Why bother with the facts?

The way things are going at Livongo we’re shocked they haven’t announced they have developed a new program to battle the coronavirus. It was bad enough that yesterday company founder Glen Tullman appeared on CNBC shamelessly implying that somehow the Livongo platform is helping patients with diabetes battle the virus, when in fact nothing could be further from the truth. Nope the company is doubling down today with a statement made by Vice President, Government Affairs Leslie Krigstein.

According to a post on the company’s blog Ms. Krigstein states;

“But while this stimulus is a great step, we need to do more to support the present and future health needs of our most vulnerable populations.”

She concludes her post stating;

“The COVID-19 pandemic presents us with a historic opportunity to reevaluate our health system, and its ability to address the urgent and unique demands of our nation’s most vulnerable citizens. This is clearly an opportunity for telehealth to step up and show how it can help, and the stimulus plan is pivotal in clearing the way for it to do so. But remote monitoring and management are essential components of the comprehensive solution as we look to scale virtual care and provide solutions for people to manage their health outside the physical bounds of our healthcare system. Through thoughtful implementation and a strong clinically backed approach, remote monitoring creates a great experience that makes it easier for people to stay healthy throughout all stages of their care journey. When we look back on this time, we’ll either view the current stimulus as a well-intended, but incomplete fix, or a decisive turning point toward an entirely new standard of care.”

Now we hate to burst anyone’s bubble here but let’s examine some very real and very pesky facts;

1. There is absolutely no correlation between poorly controlled diabetes and an increased risk of developing the coronavirus. Nor is there any evidence to suggest that patients under good control have a lower risk of getting the coronavirus.

2. It’s a fallacy to believe that increased use of telemedicine or remote monitoring decreases the risk of getting the coronavirus.

3. Social distancing combined with common sense things like washing hands regularly are the most effective methods for preventing a patient from getting the virus.

4. To the best of our knowledge data analytics do not indicate that a patient might have the virus. Or put another way all the glucose readings in the world are not correlated to whether or not the patient might have the virus.

5. Even if the patient has the virus there isn’t much Livongo can do to help them. There are no drugs these patients can take nor are there any steps other than self-isolation that protect the patient.

Yesterday we noted that perhaps at long last digital health which includes remote monitoring and virtual physician visit could at long last go from being something we talk about to something that actually works. However it should also be noted for patients with diabetes these tools have been widely available for years. For years all the toys in the toy chest have been talking to each other while sharing patient data via the cloud. Thanks to this connectivity patients can easily share their data with their physician.

There are also a plethora of free apps which take all this data apply data analytics to it and provide recommendations to patients. Simply put the patient has plenty of options if they want to take advantage of them.

Yet even with all this way cool whiz bang technology one indisputable fact remains – the majority of patients are NOT achieving better outcomes. Which makes us wonder how increased usage of remote monitoring or virtual office visits will change that fact. Again we hate to burst anyone’s bubble here but what leads anyone to think that virtual physician visits will be more effective than in person visits.

The fact is in the real-world patients forget about 90% of what they are told, why would this change just because they were told this virtually. The fact is in the real-world patients are not adherent with their therapy regimen, has this changed with remote monitoring? The fact is in the real-world good diabetes management is not that complex, as we say consistently providing the patient with the how to manage their diabetes is the easy part. The hard part is getting the patient to want to manage their diabetes, how will remote monitoring or telemedicine change this is?

What Livongo and every other patient coaching platform boils down to is behavior change and yes, it’s that simple. Yet even with all the fancy data analytics, remote monitoring and telemedicine the majority of patients either don’t want to change their behavior or cannot sustain them. We hate to be Captain Obvious here but why do so many people who have worked so hard at losing weight gain it all back?

The harsh reality here is that there is nothing Livongo can do to help patients avoid the coronavirus. Sure they can remind them to practice social distancing, it can remind them to wash their hands but beyond these already well-known steps what can they add? Increased glucose monitoring doesn’t help, eating better doesn’t help. But hey why let these well-established facts get in the way of shameless promotion.

Now to be fair Livongo is not the only company attempting to turn this crisis into a higher stock price. Unfortunately Livongo is just one of many. Are we surprised by this? Nope. However we would remise in our responsibility if we did not bring to light the many holes in what Livongo is claiming. This is a company that loves to play very fast and very loose with the facts. They continue to make outrageous unfounded claims backed up not by science but fuzzy math.

