A crowded bandwagon

A crowded bandwagon

A day rarely goes by when we don’t hear of yet another collaboration in the interconnected diabetes management (IDM) market, a market which is getting very crowded. The latest collaboration comes from the Mayo Clinic who’s working with NovioSense BV, Gentag and the sensor and near field communication teams of Fraunhofer Institute for Microelectronic Circuits and Systems. According to various reports this group is looking to develop an ultra-low cost mobile phone system which incorporates nearly pain-free glucose monitoring. As with other collaborations the goal is to improve patient outcomes.

Looking at the technologies being worked on at NovioSense, tear based, and Gentag, patch based, it remains to be seen whether this collaboration will yield the desired outcome as neither approach has been successful to date. While it’s possible NovioSense and Gentag can succeed where many others have failed the jury is still out on both approaches. Even if successful this group will still have to overcome the structural issues facing all IDM systems, namely getting the system into the hands of patients.

As we have noted in the past as promising as IDM is this is still the business of diabetes a business which isn’t getting any easier. The harsh reality is the business of IDM is really no different than the conventional diabetes devices business where building a system is just one piece of the puzzle. Once built the system will need to gain FDA approval which we all know isn’t easy or cheap. Next comes the task of getting the system reimbursed by payors, another difficult and complex task. Assuming the system makes it through the FDA and is accepted by payors next on the list is building a sales organization which gets the system to patients.

Given the complexities of this process Diabetic Investor remains convinced of two things. First the difference between success and failure will not necessarily come down to who has the best technology. Success or failure will likely come down to who can successful navigate the complexities of running a diabetes device business. Secondarily while there are many smaller more innovative companies in this area it will be the bigger already established diabetes device companies who will likely come out on top. We feel this way not just because they understand the complexities of the diabetes device market. The simple fact is existing established companies have something these smaller companies don’t; scale, and as we’ve been saying for some time scale is critical.

A few other key trends are emerging in the IDM space:

  1. Everyone and we mean everyone wants a piece of IDM and not just device companies. As we move ever closer to outcomes based reimbursement drug companies, pharmacy chains and payors all have a vested interest in IDM.
  2. The presence of high tech companies like Apple, Google and Samsung, just to name a few, will keep money flowing into this space. Diabetic Investor still believes these cash rich companies will either partner with or buy established companies in the future. Hate to be redundant but they know that scale is critical and it’s faster and cheaper to buy rather than build scale.
  3. Wide spread adoption of IDM will not occur overnight as these systems will have to prove themselves in a real world environment.
  4. As bad as things are in the conventional glucose monitoring market these systems will remain a valuable cost effective diabetes management tool. There may be fewer systems to choose from in the future but they will not go away entirely.
  5. IDM has to get beyond gathering data. Quite frankly gathering data and getting this data to the cloud is the easy part. Turning this data into actionable relevant information is the key.
  6. IDM has get beyond helping insulin using patients and reach non-insulin patients.

It is these last two points that Diabetic Investor sees as the real battleground. The fact is insulin using patients are the low hanging fruit on the IDM tree. Yet for IDM to be widely adopted it must reach non-insulin using patients as well. The only way this happens is by translating data into actionable patient relevant information no matter how that patient manages their diabetes.

The race is on but this is not a sprint, this is a marathon.