If people with diabetes could painlessly inject insulin several times a day without sticking themselves with needles, you might imagine that the diabetes world would be beating a path to the doors of companies making these devices. But these devices, called jet injectors, have been available for 20 years, and to date they have found relatively few takers.
The market is minuscule
They work by forcing the insulin through an extremely small opening in the skin at a fast rate of speed. This vaporizes the insulin into a fine mist that effortlessly penetrates the skin. The hole that the injection makes is so small that there is usually little, if any, blood at the injection site.
Most, if not all, of the companies that make jet injectors are losing money on them. But trends toward greater disposability and lower cost may yet spur sales and turn this segment into a profitable part of the insulin delivery systems market.
Minneapolis-based Medi-Ject Corp. (NASDAQ:MEDJ), in 1979 pioneered the development of needle-free injection systems for individual use. Last year its Medi-Jector Choice injectors had a 60 percent share of this market, according Frost & Sullivan, a market research consulting firm in Mountain View, California.
But Medi-ject’s claim of having sold 50,000 jet injectors to date underlines the minuscule size of this market. This works out to just 2,500 per year.
Indeed, Frost & Sullivan says that all brands of jet injectors last year had 0.7 percent of the insulin delivery system market—and that share is falling. It was 1 percent in 1997 and 1.5 percent in 1995, Frost & Sullivan says.
So, it’s probably no coincidence that three of the other four brands in this market got new owners in the past year. This is a market in turmoil.
Activa Brand Products Inc., a privately held company headquartered in Mississauga, Ontario, Canada, purchased Health-Mor Personal Care Corp.’s jet injector business in April 1998. Their AdvantaJets and GentleJets had a 35 percent share in 1998.
In March 1998 Portland-based Bioject Inc. (NASDAQ:BJCT) bought Vitajet Corp. Its Vitajet 3 had 5 percent of the 1998 market.
In May 1998 American Electromedics Corp. (OTCBB:AMER) in Amherst, New Hampshire, acquired Equidyne Systems Inc. At presstime they were ramping up to begin manufacturing their Injex needle-free insulin injection delivery system.
SEC filings for all three of the publicly traded companies show that they lost money on sales of their insulin jet injectors.
Medi-Ject reported a net loss of $5.8 million on sales of $2.8 million last year and says that it expects a net loss this year as well. The company has to be looking for a deep-pockets partner—again.
The past few months have been tough for the company. Schering-Plough Corp. unilaterally canceled an agreement in September that would have used a forthcoming Medi-Ject injector in the treatment of hepatitis.
"Without that contract the company has no time frame to get to profitability," says Dennis Nielsen, an analyst for Minneapolis-based R.J. Steichen & Co. Consequently, he downgraded his recommendation from long-term buy to hold.
"It really requires the sponsorship of a major device company," Nielsen maintains. But that company won’t be Becton, Dickinson and Co. (NYSE:BDX).
In 1996 Becton invested $5 million in Medi-Ject, but "never promoted use of this device," Nielsen says. In February of this year Medi-Ject and Becton terminated their equity agreement. The current agreement gives Becton the option to negotiate for marketing and manufacturing rights for some products in the pipeline.
"At one point we owned 20 percent of Medi-Ject," says Dr. Barry Ginsberg, Vice President Medical for Becton Dickinson Diabetes Health Care. Becton does not expect insulin jet injector sales to be significant nor does he think that they will impact the syringe business, of which Becton has the dominant share. "But if there were a jet injector which overcame the dual problems of either intermittent high pain or incomplete injections we will want to talk to them."
Ginsberg says that Becton has high margins on its syringes in contrast with the losses that jet injector manufacturers report. Insulin pump manufacturers have even higher margins. The dominant pump manufacturer, MiniMed Inc. (NASDAQ:MNMD), reported in an SEC filing that its 1998 gross profit was $87 million on sales of $139 million, a 63 percent margin.
Still, Medi-Ject keeps trying to find a corporate partner. In November it entered into an agreement with Elan Corporation Plc., a drug delivery company based in Ireland, which purchaced marketing and manufacturing rights to another product in Medi-Ject’s pipeline.
Bioject’s needle-free injection operations reported a net loss of $147,000 on sales of $57,000 for the quarter ended December 31, 1998. In July 1998 the Company entered into an agreement with Merck & Co Inc. Bio-Ject expects to get $1.5 million under the agreement, but it is only for the short term.
More promising is its recent agreement with Elan. In April Elan purchased $2.4 million of Bioject’s preferred stock and also invested $597,000 in a Bioject subsidiary. Elan now owns about 9 percent of Bioject and has warrants to buy more, says Jim O'Shea, Bioject's chairman, president, and CEO.
American Electromedics does not break out jet injector sales and net loss separately, but reported an overall net loss of $1.4 million for the six-month period ended January 31, 1999. In the absence of any jet injector sales it can’t be making money on this part of its business. Furthermore, it announced in January that it is closing down all of its operations except jet injectors.
