The fight has just begun

The fight has just begun

Can anyone tell me what Dexcom (NASDAQ: DXCM) shares closed at three years ago? Back on November 3rd, 2014 shares closed at $43.96. Today November 1, 2017 shares closed at $44.86. Now in between these dates shares have hit $100.55 September 18th, 2015 and have traded well above $90 per share over this time frame. So just in case anyone thought that Dexcom has become irrelevant because of the FDA approved the Libre, we would suggest thinking again.

Want more proof look at the results they released after the market closed today;

• Revenue grew 24% over the third quarter of 2016 to $184.6 million

• International revenue grew 83% over the third quarter of 2016

• Gross profit of $127.0 million, or 69% of revenue

Now everyone has just assumed that Libre because of its non-calibration approval will kick Dexcom’s tush. That Abbott (NYSE: ABT) will use price as hammer to pound Dexcom into the ground. No one seems to care all that much that Abbott hasn’t sold one, not one Libre in the United States. No one seems to care that as far as we know not one, not one payor has placed the Libre ahead of the Dexcom system on formulary. And while Libre does have some advantages none of them cannot be overcome.

Simply put this fight which far too many see being won by Abbott hasn’t even been fought yet.

Dexcom will get a non-calibration claim.

Dexcom remains more accurate than Libre.

Dexcom offers several advantages that Libre does not have the biggest being smartphone connectivity.

The reality is over time these two systems will converge in terms of features. It is also true they will converge from an accuracy perspective. The same can said for Medtronic (NYSE: MDT) who is also getting set to enter the stand alone CGM market. This will not be battle over cost or accuracy, this will be a battle of turning data into patient actionable and patient relevant information. And here the edge goes to Dexcom and Medtronic as Dexcom has partnered with Google and Medtronic with IBM Watson Health.

We give more of an edge to Dexcom as they will soon have a slap it on turn it on sensor that will spank the Libre, think doing more costing less
.
Yes, Dexcom has some short-term issues as they watch their insulin pump partners sink into the ocean. Yes, they must deal with the positive publicity received by the Libre, publicity that is not deserved but very understandable. The fact is no one talks about what Libre does not have they focus on one thing and one thing only, no finger-stick calibrations. This is foolish and very misguided as it is a hollow victory that will be replicated by Dexcom soon.

Once Dexcom has this claim and they will get it, were right back to the same old story who can deliver the best feature set at the lowest possible cost. Who will get the formulary position, who will be able to manufacture sensors on massive scale and do so consistently. Bottom line who knows how to run a commercially viable CGM business, which by our way of thinking comes down to talent.

Go ahead and bet against Dexcom but do so at your own peril. As we are perhaps one of the few who believe both Dexcom and Abbott can win. That this is not an all or nothing proposition. But no one sees it that way which makes us even more convinced that it will happen.

This is not a story about non-calibration or no finger-sticks. This is not a story about whether CGM will replace SMBG, it will. This is not a story about accuracy. This is not a story about costs, costs will come down no matter who’s in the market. This is a story about who can turn all this damn data into patient relevant, patient actionable data. This is story about the ability to run a commercially viable CGM company.

To dismiss Dexcom, to think they are beat just because Libre has been approved by the FDA is just plain stupid. This is the same line of thinking when Animas came to market, when the Cozmo came to market and when Tandem (NASDAQ: TNDM) came to market. Everyone, all the “smart” people said that Medtronic had meet their match, that at long last the Evil Empire would be brought to their knees. That they had the plan that would destroy the Death Star.

Well Animas and the Cozmo are now in the insulin pump graveyard and Tandem is about to join them. Medtronic like it or not remains standing.

Listen we always knew Dexcom would have competition that is not a surprise. We also knew that analysts would over-react to the Libre approval. But the reality is this fight has just started and even better there can and likely will be more than one winner. The fact that no one else sees it is hardly shocking this is par for the course.

As Momma Kliff used to say; “Just because someone has stumbled does not mean they will not get up, learn from the experience and be more determined than ever before.”