Q12. The company attributed the year-over-year increase to sales growth in Europe and South America and the addition of revenue from Australia. The company ended 1Q13 with ~$33 million, reflecting a cash burn of ~$9 million from the end of 2012. Of note, management said discussions were ongoing as to the best means to bring additional cash to the company outside of EndoBarrier sales. Research and development costs totaled $3.1 million in

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the quarter, up from $2.6 million in 1Q12 due to ENDO trial enrollment. Sales and marketing expenses totaled $2.5 million compared to $1.8 million in 1Q12; the increase was attributed to building commercial infrastructure. General and administrative expenses reached $3 million in 1Q13, up from $2 million during the same period last year due to higher non-cash share-based compensation expense, increased legal expenses, and increased employee related expenses (necessitated by an expanding employee base to support GI Dynamics growth).

• Gilead – Ranolazine for coronary artery disease remains in phase 3

On May 14, Gilead Sciences CEO John Martin announced the company's 1Q13 financial results. Gilead's late sodium current inhibitor ranolazine remains in phase 3 for coronary artery disease (CAD) in patients with type 2 diabetes. However, the phase 3 program is focused on the drug’s effect on A1c and could provide the basis for a type 2 diabetes indication. The program investigates ranolazine for people with type 2 diabetes in three active trials: 1) in treatment-naïve patients (ClinicalTrials.gov Identifier: NCT01472185); 2) when added to glimepiride in patients with inadequate control on metformin or sulfonylurea (ClinicalTrials.gov Identifier: NCT01494987); and 3) in patients with inadequate control on metformin alone (ClinicalTrials.gov Identifier: NCT01555164). The trials have completed enrollment, and Gilead expects to release topline data in the fourth quarter of this year. Gilead’s phase 1 study investigating the effect of ranolazine on postprandial glucagon in patients with type 2 diabetes is also ongoing (ClinicalTrials.gov Identifier: NCT01843127). For background, ranolazine is approved for the treatment of chronic angina (chest pain/pressure resulting from lack of blood and oxygen supply) and is marketed as Ranexa. The company announced positive phase 4 results examining Ranexa in patients with type 2 diabetes and chronic stable angina earlier this year. Ranolazine, when added to background antianginal therapy in chronic angina patients with type 2 diabetes, significantly reduced the frequency of weekly angina episodes compared to placebo and background antianginal therapy during weeks two to eight of an eight-week treatment intervention period (3.8 vs. 4.3; p=0.008). Interestingly, subgroup analyses revealed a significant treatment effect difference based on geographic region.

• GSK – No updates on albiglutide

GlaxoSmithKline reported 1Q13 financial results on April 24 in a call led by CEO Andrew Witty. Surprisingly, neither management nor investors mentioned the FDA’s then upcoming Endocrinologic and Metabolic Drugs Advisory committee meeting on rosiglitazone (GSK’s Avandia), scheduled for June 5-6, 2013. [Editor’s note: The Avandia meeting took place on June 5-6; 13 members of the committee voted to modify rosiglitazone’s REMS, seven voted to remove the REMS, five voted to continue the REMS as is, and one voted to withdraw rosiglitazone from the market. While GSK representatives were at the meeting, GSK has not publicly made any statements about the Avandia meeting.] This meeting was fairly unanticipated and we expected investors to ask for more clarity about its purpose and potential implications. As background, GSK previously remarked that it had not requested the meeting or asked to change Avandia’s label or distribution. At the time of the meeting announcement, management speculated that the FDA wanted to follow up on requests made during the 2010 advisory committee meeting, namely its instructions that GSK create a REMS program and commission an independent re- examination of RECORD. Unfortunately, GSK did not break out regional Avandia sales for 1Q13, reporting geographical data only for the overall Metabolic Division; however, the press release did note that worldwide Avandia sales totaled £5 million in 1Q13 ($7.6 million), down 38% year-over- year and down 29% sequentially. Avandia’s revenue appears to be resuming its quarterly decline after increasing 75% sequentially in 4Q12.

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Management provided no updates on its once-weekly GLP-1 agonist albiglutide (Eperzan). GSK filed albiglutide in the EU in March 2013, in line with previous guidance for a submission in 1Q13. This timeline places a final EU decision around 1Q14/2Q14 and positions albiglutide to be the fifth GLP-1 agonist on the market behind the already-marketed Victoza, Byetta, Bydureon, and Lyxumia. GSK previously submitted albiglutide to the FDA in January 2013, placing a decision around 4Q13/1Q14. Management did not comment on its ongoing partnership discussions for albiglutide – as a reminder, management remarked during the 4Q12 update that GSK was looking for a commercialization partner, specifically a co-promotion partner in the US and either a co- promotion or marketing partner in Europe. At the time, management sounded optimistic that interest in the drug would result in a “good” partnership proposition. While management provided no updates on GSK’s remaining diabetes pipeline, both the online pipeline and ClinicalTrials.gov reflect several changes. On March 8, the sole study of darapladib in DME was newly classified as completed, in line with its estimated scheduled completion date of February 2013 (Identifier: NCT01506895). As a reminder, darapladib is GSK’s phase 2 candidate for diabetic macular edema (also in phase 3 development for atherosclerosis). GSK’s pipeline now lists its SGLT-1 inhibitor (GSK 1614235/DSP-3235/KGA-3235) and its ileal bile acid transport inhibitor (GSK 2330672) as one entity in phase 1 for type 2 diabetes, suggesting that GSK has combined the two therapies. Indeed, ClinicalTrials.gov shows that GSK completed a phase 1 study of the ileal bile acid transport inhibitor given alone or with the SGLT-1 inhibitor – we presume the study found the latter to be more effective. Lastly, GSK’s IL18 monoclonal antibody remains in phase 2 for type 2 diabetes, with one ongoing trial (ClinicalTrials.gov Identifier: NCT01648153). GSK is also developing a GLP-1 agonist for obesity that remains in phase 1; furthermore, the company appears to have dropped its HM74A agonist for metabolic disorders (previously in phase 2), as the candidate is no longer listed in the online pipeline.

• Halozyme – PH20 closed-loop study approved by FDA

On May 8, Halozyme released 1Q13 financial results in a call led by CEO Dr. Gregory Frost. Notably, the company initiated a 400-patient, phase 4 clinical study of Hylenex in type 1 insulin pumpers (CONSISTENT 1) – the timing lined up with remarks in the 4Q12 call. This trial is to test pre-administration of Hylenex prior to infusion set insertion, and it was expected to appear on ClinicalTrials.gov in the “next 24 hours” [Editor’s note: the trials is now on ClinicalTrials.gov and has the identifier NCT01848990]. CONSISTENT 1 will occur at 40 centers across the US and randomize patients (we assume to standard infusion set insertion or to pre-administration with Hylenex). Treatment differences will be evaluated at four months (primary analysis) and 12 months. The goal of Hylenex pre-administration is to deliver a more “consistent” and physiologic insulin profile; specific endpoints include A1c (non-inferiority margin of 0.4%), postprandial glucose, and rates of hypoglycemia (patients will be followed for two years). As we understand it, CGM will be used. Notably, enrollment in CONSISTENT 1 has “greatly exceeded” internal expectations – over 25% of the planned 400 participants have been enrolled (160 have been screened), and 30 sites have been activated to date. As a reminder, this phase 4 study is not required by the FDA, since Hylenex is already approved to accelerate the diffusion of subcutaneously injected drugs. (We assume that phase 4 data would be necessary to achieve reimbursement and HCP buy-in, however.) Management was also “very excited” to report that investigators at Yale have received FDA clearance to start an artificial pancreas trial. In a follow-up conversation with the team at Yale, we learned that they will test both Hylenex pre-administration and a PH20-Humalog insulin coformulation in 20 patients. The three-day study is funded by JDRF, will include 24 hours under each condition, and was expected to start enrolling in July [Editor’s note: we have not heard

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whether or not this trial is enrolling yet]. The addition of Hylenex to a closed-loop system would theoretically provide faster and more reliable insulin absorption and improve time-in-zone, especially after meals. The Yale team has become a go-to place for testing new closed-loop approaches (e.g., pramlintide and Insuline’s InsuPatch), so we look forward to seeing results. We’re particularly excited to see a direct, crossover comparison between the pre-administration and coformulation approaches. We expect the coformulation approach to win on convenience and efficacy, though we look forward to seeing the data. Halozyme’s revenues in 1Q13 were $12 million, up 59% from $7 million in 1Q12 (almost entirely R&D reimbursements from non-diabetes-related partners). R&D expenses were $22 million in 1Q13, up 38% from $16 million in 1Q12. Halozyme reported a net loss of $19 million in 1Q13, up 28% from $15 million in 1Q12. Cash and cash equivalents were $87 million as of March 31, reflecting a cash burn of $12 million in 1Q13 (right on with 4Q12’s expectation of a $45-50 million cash burn in 2013, and down from a $17 million burn in 4Q12).

• Insulet – Sales up 20% year-over year; second-gen pod shipments strong

On May 7, Insulet CEO Duane DeSisto led the company’s 1Q13 financial update. Revenues in 1Q13 totaled $57 million, up 20% from 1Q12 and down 1% from 4Q12. The sequential growth was comparable to that observed in both 1Q12 (1%) and 1Q11 (2%). Core OmniPod sales grew 25% year-over-year (YOY). Since the launch of the next-gen pod in February, the company has seen impressive gains in patient referrals and initial shipments (40% growth since launch vs. the same time period last year and 50% growth in the month of April compared to April 2012). However, Insulet continues to see reorder disruption from existing patients delaying or decreasing orders in anticipation of switching to the new pod (expected to continue in 2Q13). Notably, Insulet was operating-cash-flow profitable for its second consecutive quarter. The company ended 1Q13 with $148 million, of which ~$93 million was attributed to the company’s sale of almost five million shares. Excluding the public offering, Insulet had a cash burn of ~$2 million in the quarter. Looking forward, management guided for revenue of $59-62 million in 2Q13 (~16-22% YOY growth) and reiterated its forecast for full-year 2013 sales of $240-255 million (~14-21% YOY growth). The new OmniPod started shipping to new patients in late February, and management emphasized that demand has exceeded expectations. CFO Brian Roberts was excited to report that over 10% of new shipments since the launch came from diabetes practices that had no shipments in 2012 – the big difference has been the smaller size and updated insulin-on-board calculation (especially for pediatric endocrinologists). Unfortunately, an “eyelash”-sized manufacturing problem (one component off specification by two ten thousandths) led to lower- than-expected second-gen OmniPod production in 1Q13. The result was that installed base conversion would start in the next few weeks, representing a delay of ~90 days [Editor’s note: On June 4, Insulet updated its website to say that this had occurred]. On the bright side, Insulet quickly identified and remedied the manufacturing problem – great to hear that no pods left the building. The goal is still to convert the entire installed base by the end of 3Q13 (September), consistent with remarks in previous calls. Much of the call focused on the new development agreement with Lilly to build a new OmniPod for use with U-500 insulin. Management estimates a target market of approximately two million type 2 patients, representing a potential doubling of the company’s current type 1 target market. No timelines were shared, though management gave nuance on the regulatory side (a 510(k) application from Insulet plus an updated insulin label from Lilly) and shared its plans to conduct a clinical study. Regarding the LifeScan-integrated PDM, management hopes it will be commercially available by year-end 2013; the company cannot file with the FDA until it receives Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 25

some information from LifeScan. No new details were shared on Insulet’s new plans to integrate a CGM into the OmniPod patch – the goal is still to enter human trials in 2014.

• Isis – Plans to initiate phase 3 for apoC-III inhibitor in early 2014

Isis Pharmaceuticals announced 1Q13 financial results in a call led by CEO Dr. Stanley Crooke on May 7. Management spoke briefly about Isis’ apoC-III inhibitor ISIS-APOCIIIRx, most notably guiding for a phase 3 initiation in early 2014. Management reiterated that Isis is currently conducting two phase 2 studies of the candidate. As a reminder, both trials are currently recruiting: the first trial will evaluated ISIS-APOCIIIRx in roughly 24 people with type 2 diabetes and hypertriglyceridemia (ClinicalTrials.gov Identifier: NCT01647308), and the second will study ISIS-APOCIIIRx in roughly 102 people with severe or uncontrolled hypertriglyceridemia (ClinicalTrials.gov Identifier: NCT01529424). During Q&A, management noted that data from the second trial may allow Isis to evaluate whether lowering triglycerides and/or APOCIII could increase insulin sensitivity. Isis plans to report results from these studies in mid-2013 and late 2013, respectively. As noted on the call, Isis recently published data showing that ISIS-APOCIIIRx provided “significant reductions of APOC-III and triglycerides in multiple animal models and in human beings” (Graham et al., Circulation Research 2013). As a reminder, the company is pursuing a staged development plan for ISIS-APOCIIIRx and is initially planning to develop the drug for patients with severe hypertriglyceridemia (>1,000 mg/dl), who are at high risk of CV disease and pancreatitis, followed by other indications (such as type 2 diabetes). During the 1Q13 call, management explained that because of the severity of the disease and the lack of effective treatments, Isis believes that a “rapid, less-expensive” registration pathway is possible (it appears Isis may pursue FDA fast-track status). Management reconfirmed that Isis plans to develop ISIS-APOCIIIRx for severe hypertriglyceridemia on its own; however, during the 4Q12 update management remarked that Isis plans to pursue a partner for more general indications such as moderate hypertriglyceridemia (including diabetes), which may require a CV outcomes trial and thus greater investment. At the time, management remarked confidently that Isis will not partner the drug until it receives “the price that we want.” No details were provided on the remainder of Isis’ diabetes pipeline, which includes three candidates, all in phase 1 for the treatment of type 2 diabetes: 1) ISIS-PTP1BRx, a PTP-1B inhibitor and novel insulin sensitizer; 2) ISIS-GCGRRx, a glucagon receptor antagonist; and 3) ISIS-GCCRRx, a glucocorticoid receptor inhibitor. Management previously announced plans to move the three candidates into phase 2 in 2013 and to establish partnerships for the drugs once their phase 2 studies complete in 2014 and 2015. Phase 1 data and phase 2 plans for the three candidates are detailed in the Appendix at the end of this report. Isis is also developing a FGFR4 antagonist for the treatment of obesity (ISIS- FGFR4Rx), which remains in phase 1.

• J&J – Invokana performs strongly in first two months on US market

Invokana was a clear focus during J&J’s pharmaceutical business review on May 23, and management’s excitement for the drug was very evident. Management declared that it was “delighted” with Invokana’s performance in its first two months on the market, and we would certainly agree that its prospects seem promising; management noted that it is outperforming Bydureon, Onglyza, and Tradjenta’s first-six-week performances in total prescription (TRx) volume. J&J’s slides suggest that TRx volume totaled roughly 7,500 after six weeks; new-to-Brand prescription (NBRx) share has also climbed steadily to nearly 9%, surpassing both Tradjenta and Onglyza. In addition, management reported that it is receiving broad reimbursement at tier 3 on commercial plans and that formulary reviews should occur over the next six months. In the meantime, J&J has established a card that covers copayments. On the R&D front, management Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 26

announced that it is studying an Invokana fixed-dose combination (FDC) for “initial use.” From information posted on ClinicalTrials.gov, we presume that J&J is referring to the Invokana/metformin XR FDC for first-line use. The ClinicalTrials.gov posting indicates that J&J will compare canagliflozin 100 mg and 300 mg both in combination with metformin versus canagliflozin 100 mg and 300 mg alone and metformin alone for 26 weeks (ClinicalTrials.gov Identifier: NCT01809327). This is consistent with J&J’s efforts to position Invokana as a first-line therapy; we hope that the combination shows sufficient benefit over metformin alone, which will give reason for payers to support a brand-name drug for first-line therapy. We are also curious about the potential for additional FDCs using Invokana. On the call, management also expressed interest in potentially exploring indications for Invokana in obesity and type 1 diabetes. No clinical trials are underway, though we are keen to hear more on both fronts. We have not heard BMS/AZ formally announce intentions to investigate type 1 diabetes or obesity indications for canagliflozin. We believe other companies are in pursuit of these indications. In line with the US and EU’s standard 12-month review cycles, J&J expects decisions for Invokana as a single agent in the EU in 3Q13, the Invokana/metformin XR FDC in the US in 4Q13, and the FDC in the EU in 2Q14. We were excited to hear J&J discuss many exciting novel research efforts in diabetes and diabetes complications; we found this to be a refreshing change of pace from the company’s normally quiet take on diabetes during financial updates. J&J emphasized its broad ranging efforts in novel and exciting research areas for diabetes. Management highlighted its partnership with Evotec/Harvard and Dr. Douglas Melton’s recent work on betatrophin as a beta cell regenerator; its intention to explore stem cell therapy; its partnership with NGM Biopharmaceuticals to develop treatments for type 2 diabetes that mimic the metabolic effects of metabolic surgery; and its partnership with Vascular Pharma on the chronic kidney disease compound, VPI-2690B (phase 2 ready).

• J&J – Diabetes Care revenue down 10%

On April 16, Johnson and Johnson CFO Dominic Caruso led the company’s 1Q13 financial results update. Worldwide revenue for 1Q13 totaled $600 million, down ~10% on both a reported and operational basis from 1Q12. The comparison was only moderately challenging, as 1Q12 sales were up 5% and 7%, respectively. The quarter’s decline marked the fourth consecutive quarter of negative growth and the lowest quarterly revenue since 1Q10. The sales decline was the most severe in the US: revenue totaled $283 million and declined 20% YOY. That comparison was particularly challenging – during 1Q12, sales grew 13% in the US, largely due to the launch of the OneTouch Verio IQ meter. Internationally, sales were nearly flat as reported and up 1% operationally. Pricing and reimbursement challenges abound in the BGM market and are likely to only increase going forward with CMS’ competitive bidding and growing pricing pressure from low-cost competitors. Turning to the pipeline, J&J announced that it had submitted the premarket approval (PMA) application for the Animas Vibe insulin pump with integrated Dexcom G4 Platinum CGM to the FDA. In February, the company received clearance for the Bluetooth- enabled OneTouch Verio Sync blood glucose meter. The clearance was not mentioned on the call and no launch details have been provided. This positive, however, was tempered by the recall in March of all OneTouch Verio IQ, OneTouch Verio Pro, and OneTouch Pro+ meters for a software issue. [Editor’s note: at ADA, we heard that the Verio IQ’s software problem was fixed. LifeScan was manufacturing new meters and reps were to have in their hands “fairly soon.”] As we understand it, the Verio Sync is not affected by this issue.

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During the call, management also discussed the recent US approval of Invokana (canagliflozin), J&J’s SGLT-2 inhibitor and first pharmaceutical diabetes product. Notably, LifeScan and Animas device reps will sell Invokana directly to HCPs with diabetes patients. We’ve also learned a number of other updates on Invokana not discussed during the call. As we understand it, the drug was launched on March 30, an impressive one day after approval. The FDA has posted the label online, and it recommends starting all patients on the lower 100 mg dose and then escalating to 300 mg if adequate glycemic control is not achieved and if the patient has normal renal function or mild renal impairment (eGFR ≥60 ml/min/1.73 m2). The FDA does not recommend Invokana for people with eGFR below 45 ml/min/1.73 m2. Additionally, according to ClinicalTrials.gov, CANVAS (Invokana’s CVOT), will now run five years longer than initially planned to allow for up to nine years of patient follow-up (Identifier: NCT01032629). This likely reflects the FDA’s great uncertainty around the CV risk raised during Invokana’s advisory committee meeting (Invokana was associated with elevated LDL cholesterol and a strong CV signal in the first 30 days of CANVAS). We remain curious about what differentiating characteristics may emerge amongst SGLT-2 inhibitors, and we continue to be very interested in the potential for SGLT-2 inhibitor fixed-dose combinations with other therapies. J&J provided no other updates on its diabetes drug pipeline.

• Jawbone – Acquires BodyMedia

In early May, Jawbone acquired BodyMedia in a deal reportedly worth $100 million. We have been interested in BodyMedia since the company was founded, and we enjoyed testing out the company's activity monitoring armband in diaTribe. As background, San Francisco-based Jawbone has been around for a decade and is most well known for wireless speakers and the UP wristband, which tracks movement and sleep and syncs with iPhone and Android apps. Notably, on the same day the BodyMedia acquisition was announced, Jawbone also unveiled the UP platform, which allows 10 other wellness apps to integrate with the UP activity app (IFTTT, LoseIt!, Maxwell Health, MapMyFitness, MyFitnessPal, Notch, RunKeeper, Sleepio, Wello and Withings). We see such integration and openness as an increasing trend in mHealth and think that it will benefit both consumers and providers. It should allow for a more holistic and integrated view of one’s health, reduce the need for manual entry, and thereby encourage uptake. Certainly, the extra data might be overwhelming for some, but we have faith that apps will soon have smart analytics that will ultimately help drive better outcomes (e.g., “On average, you get only 10 minutes of exercise and six hours of sleep per day on weekdays. You also eat 200 more calories on these days. Based on your habits over the last two weeks, focus on eating less after 8 pm, going to bed no later than 11 pm, and taking a mid-morning walk”). We also hope to eventually see diabetes devices integrate with these eating and exercise apps, since all are integral parts of good glucose management. We also love the focus on simply empowering consumers to easily collect their own data – we come back to the adage attributed to management expert Peter Drucker: "If you can't measure it, you can't manage it." Our hope is that this whole area of self-tracking expands in the coming years beyond the early adopters, as it has potential to get individuals much more engaged in their health and to facilitate behavior change. Just one day following both of these announcements, we saw that influential Yahoo CEO Marissa Mayer and Warner Music Group COO Robert Wiesenthal had joined Jawbone's board of directors. This certainly appears to be a strong vote of confidence in the company's future.

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• Lexicon – Presents new type 1 diabetes data for LX4211

Lexicon's CEO Dr. Arthur Sands spoke at the Deutsche Bank Healthcare Conference on May 29, presenting data that further piqued our interest in the company and its first-in-class SGLT- 2/SGLT-1 dual inhibitor, LX4211. The phase 2 trial of LX4211 in type 1 diabetes completed the open-label pioneer phase – although it was a tiny trial (n=3), we were very interested to see the drop in hypoglycemia and the difference in A1c; this is only suggestive, of course, in such a small group, but exciting nonetheless and could well enable differentiation based on efficacy and side effects (presumably driven by the reduced urinary glucose excretion) if it plays out similarly in larger trials. The data in type 1 was exciting; as we understand it, Lexicon will pursue a type 1 indication prior to a type 2 indication – this rarely happens for type 1 patients and we're going to be very keen to watch this. As was discussed in the company’s 1Q13 call, we see that LX4211's inhibition of SGLT- 1 should allow the drug to confer a strong effect on postprandial glucose (PPG) and allow LX4211 to achieve similar glucose lowering as selective SGLT-2 inhibitors with a lower degree of urinary glucose excretion. This could differentiate the candidate from selective SGLT-2 inhibitors and will obviously also help the type 2 indication. Lots of patient interest in this compound exists for type 1 diabetes; among the most interested parties are parents, since it appears outsiders tend to believe that type 1 diabetes patients may be able to take LX4211 and then not take any insulin (bolus, shots, whatever) to cover breakfast and lunch. Clearly it is a long path to get to that point, but that would be fairly transformative for children, in particular (many of whom are in settings where they are not old enough to dose their own insulin but their teachers either do not feel comfortable enough doing it or are not allowed to). We see the type 1 potential as a significant positive for potential partners who want to demonstrate they do indeed care about type 1 patients and not just the larger, typically more lucrative type 2 diabetes market. We should see results for the larger expansion phase of the type 1 trial in 4Q13. Although Lexicon’s partnership discussions for LX4211s focus squarely on type 2, we believe that a partner could offer Lexicon lots of advice on a phase 3 trial in type 1 diabetes. In particular, we hope and assume that such a submission to FDA or in the EU or elsewhere would not require a CVOT (lowering hypoglycemia should trump CV concerns) – that could, of course, would speed up approval for the compound considerably (and create the possibility for type 2 diabetes patients to take the drug off-label). While we aren't sure if the type 1 diabetes indication will be fast-tracked by FDA, dramatically reducing hypoglycemia along with reducing the need for insulin sounds transformative. Though the FDA may not care as much about reducing postprandial hyperglycemia per se, HCPs and patients certainly are interested in this. As noted, management expects that LX4211’s effect on PPG could be similar to that of a GLP-1 agonist in type 2 diabetes; they further explained that LX4211 may be the more potent drug in type 1 diabetes since GLP-1 agonists act in an insulin- dependent manner. (We think that this comment overstated the difference somewhat, since GLP- 1 agonists seem to have insulin-independent effects as well.) We will be seeking to learn more about the impact of SGLT-1 inhibition and how much this will contribute to differentiation and in which sub-populations this would be particularly useful. We assume that these subpopulations include patients over-65 years (who are more likely to be renally impaired), as well as children (who could benefit more from the postprandial benefit due to the complexity of insulin dosing at school).

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• Lexicon – Phase 2 trial in type 1 advances to expansion phase

Lexicon Pharmaceuticals reported 1Q13 financial results in a call led by President and CEO Arthur Sands on May 10. The company highlighted that Lexicon has advanced the phase 2 trial of LX4211 in type 1 diabetes from the open-label pioneer phase (n=3) to the placebo-controlled expansion phase (expected to enroll up to 30 patients), which will study the 400 mg once-daily dose. Lexicon did not disclose data from the first phase during the 1Q13 call; however, it did so at the Deutsche Bank Healthcare Conference (details in above Lexicon entry). The presentation slides guided for results of the expansion phase in 4Q13. Management spoke at length during Q&A about their expectations for LX4211 in type 1 diabetes, noting that while Lexicon will find a partner for LX4211’s overall phase 3 program, the company could take a lead role for the type 1 indication. Management explained that LX4211’s inhibition of SGLT-1 should allow the drug to confer a strong effect on postprandial glucose (PPG) and will differentiate the candidate from selective SGLT-2 inhibitors such as canagliflozin (Invokana) and dapagliflozin (Forxiga) that are also being studied in type 1 diabetes. Management expects that LX4211’s effect on PPG could be similar to that of a GLP-1 agonist in type 2 diabetes. They further suggested that LX4211 may be the more potent drug in type 1 diabetes since GLP-1 agonists act in an insulin-dependent manner, though we note that GLP-1 agonists appear to have insulin-independent effects as well (e.g., glucagon suppression). Management commented briefly on the phase 1 study of LX4211 in type 2 diabetes patients with renal impairment, noting that it is still enrolling and may now include up to 30 participants (up from the 20 people originally expected as of the 4Q12 update). Management remarked that the study could complete around the end of 2Q13, with results expected in 3Q13. During Q&A, management noted that they might eventually conduct a head-to-head trial comparing LX4211 to an approved SGLT-2 inhibitor in this patient population, but that this would not be the design of the first study in renal impairment in the phase 3 program. Consistent with previous earnings calls, management did not comment on Lexicon’s ongoing partnership discussions for LX4211 and only reaffirmed that Lexicon plans to initiate phase 3 with a partner later this year. Management made several interesting comments on other SGLT-1 and SGLT-2 programs. To Lexicon, the FDA approval of J&J’s Invokana, the FDA submission of BI/Lilly’s empagliflozin, and the Merck/Pfizer partnership on ertugliflozin indicate the “comfort level and general acceptance” of the SGLT-2 inhibitor mechanism for diabetes. Management noted that while the Merck/Pfizer deal has no direct impact on Lexicon’s partnership discussions, it may have favorable indirect effects (not specified). Turning to Novartis’ SGLT-1/SGLT-2 dual inhibitor LIK066, management remarked that the movement of LIK066 into phase 2 indicates that Lexicon’s work has generated interest in dual inhibitors and the SGLT-1 inhibitor mechanism. Management highlighted the challenge of maintaining sustained SGLT-1 inhibition in the GI tract (given GI motility) and implied that this could be a key differentiator between LX4211 and LIK066.