Livongo is playing a very dangerous game betting that this house of cards does not come tumbling down before they can sell the company. They will do or say almost anything to promote the myth that they have developed something unique, when in fact all they have done is taken an old idea that didn’t work the first time around, wrapped it in new technology and telling everyone how great it is. They are using revenue recognition methods that at best are convoluted and at worst borderline illegal.

As Momma Kliff used to say it’s during times of crisis that people reveal their true colors. Thankfully the coronavirus crisis has brought out many examples of people showing their better selves. We have seen some incredible acts of kindness combined with a new appreciation for who the real heroes are. Just as we came together after 9/11 once again the American people are joining forces, putting aside past differences and coming together.

However there are always those who seek to take advantage of a crisis, to enrich themselves rather than help others. During this crisis Livongo is showing their true colors and they aren’t pretty at all.

Chutzpah with a capital C

Today while insiders we’re selling Livongo CEO Glen Tullman, who was among the sellers, appeared on CNBC. According to the CNBC website “Glen Tullman, executive chairman and founder of Livongo Health, joins “Squawk on the Street” to discuss how his company is working to monitor coronavirus patients from home.” Yet during the interview which can be found at https://www.cnbc.com/video/2020/03/30/livongo-health-founder-glen-tullman-on-fighting-coronavirus-with-remote-monitoring.html, Mr. Tullman failed to mention one specific thing Livongo was doing that is related to the coronavirus.

Now we understand that Glen will do just about anything to promote Livongo and shameless self-promotion is part of the package. Glen being the smart guy that he is knows full well that any company even remotely related to the current crisis will get a nice bump by merely saying they are working on a solution. It really doesn’t matter if these solutions are real as they are for Abbott or Medtronic or imagined as they are with Livongo.

We hate to bring up those pesky facts but Livongo in no way whatsoever has anything of substance when it comes to the coronavirus. About the only coronavirus connection Livongo has is the fact that patients with diabetes are at increased risk of getting the virus. The programs Livongo offers don’t change this fact nor do they do anything that will prevent these patients from possibly getting the virus.

Livongo is a diabetes coaching platform, a platform that is dependent on patients signing up for the program. Something which is becoming increasingly difficult to do these days given that people are now working from home and have more important things to worry about. But when it comes to shameless self-promotion let’s not let the facts get in the way of pumping your share price so that insiders can cash out at a higher price.

Over the past 20 plus years we have seen many acts of pure unmitigated chutzpah, but this interview tops them all. This isn’t chutzpah this is CHUTZPAH on steroids and quite frankly CNBC should be ashamed of themselves for promoting this bullshit.

Looking for good

Momma Kliff used to say when possible look for the good that comes from a bad situation. Well Mom just might have a field day given how bad things look right now. The country is basically on lockdown until the end of April, several companies have halted clinical trials or put major projects on hold. No one is quite sure what impact the coronavirus will have on sales, but no one is expecting the news to be good.

Still we do see several positives coming out of this crisis and not just the increased use of telemedicine. Before we go into greater detail a quick note about telemedicine. Even before the coronavirus hit the use of telemedicine was on the rise. The pandemic will likely open the floodgates for telemedicine, but this was going to happen anyway.

Thanks to the connectivity of all the toys in the toy chest diabetes could well become the posterchild for just how different things will become. As we have noted many times even before the pandemic hit CGM was becoming the standard for glucose measurement. Thanks to the connectivity of these devices we see the crisis increasing CGM usage among less intensively managed patients.

Along these same lines the pandemic will be a boon for interconnected insulin delivery systems. Again as we have noted there are a plethora of interconnected insulin pens or interconnected disposable insulin pen cap covers. With all this information seamlessly shared via the cloud physicians can monitor patients more effectively. Additionally using telemedicine, email or text messaging physicians can easily communicate with patients.

The hold up here prior to the pandemic was twofold, getting patients comfortable with virtual consultations and reimbursement from payors. Thanks to the pandemic both barriers are coming down. Even when social distancing goes away and patients are allowed to move freely without restriction, we anticipate many will seek alternate methods to the traditional office visit.

Additionally we see patient training moving from face to face to virtual. Just as parents are beginning to experience virtual classrooms for their children, patients with diabetes will experience virtual classrooms when they get a new device. By extension customer support will also move in this direction. Again this is a trend that would have happened anyway but will get a boost thanks to the crisis.

