JPM Day One Morning Session

Before we get into what’s gone on this morning let’s first reveal the answer to a question we know everyone wants answered – the bags this year are a swanky grey with orange trim. Now onto some more mundane yet equally important items.

Although Medtronic was not the first presentation we witnessed this morning it was somewhat revealing. It wasn’t that long ago that here at JPM when it came to their diabetes franchise the company was boosting about projected high double digit growth rates and a stand alone CGM platform that would generate billions in revenue. Fast forward to today and well let’s just say things haven’t worked out as the company had anticipated.

The much ballyhooed whiz bang way cool 670G has failed to live up to the hype, Tandem with the Control IQ is now the coolest toy in the toy chest and likely will eat the 670G for lunch. The stand alone CGM platform hasn’t come anywhere close to meeting expectations as the company continues to insist that even though neither the Dexcom G6 or Libre require finger stick calibrations that patients really don’t mind these calibrations.

Sticking with this point, and yes the play on words is very intentional, during the breakout when asked about their struggling diabetes unit the company acknowledged they have a ways to go with CGM but continued to state that finger stick calibrations aren’t a big deal. To say this is embarrassing is a huge understatement, more like majorly delusional. If the company really believes this BS they have bigger problems then we thought and they have some really big problems already.

That being said we can’t help but wonder with the Omar leaving and new leadership coming soon will the new guy wait until Omar has ridden into the sunset and then divest the company of this struggling yet still valuable unit. While Omar didn’t bet the ranch on diabetes his handpicked guy to the run the unit is gone, his projections for this unit haven’t materialized making it easy for the new guy should he find a buyer put his stamp on the company by getting ride of diabetes.

One company that is having no problem meeting, actually we should say exceeding their projections is Dexcom who for the fifth consecutive year here at JPM released preliminary fourth quarter and full year results which set records and blew away analyst projections. The company also noted that G7 should be here sometime late in the year making tomorrows presentation by Abbott even more important. As we noted during CES should it be true that Libre2 won’t be here in the US for another year this means that the G7 and Libre2 would be hitting the US market at the same time.

Given everything we know about the G7 and everything the company stated today, the G7 will come to market not just with the traditional Dexcom accuracy combined with ease of use but also a much lower price point and lower COGS. Bottom line here when put side by side the G7 will be superior to the Libre2, be price competitive with Libre2 and will set up an interesting battle that we see Dexcom winning. It’s far too early to call the G7 a Libre2 killer but the pressure will definitely be on Abbott.

Abbott however might just crave pressure as we learned this morning they lead a new financing round for their connected pen partner Bigfoot. Per a company issued press release;

“Bigfoot Biomedical, Inc. announced today that the company has raised $45 million in the initial tranche of a Series C equity financing. The round is led by Abbott with support from existing investors, including Quadrant Capital Advisors, Senvest Capital, Janus Henderson, and Cormorant Asset Management. Proceeds from the financing will support the completion of product development and FDA clearance for the Bigfoot Unity™ Diabetes Management Program, an injection-based digitized insulin dosing platform utilizing a proprietary, connected insulin pen-based system that integrates Abbott’s FreeStyle Libre glucose sensing technology. Submission of Bigfoot Unity is anticipated in 2020 with a target launch by year-end 2020. Series C funds will also be directed toward clinical trials of future generation Bigfoot Unity systems incorporating closed-loop technology for injection users.”

This news follows the news from Companion who also got more money.

While we shall attempt to learn more tomorrow our gut tells us that Abbott didn’t want to see Bigfoot fold which likely would have happened as they were running out of money. Simply put it would have an embarrassment for Abbott who was one of the initial investors in Bigfoot. Abbott isn’t the first diabetes device company to follow this strategy as way back in the day JNJ who was an initial investor in Animas ended up buying the company rather then see it collapse, which it was about to do. Will Abbott pull a JNJ and buy Bigfoot, only time will tell but in this wacky world as we have come to learn deals that make no sense whatsoever are made all the time.

Speaking of deals and getting back to Dexcom, the company also announced today a new partnership with Livongo. Per a press release;

“Livongo (Nasdaq: LVGO), a leading Applied Health Signals company empowering people with chronic conditions to live better and healthier lives, has partnered with Dexcom, Inc. (NASDAQ: DXCM), a leader in continuous glucose monitoring (CGM), to offer Livongo Members the ability to synch data from their Dexcom G6 Continuous Glucose Monitoring System with the Livongo platform, providing access to key insights and Health Nudges™ from Livongo’s Applied Health Signals platform based on their CGM data.”

This announcement is interesting on several levels not the least of which it makes Verily’s presentation this afternoon more interesting. Keep in mind although Verily and Dexcom are no longer “partners” they are somewhat joined at the hip with OnDuo, the Verily Sanofi diabetes partnership. It’s also no secret that OnDuo and Livongo are competitors.

The announcement also signals a shift in Livongo’s strategy as they seem to moving away from selling conventional test strips which their platform is currently based on and moving more towards being a software play. All along we have contended that CGM was a far better data gathering tool for Livongo and it seems the company through this deal agrees. However as we just noted OnDuo is already using the Dexcom CGM with their platform so is Livongo playing defense here?

What’s becoming true is something we predicted long ago, in the future and by the looks of things we are almost there, all the toys will talk to all the other toys and the apps/platforms that analyze the data generated from these toys. Coaching whether its from a real human or virtual assistant using sophisticated algorithms will be common place making something else we predicted come true.

With all this connectivity Tyler’s brother Austin will be here sooner than we thought. For those who haven’t meet Austin yet unlike Tyler who integrates CGM/insulin dosing algorithm/connected pens -Austin is a comprehensive diabetes management system which integrates glucose monitoring (more than likely CGM)/patient coaching regardless of therapy option. While Tyler will focus on insulin using patients Austin will focus on the much larger non-insulin using patient population.

What this means to us is that one more prediction should come true as well as outcomes based reimbursement will become commonplace. Companies like Livongo and OnDuo will ONLY get paid for producing verifiable improvements in patient outcomes PLUS demonstrating real savings. We thought it was interesting that Dexcom highlighted for the first time how much money they saved InterMountian Health when Type 2 patients used a CGM.

Once again proving that when all is said and done this comes to down to …. Wait for it …. Money. Who makes it, who spends it and who saves it. As Momma Kliff says some things never change.