Knocking it out of the park
This morning Dexcom (NASDAQ:DXCM) the leader in continuous glucose monitoring and Google, yes that Google, announced a collaboration to develop cheaper sensors and make a run at the underserved Type 2 market. According to a company issued press release; “DexCom, Inc. (NASDAQ:DXCM), a leader in continuous glucose monitoring (CGM) for people with diabetes, announced today that it has entered into an agreement with the life sciences team at Google to jointly develop a series of next-generation CGM products that are designed to be smaller and less expensive than existing technologies. These new products will incorporate Google’s miniaturized electronics platform with DexCom’s best-in-class sensor technology. This collaboration also provides an opportunity to better utilize the data generated by these CGM products to significantly improve the outcomes and reduce the costs associated with diabetes care.”
This collaboration is significant on several levels and not just because Dexcom is hooking up with Google. First and foremost IF successful this collaboration will open the door to a huge market. While Diabetic Investor does not believe a majority of Type 2 patients would use a CGM no matter how cheap it is, we do however see a healthy portion of Type 2’s using this technology. The key of course is not just cost, which will be important, but also the design of the system. Given their years of experience in CGM combined with Google’s money and expertise we’re cautiously optimistic that Dexcom will get the job done.
Second the fact that the company is collaborating with Google rather than Apple is also significant. Back in the day Dexcom and Apple seemed destine to work together. The two companies meet on several occasions and it seemed it was only a matter of time before they worked together. The icing on the cake seemed to be that Apple wants to be in the diabetes space in the worst way and who better to work with than Dexcom. Still what looked like a sure thing never came to be and Google, another high tech company desperate to be in this wacky world, was more than thrilled to work with Dexcom.
Third and this may sound somewhat crazy but Abbott (NYSE:ABT) should get partial credit for making this deal happen. Although it’s had it fair share of issues the FreeStyle Libre has shown to be a valuable tool for patients with Type 2 diabetes. The problem with the Libre is its cost and size. However conceptually the product does fill a need as insulin using patients aren’t the only ones who can benefit from the data a CGM generates.
It is this last point that is the hidden gem of this collaboration as the data generated from this system will surely be sent to the cloud where it can be not just shared but analyzed. Dexcom is already doing this with their current system, a system that we suspect will be enhanced using Google’s expertise in this area. While several companies are using advanced data analytics for Type 1 patients, this collaboration will open a new doors into the huge Type 2 market. This data set could provide new insight into how patients with Type 2 diabetes should be managed plus help develop more effective therapy options.
Diabetic Investor has long held Dexcom in the highest regard, as a model for how a diabetes device company should be run. Although the company would likely listen to offers should they come along they are not running the company strictly so it can be acquired. They are running the company to build shareholder value and they doing that by putting patients first. This deal is another example of why Dexcom is the premier diabetes device company. They didn’t just hit a home run this one was a grand slam.
