JPM Day Two Monring Wrap Up
Before we go onto the news of the day allow us to finish up on Abbott. Other than learning that Libre2 is aways away we also asked why the company continued to invest in Bigfoot. Here as well the answer was somewhat confusing as the company noted they like the Bigfoot platform but in the same answer pointed out there other partnerships with the insulin companies. Now to us this seems almost counter intuitive as if the Bigfoot platform is so good why also partner with the insulin companies who are developing Tyler’s of their own and who as we keep noting should own the Tyler market if they ever get their act together.
Just as an FYI we’ll have more on that later as both Lilly and Novo Nordisk present this afternoon.
Our guess here is what we noted yesterday Bigfoot without this fresh capital was likely to become BigDead as the company was running out of money. Abbott was one of the early investors and rather then see this money go down the tubes they figured to throw some fresh capital hoping somehow Bigfoot will turn into something. More simply put they are kicking the can down the road preferring not to be embarrassed today praying that when the end comes it won’t happen during a major conference.
One company that isn’t kicking the can but kicking some serious ass is Insulet who continues to execute with near flawless perfection. Sales are growing, margins improving and in the second half of this year their entry into hybrid closed loop Horizon will be here. Is Horizon on the Horizon when ADA rolls around in June who knows but whenever it gets here it will only throw gas on an already raging fire. Frankly it’s refreshing to sit threw a presentation with no surprises, little BS and optimism that isn’t phony and truly warranted. To quote an old television commerical you’ve come a long way baby.
Looking at how shares of Livongo are doing today one might think their presentation was kick ass. Yes the room was packed, we expected that. And yes the presentation was well done. But when you get beyond the way cool whiz bang the prevailing question remains is digital health or in this case digital diabetes a house of cards waiting to collapse or is Livongo the first domino to fall in series of dominos. As we noted yesterday on the surface everyone is enthusiastic about digital health however underneath the surface there are lots of questions whether digital health is for real or not.
We have attempted to explain some of the holes in the Livongo platform besides the crazy way they account for revenue. We have noted they are not the only digital diabetes player and competition will drive patient acquisition costs up and monthly fee’s down. We have further noted that some of their competitors not only have access to more capital but also have lower costs. We have also noted that digital health can and does work. So allow us to look at this from a slightly different perspective and us some the company’s own examples.
Livongo contrary to what the company stated during their presentation today is not like Amazon or Google. When someone visits Google or shops on Amazon they are pulling information from these providers, unlike a Livongo patient who has information pushed to them. Livongo takes data, analyzes it then gets back with the patient with recommendations that the patient may or may not implement. The patient did not ask for these recommendations they were pushed to the patient.
Now in the beginning this is somewhat refreshing to the patient knowing they aren’t alone when it comes to managing their diabetes. However this newness factor will eventually wear off and become more of an annoyance. This isn’t a theory this is from real patients in the real world. See diabetes management is not a part time job that is done once in a while. Diabetes management is done every day with no days off.
Diabetes management is not like going on Google doing a search and getting an instant answer. Nor is it like shopping on Amazon when the person orders something they needed or wanted and it shows up the next day. The “rewards” of good diabetes management do not come instantly nor do they show up on the patients doorstep the next day. The benefits of good diabetes are not tangible the patient cannot see them touch them or feel them. The benefits of good diabetes management only become ‘tangible” after a doctor visits combined with a blood test. Even then should they achieve good control it’s rare that even get told they are doing a good job, more like come see us again in 6 months so we can repeat this cycle.
This is one reason Livongo and nearly every other digital diabetes company focuses so heavily on short term results and rarely if ever mentions what their attrition rates are. Sure Livongo mentioned their enrollment rate is 34% but only when you scavenge through their SEC filings do you learn their attrition rate is 2% PER MONTH. Sure they mentioned that they have 208,000 members now but we have yet to see year over year comparisons for those programs that have been around more than recently.
We hate to keep using this example but it is appropriate when a person loses weight they get lots of positive feedback plus THEY THEMSELVES CAN SEE TOUCH AND FEELL THE DIFFERENCE. Even with all this positive reinforcement more often than not what happens, they gain the weight back. Why? Did they forget what got them to their weight lose goal? No more often than not they go back to their old habits, they stop doing the heavy lifting required to keep the weight off.
How many of us see this at the health clubs we belong too with all the new members in January who made the New Years resolution to lose weight and get in better shape. These newbies who’s rank begin dwindling in February and few if any are left when March rolls around.
This is the obstacle faced not just by Livongo but every digital health and digital diabetes company fundamentally they are trying to change well established patient behavior and behavior change is the toughest obstacle of all. Sure it can be done over the short term and yes for some it is sustainable unfortunately history and those pesky facts tells us for the masses these short term gains do not translate into long term sustainable improvements.
As Momma Kliff used to say it’s great to achieve goals it’s an even greater accomplishment to sustain them and achieve new goals. The problem is most people forget what got them there in the first place and end up back where they started.