• Ligand – No new updates on diabetes R&D

Ligand Pharmaceuticals reported 1Q13 financial results in a call led by President and CEO John Higgins on May 8. Management mentioned its preclinical glucagon receptor (GCGR) antagonist, LGD-6972, reiterating that it expects the molecule to improve upon other GCGR antagonists that are already in clinical development. In the past, management has forecast a 2013 IND submission and has identified this compound as one of its most promising unpartnered assets. This is consistent with comments made during the company’s December 2012 Analyst Day, when management remarked that they expected LGD-6972 to compare favorably with Lilly’s phase 2

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GCGR antagonist, LY2409021. Ligand believes that Lilly’s phase 2 data have clinically validated the GCGR antagonist class of molecules as a treatment for type 2 diabetes. Lilly plans to release further phase 2 data on the candidate later this year, which Ligand believes will “ripen” the landscape. We understand that while the drug class holds promise, all active candidates are still in early-stage development; it remains to be seen how well therapies can balance the positive and negative effects of glucagon antagonism. For example, concerns have been raised about the risk of hypoglycemia and increased liver transaminases (suggestive of liver damage) that were observed with Merck’s failed candidate MK-0893. Along with Lilly and Ligand, Isis is also developing a GCGR antagonist (ISIS-GCGRRX, phase 2). In contrast to MK-0893, Isis’ GCGRRx had no clinically significant effects on lipid profile, blood pressure, or hypoglycemia in a phase 1 trial. As a reminder, Ligand gained its GCGR antagonist program through the company’s October 2009 $3.2 million acquisition of Metabasis. No other updates were provided on the rest of Ligand’s diabetes pipeline, which includes a fructose-1,6-bisphosphatase (FBPase) inhibitor program (the phase 2 MB07803 is the lead candidate), a phase 1 mineralocorticoid receptor antagonist for the treatment of metabolic disorders (XL550), a liver-specific glucokinase activator (GKA) program (unspecified compounds, which appear to be preclinical), and an enterocyte-directed DGAT-1 inhibitor program for obesity or type 2 diabetes (unspecified compounds, which appear to be preclinical). There was no diabetes-related Q&A.

• Lilly/Transition Therapeutics – Lilly retains its rights to phase 2 ready TT-401

On June 17 Lilly announced that it was retaining its rights to TT-401, Transition Therapeutics/Lilly’s once-weekly GLP-1/glucagon dual agonist and was therefore paying Transition a $7.5 million milestone. The decision was based on results of Transition’s proof-of- concept (POC), multiple ascending dose study of TT-401. Transition announced on April 30 that the five-week trial found that diabetes patients on the highest three doses (of five) experienced statistically significant reductions in mean fasting plasma glucose relative to placebo (absolute changes and p-values not provided). Those in the three highest dose groups also experienced statistically significant body weight reductions from baseline. During Transition Therapeutics F3Q13 update, management remarked that they were pleased with the weight data, though declined to give details. The POC study also included a non-diabetic obese cohort (on one TT-401 dose), who experienced similar reductions in body weight (not specified). We are curious if this latter finding will prompt Transition to consider developing TT-401 for an obesity indication. Lilly also opted, on June 17, to conduct phase 2 development of TT-401 internally. Transition prepared for phase 2 studies by performing preclinical studies to satisfy the FDA’s requirements for phase 2 development and by manufacturing the necessary quantities of TT-401 for the trials. As a reminder, Transition in-licensed TT-401 and other preclinical compounds from Lilly in March 2010 for an upfront payment of $1 million.

• Lilly – Humalog sales up 7% and Humulin sales increase 1%

Lilly announced 1Q13 financial results on April 24 in a call led by CEO Dr. John Lechleiter. Humalog sales grew 7% year-over-year (YOY) and 3% sequentially to $633 million, achieving the second highest quarterly sales on record (behind 4Q11 sales). Growth was mainly driven by sales in the US, which increased 9% YOY and 14% sequentially to $378 million. Management attributed the YOY US growth to greater wholesale stocking and higher selling prices. International sales totaled $255 million, up 5% YOY but down 11% sequentially. Notably, Lilly has submitted a supplemental new drug application (sNDA) for a U200 formulation of insulin lispro, which would make Humalog the first mealtime insulin available in this concentration. Worldwide 1Q13 Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 31

Humulin sales totaled $312 million, up 1% YOY but down 9% sequentially. Sales were split roughly evenly between $164 million in the US (up 5% year-over-year and flat sequentially) and $149 in international markets (down 3% year-over-year and down 18% sequentially). For the first quarter, Lilly did not report sales for Byetta and Bydureon, as it has fully transferred the international rights to both drugs to BMS and AZ (the timing is in line with previous guidances); per BMS and AZ quarterly results, sales of both drugs reached $137 million globally, down about 10% sequentially from 4Q12. In 1Q13, Lilly recognized $43 million from sales of Tradjenta, up 7% sequentially and up over 200% from $13 million in 1Q12. Interestingly, Lilly also reported sales of its glucagon product for the first time, which totaled $19 million. Lastly, sales of Actos continue to decline, dropping 44% YOY and 34% sequentially to $15 million. Management discussed a number of pipeline updates on the call. As previously announced, Lilly has now submitted its/BI’s SGLT-2 inhibitor empagliflozin in both the US and the EU. As a reminder, J&J’s Invokana (canagliflozin) was approved earlier this year in the US, and BMS/AZ have guided for a resubmission of Forxiga (dapagliflozin) in mid-2013. To date, some safety and tolerability concerns have arisen in discussion of the class; to be sure, we believe there is room for differentiation. Elsewhere in the call, management reiterated positive topline dulaglutide (once- weekly GLP-1) results that were released last earlier in April. On the basal insulin front, Lilly has expanded the phase 3 IMAGINE program for its novel basal insulin analog (LY2605541) to include two new trials, according to ClinicalTrials.gov. Notably, IMAGINE-7 will examine dosing of LY2605541 on a variable schedule compared to a fixed schedule – this is the first we’ve heard about the potential for flexible dosing for this candidate; such an indication could help Lilly compete against Novo Nordisk’s Tresiba (degludec). With regard to Lilly/BI’s insulin glargine formulation, management stated that it would likely disclose data from the pivotal trial at scientific meetings in 2014 – this is a departure from previous announcements that it would not publicly disclose these results after internal read outs in 2013. Lilly also advanced a biologic chronic kidney disease (CKD) candidate into phase 2 and moved a new CKD small molecule into phase 1. The remainder of Lilly’s diabetes pipeline remains unchanged. Lilly will also host an Investment Community Update in Indianapolis on October 3. Notably, while Lilly is downsizing its sales force in certain fields in preparation for losing patent exclusivity for Cymbalta and Evista, it has expanded its diabetes sales force, likely in anticipation of the many potential launches in 2014 (e.g., empagliflozin, dulaglutide, the new insulin glargine formulation).

• MannKind – Phase 3 Afrezza trials on schedule, data in mid-August

MannKind reported 1Q13 financial results on May 9 in a short call led by CEO Al Mann. All timelines on the company’s two phase 3 trials of Afrezza remain the same – both studies are tracking as expected and should conclude in mid-June, data will be shared in mid-August, and an FDA resubmission is planned for late September/early October. Study dropout rate is currently tracking to meet the target of 90% statistical power. CEO Al Mann provided a valuable overview of the trial design advantages of both studies (ClinicalTrials.gov Identifiers: NCT01445951 and NCT01451398). The company recently sat down with FDA at a pre-NDA meeting to clarify the formatting and statistical particulars of the resubmission package. Said management, “We got a very positive response from them and feel that we’re on the right path for resubmission.” On previous calls, management has said that a six-month agency review is expected. Much of Q&A focused on the partnership front, though no specifics were shared. Management again reiterated that both regional and global partners are being considered. Interestingly, MannKind may decide to retain co-promotion rights for Afrezza in North America – as an example, the company could take on the endocrine market, and the partner could take on the Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 32

primary care market. We think that this would be a smart move for MannKind, as the company should be able to take on the US endocrine market with a modest sales force and give Afrezza more focus than a large partner. Q&A also discussed MannKind’s ongoing safety study (ClinicalTrials.gov Identifier: NCT00642616) in people with diabetes and either asthma or COPD (n=510). It has been on the books since 2008 and is quite challenging to recruit for. As the expected completion date is in late 2015, the study will be ongoing at the time of resubmission (similar to Exubera’s filing). Pulmonary safety will certainly be a key labeling discussion item with FDA should Afrezza be approved – we note that Exubera’s label stated, “Exubera may lower your lung function,” “You need to have lung tests before you start Exubera,” and “Exubera is not recommended for people that have chronic lung disease.” We’ll be interested to see if Afrezza’s label includes similar language – given the regulatory environment, we would be surprised not to see this. Cash and cash equivalents were $28 million as of March 31, 2013, reflecting a cash burn of $34 million in 1Q13. Financial resources (cash plus the remaining credit facility from CEO Al Mann) are expected to fund operations into 4Q13 – this is an improvement from the timeline of “mid- August” given in the 4Q12 call. MannKind could also see an additional $90 million if outstanding warrants are exercised. In line with prior quarters, the company is “pursuing additional funding opportunities, but there is nothing additional to announce at this time.” On an inventory note, we were interested to learn that MannKind has enough insulin supply on hand until Afrezza reaches ~$10 billion in sales. This will keep cost of goods sold (COGS) down for quite a while, assuming that the insulin does not expire (no degradation has been seen to date).

• Medtronic – US sales down 2%, international up 14%

Medtronic reported F4Q13 results on May 21 in a call led by CEO Omar Ishrak,. Worldwide diabetes revenues totaled $407 million, up 4% on a reported and operational basis. Sequentially, worldwide F4Q13 revenues were up a strong 8%, the best sequential gain in over two years. In the US, sales of $234 million represented a 2% decline, the second straight quarter of negative stateside growth (the first time we’ve seen this since we’ve been tracking Medtronic). Overall FY 2013 US sales of $900 million actually declined slightly from FY 2012 sales of $906 million – this reinforced the challenges that Medtronic is facing in the US. Similar to the F3Q13 call, management attributed the US sales pressure to consumers waiting for FDA approval of the MiniMed 530G insulin pump and Enlite sensor. Also consistent with previous commentary, management expects the US business to “quickly return to faster growth” once the new system is approved – this could take some time, however, based on longer-than-expected delays. Meanwhile, the international business continues to grow, with sales up a striking 12% as reported and 14% operationally to reach a record $173 million, stemming from continued adoption of the Paradigm Veo insulin pump and Enlite CGM. We note that management did not mention CGM growth, in contrast to multiple previous quarters in which at least “double-digit growth” had been mentioned. On the pipeline front, news was disappointing on the MiniMed 530G: CEO Omar Ishrak said that Medtronic is planning for approval “within the calendar year.” This represents a delay from last quarter’s “later this spring or summer” timeline, which itself was back from previous estimates of an April 2013 approval. Still, Medtronic has deferred $23 million of revenue ($14 million in F4Q13) in order to convert recently sold pumps to the MiniMed 530G once it is approved – this might signal that things are moving well-enough along with the FDA that approval could come soon. However, management mentioned that an FDA audit identified “some deficiencies” related to Medtronic’s “insulin pump quality systems.” No further details were provided, but we assume this is holding up the review of the MiniMed 530G. We suspect that the Sof-Sensor CGM is

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holding back US pump sales and that approval of the new Enlite sensor will help. That said, Medtronic now faces more competition on the pump side with a smaller Insulet pod (no wonder Insulet is shipping the pod to new patients before current OmniPod users), an iPhone-like Tandem, and the Animas/Dexcom Vibe coming soon. Pipeline news was more positive in Europe, where the next-gen Enlite 2 sensor has been submitted for CE Mark approval. Meanwhile, the international launch of the MiniMed 640G predictive low glucose management pump is expected in the next six months (“first half” of FY 2014), consistent with the summer timeline given in F3Q13. Medtronic just started the first user evaluations of the pump.

• Merck – Januvia franchise sales fall 1% to $1.3 billion

Merck reported 1Q13 financial results on May 1 in a call led by CEO Kenneth Frazier. Despite the excitement surrounding Merck and Pfizer’s partnership for the SGLT-2 inhibitor ertugliflozin, the call had a somber tone due to the first quarter ever of weaker-than-expected sales of the Januvia franchise (Januvia, Janumet, and Juvisync). The franchise posted sales of $1.3 billion, down 1% year-over-year (YOY) as reported and down 18% sequentially. The 1Q13 results mark the first YOY decline in the franchise’s history and the worst sequential performance to date; indeed, previously 3Q12 had been Januvia’s quarter of slowest growth, both YOY (up 15%) and sequentially (down 6%). Operationally, growth numbers didn’t look too much better, though sales did increase 1% YOY by this metric. We do point out that Merck’s payment schedule from Japan distorts the sequential growth, since $100 million in sales are reported to Merck's Japanese co-marketing partner only during 2Q and 4Q – had the $100 million paid in 4Q12 been split evenly between 4Q12 and 1Q13, the sequential decline in 1Q13 would have looked slightly better at 14% (though this is still relatively weak). Global franchise sales in 1Q13 were split between $884 million in Januvia sales (down 4% from 1Q12 and down 22% from 4Q12) and $409 million in Janumet sales (up 4% from 1Q12 and down 10% from 4Q12) – both products experienced the lowest YOY and sequential growth rates in their history. Merck stated that it was “not satisfied with [its] overall number for the Januvia franchise.” Both US and ex-US sales were relatively weak in 1Q13, but the drop-off was greater in the US. US franchise sales totaled $659 million in 1Q13, down 5% YOY and down 18% sequentially. Management attributed the reduced sales to slowing growth in demand due to reduced potential to take market share from thiazolidinediones, increased levels of discounting due to more price competition (though Januvia continues to have over a 75% market share in the US and 85% preferred formulary status), and a $70 million inventory reduction, which Merck believes was a one-time event in response to stabilizing demand. Management estimated that had this inventory reduction not occurred, US sales would have increased by roughly 5% YOY. Merck is addressing these weaknesses in several ways, including training and reassigning additional full-time dedicated sales personnel in the US to Januvia (to counter slowing sales). While management did not comment on the increasing concern over incretins and pancreatitis, we believe that this issue could have played a significant role in dampening domestic (and international) sales growth. International sales in 1Q13 grew 3% YOY and declined 19% sequentially. Normalizing for the Japanese payment schedule, ex-US sales declined 7% sequentially. Management highlighted that in Japan, DPP-4 inhibitors (Merck has a ~70% market share) are the leading oral anti-diabetic class – ahead of sulfonylureas and, strikingly, metformin (we are curious about the co-pay for DPP-4 inhibitors relative to sulfonylureas and metformin, and whether the class’ price is less of a concern in Japan than in other countries). Front and center on the pipeline front was Merck and Pfizer’s new collaboration to develop and commercialize Pfizer’s “phase 3-ready” SGLT-2 inhibitor ertugliflozin. While management did not Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 34

provide new details, they stated that Merck is “very pleased” to be collaborating with Pfizer and that ertugliflozin has “very desirable properties and an extremely strong phase 2 profile” – we hope to hear more details on this front, as few clinical results have been presented thus far. Merck believes that the “importance of combination [therapies] just can’t be overemphasized” and that ertugliflozin can be differentiated from other SGLT-2 inhibitors. (Management was not specific on this potential for differentiation, although they expressed great enthusiasm for a fixed-dose combination (FDC) potential with sitagliptin – we wonder if this means Merck believes the Pfizer SGLT-2 has a cleaner side effect profile than other SGLT-2 inhibitors in development). Interestingly, Merck has conducted market research in Europe that suggests SGLT-2 inhibitors will be used after DPP-4 inhibitors. While we imagine this will differ by patient group, we could see more patients and providers being interested in fixed-dose combinations since the two should work well together (pending the side effect profile of ertugliflozin). We are not surprised that Merck owns the phase 3 clinical program for ertugliflozin – we imagine that if it enters a partnership on a drug that could be combined with Januvia and Janumet, it will want control of the formulation. Management did not provide any other updates to the diabetes pipeline, but we note that two of ten phase 3 trials for the once-weekly DPP-4 inhibitor MK-3102 have completed recruitment, and that another six are now recruiting. The latest primary completion date listed is now July 2016 (with the exception of the cardiovascular outcomes trial, whose completion date is 2017) – this timeline makes a mid-to-late-2017 approval possible, should all go well. No updates were provided on SmartCells, Merck’s interest in the GPR40 mechanism, or Merck’s candidate for the treatment of painful diabetic neuropathy (MK-6095).

• Neurocrine – No updates on GPR119 agonist development program

Neurocrine Biosciences reported 1Q13 financial results on May 2 in a call led by President and CEO Kevin Gorman. Management did not provide an update on the company’s preclinical GPR119 agonist development program, for which it collaborates with Boehringer Ingelheim (BI), but they did note that Neurocrine received less revenue from the BI partnership in 1Q13 compared to 1Q12. According to the accompanying 10-Q, Neurocrine did not receive any milestone payments for the GPR119 agonist program in 1Q13. However, the company is eligible to receive additional preclinical milestone payments that could total approximately $3 million. This is consistent with Neurocrine’s 2Q12 guidance that it would not receive milestone payments from the program in 2012, but that it might in 2013. On the financial front, Neurocrine ended 1Q13 with $177 million in cash, investments, and receivables, up slightly from $173 in 4Q12.

• NeuroMetrix – 145 Sensus devices shipped

On May 1 NeuroMetrix reported 1Q13 financial results in a call led by CEO Dr. Shai Gozani. In its first quarter on the market, sales of the Sensus pain management system totaled $33,000, representing the shipment of 145 devices. During the 1Q13 update, management set the goal of shipping 2,000 devices in 2013. As a reminder, the Sensus is a transcutaneous electrical stimulation (TENS) device designed to be worn discreetly around the calf to dull pain associated with painful diabetic neuropathy (PDN). Management announced that the first post-marketing study for the Sensus would commence in 2Q13; results may be disclosed by the end of the year. NeuroMetrix has also filed a 510(k) for a model of the Sensus that would allow it to be used during sleep. The company hopes to launch this model by the end of 2013. NC-Stat DPNCheck sales fell 12% sequentially to $315,000 in 1Q13. Management attributed this to CMS’ recent uncertainty about prospective Medicare Advantage rates for 2014 – the issue has since resolved, Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 35

and management expects DPNCheck revenue and account adoption to resume. In 1Q13 NeuroMetrix signed two international agreements for distribution of the DPNCheck with Handok Pharmaceuticals in South Korea and Omron Healthcare in Japan.

• Novartis – Galvus on track for blockbuster status

On April 24, Novartis announced 1Q13 financial results in a call led by CEO Joseph Jimenez. In 1Q13, Galvus (vildagliptin) and Eucreas (vildagliptin/metformin) sales totaled $267 million, up 33% as reported from 1Q12 (40% in constant currency). Additionally, the franchise grew 5% from 4Q12. If the Galvus franchise maintains or improves this revenue, it will achieve blockbuster status for 2013 – a threshold it was just shy of in 2012 with $910 million in revenue. While in a conservative case, the launch of SGLT-2 inhibitors and/or the concerns over incretins and pancreatitis could slow sales and prevent Galvus from passing the $1 billion mark, we think that Galvus is well positioned. Lucentis’s (ranibizumab) growth in 1Q13 was its weakest thus far. Lucentis posted revenue of $596 million, up 5% as reported from 1Q12 (up 7% in constant currencies) and down 6% sequentially. Until 1Q13 Lucentis’ slowest YOY growth had been 12% in 2Q12 (albeit that comparison was against a slightly smaller base of $541 million versus $567 million in 1Q12), and its worst sequential drop had been 5% in 3Q11 (against a $541 million base in 2Q11 versus the 1Q13 comparison against $634 million in 4Q12). Novartis cited the launch of Bayer/Regeneron’s Eylea (aflibercept) as the reason for Lucentis’ slower sales, stating that Lucentis would have done eight points better had it not lost business to Eylea. Strikingly, management stated that Novartis did “quite well” in Europe despite Lucentis’ losing 10 share points in Germany. In contrast, Novartis stated that “Japan and Australia did not go well.” Furthermore they did not indicate how many share points were lost in these countries. In 4Q12, Lucentis posted ~$120 million worth of sales in Japan and Australia, representing 20% of its worldwide sales. As a reminder, Eylea competes with Lucentis mainly in the age-related macular degeneration arena; Eylea is still in phase 3 development for diabetic macular edema (DME) as of Bayer's last financial update. We might expect somewhat stronger pressure from Eylea on Lucentis should Eylea receive approval for DME. On the pipeline front, ClinicalTrials.gov continues to list a phase 3 study of vildagliptin for recent onset type 1 diabetes as not yet recruiting. (Identifier: NCT01559025) The study’s start date was scheduled for August 2012, its primary estimated completion date is listed as November 2012, and the posting has not been updated since March 2012. We hope that Novartis has simply been delayed in either performing the trial or updating the posting rather than having a change of heart. Novartis has an SGLT-1/SGLT-2 dual inhibitor in phase 2 development, LIK066, which it plans to file in 2017 or later. According to ClinicalTrials.gov, Novartis is recruiting for a phase 1/2 trial of LIK066 and is planning a phase 2 dose-selection trial (Identifier: NCT01824264). Novartis’ supplementary materials reaffirmed that its phase 3 DGAT-1 inhibitor, LCQ908, is being developed for familial chylomicronemia syndrome. Finally, ACZ885 (canakinumab, an anti- IL-1β) is no longer listed as being developed for diabetes; as of the company’s 4Q12 update, the drug was slated to be filed for this indication in 2017 or beyond, though this was delayed from the prior timeline of 2015 or beyond.

• Novo Nordisk – Topline phase 3a SCALE-Obesity and Prediabetes results

On May 23, Novo Nordisk released topline results for its 56-week phase 3a SCALE-Obesity and Prediabetes study of liraglutide 3 mg in obesity. The trial enrolled 3,731 people who were obese or overweight with comorbidities such as prediabetes but not type 2 diabetes.

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From a mean baseline weight of 106 kg (BMI of 36 kg/m2; 234 lbs), participants on liraglutide achieved a mean 8% weight loss, compared to 2.6% for those on placebo – slightly better than the FDA's continuous benchmark for obesity drugs (a mean >5% placebo-adjusted weight loss). Categorically, 64% of people on liraglutide achieved at least 5% weight loss (vs. 27% for placebo) and 33% achieved weight loss of at least 10% (vs. 10% for placebo). As a reminder, the FDA's categorical requirement for obesity drugs states that the percentage of on-drug participants who achieve >5% weight loss must be at least 35% and twice the percentage of people on placebo achieving >5% weight loss. To the extent that comparisons can be made across entirely separate studies, liraglutide's efficacy appears to be less than phentermine/topiramate ER's (Vivus' Qsymia; ~7-9% placebo-adjusted weight loss) and better than bupropion/naltrexone’s (Orexigen's Contrave; ~4-5% placebo- adjusted weight loss). In people without type 2 diabetes, liraglutide's efficacy appears to be be superior to lorcaserin's (~3-4% placebo-adjusted weight loss), contrasting their more similar efficacy in people with type 2 diabetes (~3-4% placebo-adjusted). KOLs, such as Dr. Luc Van Gaal (Antwerp University Hospital, Antwerp, Belgium) at Excellence in Diabetes 2013, have pressed that anti-obesity medications with mean weight loss of 10% are needed. Still, people respond to some drugs better than the mean. Thus, having more options on the market could increase the likelihood that a person will respond to at least one of them with >10% weight loss. Notably, liraglutide appears to improve and prevent prediabetes – a finding that we expect will increase uptake among payers. Sixty-one percent of all study participants had prediabetes at baseline. At week 56, 69% of the prediabetes subgroup treated with liraglutide no longer showed signs of prediabetes, compared to 33% of the placebo-treated group. Among people without prediabetes at randomization, 7% of those on liraglutide and 21% of those on placebo developed prediabetes. We are curious what impact liraglutide use had on people transitioning from prediabetes to type 2 diabetes. People with prediabetes at baseline will receive liraglutide or placebo treatment for another two years, at which point analysis of this outcome might be more robust. In SEQUEL, Vivus' two-year trial of Qsymia (phentermine/topiramate ER), the drug reduced progression to type 2 diabetes by 54% to 76% compared to placebo. Novo Nordisk expects to complete the remaining phase 3a trial, SCALE, in 3Q13 and to file the drug for obesity in the US and EU around the turn of the year.

• Novo Nordisk – Diabetes Care up 13%; Victoza sales increase 35%

On May 1, Novo Nordisk reported 1Q13 financial results in a call led by CEO Lars Sorenson. Global Diabetes Care revenue rose 13% year-over-year to DKK 15.8 billion ($2.8 billion), driven again by strong sales of modern insulin and Victoza (contributing 50% and 28% of Novo Nordisk’s total sales growth in 1Q13, respectively). Diabetes Care sales declined sequentially (-4%) for the first time since 1Q11. Novo Nordisk continues to hold a leading 26% value share of the global diabetes market, on par with 4Q12 and up from 24% in 1Q12. Sales of modern insulins increased 14% year-over-year and declined 4% sequentially to DKK 9.0 billion ($1.6 billion). These products – NovoRapid, NovoMix, and Levemir – experienced parallel year-over-year sales growth (ranging from 12-17%), as well as similarly negative sequential growths (-3% to -5%). Sales of Victoza grew a reported 35% year-over-year to DKK 2.7 billion ($470 million), driven by sales in the US. The year-over-year comparison was relatively challenging, as sales grew 81% (!) in 1Q12. Sequentially, Victoza sales declined 1%. Notably, management stated that the recent discourse on incretins and pancreatitis has not affected Victoza sales, though it seems to have affected the Januvia franchise (sales down 18% sequentially) and potentially Bydureon/Byetta (sales down 10% - another reason could also be the full transition to BMS/AZ). Management remarked during Q&A that the declining growth of the DPP-4 inhibitor market could result in Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 37

greater growth opportunity for GLP-1 receptor agonists and for insulins. (Sales of Merck’s Januvia declined 4% YOY in 1Q13; this was the drug’s first negative growth to date.) On the R&D front, management disclosed preliminary details on the design of Tresiba’s cardiovascular outcomes trial. Notably, Novo Nordisk will be able to use two-to-three year interim results as the basis for resubmission to the FDA; with the CVOT expected to start within the next year, a potential approval could be anywhere from 2016 to 2018. Management also announced topline results of the 26-week extension of IDegLira’s DUAL-I study in which IDegLira’s A1c superiority over Victoza or Tresiba alone persisted out to 52 weeks. Novo Nordisk expects to file IDegLira in the EU in 2Q13, with US filing pending regulatory status of Tresiba. This delay on IDegLira’s US submission is the biggest downside of the FDA’s degludec decision in our view. On the quarterly call, management also announced that semaglutide’s first phase 3 trial – a CVOT – began in February, revealing that Novo Nordisk selected the 1.0 mg dose to carry forward to phase 3. In Q&A, management remarked that they still expect the 1.0 mg dose to exhibit the best efficacy of all agents currently in phase 3, and they believe that the high rates of nausea observed in phase 2 on the 1.6 mg dose were due to inadequate titration. (Still, however, we assume that choosing a considerably lower dose will result in far less nausea to address and that the titration will be easier.) While management did not discuss liraglutide for type 1 diabetes (LATIN T1D; NN9211) during the call, we learned details of its phase 3a trial design on ClinicalTrials.gov (ADJUNCT ONE; Identifier: NCT01836523); the trial will examine 0.6 mg, 1.2 mg, and 1.8 mg doses of liraglutide in conjunction with patients’ pre-treatment insulin regimens – so they are using the same doses indicated for type 2 diabetes after all. (We think that a lot of study went into this choice. The decision also makes things easier from a manufacturing and commercial perspective since different pens won’t need to be manufactured for type 1 diabetes). Regarding liraglutide for obesity, management reviewed the topline SCALE-Diabetes results that were released in March. Novo Nordisk has added another oral basal insulin candidate to phase 1. This newcomer, OI287GT (NN1956), joins the company’s two other oral basal insulin candidates (also phase 1), for which there were no new updates. Finally, while management did not discuss this on the call, details on two phase 3 trials for ultra-rapid acting insulin FIAsp (one trial in type 1 and one trial in type 2) have been posted to ClinicalTrials.gov. We note that onset 1 (the study in type 1 diabetes) will have an arm where FIAsp is administered post-meal. There were no other updates to the diabetes pipeline, which includes three phase 1 oral GLP-1 receptor agonist agents and a phase 1 ultra-long acting insulin with the potential for once-weekly dosing.

