Does it matter anymore?

Does it matter anymore?

As the second quarter comes to close its time again to fill our calendar with reminders for upcoming earnings calls.  The real question for those companies in the conventional glucose monitoring space do these calls matter anymore. Although it seems like ancient history there was a time when these announcements were joyous events. The market was growing at double digit rates, reimbursement wasn’t an issue and all a company had to do to expand share was to introduce a way cool whiz bang new monitor.  Simply put back in the day money was falling from the sky and these units were cash cows.

Today the conventional glucose monitoring market has collapsed, usage is contracting not expanding, reimbursement is a huge problem and company’s must buy share. Yes, the BGM market has fully transformed itself into a commodity market.

The fact is we saw this coming and warned that if these companies did not plan for change they would be ruined by change. Which is exactly what happened. Fat and happy back in the day no one seemed to think that the good times would end, that the band would stop playing and the party would be over.

Today earnings announcements sound more like eulogies than parties. The party is way over.

Which begs the question have these calls lots their relevance? Is it even necessary to listen? The honest answer is no these are no longer must listen too events.

As diabetes management transitions from a collection of devices and drugs to a systems based approach the individual pieces of this system are almost irrelevant. This is particularly true on the device side of the system as these pieces are basically interchangeable. Let’s be honest here if formulary position was taken out of the picture is a patient harmed by using a OneTouch VerioFlex vs. Accu-Chek Aviva Connect? Is the Medtronic 530G that much better than a Tandem t:slim? The lone exception on the device side is CGM where the Dexcom system is favored for performance reasons.

Up until recently we would have said the same was true on the drug side of the system. However, what we are finding out is that not all SGLT2’s are created equal, that there are performance differences.  That this is one drug class where commodization may not occur. Yet when it comes to DPP4’s, GLP-1’s and insulin – short and long acting commodization is happening. The differences aren’t so much performance based rather delivery systems. Again this is the reason we’re high on Intarcia not because their exenatide works better than Trulicity rather it has a better overall delivery system than Trulicity.

Put more simply with the exception of CGM diabetes devices are basically interchangeable while on the drug side this interchangeability is occurring in some classes but not in others.

The key as we keep saying is the apps/analytics that ties all the pieces together. This why every diabetes device and drug companies are attempting to build their own diabetes echo systems. Everyone sees what’s coming and understands that without such a system they will be out of the loop. The hard part here is trying to handicap who’s ahead and who’s behind. This handicapping is made more difficult as the folks in the device arena believe they should control the system and naturally the folks on the drug side disagree.

And let’s not forget that these aren’t the only companies building a system. What about Walgreens or CVS? What about any of the major health insurance providers? Do we even need to mention our friends in Silicon Valley?

The fact is when it comes to quarterly earnings for remaining major BGM players these are non-events. Growth will not return, prices will continue to contract and this slow and steady march towards obsolescence will continue. These franchises once major cash cows have been milked for all they were worth and are being repositioned. What matters now isn’t so much how one franchise is doing relative to another rather which is closer to having their echo system in place.