Day Two Morning Sessions

Android vs iOS

Listening to the Abbott presentation and corresponding Q&A a few things are becoming clearer in the expanding CGM market.

1. The company noted there are now over 1 million patients using the Libre with 200,000 domestically and 800,000 overseas. This has generated sales approaching $1 Billion.

2. There is no question that Abbott is committed to providing Libre at a lower price point than Dexcom, noting several times that Libre is an “affordable” CGM.

3. In an interesting twist the company made a point to mention that getting the Libre to work is only half the battle and that manufacturing processes are critical to future success. While we don’t believe this was a slight to Medtronic who has known issues with manufacturing their sensors rather making investors aware what we say all the time the CGM business is equally about making accurate reliable sensors on a massive scale.

4. Like Dexcom Abbott is well aware of the many CGM wannabes who are waiting in the wings. While few of these CGM wannabes have anything of substance it’s refreshing to see the company remind everyone that it takes more than way cool whiz bang technology to establish a toehold in this growing market.

Our takeaway here is the CGM market continues to follow the early days of the insulin pump market back when the market was dominated by two players, MiniMed and Disetronic. Dexcom and Abbott are grabbing the low hanging fruit on the CGM tree building substantial installed user bases. Both companies understand the complexities of this market and the huge barriers to entry.

Abbott made it very clear they intend to pour additional resources into Libre while maintaining a competitive price point. As we predicted future versions of the Libre will become more like what Dexcom is today – alarms, alerts, etc. Yet to their credit Abbott is in no hurry to compete head on with Dexcom, they realize they have a winner with Libre and rather than moving recklessly ahead they will proceed methodically.

Simply put while Abbott and Dexcom may be competitors both realize they are leading the way in CGM and there is room for both to be successful. Perhaps the best way to think about CGM is look at the Android vs. iOS battle. Both operating systems peacefully co-exist with each staking out different territories. Android taking the greater share at a lower price point while iOS dominates the premium segment of the market.

Both companies are keenly aware that competition is coming sometime in the future. Yet rather than fret over who might be coming, when they are coming or what pricing tactics they will use they are out grabbing as many patients as possible while the competition continues to wander in the wilderness. Put in simple terms Dexcom and Abbott are perfectly content to let everyone else battle for third place in CGM.

Moving onto our Chardonnay guzzling friends visiting from Paris we’d like to say something nice as we were saddened to hear that Sanofi CEO Olivier Brandicourt could not attend the conference due to a health issue. Yet when it comes to Sanofi and diabetes it’s extraordinarily difficult to find something nice to say. As we have already reported their much hyped partnership with Verily isn’t going all that well while their existing diabetes franchise continues to twist in the wind. Therefore we’d like to wish Olivier a speedy recovery and hope to see you next year.

Last up this morning was Insulet and the first go around for newly appointed CEO Shacey Petrovic. First kudos to Ms. Petrovic for a very well done presentation that outlined where Insulet has been and where it is going. The highlight, well to us anyway, is just how far the company has come in terms of payor coverage. Prior to Ms. Petrovic taking the helm the big question for Insulet always had been when would Medicare cover the OmniPod. As she noted with this hurdle cleared Insulet has gone from one the least covered systems to one of the most covered systems.

Although the company still has hurdles to overcome they appear well positioned going forward. The soon to released DASH is just the beginning of several upgrades to the OmniPod with the ultimate goal of having a patients smartphone control the OmniPod. This not only makes financial sense, no costly PDM to provide, but also common sense as this is the most requested feature from current OmniPod users. Simply put the less things a patient needs to carry around the better.

A few other items that caught our eye:

1. Being covered as a pharmacy benefit eliminates the worry of high deductible plans and places the OmniPod as a more affordable option as the patient only worries about co-payments.

2. The pay as you go no upfront cost structure also fits well within the needs of payors and is much more attractive option than dishing out $5,000 plus for conventional systems.

3. That once elusive goal of profitability appears within reach.

Having followed this company from its inception Insulet has been on one crazy roller coaster ride. The original team even with the many mistakes they made should be commended for getting the OmniPod onto the market. Pat Sullivan took over during a difficult time, made some initial mistakes, but should be credited for learning quickly and putting the company on a solid foundation. It’s now up to Ms Petrovic to take the ball and bring Insulet to where they always wanted to be, a ,major player in the space worthy of being acquired. The goal hasn’t changed from the inception only the players have.