• Orexigen – European rapporteurs assigned for Contrave

Orexigen Therapeutics reported 1Q13 financial results on May 8 in a very brief call led by CEO Mike Narachi. Orexigen continues to forecast a 2H13 FDA resubmission for Contrave. As a reminder, Orexigen will be able to resubmit with a summary report of interim data collected from the Light Study (ClinicalTrials.gov Identifier: NCT01601704). In order to preserve blinding and trial integrity, the data monitoring committee (DMC) is not reporting the observed event rate to Orexigen, but will remain in communication about whether the projected 2H13 resubmission date will remain possible. Management did not mention Contrave’s Ignite Study, which completed enrollment in just three days in February (n=242; ClinicalTrials.gov Identifier: NCT01764386). This is a randomized controlled method-of-use study examining Contrave’s effectiveness in a real-world situation when it is paired with a commercially available telephone-based lifestyle modification program.

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Notably, Orexigen remarked that finding a partner for Contrave outside of North America is now one of its priorities; as previously stated, Orexigen expects to culminate a deal after results of the Light Study are available so that the deal is de-risked. Management also announced that Contrave’s European rapporteur and co-rapporteur had been assigned and that they plan to meet to discuss how to best utilize data from the Light Study. European authorities have been quite strict on obesity therapeutics; the CHMP declined Vivus’ Qsiva (phentermine/topiramate) and expressed objections to Arena/Eisai’s Belviq (lorcaserin) that led to Arena’s withdrawal of the MAA. During Q&A, Orexigen management remarked that they believed these difficulties stemmed mainly from compound-specific issues or uncertainty around cardiovascular safety; management noted that the Light Study should provide clarity on Contrave’s CV profile and that Contrave should not run into the compound-specific issues that the other two drugs have. Orexigen has previously guided for a 2013 European submission and did not provide an update on whether it still expects to meet this timeline. The call did not mention Empatic (bupropion/zonisamide), for which Orexigen is waiting to establish a partnership prior to advancing to phase 3. As we understand it, Orexigen had also been waiting on the EMA’s Qsiva decision to move forward on Empatic since zonisamde is an anticonvulsant (like topiramate) that could potentially have teratogenic risk. Thus, the EMA’s rejection of Qsiva likely does not bode well for Empatic. Finally, during Q&A management commented on the new AACE algorithm, which highlights many up-to-date methods of managing obesity. Management believes this is part of a “cascade” of events moving toward greater acceptance and adoption of obesity therapeutics. Management confidently reaffirmed Arena’s estimation that three years after launch of the three new obesity drugs, we could see 70% reimbursement coverage. For reference, management stated that peak coverage was about 40-45% when Meridia and Xenical were on the market.

• Perrigo – Diabetes over-the-counter segment grows 3%

On May 7, Perrigo CEO Joseph Papa led the company’s F3Q13 financial results update. As we’ve come to expect, Mr. Papa highlighted the continued conversion from national brands to store brands, a trend which certainly exists in Perrigo’s over-the-counter (OTC) diabetes business. He characterized store brand growth in Perrigo’s OTC diabetes business as “tremendous,” increasing 13% year-over-year (YOY; revenues were not disclosed). Comparing sequentially, F3Q13 growth followed an F2Q13 increase of 14% YOY. National brands, however, fell 3% in F3Q13, leading to modest overall diabetes OTC growth of 3%. Diabetes was highlighted as one of four areas that Perrigo hopes to expand through mergers and acquisitions (M&A) activity. (Also included in this list were ophthalmics, adult nutrition, and opportunities in international markets.) This complements remarks made by Mr. Papa during JP Morgan Healthcare 2013, during which he described Perrigo’s current diabetes care offerings as a platform from which the company intends to build. This is the second quarter in which Perrigo did not break out its revenue for the whole of its Diabetes Care business. Perrigo last reported Diabetes Care revenue in F1Q13, when sales reached $9 million. As a reminder, Perrigo acquired CanAm Care in early January 2012, giving Perrigo Dex4 hypoglycemia products (tabs, liquids, and gels), insulin delivery syringes and pen needles, wound care, and compression stockings. The acquisition broadened Perrigo Diabetes Care, which had previously consisted of a blood glucose monitor (BGM) business launched in 2011 via an exclusive agreement with AgaMatrix. At the time of the acquisition, Perrigo Diabetes Care sales for calendar year 2012 were forecasted at $40 million, meaning sales would have needed to reach ~$13 million in F2Q13 to meet this guidance. Management has not given any guidance for Diabetes Care sales in calendar year 2013. Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 39

• Pfizer – New candidates added for type 1 diabetes and diabetic nephropathy

On April 30 Pfizer reported 1Q13 financial results in a call led by President and CEO Ian Read. Management briefly mentioned Pfizer’s new partnership with Merck, commenting that phase 3 trials of the SGLT-2 inhibitor ertugliflozin will begin this year and will examine the drug as monotherapy and within fixed-dose combinations (FDCs). While management expressed great enthusiasm about this deal during Q&A, they provided no new details. As background, Merck and Pfizer announced earlier in the week that they had entered a collaboration to develop and commercialize ertugliflozin worldwide (except in Japan). Specifically, the deal covers ertugliflozin monotherapy, as well as two FDCs. Pfizer’s most recent online pipeline (updated February 28, 2013) shows that the company has added one new biologic for type 1 diabetes (PF-06342674; phase 1). This marks Pfizer’s only candidate in the type 1 indication. The remainder of the diabetes pipeline remains unchanged: both ertugliflozin (PF-04971729) and a hepatic glucokinase activator (GKA; PF-04937319) remain in phase 2. ClinicalTrials.gov shows that two studies of the GKA candidate have completed since Pfizer’s 4Q12 update and that the candidate currently has no ongoing studies. As a reminder, management previously forecasted that phase 2 data for the GKA are expected in 2013. Pfizer’s phase 1 pipeline for type 2 diabetes still includes two biologics with unspecified mechanisms (CVX 096 [PF-04856883] and PF-05231023; PF-05231023 has one active trial), as well as one small molecule candidate (PF-05175157). ClinicalTrials.gov now shows three new trials for the latter drug: one study in healthy volunteers (currently recruiting; ID: NCT01819922), one trial in type 2 diabetes (currently recruiting; Identifier: NCT01792635), and one study in overweight and obese healthy participants (not yet recruiting; Identifier: NCT01807377). Pfizer’s pipeline now includes a new therapy for diabetic nephropathy (PF-04634817) in phase 2. Information on ClinicalTrials.gov indicates that the candidate is a chemokine CCR2/5 receptor antagonist (with one active trial). Pfizer also continues to develop a second nephropathy candidate in phase 2 (PF-00489791; an inhibitor of phosphodiesterase type 5; one active trial). Though management previously guided for new data on this candidate in 2013, they have not provided a recent update. Lastly, Pfizer has PCSK9 antibodies in phase 2 (RN316 [PF-04950615]; two active trials) and in phase 1 (RN317 [PF-05335810]; one active trial) for the treatment of hypercholesterolemia. We’re curious why Pfizer is developing two candidates with this mechanism and wonder if the safety/efficacy data for RN316 fell below expectations. We last heard data on RN316 at ACC 2013 in March, when Dr. Hong Wan (Pfizer, San Francisco, CA) presented the results of one phase 1 study and two phase 2 studies. In all three trials, RN316 led to significant reductions in overall VLDL and LDL particle concentrations, as well as small increases in LDL particle size and HDL particle concentration.

• Rhythm – Announces positive phase 1b data for RM-131

Rhythm announced results of two studies relating to its diabetic gastroparesis (GP) candidate RM-131 at Digestive Disease Week 2013. The first was a phase 1b pharmacodynamics trial in people with type 1 diabetes and a history of diabetic GP (n=10). Also, Dr. Lee Kaplan (Massachusetts General Hospital, Boston, MA) announced an epidemiological study suggesting that the prevalence of diabetic GP symptoms is higher than previously estimated, especially in people with type 2 diabetes. The phase 1b study found that RM-131 provided a median 55% reduction in gastric emptying half- time over placebo and that RM-131 improved GI symptoms. Results were also published this May in Clinical Gastroenterology and Hepatology (access the paper at http://www.cghjournal.org/article/S1542-3565(13)00578-8/abstract). Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 40

The epidemiological study found that while the primary focus on diabetic GP has been on type 1 diabetes, people with type 2 diabetes report GP symptoms at about 80% the rate of type 1 diabetes patients, and they report moderate to severe symptoms at 75% the rate of patients with type 1 diabetes. The authors estimated that more than 2 million people with type 2 diabetes and about 165,000 people with type 1 diabetes in the US were seeking treatment for moderate-to-severe symptoms of diabetic GP and had experienced symptoms in the last seven days. This is higher than most previous estimates of prevalence, which ranged anywhere from 100,000 to 2.3 million. (Rhythm attributes these discrepancies to inconsistent diagnostic criteria and limitations in previous patient study populations). Rhythm utilized a GP symptom assessment tool compliant with FDA guidelines for patient-reported outcomes. We appreciate that Rhythm is attempting to show that diabetic GP is underdiagnosed and underappreciated. However, the generally unspecific symptoms associated with the disorder (nausea, vomiting, abdominal pain, postprandial fullness, and bloating) seem to undercut the principle of using a symptoms-based survey to estimate prevalence. Rhythm’s announcement did not report how many patients had co- occurring clinically significant GI disorders unrelated to their diabetes. Rhythm believes its survey improves upon previous estimates of prevalence by studying a representative national sample of patients with diabetes, drawn from a panel of 10,000 people with diabetes. We are curious what the characteristics of the sample population were (e.g., average A1c and diabetes duration). As a reminder, RM-131 is a novel synthetic ghrelin analog currently in phase 2 that increases GI motility and accelerates gastric emptying. It is delivered as a subcutaneous injection. The FDA granted Fast Track status to RM-131 in October 2012, highlighting the unmet need in this area. The current treatments for GP are suboptimal; they include dietary changes (more frequent and smaller meals), feeding tubes, electrical stimulation, surgeries, and medications such as Reglan (metoclopramide) and erythromycin. Both drugs are associated with a number of side effects.

• Roche – Reportedly considering sale of its blood glucose monitoring business

On May 15, Reuters reported that Roche was considering selling its blood glucose monitor (BGM) business (the article can be accessed at http://www.reuters.com/article/2013/05/15/us-roche- sale-idUSBRE94E14X20130515). The article lacks on-the-record sources (it cites "three people familiar with the matter" who wished to remain anonymous), warranting cautious interpretation, in our view. The article says that discussions on a potential divestiture are “still in their early stages.” Whether or not a sale will materialize is speculation, but clearly the BGM industry is under immense pressure due to both pricing and reimbursement challenges. Further, with CMS' competitively bid payment amounts for diabetes care supplies set to go into effect on July 1, pressures could soon intensify. We estimated that in 2012, diabetes care revenue for the Big Four BGM companies (Roche, Abbott, J&J, Bayer) was ~$8.1 billion, down ~4%-5% as reported from 2011. In 1Q13, combined revenue of ~$1.8 billion was down ~6% as reported from 1Q12 sales. For Roche Diabetes Care specifically, 2012 revenue of ~$2.7 billion declined 3% on a reported basis from 2011. In 1Q13, sales of ~$579 million were down 4% as reported from 1Q12 (the lowest quarterly revenue in over seven years). Of course the big question is, if Roche really does decide to sell its business, which company would be the appropriate buyer. Bayer allegedly put its business up for sale almost exactly one year ago according to media headlines, but reportedly did not find an interested party. Around the same time, Bayer Diabetes Care was reportedly for sale at a price of $1.5 billion; that division brought in ~$1.3 billion in 2012. For comparison, Roche brought in ~$2.7 billion in 2012, so using the same or similar multiple, a price hovering around $2.3 billion might be expected. The Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 41

article cites Medtronic and J&J as possible buyers. We are skeptical that Medtronic would make the strategic move to get into the blood glucose monitoring business, given the existing BGM partnership with Bayer and the challenging pump market. Medtronic management has also described its M&A strategy as on the more conservative side. The J&J discussion was also surprising to us, as we do not see J&J as a likely buyer of this business. Theoretically, J&J could expand its ex-US business with the acquisition, which could be valuable given the increasingly challenging US market. (Roche noted that in 1Q13 it was actually able to increase reimbursement in France and Scandinavia.) We’re not certain, however, if this deal could happen due to FTC considerations. We are also unsure that J&J would be looking to expand its international business in this environment. Alere would be an interesting potential buyer, although we’re not sure that it has the buying power, as Roche has a far larger diabetes business. Further, Alere might not be the best strategic fit, as the company is specifically seeking to become the low-cost supplier in the mail-order business.

• Roche – Diabetes Care down 4% on a reported basis and 5% operationally in 1Q13

On April 12, Roche CEO Severin Schwan led the company’s 1Q13 results update. Global Diabetes Care revenue of 539 million CHF (~$579 million) in 1Q13 fell 4% on a reported basis and 5% on an operational basis. The comparison was an easy one – 1Q12 sales fell 12% as reported and 7% operationally. Sales in 1Q13 represented the lowest quarterly total in over seven years. By geographic breakdown, sales decline were steepest in North America. Revenue totaled 94 million CHF (~$101 million), down 21% as reported and 22% operationally, despite an easy year-over- year (YOY) comparison: North American 1Q12 sales fell 11% and 5%, respectively. The EMEA region (Europe, Middle East, and Africa) was the only segment that had positive growth: 3% as reported and 2% operationally. The comparison was easy with sales declines of 17% and 11%, respectively. Management engaged in very candid discussion about its Diabetes Care business and the challenging BGM market place: reimbursement pressure from CMS and pricing pressure from low-cost competitors are two of the biggest headwinds. Turning to recent device launches, the company launched the new maltose-independent strips for the Accu-Chek Active meter in the EU in 1Q13; the next-gen meter itself will be launched in 3Q13. Roche has also launched the next-gen DiaPort to Centers of Excellence in the EU, though the launch was not mentioned on the call. Looking forward, the company intends to launch the Accu- Chek Insight blood glucose monitor and pump system in the EU later this year and to file for its approval in the US in 2014. As we understand it, the company also intends to file the Accu-Chek Avivia Expert (meter with built-in bolus calculator) in the US this year. Also of note, the company presented never-before-seen data on its prototype CGM system at ATTD: the sensor recorded a mean absolute relative difference of 8.6% compared to the Accu-Chek Aviva meter (n=7,039). Roche did not provide any updates on its diabetes drug pipeline. Turning to ophthalmology, Lucentis’ uptake for diabetic macular edema (DME) has been fairly strong since the August 2012 FDA approval for this indication. US Lucentis sales totaled 393 million CHF (~$422 million) in 1Q13, marking Lucentis’ first quarter of positive operational growth (1%) in one year. Roche attributes this to both stabilization of the age-related macular degeneration market (in which Lucentis had been losing share to Bayer/Regeneron’s Eylea over the past year) and strong uptake in DME. Roche announced that, as expected, in February the FDA approved an as-needed (pro re nata, or PRN) dosing indication for Lucentis, which will allow Roche to promote less-than- monthly dosing for AMD. This should also serve to increase uptake amongst patients for whom the high cost of anti-VEGF therapy, and/or a fear of injections, are barriers to treatment; we are curious if Roche will also seek this indication for DME.

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• Sanofi – Diabetes Division sales grow 18% to $2 billion

Sanofi reported 1Q13 financial results on May 2 in a call led by CEO Chris Viehbacher. Worldwide Diabetes Division sales (Lantus, Apidra, Amaryl, Insuman, BGStar, iBGStar, and Lyxumia) totaled €1.54 billion ($2.04 billion), rising 18% year-over-year on a reported basis (on par with growth in 1Q12). Management attributed the strong growth to sales of Lantus, which increased 20% from 1Q12 to exceed €1 billion for the sixth straight quarter (sales totaled €1.3billion [$1.8 billion]). Lantus continues to be the top-selling diabetes drug and has pulled further ahead of the Januvia franchise, whose 1Q13 sales declined 1% year-over-year to $1.3 billion. Management highlighted the “very nice comeback” of Apidra sales, which reached €66 million ($87 million), up 27% as reported from 1Q12. Management also remarked that at the time of the call, Sanofi had reported three weeks of Lyxumia sales; however, the company did not break out revenue from the drug. Finally, while Sanofi does not report sales for the BGStar and iBGStar, we estimate that revenue totaled ~€11 million (~$15 million) in 1Q13, flat with 4Q12. On the pipeline front, Sanofi announced that it has decided to focus primarily on the fixed-ratio combination device for Lyxumia/Lantus rather than the fix-flex device that would have allowed for variable doses of Lantus at a fixed dose of Lyxumia. Sanofi is doing so in order to take advantage of the opportunity to be the first GLP-1/basal insulin combination product to the US market now following Tresiba’s (and, therefore, IDegLira’s) delay in the US. The fixed-ratio device will be faster to develop, and Sanofi plans to continue investigating the fix-flex device as a potential future follow-on. Management also announced that they would release the first phase 3 data for Sanofi’s new insulin glargine formulation, with detailed results of EDITION I being presented as a late-breaking poster at the ADA Scientific Sessions in June and topline results of EDITION II being released at the same time. Management confirmed that its two biosimilar insulin projects have entered phase 1 and discussed a number of strategic considerations on biosimilar insulins during Q&A. Sanofi’s phase 1 cathepsin A inhibitor was not mentioned on the call, but the company appears to have reassigned the indication to pulmonary hypertension instead of CV-related complications and deaths in diabetes patients. Lastly, Sanofi expects to report the first topline phase 3 results for its PCSK9 inhibitor, alirocumab (SAR236553/REGN727), in 3Q13.

• Santarus – Glumetza sales total $42 million

In 1Q12, Glumetza (metformin XR) posted revenue of $42 million, up from $31 million in 1Q13 and down slightly from $43 million in 4Q12. Cycloset had 1Q13 revenue of $3.9 million, up from $3.6 million in 1Q12 and down from $4.5 million in 4Q12. Santarus saw improvements in the prescription rates of both drugs between 1Q13 and 1Q12. Glumetza new prescriptions (NRx) grew 21% year-over-year (YOY), and total prescriptions (TRx) increased 18%. This TRx growth was down from 24% YOY in 4Q12; during Q&A management noted that some "softening" in the first quarter is not unusual due to people changing insurance plans at the end of the year. Cycloset NRx increased 21% YOY; TRx YOY growth was 44%, a rate that was down slightly from the 49% increase seen between 4Q11 and 4Q12.

• Takeda – Reports first phase 3 results for GPR40 agonist fasiglifam

On May 16, Takeda announced initial phase 3 results for its GPR40 agonist fasiglifam (TAK-875), the first GPR40 agonist to reach phase 3. Like other agonists of the G-protein coupled receptor 40 (GPR40; also known as free fatty acid receptor 1), fasiglifam stimulates insulin in a glucose- dependent manner.

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The 24-week, double-blind trial randomized Japanese type 2 diabetes patients to once-daily fasiglifam 25 mg, fasiglifam 50 mg, or placebo (n=192; aged ≥20 years; baseline A1c of 7.69- 7.84%; other baseline characteristics not provided; ClinicalTrials.gov Identifier: NCT01433393). At 24 weeks, both fasiglifam doses provided statistically significantly greater A1c reductions compared to placebo (placebo-adjusted A1c reduction of -0.75% [95% CI: -0.99; -0.52] for the 25 mg dose and reduction of -1.01% [95% CI: -1.24; -0.78] for the 50 mg dose). Fasiglifam 25 mg and 50 mg appeared to be efficacious in participants with a baseline A1c <8.4% (non-placebo adjusted A1c reductions of 0.41% and 0.62%, respectively), though to a lesser extent compared to people with an A1c ≥8.4% (placebo-adjusted A1c reductions of 1.37% and 1.40%, respectively). Furthermore, the proportion of patients achieving an A1c <6.9% was statistically significantly greater for fasiglifam 25 mg (30.2%) and 50 mg (54.8%) compared to placebo (13.8%; p value not given). Takeda did not give detailed safety information, stating only that drug-related adverse events were mild to moderate and that the three treatment groups saw similar rates of adverse events, including hypoglycemia. The most frequently reported adverse events (≥5%) were nasopharyngitis and upper respiratory tract inflammation. As background, Takeda management has previously spoken quite optimistically about fasiglifam, expressing confidence in its blockbuster potential and remarking that the candidate “is considered a revolutionary treatment for diabetes and has captured the interest of endocrinologists, diabetologists and industry specialists.” Management has noted that while other companies have approached Takeda about partnering on fasiglifam, Takeda will develop the drug on its own. The company’s most recent (F4Q12) earnings report indicates that Takeda plans to file fasiglifam first in Japan in fiscal 2015 (calendar 2Q15-1Q16) followed by the US and EU in fiscal 2016-2017 (2Q16-1Q18). At the time of the call, ClinicalTrials.gov listed five ongoing phase 3 studies of fasiglifam (all recruiting), as well as three completed phase 3 studies and three trials that are scheduled but not yet recruiting. This list excludes fasiglifam’s cardiovascular outcomes trial, which is expected to enroll 5,000 participants and complete in December 2018.

• Telcare – Receives CE Mark for wireless blood glucose meter

On May 14, Telcare announced that its wireless blood glucose meter received CE Mark. The meter will launch first in the UK and Ireland; detailed launch plans have not been shared. As we understand it, the meter is nearly identical to the product in the US with the exception of EU- specified language and blood glucose units (i.e., it displays mmol/l instead of mg/dl). The device was cleared by the FDA in 2011 following a five-month FDA review, a remarkably fast clearance compared to other recent reviews. Telcare’s meter features GPRS cellular connectivity, allowing blood glucose data to be automatically uploaded to ‘the cloud’ as soon as the strip is removed from the meter. At the time of AADE 2012 last August, Telcare planned to launch a next-generation meter in time for ADA 2013. This product was intended to include only enhancements consistent with Telcare’s existing 510(k). A preview of that model was displayed at the Consumer Electrics Show in January. At this time, the company also announced that its meter had just received certification to operate on Verizon’s CDMA network. Looking forward to future meetings, we expect to see Telcare’s release of Diabetech’s GlucoDynamix-ADMS (an automated day-over-day trend- monitoring system), and we look forward to more updates on the company’s pipeline. In a conversation with Telcare management, the company was optimistic about European payers’ reception of the technology. Relative to the US, Europe has more single-payer systems, entities that should find Telcare’s data collection capabilities quite appealing. Additionally, there seems to

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be an increasing focus on mHealth in Europe, perhaps typified by the President of Ireland speaking at the recent World of Health IT Conference and Exhibition. That said, US payers might be slowly warming to mHealth technology as well. Kaiser CEO Mr. Bernard Tyson noted at JP Morgan 2013 that the health system had no e-visits to physicians five years ago, compared to over 20 million e-visits (!) last year – quite impressive considering that the number of face-to-face visits was 40 million. Mr. Tyson expects 25 to 30 million e-visits over the next couple of years. Forward-thinking Kaiser also popped up during J&J’s January Medical Devices & Diagnostics (MD&D) Business Review, when management announced that it is pioneering a text-message system with Kaiser to alert providers when patients have elevated blood glucose levels.

• Transition Therapeutics – Ends F3Q12 with $25 million in cash

Transition Therapeutics announced financial results for F3Q13 (ending March 31, 2013) in a call led by CEO Tony Cruz on May 7. The company expressed confidence in its proof-of-concept results for TT-401, Transition/Lilly’s GLP-1/glucagon dual agonist, which Lilly later retained rights to (for details see Lilly/Transition Therapeutics entry above). No updates were provided on TT-402, Transition’s second GLP-1/glucagon dual agonist acquired from Lilly. As background, other companies developing GLP-1/glucagon dual agonists include Zealand Pharma (ZP2929; phase 1) and PROLOR Biotech (MOD-6030; phase 1). On the financial front, Transition ended F3Q12 with cash, cash equivalents, and short-term investments of roughly $25 million, up from $16 million at the end of F1Q13. Management noted that Transition’s cash resources should be sufficient to fund the development of their current programs for the next 24 months.

• Vivus – FDA approves Qsymia REMS modification

On April 16,Vivus announced FDA approval of the amendment and modification to the Risk Evaluation and Mitigation Strategy (REMS) for Qsymia, allowing it to be dispensed through certified retail pharmacies (in addition to the existing network of certified mail-order pharmacies). As a reminder, the amendment was submitted in October 2012, reflecting a review time of roughly six months. The approval’s timing was right on par with Vivus’ initial estimate of mid-April. Retail pharmacies must meet the same standards to be “certified” as mail-order pharmacies. The certification process at an individual site takes about 15 to 20 minutes for retail chains, and a little more for independent pharmacies. In Vivus’ 4Q12 update, management emphasized the restrictiveness of the mail-order network, noting that expanding access could accelerate sales by reducing provider frustration, burden, and “hassle factor” and by increasing access for patients. Only ~30% of all US scripts are filled through mail order. We'll be interested to see the magnitude of sales expansion due to this REMS modification. We wonder what percentage of obesity doctors use mail order in the US – we would guess even less than 30%. During 4Q12, Qsymia’s first full quarter on the market, it had revenues of $2.0 million, below analyst estimates of ~$3.0 million; at the time, we assumed the gap was in part due to restrictive pharmacy distribution. In the four-week period ending February 15, 17,383 Qsymia prescriptions were written, up 34% from the prior four-week period. However, given the over 100 million patients within Qsymia’s label, many have been disappointed that Qsymia’s launch has not been stronger. We note a few factors that have made this launch particularly challenging. First, reimbursement is low, though it is expanding (~25% of Qsymia scripts are covered by a third- party payer, up from ~20% as of Vivus’ 3Q12 call. The goal is 30% coverage by September – even here, co-pays are high). Also, the obesity field is an undeveloped market that needs to be moved

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into mainstream American medicine, as there is low recognition that obesity is a chronic medical condition requiring treatment. Another hurdle is that Vivus lacks a US partner to help with marketing Qsymia (per comments in the 4Q12 update, this might change now that the REMS modification has been approved). Additionally, many healthcare providers have safety concerns grounded in the field’s negative history and a lack of long-term data for Qsymia (a theme at last week’s Internal Medicine 2013 conference). The REMS modification has been a central focus of Vivus’ 2013 strategy to expand access to Qsymia. On March 26th, Vivus announced a $110-million non-equity financing agreement with Pharmakon Advisors. Vivus made an initial draw of $50 million and has the option to draw an additional $60 million before December 31, 2013. Vivus intends to use this cash for Qsymia commercialization, especially the direct-to-consumer advertising that it plans to begin now that the FDA has approved the REMS modification request.

