There have been two exciting news stories circulating in the last month that are relevant to our venture. We’ve received some great questions about the expected impact to our business and wanted to share our thoughts here.
This is relevant to both pieces of news. The value proposition for our technology is in the automatic detection of opioid overdose and administration of naloxone. Our technology is meant to be simple, discreet, and designed for continuous wear to protect patients at all times. We do not seek to develop a new formula of naloxone or to sell a “simple” version of the drug.
With 83% of overdoses occurring without a bystander in the room, we believe that “simple” naloxone products can at best reverse 17% of today’s fatal overdoses, and to prevent the other 83%, we need to automate overdose detection and drug delivery.
https://www.massdevice.com/masimo-fda-opioid-overdose-prevention-alert-system/
This is huge news for us.
An FDA De Novo clearance is used for a moderate-risk device that doesn’t have a clear predicate device for the FDA to compare to. These clearances take longer, cost more, and are riskier than the 510(k) clearance pathway used when a device has a clear predicate. By receiving an FDA de-novo clearance, Masimo has set a standard with the FDA that future devices can be evaluated for 510(k) clearance. This has potential to shorten our cost and development timeline.
The entrance of an industry leader like Masimo into this space sends a clear message: Remote opioid overdose detection is a significant market opportunity. Analysts covering Masimo’s moves here have pegged the opportunity at $4.5B, even higher than the $2.6B that we’ve been using as our estimates in the past. We believe that this level of interest from industry leaders will be valuable for future fundraising as well as potential acquisition.
We have also been considering releasing a “sensor + alarm only” version of our product, and Masimo’s launch here helps to validate the commercial viability of such a product.
The obvious follow-on question is “does this put us in direct competition with Masimo?” The short answer is “yes”. However, we believe that our approach is significantly differentiated from Masimo’s such that we have a different value proposition, target a different population, and plan to distribute through different channels than Masimo. Our product will not require a connection to a hub or smartphone and is designed to be worn discreetly and continuously. Not to mention, our product will eventually combine drug delivery with overdose sensing. To date, Masimo does not manufacture drug delivery devices, and we believe that this is far enough outside their core competency that they won’t look to compete there soon.
We believe that Masimo has done our team a great favor by validating this market and setting the stage for a future 510(k) clearance for our overdose detection technology. We will need to watch the company’s moves carefully to ensure competitive differentiation and may consider Masimo as a potential acquisition target in the future.
https://www.wsj.com/articles/fda-approves-narcan-for-non-prescription-sale-8386c3e
Emergent BioSolutions has received FDA approval for OTC sale of Narcan, their market leading naloxone product. Two other companies are also pursuing OTC naloxone products. Pricing data for this product has not yet been released.
We expect the increased availability of naloxone products to put downward pressure on naloxone prices. The purely optimistic view is that this will help reduce our costs of goods while not impacting our key value propositions (OD detection and drug delivery). Also, by reducing the amount that state programs need to spend on naloxone products (by lowering cost and driving more people to purchase OTC), it may free up additional budget to be spent on our technology.
A risk here is that a potential customer might say “yeah, but now we can buy [even more] units of regular naloxone for the cost of one of your devices” This may be true, but we believe that we’re approaching diminishing returns for the volume of “regular naloxone” distributed. This is where it will be important to focus on the unique value proposition of our technology, point out the cases where our product will work, and “simple” naloxone will not.
We believe that Emergent BioSolutions’s primary motivation for seeking OTC approval is for competitive differentiation to help keep Narcan as a market leading product. Last year, Emergent BioSolutions lost a patent lawsuit that allowed drug manufacturer Teva to sell a generic version of naloxone nasal spray. As other OTC naloxone products become available, this will increase commoditization of the drug, driving companies to seek other means of competitive differentiation. Our technology can provide that sought-after differentiation, making us a great target for partnership with a larger pharmaceutical company.
This is a topic we will watch closely. Insurers have varying approaches to coverage of products that are sold OTC, so in the worst-case scenario we may see resistance from insurers to cover our technology as a naloxone product. If this is the case, we will continue to lean into the sales to government programs and direct-to-families.
Our business stands to benefit from downward price pressure and increased commoditization of simple naloxone products. We will continue to keep a close eye on how insurers cover naloxone products to ensure our business model is optimized for insurance coverage.