This move to the virtualization will go beyond patient/physician interactions and extend to how drugs and devices are sold. Even before the crisis companies were shedding field sales forces. Thanks to the internet and social media it’s easier than ever for physicians and patients to get information. While we don’t believe field sales forces will be eliminated entirely, not just yet. We do see them becoming more of a luxury used sparingly.

The reality here is that many trends that were already underway will get a major boost from the crisis. When this crisis passes it could finally usher in the real era of digital health. Finally at long last all this whiz bang way cool technology could become mainstream. Listen we have long known digital health had vast potential but that’s all it had, potential. Yet the longer this crisis goes on, the longer people are cooped up in their homes the more digital options are being utilized.

Companies are finding ways to get their message out, their products sold, and their customers trained and supported. Patients are finding way to make sure they have the meds they need without leaving their homes. Social media already a major communication tool before the crisis is becoming even more important. The reality is all this way cool whiz bang technology is now being forced into everyone’s hands. Digital health is no longer the luxury of a select few it is now becoming mainstream.

All along we have stated that it’s not about the toys in the toy chest. That the real trick was getting the patient, the physician, the payor – everyone in the process to play with the toys if they were to be effective. It could be that the good that comes from the bad in this case will be digital health goes from a great idea to a useful productive tool that’s actually used not just talked about.

Continued Fallout

This morning as anticipated Senseonics effectively ceased operations. Per an 8-K filed today;

“As part of the previously announced strategic review that Senseonics Holdings, Inc. (the “Company”) is conducting in connection with its evaluation of strategic alternatives, and considering the impact of the COVID-19 global pandemic on access to physician offices and medical facilities, the Company is, effective immediately, suspending commercial sales in the United States of its 90-day Eversense continuous glucose monitoring (“CGM”) system to new patients and physician practices. The Company intends to continue distributing the 90-day Eversense system to patients who are currently using the product for the foreseeable future. The Company also intends to continue supporting existing patients and their physicians. The Company is evaluating its Eversense Bridge program and may revise, suspend or cancel this program in its entirety. The Company plans to continue its development and regulatory submission efforts for its Eversense XL CGM system for use for up to 180 days in the United States as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The Company expects that cash used in operating activities for the quarter ending March 31, 2020 will be consistent with average quarterly operating cash outflows during 2019. However, the Company expects that the cost reduction measures previously announced, including the suspension of commercial sales of the 90-day Eversense system, will significantly reduce the cash used in operations in future quarters.”

We’re sorry to see this happen but as we have been stating for some time now it wasn’t a question of if the company would be forced to shut down but when it would happen. Additionally it must be noted that while COVID-19 pushed the company over the edge it is not the main reason the company failed. The reality here is that Senseonics made a good product which had limited demand, bottom line there just want enough interest in an implantable sensor.

We also believe that COVID-19 could accelerate additional strategic options including the possible sale of the Medtronic diabetes franchise. Already beset by a host of problems Medtronic could well decide that at long last it’s time to get something before it turns into nothing. Even with its many problems the franchise has value and in the right hands could yield solid profits. Medtronic has toyed with this possibility before and has the blessing of their investment bankers to attempt such a deal.

As always it comes down to finding a buyer who is willing to meet what we believe will be a hefty price. Even with the Control IQ doing very well and the OmniPod gaining Medtronic remains the undisputed leader in insulin pumps when it comes to installed users. Although there is no way of knowing this, we suspect given these uncertain times and patients inability to see their physician sales of all insulin pumps will stagnate in the near term. This provides Medtronic with a window of time to make this deal happen.

Should the company wait until things get back to normal, or whatever our new normal will be, the Control IQ and OmniPod will continue to eat away at their installed base. A base which had been slowly eroding over the years. Keep in mind that the continued revenue stream from supply sales isn’t the only reason this base is valuable. The base also produces substantial revenue from upgrades and patients replacing out of warranty systems with new systems. Add in the sales of sensors and the value only increases.

That being said some might reason there is no reason to monetize this asset, that an easier option would be to continue along the present path. We can understand this thought process until one looks at the future. Even if the company can enhance their existing systems under development and fix the many issues with their sensor there is little guarantee these new systems will yield different outcomes. Medtronic’s dilemma is vast improvements must be made just to get their systems on par with the Control IQ and the coming Horizon from Insulet.

