The End Of The Diabetes Industry? This Small Cap Could Upend The Business Models of Pharma Giants

A Threat To The Diabetes Cash Cow

Years ago, in a conversation with an endocrinologist, I mentioned there was no incentive to cure diabetes, giving the money companies were making from managing it (with testing supplies, insulin, etc.). He replied that the incumbents had no incentive to cure it, but a startup company would. Now it looks like one has—at least in one patient. Sana Biotechnology, Inc.  SANA has developed a one-time treatment that could upend the entire diabetes industry.

How It Works

Type 1 diabetes occurs when the immune system destroys the pancreatic beta cells, which are responsible for producing insulin. While transplants of donor islets—clusters of cells that include beta cells—can restore insulin production, they require scarce donor tissue and lifelong immunosuppressive drugs, which carry serious risks. As a result, insulin remains the only practical treatment for nearly all Type 1 diabetics. Sana has successfully engineered donor-derived islets to evade immune rejection, enabling a Type 1 diabetic to produce his own insulin, without the need for immunosuppressive drugs.

This isn't just theory. In a clinical trial at Uppsala University in Sweden, Sana's genetically engineered pancreatic islets were injected into the forearm of a Type 1 diabetic. As the company noted in its annual report, this patient is now more than three months post-treatment, making his own insulin for the first time in 30 years—with no immunosuppressive therapy.

A recent presentation by Sana shows the results of this experiment so far. The C-peptide mentioned there is a biomarker of insulin production.

As the subsequent slide in the presentation shows, the patient was producing no insulin before the procedure, but has been producing insulin consistently since.

The Plan For Mass Production

The islet cells used in that trial came from a cadaveric donor. Sana's goal is to scale this breakthrough using stem cell–derived islets—which contain insulin-producing beta cells—that can be manufactured in large quantities and delivered off the shelf. The result would be a one-time treatment that could eliminate the need for insulin, blood sugar monitoring, and other diabetes therapies.

Larger dose‑escalation cohorts under way, with 6‑ and 12‑month read‑outs expected over the next year.

The Potential Market Impact

If the current results hold up, Sana's therapy would convert Type‑1 diabetes from a chronic drug‑and‑device market into a one‑time cell‑therapy market—a seismic shift for incumbents.

As you can see above, diabetes therapies comprise 75% of Novo Nordisk A/S’s NVO sales and 43% of Ely Lilly and Company’s LLY. For DexCom, Inc. DXCM and Insulet Corporation PODD, diabetes is pretty much their entire businesses.

The Timeline That Matters

Some potential milestones to keep in mind for Sana headlines that could impact the diabetes therapy industry.

The Bottom Line

Sana has not cured diabetes yet—but a > 3‑month insulin‑free human case without immunosuppression is more evidence than the market usually prices into chronically‑treated franchises. Shareholders of the incumbent companies mentioned above ought to consider hedging. The Portfolio Armor iPhone app can help you find the least expensive hedge that fits your risk tolerance and time frame. You can download it by aiming your iPhone camera at the QR code below (or by tapping here, if you are reading this on your iPhone).

Enterprising investors might also consider adding a small position in SANA. There's asymmetric upside potential if follow‑up cohorts validate the initial results. My subscribers and I bought shares in the company earlier this year, and then LEAPS on it last week, now that the stock has options traded on it.

Our LEAPS expire in January, 2027.

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