• WellDoc – Launches BlueStar, FDA-cleared, mobile prescription therapy for type 2 diabetes

On June 13, WellDoc announced the launch of BlueStar (“the first FDA-cleared, mobile prescription therapy for type 2 diabetes with insurance reimbursement”) at the 2nd annual Digital Health Summit in San Diego. Using patients’ own inputted data (e.g., medications, blood sugar readings, diet, and exercise), the BlueStar software provides real-time coaching, educational content, and motivational support to people with type 2 diabetes. We especially like that it offers personalized messaging to patients, which dovetails incredibly well with the field’s increasing focus on individualized therapy. BlueStar is FDA cleared (over a year between 510(k) submission and clearance), works on smartphone platforms (e.g. iPhone and Android), feature phones, tablets, and desktops (nice to see broad device compatibility), and requires a prescription from a licensed HCP. The product is based on WellDoc’s Automated Expert Analytics System, the same system that powered an earlier version of BlueStar used in the company’s randomized controlled trials (Quinn et al., Diabetes Care 2011; Quinn et al., DT&T 2008). Notably, the BlueStar product also provides HCPs with medication and other care plan suggestions based on ADA and AADE clinical guidelines. Speakers at diabetes technology conferences have been increasingly begging and pleading for clinical decision support software that works, that saves them time, and improves patient outcomes. We will be interested to see how quickly clinicians and patients embrace BlueStar, and more broadly, which side of the table drives more of the demand. We were very encouraged to see that BlueStar will launch with reimbursement similar to other prescription products (adjudicated as a pharmacy benefit; i.e., copays that vary by insurance plan). This is a major win for patients and a testament to WellDoc’s strong management team and focus on publishing solid clinical data. A controlled launch in “select areas” will occur this summer (we assume major cities and areas near large diabetes centers) followed by a nationwide launch later this year. We applaud the efforts of Ford, Rite Aid, Dexcom, and “other Fortune 500 companies” that are adding BlueStar to their health insurance coverage under their prescription benefit plans. Given the amount of self-care diabetes requires, the lack of time and patient contact with HCPs (four times per year at best), the fraction of patients at goal, and the challenges of staying motivated to manage an “invisible” disease, we see holistic, mobile, personalized, patient- centered solutions like WellDoc’s BlueStar as playing a hugely important role in the future. We think it’s key that WellDoc has a business model in place (somewhat of a novelty in mHealth!); a focus on translating data into actionable knowledge; and a system that comprehensively addresses the psychological, medical, and adherence aspects of diabetes. We believe BlueStar’s success will depend on many factors, especially: 1) Will patients stay engaged and motivated to Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 46

use it, particularly because BlueStar relies on patient data logging (it’s a plus that BlueStar gives patients dynamic and personalized real-time and longitudinal feedback, which improves the cost- benefit ratio in our view); and 2) Will providers embrace the system, will it save them time, and will they be comfortable relying on its recommendations?

• XOMA – No update on diabetes pipeline

XOMA reported 1Q13 financial results in a call led by CEO John Varian on May 8. Most of the call focused on gevokizumab (XOMA 052), an anti-IL-1 beta antibody for the treatment of several diseases including type 1 diabetes. XOMA previously announced that it would not concentrate on developing gevokizumab for diabetes; indeed, management’s discussion of gevokizumab during the call centered on other potential indications such as inflammatory acne, osteoarthritis, and uveitis. As a reminder, ClinicalTrials.gov currently shows two ongoing trials of gevokizumab in type 1 diabetes, neither of which has been updated since XOMA’s 4Q12 call in March: 1) a phase 2 trial evaluating the effect of gevokizumab on beta cell function and insulin production in adults with well-controlled type 1 diabetes (n=24; Identifier: NCT01788033); and 2) a phase 2 study conducted with JDRF to study the effects of gevokizumab on beta cell destruction and regeneration in adults with well-controlled type 1 diabetes (n=24; Identifier: NCT00998699). Management did not discuss XMet A and XMet S; however, during the 4Q12 update management reaffirmed that XOMA would continue to conduct preclinical studies in 2013 to evaluate the candidates’ dosing and durability. At the time, management explained that the small investments made to perform additional preclinical studies would result in “exponentially greater” returns in the future, as this strategy would allow XOMA to secure a better licensing agreement (XOMA plans to license both candidates under one deal). XOMA had previously expected the preclinical stage to last roughly 12-18 months, placing licensing discussions around 4Q13 to 2Q14. As background, XMet A is an allosteric activator and partial agonist of the insulin receptor that XOMA believes could replace long-acting insulin. XMet S is an insulin sensitizer that in preclinical studies provided significant improvements in fasting blood glucose levels, glucose tolerance, and non-HDL cholesterol in obesity-induced insulin-resistant mice. Management did not provide updates on XMet D, an antibody that antagonizes and deactivates the insulin receptor. During the 4Q12 update in March, XOMA stated that over the next 18-24 months, the company would manufacture the candidate, perform toxicology studies, and conduct a pre-IND meeting with the FDA. Management has highlighted that XMet D could potentially be used to treat ultra-orphan indications related to hypoglycemia, such as congenital hyperinsulinism, insulinomas, and hypoglycemia following gastric bypass surgery. XOMA previously announced plans to develop and market the candidate alone.

• Zealand – No Lyxumia revenue reported yet; ZP2929 remains in phase 1

Zealand Pharma published its 1Q13 financial report on May 15. The company reported no revenue in 1Q13, indicating that it has not yet received the first royalties on sales of Lyxumia from Sanofi (this was expected, as the first reported revenue will likely coincide with Sanofi’s 2Q13 earnings call). For comparison, Zealand also received no revenue in 4Q12, whereas revenue in 1Q12 totaled DKK 120.3 million ($21 million). As a reminder, management has not provided guidance on Zealand’s 2013 revenue, partly because Sanofi has not given sales estimates for Lyxumia, making it difficult for Zealand to forecast royalty payments. Management remarked during the 4Q12 update that Sanofi would report sales and pay royalties to Zealand for Lyxumia on a semi-annual basis – and for the first time in the 1H13 financial report. Zealand’s report notes that Sanofi has launched Lyxumia in the UK, Germany, and Scandinavia and in 2013 will continue to roll out the drug in other EU countries, as well as in Norway, Iceland, and Liechtenstein. Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 47

The 1Q13 financial report reaffirms that Sanofi will prioritize the development of the Lantus/Lyxumia fixed-ratio combination product over the Lantus/Lyxumia fix-flex device for the start of phase 3 studies. During Sanofi’s 1Q13 earnings call, management explained that they have chosen to prioritize the former product due to its simpler technology, which will allow for faster speed to market. Sanofi’s goals have shifted slightly: now that development of Novo Nordisk’s IDegLira has been delayed (because Tresiba [insulin degludec] received a complete response letter from the FDA requesting a cardiovascular outcome study to rule out any CV risk prior to approval), Sanofi aims to bring the first GLP-1/basal insulin combination product to the US market. The fixed-ratio device is currently being studied in a phase 2b trial (slated to complete in 2H13) [Editor’s note: Sanofi has since indicated that it expects to begin phase 3 development in 1H14]. Sanofi management has emphasized that though it reported a “technical glitch” for the Lantus/Lyxumia fix-flex device last February, the company still plans to pursue the candidate. This is good news from our view since we think for many patients, being able to individualize the Lantus ratio will be good news. We remain surprised that the FDA delayed Novo Nordisk’s degludec and point out the downside of a risk-averse regulatory perspective. While the benefits of GLP-1 insulin combination therapy have been known since 2006/07, companies have had to take some time to develop a combination pen. The fact that a novel product like IDegLira has been delayed at least four years because FDA didn’t view degludec monotherapy as differentiated enough to warrant modifying a zero-risk stance is regrettable. That said, of course this is technically positive commercial news for Sanofi (though even competitors would likely rather have an FDA who views benefit/risk less conservatively). As for the rest of Zealand, no updates were provided on the remainder of the pipeline: Zealand/BI’s glucagon/GLP-1 dual agonist remains in phase 1; while the company previously guided for an end of enrollment of a SAD study in 1Q13, no details were provided. Zealand’s report did not mention the gastrin/GLP-1 dual agonist ZP3022, which we presume remains in preclinical studies.

-- by Adam Brown, Hannah Deming, Jessica Dong, Rajiv Narayan, Kira Maker, Nina Ran, and Kelly Close

4. Interview: Diabetes expert Dr. Stefano Del Prato weighs in on incretins and pancreatitis, the role of SGLT-2 inhibitors, pharmacotherapy in prediabetes, and what he learned from ORIGIN

Members of our Close Concerns team had the privilege of interviewing Dr. Stefano Del Prato at the 5th International Congress on Prediabetes and the Metabolic Syndrome, held in Vienna Austria on April 18- 20. A decades-long leader in diabetes research and management, Dr. Del Prato needs little introduction. With over 400 publications, he has played a key role in advancing our understanding of type 2 diabetes pathophysiology and therapy, and has received numerous honors including the Prize of the Italian Society of Diabetology for outstanding scientific activity. Currently, Dr. Del Prato is Professor of Endocrinology and Metabolism at the University of Pisa’s School of Medicine, Chief of the Section of Diabetes at the University of Pisa, and Vice President of the European Association for the Study of Diabetes (EASD).

Dr. Del Prato spoke with us on several of-the-moment topics – e.g., incretins and pancreatitis, SGLT-2 inhibitors, pharmacology in prediabetes – offering his opinion and advice and incorporating insights from landmark trials and his knowledge of disease pathophysiology. While commenting on incretins and pancreatitis, Dr. Del Prato gave his view on Dr. Peter Butler’s morphological study, highlighted the Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 48

actions of the EMA, and explained what we can learn from cardiovascular outcomes trials (CVOT). Notably, he urged diabetologists to collaborate with gastroenterologists, especially in forming a task force to further investigate this issue. Dr. Del Prato’s discussion of the treatment paradigm covered several key topics, including the potential for genetic screenings, the pros and cons of sulfonylureas, the burden of primary care physicians, and lessons learned from ORIGIN. His expertise in type 2 pathophysiology lent a plethora of insight into how scientists should study SGLT-2 inhibitors in type 1 diabetes, and how researchers should investigate whether hyperinsulinemia precedes insulin resistance, and if HCPs can accurately identify people who will progress from prediabetes to diabetes. In ending, Dr. Del Prato expressed optimism that current studies will bring us closer to answering the critical question of whether glycemic control with one drug or drug combination can prevent macrovascular complications.

INCRETINS AND PANCREATITIS

Nina Ran: We wanted to touch upon the issue of incretins and pancreatitis first because it's such a hot topic. What do you think about the validity of Dr. Peter Butler's study and about Dr. Steven Kahn's review of the study? Do you think the data represent a legitimate concern?

Dr. Del Prato: The data by Butler's group should be looked at with interest. We cannot deny them. It's a research group with a lot of experience in the study of the pancreas and pancreatic islets. However, we should keep in mind that these data are limited and present limitations. Pancreata were obtained from an organ donor bank, and tissues could have been exposed to different stress conditions before and after collection, conditions that may have an impact on the pancreas and islet morphology. Moreover, characterization of the donor may not be that straightforward. For instance, a number of patients not exposed to incretins may have had type 1 rather than type 2 diabetes: two of them died of DKA and a couple more started insulin treatment at a very young age. Finally, a difference in body weight and gender distribution was also apparent and may have had quite an impact on the pancreas weight and beta-cell mass. Of greater relevance is the hyperplastic response of alpha-cells, an intriguing finding on the light of the suppressive effect of incretin-based treatment on glucagon secretion. The finding is striking, yet it is worth noting that in spite of the huge number of patients treated with incretins, there have yet to be any reports about hyperglucagonemia or neuroendocrine tumors. In summary, we need to collect more information that merges mechanistic, pathology, epidemiologic and clinical studies to come to a final word on the safety of these forms of treatments. A number of large intervention trails are currently ongoing to evaluate the cardiovascular safety of DPP4-inhbitors and GLP-1 agonists. In these trials pancreatitis events will be adjudicated and the hope is that the data will be made available for a pooled analysis that may reach sufficient power to provide valuable information. At the present time we need to stay alert, critical, and curious and we should continue following the advice of the regulatory agencies. They have set up a specific surveillance and analysis though no action has been taken. They will monitor treatments but, for the time being, they don't see a reason to raise specific concern.

Nina Ran: Do you think cardiovascular outcomes trials can give us a definitive answer to this question?

Dr. Del Prato: If you referring to potential cardiovascular protection, I am afraid the ongoing trials are very unlikely to provide strong evidence. Most of these studies have been designed to satisfy a specific request from the FDA: to prove cardiovascular safety by showing that the upper limit of the 95% confidence interval for the hazard ratio is below 1.3. However, this does not give us much information on what we are really interested in, that is whether these novel forms of treatment can reduce cardiovascular risk. These studies are not the best way to test such a hypothesis, because in order to collect the necessary Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 49

number of events in a relatively short time, they have recruited very high-risk individuals – i.e., people with prior cardiovascular events and people with a very high cardiovascular risk, and even participants with a recent acute cardiovascular event. Given that these patients will be on intense treatment for all CV risk factors,, it will be surprising if adding a DPP4-inhibitor or a GLP-1 agonist can show superiority. The overall results of SAVOR-TIMI seem to be in line with this reasoning. While we wait for detailed reports, no reduction on CV risk has been recently announced. If you were referring to whether these trials may provide information on pancreatitis risk, then, as already said, I think something can be gained if data from all studies will be pooled together.

Jessica Dong: That makes a lot of sense. What do you think are the biggest pieces of missing information in our understanding of the pancreatitis risk? What specifically do we need to investigate and what trials can we conduct to do that?

Dr. Del Prato: Pancreatitis recognizes a complex pathogenesis and it may not always be that simple to diagnose it apart from the most dramatic cases. I strongly believe that we need to establish a sort of task force made of endocrinologists/diabetologists and gastroenterologists. Pancreatitis is known to occur at a greater frequency among diabetes patients, and the true reason for that is not completely clear. It could be due to a number of things, including activation of inflammatory process, dyslipidemia – in particular hypertriglyceridemia – liver steatosis, alcohol abuse, and gallstones. Interpreting pancreatitis events that may occur in diabetes patients with or without incretin-based treatment will require accurate and proper diagnosis, identification of risk factors, and evaluation of interaction with anti-diabetes treatments. I think that we really need a close collaboration with gastroenterologists to approach this critical problem.

Jessica Dong: Can you tell us more about such studies in collaboration with gastroenterologists?

Dr. Del Prato: What I’m trying to say is that we need a collaborative effort much like what has been done with cardiologists in designing and running CV intervention trials. Papers on pancreatitis and pancreatitis risk associated with incretins have already appeared in gastroenterology journals and more interest is building up. Gastroenterologists are already involved in the adjudication of pancreatitis events in the CV intervention trials for DPP-4 inhibitors and GLP-1 agonists. Their assistance is mandatory because, as i already mentioned, accurate diagnosis of pancreatitis can be complex since the condition can manifest in several ways, ranging from an increase of pancreatic enzymes to the full dramatic conditions of necrotic pancreatitis. So we do need to have gastroenterologists on board to look into it and to adjudicate whether the reported cases are indeed pancreatitis, and if that is the case, how severe the disease is.

Jessica Dong: Will the event rate for pancreatitis be high enough in the CVOTs to shed any light on the question of pancreatitis?

Dr. Del Prato: The incidence rate of pancreatitis will be monitored in all of the CV studies. Whether there will be enough pancreatitis events to evaluate the issue is, at the moment still uncertain, but this is a unique opportunity. I believe pooling all the recorded events in the trials and adjudicating them with the collaboration of gastroenterologists will provide much stronger data than those collected with pharmacosurveillance.

Nina Ran: It's interesting that you mentioned that the EMA put out the data and then is not really doing anything about it.

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Dr. Del Prato: EMA and FDA are complying with their institutional goal: collect all available data, request specific studies and/or analyses, and take decisions that are based on reliable data. At the present time, the information is not sufficient to support taking any specific action regarding marketing or availability of the drugs.

SGLT-2 INHIBITORS

Nina Ran: We also wanted to ask you about SGLT-2 inhibitors given their recent approval in the EU last year and in the US this past spring. Where would you consider their use in the treatment paradigm? Do you envision them going up against DPP-4 inhibitors as next- line of therapy after metformin?

Dr. Del Prato: I don't like to look at a new diabetes drugs as something that would challenge the available ones because that would imply that the introduction of a new drug is simply the result of marketing competition. Type 2 diabetes has been considered a very simple disease for too many years and is still too often considered a simple disease – if a disease at all – that is mainly the result of the gluttony and a lack of exercise. No doubt lifestyle is important, but we should also consider the impact of lifestyle changes on a complex pathogenic background.

Type 2 diabetes is the result of multiple interactions among a number of defects. The basic alterations accounting for the development and progression of hyperglycemia reside at the level of the beta cell and in the impaired ability of insulin to exert its biological action on peripheral tissues – i.e., insulin resistance. But there is more than that since alteration of the incretin axis, bile acids, and the brain itself can contribute to glucose intolerance and diabetes. More recently, the kidney has been shown to contribute to hyperglycemia as well. Given this mosaic of complex factors, it is very unlikely that one drug can address everything. Rather, we need drugs that can tackle specific mechanisms. SGLT-2 inhibitors address the role of the kidney in diabetic hyperglycemia. These agents inhibit glucose reabsorption from the kidney tubule by inhibiting the sodium-glucose contransporter-2 (SGLT-2), which turn out to be overexpressed in diabetes, causing increased reabsorption of glucose that would be normally lost through the urine.

The interesting part of is that, for the first time, plasma glucose levels can be reduced without manipulating the main regulators of glucose homeostasis – i.e., beta cell function and insulin sensitivity. Rather by lowering glucose, glucotoxicity can be relieved which in turn will be followed by improved insulin secretion and insulin action. The question is where to position SGLT-2 inhibitors in the treatment algorithm and how to best combine the drugs. To this purpose, a better appreciation of different phenotypes of type 2 diabetes may help. With respect to SGLT-2 inhibitors, the lowering effect on glucose levels along with the body weight reduction (due to loss of calories with glycosuria) and the improvement of blood pressure (due to reduced circulating volume) should be appreciated. On the other hand, the notion that the efficacy of these drugs is largely based on preserved renal function should be kept in mind together with the impact on patent’s perception of urinary/genital infections. By balancing these different aspects, it may be easier to identify target patients.

Nina Ran: What is your perspective on the potential for using SGLT-2 inhibitors in type 1 diabetes, similar to how some people have started to use GLP-1 agonists (off-label) in this patient population?

Dr. Del Prato: From a theoretical point of view, this makes good sense. As mentioned, SGLT-2 inhibition offers the possibility to reduce glucose levels without directly interfering with insulin secretion and insulin sensitivity. We are simply increasing glucose excretion through the kidney and therefore it is expected to work in type 1 diabetes as well. This is also supported by data obtained in insulin-treated type Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 51

2 patients. One aspect that we need to consider in the case of type 1 patients, however, is the effect of this form of therapy on body weight. Most type 1 patients are lean, and we do not want them to lose weight, or to expose them to a greater risk of hypoglycemia. In other words, we need results from ad hoc studies.

Kelly Close: It may be true historically that more type 1 patients were lean; as a matter of fact, 25% were overweight or obese exiting DCCT and today, many more type 1 patients are overweight and obese – it actually mirrors the typical global population’s obesity challenges.

Dr. Del Prato: This is, actually, a good point. But as said, we need to have ad hoc trials assessing the risk-to-benefit ratio of adding a SGLT-2 inhibitor to multiple dose insulin regimen in type 2 diabetic patients.

THE TREATMENT PARADIGM AND INDIVIDUALIZING THERAPY

Nina Ran: Switching gears! You previously mentioned individualizing therapy, and we've been thinking a little bit about how to use genetic information. Are there some molecular targets that we can look at for genetic screenings that can hint at which drug may be optimal for that patient?

Dr. Del Prato: Well, this is what we are dreaming of, but the data so far are not that strong. The point is that type 2 diabetes is a polygenic condition with many of the genes involved contributing just a little. This means that the mix of genes involved in the development of hyperglycemia may vary from subject to subject. The current evidence show that identifying individuals carrying these genetic variants may add little, if anything, to the prediction of diabetes that can currently be done by looking at the classic parameters – i.e. age, family history, body weight and so on. It looks like we still have to wait for effective genetic screening. An interesting possibility is that genetic tagging may help in identifying people at risk for experiencing side effects to a treatment. In the future, this may help with selecting drugs with fewer side effects on a per-patient basis. Were that possible, we could improve treatment adherence, since poor compliance is largely attributed to drug side effects. Right now, the phenotype (lean vs. obese, young vs. older, prevalent fasting vs. post-prandial hyperglycemia, etc.) and appreciation of the pathophysiological mechanisms (insulin secretion and action, obesity related mechanisms, etc.) may help identify more appropriate treatments and suggest optimal combinations of the available therapeutic options. With respect to the latter, the GRADE study will help in understanding pros and cons of different drug combinations. [Editor’s note: we conducted this interview before the GRADE study design was finalized].

Jessica Dong: It seems like GRADE will be looking at the median response to all these different first-line and second-line options. Do you think it will really give us answers as to which patient profile to target?

Dr. Del Prato: No, I don't think it's powered to look at that, but I think it can give us some good hints. More importantly, it should clarify what and how much can be gained with initial combination therapy and which combination may have the best risk-to-benefit ratio.

Kelly Close: There appears to be some concern that it will give us lots of insight on monotherapy but less so on fixed dose combinations?

Dr. Del Prato: Well, though you may be right, the trial is a proof of concept study exploring whether combining two drugs from the very beginning may provide better results. If the results are positive, the

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preparation and evaluation of fixed dose combinations, when feasible, will be surely considered and tested.

Nina Ran: During ADA 2013, there was a debate on whether sulfonylureas are an acceptable add-on therapy to metformin. Can we get your perspective on this class?

Dr. Del Prato: I think that we’ll continue to hear more about it, as the story is not over yet. For instance, if we look at the reference group in the ORIGIN study, we can appreciate that a substantial proportion of patients were on metformin plus a sulfonylurea. As you remember, these were patients with a short duration of the disease and a low A1c at entry. After the seven-year follow-up, their average A1c was still, <6.4%. I tend to interpret these data as to suggest that, yes, choosing a treatment can be important, but it is at least as important to start treatment as early as possible. Also, we must appreciate that differences exist among sulfonylureas. While glyburide may have the worst risk-to-benefit ratio, other sulfonylureas may have a better and more favorable profile.

Jessica Dong: What do you think though about claims of potential cardiovascular harm with sulfonylureas, along with beta-cell burnout and weight gain?

Dr. Del Prato: Again, most of the data suggesting potential cardiovascular harm are retrospective and the few prospective ones do not seem to support this concern. In the UKPDS, ADVANCE and, more recently, ORIGIN, patients on sulfonylureas did not have an increased CV risk.

The risk of beta-cell burn out is less clear. Durability has been shown to be worse with sulfonylureas compared to other drugs, though the ORIGIN data I just referred to seems to suggest that if thetreatment is initiated early in the course of the disease, beta cell burn out may be of less concern. The ORIGIN data shows that glycemic control remained optimal over the seven-year follow-up, a finding that indirectly suggests that beta-cell function was not dramatically reduced over the years.

Kira Maker: Do you think the results are generalizable to the entire SFU class?

Dr. Del Prato: As noted, sulfonylureas are not all alike. Generally speaking the greater the potency, the higher the risk of the side effects. Glyburide is the most potent SFU, and it is the one that raises more safety concerns. There are sulfonylureas that can be considered safer. We may well need to conduct a good study with patients very early in the disease stage to compare the effects of sulfonylureas, DPP-4 inhibitors, SGLT-2 inhibitors, etc. Data in vitro have suggested that SFUs may induce apoptosis and, because of that, they may accelerate the loss of beta cell mass. However, whether and to which extent this applies to the in vivo situation as well is hard to say. The ADOPT study investigated the durability of glyburide, metformin, and rosiglitazone as early treatments in type 2 patients with a baseline A1c of 7.4%. The trial showed that fewer people needed a rescue therapy over the time if they were on rosiglitazone; the highest number of people who needed to be rescued were those who started on glyburide, with metformin coming in between the two. These data should be confronted with the ones I have just quoted from ORIGIN. The reason for the discrepancy is not clear, but explanations might reside on the initial glycemic control, shorter duration of diabetes, and even the SFUs used in the two trials. We need to better understand what can be gained with a very early intervention and how to implement effective early treatment.

Of interest the VERIFY study will explore the efficacy of starting patients on metformin monotherapy as compared to the immediate combination of metformin plus vildagliptin, a DDP-4 inhibitor, in patients in the very early stage of their disease and with mild initial impairment glucose homeostasis. The study will

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recruit up to 2,000 such participants and the trajectories of the A1c changes will be monitored to calculate the rate of glucose deterioration.

Kelly Close: That’s fascinating. Can you tell us more about this study – and also, what are the chances that the SFU study you mentioned would be done?

Dr. Del Prato: There is good reason for hypothesizing that early use of metformin and a DPP4-inhibitor could provide advantages. Metformin exerts some insulin sensitizing effect, which seems to be more apparent at the level of the liver. Moreover, metformin has been shown to increase, to some extent, the synthesis and release of GLP-1. Therefore, the combination of metformin and a DPP-4 inhibitor may result in a synergistic effect on the incretin axis, with subsequent beneficial effects on pancreatic islet function. It is apparent that, from a hypothetical point of view, greater advantages could be envisioned with use of this combination therapy from the very early stage of the disease.

Head-to-head studies of DPP4-inhibitors and SFU were performed in the past. What is missing is a comparison in patients at the time of diagnosis. I don’t know whether such study will be designed and actually carried out, but it would provide quite useful information.

Jessica Dong: Regarding SGLT-2 inhibitors, we talked about individualizing therapy and how SGLT-2 inhibitors offer a unique opportunity to be combined with other therapies to really address another pathophysiological issue for type 2 diabetes that has so far gone unaddressed. We know that a lot of the burden for caring for type 2 diabetes patients falls on primary care physicians, who may not have the expertise or time to effectively determine these drug combinations. What is the best thing we can do as a diabetes community?

Dr. Del Prato: Education, continuing education.

Jessica Dong: Do you believe that education is feasible?

Dr. Del Prato: This is challenging. I understand it, but I don’t see simple solutions. PCPs are busy, their waiting room often crowded, time is scanty but the disease is so complex that I find it hard to conceive that we can come up with a “magic” simple equation for effective, long lasting treatment. Moreover, such expectation is in contrast with the growing concept of treatment individualization. The patient population is heterogeneous, the number of treatments is increasing, life expectancy is growing longer and with that, co-morbidities become more common, leading to more complex polypharmacy. We all would love it if treating diabetes was quick and easy, but I doubt we could ever get there. Education may be challenging, but it is necessary and it must be a continuing process.

Jessica Dong: Is there a way to change the system as a whole so that diabetes is less of a PCP disease?

Dr. Del Prato: You mentioned it. We need to rethink the system, which is not just the medical health system. It must involve the whole society. Prevention is key. If the number of new people with diabetes continues to grow at the present rate, it will be more and more difficult to cope with that. The general population must become more aware of the risk of diabetes and the possibility to reduce such risk. This is a required condition in order to implement effective preventative measures. We also need a better and stronger network for the treatment of diabetes that strengthens the relationship between PCPs and specialists and that introduces structured roles for diabetes nurses, nutritionists, podologists and so on –

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this is mandatory. The initial investment to build this network may be large, but without this, the cost for the individual and for society of long-term complications may become unbearable

Jessica Dong: The reality is that general practitioners really don't have any time. We were at the annual meeting for the American College of Physicians recently, and it is astounding the amount of information they have to keep track of. One PCP said to us that he used to like being a doctor, but that now he felt like a typist, given the extraordinarily increased administrative load.

