Navigator Approval, HDI Reports and more on what’s going on with Deltec
Today Abbott (NYSE:ABT) announced they have finally received FDA approval for the FreeStyle Navigator® continuous glucose monitoring system. While Diabetic Investor does not see this approval helping Abbott turn around their struggling diabetes care unit at least they will no longer have to answer any more question on what’s up with Navigator. Now the question becomes where does the company go from here.
Before we continue it worth noting a few points:
1. 1. No one questions that Navigator is excellent technology.
2. 2. Based on interviews with several industry thought leaders, endocrinologists and diabetologists the Navigator comes to market with a favorable profile.
3. 3. Navigator’s main competitor is Dexcom (NASDAQ:CM) and not MiniMed. It’s clear that MiniMed’s strategy is to tie their CGM system to their insulin pump users and not sell their system as a stand-alone unit.
This being the case let’s take a look at the two systems or more importantly the differences between the Navigator and Dexcom’s Seven ™ System. The first difference is cost, according to the Navigator customer service department the starter kit for the Navigator will cost between $960 to $1,040 with replacement sensors, sold six to a box, will cost between $360 to $390. In typical Abbott fashion the web site for Navigator www.continuousmonitor.com contains a great deal of information on the Navigator expect the cost. Diabetic Investor conducted an extensive search of the site and found no mention of what the system costs. This omission is strange when you consider that when someone calls the Navigator customer service number the message constantly refers patients to the site.
By way of comparison the Dexcom site contains all relevant information including price which are $800 for the starter kit and $240 for a box of four replacement sensors. Besides costing more to get started the Navigator is also more expensive on a per basis as the Navigator sensor is designed to last five days while the Dexcom sensor lasts seven days.
Besides having a longer sensor life Dexcom has a two hour calibration period compared to 10 hour calibration period for Navigator. According to the Navigator user guide; “Continuous glucose readings will NOT be reported until the 1st calibration is performed successfully.” Diabetic Investor sees this a key point that has gone unmentioned in the many analysis of the Navigator, especially when one looks at the real world experiences of CGM users. Even if everything goes well with the Navigator calibration the user is forced to use a conventional monitor for the first 10 hours, effectively eliminating one day of the sensor life. We can only the imagine the frustration of users if the Navigator fails to calibrate properly and the user is forced to insert and calibrate a new sensor. It’s bad enough that users have to wait two hours for the Dexcom device to calibrate but at least they don’t lose a whole day’s worth of data should the sensor not calibrate properly.
It will interesting to see how Abbott sales reps attempt to sell the Navigator when the Dexcom Seven comes out on top based on a head to head comparison. This completely ignores the fact that besides being cheaper, having a longer sensor life and shorter calibration period Dexcom’s customer support team has real world experience. As we mentioned yesterday the insulin pump market and CGM market have several similarities and 24x7x365 customer support is just one more. As we have seen from past product introductions, there is a huge difference between patients that participate in clinical trials and patients in the real world. In the real world patients rely on customer support as the don’t have the benefits of the extra hand holding that is standard practice for patients that participate in clinical trials. Abbott’s lack of real world experience here could haunt the company as CGM users, like pump users, are a demanding and vocal group. It’s a well known fact that after Medtronic (NYSE:MDT) acquired MiniMed they made the disastrous decision to eliminate several customer service personal. A decision they later reversed but still haunts the company to this day.
In the end Diabetic Investor sees little hope that the Navigator in its present form will ever live to up the hefty expectations Abbott once had for the device. Besides being late to the party and missing the opportunity to grab the low hanging fruit, as approved the Navigator is an inferior product compared to their competition. Diabetic Investor suspects Abbott will go back to the FDA with a supplemental application with second generation device that does not require a 10 hour calibration period. Because of the many blunders with Navigator the company is now in a constant state of checking up to the competition.
In other news Home Diagnostics (NASDAQ:HDIX) reported full year results this morning. While the company continues to struggle in the US international sales grew an impressive 46.3% compared to 2006. As impressive as the growth was international sales account for just 14.7% of HDI sales. Diabetic Investor is encouraged by this increased focus on international markets as it offers the company a previously untapped area where the company can increase sales.
While the company had a difficult time domestically, this trend could change. In 2008 we should begin to see the effects of the company’s exclusive co-branded agreement with Rite Aid (NYSE: RAD), the nation’s third largest retail pharmacy. Helping the company even more are the changing dynamics of the domestic market. Next month we should learn the results of competitive bidding for Medicare which could benefit the company. 2008 could also signal the beginning of a change in the way insurers reimburse for testing supplies. As Diabetic Investor has mentioned previously several recent studies have failed to show a correlation between glucose monitoring and improvements in HbA1c for non-insulin using Type 2 patients. With the number of type 2 patients increasing and the high cost of testing supplies it’s quite possible insurers will begin to increase co-payments or stop covering testing supplies for non-insulin using type 2 patients.
Already we’ve seen moves by LifeScan, Bayer and Abbott to further entrench their monitors with insulin pumps. These companies understand all too well that insulin pump patients check their glucose on average seven times each day and account for almost 25% of all test strips sold. It is also a well known fact that the big four (LifeScan, Bayer, Abbott and Roche) have intensified their efforts to capture insulin using patients not on pump therapy as these patients must monitor their glucose frequently as well. Should insurers move towards higher co-payments or eliminate reimbursement for non-insulin patients all the players understand that patients will be reluctant to pay for testing supplies out of pocket especially when one consider the majority of these patients don’t understand the value of testing in the first place.
This could favor HDI when one looks at what patients would have to pay out of pocket. According to the Walgreens web site here are some retail prices for the more popular monitor (note all prices are for boxes of 50 test strips) –
Bayer Contour $55.99
LifeScan OneTouch $54.99
Abbott FreeStyle $59.99
Accu-Chek (Roche) Comfort Curve $57.99
Walgreens (Co-branded from HDI) $26.99
Already the HDI product carries a retail price tag that’s lower than patient co-payments established by several insurers. With their well established and expensive infrastructures the Big Four would have to do some serious restructuring or accept much lower margins to bring their cost in-line with what HDI can charge.
The final nail in the coffin for test strips and non-insulin users could be Byetta LAR and the increased usage of GLP-1 therapy. Besides the effectiveness of GLP-1 therapy, patients and their physicians are attracted to GLP-1 therapy because there is no need for patients to check their levels. The fact that insulin therapy requires regular monitoring has always been a contributing factor why primary care physicians use insulin therapy as a therapy of last resort.
With it’s simple once-a-week dosing and no need to regularly monitor glucose levels Byetta LAR is not only a major threat to insulin but test strip sales.
Lastly, Diabetic Investor has confirmed that Smiths Medical is actively shopping Deltec the makers of the Cozmo insulin pump. Not wanting to throw more money into this struggling unit the company is finding selling the unit as difficult as running it. The major obstacle is Deltec’s agreement with Medtronic which would need to be renegotiated should the company be sold. Smiths just may decide to practically give the company away at fire sale prices as they focus their efforts on other more promising business units.