There is no question in our mind that the fallout from the coronavirus will continue well beyond its present impact. First quarter results will provide the first glimpse with the second and likely third quarter reflecting a more accurate gauge. Sadly Senseonics will not be the only causality. It goes without saying that our lives will be forever changed by the coronavirus and this includes what happens in the wacky world of diabetes.

An apple a day

There’s a very old saying that an apple a day keeps the doctor away. Now we have no idea who came up with it or how many times it’s been used but when it comes to cliché’s this has to be in the top five. We were reminded of this cliché while reading yet another press release from DarioHealth a company which is supposed to be in the conventional BGM business but is much better at issuing press releases. Now most of these releases are meaningless and amount to nothing more than garnering attention.

We also think its slightly old school and a little out of touch given the popularity of social media. OneDrop another conventional BGM business which is doing their best to become yet another coaching platform has become the master of using social media, leapfrogging Bigfoot who seems to have lost their voice for over promising and under delivering. Thanks to Abbott Bigfoot gets to live on but it won’t be long before Abbott walks away, and Bigfoot becomes Big Dead.

Moving to the CGM world you have to love another hyperactive child, Nemaura Medical. Nemaura is the makers of the world famous SugarBeat system, a system based on old technology which didn’t work the first around but why let the facts get in the way of a good story. Nemaura who we’ve followed for years caught our attention again when they noted they would be launching this NON-FDA approved device in the US. Per a company issued press release;

“Nemaura Medical Inc. (NASDAQ: NMRD) (“Nemaura” or the “Company”), a medical technology company focused on developing micro-systems-based wearable diagnostic devices and currently commercializing sugarBEAT®, its non-invasive and flexible continuous glucose monitor (“CGM”), together with BEAT®diabetes, a planned health subscription service designed to help people with Type 2 diabetes and pre-diabetes through personalized lifestyle coaching, announced it is preparing for the launch of sugarBEAT® in the U.S. under the wellness category following recent feedback from the U.S. Food and Drug Administration (the “FDA”).”

The release goes onto state;

“The FDA general wellness category use is defined as: (1) An intended use that relates to maintaining or encouraging a general state of health or a healthy activity, or (2) an intended use that relates the role of healthy lifestyle with helping to reduce the risk or impact of certain chronic diseases or disease conditions and where it is well understood and accepted that healthy lifestyle choices may play an important role in health outcomes for the disease or condition.”

Before we go on here let’s make a few points clear;

1. The FDA has NOT approved the device.

2. If accurate this would be the first time the FDA allowed this type of launch. We say if accurate as the company is the one saying they can do this NOT the FDA. We could not find any mention of the company or its product anywhere on the FDA web site.

3. As of the end of 2019 the company had just over $1 million in cash and per it’s most recent press release has entered into multiple non-binding verbal agreements which may or may not result in collaborations.

4. Reading through the most recent 10-Q you find that –

“The Company was notified by NASDAQ on July 15, 2019 that the Company no longer met the requirements of NASDAQ Rule 5550(a)(2) requiring listed securities to maintain a minimum closing bid price of $1.00 per share. The Company effected:

(i) A reverse split of the Company’s issued and outstanding common stock, par value $0.001 per share on a one (1) for ten (10) basis; and
(ii) A decrease in the Company’s authorized number of shares of common stock on the same basis from 420,000,000 shares of common stock to 42,000,000 shares of common stock which were effective with NASDAQ at the opening of business on December 5, 2019.

On December 19, 2019 the Company received confirmation from NASDAQ that the Company has regained compliance with the Minimum Bid Price Rule and the matter is now resolved.”

5. Management not surprisingly owns a boatload of stock and as per standard operating procedure hopes to find a greater fool to take this dog of a product off their hands at a vastly inflated price so that they can become rich and then repeat this scam and get richer.

Folks try as we might to bring these scams to everyone’s attention investors foolishly continue to pump money into companies like Nemaura. Back in the day before CGM it was non-invasive conventional glucose monitors that stole millions from investors, today we have a new crop of crooks with non-invasive CGM’s. Which to us conclusively proves something Momma Kliff has been saying for years – There is no cure for stupid.

The Invisible Threat

The coronavirus isn’t the only invisible threat we’re facing these days. As the diabetes device world continues to become interconnected with information being seamlessly shared a new hidden threat has emerged. Just the other day the Department of Homeland Security issued an advisory regarding the OmniPod PDM. The advisory states;

“Successful exploitation of this vulnerability may allow an attacker to gain access to the affected products to intercept, modify, or interfere with the wireless RF (radio frequency) communications to or from the product. This may allow attackers to read sensitive data, change pump settings, or control insulin delivery.”