Dr. Del Prato: Let me be simplistic. I would say first of all, try not to wait too long before doing anything. Forget about choosing between drug A or drug B, let’s just do something. Then, after initial improvement, if patients’ A1c starts to increase again, don't say, “Okay, you better behave and come back in six months.” A few minutes of consultation cannot be expected to take care of the problem. If the A1c is rising, of course we have to reinforce lifestyle, but we should also consider doing something to bring the A1c under control in a proactive manner. The big challenge is how to take the next step. We spend a lot of time discussing which drug is less or more potent while we should realize that there are no enormous differences in terms of potency among the different classes of anti-diabetes medications. By and large, we can expect a 0.8 – 1.0% A1c reduction. The bottom message to our PCP colleagues can be quite simple: if we start with an A1c of 7.5%, we can expect a 0.5-1% reduction with the introduction of a new treatment. With that, the A1c can be lowered to 7% or 6.5%. If we start with an A1c of 9% or 10%, even considering a greater drop, as usually occurs for higher initial A1c values, the chance of reaching the A1c goal is very low. So we cannot wait for the A1c to go up to 10%. We have to avoid procrastination and we have to fight clinical inertia. I understand that we all have time constraints, but rather than saying "Okay, I will have more time next time," which is seldom true, we should take a few extra seconds and decide to do something at that point in time.

Jessica Dong: That is a very great point.

Kelly Close: I agree. How do you recommend controlling lifestyle? Subsidy of more healthy food? Rewards for exercising? Globally we are not making any progress on this point. In fact, the obese are getting more obese, the overweight are becoming obese, etc.

Dr. Del Prato: I believe this must go through increased societal awareness: better education, more education. Let’s start in the schools; let’s have health awareness programs become part of study curricula. Let’s educate people toward improved taste. The best reward is being healthy and fit, isn’t it?

PREDIABETES

Jessica Dong: Speaking of early treatment, what are your general feelings about the use of pharmacotherapy in prediabetes?

Dr. Del Prato: I doubt this is affordable, though in some very high-risk individuals it may be rational enough. The point is that pre-diabetes is not currently considered a disease

Jessica Dong: Do you think we could define it to be a disease?

Dr. Del Prato: There's some semantics here because we define the disease diabetes based on some conventional cutoff glucose levels. Whether or not these glucose values are really associated with an increased risk for microvascular or macrovascular complications is still debated, but we define the disease because we want to provide treatment to prevent complications. On the contrary, in pre-diabetes, we

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might consider treatment to prevent hyperglycemia, something we know that can be accomplished by lifestyle modification. Someone may also see pharmacological treatment for pre-diabetes as an excuse to further discourage people to adhere to lifestyle changes. We live in an era in which we look for the remedy. We got something wrong, we fix it. We have a car, we don't pay much attention to whether we use it in a proper manner because we can change it or can get it fixed. I think we tend to do the same with our health.

We need to be positive and show that diabetes and its sequelae can be prevented. The long-term results of the Diabetes Prevention Program showed that lifestyle modification is effective in reducing conversion to diabetes and, even more importantly, its positive effect is still ten years later. The same is true for the China Da Qing Diabetes Prevention Study. The effect is still there, so it's something we can rely on for years.

Of interest, in the DPP, metformin had a beneficial effect in preventing diabetes; however, its efficacy was less pronounced than lifestyle intervention. Also, in terms of the carry-on effect, it remained less effective.

Finally, the economical implication of pharmacologic intervention in pre-diabetes should be considered as well. How many people have pre-diabetes in US? There are already 30 million obese people; what the cost increase if they were all started on a drug?

Kira Marker: Do you think that anyone will do those studies to look at the economics? Who should be doing those studies?

Dr. Del Prato: The economic evaluation has been actually performed. Lifestyle modification was found to be cost-effective in the DPP, though a program like that would require incredible, phenomenal organization. Lifestyle modification, however, needs to be guided. The business of gyms and diet food is huge. In spite of that, the prevalence of obesity continues to increase. Quite a paradox, isn’t it?

Nina Ran: You discussed the lifestyle treatments that we prescribe ourselves in the US and that we spend money on. Do you think that lifestyle interventions are being given to a population that's different from the population that is at higher risk of prediabetes? Often times, lower income populations have a higher incidence of prediabetes but aren’t able to spend money on lifestyle modification.

Dr. Del Prato: The point is whether lifestyle intervention at all is given to anyone. But you are right, there are strata of the society where the risk of obesity and metabolic diseases is much greater. Low social class and low educational level are both associated with a greater risk of diabetes. Nutrition among these individuals is often high in calories and low in nutrient quality. A paternalistic, if not accusatory, approach is unlikely to be effective here. We should go back to the comments we already made earlier on. We should improve education, awareness, and the appreciation of the risk of inappropriate nutrition and lack of physical activity. We should favor access to healthy food and ensure that the environment can facilitate physical activity, including ad hoc facilities for sport activities.

Nina Ran: Do you think that pharmacotherapy could be part of that system?

Dr. Del Prato: Alternatively, we should try to have better tools to identify very high-risk individuals who may benefit from starting on pharmacotherapy. A number of research groups are working to identify biomarkers that may support us in this type of decision. We also have developed a program that is known as Genetics, Physiopathology and Evolution of Type 2 Diabetes (GENFIEV), where high risk individuals identified in collaboration with PCPs have been carefully characterized both in term of pathogenic Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 56

mechanisms (i.e. beta-cell function and insulin action) as well as genetic background and cardiovascular risk. Hopefully, these efforts will be able to give us better opportunities for preventing type 2 diabetes.

Jessica Dong: What if we were able to very accurately predict which people with prediabetes would progress to diabetes?

Dr. Del Prato: Thanks to studies like the one mentioned before, I think we're getting better at that. In the meantime, we should take full advantage of what we already know can represent a risk condition: obesity, family history, prior gestational diabetes, dyslipidemia and hypertension, aging, and prior identification of glucose impairment. In all these individuals, lifestyle is highly recommended along with regular monitoring of glucose tolerance in order to intervene at the first sign of accelerating to diabetes.

Jessica Dong: How good are we right now at predicting who goes from prediabetes to diabetes? Is there still a lot of room for improvement or are we already pretty good at it?

Dr. Del Prato: We have to be better, and studies are ongoing in the attempt to define better diagnostic tools. Alternatively, we could try to screen as many individuals as possible. For this, simple and inexpensive tools are needed. One way to do it is to use a questionnaire with a few simple questions to be answered to build up a risk score. The most common questionnaire is the one derived from the Finnish Diabetes Prevention Study, which has been validated in many European Countries.

Nina Ran: Is it the same for people who have been in diabetes remission for a while? In your presentation earlier today, you noted that the definition of a cure should encompass the risk of getting diabetes again. Can we accurately predict the risk of relapsing?

Dr. Del Prato: Well, we are learning a little bit more about the recurrence of diabetes. For instance, factors affecting diabetes recurrence after bariatric surgery are becoming clearer. Metabolic surgery, as it is now more commonly defined, is often followed by the disappearance of hyperglycemia and the withdrawal of antidiabetic therapy even in people who were already on insulin treatment. Yet, a number of individuals tend to have a relapse of their diabetes. The risk of diabetes recurrence is greater in older individuals, in those with longer duration of the disease, and in people who already were on insulin.

Nina Ran: Once patients have gone into remission and have been there for a while, can we predict what happens afterwards?

Dr. Del Prato: That is something that we are learning as the number of people undergoing metabolic surgery increases and as the follow-up periods get longer. I think that the factors I mentioned – less reduction in the body weight because of the surgical operation, prior treatment and more complex prior treatment – lead to greater chances of relapsing.

TYPE 2 DIABETES PATHOPHYSIOLOGY

Nina Ran: Barbara Corkey has posited the theory that high insulin secretion actually precedes obesity and insulin resistance, and is the triggering factor for type 2 diabetes. What do you think of this hypothesis?

Dr. Del Prato: What we know from previous studies is that people at risk of diabetes already have impairment of both insulin secretion and insulin sensitivity. When we speak of hyperinsulinemia, we refer to circulating plasma insulin levels, which do not necessarily reflect beta cell function. Generally speaking, when insulin concentration is measured, pre-diabetic, overweight people have higher plasma insulin

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levels compared to normal people. However, if the beta cell function is explored in a more direct manner, a defect becomes readily apparent. This defect is almost invariably associated with an impairment in insulin sensitivity. The two parameters are very difficult to separate. For instance, in people with normal glucose tolerance who move to impaired glucose tolerance, the two parameters – i.e. insulin action and beta cell function – worsen together. Conversely, those who convert from impaired to normal glucose tolerance have a concomitant improvement of both factors.

Thus, insulin resistance and defective beta cell function – no matter if the insulin concentration is high or low – are most likely present very early in the natural history of diabetes and obesity.

Nina Ran: Do we have a clue as to whether increased insulin secretion by the beta cell comes after impaired insulin sensitivity or before?

Dr. Del Prato: This is a question investigators have tried to address for years and, sometimes, opposed parties have stood up in favor of one or the other. So far, it has been practically impossible to unlink the two. Having said so, it must be appreciated that in term of genetic predisposition, the vast majority of genetic variants that have so far been identified are related to beta cell dysfunction rather than insulin action. It’s tough to say whether this can be taken as a suggestion that the primary defect resides in the beta cell. The relationship between the genetic variant and function is largely based on associations. Therefore, the more accurate the measure of function, the higher the chances of showing an association. From this point of view, assessment of beta cell function appears to be more accurate than insulin sensitivity.

Nina Ran: Do we know how fast insulin is cleared? Would that help us have a better understanding of total insulin levels?

Dr. Del Prato: Plasma insulin clearance is a complex mechanism that depends on first pass hepatic clearance, insulin binding to its membrane receptors and internalization of the insulin-receptor complex, protein degradation, and loss through the kidney. The half-life of insulin is quite rapid, in the order of few minutes. Nonetheless, methods have been developed to study beta cell function independently of prevalent insulin and glucose levels. These methods are largely based on the kinetics of C-peptide and allow for the estimation of parameters of beta cell function that can be confronted in different patients and in response to interventions.

Nina Ran: What kind of experiments could we perform to try to unlink them?

Dr. Del Prato: This may be quite difficult and cumbersome. One could consider starting to look very early in life and tracking changes over the time. Even with this approach, however, it may be quite difficult to unlink the two factors. Nonetheless, this should be taken as an indication of the need to concomitantly correct the two pathogenic defects of type 2 diabetes.

Nina Ran: Do you think that obesity directly causes type 2 diabetes, or is there potentially a third metabolic factor?

Dr. Del Prato: My way to look at the problem is that the pathogenesis of type 2 diabetes is complex and recognizes different factors that favor the development of diabetes. These include the genetic background (i.e. the presence of genetic variants), as well as the modulation of gene expression (i.e. through epigenetics) as induced by exposure to specific environments. Moreover, we can recognize secondary factors that work as catalyzers of the genetic predisposition. Among these, obesity plays a major role. In the US, the change in the incidence of obesity over the past 20 years has paralleled the change in the Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 58

incidence of diabetes. The two conditions go hand by hand. Obesity can trigger diabetes by increasing free fatty acid availability and inflammatory processes, exerting a negative effect on both peripheral tissues and beta-cell function – a process known as lipotoxicity. Moreover, with the adipose tissue enlarging, fat starts to build up in unusual places such as the liver, muscle, heart, vessels, and pancreatic islets, a phenomenon known as “ectopic fat”. Altogether, this contributes to the exacerbation of insulin resistance, beta cell dysfunction and apoptosis, and cardiovascular risk. The subsequent development of hyperglycemia will function as an accelerator of these processes through glucotoxicity.

Nina Ran: Do you think we will ever a drug that directly addresses insulin resistance?

Dr. Del Prato: This is a good question. At the present time we are left with metformin, a weak insulin sensitizer with a prevalent effect on the liver, and glitazones, which are associated with a number of limiting side effects. Active research is ongoing to explore the multiple steps involved in the insulin signaling pathway, but most of the targets identified so far remain speculative and/or in their pre-clinical phase. The only compound in an advanced clinical phase is aleglitazar. This is a dual PPAR alpha/gamma with the potential to act on both glucose and lipid metabolism. [Editor’s note: Dr. Del Prato recently reminded us that the cardiovascular trial ALECARDIO (designed to explore aleglitazar potential cardiovascular protection) was prematurely interrupted because of an unfavorable risk/benefit ratio.]

Kira Maker: I heard an interesting talk this morning about whether improved cardiovascular risk is due to reductions in glucose or to improvements in insulin resistance. I was just wondering if you had any perspective on that.

Dr. Del Prato: The question whether improvement of glycemic control can have a positive effect on cardiovascular risk remains a matter of debate. ACCORD, ADVANCE, VADT concluded that improving glucose control was not associated with significant effect of CV risk. Only by pooling together all the data from all the CV outcome studies was it possible to show a significant 16% reduction of the risk of myocardial infarction, with no effect on cardiovascular mortality. It remains to be proven whether specific intervention on insulin resistance may have a beneficial independent effect.

Nina Ran: Do you think those studies were long enough or designed well enough to measure of any of that?

Dr. Del Prato: Those studies showed that it is possible at any stage of the disease progression to achieve and maintain strict glycemic control, which may not necessarily translate into improved cardiovascular disease. The point is that glycemic control was achieved too late in the natural history of diabetes.

Nina Ran: What if we shifted this question to just people with early diabetes?

Dr. Del Prato: I had the opportunity to comment the VADT results at the EASD Annual Meeting when results of the study were made public. In preparing my comment, I was looking at the data when I realized that the patients recruited in the VADT had a baseline A1c of 9.4%, not really good glycemic control. In six months, the investigators managed to reduce patients’ A1c levels down to 6.8% and maintain that level for the rest of the study. The other thing that struck me was the duration of the disease (12 years) and the high prevalence of patients who already had microvascular and macrovascular complications. The question I asked myself was, “What happened of the metabolic control of these patients in the years before they entered the trial?” So, I tried to extrapolate the prior history of their diabetes using an educated guess. The UKPDS told us that upon diagnosis and initial improvement in A1c, there is a progressive deterioration of glycemic control to the point a patient may reach, over the years, an A1c of 9.4%, similar to the VADT participants. At that point, intensive treatment is implemented, A1c suddenly Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 59

improves and, fantastically, it stays there for the next five to six years. Yet no effect is obtained with respect to CV risk. However, one should ask what could have occurred if the same degree of glycemic control were ensured from the very beginning of the disease. If we assume that this is something that can be accomplished, it is readily apparent that there is a major difference from the hypothetical natural history of diabetes of the patients in the VADT. This difference consists in a number of years with poor metabolic control that may have prevented the full exploitation of subsequent improvement in glucose control. In other word, a lack of initial good glycemic control may result in the development of diabetic complication (as it was the case in a large percent of the patients) and in the building up of a metabolic memory that conditions the system to become resistant to the beneficial effect of strict glycemic control. This view is supported by the results of the UKPDS follow-up study: patients with no prior cardiovascular events properly treated from the time of diagnosis acquired a legacy effect conferring them cardiovascular protection that was still apparent ten years after the intervention was stopped.

Nina Ran: Wow, thank you so much for taking the time to speak with us. This was fantastic.

--By Nina Ran, Jessica Dong, Kira Maker, and Kelly Close

5. Conference Pearls: American Diabetes Association – 73rd Annual Scientific Sessions

June 21-25, 2013 Ÿ Chicago, IL Ÿ http://scientificsessions.diabetes.org/

ADA’s 73rd Scientific Sessions drew 17,737 attendees, on par with last year’s 17,890 attendees and up from 17,300 people in 2010. In our conversation with ADA organizers, they noted that ADA 2013 included over 14,000 medical professionals, a slight increase of ~3% over last year. A striking 59% of registered attendees were international, representing a total of 117 countries (up from 111 in 2012) – despite “American” in the name of the conference, this statistic truly symbolizes the global nature of diabetes. The largest international contingents hailed from Brazil, Japan, India, China, and Canada. With 730 expert speakers this year, the five-day meeting spanned eight tracks and included 92 symposia, 387 oral presentations, 2,511 posters, over 150 exhibits, 60 guided audio poster tours, 16 meet the expert sessions, 11 corporate symposia, nine interest group discussions, five current issues, and four special lectures – a phenomenal array of brainpower, depth of discussion, and breadth of topics. We’ve sorted through the learnings and below are our themes from the conference based on 321 presentations – drawn from symposia, lectures, oral presentations, corporate symposia, and the meet-the-expert sessions – as well our coverage of 31 posters and 25 exhibits.

DIABETES TECHNOLOGY

• ADA 2013 showcased closed-loop progress in a big way, with outpatient trials becoming the norm rather than the exception. In a series of oral presentations during “The Journey to a Viable Artificial Pancreas” session, Dr. Revital Nimri (Schneider Children’s Medical Center of Israel, Petach Tikvah, Israel) presented encouraging results from the DREAM 4 closed-loop trial, which compared overnight glycemic control with the MD-Logic AP system to sensor-augmented pump control in the patients’ homes (13-OR). We also heard Dr. Steven Russell’s (Harvard Medical School, Boston, MA) brief update on the ongoing five-day, outpatient Beacon Hill study testing his and Dr. Edward Damiano’s (Boston University, Boston, MA)

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bihormonal bionic pancreas (15-OR) (to read a patient perspective on the trial, visit http://diatribe.org/issues/55/test-drive). Meanwhile, Dr. Kenneth Ward previewed an upcoming outpatient, hotel-based study exploring his group’s bihormonal closed-loop system (14-OR). Also at ADA 2013, we heard updates from Dr. Boris Kovatchev (University of Virginia, Charlottesville, VA) on two recent outpatient trials comparing open- and closed-loop control. Dr. Helen Murphy (University of Cambridge, Cambridge, UK) and the Cambridge team are even embarking on the very first outpatient feasibility study investigating overnight closed-loop control in pregnant women with type 1 diabetes. In contrast to the previous years, this year’s discussion around the closed-loop overwhelmingly had a sense of “when,” not “if.” While systems are very much still in the feasibility and research phase (e.g., on smartphones rather than in pumps), AP trials are now bolder than we’ve ever seen (e.g., missed meal boluses, exercise, simulated errors). There’s no question that a lot has to go right to bring a device to market, but the rate of progress in recent years has been very encouraging from a patient perspective. This is in large part due to the efforts of JDRF and the Helmsley Charitable Trust, as well as to many committed researchers. Now, we hope companies seize the opportunity and bring devices to market in the coming years.

• ADA 2013 made it abundantly clear that even closed-loop systems with the smallest amount of automation can make a huge difference in patient outcomes. This was most clearly demonstrated in new data on Medtronic’s MiniMed 530G/Veo pump with low glucose suspend. Most striking to us was Dr. Trang Ly’s (Princess Margaret Hospital, Perth, Australia) randomized controlled trial (228-OR) comparing low glucose suspend (LGS) with the Paradigm Veo to pump-only therapy over a six-month period in 95 patients with hypoglycemia unawareness. In what Dr. Hans DeVries called “the most important study at this whole meeting,” LGS eliminated (!) severe hypoglycemia without any increase in A1c in the 46 patients in the Veo group. Medtronic’s late-breaking poster (48-LB) on the ASPIRE in-home study echoed these strong results: big improvements in hypoglycemia without any increase in A1c. In our view, both studies provided strong real-world evidence that even low-glucose-suspend technology – literally a baby step in closed-loop development – will have a very big clinical impact on patients (and from a payer perspective, the severe hypoglycemia benefits are nothing to downplay either). For now, our waiting caps are on as the FDA continues to review the MiniMed 530G (as of Medtronic F4Q13, approval was expected this calendar year).

• The range of artificial pancreas systems described at ADA suggests that a “closed- loop” device will likely be as diverse and varied as any other diabetes technology. The oral session on “The Journey to an Viable Artificial Pancreas” displayed devices under development, ranging from low glucose suspend targeting nocturnal hypoglycemia to bihormonal closed-loop systems for 24/7 control. We heard multiple perspectives on the optimal design for closed-loop products: a debate headlined by Dr. Bruce Buckingham (Stanford University, CA) and Dr. Moshe Phillip (Tel Aviv University, Petah Tikva, Israel) explored whether treat-to-range techniques worked better than fully closed-loop control. Meanwhile, talks throughout the meeting made it clear that companies and academic groups are continuing to move products forward in different areas – everything from low glucose suspend to multi-hormonal, fully closed-loop control is being pursued.

o We would not be surprised to eventually see different closed-loop products for different types of patients – those already in tight control might benefit the most from a predictive low glucose suspend system, while those who often forget meal boluses might see the most positive benefits with a fully closed-loop system. Certainly, the wide breadth of JDRF’s recent funding initiatives (supporting multiple closed-loop approaches) suggests that there is no one “right” option for patients. This broad swath of initiatives was most clearly emphasized by JDRF’s Dr. Aaron Kowalski in the JDRF/NIH Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 61

Closed-Loop Control Meeting. Like in other market spaces, we expect to see variability in what patients want from their technology (e.g., how much control will they be willing to give over to their technology? How important is reducing the number of devices [i.e., having an integrated sensing-infusion device]? Will patients prefer intraperitoneal delivery vs. subcutaneous delivery?). What will be particularly fascinating to see is how patient selection and reimbursement will work for these different devices.

o Many are still debating whether insulin-only closed-loop systems are enough, and if not, what hormone should be added next. We note that the day before the start of ADA 2013, JDRF announced two partnerships (with Xeris and Latitude) to develop a stable, pumpable glucagon for the artificial pancreas. In our view, glucagon stands to add a lot to the artificial pancreas from a safety perspective, though it certainly increases a system’s complexity from an R&D, regulatory, and cost perspective. Stabilizing glucagon is definitely a challenging scientific hurdle to climb, as many companies have been working on it for some time. We are optimistic this is coming in the next few years, and we hope to see players like Novo Nordisk and Lilly jump into the game as well. Speaking of other hormones, we also have high hopes for amylin, as adding it to insulin in the closed loop would mimic natural physiology quite well. It will certainly be interesting to see which group/company with which hormone(s) will be the first to file for regulatory approval, as well as how one group’s experience with the FDA and on the market will impact other systems under development.

• The absence of Abbott and Bayer – both Big Four blood glucose monitoring (BGM) companies – in this year’s exhibit hall speaks to the growing business challenges in the BGM market. Competitive bidding was a topic of discussion among ADA attendees, as the meeting took place just days before the July 1 implementation date for the national competitive bidding program for diabetes supplies. The impact on the BGM industry and on patient care has been difficult to fully understand, and we were somewhat disappointed not to see formal discussion on the matter at the 73rd Scientific Sessions. At the 7th Annual Diabetes Forum (presented by TCOYD, Close Concerns, and diaTribe), Dr. James Gavin (Emory University School of Medicine, Atlanta, GA) captured the sentiment of many attendees: “I’m not asking ADA to take a position or put it’s neck on the line, but everyone who is interested in and committed to sensible things happening on behalf of patients in this space, is either at this meeting or could have been at this meeting. To organize a forum within this meeting that could speak in substantive ways about how we might develop a focus that could circumvent some of this trend – I’m surprised that this hasn’t happened and quite frankly disappointed.” We are already looking to the next major US diabetes conference, the American Association of Diabetes Educators (AADE) Annual Meeting & Exhibition, and hoping to see if there is space for such a forum to take place.

• In the world of CGM, comparisons between Dexcom and Medtronic were front and center. One major highlight was Dr. Steven Russell's (Massachusetts General Hospital, Boston, MA) presentation comparing the Dexcom G4 Platinum, Abbott FreeStyle Navigator, and Medtronic Enlite (171-OR). Dexcom’s accuracy (MARD) came in at an impressive 10.8%, slightly ahead of the Navigator at 12.3% and far ahead of the Enlite at 17.9%. We were most struck by the lower-than-expected Enlite accuracy results, which were far lower than the 13.6%-16.3% MARDs presented in the company’s poster at last year’s ADA. To us, this underscores the critical importance of independent, investigator-initiated, head-to-head evaluations of CGM – there are simply too many differences in study design, data processing, reference methods, patient populations, and accuracy metrics to directly compare accuracy across manufacturer studies. We look forward to seeing future accuracy data on Medtronic’s pipeline of CGM products in development: Enlite 2 (submitted for CE Mark), its optical sensor, and several redundant sensor Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 62

products. As the first ADA with the FDA approved G4 Platinum, Dexcom’s exhibit hall booth and posters focused on data from the device’s pivotal study. Particularly notable were the improvements in hypoglycemia alarm accuracy and detection (391-P), an area enthusiastically highlighted in Dr. Irl Hirsch’s presentation on CGM and hypoglycemia. Last, Dexcom’s exhibit hall booth really underscored the comparisons between its G4 Platinum and Medtronic’s Sof- Sensor and Enlite, headlined by a one-page handout entitled “Accuracy matters.” Overall, we’re glad to the see healthy competition between both companies on CGM performance – it stands to bring better products to patients and improve the overall utility of CGM over the long-term.

• A few studies tested CGM in specific populations, though none showed strikingly positive results; we are optimistic that future trials using newer, next-gen devices will indeed demonstrate strong benefits. On the type 2 side, Dr. Richard Bergenstal (Park Nicollet International Diabetes Center, St. Louis Park, MN) presented results from one of the few studies comparing structured SMBG to CGM data in 104 patients with type 2 diabetes. Both SMBG data (Roche Accu-Check 360° View) and CGM data (ambulatory glucose profile) resulted in significant improvements in A1c and time in range compared to baseline (no between-group difference), but only CGM reduced the percentage of readings in the hypoglycemic range. Meanwhile, two other studies disappointingly showed little benefit to wearing CGM in specific populations: the HypoCOMPaSS trial in patients with impaired hypoglycemia awareness (387- OR) and Dr. Elizabeth Mathieson’s study in pregnant women with type 1 diabetes. Importantly, both used Medtronic’s Sof-Sensor and not the newer (though yet-to-be FDA-approved) Enlite. In the past, Dexcom has repeatedly mentioned the “lag time” between published clinical trial data and use of next-gen devices like the Enlite and G4 Platinum – we think this is an especially critical point for a field as new as CGM, where early perceptions of the technology and data seem to color the field for years to come. We have no doubt that more trials will emerge in the coming years testing newer-generation devices – the higher utility of these devices (e.g., better accuracy, reliability, and signal transmission) stand to show much stronger clinical benefits in our view.

• We did not see any landmark new data on investigational CGM systems in development, though it was encouraging to see movement from several companies. Roche (172-OR), Senseonics (176-OR), EyeSense (177-OR), and other groups presented data on their systems in development – in our view, none are ready for prime time quite yet, though it’s very positive to see continued focus on gathering data and presenting it publicly. There’s no doubt that much better products have emerged over time from the early days of CGM, though the perceived clinical utility of CGM is still too low, and doctors are still not adequately rewarded for helping patients get on CGM. While the product is well reimbursed, we believe doctor time isn’t – that’s a systemic problem that may be challenging for companies to address on a broad scale, though better next-gen products will certainly go a long way towards empowering parents to better utilize the technology in the long run. We also think better patient training from companies could go a long way towards properly setting expectations and optimizing use of CGM. We think an even bigger shift towards compelling self-training materials (e.g., videos, online assistance, live chat) would be welcomed by patients new to CGM.

