And it continues

And it continues

Try as we might we just cannot understand why anyone would want to be in the conventional glucose monitoring business. Usage is decreasing, prices continue to contract, and the technology is outdated. Yet these facts haven’t stopped new companies from entering this market. The latest is Innovus Pharmaceuticals who just received FDA clearance for their GlucoGorx glucose monitoring kit.

So just what is the value proposition for the GlucoGorx as far as we can tell it’s the kit delivers a test result in 4 seconds. Which is one second faster than the current crop of meters… WOW.

However, Innovus isn’t the only company entering an already overcrowded market. Last week Common Sensing makers of the GoCap received $6.6 million in funding. The GoCap is just one of several “smart” insulin pens those systems which sends insulin dosing information to a way cool whiz bang app. Now we have nothing against the GoCap or any of these “smart” insulin pens as they do fit into the future and are one component that makes up a Tyler.

Yet like the BGM market which has too many systems and too few patients, the “smart” insulin pen market is going down the same path. Seriously just how many of these systems do we need.

Now at some point you would think that the companies who invest in these way cool whiz bang technologies would notice that these technologies are nothing more than a commodity. Just as there are minor differences between BGM systems and insulin pumps the fact is all these way cool whiz bang “smart” insulin pens do basically the same thing the same way. That in a Tyler the hardware is basically interchangeable.

What matters is not the “smart” insulin pen rather what matters is the insulin dosing algorithm combined with an accurate and reliable CGM. Yet for reasons only the investors seem to understand they believe that one “smart” insulin pen can be better than another “smart” insulin pen. This is like investors believing the Tandem (NASDAQ: TNDM) insulin pump is the reason why their newest system is better than the way cool whiz bang 670G from Medtronic (NYSE: MDT).

We hate to burst anyone’s bubble, but the fact is the Tandem pump is the least important piece of the puzzle. The fact is the pump just does what it is told to do. As we have stated before you could take the TypeZero algorithm and Dexcom (NASDAQ: DXCMN) CGM combine them with any insulin pump and likely have the same results.

Just in case it’s not clear yet allow us to dumb it down for everyone – THE HARDWARE DOES NOT MATTER AS LONG AS IT WORKS. THE HARDWARE IS INTERCHANGABLE AND THEREFORE A COMMODITY.

Tandem’s stock is up almost 100% on the false premise that the hardware does matter. The one and only advantage Tandem has at the MOMENT is the work with TypeZero and Dexcom. But this is a temporary advantage as they do not have an EXCLUSIVE with TypeZero. Allow us for a moment to outline a scenario that would kill Tandem’s current momentum.

Let’s say that Dexcom partners with Ypsomed who as we noted has a nice new insulin pump. A pump that it just so happens can use a pre-filled reservoir from Novo Nordisk (NYSE: NVO). Dexcom and Novo are already running clinical trials on a Tyler and it’s known that Novo has been sniffing around the insulin pump space. What then prevents Dexcom from buying TypeZero putting its algorithm on the Ypsomed pump? Nothing at all.

But wait it gets better. Novo isn’t the only insulin company partnered with Dexcom as they have deals with Lilly (NYSE: LLY) and Sanofi (NYSE: SNY). Lilly is building their own way cool whiz bang insulin pump and Sanofi is using the already mentioned GoCap from Common Sensing. Owning TypeZero would give Dexcom a huge leg up on the competition while helping them fend off Abbott (NYSE: ABT) and Medtronic.

See this is the Achilles heel in Abbott’s strategy with the Libre. As it stands today they are not partnered with any insulin pump company nor as far as we know do they have any relationships with any “smart” insulin pens. Although we see the bigger market for CGM as the non-intensively managed patients it will take time for this market to develop. The shortest distance between selling more sensors is to capture not just insulin pump patients but also patients following multiple daily injection (MDI) therapy.

This problem does not solely fall on Abbott it also falls on the many Dexcom wannabes. Sure, they might be able to build the damn thing and they MAY be able to make them cheaper but with Dexcom locking up all the insulin companies and most of the insulin pump companies who are they going to sell sensors too.

Medtronic may not have a great stand-alone CGM, but they have bucks and established relationships with payors. Therefore, any CGM newbie not only has to overcome Dexcom and Abbott but Medtronic as well.

Still money continues to pour into systems which are nothing more than a commodity. Why? Because everyone thinks they have a better mouse trap and the diabetes market is huge and growing. These investors seem to turn a blind eye to what happens after you get the damn thing through the FDA and onto the market. Basically, what they are counting on is the greater fool theory, that some large company will come along and buy the company they just invested in.

As we say often we cannot blame them at all as this has been the history in the diabetes device world.

We are no longer trying to find a rational for deals which to us look like a huge waste of money. Frankly we have enough gray hairs already and as Momma Kliff used to say; “Never underestimate the power of stupidity.”