Change in the Valley

By now everyone has likely seen the press release issued by Dexcom announcing they have amended their agreement with Verily Google’s life sciences unit. Per that release;

“DexCom, Inc. (NASDAQ:DXCM), a leader in continuous glucose monitoring (CGM), and Verily, an Alphabet company, announced an amendment to the Collaboration and License Agreement surrounding the ongoing development efforts between the companies. The revised terms are intended to reinforce the companies’ mutual product development goals, while expanding options for future collaborations. The agreement also accelerates Dexcom’s efforts to advance into the Type 2 diabetes space and improves its future profitability.”

Now we can’t say we’re that surprised by this news given the continued growth in the CGM market. The bigger story here could be what this means to Google’s neighbors Apple. As we have been noting Dexcom and Apple have been getting closer than ever. Apple is looking at adding CGM functionality to the Apple Watch and their efforts to date have been less than impressive. While we don’t see Apple acquiring Dexcom at this point it would not surprise us if these two getting even closer in the future.

Another side story here is what this means for Google and their deep dive into diabetes. As we noted just last week there have been some personal changes at Google. Additionally their partnership with Sanofi, OnDuo is on shaky ground, so much so that Sanofi is seriously considering pulling a Dexcom and buying Google out of this partnership. Although this buyout would come at a steep cost our Chardonnay drinking friends in France aren’t happy and they desperately need OnDuo to succeed to remain relevant in diabetes.

The third story here is what this says about tech’s deep dive into diabetes. When it first became public that Google, Apple and Amazon were making the deep dive we speculated this could be a watershed moment for diabetes. That with their talent, reach and vast resources these companies could have a major impact on the future of diabetes management. We noted that unlike the old guard they did not come to this market with any baggage and even better they did not need their efforts in diabetes to pay off immediately. They did not NEED to be in diabetes to make money, they wanted to be in diabetes to expand their existing platforms.

However our concern was would they learn from the mistakes made by others? Would they use their vast resources wisely? Or would they fall into the same trap that stifled innovation in the past? As Momma Kliff used to say; Just because you are very good at one thing doesn’t mean you will be very good at all things no matter how much money you throw at it.

While we don’t see tech abandoning their efforts in diabetes we do believe they lack clarity of purpose. Having watched their efforts to date we see lots of whiz bang way cool, lots of promise but very little in the way of clarity of purpose, a road map if you will. To quote our wine consultant the train has left the station but with no destination in mind. Yes it will get somewhere the only problem is no one is quite sure where that will be.

Rather than take the easiest path between two points these high tech companies seem to suffer the same affliction as the old guard, let’s find new and creative ways to screw up a simple peanut butter and jelly sandwich. Here are just a couple of examples;

1. Rather than buying Tandem when it was on deaths doorstep and having an immediate presence in the insulin pump market they decide to develop their own way cool whiz bang toys.

2. Rather than buying LifeScan and using it as platform to expand CGM usage they took a pass.

3. Rather than aligning closely with Dexcom or Abbott they attempted to develop their own way cool whiz bang non-invasive monitors which never had a chance at working.

We could go on but the pattern is clear, hubris and arrogance are not just problems unique to the old guard in diabetes. We had hoped these cash rich techies would have avoided some of this, that they would have listened more and talked less. Yet if there is a saving grace here it’s these companies still have boatloads of bucks and as Momma Kliff liked to say money buys lots of things. Or simply put it’s never to late for these techies to correct the errors of the past.

How will this play out in the end, who knows. Can the old guard rest easier, they shouldn’t. Can tech still have a major impact, no question about it. Will they, that’s hard to say. Having been around this space for over 20 years we have witnessed many events which at first glance seemed to be watershed moments only later to turn into another wasted effort. Let’s hope that our friends in the valley take a moment to re-examine their efforts and most all if they decided to stay in the pool develop a clarity of purpose.

Happy Thanksgiving everyone.