DIABETES DRUGS

• While last year’s ADA provided the bulk of the glycemic efficacy data for SGLT inhibitors, ADA 2013 provided a more nuanced view of their action profiles and benefits for specific patient populations. Notably, we saw the first clinical data on the use of the SGLT-2 inhibitors dapagliflozin (70-LB) and empagliflozin (1074-P) in type 1 diabetes. While still in the early stages, these investigations in type 1 appear quite promising and further support the movement toward using non-insulin agents (such as GLP-1 agonists) in this patient Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 63

group. On the SGLT-2 inhibitor front, we also heard new data showing that dapagliflozin improves insulin sensitivity and secretion (242-OR), that combined A1c and weight reduction is achieved more frequently with dapagliflozin than with glipizide (236-OR), and that canagliflozin provides greater reductions in A1c and body weight compared to sitagliptin (238-OR). Lexicon Pharmaceuticals had a strong showing during the SGLT inhibitor oral sessions, presenting three abstracts. Most notably, preclinical data for the SGLT-1 inhibitor LX2761 indicated that the drug increases GLP-1 levels (with or without sitagliptin), decreases postprandial glucose excursions, and improves glycemic control (240-OR). The two presentations on Lexicon’s SGLT-1/SGLT-2 dual inhibitor LX4211 provided additional details on the phase 2 results that were first released last summer – i.e., that LX4211 reduced systolic blood pressure in a dose-dependent manner (241-OR) and decreased both body weight and triglyceride levels in patients with elevated weight and triglycerides at baseline (243-OR).

• The discussion of insulin therapy at ADA focused mainly on up-and-coming compounds, rather than on ways to optimize the use of current products. In a presentation on new insulin formulations, Dr. Thomas Donner (Johns Hopkins University, Baltimore, MD) outlined the advantages of both ultra-long-acting insulins (reduced nocturnal hypoglycemia and less weight gain – or potentially weight loss), as well as ultra-rapid-acting insulins (greater reductions in postprandial glucose excursions). His talk covered a range of candidates, including Novo Nordisk’s insulin degludec, Lilly’s pegylated insulin lispro, Biodel’s BIOD-123 (insulin lispro with citrate and calcium EDTA), and Novo Nordisk’s FIAsp. Speaking on alternative insulin delivery systems –i.e., transdermal, nasal, sublingual, buccal, oral, inhaled, and intraperitoneal – Dr. William Cefalu (Pennington Biomedical Research Center, Baton Rouge, LA) placed the greatest focus on oral insulin, noting that several candidates are currently in development: Biocon’s IN-105, Oramed’s ORMD-0801 (with new data in poster 1054-P), Diabetology’s Capsulin, Novo Nordisk’s oral insulin candidate, and Diasome’s hepatic-direct vesicles. While not presenting new data, Sanofi released a poster and a press release highlighting the results of EDITION I and EDITION II for it’s new U-300 insulin glargine formulation. Authored by Dr. Matthew Riddle (Oregon Health and Science University, Portland, OR), the EDITION I poster showed that U-300 was non-inferior to glargine U-100 in lowering A1c, and that participants on U-300 glargine experienced lower rates of severe or nocturnal confirmed hypoglycemia (36.1% with U-300 vs. 46.0% with U-100; p=0.0045; 43-LB). As noted in the press release, topline results from EDITION II were consistent with those from EDITION I with regard to glycemic efficacy and rates of hypoglycemia. Discussion of Novo Nordisk’s insulin degludec (Tresiba) was noticeably absent during the conference, as the drug received a Complete Response Letter from the FDA in January – we imagine that the next wave of data on this drug will be presented at EASD 2013 in Barcelona.

• There was little groundbreaking data for GLP-1 agonists as monotherapy for type 2 diabetes this year – the most exciting data for this drug class concerned their potential in type 1 diabetes (liraglutide [1007-P]) and in combination with basal insulin (IDegLira [65-OR]; see bullet on combination therapy). On the novel GLP-1 front, detailed results for dulaglutide’s AWARD 1, 3, and 5 were presented that expanded on the topline data for these trials disclosed in October 2012 (66-OR, 69-OR, 71-OR, 1004-P). The top dose of dulaglutide provided a ~1% additional A1c reduction over placebo, an additional 0.7% reduction over sitagliptin, and a 0.2% additional reduction (statistically significant) over metformin. Dulaglutide data seemed strong overall, with adverse event profiles similar to that of other long-acting GLP-1 agonists. Detailed results of GSK’s albiglutide’s HARMONY 8 were presented (68-OR) during which albiglutide provided 0.3% greater A1c reduction than sitagliptin in people with renal impairment. While Sanofi was supposed to share more information on the

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functionality of its Lyxumia/Lantus fixed-ratio combination device (and the problems that it encountered with the fix-flex device), the company disclosed disappointingly little during the conference call it held during ADA. Also notably, a phase 1 study of the safety and efficacy of the oral GLP-1 agonist TTP054 (115-OR), found consistently greater declines in fasting plasma glucose and two-hour postprandial glucose versus placebo-treated patients, with no hypoglycemic events and with a similar rate of GI adverse events to the placebo arm. No other oral GLP-1 agonist has reported results yet; we believe that the diabetes community is in the early stages of seeing GLP-1 use, as considerably more patient- and provider-friendly means of administering GLP-1 agonists are being developed and commercialized. This suggests the market will be very interesting to watch from a commercial perspective in the years ahead, barring any surprises on the pancreatitis/pancreatic cancer front.

• DPP-4 inhibitors received the spotlight on Sunday morning in an oral session that included a range of topics. Pooled data from three phase 3 studies indicated that linagliptin (BI/Lilly’s Tradjenta) has a favorable effect on the composite primary endpoint of cardiovascular (CV) death, non-fatal stroke, and non-fatal myocardial infarction (HR: 0.78; 95% CI: 0.55-1.12; 376-OR) – interestingly, Dr. Odd Erik Johansen spent only a fraction of time discussing the CV data, perhaps because linagliptin’s CV outcomes trial CAROLINA (comparing the drug to glimepiride) will provide more concrete data on the drug’s CV effects (though CAROLINA is not expected to finish until 2018). A study of linagliptin in type 2 diabetes patients on hemodialysis included the use of CGM and found that switching patients from insulin to linagliptin led to marked decreases in mean amplitude of glucose excursions (MAGE) while on hemodialysis (374- OR). On the preclinical front, Dr. Marco Bugliani (University of Pisa, Pisa, Italy) presented in vitro data showing that the DPP-4 enzyme is present in human pancreatic islet cells (primarily alpha cells) and that DPP-4 inhibitors such as Merck’s MK-0626 could have direct protective effects against glucotoxicity and lipotoxicity (378-OR). Outside of the oral session, a notable poster by Dr. John Buse’s (University of North Carolina, Chapel Hill, NC) group investigated the question of DPP-4 inhibitors and pancreatic cancer and found no increased risk of pancreatic cancer or any cancer with DPP-4 inhibitors compared to SFUs or TZDS (111-LB).

o Looking forward, we see several major questions for DPP-4 inhibitors: first, what can we learn from the many CV outcomes trials? The SAVOR-TIMI trial for BMS/AZ’s Onglyza revealed a piece of the puzzle, indicating that Onglyza was non- inferior but not superior to placebo for reducing CV events. Interestingly, we did not hear as much discussion on DPP-4 inhibitors and cardiovascular effects as we expected, perhaps since SAVOR-TIMI did not achieve its ambitious endpoint of superiority or perhaps since most CVOTs are a few years away from reporting results. Broadly, we are not surprised superiority was not reached, given the short time period studied. We wonder if it would be different had a smaller number of patients been studied over a longer time period (we recognize this is a fairly theoretical question given the commercial implications of a trial being longer). Secondly, we’re interested in the optimal approach for combining DPP-4 inhibitors with other therapies – we’re already seeing movement on this front with the BMS/AZ Alliance, the Lilly/BI partnership, and the Merck/Pfizer partnership (the latter which will aim to develop a ertugliflozin/sitagliptin fixed-dose combination), and likely with yet still others, and we’re curious about the possibility of combining a DPP-4 inhibitor with a GPR40 agonist such as Takeda’s TAK-875. Lastly, we’ll be keeping a close eye on whether and how the prescribing patterns for DPP-4 inhibitors change as SGLT-2 inhibitors enter the market – while SGLT-2 inhibitors come with the added side effect of genitourinary infections, KOLs have yet to reach a consensus on whether this issue will be a significant barrier for patients; for now, it certainly seems

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to be considered a more manageable side effect than nausea, weight gain, and other side effects associated with other drugs.

• The potential association between pancreatitis and incretins was on the minds of many. Several talks during corporate symposia on GLP-1 agonists or DPP-4 inhibitors addressed the topic, reinforcing the opinion that current clinical data are insufficient to suggest taking patients off of these drugs. Most strikingly, Dr. Vanita Aroda (MedStar Health Research Institute, Hyattsville, MD) spoke at an independent session where, during Q&A an audience member asked if she herself would take her patients off of incretin-based therapies at this point. She turned the question around, and a poll of the very-packed audience found that no one would do this. While this sentiment likely prevails with endocrinologists, PCPs may find the decision less clear-cut; this question and other related ones are being explored in a new PCP survey from our sister company dQ&A (write [email protected] for more information). A related question, of course, is whether a PCP deciding to initiate incretin-based therapies for a patient would instead opt for an SGLT-2 inhibitor as we await more safety data on DPP-4 inhibitors and GLP-1 agonists. Clearly, there are competing forces at play since the long-term safety profile of SGLT-2 inhibitors is also more unknown relative to the incretin profiles.

• Combination therapy took center stage for type 2 diabetes drugs for the first time this year. We noticed more companies venturing beyond metformin combination therapy into the branded combination therapy realm – while data are still a bit sparse and in their early stages, what we have seen is impressive. The results for IDegLira (insulin degludec and liraglutide) were some of the most compelling we saw at the conference: Dr. John Buse presented data from IDegLira’s DUAL-1 (65-OR), during which over 80% of patients taking IDegLira achieved the A1c goal of 7.0% or below. IDegLira was better than degludec alone in terms of hypoglycemia (one third less than with degludec) and weight (slight weight loss, instead of weight gain with Tresiba). Dr. Ralph DeFronzo’s highly-anticipated Triple Therapy results (presented by Dr. Muhammad Abdul-Ghani [University of Texas Health Science Center, San Antonio, TX]) were another highlight in combination therapy (72-OR). We thought the results were encouraging (detailed below), though interpretation is complicated given how unusually well conventional therapy performed.

• ADA 2013 provided both high-level and nuanced analysis on navigating the type 2 diabetes treatment paradigm. Taking a targeted approach, Dr. Ralph DeFronzo’s study (which was presented twice during the conference) investigated whether triple therapy (metformin plus pioglitazone plus exenatide twice daily) provided greater glycemic control compared to the conventional step-wise method previously endorsed by the ADA (metformin followed by subsequent addition of an SFU and then basal insulin). The study showed compelling results for the triple therapy approach (an average A1c of 6.0% after 24 months, vs. 6.6% in the conventional therapy arm, from a baseline A1c of 8.6%) and corroborated the advantages of addressing the pathophysiological defects underlying diabetes rather than just hyperglycemia. The study also raised several questions beyond the glycemic efficacy of these two treatment approaches – i.e., how relevant are the results now that prescriptions for pioglitazone and exenatide twice daily appear to be decreasing? How can the results of the trial be replicated in a real-world setting? Should specialists and maybe even PCPs follow the deliberate titration scheme used in the study? We’re reminded of the ADA/EASD position statement – which highlighted the lack of head-to-head data comparing different therapies or treatment approaches – and hope that future trials will continue to evaluate treatment methods, as well as the dosing needed to optimize these approaches. On the broader level, we heard further discussion of the ADA/EASD position statement (by Dr. Anne Peters), as well as more commentary on the recently-released AACE

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comprehensive treatment algorithm (by Dr. Paul Jellinger). In general, KOLs appear to agree that rather than opposing each other, the two documents serve different purposes and advantages for different types of HCPs.

• Overall progress for diabetes drugs was more incremental this year compared to the larger leaps seen in diabetes devices – highlights were Elcelyx’s NewMet and the use of type 2 drugs in type 1 diabetes. The late-breaking poster for Elcelyx’s NewMet garnered considerable acclaim (75-LB). This delayed-release version of metformin aims to address two of the biggest barriers for metformin uptake: renal insufficiency and gastrointestinal side effects. The company estimates that four million out of the seven million people in the US not on metformin that could benefit from it are not on treatment because of either of these two factors. Elcelyx’s market research, strikingly, suggests that US payers would support NewMet at price parity with Januvia. Furthermore, 60% of surveyed physicians blindly rated the product profile of NewMet as “significantly better” than metformin and indicated that they could see such a product replacing metformin in more than 40% of patients currently on metformin. We imagine the biggest potential for NewMet will be in oral combination therapies, in which the current metformin may muddy a otherwise cleaner side effect profile (e.g., in Janumet or in future combination with SGLT-2 inhibitors). On the topic of repurposing type 2 diabetes drugs for type 1 diabetes, posters on dapagliflozin (70-LB), liraglutide (1007-P), and Lilly’s glucagon receptor antagonist LY2409021 (64-LB) all suggested that these drugs that were initially developed for type 2 diabetes could considerably reduce insulin requirement for people with type 1 diabetes. We are encouraged to see this substantial progress here toward gaining an official type 1 diabetes indication for these drugs, since, as Children with Diabetes’ Jeff Hitchcock once said, “Life is lived off label.”

• Presentations on novel drug development aside from SGLT inhibitors were fairly sparse this year. No single mechanism in the earlier-stage pipeline stands out yet as the “next big thing,” though there were some promising results presented for Lilly’s glucagon receptor antagonist LY2409021, Takeda’s GPR40 agonist TAK-875, and Zealand Pharma’s liquid glucagon analog ZP-GA-1. Additional phase 2 data for LY2409021 were presented as an oral (112-OR) and poster (64-LB). In a phase 2 type 2 diabetes trial, the candidate provided a 0.6% or 0.8% placebo- adjusted A1c reduction at 10 mg and 20 mg doses, respectively, after 24 weeks and mild elevations in liver transaminases (consistent with previous observations). Meanwhile, an early- stage study in type 1 diabetes suggested it could have the potential to reduce daily insulin requirements. A poster on TAK-875 (1165-P) suggested that co-administration with glimepiride has the potential to produce synergistic effects. Zealand Pharma’s ZP-GA-1 was a surprise to many – the compound is a new glucagon analog shown to be stable in a liquid formulation (404- P). It was great to see Zealand now working on the challenging scientific problem of stabilizing glucagon in solution (joining Xeris, Biodel, Latitude, and others), an instrumental step in making the product available for the bihormonal artificial pancreas and more user-friendly rescue products. Also notable was a poster (1051-P) on Pfizer’s hepatoselective glucokinase activator (GKA) that was discontinued in phase 2. In this study, it demonstrated only modest A1c-lowering efficacy (~0.5% and 0.6% placebo-adjusted reduction on the top twice-daily and top once-daily doses tested, respectively) with a number of side effects (16-19% increase in triglycerides [TG] with three patients in the twice-daily group discontinuing treatment due to TG increases and slight elevations in ALT and AST liver enzymes).

• This year’s ADA featured a number of substantive debate-style events. The debates focused on common challenges for health care providers caring for diabetes patients, and were among the most clinically relevant events on the ADA docket. On Day #2, Drs. Martin

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Abrahamson (Joslin Diabetes Center, Boston, MA) and Saul Genuth (Case Western Reserve University, Cleveland, OH) discussed whether sulfonylureas should remain an acceptable add-on therapy for type 2 diabetes patients already on metformin. Dr. Abrahamson provided a very thorough representation of the “pro” argument given that his personal opinion is more qualified than the presentation topic he was assigned. After their partisan debate statements, the two KOLs came to a consensus that not all SFUs are created equal, and that most are only appropriate for a select group of patients early in the disease progression. On Day #4, Drs. Vivian Fonseca (Tulane University Medical Center, New Orleans, LA) and Parresh Dandona (State University of New York, Buffalo, NY) squared off regarding the appropriate course of action for type 2 diabetes patients “failing therapy” with oral agents (in the case of SFUs, we see it as closer to therapy failing patients). Dr. Fonseca argued that a GLP-1 agonist is the most prudent approach, while Dr. Dandona advocated adding basal insulin. Here, too, the debaters ended by agreeing on a number of points, namely that a combination of insulin and GLP-1 agonists could potentially prove most effective. Finally, on Tuesday, Drs. Cara Ebbeling (Children’s Hospital Boston, Boston, MA) and Michael Rosenbaum (Columbia University, New York, NY) debated whether low carbohydrate diets are helpful for maintaining weight loss. We look forward to more debates at future conferences, as they seemed to galvanize audience enthusiasm and bring forward some great questions from the floor. Nonetheless, we could not help but notice that the perceived strength of the debaters’ arguments was a function of their style as well as their arguments’ substance. We would also like to see the ADA encourage speakers to disclose their true opinions in addition to the side of the argument they are assigned to present.

OBESITY

• ADA 2013 marked the first Scientific Sessions in 13 years with new FDA-approved anti-obesity medications on the market. Vivus and Eisai are each deep in the throes of commercializing their drugs (Qsymia and Belviq, respectively) in a market that is still in the early development stage. These milestone launches were signified by the presence of each company’s booths in the Exhibit Hall, Vivus- and Eisai-sponsored product theaters, and a Vivus-supported CME. Eisai’s presence was particularly noteworthy, as Belviq was only launched on June 7, 2013 (nearly a year after being approved by the FDA due to the drug needing to be scheduled by the Drug Enforcement Agency).

• Though commercialization of the new anti-obesity drugs has been challenging, we saw several encouraging signs for the market. In Eisai’s product theater, Dr. Caroline Apovian (Boston University Medical Center, Boston, MA) convinced 53% of audience members to reconsider delaying obesity pharmacotherapy for obese or overweight patients. Vivus-sponsored and -supported events featured well-respected diabetes KOLs encouraging endocrinologists to consider prescribing anti-obesity pharmacotherapies. For example, Dr. James Gavin (Emory University School of Medicine, Atlanta, GA) led Vivus’ product theater on Qsymia, and Dr. Ralph DeFronzo (University of Texas Health Science Center, San Antonio, TX) joined obesity experts at the podium of Vivus’ CME. We believe diabetes KOLs’ growing presence at these events highlights that endocrinologists are likely to become thought leaders in the obesity field. Additionally, the highly respected family physician Dr. Michelle Look (San Diego Sports Medicine and Family Health Center, San Diego, CA) voiced strong support for the use of Qsymia and Belviq; we will be interested to see if more generalist KOLs will also join Dr. Look. PCPs are a vital group in the fight against obesity, and we were concerned leaving the American College of Physician’s annual meeting (Internal Medicine 2013) that PCPs were being dissuaded from prescribing Qsymia and Belviq by some presenters.

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• Presentations on obesity pharmacotherapies tended to be factual recounts of Qsymia and Belviq’s labels, with few opinions conveyed and little focus on drugs in development. Several presentations repeated slides from one another or rehashed talks we saw at prior conferences. Indeed, Dr. Robert Eckel (University of Colorado, Aurora, CO) noted in the panel discussion following his presentation that he was careful to keep his description of each drug factual since he wanted attendees to decide for themselves which drug to use. Fortunately there were a few exceptions to this trend. For example, during the same panel discussion Dr. Eckel later remarked that he did not think 3.0 mg liraglutide’s (Novo Nordisk’s Victoza for obesity) side effects were worth its weight loss benefit, or at least were “limiting.”

• Similar to the past two years, there were no oral sessions on obesity drugs, and there was little discussion on new clinical developments. We did, however, see several posters on anti-obesity candidates, mostly post hoc analyses of the phase 3 programs for Vivus’ Qsymia (phentermine/topiramate), Orexigen’s Contrave (naltrexone/bupropion), and Arena/Eisai’s Belviq (lorcaserin). A post hoc analysis of the phase 3 CONQUER study for Qsymia found that in patients with baseline dysglycemia, Qsymia still led to a mean weight loss of 7.6%- 11.6% across all BMI categories (2103-P). A similar analysis found that Qsymia provided significant improvements in glycemic parameters, with greater weight loss associated with greater glycemic benefits (2121-P). Additionally, two post hoc analyses of Contrave’s four phase 3 trials found that Contrave was similarly efficacious across a broad range of baseline BMIs (1130-P) and that Contrave provided significant improvements in quality of life (1056-P). A post hoc analysis of Belviq’s phase 3 program found that patient responder status at week 12 (i.e., whether or not a patient achieved ≥5% weight loss) strongly predicted weight loss at week 52, thus providing evidence to support Belviq’s 12-week stopping rule in patients not achieving ≥5% weight loss (2117-P). With regard to novel obesity therapeutics, one notable poster presentation was on early phase 2 data for Zafgen’s MetAP2 inhibitor, ZGN-440 (beloranib). The highest dose of ZGN-440 provided up to 10 kg (22 lb) of weight loss after 12 weeks – a striking result for sure, though we’d note that the study population was fairly heavy at baseline and the poster presented results of the per-protocol population.

• The Monday of ADA included a symposium dedicated to the Look AHEAD trial, which compared the effects of intensive lifestyle intervention (ILI) vs. diabetes support and education (DSE) on cardiovascular (CV) risk in ~5,000 obese or overweight type 2 patients. As a reminder, the study was terminated prematurely, as it failed to show a difference in the primary endpoint (major cardiovascular events) between the two trial arms. After an introductory presentation on the study design, Dr. Rena Wing (Brown University, Providence, RI) presented the CV results, highlighting that while ILI did not reduce the risk of cardiovascular morbidity or mortality, it did lead to significant and sustained weight loss, as well as improvements in fitness, A1c, systolic blood pressure, and HDL. Regarding microvascular complications, ILI reduced the risk of chronic kidney disease and provided favorable effects on several parameters of kidney function. The Look AHEAD symposium also included thought-provoking talks on the effects of ILI on healthcare costs and on quality of life – two key but often overlooked study endpoints. Regarding quality of life – specifically depression – ILI reduced the risk of progression to mild or more severe symptoms of depression by 20% versus DSE, as assessed by the Beck Depression Inventory (BDI) score. Dr. Lucy Faulconbridge (University of Pennsylvania, Philadelphia, PA) remarked that this data represents the strongest evidence to date that ILI may protect overweight and obese individuals from depression.

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ADDITIONAL TOPICS

• We were somewhat disappointed at the lack of substantive sessions on diabetes and obesity prevention. Remarkably little new information on the subject was shared, and the limited number of relevant presentations generally reiterated old information. There were a few bright spots: on Days #2 and #3, Outstanding Educator in Diabetes award winner Dr. Ann Albright (CDC, Atlanta, GA) gave an energizing set of talks on the importance of prevention. She promoted the National Diabetes Prevention Program, and argued that prevention can happen at the community as well as the individual level. A comprehensive Day #2 symposium on the cost benefits of diabetes prevention also provided convincing arguments in favor of prevention. Throughout the conference, various KOLs also brought up the results of the Diabetes Prevention Program and Look AHEAD studies. On the whole, however, prevention was far from a major topic at this year’s ADA. We feel that the endocrinology and diabetology community is responsible for leading the field in advocating prevention, and we hope to see more attention paid to the topic at future events.

• In their respective trials, the type 1 diabetes cure immunomodulatory therapies discussed at ADA all failed to meet their primary outcomes. In a distant corner of the conference hall (a sign en route encouraged attendees to “keep walking”), presenters in a symposia on candidates in clinical development dedicated much of their time to highlighting positive safety data and noteworthy sub-analyses as evidence that their therapies could still be efficacious for some patients. For example, in the early phase 2 START trial (n=66), anti- thymocyte globulin (ATG) therapy did not significantly delay two-hour C-peptide AUC decline over the course of 12 months. However, 22-35 year-olds old faired better on the treatment (compared to their younger counterparts) – they trended strongly toward C-peptide preservation, suggesting that statistical significance could potentially be achieved with a longer trial.

o We were particularly frustrated to learn that poor trial execution could potentially explain why alefacept did not have a significant impact on C- peptide levels in the phase 2 T1DAL Study (n=66) – the trial only enrolled 75% of its target because the manufacturer (Astellas) decided to discontinue the drug for business reasons. This led Dr. Mark Rigby (Indiana University School of Medicine, Indianapolis, IN) to suggest that the drug might be efficacious, as the trial was statistically underpowered. Unfortunately, there are few second chances for candidate therapies and we hope researchers will work to prevent tragic trial design and execution flaws, which preclude serious discussions of therapies’ benefit/risk profiles’ (i.e., one can not weight the risks and benefits of alefacept if the trial is not even completed and enrolled as designed!). At prior conferences, KOLs have commented that teplizumab and oral insulin might also have been victims to poor trial design. These presentations left us feeling all the more grateful for the artificial pancreas’ (AP) positive data, which stands to notably improve outcomes in the very near-term while patients wait for a biological cure. We also remember that this recent boom of progress in the AP followed many years of grueling and disappointing work, perhaps similar to what researchers in immunomodulation are experiencing now.

EXHIBIT HALL

• The ADA 2013 exhibit hall featured new product launches from a number of companies. Eisai’s Belviq was launched for the first time following nearly a year wait for the Drug Enforcement Agency (DEA) to schedule the drug. This year’s ADA also represented the true launch of Invokana, the company’s new SGLT-2 inhibitor – the drug was featured strongly in Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 70

J&J’s large booth and was positioned as the “first and only SGLT-2 inhibitor approved in the USA.” On the device side, Insulet’s circular blue-and-green booth was all about the new OmniPod, with ADA 2013 representing the company’s first large US meeting following FDA approval last December. Finally, BD launched its EasyFlow pen needle technology at ADA (one of our favorite demonstrations in the exhibit hall), while NeuroMetrix showcased its recently approved Sensus device for the management of diabetic peripheral neuropathy.

• This Exhibit Hall lacked some of the spectacle of its predecessors, with the products and information supplemented with relatively little by way of giveaways or live entertainment. Although we’re now a few years removed from the “golden age” of Exhibit Hall giveaways – when attendees sometimes filled entire ADA bags to the brim with swag from various booths! – this year felt more austere by Exhibit Hall standards. There have been tightened restrictions on corporate giveaways so that main items given away seem to be ones that can be consumed onsite or those that are educational; in practice, this meant that espresso machines could seemingly be found every 20 feet. Frozen yogurt and bowls of apples were also spotted in multiple booths. We noted that there was also significantly less on-site entertainment than in years past – for instance, the splashy live quizzes that were such a big part of the experience at last year’s Exhibit Hall were now played on rather less obtrusive tablet devices. The focus is squarely on product awareness – though this is likely in response to tightening budgets, this is where the focus should be, as long as just as many HCPs are being drawn into booths. There was at least one highly entertaining exception that we kept hearing about (and then saw) all day, as Insulet enlisted the services of corporate magician Charles Greene III to perform card tricks – complete with bell sound effects, because “OmniPod has a ring to it” – in front of their exhibit.

