Game On
We must admit it felt a bit odd this morning as we actually wanted to listen to Abbott’s (NYSE: ABT) earnings call. It felt surreal especially after yesterday’s call by Johnson and Johnson (NYSE: JNJ), a company which once dominated the glucose monitoring space and now for all practical purposes is out of diabetes. Talk about one company going from the penthouse to the outhouse and the other going in the exact opposite direction. As if we needed any more justification for calling this the wacky world of diabetes.
Now onto what was said and the most astonishing and surprising statement was that the company is adding 50,000 Libre patients a quarter. Keep in mind that this growth is ex-US which makes it even more astonishing. That statement alone brought back memories of the early days in the insulin pump market when MiniMed was growing at 50% a quarter.
Looking ahead and the Libre launch here in the US a few quick observations
1. As expected they will emphasize that Libre does not require calibration – however we should note this “benefit” will be short lived as we suspect Dexcom (NASDAQ: DXCM) will receive this indication in the near future.
2. It was nice to hear the company note that Libre is not just for insulin using patients but all patients with diabetes. This shows the company has a correct understanding of the bigger picture.
3. Given that the term valuation proposition came up repeatedly it’s obvious the company will use price as weapon and that a price war that no one wants is coming.
4. There was no mention of adding connectivity or interconnected diabetes management (IDM).
It’s this last point we want to focus on for a moment. Here we think Abbott is doing the right thing. They understand for a limited time anyway they have the advantage of no calibration. They also understand they have somewhat of a price advantage with payors, an advantage they intend to press. Therefore, it makes sense they would first establish Libre here in the US before adding more features. Put simply for once the company is not biting off more than they can chew.
The bottom line is the company has basically said to Dexcom – we’re gunning for you and will use every advantage we have.
Let us stress that their two major advantages – no calibration and price – are short term. Dexcom will get a no calibration indication and they will fight back on price. Which means that the next phase in this battle will be …. wait for it … transforming this data into patient relevant patient actionable information.
Abbott will also be forced to match some of Dexcom’s advantages and yes contrary to what the main stream media seems to believe Dexcom has several advantages and not just accuracy. Which like no calibration will only last so long. However here are just a few things Abbott will be forced to do;
1. Connectivity with smartphones, smart watches and other wearables i.e. FitBit.
2. Who will be Abbott’s Google?
This last point cannot be over emphasized as the real opportunity in CGM is not insulin using patients or Type 1 patients this as we say is the low hanging fruit. The real opportunity is non-intensively managed patients and with Google as their partner we give the advantage to Dexcom. Should Abbott find a friend in Silicon Valley, which we suspect they will, this could not just be battle between Abbott and Dexcom but a battle between Google and perhaps Apple or Amazon. This quite frankly is one fight we hope to see as everyone will come out winners.
The bottom line here is that Abbott has said to Dexcom we are gunning for you, we aren’t going to be shy either. Now it’s up to Dexcom to respond which we are sure they will do. This battle is not over by any means no matter what has been written in the main stream media. This battle is just beginning with Abbott firing the first shot. Dexcom will fire back and then it will be game on.
