Before we get into the numbers take a look at this from Abbott’s press release this morning;
“During the quarter, Abbott released real-world data from nearly 500,000 users that shows higher rates of scanning with its FreeStyle Libre system improves glucose control for people living with diabetes.”
Now we don’t want to be snarky, but this is like saying Tiger Woods won the Masters because he had the lowest score. We have always found it funny that Abbott brings up this fact every chance they get, like it’s something special. Never mind that patients using the Dexcom system DO NOT have to scan anything and their readings are sent to an app on their smartphone, something the Libre does not do. But what the heck Abbott seems to think this is important and the analysts who know next to nothing about diabetes management buy it so why the hell not mention something that is obvious.
Ok with that Alexa moment out of the way there is a reason the folks at Abbott are doing the happy dance. As we anticipated Libre continues to add new patients most of which are Type 1 which bodes well for future reorder rates. The company is adding manufacturing capacity and has the Libre 2 in front of the FDA seeking an iCGM approval. The company also made it very clear that when it comes to Libre, they will sacrifice price to achieve scale.
Let’s examine that last point a little deeper as the CGM business is really no different than the BGM business in that scale is critical and drives profits. Put simply the more of these suckers are made the cheaper each one is made for. Scale allows Abbott to achieve critical manufacturing efficiencies enabling them to maintain a low price point. Give Abbott credit as they see what’s coming, they know that Dexcom will not be there lone competitor and if they are to compete effectively, continue to grow they must be competitive on price while making a profit, scale makes this possible.
The company should be given credit in another area as they are moving methodically with Libre enhancements. While we like to make fun of the fact that Libre needs to be scanned, does not have connectivity nor alarms or alerts, it’s obvious this hasn’t hurt sales. Abbott understands that price and access trumps these features. Starting with Libre 2 some of these enhancements will come and eventually we see Libre having every feature Dexcom now has. Again to their credit Abbott wants to add as many patients as possible making the necessary sacrifices to achieve scale.
Abbott knows the G7 is coming along with additional competitors, competitors who will attempt to use price as weapon to gain share. While we don’t believe they will become what Medtronic has become in the insulin pump market, they along with Dexcom baring major missteps will own the CGM market likely controlling 80% plus share forcing these competitors to fight over the remaining 20% of the market. This is exactly what happened with BGM and now is happening in CGM.
It was also good to hear that Abbott sees Libre not just as a CGM but a platform that can measure other metrics. As we have noted there are applications beyond diabetes for CGM, applications which will expand CGM to a wider audience. For the moment however, CGM is a diabetes/growth story. As we noted yesterday this story is beginning to change a little as reorder and attrition rates are becoming more important. As we also noted the larger the patient base the more data there is to monetize.
It’s a little ironic that yesterday JNJ reported results which used to be a must listen to event as they were deep in the diabetes pool. Not that long the Abbott calls were a yawn not worthy of live listening. Today JNJ has drowned in the diabetes pool with Abbott swimming like Michael Phelps. We wouldn’t call Abbott’s turnaround in diabetes a Tiger like comeback but it’s pretty damn close. Keep in mind there was time not that long ago before Libre when it looked like Abbott was going to join JNJ at the bottom of the pool.
One last thing before we close as well as Abbott is doing Dexcom is doing equally as well. As we noted earlier these two companies own the CGM market. What everyone needs to understand is that this is NOT a winner take all market, that both companies can win. Let’s face it folks CGM is where it’s at and Abbott and Dexcom are doing the hippie hippie.