• Regarding social media presence, we found that most companies have not yet tapped into the full potential of various social media platforms (Facebook, Twitter, and others) as part of their Exhibit Hall efforts. When we asked booth representatives about social media, they were more often than not unfamiliar with the broader social media presence of their company, which we speculate is because companies partition their sales team on the ground from their marketing and outreach team; even in those booths that had their social media person present, we generally found that other reps could not speak to the online presence of their company. That social media related to their products was not part of the prepared talking point repertoire suggests to us that social media has yet to permeate the consciousness of most companies at ADA. Someday, we'll be at an ADA where contacts will tell us what they’re most excited about from their online outreach, but we’re not quite there yet. There were some exceptions to this – Sanofi and Medtronic were particularly impressive in their social media efforts – and these are noted in the company-specific entries, which also include brief analyses of the company’s Twitter and Facebook presences; all statistics are accurate as of June 22. -- By Melissa An, Adam Brown, Eric Chang, John Close, Poonam Daryani, Hannah Deming, Jessica Dong, Samiul Haque, Stephanie Kahn, Benjamin Kozak, Adam Kraus, Tim Maher, Kira Maker, Hannah Martin, Rajiv Narayan, Gabriella Puente, Nina Ran, Phaedra Randolph, Lisa Rotenstein, Joseph Shivers, Tony Thaweethai, Jennifer Tsai, Manu Venkat, Katrina Verbrugge, Vincent Wu, and Kelly Close

6. Literature Review

Close Concerns regularly writes short summaries notable journal articles. Below, we have included such summaries of several interesting articles. In particular there were several journal articles and media

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accounts surrounding concerns of incretin mimetics potentially being tied to pancreatitis and pancreatic cancer. Related to this, we have included Diabetes Care’s Point/Counterpoint series featuring articles by Drs. Peter Butler and Michael Nauck debating this issue. In the media, The New York Times published a piece focusing on Dr. Peter Butler leading into the NIDDK’s meeting on incretin mimetics, pancreatitis, and pancreatic cancer. Similarly Forbes ran Dr. Steven Nissen’s criticism of CDER for attempting to hide Avandia’s CV risk prior-to the FDA’s Advisory Committee dedicated to discussing the drug. On the tech side, Diabetes, Obesity, and Metabolism published an article on the accuracy of Medtronic's Guardian Real-Time continuous glucose monitor (CGM).

DIABETES DRUGS

• Diabetes Care's Point/Counterpoint series features articles by Drs. Peter Butler and Michael Nauck, who give opposing views on incretins and pancreatitis. Dr. Butler proposes a mechanism for how incretin therapies promote acute pancreatitis and states that the clinical evidence shows a compelling safety signal. He proposes the theory that in some people with low-grade asymptomatic chronic pancreatitis, incretin therapies can accelerate pancreatic dysplasia and lead to acute pancreatitis. In contrast, Dr. Nauck argues that the clinical benefits of incretins outweigh the uncertain risk of pancreatitis and that for now, the therapies should be considered safe. Dr. Nauck goes head-to-head with Dr. Butler, critiquing the studies that Dr. Butler's group published in JAMA Intern Med and Diabetes. Below are our summaries of each argument as well as our concluding thoughts on the written debate.

o Dr. Peter Butler argues that the safety of incretin therapies cannot be assumed, and that the burden of proof lies with those who wish to convince us of their safety. He begins with a historical perspective and highlights the safety concerns associated with TZDs to illustrates that the harmful effects of drugs can be slow to emerge; he notes that like TZDs, incretin therapies have pleiotropic actions. Dr. Butler then discusses the preclinical data, arguing that they offer a plausible mechanism for how incretin therapies promote acute pancreatitis: “duct proliferation might lead to duct occlusion, occlusion would generate back pressure, and back pressure would stress acinar cells thereby activating and releasing the digestive enzymes they contain.” The article also reviews the clinical evidence, dedicating notable discussion to the FDA MedWatch data – Dr. Butler reminds us that the reporting rate for acute pancreatitis was higher with exenatide compared to non-incretin therapies, and that despite its limitations, the FDA alert system indicates a compelling signal for pancreatitis. Turning to the implications, Dr. Butler posits that this signal is only the “tip of the iceberg,” a signal that indicates that incretins cause pancreatic harm (e.g., subclinical duct proliferation, acinar to ductal metaplasia, and subclinical pancreatitis) to a greater extent than previously believed. He emphasizes that low-grade asymptomatic chronic pancreatitis is not uncommon in people taking incretin therapies and proposes that in this setting, incretin therapies can accelerated pancreatic dysplasia in a minority of patients and result in acute pancreatitis and possibly pancreatic cancer. Looking forward, Dr. Butler states that the answer to the question of incretins and pancreatitis lies in studying the pancreases of humans exposed to incretin therapies (this is unsurprising, as Dr. Butler’s group recently published such a morphological study; Diabetes 2013, link below). Dr. Butler ends with a brief discussion of incretins and thyroid cancer, proposing a similar theory that incretin therapies accelerate the progression of cancer in people with premalignant lesions.

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Dr. Butler’s Article link: http://care.diabetesjournals.org/content/early/2013/05/03/dc12- 2713.abstract.html?papetoc

o Dr. Michael Nauck argues that incretins' proven clinical benefits for glycemic control clearly outweigh the uncertain risks of pancreatitis, pancreatic cancer, and thyroid cancer. He concludes that incretins address substantial, central issues in diabetes management (i.e., they achieve glycemic control with the added benefits of hypoglycemia-neutrality and weight-neutrality or -benefit, which was a huge step forward from previously-available insulin, TZDs, and SFUs) while the risk for harm is rare and uncertain. Like Dr. Butler, Dr. Nauck argues that the pancreatitis and thyroid issues warrant greater investigation, though Dr. Nauck asserts that for now, incretins should be considered effective and safe. Specifically with regards to acute and chronic pancreatitis, he highlights the inconsistency with which pancreatitis emerges as a signal in both animal models and in clinical studies of various incretin-based agents. He critiques recent studies that have garnered a great deal of attention, contending that the Singh et al. case-control analysis of hospitalization for acute pancreatitis (JAMA Int Med 2013) had to combine groups treated with exenatide or sitagliptin because separate analyses of either agent on its own did not yield significant findings. Additionally, with regards to the Butler et al. study (Diabetes 2013) examining post-mortem human pancreases, Dr. Nauck states that the study must be replicated in a larger, more representative patient population that was not in long-term critical illness, because that in itself has been shown to promote beta cell proliferation. In contrast to the inconsistency of pancreatitis claims, Dr. Nauck highlights the consistency with which all of the various GLP-1 agonists and DPP-4 inhibitors demonstrate the potential for cardiovascular benefit (Dr. Nauck states that aggregate analyses of phase 3 data for each marketed GLP-1 agonist or DPP-4 inhibitor show a point estimate below 1.0 for relative risk of MACE). Dr. Nauck’s Article link: http://care.diabetesjournals.org/content/early/2013/05/03/dc12- 2504.abstract.html?papetoc

o While we appreciate Dr. Butler and colleagues’ intention to uphold the ‘first, do no harm’ spirit of the Hippocratic oath, in many cases, negative data tend to have a disproportionate impact on public perception in comparison to positive data. This situation reminds us of the early days of GLP-1 agonist therapy when blood pressure increases in rats nearly halted commercial development. Yet this finding was never substantiated in the clinic, and today we tout blood pressure lowering as a benefit of GLP-1 therapy. We would never advocate physicians to prescribe medications of questionable safety, though we also believe that the proper evidence must be accumulated prior to inciting public alarm. While some physicians may feel inclined to take the "better safe than sorry" route that Dr. Butler advocates, we hope they then also consider the very real and established risks of diabetes complications due to inadequate glycemic control. We do believe the perceived fear associated with this controversy may be having an impact on commercial results for the field (Merck and BMS/AZ both saw reduced revenue for their incretin franchises in 1Q13 though Novo Nordisk’s results were strong).

• The March issue of Diabetes included Dr. Steven Kahn's critical dissection of Dr. Peter Butler's morphological study on incretins and pancreatitis. After briefly

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discussing Dr. Butler's study results, Dr. Kahn raises five issues that challenge the study's conclusions: 1) he considers whether the increase in pancreas mass observed in patients on sitagliptin or exenatide could be explained by significant differences between the two diabetes groups (e.g., weight, sex, age, disease duration, perhaps even diabetes type) rather than the use of incretin therapies; 2) Dr. Kahn notes that it’s unclear how incretins increase beta-cell mass, as they appeared to have little effect on beta cell replication in the study; he speculates whether the differences observed for beta cell mass stem from between-group differences related to the type of diabetes (i.e., those not on incretins could have had type 1 diabetes) or the type and/or duration of life support received by the patients; 3) he noted that the high rate of glucagon-producing microadenomas observed in the study (37.5%) is inconsistent with pharmacovigilance data – given the millions of patient years of exposure to incretins, why have we not seen increased reports of such abnormalities in patient pancreas samples or a greater reporting of the symptoms caused by these abnormalities?; 4) people undergoing gastric bypass exhibit markedly elevated levels of GLP-1 post surgery (more than 3-fold), yet do not appear to exhibit the abnormalities observed in the Butler study, even eight years post surgery – perhaps this is due to confounding by weight loss; 5) Dr. Kahn highlights that preclinical evidence and the current literature consistently show no link between incretins and pancreatitis. In closing, Dr. Kahn remarks that the most rigorous information on this topic will come from long-term studies such as the ongoing incretin cardiovascular outcomes studies (CVOT) and the GRADE study. He points out that the continuation of CVOTs (i.e., no premature trial terminations) suggests that researches have not observed a worrisome signal of excess pancreatic malignancy with incretin treatments. Dr. Kahn concludes that while the Butler study should prompt further investigation, "the current level of evidence falls short of that required to prematurely banish" incretin therapies. We greatly appreciate his thoughtful and analytical critique.

• On May 30th, The New York Times published a piece on Dr. Peter Butler’s morphological study (Butler et al., Diabetes Care 2013) and the potential risk of pancreatitis and pancreatic cancer associated with incretin-based therapies. The NIDDK and NCI hosted a workshop on this topic on June 12-13, where speakers noted that they would wait for data from CVOTs to better understand this potential risk (Some have remarked the CVOTs are not large enough or long enough to provide conclusive data; however, many seem to agree that since a trial dedicated to this question appears unlikely, CVOTs may represent one of our best chances for further data – for additional details, please see our interview with Dr. Stefano Del Prato in this issue of DCU). Those in academia also agree that this discussion requires more data, and several have raise doubts about the conclusions that Dr. Butler has implied. Dr. Steven Kahn has published perhaps the most-cited critique, which pointed out several study flaws, including the question of whether some of the pancreases used in the study came from patients with type 1 diabetes (Kahn, Diabetes 2013). The general opinion – corroborated by the NIDDK meeting – is that while the Butler study prompts further investigation, the current body of information on incretins and pancreatitis does not support changing the clinical use of incretin therapies. We imagine that some HCPs may be more open to trying other new classes such as SGLT-2 inhibitors in the wake of this controversy, even though a conclusion has yet to be established. This reminds us of 2006, when Merck's DPP-4 launch benefited from a number of factors, including the escalating Avandia controversy. We imagine that thoughtful scientists and clinicians would not change their clinical practice based on a single study that is said to have major limitations; on the other hand, would PCPs change practice based on limited information and no time to pursue the question, particularly given limited data? We would love to ask for United or another payer whose patients use GLP-1 extensively to look at their own database and

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perhaps share some information on what they have found; we can't imagine they haven't already looked at this data. Going so far as to limit incretins would be a major step; indeed, even Dr. Butler acknowledges as much although the headline and hype about the article will probably not highlight this. As a reminder, the current debate on incretins and pancreatitis was sparked by Dr. Singh’s case- controlled database study, which found that sitagliptin and exenatide are associated with an increased risk of hospitalization for acute pancreatitis (Singh et al., JAMA Internal Medicine 2013). The article generated a strong response by ADA and AACE, who highlighted drawbacks of the study design and urged patients and HCPs not to change their clinical use of incretin therapies. Recent meetings have added significant color to the debate, with several KOLs commenting on this issue. Finally, the recent 5th International Congress on Prediabetes and the Metabolic Syndrome contained interesting discussions of incretins and pancreatitis, with thoughts from Dr. Cliff Bailey and Dr. Stefano Del Prato. Article link: http://www.nytimes.com/2013/05/31/business/a-doctor-raises-questions-about-a- diabetes-drug.html?pagewanted=all&_r=1&

• In his Forbes article, Avandia whistleblower Dr. Steven Nissen criticized CDER for attempting to hide the drug's CV risk. No stranger to controversy, Dr. Nissen declared that CDER is conducting "a 2-day advisory meeting on a drug nobody uses" in order to prove Avandia's safety and "avoid accountability for its role in the Avandia tragedy." In his recount of the drug's controversy, Dr. Nissen stated that in 2005-2006, GSK told CDER that Avandia increases the risk of CV events by 30%. He claims that CDER decided to hide this data, and that the agency scheduled an FDA Advisory Committee meeting in 2010 in hopes that data from the RECORD trial would clear Avandia of any CV harm. He detailed how "the CDER plan backfired", as an independent analysis of RECORD found the study to be highly unreliable, leading a majority of the 33 panelists to vote in favor of removing the drug from the market (12 votes) or severely restricting its use (10 votes). Dr. Nissen concluded that while the "ostensible" purpose of this new advisory meeting is to consider a re-adjudication of RECORD (performed by researchers at Duke University), CDER's true intention is to "re-write" history by showing that Avandia is indeed safe, thus absolving itself from its 2006 decision to hide the drug's CV risk. Dr. Nissen challenged the integrity of the re-adjudication (noting that GSK provided the materials to Duke) and anticipated that the June 5-6 meeting would fail to include panelists who previously expressed concern over Avandia [Editor’s note: 13 members of the committee voted to modify rosiglitazone’s REMS, seven voted to remove the REMS, five voted to continue the REMS as is, and one voted to withdraw rosiglitazone from the market]. Article link: http://www.forbes.com/sites/matthewherper/2013/05/23/steven-nissen-the- hidden-agenda-behind-the-fdas-avandia-hearings/?partner=yahootix

• Diabetes, Obesity, and Metabolism has published the results of a 26-week phase 3 trial comparing canagliflozin 100 mg and 300 mg to placebo in 580 type 2 patients. The results were consistent with those of previous trials: at 26 weeks, greater improvements in A1c were observed with canagliflozin 300 mg (-1.0%) and 100 mg (-0.8%) compared to placebo (0.1%) from baseline A1c levels of 8.0% (p<0.001 for both comparisons). Both doses of canagliflozin provided greater reductions in fasting plasma glucose (placebo-adjusted declines of 43 mg/dl and 36 mg/dl, respectively), as well as in 2-hour postprandial glucose (placebo-adjusted declines of 65 mg/dl and 49 mg/dl, respectively). Canagliflozin 300 mg and 100 mg led to greater weight loss compared to placebo (7.5 lbs, 5.5 lbs, and 1.1 lbs, respectively), as well as greater improvements in blood pressure. Canagliflozin also appeared to improve beta-cell function, as indicated by increases in HOMA-2%B, decreases in the proinsulin/insulin ratio, and decreases in Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 75

the proinsulin/C-peptide ratio. On the safety front, higher rates of urinary tract infections (UTIs) were observed with canagliflozin 300 mg (5%) and 100 mg (7%) compared to placebo (4%), as well as higher rates of genital mycotic infections. Article link: http://onlinelibrary.wiley.com/doi/10.1111/dom.12054/pdf

• In May, Diabetes Care published the final study design for the GRADE study. For reference, the purpose of the GRADE study is to compare the long-term effectiveness of four popular second-line therapy options: the DPP-4 inhibitor Januvia (sitagliptin), the GLP-1 agonist Victoza (liraglutide), the sulfonylurea Amaryl (glimepiride), and the basal insulin Lantus (glargine). The study design has evolved since its initial inception: at the time of grant submission, the study aimed to both examine the comparative effectiveness of these options as well as to determine the benefits of early combination therapy vs. sequential therapy in drug- naive patients. The latter aim of the study was not pursued, though the comparative effectiveness part of the study will fill a large gap in the evidence base for choosing between the growing number of second-line options. Notably, we were pleased to read in the Diabetes Care article that the study will examine phenotypic and genotypic differences between responders and non- responders to therapies. In the past, one key criticism we had heard of the study was that it would only answer the question of comparative average response and would not actually provide guidance on how to individualize therapy. For example, Dr. Robert Ratner made this argument at EiD 2013, saying that in order to actually help HCPs choose the best medication for the patient in front of them, they needed to analyze characteristics that would identify patients who would be responders or nonresponders to a particular medication. The Diabetes Care article does not detail how this analysis will be performed, however, we are glad to see it included. We do believe that years from now (perhaps around the time the study reports), branded fixed-dose combinations will be very popular, and perhaps a study with FDCs will be useful. Sulfonylureas (SFUs) have been the subject of significant criticism lately (a major session at ADA discussed their use); we are especially curious to see if the GRADE trial will answer questions of durability and long-term safety of SFUs, given its long duration (four to seven years of follow up). Article link: http://care.diabetesjournals.org/content/early/2013/05/14/dc13-0356.full.pdf

DIABETES DEVICES AND TECHNOLOGY

• In February, an article published in Diabetes, Obesity, and Metabolism explored the accuracy of Medtronic's Guardian Real-Time continuous glucose monitor (CGM) and its ability to detect hypoglycemic events. Eighteen patients with type 1 diabetes wore the CGM for 18 days each, resulting in a total of 2,317 lab-reference-paired CGM data points. Hypoglycemic alarms were set to alert patients to a CGM reading <70 mg/dl. The system recorded a respectable mean absolute relative difference (MARD) of 17%, though MARD was a disappointing 39% in the hypoglycemic range (<70 mg/dl). The system detected 63 of 168 hypoglycemic events (47% success rate) and recorded 72 false hypoglycemic alarms (53% false alert rate). The authors conclude that patients need to be cognizant of these findings, which demonstrate an important limitation of CGM systems. We appreciate the authors' concern, though in our view, it is critical to appreciate that the Medtronic Guardian and the resulting data very much represent a previous-gen device. Both Medtronic and Dexcom already have next- generation, more accurate CGMs on the market: the Enlite sensor is available in the EU (US approval expected this spring or summer), while Dexcom's G4 Platinum is available worldwide. The G4 Platinum, generally considered the most accurate sensor on the market right now, recorded a MARD of 19% in the hypoglycemic range, a significant improvement over the 27% MARD in the Seven Plus (see page 128 in our EASD report for detail). While room for progress

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remains in the CGM field, each iteration brings more promising results. However, we continue to see studies published with previous-generation devices, a "lag time" highlighted by Dexcom's Dr. Tom Peyser on Day #2 of ATTD 2013. Unfortunately, these studies with older technology can negatively influence clinical decision making by those who are not as familiar with current devices. Article link: http://onlinelibrary.wiley.com/doi/10.1111/dom.12001/abstract

• An article from the Canadian Medical Association Journal presented a randomized crossover trial exploring the benefits of dual-hormone closed-loop therapy to standard insulin-pump therapy in patients with type 1 diabetes (n=15). During 15-hour clinic visits, patients underwent an exercise session, meal, snack, and overnight stay. The study found that patients spent a significantly greater amount of time in range (72-180 mg/dl from 4:00-11:00 pm, and 72-144 mg/dl from 11:00pm-7:00 am) on closed-loop control vs. standard insulin therapy (71% vs. 57%; p=0.003) with a non-significant difference in mean glucose or time above target. Further, fewer patients on closed-loop control experienced a hypoglycemic event (1 vs. 8; p=0.02), as measured by blood glucose <3 mmol/l (54 mg/dl). The authors note that the clinical applicability of their study rests in three design strengths: 1) a physician never overrode the dosing algorithm recommendation; 2) a single glucose sensor was used per patient (Medtronic Sof-sensor); and 3) the sensor was calibrated using capillary fingersticks. Meal announcements were given during closed-loop intervention. We think that the article adds to growing evidence of the feasibility of insulin-glucagon closed-loop delivery. However, significant challenges remain to be overcome, including lack of stabilized glucagon (Xeris and Biodel and others are at work on this), the need for dual-chambered pumps (Tandem is at work on this with JDRF), as well as certainly regulatory concerns. We see insulin-glucagon delivery as a valuable strategy to pursue for the long term, though we also remain highly optimistic that insulin-amylin or insulin-GLP-1 systems can also generate encouraging data. Indeed, an insulin-amylin system may have the strongest biological basis, since amylin is co-secreted with insulin from beta cells, and is thus absent in type 1 diabetes. Article link: http://www.cmaj.ca/content/185/4/297.full.pdf+html

COMPLICATIONS

• In March, JCEM published the results of a retrospective cohort study that associated insulin therapy with an increased risk of cardiovascular events, cancer, and death. The authors examined data from roughly 85,000 type 2 patients from a UK database (2000-2010) and classified the patients by diabetes regimen. The primary endpoint was time to first CV event, cancer, or death, and secondary endpoints included these individual components as well as microvascular complications. The analysis showed that when compared to metformin monotherapy, insulin monotherapy, sulfonylurea monotherapy, and insulin+metformin were associated with an increased risk for the primary endpoint (adjusted hazard ratios of 1.8, 1.4, and 1.3, respectively; p<0.0001 for each). After discussing the study’s drawbacks – as well as data from previous studies – the authors conclude, “These data should raise justifiable concerns in relation to the optimal use of exogenous insulin therapy in clinical practice.” The JCEM study has some positive features, including a relatively large sample size and long study duration; however, given the study’s limitations, we would hesitate to draw any firm conclusions about the relative safety of insulin therapy. Interestingly, the ADA and AACE have not commented on these study results, but did issue a strongly worded press release regarding another study on incretin therapies and pancreatitis. As the authors point out, previous studies have yielded inconsistent results on insulin safety– we note that other observational studies Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 77

similar to this one have found no effect of insulin therapies on similar endpoints. Even large RCTs, such as ORIGIN, The Diabetes and Insulin-Glucose Infusion in Acute Myocardial Infarction (DIGAMI)-1 and DIGAMI-2 trials, and UKPDS have provided conflicting evidence that insulin therapy increases the risk for cardiovascular disease. Though ORIGIN showed no such relationship, the JCEM authors caution that ORIGIN participants randomized to standard care also received sulfonylurea and insulin. The question of insulin therapy and CV disease has received greater attention as of late, since the FDA issued a Complete Response Letter to Novo Nordisk asking for a dedicated CV outcomes trial before it can complete its New Drug Application review of Tresiba (insulin degludec) and Ryzodeg. The question of insulin therapy and cancer is more difficult to examine, as cancer takes several years (i.e., over a decade) to develop; furthermore, myriad factors influence the onset of cancer, including patients’ age, medication regimen, duration of diseases (such as diabetes), comorbidities, the type of cancer, and bias in use of the procedure. The most rigorous observational studies do not appear to indicate a convincing cancer signal with insulin, though even these studies are not definitive. Looking forward, large cardiovascular outcomes trials may provide insight into the cancer question, though it remains uncertain whether these trials will be long enough to establish the drug’s effects on cancer risk. Article link: http://jcem.endojournals.org/content/early/2013/01/31/jc.2012- 3042.abstract

• Diabetologia published a comprehensive and balanced review in January on the current understanding of the relationship between glucose levels and cardiovascular disease. Dr. Naveed Sattar, EASD 2011 Minkowski Lecturer, draws many nuanced conclusions reflecting our evolving understanding of the relationship between glucose and cardiovascular disease (CVD): 1) Whereas higher glucose levels in the non-diabetic range are risk factors for diabetes, they do not robustly predict cardiovascular outcomes. The relationship, if there is one, is modest and non-linear and currently does not add much value beyond established predictors of CVD (i.e., total/non-HDL cholesterol and blood pressure). 2) On average, diabetes increases risk of CVD by about a factor of two, with risk being lowest in those who are newly diagnosed and highest in those with existing macrovascular disease or impaired kidney function. 3) Relatedly, with regards to the oft-quoted adage that diabetes is a post-myocardial infarction "risk equivalent," newly diagnosed diabetes does not quite confer an equivalent risk as previous coronary heart disease (CHD), but risk levels rise over about a decade of diabetes duration to equal that of prior CHD. Dr. Sattar recommends that people with diabetes receive conventional dose statin therapy at lower average CVD risk thresholds than the general population. 4) The CV risk reduction conferred by glucose lowering is less than that conferred by blood pressure lowering and use of statins. 5) The finding that statins may be modestly diabetogenic (combined with the understanding that some anti-diabetic agents increase CV risk) suggests that combined CVD/diabetes screening may be useful and suggests that future trials of lipid-lowering agents should include new-onset diabetes as an endpoint. Dr. Sattar advises for no change in policy for prescribing statins to patients with existing diabetes or for secondary prevention of CVD. We applaud Dr. Sattar for this very complete, easy to digest, and nuanced piece. Article link: http://link.springer.com/article/10.1007/s00125-012-2817-5

TREATMENT STRATEGIES

• RISE – Evaluates metformin, liraglutide, and glargine in early type 2 diabetes We want to draw your attention to the Restoring Insulin Secretion (RISE) trial, which will investigate whether aggressive glycemic control in prediabetes and early type 2 diabetes can

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promote a sustained recovery of beta cell function (ClinicalTrials.gov Identifier: NCT01779362). The NIH-funded study is expected to enroll 255 drug-naive participants with prediabetes or self- reported type 2 diabetes (<1 year duration) who are overweight or obese (BMI of 25-40 kg/m2). Participants will be assigned one of four arms for the 12-month treatment period: 1) blinded placebo; 2) blinded metformin alone (up to 2,000 mg/day); 3) insulin glargine for three months (titrated to a morning FPG of 80-90 mg/dl) followed by open-label metformin for nine months; or 4) liraglutide (titrated up to 1.8 mg/dl) plus open-label metformin. Following a three-month washout period, the investigators will assess the primary endpoint of beta cell function (via hyperglycemic clamp techniques), as well as several other parameters derived from hyperglycemic clamp and OGTT measurements; both techniques will also be applied immediately following the treatment period to measure beta cell function and glucose tolerance, to compare specific parameters (not listed) before and after treatment, and to identify biomarkers that may guide treatment response. The trial is scheduled to run from April 2013 to August 2017 and will be conducted at The University of Chicago Medicine, the VA Puget Sound Health Care System in Seattle, and Indiana University. Online articles have also noted that the investigators have applied for additional funding to expand the RISE study to include a sleep study, which will examine whether sleep disorders influence patients’ response to therapy (expected n=85 for 21 months). Previous results have suggested a possible benefit for using these drugs in dysglycemia and early type 2 diabetes – we hope RISE provides greater clarity on this front. Studies in China have shown that intensive insulin therapy at diagnosis can prompt diabetes remission and improve beta cell function. However, at Rachmiel Levine 2013, Dr. Jack Leahy questioned whether such results could be generalized to the overall diabetes population. Dr. Leahy also noted that while insulin glargine appeared to delay the progression to diabetes in ORIGIN, the between-group difference was not remarkable: 35% of people in the glargine group progressed to diabetes compared to 43% of those on standard care. We also note that neither the ORIGIN investigators nor other KOLs have championed the use of insulin in early type 2 diabetes. At GTCBio 2013, Dr. Sethu Reddy, MD (VP US Medical Solutions, Merck) suggested that the FDA has requested BMS to pursue a prediabetes indication for metformin – BMS has not commented on this topic, and we’re curious whether the company can use data from RISE to support a filing, should one occur. Lastly, we’re also interested in whether RISE data can support the use of liraglutide in obesity (Novo Nordisk is conducting the phase 3 SCALE program for this new indication).

