Let’s take this show on the road
Before we get onto business we’d like to issue an apology to our friends across the pond as several readers noted England did win the World Cup back in 1966. Unfortunately, the Three Lions we’re unable to get past pesky Croatia yesterday falling 2-1 in extra time. Up next for pesky Croatia is France in Sunday’s final. Nothing against Le Bleu but our hearts are with pesky Croatia to bring home the cup.
Now onto business.
There’s no question investors have fallen in love with medical device companies and CGM companies in particular. As we head into today’s session shares of CGM leader Dexcom are up over 77% on a year to date basis. Surprisingly shares of Senseonics are up almost 58% over the same time frame. We say surprisingly as Senseonics doesn’t have much of presence in the market yet.
Since receiving FDA approval for their Eversense system the company has been busy signing deals the most recent coming just a few days ago with Glooko. This deal follows another with Beta Bionics the makers of the iLet. The company also closed another financing round raising another $149.5 million.
Yet what really intrigues us is the way cool Ever Mobile Clinic which according to a company issued press release;
“Senseonics Holdings, Inc. (NYSE American: SENS) today announced the launch of the company’s Ever Mobile Clinic Tour, a program to bring hands-on diabetes device training and education directly to U.S. patients and healthcare professionals in their local areas via a custom-built 18-wheeler mobile training facility.
The national education-based tour features the Ever Mobile Clinic, a mobile educational facility custom-built within a semi-truck to accommodate the education and training of healthcare professionals and patients in the use of the company’s recently approved Eversense® Continuous Glucose Monitoring (CGM) System. The Ever Mobile Clinic was previewed last week at the American Diabetes Association, and in July, Senseonics will kick off the mobile clinic’s national tour bringing education and training to major markets across the United States.”
Yep Senseonics is taking its show on the road.
As way cool and whiz bang as this 18-wheeler is it won’t solve a fundamental issue facing the company. First let’s make clear from the outset that there is nothing wrong with the Eversense system it works just fine. As per usual the toy isn’t the problem, the problem comes in getting patients to play with the toy and keep playing with it.
Unlike the G6 from Dexcom, Libre from Abbott or Guardian Connect from Medtronic, the Eversense sensor is IMPLANTED in the patient who then wears a transmitter that delivers readings to a patient’s smartphone. It goes without saying that you cannot launch any system in diabetes these days and not have a way cool whiz bang app. Heck one day we suspect that an old-fashioned syringe will be reconfigured so it too works with an app. But we digress.
Anyway, the issue we have with the Eversense is not the fact that even though the sensor is implanted the patient still must wear something on their body. One could say what’s the point of having the damn thing inserted when the patient still must wear a transmitter on their body. Excuse the expression but isn’t the point of having an implantable sensor so that the patient doesn’t have anything on their body. But again, we digress.
One could also argue that the Eversense as cool as it is coming to market with another disadvantage, calibration. We’re pretty sure that future versions won’t require calibration but as it stands today the fact that the system requires calibration and the G6 and Libre don’t is a disadvantage. Think about this just for a second a patient who choses the Eversense not only has to have the toy INSERTED in their body they must calibrate it too. By comparison both the G6 and Libre come with simple applicators and require NO calibrations.
Here we could point out that while we have no reason to believe there will be any problems with the sensor this is a medical device and medical devices fail or malfunction. Now if that happens with the G6 or Libre no big deal but if it happens with the Eversense the damn thing must taken out of the body and new one put in. OUCH.
Herein lies the biggest problem of all and yep it is a common one that seems to be ignored by everyone; the company’s business model. Let’s say the company overcomes what we have mentioned so far and let’s not forget they also have to get the damn thing on formulary so it can be reimbursed. Let’s say they overcome all these issues the only way they make any money is not getting a patient to try the toy, the money comes from continual use of the toy. The key metric for Senseonics is not patient starts but reinsertion rates.
This isn’t a problem for Dexcom or Abbott but could be a huge problem for Senseonics. Based on the systems performance in Europe reinsertion rates have been less than impressive. According to people we have spoken with Roche the company’s partner in Europe hasn’t been thrilled with reinsertion rates. Now this doesn’t mean the same issue will surface here in the states but if it does the entire business model falls apart.
Now this may be a mute issue as more than likely someone will come along and buy the company. As we have noted on many occasions CGM is the hottest thing going in diabetes. Everyone has awakened to the fact that CGM will become the standard for glucose measurement replacing old-fashioned BGM. That poor dead cat can’t be swung without hitting a CGM company. Yet as so often happens in our wacky world those late to the party pay a heavy price to enter markets they should have been in years ago.
This is good news for stakeholders in Senseonics for if any potential buyer takes the time to look at this market, where it is and where it is going they just might pass. They just might discover that as much as this market is growing Dexcom and Abbott are gobbling up users, building impressive users bases and establishing solid relationships with payors. They would also discover that the Eversense system as cool as it is has limited potential as this is definitely a product for highly engaged insulin using patients.
The real money in CGM isn’t going to come from insulin using patients, that as we keep saying is the low-hanging fruit on the CGM tree. The real money will come when non-insulin using patients start adopting this technology. And let’s be honest here while we can see some insulin using patients putting up with insertions and calibrations non-insulin using patients won’t.
So as Senseonics takes it show on the road in that swanky 18-wheeler the question is can they capture enough insulin using patients. Can they convince physicians to recommend it, can they convince patients to use it and payors to pay for it? Folks as we keep saying anyone can build a CGM but it takes real talent to run a commercially viable CGM company.
Still this being the wacky world of diabetes where anything can happen and usually does it may not matter much. For if there is one thing we have learned the greater fool theory is very much alive and well.