Busy Day at the FDA

Yesterday the FDA announced not just one but two approvals in the diabetes device arena. Senseonics received approval for their Eversense implantable CGM while Tandem (NASDAQ: TNDM) received approval for their t:slim X2™ Insulin Pump with Basal-IQ™ technology. Of the two approvals we see the Tandem as more significant as it puts them on a path to compete head on with insulin pump market leader Medtronic (NYSE: MDT).

A few quick comments as many see this as the dawn of new era at the FDA and it may well be. After years of moving at glacial speed the FDA has done an about face and now seems to approve new devices at lightening speed. The new attitude at the FDA appears to be that if a device has a data set comparable to an already approved device and there are no serious issues approve it. This was evident when they approved the FreeStyle Libre from Abbott (NYSE: ABT) and allowed Abbott to have a dosing claim in the label.

We suspect there are several reasons for this new attitude as the agency was under pressure for taking forever and a day to approve anything. They see what’s going on in the marketplace and to their credit adjusted. Whether this is a good or bad thing remains to be seen. It’s certainly an improvement from the past but we wonder if the pendulum has now swung too far the other way. Time will tell.

Looking at the Senseonics news this now means there are now 4 players in the increasingly crowded CGM space. And more are coming as everyone is finally waking up to the face that it is no longer a question of if CGM will replaced BGM as the standard of glucose measurement but when that will happen.

The real question is can they compete. Can they successfully navigate the payor minefield and get the Eversense system into the hands, or perhaps we should say in the bodies of patients? While we see nothing wrong with the system our instinct tells us that achieving the scale they need to become profitable will be difficult. This will be even tougher going forward with the coming slap it on turn it on sensor from Dexcom (NASDAQ: DXCM) and Google. There is a place for an implantable sensor we just see this as a rather limited market.

The Tandem news has more potential as it places them on the path to reach their ultimate goal a closed loop insulin delivery system that can compete head on with the 670G. It also places even more pressure on Insulet (NASDAQ: PODD), who will be touting their new DASH system in Orlando, to get their closed loop system to the FDA. The fact is pretty soon every insulin pump company will have something like the 670G which means simply the more things change the more they stay the same.

Just as the CGM space is getting more crowded each day the insulin pump market continues to gain new entrants who believe they can build a better mouse trap. Which makes us wonder how Lilly (NYSE: LLY) will compete if they ever get their way cool whiz bang system to market. Or what about Bigfoot who is also getting set to enter this market? Or what about CellNovo? Or what about Ypsomed? When it comes to CGM or the insulin pump market that dead cat is getting a serious workout.

And let’s not forget about Tyler – that way cool “smart” insulin pen-app- CGM system which is coming. A system which will offer pump like outcomes at a fraction of the cost of a pump.

Folks when it comes to insulin delivery a few things are becoming crystal clear;

1. Thanks to these sophisticated insulin dosing algorithms life is about to get much better for insulin using patients.

2. Payors will remain in control over which systems are successful as they control access to these systems.

3. Therefore, the battle hasn’t changed as this is all about formulary position.

Sure, in Orlando there will lots of debate over who has the best toy, the most sophisticated algorithm. The experts will dig deep into the data sets looking for any advantage or weakness. Yet in the real world all this discussion is mute as insulin delivery still comes down to what it has always come down to; money. Yep the technology has changed and thankfully is getting much better but what hasn’t changed is that payors don’t care about whiz bang or way cool, they care about money.

It will be interesting to see how everyone frames this new paradigm. What narrative they will push. For us not much has changed. When it comes to insulin pumps we still want to know how anyone will take share away from Medtronic and do so profitability. In CGM can anyone compete with Dexcom and Abbott as they gobble up the low hanging fruit on the CGM tree building large installed user bases.

That toy chest is getting very full and these new toys are very slick. Yet it doesn’t mean a damn thing if the kids cannot afford the toys or don’t play with them.