Which statement is true?

A diabetes epidemic is raging in the US - and most of the rest of the developed world.

A disease epidemic is just beginning in the US - and most of the rest of the developed world.

They both are true - and this epidemic presents wonderful opportunities for investors. How to sort out winners and losers? Look at what Wall Street often forgets - patient convenience.

Diabetes is epidemic and a cousin of heart disease because they share a primary cause -- obesity. This is doubly true for the supposedly knowledgeable baby boomers. This generation may be the best-informed ever about health, but they are also the least healthy bunch of oldsters the world has ever seen -- partially because they are living longer thanks to advances in life sciences, and partially because they eat too much and exercise too little. Tobacco was the chief villain among our parents' generation, while McDonald's, all-you-can-eat pasta bars and "jumbo" everything are doing in the Boomers. If you think I am overstating the case, think again. According to the charts, I am obese -- more than 25% overweight -- although no one thinks I am anything other than slightly overweight.

At present diabetes is the second-largest preventable public health problem, after smoking-related illness and death, and consumes 10% of the national healthcare budget.
The market for diabetes treatments, testing and related products and services is estimated by some on Wall Street to be $30 billion by 2009. Take my word for it; it will be closer to $35 billion. The American Diabetes Association estimates more than 213,000 people died from diabetes and related illnesses in 2005. The estimated cost is more than $150 billion dollars -- roughly one in 10 healthcare dollars spent in the U.S.

Some salient facts show how harmful this supposedly treatable disease is today:

• Half of all diabetics are over the age of 55 and the incidence of the disease increases with age. Conversely, roughly 18%-19% of Americans over the age of 60 have diabetes in some form.
• More than two-thirds of people with diabetes die of heart disease or stroke -- yes, they are cousins. Diabetics' chances of having heart disease are two to four times greater than a non-diabetic. The same is true for stroke.
• The leading cause of blindness in people ages 20-75 in the U.S. is diabetic retinopathy, a disease attacks the retina and stems directly from diabetes.
• Kidney disease called diabetic nephropathy affects 10%-20% of diabetes patients and is responsible for more than a third of new renal patients - and these folks require dialysis or kidney transplants.
The disease has been treatable for many years with various medications and insulin, but this does not seem to matter. Why? The world has shifted not to constant medical care from physicians but self-managed care and diabetics are about as successful in taking care of themselves as we all are about eating less. Case in point -- it is recommended diabetics test their blood glucose levels four times a day and 41% American diabetics surveyed recently respond to this advice by testing once per week and another 10% just once per day.

ChangeWave surveys show patient self management is not the wave of the future, it is here, right now, and the key to patient compliance is patient convenience. Three examples:

1) Wall Street geniuses said a new drug, Byetta, would fail because it required injection twice a day unlike oral competitors. It is now a blockbuster. Why? It is the only diabetes medication, anywhere, anytime, that induced weight loss and, more importantly, patients inject themselves twice a day, at the same time, avoiding lots of fumbling and measuring and doing things at different times of the day and mealtime.
2) ChangeWave surveys show that Exubera, a form of inhalable insulin, once it is marketed aggressively by Pfizer, will be a blockbuster (the same survey predicted this for Byetta despite conventional wisdom at the time) with new patients and eventually with existing patients already taking insulin. Would you inject yourself when you could breathe instead? Players in inhalable insulin include Pfizer (FE), Eli Lilly (LLY), Nektar (NKTR), Alkermes (ALKS), Aradigm (ARDM) and Mannkind (MNKD).
3) Tired of Wilfred Brimley selling you diabetes supplies on cable at two AM? Don't be - his outfit, Liberty Medical, is actually Polymedica (PLMD). They ship testing supplies, insulin, pretty much whatever a patient needs and does all the paperwork with Medicare. Over the past year the stock has gone from $12 to $40. Enough said about patient convenience.
4) The "hot" product segment catering most to the need for patient convenience is insulin pumps - devices that automatically test and supply insulin as needed. There are many vendors - and major issues with these products-- send me an email if you want more information on this or post something to this blog. I can be reached at mshulman@changewave.com

That is not say patient convenience is the only driver behind successful investments. Diabetes kills and causes terrible problems - and with them investment opportunities.
As a mature patient marketplace, treatment is also very sophisticated and can be broken down into the following segments: diagnosis and testing, early treatment, mid-stage treatment pre-insulin, insulin treatment, late-stage insulin treatment, and complications from diabetes -- namely diabetic nephropathy and diabetic retinopathy. Many companies serve different cross-sections of this marketplace and it is best for investors to look at the whole market when evaluating companies.

Diabetic Peripheral Neuropathy: This is the disease associated with diabetes that creates great pain in patients, often a burning sensation, due to damage to the nervous system. There are no effective treatments but given the size of the market there is a lot of activity in this area.

Diabetic Retinopathy: The current preferred treatment is surgery and only a handful of companies are working on treatments for this disease -- the leading cause of blindness in people ages 20-74. Several biotech companies have drugs in mid- and later-stage trial and even a partial delay in the onset of blindness or a mitigation of symptoms is attractive to patients and public health authorities. Four companies had drugs in mid-stage trial - Lilly, AstraZeneca (AZN), ISTA Pharmaceuticals (ISTA) and OSI Pharmaceuticals (OSIP).

Diabetic Nephropathy: Many companies are pursuing treatments for this disease, which has terrible effects on patients and is a drain on healthcare budgets. At present, other drugs from other market segments (notably blood pressure medications) are used to slow the progression of the disease. If there is to be a winner in this category, it may be a drug in Phase III trial called KRX-101 from Keryx Biopharmaceuticals (KERX). It has shown encouraging data in late-stage trials. More trials and trial data will be needed for approval but this is a company and drug to watch in this segment.

Find out more - contact me at mshulman@changewave.com or post your comment, I read and respond several times a week.