Signing supply and distribution agreements in Germany, Japan, and Mexico this year has been the best recent news for American Electromedics. The bad news is that because of net losses for the past two years it needs more working capital than it has available, according to an SEC filing.
It says it’s looking for more capital through equity or other financing. Meanwhile, it admits that "substantial doubt exists about the ability of the company to continue as a going concern."
The only other company producing insulin jet injectors, National Medical Products Inc. in Irvine, California, was off Frost & Sullivan’s radar screen, perhaps because most sales of its J-Tip injector were overseas. This privately-help company also remains in the red, according to CEO Danny Patel. But he is optimistic for the immediate future and hopes to be in the black and ready to go public in the next year or two.
The company sold 2.2 million units —mostly in Europe and Saudi Arabia—since 1998, says the company’s Medical Director, Tim Chapman. Fewer than 20,000 of these units were for insulin delivery here.
These sound like big numbers compared with the 50,000 jet injectors that Medi-Ject sold in all of the past two decades. But there are huge differences—price and disposability. And these differences threaten to turn this market upside down.
Prices were already trending down before National Medical came on the scene. One of the first changes that Activa made after purchasing Health-Mor’s AdvantaJet and GentleJet lines was to drop the price from $795 to $495. Medi-Ject is phasing out its stainless steel nozzle Medi-Jector at $599 in favor of its disposable nozzle Medi-Jector Choice at $399. The cost of the Vita Jet 3 remains at $399 after Bioject’s purchase. Equidyne plans to sell its Injex at $225, says Patrick Gray O’Conner of the company’s sales and marketing department.
But that can’t compare with the retail price of National Medical’s J-Tip jet injector—$2. The difference is disposability. An all plastic molded unit about 4 inches long weighing just 9 grams, the J-Tip is a single-use device incorporating its own CO2 power source.
In use, patients load the J-Tip with the desired dose, place it against their skin at the selected site, and press the trigger. In a fraction of a section the high-pressure gas forces the insulin into subcutaneous tissue without noticeable discomfort.
Few endocrinologists and even fewer diabetics are aware of the J-Tip yet. Dr. Nancy J. Bohannon, a diabetes researcher with a special interest in insulin delivery systems and who has a private practice in San Francisco, hadn’t heard of the J-Tip. She says she would be "worried about quality control at that price."
National Medical’s Patel responds that their operations are ISO9001 certified. "That means our quality control is very tight."
One endocrinologist, M. Arthur Charles, the director of the Diabetes Research Center in Tustin, California, is quite familiar with the J-Tip injector. He studied groups of seven and 10 patients using the J-Tip for 60 and 33 weeks respectively.
"It is very clear that excellent glucose control by each patient was maintained," he says, and "thus I have no hesitation to conclude that the jet injector delivers insulin appropriately. We really like this thing, and our patients really like it too."
Other companies are developing single use, disposable needle-free injectors for the delivery of liquid medicines. But Medi-Ject is the only one working on one for injecting insulin, the AJ-1.
"We are looking at the $3 to $4 range," says Chief Financial Officer Lawrence M. Christian. Commercialization is planned for 2001.
Even though the upfront cost of disposable jet injectors is minimal, the annual cost could be substantial for patients injecting insulin twice or more often daily. However, National Medical’s Patel says "all the insurance companies provide reimbursement."
Insurance reimbursement for the much more expensive first-generation jet injectors is spottier. "Insurance covers the purchase a little more than 50 percent of the time," says Medi-Ject’s Christian. "It depends on the persistence of the M.D. in filing a letter of necessity with the insurance company."
Insurance covers the cost of Bioject’s Vitajet 3 injector "about 60-70 percent of the time," O’Shea says. "You could get an initial denial and then get a letter of medical necessity."
Equidyne’s O’Conner disagrees. He believes that "typically jet injection has not been covered by insurance."
The major insurance companies failed to return repeated calls to determine what their specific coverage policies were and why. Aetna—the nation’s largest health insurer—as well as Cigna and Blue Cross did not respond by presstime.
Clearly, cost has been a major factor holding back commercial acceptance of jet injectors. Why else would a device that is painless not gain greater market acceptance?
"Mainly I don’t like them because they are very heavy, very awkward, very expensive, and have to be sterilized," replies Dr. Bohannon, speaking of the first-generation injectors. "They’re a pain in the butt."
What’s next? Who’s going to win out in the competition for the dollars of insulin-dependent diabetics?
The development of single-use disposable devices will expand the market for jet injectors, one business analyst told me. He is enthusiastic about the J-Tip injector and expects that the jet injector market will experience "double digit growth rates through 2005."
Becton’s Ginsberg believes that "the devices that are going to win are the devices that are going to make things simpler and more convenient. They have to give better control and do it effortlessly."
Since I wrote this article in 1999, the field of needle-free injections (NFI) has changed significantly. Most recently Medi-Jector said that it will no longer sell its Vision to new customers.
However, the SQ-PEN needle free injection system has become available from Diabetes Management International B.V. in The Netherlands. The URL is http://www.sqpen.nl/index.php?mid=2&lang=en
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