• Diabetes Care published a series of papers from the TODAY study online in May. The studies published highlight the aggressive nature of type 2 diabetes in youth, demonstrating that children with the disease develop complications more quickly than adult counterparts, even when undergoing the intensive treatment arm of the study. Articles in this special issue discuss several topics: 1) Beta cell function: investigators observed a 20-35% decline in beta cell function/year, which is two-to-three times more rapid compared to the 7-11% for adults; 2) Hypertension and kidney disease: after a mean 3.9-year follow up, even after aggressive antihypertensive treatment, hypertension rose from 12% at baseline to 34%; microalbuminuria rose from 6.3% at baseline to 16.6%. It is devastating to imagine how many of these children will progress to end-stage renal disease so early on in life; 3) Body composition: weight loss from lifestyle intervention was smaller than hoped for, and positive effects were lost by 24 months; 4) Lipids and CV risk: fewer than 56% of participants maintained an LDL of <100 mg/dl over 36 months; and 5) Retinopathy: results here were similar to those found in adults - obesity was correlated with a reduced risk of developing retinopathy (a phenomena termed the retinopathy and obesity paradox). Overall, the reports highlight the helplessness that physicians feel when it

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comes to treating type 2 diabetes in youth, given that the most effective treatment option in this study (metformin plus rosiglitazone) still resulted in very poor outcomes. Article link: http://care.diabetesjournals.org/site/misc/todayseries.xhtml Press Release Link: http://www.diabetes.org/for-media/2013/TODAYstudy.html

OBESITY

• Dr. Lee Kaplan and colleagues published a study in Science Translational Medicine demonstrating that changes in the gut microbiome caused by Roux-en-Y gastric bypass (RYGB) in mice may lead to weight loss and improved adiposity. The widely held view in metabolic surgery is that restructuring the gastrointestinal (GI) tract during RYGB provides additional metabolic benefits beyond the weight loss conferred by decreased caloric intake or malabsorption. This new study, analyzed the RYGB procedure for its impact on changing gut microbiota and whether these changes in gut microbiota could explain metabolic effects of RYGB. Dr. Kaplan’s group used a mouse model of RYGB that mimics many metabolic effects of RYGB observed in humans (e.g., in these mice, the RYGB procedure provided weight-independent benefits on glucose metabolism). Analysis of fecal samples found that RYGB increased the abundance of Gammaproteobacteria Escherichia and Verrucomicrobia Akkermansia as early as one week after surgery, and this elevation stabilized after five weeks (these particular shifts in gut ecology have also been observed in humans undergoing RYGB in other studies). These changes were observed only in mice undergoing RYGB surgery, and not sham surgery or sham surgery coupled with caloric restriction, demonstrating that the changes in the gut microbiome were a result of GI restructuring. Additionally, transplanting gut microbiota from RYGB-treated mice to germ-free sham-operated mice induced significant weight loss and decreased adiposity within two weeks, suggesting that the microbial change induced by the surgery was sufficient to cause weight loss. In recipients of RGYB-treated mice gut microbiota (RYGB-R mice), there was also a trend towards improved insulin sensitivity (estimated by HOMA-IR), and a significant reduction in fasting triglycerides compared to recipients of the sham-treated gut microbiota (SHAM-R mice). Previous studies have shown that transferring gut microbiota from obese mice into lean mice can induce weight gain, but this is the first experimental evidence for gut microbiota changes contributing to metabolic effects of RYGB. How the gut microbiota improve metabolic outcomes is still uncertain, and how we can manipulate community structure of gut microbiota also remains unclear. The authors posit that since previous studies of RYGB in humans, rats, and now this mouse model have observed increases in Gammaproteobacteria, that this may be a key contributor. Additionally, the authors propose further study on the metabolic effects of Verrucomicrobium Akkermansia, a microbe that forages on mucus. The authors also observed a puzzling decrease in the levels of Firmicutes, which would have been expected to increase given the fecal fat and pH profiles of the RYGB animals studied. Therefore, they conclude that they still do not fully understand how to predictably modulate levels of gut microbiota in the GI tract in a therapeutically beneficial manner. Article link: http://stm.sciencemag.org/content/5/178/178ra41.full

• On March 20, Health Economics Review published a study demonstrating that Medicare could realize significant cost savings through anti-obesity medications that produce either permanent or temporary 10-15% weight loss. We note that three of the four study authors are consultants to Vivus and a company press release was jointly released with the publication. The study modeled Medicare beneficiaries with a BMI ≥27 kg/m2 and at Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 80

least one weight-related comorbidity or a BMI ≥30 kg/m2 (i.e., Qsymia’s labeled indication). Permanent weight loss of 10-15% was projected to yield $9,445-$15,987 in gross per capita savings through a Medicare recipients’ lifetime, and $8,070-$13,474 over a ten-year period (depending on a person’s baseline BMI and the percent weight loss). Notably, temporary weight loss of 10-15% followed by 90% weight regain (over ten years) was still projected to produce gross per capita savings of $7,556-$11,109 over a person’s lifetime, and $6,456 to $8,911 over ten years. Taking it to the healthcare system-wide level, the researchers estimated that the available pool of savings associated with temporary weight loss among people with class I obesity (BMI ≥30 kg/m2) is $41 billion (10% weight loss) or $49 billion (15% weight loss) over a ten-year period. If that weight loss was permanent, savings could reach $50 billion or $67 billion, respectively. For class II obesity (BMI ≥35 kg/m2), the available pool of savings for 10-15% temporary weight loss over years is $25-$28 billion, rising to $33-$44 billion if permanent. The author’s noted that in phase 3 trials, Vivus’ Qsymia produced weight loss efficacy at the magnitude used in their model: 9.8% weight loss in people with two or more comorbidities (vs. 1.2% for placebo) and 10.9% in people with severe/extreme obesity (vs. 1.6% for placebo). Additionally, the article cites SEQUEL’s two-year data as evidence that Qsymia’s weight loss efficacy is sustained. Based on these findings, the authors project that the efficacy from the recommended and high doses of Qsymia could result in net per capita savings to Medicare of almost $3,000 (class I obesity) and $4,000 (class II obesity) per capita over ten years. These calculations assume a Medicare Part D tier-3 co-pay of $70 per month, and that people received continual Qsymia treatment throughout the ten-year period. Article link: http://www.healtheconomicsreview.com/content/3/1/7

• A case-control study published in JAMA Surgery suggests that patients undergoing bariatric surgery may not have lower overall healthcare costs compared to patients who did not undergo surgery but scored similarly on an obesity-propensity index at baseline. Weiner and colleagues found that bariatric surgery might not reduce overall healthcare costs for obese patients, based on a case-control analysis of insurance claims data for 29,820 patients who underwent bariatric surgery in 2002-2008. Compared to the control group, patients who underwent bariatric surgery had higher mean overall healthcare costs in years two and three after surgery, and similar costs thereafter. Specifically, after adjusting for confounding factors, this study found that the surgical and control groups incurred similar overall healthcare costs in year one following surgery, with the surgical group costing 16% more and 7% more in years two and three, respectively, and a similar amount in subsequent years compared to the control group. Inpatient costs spiked for the surgical group at ~1.7 times the costs for the control group in year two and ~1.5 times in year three. Compared to the control group, the surgical group’s pharmacy costs were roughly 40% lower than the control group in the first three years following surgery, and then ~20-30% lower in subsequent years. Office visit costs remained relatively stable throughout the six years, with the surgical group having costs around 10-20% less than the control group. The authors also analyzed costs associated with different types of surgery, finding that in the first two to three years following surgery, laparoscopic banding and laparoscopic gastric bypass cost less than open gastric bypass, but that this decreased cost did not persist after year three. The authors conclude, given the high cost of bariatric surgery (~$28,000 in 2005 US dollars) and the lack of cost savings post-surgery, that future discussions about the value of bariatric surgery should focus on how surgery improves patients’ health and well being rather than on cost savings alone. We note that many medical procedures are cost effective (based on cost per quality- adjusted life year [QALY]) but not necessarily cost saving – a review of bariatric surgery studies

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prior to 2008 calculated the cost of bariatric surgery to be only $3,200-$6,300 per QALY (Picot et al., Health Tech Assessment 2009). Given that few medical options currently exist for treating obesity, and that bariatric surgery is such an effective means of losing weight – and even improving glycemic control – we would advocate for identifying what baseline characteristics predispose patients to complications or incurring high healthcare costs such that the benefit for other patients is not obscured (for background, ~ 80% of patients with diabetes experience remission for a period of time after gastric bypass. Article link: http://archsurg.jamanetwork.com/article.aspx?articleid=1653574

• In a paper published in BMJ, Myung et al., conduct a systemic review and meta- analysis of randomized controlled trials (RCTs) to explore the efficacy of vitamins and anti-oxidants in preventing major cardiovascular events. In their analysis, the authors included 50 RCTs from various countries published between 1989 and 2012, with a total of ~294,000 participants (~157,000 in intervention groups and ~138,000 in control groups). The review and meta-analysis found "no evidence to support the use of vitamin and anti-oxidant supplements for prevention of cardiovascular disease." This finding contrasts with many observational studies purporting that eating fruits and vegetables – i.e., foods rich in vitamins and anti-oxidants – can reduce heart disease by more than 30%. Of course, getting vitamins and anti-oxidants from fruits and vegetables is very different from supplements, perhaps due to other natural components in whole foods. This also may represent another example where observational (epidemiological) studies report a relationship between variables that cannot be confirmed by RCTs, which are able to control for confounding (the fundamental weakness of cohort studies). Article link: http://www.bmj.com/content/346/bmj.f10

HEALTHCARE DELIVERY AND DIABETES PREVENTION AND EPIDEMIOLOGY

• JAMA Archives published a paper assessing how patient-HCP communication influences medical refill adherence to oral antiglycemic, lipid- lowering, or antihypertensive agents. The researchers conducted a cross-sectional analysis of ~9,400 patients in Kaiser Permanente's Diabetes Study of Northern California (a race- stratified, random sample survey). Communication was measured using the Consumer Assessment of Healthcare Providers and Systems Survey (CAHPS), as well as with items from the Trust in Physicians and Interpersonal Processes of Care instruments. The researchers found that 30% of participants had poor cardiometabolic medication refill adherence (defined as >20% continuous medication gap for ongoing medication therapies). Specifically poor adherence was slightly more prevalent in patients on oral antiglycemics (25%), than patients on antihypertensive medications (20%) or on lipid-lowering drugs (21%). HCP-patient communication was associated with greater adherence: for each 10-point decrease in CAHPS score, the adjusted prevalence of poor adherence increased by 0.9% (p=0.01). In particular, patients were more likely to be non- adherent if they gave their HCPs low ratings across certain parameters: 1) involving them in decisions (4% higher prevalence; p=0.04), 2) understanding their problems with treatment (5%; p=0.02), and 3) eliciting confidence and trust (6%; p=0.03). Interestingly, the authors note that the association between communication and adherence were somewhat stronger for diabetes medications than for other medications. We commend the authors for investigating factors that influence adherence, as we agree with the many researchers and clinicians who believe that some of the biggest barriers to diabetes care (which does not seem to be improving - see our report) concern adherence to treatment. Article link: http://archinte.jamanetwork.com/article.aspx?articleid=1487288 Diabetes Close Up #115 ~ Summer 2013 ~ Beacon of Hope ~ www.closeconcerns.com 82

• This April, in an article published in Diabetologia, Lakey et al. classified ~2,500 diabetes-related trials and questioned whether clinical research is addressing important issues in diabetes care. This article prompted us to consider how to better focus the clinical research of diabetes. Lakey et al. analyzed roughly 2,500 diabetes-related trials registered with ClinicalTrials.gov between 2007 and 2010 and found that 75% focused on a therapeutic approach, 10% on prevention, and 7% on basic science. Studies of diabetes diagnosis, supportive care, screening, and health services accounted for smaller proportions. Overall, clinical trials appear to be short in duration (a mean of 1.8 years to primary trial completion) and small in size (91% included 500 people or less; roughly 60% were designed to enroll 100 people or less). Not surprisingly, most trials (63%) involved drug treatments; in comparison, only 8% of studies evaluated device-related interventions. Geographically, 40% of trials had facilities only in the US while 50% were conducted in the US and 10% were performed in the US and other regions. The authors also show that clinical trials may neglect to study important patient populations with unique risks and disease profiles – only 4% of trials specifically studied patients 18 years and younger (children) and less than 1% of trials selectively enrolled patients 65 years and older (the elderly). Furthermore, 90% and 31% of trials excluded youth and the elderly, respectively. We agree with the authors that “the current trials portfolio [...] appears to be inadequate for expanding and refining preventive efforts or translating effective care strategies into the community setting.” In March, the ADA suggested that the annual cost of diabetes – estimated at $245 billion in 2012 – was driven primarily by the growing disease prevalence, indicating that improving diabetes prevention would have a high ROI for decreasing future costs. Of course, preventing or delaying progression to diabetes would significantly relieve the diabetes burden in myriad other ways. Patients aged 65 and over not only have the highest disease prevalence (27%, compared to 14% for people aged 45-64 years), but also the greatest per-capita costs ($11,800, compared to $5,600 for people aged 45-64 years), representing an at-risk patient population that accounts for 59% of diabetes-related healthcare expenditure. Juxtaposing these data with the composition of clinical trials indicates that clinical research may not be focusing on important areas of interest for diabetes – i.e., prevention and special populations. The relatively short length and small size of current trials implies that greater scientific rigor may be needed to provide more meaningful, accurate clinical data. Improving the focus and execution of clinical research will likely take several years, if not decades – indeed we don’t have a solution. Looking forward, we believe an FDA pre-diabetes pathway will incentivize greater study in this area. We also wonder whether more government focus on older diabetes patients – who use Medicare dollars – will prompt a greater number of trials in this population. The biggest issue is that several important studies (that could provide key insights into issues such as adherence, treatment individualization, and prevent) are not performed due to costs. This article provides a helpful look a the current clinical research landscape, and the next step requires further analysis and thought on how to optimize the allocation of financial resources to fund the most important studies. Article link: http://84.19.28.94/diabetologia-journal/files/Lakey.pdf.

• In April, the NEJM published a special article online tracking national progress in diabetes care in the US from 1999-2002, 2003-2006, and 2007-2010. In the April 25 edition of the New England Journal of Medicine, Dr. Mohammed Ali and colleagues published a special article on the achievement of goals in US diabetes care from 1999 to 2010. The paper analyzes data from over 100,000 adults with self-reported diabetes from the National Health and Nutrition Examination Survey (NHANES) and the Behavioral Risk Factor Surveillance System (BRFSS; the same telephone-based study used to compile the obesity maps of the US). The researchers specifically examined risk-factor control (A1c, blood pressure, cholesterol, tobacco),

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preventive practices (screenings, glucose monitoring, and vaccinations), and risk scores for coronary heart disease from 1999-2002, 2003-2006, and 2007-2010. Broadly speaking, recent results are fairly disheartening for diabetes control. While there were big improvements in A1c between 1999-2002 and 2003-2006, the gains in glycemic control seem to have plateaued or been chipped away – the percentage of patients with an A1c <7% has actually declined from 57% (2003-2006) to 52% (2007-2010). Additionally, the number of patients with very poor glycemic control (A1c >9%) has stayed roughly flat (13% vs. 12.6%) from 2003-2006 and 2007- 2010. We were also very surprised to see that an astonishing 22% of people with diabetes are current smokers, a number that has only declined two percentage points from 1999- 2002. Blood pressure (<130/80 mm Hg) and LDL cholesterol were certainly bright spots in the analysis, with improvements continuing on a positive linear trend in recent years. Additionally, the percentage of patients meeting all goals for A1c, blood pressure, LDL cholesterol, and nonsmoking status notably improved as well – still, just 14% are hitting all four metrics, suggesting there is a lot to do on this front. Additionally, given the lack of improvement in diabetes control and smoking, we suspect the gain in this catch-all metric stems from improvements in lipids and blood pressure. We thought the first sentence of the accompanying editorial from Drs. Graham McMahon and Robert Dluhy summed it up well: “...the recent report card on our national performance that appears in this issue of the Journal suggests we have reached a plateau...there’s a long way to go to deliver the quality of diabetes care that truly meets our patients’ needs.” Drs. McMahon and Dluhy believe the “chronic care model offers some hope.” They call for greater use of team care, changes in medical education and training, and quality improvement metrics that are tracked and rewarded. We couldn’t agree more, especially on the latter. Diabetes is truly a metrics-driven disease, though to date, we believe landmark trials have perhaps encouraged overreliance on the crude metric of A1c. We hope providers are rewarded for one day for keeping patients “in-zone” more often and avoiding hypoglycemia. Article link: http://www.nejm.org/doi/full/10.1056/NEJMsa1213829 Editorial Link: http://www.nejm.org/doi/full/10.1056/NEJMe1302610

• An American Institutes for Research (AIR) analysis found that diabetes prevention has long-term financial benefits; however, only 17% of American adults with prediabetes are aware of their condition. The AIR estimated that 28% of adults living in the US meet several of the criteria for prediabetes. The low rate of prediabetes-diagnosis is concerning since the AIR found that prevention programs could have long-term financial benefits for the country. Additionally troublesome, however, was the AIR's finding that the current healthcare delivery and reimbursement system largely does not fiscally incentivize the provision of preventative care. The AIR found that for private plans, it could take at least 10 years for the cost of a prevention program to be offset by savings on medical expenses, suggesting private plans have no fiscal incentive to prevent diabetes among members older than 55 years old. This is because while the plan pays for the program, the federal government via Medicare reaps much of the cost savings. Indeed, the study found that the federal government is fiscally incentivized to provide full funding to private plans for diabetes prevention programs. The AIR found that the largest potential savings could come under the ACO model, which has an incentive to provide prevention services to people of all ages so long as most of their members remain within the ACO once they are eligible for Medicare. This might be good news given that ACOs are becoming more prevalent under the ACA.

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Article link: http://www.air.org/reports-products/index.cfm?fa=viewContent&content_id=2527

LIFESTLE INTERVENTION

• An article published in Diabetes Care explored the impact of dietary fat on insulin requirements. In this 48-hour crossover design study, patients with type 1 diabetes (n=7) were randomized to receive 18 hours of closed loop control after a high-fat dinner on day 1 followed by a low-fat dinner on day 2 or vice-versa. Dinners had identical carbohydrate and protein content; caloric differences were compensated for during breakfasts and lunches to keep overall caloric intake equal to the subject's estimated 48-hour calorie requirement. In the five hours following dinner, the high-fat dinner resulted in higher insulin needs (12.6 units vs. 9.0 units; p=0.01) and led to more hyperglycemia as measured by area under the curve greater than 120 mg/dl (16,967 mg/dl min vs. 8,350 mg/dl min; p <0.0001). Further, the carbohydrate-to-insulin ratio for the high-fat dinner was significantly lower and varied greatly between individuals. This study underscores an important limitation to carbohydrate-based approaches to insulin dosing at meals. Further, primary investigator Dr. Howard Wolpert (Joslin Diabetes Center, Boston, MA) and colleagues suggest that the glycemic effects of different dietary macronutrients may be even more complex (e.g., saturated fats may cause more insulin resistance than polyunsaturated fats). Dr. Wolpert first discussed findings from this study at the Diabetes Technology Meeting (DTM). Certainly, carbohydrate counting is difficult for many and adding dietary fat to the equation could further complicate the process. An improved insulin dose calculation algorithm is needed, but perhaps as Dr. Wolpert suggested during his presentation at DTM, dietary education that directs patients with diabetes to meal and food choices that have less glycemic impact should supersede perfecting such a dosing algorithm. Article link: http://care.diabetesjournals.org/content/36/4/810.full.pdf+html

• A study published in the New England Journal of Medicine in late February explored the relationship between a Mediterranean diet and primary cardiovascular (CV) event prevention. In this randomized control trial, 7,447 people with no CV disease at enrollment but a high CV risk were assigned to a Mediterranean diet supplemented with nuts, a Mediterranean diet supplemented with extra-virgin olive oil, or a control diet (in which they were given advice on a low-fat diet). The primary endpoint assessed was a composite of myocardial infarction, stroke, and death from CV causes, and participants had a median follow up time of 4.8 years. A primary end point event occurred in 83 individuals assigned to the Mediterranean diet supplemented with nuts and in 96 individuals assigned to the Mediterranean diet supplemented with extra-virgin olive oil, which corresponded to a multivariable-adjusted hazard ratio of 0.72 and 0.70, respectively; 109 events occurred in the control group. A 14-item Mediterranean diet adherence survey and biomarker analysis suggested good dietary assignment adherence. And while the authors note several important study limitations, including the initial lower intensity of intervention for the control group, the paper serves to build the growing body of evidence for a positive CV benefit of the Mediterranean diet. The authors posit that the extra-virgin olive oil and nuts were "probably responsible for most of the observed benefits of the Mediterranean diets." Article link: http://www.nejm.org/doi/full/10.1056/NEJMoa1200303

– By Adam Brown, Hannah Deming, Jessica Dong, Kira Maker, Nina Ran, and Kelly Close

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7. Comings and Goings • Thomas Abate, CFO of Edwards Lifesciences announced on April 14 his intention to retire later this year. He served as CFO for Edwards since January 2006.

• Ricardo Balboa was named General Manager of Eisai Laboratories, Mexico on May 16. Previously, he led the Specialty Medicine and Institutional Business for Bayer’s Mexico operations.

• J. Martin Carroll was appointed to the Board of Directors of Vivus on May 13. From 2003 to 2011, Mr. Carroll served at Boehringer Ingelheim with roles including President and CEO, and Head, Global Strategy and Development.

• Breaux Castleman joined the Board of Directors at Isis Pharmaceuticals on June 25. Mr. Castleman serves as the President and CEO of Syntiro Healthcare Services, and is also a director of USMD Holdings, as well as a senior advisor to McNally Capital.

• Francis Cuss, MB, BChir was appointed Executive Vice President and CSO of Bristol-Myers Squibb effective July 1, following the retirement of Elliott Sigal, MD, PhD.

• Scott Donnely was elected to the Board of Directors of Medtronic as an independent director effective July 1. Mr. Donnely serves as Chairman and CEO of Textron since 2009.

• Marc Dunoyer began serving as Executive Vice President of Global Portfolio & Product Strategy at AstraZeneca on March 21.

• Richard Fante joined Vivus as a Senior Advisor effective May 7. Mr. Fante formerly served as CEO of North America and Vice President of Americas at AstraZeneca. He has agreed to provide advice to Vivus regarding commercialization of Qsymia.

• William Fitzsimmons, PharmD became the new Head of Global Regulatory Affairs and Clinical/Research Quality Assurance at Astellas on April 1. Mr. Fitzsimmons will report to Masaharu Asano, DVM, PhD, Senior Vice President and President of Quality Assurance and Regulatory Affairs.

• Herbert Heitmann, PhD will be Head of Communications and Government Relations at Bayer AG effective September 1, succeeding Mr. Michael Schade. Currently, he is the Executive Vice President of External Communications at Royal Dutch Shell.

• Shinji Honda was named Director and Senior Vice President of the Corporate Strategy Department, as well as President of Takeda Pharmaceuticals effective June 26.

• Douglas Ingram was appointed President of Allergan on June 24 by CEO and Chairman of the Mr. Board David Pyott. He previously served as the Executive Vice President and President of the Europe, Africa and Middle East (EAME) division of Allergan.

• Vincent Intrieri was appointed as a new member of the Board of Directors of Forest Laboratories on June 11. Mr. Intrieri was previously employed by Ichan-related entities for 15 years.

• Lynn Kramer, MD was appointed to the newly formed position of Chief Clinical Officer of Eisai Product Creation Systems effective April 11. Dr. Kramer will assume responsibility for approving protocol designs of studies for clinical approval, indications, and life-cycle extensions.

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• John Lechleiter, PhD returned to his role as Chairman, President, and CEO of Eli Lilly on July 8. Mr. Lechleiter was on medical leave since May 13, 2013 and was recently cleared by his physician to return to full-time work.

• David Loew was appointed Senior Vice President of Commercial Operations in Europe at Sanofi effective June 1. He will report to Mr. Peter Guenter, Executive Vice President of Global Commercial Operations.

• David Maggs, MD was appointed CMO of GI Dynamics on April 30. His role will be to oversee the clinical development of the EndoBarrier.

• Tetsuyuki Maruyama, PhD was named Corporate Officer and General Manager of the Pharmaceutical Research Division of Takeda effective June 26.

• Garry Menzel, PhD was announced as the CFO of DaVita HealthCare effective September 30. He joined DaVita on July 8 as the Senior Vice President of Finance and will assume the role of CFO following the filing of the company’s 3Q13 report.

• Michael Needle, MD was named CMO of Array BioPharma on March 21. Dr. Needle is a certified hematologist and oncologist, and recently served as the CMO of the Multiple Myeloma Research Foundation and Consortium.

• John Northcott joined Lexicon as Vice President of Marketing Commercial Strategy and Operations on June 18. Mr. Northcott previously served a commercial role in marketing with Genentech and Roche as the International Business Leader for Avastin.

• Hiromi Ooyabu was named Vice President of HR Management Department and the Pharmaceutical Marketing Division of Takeda effective June 1. His previous assignment was Vice President of HR Department.

• David Osborne was appointed Senior Vice President and Global HR Officer of Takeda effective May 7. His previous role was solely Global HR Officer at Takeda.

• Dinesh Paliwal was named a member of the Board of Directors of Bristol-Myers Squibb effective July 1. Mr. Paliwal will additionally serve as a member of the Committee on Directors and Corporate Governance. Previously, he served as Chairman, President, and CEO of Harman International Industries since 2008.

• GV Prasad was announced as Chairman and CEO of Dr. Reddy’s Laboratories effective March 30, following a previous appointment as Vice-Chairman and CEO.

• Jorge Plutzky joined the Board of Directors at Vivus on May 13, following a position as the Director of the Vascular Disease Prevention Program at the Brigham and Women’s Hospital.

• David Ramsay was named CFO of Halozyme, on May 23, after serving as the Vice President of Corporate Development.

• Satish Reddy was named Vice-Chairman in addition to his existing role as Managing Director and COO of Dr. Reddy’s Laboratories effective March 30.

• Christopher Reidy was appointed by BD to CFO and Executive Vice President of Administration effective July 15, 2013. Previously, Mr. Reidy served as Corporate Vice president and CFO at ADP Corporation for six years.

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• Johannes Schubmehl succeeded Matthias Moritz as the Chief Information Officer of Bayer HealthCare AG effective May 1. Mr. Schubmehl has served in various managerial positions for Bayer Group since 1999.

• Manabu Sakai was appointed Member of the Board at Daiichi Sankyo on June 21 after serving as Senior Executive Officer and Head of Corporate Management Division at the company.

• Jacqueline Strayer was appointed Senior Vice President of Corporate Communications of Covidien effective May 6, and will report to José Almeida, the Chairman, President and CEO. She previously served as Vice President of Corporate Communications from Johnson Controls.

• Donato Tramuto joined the Board of Directors of Healthways on June 10. Mr. Tramuto is currently the CEO and Vice Chairman of Physicians Interactive, the leading provider of online and mobile clinical resources and solutions for healthcare professionals.

• Tsutomu Une, formerly a Member of the Board at Daiichi Sankyo was appointed Corporate Advisor to the company on June 21.

• Suketu Upadhyay will serve as BD’s principal accounting officer as Senior Vice President of Finance, effective July 15, 2013. He previously served as the Acting CFO since November 2012, and will take on expanded responsibilities for BD’s finances.

• Robert Wilson joined the Board of Directors at Vivus effective April 26. He also serves as the Chairman of Mevion Medical Systems, and previously served as Vice Chairman of the Board of Directors at Johnson & Johnson.

• Nancy Wysenski was elected to the Board of Directors of Alkermes on May 16. She recently served as the Chief Commercial Officer at Vertex Pharmaceuticals, and brings nearly 30 years of leadership and commercial experience in the biopharmaceutical industry.

-- By Samiul Haque, Hannah Deming, and Kelly Close

Copyright © 2013, Close Concerns, LLC.

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