Reactions Overreactions

Reactions Overreactions

Newton’s third law states that for every action there is an equal and opposite reaction. This just might explain some share movement witnessed recently. First Abbott announces they will be working with Tandem integrating the Libre with Tandem insulin delivery systems. Action- Tandem shares close up $5.37 almost a 10% increase-Reaction Dexcom shares close down -$7.21 a decrease of almost 5%.

Now never mind that this deal between Abbott and Tandem does not change the fact that Dexcom is the engine that is driving the Basal IQ and soon the Control IQ. Nope it doesn’t matter that it will take some time to even get the Libre or the yet to be approved Libre2 to work with any Tandem insulin delivery system. All that matters is that one day in the distant future the Libre may talk with a Tandem insulin delivery system. Something which is supposed to happen in the new world of interoperability.

Just as an FYI we will likely see this same action reaction cycle play out with Abbott and Dexcom today as Abbott reports earnings later this morning.

Also yesterday Livongo did what it does best issued a press release announcing yet another deal which looks good on paper but really is meaningless when it comes to producing any real revenue. Here’s what the release said;

“Livongo Health, Inc., a leading Applied Health Signals company empowering people with chronic conditions to live better and healthier lives, today announced a partnership with VSP® Vision Care to expand outreach efforts to Members with diabetes. This partnership includes the opportunity for mutual clients to provide their employees with important reminders to schedule their annual comprehensive eye exam with a VSP network doctor. In addition, Livongo will now offer its Diabetes, Hypertension, and Behavioral Health solutions to VSP employees and their dependents.”

Naturally shares of Livongo which have been beaten like a drum reversed course and increased $1.01 about a 5.5% increase for the day.

We hate to put on our captain obvious spandex today, but this press release and deal has more holes in it than swiss cheese and doesn’t smell as good. Nowhere in the release does it say what the potential pool of eligible patients is, nor does it state any potential impact on revenues. Which even if it did these estimates would be meaningless as Livongo has the most convoluted method for calculating future revenue streams otherwise known as the WAG method.

We’ll say it again as Momma Kliff used to tell us sometimes you have to hit people over the head with a baseball bat before they get even the simplest concepts through their thick skulls, we could care less how many deals the company signs how many employers they say they have all we care about is how many eligible patients enroll and do they stay enrolled. Everything else is just a distraction.

Before we head off to the Abbott earnings call a final thought. Anyone whose been paying attention knows that more than likely no matter what Abbott says today it will adversely impact shares of Dexcom this is almost a guarantee. It’s equally likely that shares of Dexcom will then recover from this beating. Therefore it makes sense to buy shares of Dexcom on these dips as no matter what Abbott does Dexcom will be just fine.