Onward and Upward?

Yesterday Dexcom upped the ante in the race for leadership in the expanding CGM space. While terms were not disclosed the acquisition of TypeZero is already paying off as shares of Dexcom continue their surge upward. Yep this company once given up on by almost every analyst is now on a roll. The G6 is off to a great start, CGM adoption continues to increase, they have multiple partners who will drive greater sales and their pipeline is robust.

As we noted yesterday it’s now up to Abbott to respond. Abbott has already indicated they will add features to the FreeStyle Libre transforming the product into a true CGM. It’s also obvious from the comments the company has made they aren’t afraid to use price as a weapon with payors. Like Dexcom they have also embarked on an aggressive television ad campaign.

The question for Abbott is other than price what options do they have to drive greater adoption. Their one and only partner Bigfoot doesn’t yet have a product on the market. Unlike Dexcom they are not aligned with Google or Apple, nor do they have multiple insulin pump or insulin company partners. Without an existing insulin pump they do not have the luxury Medtronic has. So just where will growth come from?

The fact is the clock has started ticking for Abbott and not just because Dexcom is surging. At some point Medtronic will bring the Guardian Connect into the picture, improvements will be made and the product will eventually be on par with the Libre. Unlike Dexcom and Medtronic Abbott has not aligned themselves with either an insulin dosing algorithm or something like Medtronic’s SugarIQ. The fact is one could make a strong argument that Libre is actually behind the Guardian Connect as Libre patients don’t have a way cool whiz bang app which helps them analyze all the data.

Let’s be very clear here the Libre has exceeded all expectations. However Abbott now finds themselves caught in a vacuum. The product even with it’s limitations does work well and users are happy. Yet the CGM space is evolving and it’s not just about whether the damn thing works. It’s now becoming all about how does a patient use all this damn data to achieve better outcomes. For isn’t tat the real goal in the first place?

Without a way cool whiz bang app that collects the data, performs the analytics and then makes recommendations to the patient what does Abbott really have? What they have is limited upside. As you can take it to the bank that Dexcom and Medtronic will hype their way cool whiz bang apps. They will hype the fact that their systems send readings directly to a patients smartphone. In Medtronic’s case they will fight fire with fire matching or more likely beating Abbott’s price. Medtronic has the resources to do this and as we have seen in the past they aren’t afraid to use them.

Being realistic we could make a very strong case that the Libre is quickly approaching it’s zenith. That from here on it will grow but growth will slow and come at a steep cost. We could also argue that Abbott has set their sights on the wrong opponent, that the real threat isn’t Dexcom but Medtronic. Yes at the moment the Guardian Connect is substandard when compared head to head with Libre. However the folks in Northridge are not sitting around and eating bonbon’s. Simply put while Dexcom may lack the resources in an all out price war, that is not the case with Medtronic.

To put this in a perspective everyone can understand look back at how the smartphone market evolved. Apple the makers of all things way cool whiz bang doesn’t own the market, Google does. Yet both companies are doing quite nicely and perfectly content with this duopoly. And where is Motorola the company that once dominated the mobile phone space?

Like Motorola back in the day, Abbott looks to be in a great position until one considers that markets evolve. This exact same thing is happening in the CGM market it continues to evolve and the way it looks now Dexcom and Medtronic are evolving with it while Abbott is not. With no large installed base of insulin pump patients, without any partner that has a product on the market, without a robust pipeline the one and only option left is to use price as a weapon. Take that away and then what?

Credit should be given to Miles and his team but just as the company blew it with the Navigator, history could be repeating itself with the Libre. Our concern with Abbott has always been will they overplay their hand, could they adapt as the market evolved. Could they depart from their checkered history in glucose monitoring, remember Miles has run not one but two BGM’s companies into the ground. Time will tell but time is something Abbott doesn’t have.

Game on Miles either get with the program or risk seeing your baby get thrown out with the bath water.