A different view

Before we begin let’s get some numbers out of the way as this morning Abbott reported results which were nothing short of outstanding for the FreeStyle Libre – in the quarter 300,000 new patient adds which brings the total active user base to 1.3 million patients. These results combined with the results Dexcom preannounced at JPM only reinforces what we have been saying for some time the CGM market is not on fire it’s an all-out blaze.

More important to us is how Abbott sees the future. They noted during today’s call that of the 1.3 million active users two thirds are Type 1 with the remainder being Type 2. Even better they stated what we keep saying CGM isn’t just for insulin using patients but all patients with diabetes. This is significant but could also point to a possible Achilles heel in their long-term outlook.

With Libre 2.0 now available in Europe and soon to come to our shores Libre is adding features already available on the G6, although notably absent is the lack of device connectivity, something we suspect Abbott will rectify in the future. Obviously given the numbers Libre patients don’t seem to mind carrying around an additional device to capture the data.

The company also noted they are bringing on added capacity which will accomplish two important goals. Meeting patient demand while lowering costs. Abbott isn’t shy about noting they are cheaper than Dexcom something they will protect at all costs, excuse the play on words. Dexcom may have several performance and features advantages over Libre but as we say all the time this is all about money and from a patient and payor perspective cheaper is better.

But what happens when it’s a level playing on all aspects including cost. For this is what will happen when the Dexcom/Verily slap it on turn it on sensor gets here in 2020. A system which Dexcom has stated will be priced comparable to what conventional finger sticks are today. This will drive costs well below where they are today and create a competitive dynamic where features will matter more.

Right now, this doesn’t seem to matter as both Dexcom and Abbott are kicking some serious butt. Both are benefiting from a market that’s hotter than Georgia asphalt. Right now, they own the market don’t have any serious competitors so for now its basically open field running. The current mantra for both Dexcom and Abbott is let’s grab as many patients as possible before anyone else gets in. Let’s make life very difficult for the many CGM wannabes.

Still all this will change as the CGM market matures and moves beyond insulin using patients to all patients no matter how they treat their diabetes. As Abbott noted today and as we have been saying this market is huge offering lots of upside. However as big as this market is it’s a much different animal than insulin using patients and will require skills beyond just making CGM cheaper.

This is not to say neither Abbott or Dexcom is not up to the challenge, but it will be a challenge.

Right now, CGM has passed the infant stage and is moving into the toddler stage, there is still plenty of low hanging fruit on the insulin using tree. The real difficultly will come when this toddler grows up to become a teenager, a species which as every parent knows is sometimes difficult to deal with. So, for now let’s enjoy the cute and cuddly stage for as us parents who been through the teenage years know the difficult times are coming.