Who Had A Worse Day?
Last Thursday could well be looked upon as watershed day and not just because we found out that our beloved Chicago Bears have one great defense unfortunately it’s combined with one very bad offense, we also found out that same day that pigs do not fly and as much as wish the tooth fairy was real she’s not. Before the Bears got their wake-up call Thursday morning Livongo reported earnings which failed to impress anyone.
Here are a few facts;
1. Since the IPO the stock is now DOWN 31.60%
2. Livongo’s market cap has fallen from over $4 Billion to slightly over $2 Billion
3. Many are beginning to question whether the company will ever make money, and some are questioning the long-term sustainability of the company
As we have noted previously prior to the earnings announcement the way analysts were fawning over the company this had all the signs of the classic pump and dump. Like so many others who know nothing about diabetes and what patients go through each and every day, the analysts feel in love as they always do with whiz bang and way cool. They looked at the Livongo management team and thought these guys have got it together.
Well as it’s turning out, not surprisingly to us, is the glitter isn’t all gold. More like fool’s gold. The problem which became obvious with the earnings announcement is the road to profitability is a long and treacherous one. We have never doubted the company’s ability to attract new clients. On the surface the program looks great. However once you dig a little deeper the problem lies below the surface. Frankly signing up new clients is the easy part.
The difficulty comes with enrolling patients and then keeping them enrolled.
What no one wants to address is while the target patient population is huge this target population is the least engaged with their diabetes management. Here are some more pesky facts;
1. Intensively managed insulin using patients really don’t need Livongo’s help. Thanks to “smart” insulin pumps, CGM, sophisticated insulin dosing algorithms and connected insulin pens insulin using patients are getting plenty of help already.
2. The same hold true for the growing number of patients using a GLP-1. Whether it’s once daily or once weekly and soon orally delivered, GLP-1 therapy is simple, easy and very effective. Worse for Livongo there really is no need for a patient using a GLP-1 to monitor their glucose levels on a regular basis.
3. This leaves patients using orals alone or in combination with a long-acting insulin as their target market. A group of patients who rarely if ever monitor their glucose levels which again hurts Livongo as their entire system is based on patients monitoring their levels. With no data to analyze no advice or help can be given.
The company also faces another issue largely missed as even if they get these non-engaged patients engaged for short time history tells us they will not stay engaged over the long term. What these patients will quickly find out is that while the help is nice it’s also can be somewhat of an annoyance. We have said since day one that the reason these patients don’t monitor their glucose regularly has nothing to do with the “pain” of testing. But has everything to do with they don’t understand what these numbers mean and it’s not actionable information.
Livongo solves the first problem as they can help the patient understand what these numbers mean, assuming of course they get them to test. However they cannot address the second issue of turning this into actionable information. Here’s why, since Livongo is merely a coach and NOT the patient’s physician they cannot make any changes to the patient’s therapy regimen. They can only hope to change the patients BEHAVIOR and behavior modification does not work over long term.
Livongo isn’t alone with these problems as they are faced by all of their competitors. The reality is Livongo and their competitors are trying to solve a problem that has perplexed the diabetes community forever, patient compliance or adherence or whatever the current politically correct term they are using to describe patients taking their meds as prescribed. This problem has existed long before we began publishing and will likely exist well into the future.
Until these patients have a real vested interest in better diabetes management nothing is going to change. Livongo and all their competitors have fallen into the same trap as disease management companies who came before them, they are thinking clinically. Yes, we know the clinicians hate it when we say this, but diabetes is as much a LIFESTYLE as it is a chronic disease. And we know it drives everyone nuts when we say this, but real-world results tells us that the majority of patients don’t want to put in the work.
We’ve said it before, and we’ll say it again there is nothing wrong with the toys in the toy chest or the drugs in the medicine cabinet. The problem is and will continue to be getting the majority of patients to play with the toys and take their meds as prescribed. No amount of whiz bang way cool can change this. Livongo and their competitors are looking for a magic potion which does not exist.