It’s the holiday season
Well it looks as though Christmas has come early for out friends at Bigfoot as they have secured an additional $37 million in funding. This is obviously great news for Bigfoot and not so good news for our friends at Tandem (NASDAQ: TNDM). Think about this just for a moment Bigfoot has a great idea some nice relationships but nothing on the market yet. Tandem has almost 60,000 patients a real insulin pump a ready made infrastructure but they can’t raise a dime.
One just might think by now people would start to realize that the clock is ticking and it will be Tandem patients who will get a lump of coal in their Christmas stocking. The reality is investors would rather put their money into Bigfoot than invest in Tandem. The reality is investors believe that Bigfoot stands a better chance at taking on the Evil Empire than Tandem does. The reality is investors know that $37 million might keep Tandem alive for the short term but is just a drop in the bucket as they know it will take at minimum $200 million and two years to fix what ails Tandem.
See Bigfoot is not an insulin pump company per se rather an insulin delivery system company. Yes they will have a way cool whiz bang cloud enabled insulin pump but they will also a way cool whiz bang Tyler. (And just in case anyone has forgotten Tyler is our name for a “smart” insulin pen/CGM/App system.) This as we keep saying is where the money is and this is the battle Bigfoot will fight.
Besides producing pump like outcomes at a fraction of the cost of an insulin pump, Tyler has another built in advantage. Tyler can produce savings for payers quickly. See a big issue with payors is patient turnover, or how long a patient stays with the payor. Now no payor has ever gone public with the number, at least we have never seen it, but our sources tell us that the average life on a plan is 28 months. This is one reason why Tyler should become the dominant insulin delivery system.
Payors don’t save any money from improvements in HbA1c, this is just a fallacy. But they do save a bundle by keeping insulin using patients out of the emergency room. According to a study in the May 2014 issue of JAMA Internal Medicine;
“Using the Centers for Disease Control and Prevention (CDC) national medication safety monitoring system, we estimated that there were about 100,000 visits made to U.S. EDs for insulin-related hypoglycemia and errors each year during 2007-2011, or about half a million ED visits over the 5-year study period.”
According to a study published in the April 2013 issue of Diabetes Care of the $245 BILLION spent on diabetes in 2012 43% was spent on inpatient hospital care, the largest single expenditure.
This is the real value of Tyler as its real goal isn’t lowering HbA1c rather insulin dosing algorithms which prevent severe hypo or hyper glycemic events, events which send patients to the emergency room. You can take it to the bank that every payor knows how much is being spent on these visits. The reality is improving HbA1c does not save the payor a dime while keeping patients out of the emergency room or shortening their hospital stays saves them a bundle.
This is also why almost every outcomes based contract is really a joke. The only real outcome a payor cares about is cost. The fact is these outcomes based plans are just a different way of achieving a lower price point. The reality is payors cannot quantify improvements in HbA1c, but the sure can measure cost savings from fewer emergency room visits. The drive behind every Tyler is NOT improvements in HbA1c, the drive, the goal is to keep insulin using patients out of the hospital.Tyler may well improve HbA1c but that is just a side benefit.
Given the short time each patient is with a payor we cannot blame payors for looking at it this way. Improvements in outcomes take time and unfortunately do not produce measurable savings for payors. In the real world payors want to see measurable verifiable cost savings and eliminating or reducing hospital visits is the ticket.
We may reach a point one day when improvements in HbA1c matter financially but today they do not. Considering how the real world works and that this is all about money for companies like Bigfoot Tyler is the path.