One Million Sensors – So what.
When I was a kid growing up in suburban Chicago I remember watching the McDonald’s Golden Arches proclaim over 1 Billion hamburgers sold. My older brothers can remember when the Billion was millions. Today the Golden Arches not only stretch across America but around the globe and the company now proclaims that billions of hamburgers are sold each year.
This morning Medtronic (NTSE:MDT) announced that they have reached the milestone of more than one million sensors for its continuous glucose monitoring (CGM) products manufactured and sold. Before we get too far here it’s important to note that the company did not state that 1 million sensors had been sold the press release clearly states that the one million comes from sensors manufactured and sold. This one fact alone makes Diabetic Investor wonder just how many sensors are sitting in inventory.
The press release goes onto to state the wonderful benefits of CGM technology and how Medtronic is the leader in the field. The normal corporate B.S. that you would expect to find accompanying such an announcement. The press release wouldn’t be quite so flattering if it was written by the many patients using Medtronic’s CGM technology interviewed by Diabetic Investor who’ve experienced numerous sensor failures, sensors that would not calibrate, sensors that worked one day and failed the next, etc.
To be fair Medtronic’s main competitor Dexcom (NASDAQ:DXCM) is experiencing similar problems. Although the Navigator has only been approved for a short period of time it’s likely it will experience similar issues.
Try as they might the companies in the CGM space and the analysts who cover them just don’t want to see the truth when it comes to CGM. They all talk about how reimbursement will forever change the CGM market and nearly every type 1 and insulin using type 2 will use a CGM. They talk about how CGM technology will soon be in hospitals across the country. There are even some who believe that we are within shouting distance of a true artificial pancreas. Diabetic Investor isn’t sure what happened to the many unused Exubera delivery devices but we suspect that some have found their way into CGM companies and the analysts who cover them, for an alternative application.
Here are the facts about CGM:
1. 1. CGM sensors will get better as the technology evolves but this is still new technology.
2. 2. Reimbursement will help CGM sales but it will not turn a niche market into a mass-market that rivals conventional blood glucose monitoring.
3. 3. Dreams of a true closed-loop insulin delivery are just that, dreams.
4. 4. The hospital market has potential but it will take years for it to develop into anything that generates substantial revenues.
The current realities of the market are pretty much what Diabetic Investor has been saying all along. That as promising as CGM technology is it only applies to a narrow segment of the diabetes patient population. Even the physicians who support CGM use privately express concerns over how to use all the data. While there is no question that CGM and insulin pump technology go together like peanut butter and jelly, it’s also true that CGM technology and non-insulin using patients go together like oil and water.
Looking ahead we suspect that as the reliability of sensors improves more patients will adopt the technology, although we remain unconvinced that these patients will use the technology 24x7x365. It is also true that at some point reimbursement will not be a major issue however, this still does not solve the data over-load issue. In many respects the CGM market is not unlike the conventional BGM market where the highest user rates come from insulin pump patients followed by patients on multiple daily injection (MDI) therapy followed by patients using insulin plus oral therapy.
Diabetic Investor finds it ironic that no one sees the correlation between insulin usage and glucose monitoring. Although there have been changes to reimbursement rates over the years the majority of insurers cover glucose testing supplies. These supplies are easily accessible as patients can walk into any Walgreens, CVS or Wal Mart to get them. It’s also true that patients are constantly reminded by their physician to monitor their levels regularly. Still it is a well known fact that insulin using patients account for nearly 70% or more of all test strips sold. The fact of the matter is patients who do not use insulin rarely if ever test their glucose levels.
The fact is only a small percentage of insulin using patients will use CGM and the majority of those patients will be using an insulin pump. It’s also true for the hype surrounding CGM Diabetic Investor has yet to see a study that proves conclusively that patients using a CGM achieve better outcomes then those who monitor their levels using a conventional monitor 4 or more times per day.
Also ask yourself this question; Why would LifeScan sign an exclusive deal with Medtronic if CGM technology is the future? The fact is LifeScan knows that the majority of insulin pump patients who stand to gain the most from CGM technology will continue to use a conventional monitor.
Looked at realistically nothing has really changed with CGM no matter how many sensors are manufactured or sold. Medtronic does hold an edge in this market mainly due to their huge market penetration in the insulin pump market. However, Dexcom has deals in place to combine their system with Insulet (NASDAQ:PODD) and Animas insulin pumps. It won’t be long before CGM/pump combinations are common.
The bottom line here is the CGM market continues to evolve but for the foreseeable future remains a niche market. A market that now has three players fighting over a handful of potential patients.
CGM companies and the analysts who cover may have dreams that like McDonald’s, CGM could grow from millions sold to billions sold. Let’s just hope they don’t throw away their old Exubera delivery devices, Diabetic Investor thinks they’ll need them.
