Getting closer

Before we begin, we would recommend sitting down while you read this as we are about to say more nice things about Abbott. When we heard that the FDA had approved the mobile app for the Freestyle Libre and then read about the apps capabilities it dawned on us that a leopard can change its spots. Given Abbott’s history in CGM our main concern with the Libre has never been with the system but how the company would handle the product. Keep in mind that Abbott has run not one but two BGM companies into the ground, they also did an outstanding job of screwing up the Navigator.

Therefore, its understandable that we would be somewhat skeptical of how they would handle the Libre. Yet the company is proving us wrong, so far anyway. They understand what they have but more importantly they understand what they don’t have.

So, as we did earlier today with the insulin pump market let’s take a 10,000-foot view of the CGM market. Now to be clear the Libre is not a real CGM but since the FDA called it a CGM we will too. A market which is the domain of Abbott and Dexcom, given the many issues with the Medtronic system there is no way they can be considered a serious player in the stand alone CGM market.

What Abbott has proved with the Libre is that engaged patients, patients who understand what this data means and how to use the data hate fingersticks. Abbott is not expanding the market for glucose monitoring per se they are converting patients who used BGM to the Libre. Dexcom on the flip side is becoming the go to system for highly engaged patients. Insulin pump patients and those on multiple daily injection (MDI) therapy value the ease of use and accuracy of the G6.

Neither Abbott or Dexcom have deeply penetrated the non-insulin population and this where the two companies are on a collusion course. The Dexcom/Google slap it on turn it on system is directly targeted at this population. For the moment Libre has the edge here but this edge will evaporate once the Dexcom/Google system arrives. Therefore, it should go without saying this huge market will come down to what it always comes down to, price and formulary position.

As we predicted the Libre is moving ever closer to becoming a true CGM. It’s not a question of if it will become a real CGM but when. This places Dexcom in the position of how they should respond to Abbott’s current price advantage. Do they dumb down the G6 and play the price game? Or do they now that they own TypeZero add even more functionality to the G6?

The area where Dexcom does hold an advantage is all their insulin pump and insulin company partnerships. Abbott’s lone partner is Bigfoot. What Abbott is counting on is a move towards open platforms, the day when all the toys will talk with all the other toys.

For the moment the market is large enough and growing fast enough to keep both companies happy. BGM may be on its way out but it’s still the most dominate method for measuring glucose levels. The Libre and G6 are helping patients transition away from BGM and make CGM the dominate tool for measuring glucose. The real fight will begin when we move beyond the engaged patient population to the less engaged patient population, something we do see happening but not for another few years.

So, for the moment both Abbott and Dexcom can peacefully co-exist as this market continues to develop. When it comes to the dominoes for CGM they are all aligning to greater market expansion. Commoditization will eventually happen, but that day is not here just yet. For the near term it’s a happy dance for both Abbott and Dexcom.