An R of 1
Decided to catch up on some items this morning and came across the transcript for Senseonics earnings call. During the call Tim Goodnow the company’s President and CEO shared a story about a father who happened to be a marathoner runner and how the Eversense system changed his life. Now we are not picking on Tim as we hear this type of thing during almost every call. Yes, the PR people just love this sort of story as it personalizes the company’s story and helps analysts understand the real-world impact of the product.
Yet when it comes to CGM and any other way cool whiz bang diabetes device it’s about time we got past these types of stories. Folks here in the US there are some 30 million patients with diabetes, one in three children born today will develop diabetes during their lifetime, diabetes is growing at epidemic rates and is becoming not just a major healthcare problem but a huge financial burden to healthcare systems across the globe.
We can’t wait for the day when a company states during an earnings call something like this – “We slapped our way cool whiz bang device on 4 MILLION patients and you know what their outcomes improved. Even better because of this improvement in outcomes we saved the healthcare system $100 million.”
This is one reason we have never been excited about the way cool whiz bang the ultimate in diabetes technology a true artificial pancreas. A system we do believe we will see during our lifetime and a system which will no doubt benefit a handful of patients. But for all the hype all the way cool all the whiz bang a true artificial pancreas will not benefit millions of patients.
We hate to bring out those pesky facts again but we must;
1. If you add up the installed user bases for ALL the insulin pump companies about 1.5 million patients use an insulin pump and this is globally. In the US alone, it’s estimated there are 5 million patients using insulin and less than 10% of this population uses an insulin pump.
2. In the Type 1 population approximately 30% of these patients use an insulin pump a number that hasn’t changed in years.
3. Usage in the Type 2 population is under 5%.
4. Organically the insulin pump market is growing in the low to mid-single digits. Keep in mind this is patients new to pump therapy not patients switching from one pump to another.
Consider just for a moment how this compares to the potential of CGM. CGM is not limited to insulin using patients and will become a tool for ALL patients. As we have stated frequently insulin using patients are the low hanging fruit for CGM. The real money, the real potential, the real impact of CGM will be felt when it moves from being a tool for insulin patients to a tool for ALL patients.
The Dexcom (NASDAQ: DXCM)/Verily slap it on turn it on disposable CGM could be that product. The FreeStyle Libre from Abbott (NYSE: ABT) could be too. The fact is and no one wants to believe us but both Dexcom and Abbott can do quite nicely as CGM moves from the outer banks to the mainstream diabetes population. No disrespect to Senseonics but the Eversense while a fine system has limited appeal.
We are struggling to see widespread appeal to the systems that will work with future CGM products. While none of these companies publicize the size of their installed user bases our guess is if you added up the installed bases for Livongo, OneDrop, WellDoc and all the other way cool whiz bang cloud enabled toys the total would be well below a million patients more likely below 300,000 patients which is like a fly on an elephants tush. Even worse for these companies we can’t figure out why would Dexcom/Verily or Abbott need them.
While no one likes to admit it for the majority of patient’s diabetes management is not that complex. With the algorithms and analytics, we have today it’s not rocket science to figure out what’s going on with a patient and how to fix any problems detected.
Therefore, we have some advice to every diabetes device company please stop with these stories. Leave these stories for the JDRF or ADA two groups that just love to trout out little Pippi, that cute little girl in pigtails who sits before possible donors and tells them of her daily burden of managing diabetes and how if they pony up more bucks she can live a normal life. Yes, the tears will flow and donors will open their checkbooks. Mind you that nothing substantive will come from the money they donate but they will feel like they are doing something good.