Insulet isn’t the first insulin pump company to deal with this issue as Medtronic has also been hit with this same issue. Now before we go any further a few very important items;

1. Insulet to their credit hired a third party to investigate any possible cyber threats and further to their credit reported the results of the investigation which resulted in the above noted advisory.

2. While this issue is very real and is a huge potential threat no one in the insulin pump community sees this as an immediate threat. Thankfully all the insulin pump companies are talking steps to ensure the safety of their systems. As we keep stating insulin may be a life sustaining drug but it also a lethal drug when dosed improperly, hence the reason insulin pump companies are taking this matter seriously.

3. Given the movement towards interoperability this is the area we see the biggest potential threat and not just with insulin pumps. Any system which is involved in the insulin dosing process and reports results via the cloud faces this threat. Hence this is an issue facing Dexcom and Abbott, who like the insulin pump companies are taking this threat seriously.

The real concern we have is not with companies like Tandem, Insulet, Medtronic, Dexcom or Abbott. These companies understand the threat and have the resources to deal with it. No the concern we have is for every patient using an off the shelf non-FDA approved system. To be clear here we are in no way implying that the makers of these systems are not aware of the threat rather our concern is are they equipped to deal with the threat.

From the beginning the we want it yesterday movement has pushed the edge of the envelope. To their credit they have forced the conventional insulin pump companies to rethink how their systems work. However an Achilles heel of this movement has been the disjointed efforts to handle patient support. Sure interoperability is great when all the links in the chain work as designed. The problem comes when one of the links doesn’t work.

As insulin delivery becomes more automated with the patient making fewer decisions it’s imperative that these systems are secure. It’s equally imperative that the manufacturers of these systems have the resources and infrastructure in place to deal with an attack should it happen. As we are learning with the coronavirus, another threat that many thought unlikely, things like supply chain and preplanning can make the difference between life and death. Who in the right mind would have thought only a few weeks ago that something as inconsequential as facemask would become a lifesaving scare tool? That ventilators would be a critical medical device.

The major established diabetes device makers also have another reason to take this matter seriously. Not to be crude about this but these are for-profit entities who have a responsibility to their stakeholders. While the efforts of the we want it yesterday are noble who holds these groups accountable. What recourse does the patient have should they get bad information. Again let’s be clear here we are not saying these groups do not care about patients, quite the contrary they care deeply about patients. However being unregulated and not subject to any fiduciary responsibility where is the accountability when something goes wrong.

With all the strides we have made over the years one thing hasn’t and never will change when it comes to medical devices. Medical devices can and do fail or malfunction. Thankfully the established companies are taking this matter seriously but even with their efforts they understand they cannot let their guard down.

As Momma Kliff used to say insurance is one of the few things you buy hoping you never need it but your grateful that you have it when it is needed. Let’s hope and pray that this invisible threat remains just that a threat and never ever rears its ugly head. However as we are seeing right this very moment invisible threats are very real and should not be dismissed just because they seem unimaginable.

The Blame Game Begins

As we head into a well deserved Holiday weekend Diabetic Investor finds it amusing that Exubera has gone from a sure-fire blockbuster product to one of the worst product launches in history. Recently there have several articles written about Exubera and just how badly the product has performed. The most recent came today in the San Jose Mercury News- http://www.mercurynews.com/business/ci_6767521?nclick_check=1.

Diabetic Investor can’t resist a little gloating here as we predicted long ago that Exubera was nothing more than a niche product and would fail to reach the sales figures many projected.

Even worse many of the pundits who are now examining Exubera’s failure still are clueless as to the real reasons Exubera failed. These are the same people who foolishly believed Exubera would be a blockbuster just because patients would not be subject to the pain of injections. As Diabetic Investor has been saying for years patients are more afraid of insulin then they are of injections. Insulin therapy is complex; a physician cannot simply prescribe insulin without also providing some form of patient education. Exubera’s problems were compounded by the fact that its delivery device was cumbersome and less than patient friendly.

Still Pfizer (NYSE:PFE) continues to waste shareholder’s money as they have yet to pull Exubera from the market. Their latest blunder is the direct to consumer ad campaign. Just why they are continuing to throw more money into a bad product is anyone guess.

