Meter musical chairs
Not sure if kids play musical chairs anymore but that game is almost the perfect analogy for what’s gong on in the conventional glucose meter market. Now just in case anyone has forgotten how the game is played the kids gathered in circle around a set of chairs. The music plays as the kids walk around the chairs then suddenly the music stops and kids scramble to find a chair, the only problem being is there are less chairs then there are kids so ultimately not every kid can find a seat. This game continues until there are just two kids left and just one chair.
Now we have no idea in these politically correct times if this game is still played but this is exactly what’s going on with all these way cool whiz bang cloud enabled conventional meter companies. Just today DarioHealth reported earnings which included the following statements;
“More Than 8,000 Dario™ Blood Glucose Monitoring System devices sold in the U.S.; reaching cumulative sales of more than 33,000 devices in the U.S.
On the business-to-business (B2B2C) side, DarioHealth expects to partner with additional players that will be able to introduce the DarioHealth platform to payers and the self-insured market in the U.S., providing their users a fully connected and real-time solution combined with coaching services. As the market is transforming to value-based solutions where payers are looking to buy a fully integrated solution, DarioHealth’s platform is well positioned to address this need. DarioHealth has already signed its first agreement with CCS connect to provide payers a joint solution of platform and coaching services.”
Ok let’s see now isn’t this what Livongo, OneDrop, Roche and LifeScan are doing. Is it not true that you can’t swing a dead cat without hitting a conventional meter company whose meter connects with the cloud and offers some sort of patient coaching? Does not everyone claim that they can lower costs by improving patient outcomes? Is it not also true that there is not one shred of evidence that these platforms actually do just that?
Should we mention that the newbies to our wacky world Google, Apple, Amazon and the rest of the tech world are working on the exact same thing. Is it not also true that the newer versions of continuous glucose monitoring systems will make conventional point to point meters obsolete? Does not a CGM provide better more comprehensive data?
See what the conventional point to point crowd is hoping for, more like praying for, is that one of these newbies will eventually buy them. That it’s not the meter that matters but the app, coaching and patient engagement systems that matter. That since these newbies have more money than Minnesota has lakes they will part with some of their cash to buy a patient engagement/coaching platform. Now never mind that it is fairly easy to for these cash rich newbies to replicate these platforms. Or that these newbies have greater experience at data analytics and consumer engagement. No, the conventional point to point crowd lives under the delusion that if we build it they will buy it.
What we find laughable here is there is no hard evidence that these systems/platforms or whatever they are called improve outcomes and saves money. Even more laughable is the notion that these systems/platforms are somehow unique that one is better than another. This is an out and out fantasy.
Please excuse us for being blunt but if no one wants to buy LifeScan from Johnson and Johnson (NYSE: JNJ) a unit with millions of uses and ready-made infrastructure, why would anyone buy OneDrop, Livongo or any other wannabe? Please explain to us exactly what the value proposition is here? Do they bring with them any scale, scale which is critical? Are their systems and/or platforms unique? Have any of these wannabes conducted large scale clinical trials which conclusively prove they improve patient outcomes and save money?
The reality here is interconnected diabetes management is nothing new. And in theory and in some small settings it can work. We can also say that the one area where IDM has the most potential is helping insulin using patients more effectively dose their insulin. However, this one lone area is also very easy to replicate and does not provide a distinct value proposition.
What the newbies are banking on is that some cash rich tech company will see their system/platform as the key to opening the biggest market there is, non-intensively managed patients.
Now we don’t want to rain on anyone’s parade but these cash rich tech companies are many things but stupid is not on the list. They are not going to pony up millions of dollars, even if this is a drop in the bucket for them, to buy something that has no distinct or compelling value proposition.
The reality is a company like Apple or Amazon would rather build their own system then to buy one from the outside. Or if they decide to buy they will buy something like a LifeScan for two reasons. One they can easily afford it and two, LifeScan brings with it the scale and infrastructure they need. See a company like Apple, for example, understands that although LifeScan may not have the coolest thing on the market, they do have scale and infrastructure in place that Apple will need when they go to market. Apple can make the way cool stuff themselves this is what they are good at.
This is a huge problem for companies like OneDrop and Livongo as they outsource their way cool whiz bang device, they are not vertically integrated. This is their Achilles heel as they think their system/platform is valuable when it isn’t. Apple, Google and Amazon could easily replicate the system/platform what they have no interest in building is the device which gathers the data. Hence the reason Google partnered with Dexcom (NASDAQ: DXCM). See Google knows not only does Dexcom have the best CGM on the planet but they can make them on a massive scale.
The biggest fantasy of all is that anyone can successfully engage a non-intensively patient when the premise, the foundation of their system/platform is these patients MAY experience better outcomes and these patients care about such things.
Companies like OneDrop, Livongo and the rest talk a good game but that’s all that it is, talk. None of them have proven they can reach, engage and impact the outcomes of non-intensively managed patients, by far the largest patient population.
Before JNJ decided to dump diabetes, we said they had a choice to go big or go home. JNJ has chosen to go home, while companies like Google, Apple and Amazon have chosen to go big and the biggest market in diabetes is non-intensively managed patients. The help these companies need isn’t with systems/platforms they are already very good at that. Basically OneDrop, Livongo and the like are selling what these companies don’t need.
To us it’s a game of musical chairs except with no winners.