Headed for the home stretch

Headed for the home stretch

Yes we know that the fourth quarter doesn’t begin until October but Labor Day marks the end of summer. The kids head back to school – well maybe not this year – baseball pushes towards the playoffs (and don’t look now but we have one hell of team on the south side of town this year) -and football begins albeit with no fans in the stands – welcome to live sports in the COVID age. In our wacky world attention turns towards negotiations between payors drug and device companies yes the annual battle for ever important formulary position. The payors in turn are prepping for contracting season.

With 2020 thankfully coming to a close – COVID Hurricanes Wildfires Rioting and to top it all off an election – everyone wonders will 2021 be any different. It looks like sometime in 2021 there will be one or more COVID vaccines, the question is will the public feel comfortable using them? Another concern is while we have seen some recovery in the unemployment rate we have also seen major layoffs in the hospitality sector combined with major closures or bankruptcies in the retail sector. Some are beginning to wonder is it really ok for Amazon to rule the world.

We keep wondering when the self-insured employers will awaken to the fact Livongo isn’t the only way cool whiz bang diabetes coaching platform. When will Google/Verily/Onduo begin to become a factor? When will UnitedHealthcare, a company with just a few customers begin to launch their way cool whiz bang diabetes platform which not only uses state of the art CGM technology (Onduo does as well) but also uses incentives.

Correspondingly will these Livongo competitors who will make their presence felt in 2021 (and yes we know there others besides Onduo and UnitedHealthcare – Omada is one, WellDoc another and Cecelia yet another – do we really have to keep naming all of them – heck the way cool whiz bang diabetes coaching sector is like every other sector in our wacky world – a world filed with Dexcom and Companion wannabes – so please excuse us if we don’t name ever damn wannabe in the diabetes coaching sector – ok now that we got that off our chest) wake up the Street to the fact that maybe it wasn’t such a good idea for Teladoc to pay $18.5 Billion for Livongo. That maybe just maybe it wasn’t a good idea to dilute the crap out of Teladoc stock.

Since the merger was announced back on August 5th shares of both Livongo and Teladoc have been on a roller coaster ride mostly in wrong direction, a sell off which continues today. Given the increasing number of possible class action lawsuits combined with the downward trajectory of both stocks we’re beginning to wonder of this deal which hasn’t closed yet, will close. Yep Teladoc and Livongo executives continue their respective fireside chat and telemedicine conference tours something they are very good at which makes one wonder when they actually have time to run their businesses, but let’s not go there just yet.

The fact is no one really knows just what they have with these companies. There’s a ton of speculation, lots of hype but given the unpredictable nature of telemedicine being combined with coaching no one knows for sure just what they have here. Quite honestly this has never been done before and never been done in an environment which includes COVID. Want even more uncertainty, as if its needed, add in the fact that the per patient per month reoccurring revenue model which Livongo was built on is about to go away. We have read much on this deal, but nowhere have we found anyone who bothers to mention this fact or its impact on the combined company. Yes we know that we are old fashioned but making money mundane as it may be is important in the long run.

The more we look at this deal the more we’re beginning to believe we will be right twice about Livongo, which when you think about it is a pretty neat trick. All along we have said there are only two possibilities for Livongo, they get bought (this happened) or it’s the greatest short of all time (this could happen and will happen if the deal is called off). Should there be any hiccup in the deal, a change of terms etc. it will be Livongo shares that get hit and hit hard.

So as we head into the home stretch of 2020 it may be wise for investors to pay close attention to something Momma Kliff used to say to her rambunctious boys- “Don’t be stupid and start thinking with your head and not your wallet.” (Well that’s not exactly what Mom said but this is a family publication and we thought it best to adjust her quote.) Have a great day everyone.