Investors should not sour on inhaled insulin as there will be a quality product on the market in the future. Several companies are working towards this end and there is a place for inhaled insulin. However, even with a more patient friendly delivery device inhaled insulin will always be insulin. This fact alone will be a limiting factor when it comes to commercial success, especially since the product is targeted at Type 2 patients.

Ironically the biggest threat to inhaled insulin will come from an injectable product – the long acting once a week version of Byetta which we covered in our last issue. Byetta LAR has what patients and physicians crave – effectiveness and simplicity. And yes it is that simple.

David Kliff
Diabetic Investor
847-634-4646 fax
224-715-3761 mobile

All but over

There are times when we honestly wish when predictions we make don’t come true. Sadly that it is not the case when it comes to Senseonics who this morning issued a press release which stated;

“Senseonics Holdings, Inc. (NYSE-American: SENS), a medical technology company focused on the development and commercialization of the first and only long-term, implantable continuous glucose monitoring (CGM) system – the Eversense® CGM System – today announced that its Board of Directors has decided to explore potential strategic alternatives to enhance stakeholder value. The Company is engaging Moelis & Company, LLC as its financial advisor and Cooley, LLP as its legal advisor.”

As we noted previously the company was running low on cash and without a major capital infusion or acquisition would likely be forced to cease operations. The situation has now become critical as the company failed to restructure their debt with Solar Capital, LTD. As the release notes;

“On March 22, 2020, the Company terminated its Loan and Security Agreement with Solar Capital Ltd. and paid all amounts outstanding. Including a payoff fee and prepayment premium, the amount paid by the Company totaled $48.5 million.”

Based on the most recent results released by the company back on March 12th the company had approximately $96 million in cash. Take away the payment to Solar and add in their quarterly cash burn of approximately $25 million and it’s easy to understand why the company is now on life support.

The real question is will a white Knight come along to save the day. Again as we previously reported some companies have taken a look but none so far has pulled the trigger and quite frankly we doubt anyone will. Besides the economic shutdown brought on by the coronavirus the company has a host of additional issues that will prevent a sale.

While the coronavirus situation may have put the final nail in the Senseonics coffin it was NOT the cause of the company’s demise. As we have noted from the start there just isn’t a large enough market for implantable CGM. Especially a system which still requires that the patient have a transmitter attached to their body.

We could repeat the many other reasons why Senseonics failed but why throw salt in an open wound. The sad reality here is Senseonics is just the first of many toy companies likely to fail during this economic crisis. A crisis which did not create the failure but will be blamed for the failure.

Perhaps one day everyone will learn it’s not about way cool whiz bang. Perhaps one day everyone will learn that making the damn thing work is just the first step in a very long journey. Perhaps one day everyone will learn that diabetes devices are a BUSINESS and that management talent combined with a sound business strategy is more important than whiz bang way cool.

Gauging the impact

While it seems unthinkable at the moment at some point the coronavirus crisis will pass and life will get back to normal or whatever the new normal will be. No one knows when that day will come all we know is it will come. That being said it’s worthwhile to look ahead and gauge the impact this crisis will have on the business of diabetes.

It’s understandable during this time of crisis that physicians have taken some drastic measures. We have received multiple reports from reps in the field that they have been banned from physicians’ offices an understandable move given the crisis. Given the fluidity of the crisis no one knows when or if these reps will be allowed back. While we don’t see this move adversely impacting sales of drugs, we do see this hurting device sales.

Just by way of example sales of the Control IQ from Tandem were skyrocketing. As we have noted thanks to social media patients are seeing the incredible results produced by the Control IQ. However with the economy in flux and patients understandably worried about their jobs it’s logical that sales of the Control IQ will slow. How long this slowdown will last is anyone’s guess, but we have no doubt that previous projections given by Tandem can be thrown out the window.

We also anticipate that Tandem isn’t the only insulin pump company that will be adversely impacted as Medtronic will also feel the pain. Again as we have noted previously many 670G patients were looking to convert to the Control IQ however now these conversions will likely be delayed. Patients on older Medtronic systems will likely follow a similar pattern preferring to remain on their older systems until everything sorts itself out. The real question is just how many of these patients drop their pumps in favor of multiple daily injection (MDI) in an attempt to cut costs.

Being the only pay as you go option Insulet may be the least impacted by this crisis. However like Tandem and Medtronic they likely will experience slower new patient adds. We aren’t saying that growth in the insulin pump market will come to a halt rather growth will slow sustainably until this crisis is over.

