A Walk Through The Orchard

A Walk Through The Orchard

Yesterday Apple announced a partnership with Dexcom (NASDAQ: DXCM) which will allow the Dexcom CGM to send readings directly to an iWatch. An announcement which initially lifted shares of Dexcom as investors felt relieved that Apple would not be direct competitor. While this may be true we don’t think Apple has jumped out of the diabetes device pool. What we think is the company will pursue a two-pronged strategy; partnering with companies like Dexcom when it comes to FDA approved devices while also building their own toys which will not require FDA approval.

We further believe that whatever whiz bang way cool non-FDA approved toy they come up with it will work with their new way cool whiz bang HomePad and set off a fierce fight between Siri and Alexa. Yep Siri and Alexa who already have a running battle for the affection of the patient will only clash more once the HomePad hits the shelves in December. But today is not the day to discuss the Siri Alexa battle.

Let’s instead delve deeper into why Apple is taking this two-pronged approach. It should go without saying that the biggest reason to the avoid the FDA is time. Apple lives in a world with six-month product cycles and as everyone knows the FDA approval process takes years not months. Apple can easily afford the process but has made a smart decision leaving this world to the professionals like Dexcom.

Another reason they can avoid the FDA is their target market; non-intensively managed Type 2’s that DO NOT USE INSULIN. Quite frankly these patients do not need an FDA approved device. What we see for this very large group of patients, the same group Google/Dexcom are going after, is a device that shows glucose trends not actual values.  Let’s be honest these patients have no idea what these numbers mean anyway so why show them, why not instead show which glucose zone they are in.

Now longtime readers of Diabetic Investor may recall that way back in the day we noted that meter companies should develop meters which only showed which zone a patient was in. That non-intensively managed patients would be more receptive to color coded zones than actual numbers. This is where we Apple headed and they won’t need FDA approval either. No in the world Apple lives in, a world with 6-month product cycles, a world where devices are sold in Apple Stores, a world where their customer does not require a prescription to buy the latest way cool whiz bang toy.

Apple is perfectly content partnering with device companies who have FDA approved devices. They know that this is the low hanging fruit when it comes to market size, that there are 10 times more non-intensively managed patients then there are intensively managed patients. They understand that non-intensively managed patients could care less if the toy they are using is FDA approved or not. In fact, a strong argument can be made that given Apple’s strong brand these patients will feel very comfortable and not having FDA approval will be a plus not a minus.

Frankly the fact that Apple wants to avoid the FDA tells us they are smarter than the average bear. Apple wants to play in the big sandbox, they want to reach millions of patients, they want to help these patients live with and not for their diabetes. It should come as no surprise that Google also sees this but is going at these patients from a different angle. These two tech titans will soon own the glucose monitoring space and have the potential to forever change diabetes management.