Hail Mary?

Hail Mary?

One of the greatest plays in college football history was Doug Flutie’s hail Mary against Miami. Yes, this Heisman winner throw up a pray which was by some miracle answered. Well it looks like our friends at Johnson and Johnson (NYSE: JNJ) are throwing their own version of a hail Mary. This morning the company announced that “the U.S. Food and Drug Administration (FDA) has cleared the wireless integration of the OneTouch Verio Flex® blood glucose monitoring system with WellDoc Inc.’s clinically validated diabetes management platform, BlueStar®, creating a unique digital health solution for people living with Type 2 diabetes.”

The press release goes onto to state;

“Using blood glucose data wirelessly and automatically transmitted from the OneTouch Verio Flex® blood glucose monitoring system with built-in Bluetooth®[i] Smart Technology, WellDoc Inc.’s patented clinical and behavioral engine will provide patients with individualized real-time feedback and virtual coaching based on the patient’s specific treatment plan, and also help health care teams make timely diabetes management decisions. Along with the OneTouch Reveal® web and mobile app, the offering seeks to create a comprehensive, data-driven and payer-reimbursed program for the management of Type 2 diabetes.”

Now before we go any further what was that we said the other day about how quickly the interconnected diabetes management (IDM) space has commoditized. Did we not say that there is nothing novel about what One Drop, Livongo or iHealth is doing? Now we don’t mean to be snarky but seriously if this news doesn’t knock a few points off the valuation of these companies we don’t what will. It was bad enough that Telcare was sold for just 1 x sales, but now these newcomers must compete against the conventional BGM market leader. A market leader that is desperately trying to protect a legacy franchise and is locking up formulary position with reckless abandon.

As Momma Kliff used to say; “It’s no fun getting your head bashed in with a baseball bat.” But we digress.

So JNJ has found religion and sees IDM as a way to save a dying franchise. Yes, their much-ballyhooed diabetes eco-system is coming to life. Never mind that the major hole in this strategy is more like the size of the Grand Canyon, as for this to work patients MUST test their glucose regularly. Even worse JNJ is targeting patients with Type 2 diabetes who on average test less than twice per day.

Do we even need to mention that this system will soon be going up against the Dexcom (NASDAQ: DXCM)/Google Band-Aid CGM sensor which not only provides better data, cost the same as conventional finger stick monitors but has the additional advantage of simplicity? This will be the ultimate in slap it on, turn it on and forget about it technology. Oh, and before we forget what is Dexcom good at, diabetes, what is Google good at, data analytics which combined will do what JNJ is trying to do only with better data. Data that won’t require the patient to do anything more than slap on a Band-Aid, something even a Sanofi (NYSE: SNY) executive can do, well maybe not. But again, we digress.

What this system really has going for it is that its payer-reimbursed but even that won’t last. As we have noted it is no longer a question of if but when payers will stop reimbursing for patients who don’t use insulin. As it just so happens that is the majority of patients, other than that small interruption Mrs. Lincoln did you enjoy the play? Again, we digress maybe we didn’t get enough beauty sleep last night.

What’s happening here is that JNJ is doing the best they can to fend off the many IDM wannabes. They know they have a limited window before CGM becomes the standard for glucose measurement and this platform combined with their size will make it next to impossible for any of the IDM wannabes to gain any sizable share.

Listen if I’m a payer and I’m already dealing with JNJ and JNJ now has the same thing as the wannabes why would I deal with wannabes; unless of course the wannabes want to give their system away for FREE and only get paid IF and only IF patients achieve better outcomes.  But the pain and suffering for the wannabes wouldn’t end if they went this way, as guess what, JNJ would do the same thing.

JNJ has two things the wannabes don’t have scale and money. JNJ can afford to fight, the wannabes can’t and yes, it is that simple.

Should we mention again the surest path to oblivion is gain an increasing share of a declining market. Damn must be that lack of beauty rest again.

Since it is the holiday season and Momma Kliff told us that if we had nothing nice to say at least try and see something good in a bad situation. So here goes ………