Is it about patients or re-orders?

As the CGM market continues to mature it’s time to start looking at different metrics to measure success. Right now, the CGM market is following the early days of the insulin pump market. It’s all about how many patients a company can get onto their system. Yet as the pump market matured the story changed and it became not just how many new patients were added but also how many patients stayed on the system.

Thanks to Abbott every CGM company now talks about how many patients are using their system, patient growth is everything. However new patient adds are a somewhat misleading metric and it may be time to start looking more closely at attrition rates. Simply put while it’s great that more patients are using CGM the real money comes from keeping these patients on the system.

Abbott brags that they have almost 1 million patients using the FreeStyle Libre, yet they have yet to disclose their attrition rate or disclose how much revenue comes from new patients and how much comes from re-orders. Frankly we doubt we will ever get this level of detail, but it is very important for several reasons.

1. It cost more to add a new patient then keep an existing patient. Back in the days of BGM patient acquisition costs were a critical metric and one reason BGM focused on insulin using patients. Insulin using patients were more frequent testers who through their continual re-orders of test strips covered their acquisition costs quickly. Although non-insulin patients outnumbered insulin using patients by a wide margin since they didn’t test that frequently these patients rarely covered the cost to acquire them.

2. High attrition rates force a company to continually add new patients. Just by way of example let’s say that 30% of the Abbott patient uses the Libre once but do not re-order. This forces Abbott to replace those patients to maintain their revenue stream. The goose that lays all those profitable golden eggs for Medtronic in the insulin pump market isn’t new patient adds but their huge installed user base who continually orders pump supplies from Medtronic. Although we have not yet reached this point with CGM the day is coming when an active large patient base is more valuable than a semi or inactive patient base.

3. Senseonics is not immune to these dynamics just because the Eversense system is implanted rather than worn. For Senseonics a critical metric is reinsertion rates.

Right now, CGM is a growth story new patient adds are everything. However, as CGM moves from insulin pump patients to multiple daily injection (MDI) patients to insulin plus oral patients then finally to non-insulin using patient’s new patient adds will become less important and re-order rates more important.

It will also be important to use different metrics for different patient population. Just by way of example a patient using a sensor augmented insulin pump wears a sensor all the time, this is the good news. However, this is a finite and slow growing market. Even when Tyler gets here, we don’t anticipate 100% of MDI patients converting to a Tyler, as effective as Tyler will be, we anticipate 60% market adoption and that will not happen overnight. There is no question Tyler will increase CGM sales but given how things work in the real world it will be a slow and steady build rather than hockey stick like growth.

The less intensive market requires a completely different set of metrics as we don’t see these patients using CGM continually. The key to this market segment is to developing a rotating patient base, allow us to explain. We see CGM in this market being used as a discovery and maintenance tool. Rather than wearing a sensor continually we anticipate less intensively managed patients using no more than one sensor every other month or 6 sensors a year.

Let’s look at some numbers as this will clarify things even more;

For modeling purposes let’s say there are 250,000 patients on sensor augmented pumps – each using approximately 30 sensors per year that’s 7.5 million sensors. Put another 1 million patients on a Tyler using 30 sensors a year and that’s another 30 million sensors. Now throw in all the less intensively managed patients say 10 million using 6 sensors per year and that’s a whooping 60 million sensors.

Yes, we know we’re getting a little ahead of ourselves, but this is why when we look at the CGM market we aren’t looking at new patient adds as the critical measure of success. To us it’s more important that a company has a system that fits into each of these markets. CGM is not and never will be a one size fits all device used the same way by every patient. The beauty of the CGM market is it will do something that BGM never did it will be used by less intensively managed patients which just so happens is the largest patient segment.

Today CGM is a pump/MDI story but it won’t be long before it becomes a total diabetes patient population story and that’s when the real fun begins.