Any money being made here?

There is little doubt that Abbott who reported earnings this morning is selling FreeStyle Libre’s. As per today’s press release;

“In Diabetes Care, where sales increased 39.8 percent on a reported basis and 33.6 percent on an organic basis, growth was led by continued rapid market uptake of FreeStyle® Libre, Abbott’s revolutionary sensor-based continuous glucose monitoring (CGM) system, which removes the need for routine fingersticks1 for people with diabetes.”

Before we go on it wasn’t that long ago that diabetes care was dying nor was that long ago when the Navigator Abbott’s first attempt at CGM was an embarrassment. Which reminds of what one senior executive once said that the Halo above our head is just 7 inches away from being a noose around our neck. Oh, how times have changed.

Anyway, enough nostalgia what we are wondering is Abbott making any money on the damn thing. Just because they are selling the Libre does not mean by any means they are making money doing it. The problem is there is no way of knowing as Abbott is a huge company and Libre is a small fish in a very large pond. Unlike Dexcom which only sells CGM Abbott sells lots of other stuff and clumps everything together so it’s difficult if not impossible to know if they are making a profit on the Libre.

Based on what we know about the cost to make the Libre they should be making a profit but that does not consider discounts or rebates offered to payors. Now this may seem like a moot point as companies do this all time and Medtronic could be one of those companies as they attempt to get the Guardian Connect into the hands of patients.

Where it does matter is selling the damn thing is just the start of the process, CGM patients also need support and innovation. No company not even Abbott can continue to invest in a product if they aren’t making money on it this just isn’t good business. Well actually that statement is incorrect as Sanofi does this all the time, but we digress.

As we have noted before Abbott seems embarked on a risky perhaps ill-advised sell it cheaper than Dexcom strategy. A strategy that could push Medtronic into the nuclear option as they need something big to get the Guardian Connect going and giving it away from free is pretty big.

Many times, we have stated there is no reason for this price war, that there is plenty of business to go around but let’s face facts these companies aren’t exactly original thinkers. They all claim to be innovative and original but when it’s all said and done they sing from the same song book. And to be fair payors do hold the keys to the kingdom and all payors care about is money.

Still Abbott has exceeded all expectations with the Libre even their own. Their success along with Dexcom’s success is just further confirmation that CGM is becoming the standard for glucose measurement. Still everyone here is missing the even bigger picture for Abbott and Dexcom are picking the low hanging fruit off the CGM tree. This as is said so often is just the tip of the iceberg.

The real fun begins as CGM begins to transition from intensively managed patients to less intensively managed patients, who just so happen to outnumber intensively managed by a huge margin. No one can see that yet as they are focused on what’s directly ahead but that’s where the real money is.

All in all, kudos to Abbott as the success of the Libre proves something Momma Kliff used to say all the time; “Success is the child of many failures.”