This slowdown in insulin pump sales combined with the economic uncertainty will also adversely impact growth in the CGM market. The simple truth is during a time of crisis especially this one which changes day by day, patients are in no mood to make major changes. We see this not just hurting new patient adds but also reorder rates as patients currently using CGM just might scale back reorders until the crisis passes.

Although we don’t anticipate sales of drugs adversely impacted, we so see new drugs such as Rybelsus® the oral GLP-1 from Novo Nordisk hurt by the crisis. Again patients are in mood to make major changes during a time of crisis and physicians don’t have the time or energy to push a new drug. Just as we see growth slowing in the device sector, we anticipate a slowdown in prescriptions as patients hunker down.

We continue to believe Livongo will be seriously impacted for the same reason. Livongo is dependent on new patient adds and with people at home, employers making major changes the last thing these people want to do is sign up for a new program. These people aren’t worried about improving their diabetes management they are worried about their families and having a job. Without new patient adds you can take every projection Livongo has made and flush them down the toilet and you won’t need to waste the most valuable commodity, toilet paper, to do it.

Based on the situation at this very moment and heaven knows it could change at any moment the best way we can describe the current situation is stagnation. With no movement forward and perhaps some movement backward. Again as we have noted second quarter results will be the first glimpse at the reality of the situation. Our educated guess is all the companies are making contingency plans to deal with the fallout and reignite sales when the crisis ends.

However just like everyone else they have no idea when it will end nor what the true impact will be. Like everyone else they are hunkering down hoping for the best planning for the worst. The better managed of these companies will go one step further and begin designing changes for what will become the new normal. A world we believe with fewer sales reps, virtual physician visits combined with virtual patient training/support.

It’s going to be a wild ride so hold on.

Uncharted Waters

Social distancing, bars and restaurants closed, schools closed, no sports of any kind and the elbow rub has replaced hand shacks. This as we all know is the new reality, we now live in. To say that states are taking extraordinary measures to combat the spread of the coronavirus is the biggest understatement of the century. Yes one day this will come to end, and life will get back to normal or whatever the new normal will be.

Looking at the business of diabetes we are entering uncharted waters as no one really knows the impact the coronavirus will have on these companies. Our own view is several of the companies we follow are getting killed by default, before the virus hit valuations were at sky high levels and this market selloff has brought valuations in line with more traditional metrics. Many subscribers have asked is this the time to take profits or is this an opportunity to add to their holdings.

Now before we go any further let’s get a few points out in the open;

1. We are not market prognosticators and have no clue when this will end, we know it will end but just when and how much damage is done we are as clueless as everyone else.

2. The reality is for many of these companies structurally nothing has really changed. Patients still need CGM sensors, insulin pumps and of course all the drugs they take.

3. Larger well capitalized companies will get through this as they have strong balance sheets and access to capital if needed.

4. However on the flip side smaller companies who were already in weak positions prior to the crisis will not make it.

5. The real impact of the crisis won’t be felt until 4 to 6 months from now.

That being said we have begun to formulate some standards that investors can follow when making decisions.

A. As Momma Kliff would say let’s get the bad news out of the way first before we look for good news. The company we see most at risk of failing is Senseonics with MannKind also a possible causality.

B. It’s difficult at this point to gauge the impact of the crisis might have on demand for devices or supplies. This is why we’ll be paying close attention to first and second quarter results with the second quarter being the critical quarter.

C. The major pharma companies – Lilly, Novo Nordisk and Sanofi – will suffer in the short term but likely will be the first to bounce back.

D. Dexcom – Tandem and Insulet – the Three Amigo’s – are well run well capitalized and should bounce back as well.

E. Abbott should be fine and could benefit should patients seek lower cost CGM. On the flip side we see this crisis delaying the Libre2 even longer.

F. Medtronic was already beset by issues before the crisis which won’t go away when the crisis is over.

G. On balance we see this as net negative for Livongo. With several companies either shutting down or having employees work from home, signing up patients will be more difficult. It also goes without saying that patients have other more important things on their plates.

The best advice we can give of course comes from Momma Kliff stay calm as eventually things will get better. When this happens, we don’t know but it will happen. We recovered after 9/11, we recovered after the 2008 financial crisis and we will recover after this crisis. These are uncharted waters we’ve entered.