Running scared

Running scared

Although it was just an announcement the Dexcom (NASDAQ:DXCM) Google collaboration is reverberating throughout the conventional glucose monitoring space. The general consensus from the old guard is that should this collaboration succeed it will be the final nail in the conventional BGM coffin. While Diabetic Investor isn’t sure we would go that far we can understand why these companies are nervous.

Should Dexcom/Google succeed and actually develop a low cost disposable continuous monitoring system it will definitely hurt sales of conventional systems. The key here isn’t the data that such a system would generate rather getting such a system at price parity with a conventional system. Think of it this way if each system costs the same why would any patient opt for a conventional system. Or why would any physician prescribe a conventional system when they know the data generated from a CGM is more valuable.

Frankly Diabetic Investor believes Dexcom/Google has a better than 50% chance of succeeding. Dexcom has already developed a system which delivers readings to a smartphone which eliminates the need for a receiver. The Libre from Abbott (NYSE:ABT) has proven that it’s possible to capture data from a small disposable patch. The problem with the Libre is the exact problem Dexcom/Google must tackle, costs. This really has nothing to do with more advanced technology, that’s just a small piece of the puzzle.

What Dexcom and Google understand is for CGM to go beyond Type 1 patients and insulin using Type 2’s it must penetrate the non-insulin using Type 2 market. That the only way this can happen is having a system priced on par with a conventional system. Then and only then will they have a chance at expanding the CGM market.

Let’s for a moment assume, and yes this can be dangerous, that Dexcom/Google is successful. That they do develop a low cost disposable CGM system. The next question is will non-insulin patients actually use it. On the surface this seems like a no-brainer but as with most things in this wacky world the devil is in the details. First and this may seem obvious but the system has to be easy to use. The reality is non-insulin patients will not tolerate multiple calibrations or insertion devices. Best case would be a sensor that requires no calibration that is put on like a Band-Aid.

Next as valuable as this data is non-insulin patients are not used to having all this data and are unlikely to know what to do with it. There is a reason non-insulin patients are the least frequent testers and it has nothing to do with the so-called pain factor. The reality is most of these patients have no idea what these numbers mean nor is any action step associated with the test. As we noted just the other day insulin using patients can act on this data while non-insulin patients cannot, at least not immediately. What Dexcom/Google has to do is convert this data into patient relevant information not an easy task.

Given that the data from this system will be captured by the patient’s smartphone its likely Dexcom/Google will bring a third party to help convert all this data to information that is relevant to the patient. In effect Dexcom/Google will do what TelCare, Livongo and iHealth does now with their conventional monitors.

Even with these features Diabetic Investor still sees only a minority of non-insulin patients using such a system, at least initially. Perhaps the best to think about this is to acknowledge the wide gap between insulin using patients and non-insulin using patients. Insulin using patients understand this information and therefore value the data, the exact opposite is true for non-insulin using patients. It would be foolish to believe just because non-insulin patients have easy access to this data that they want all this data. This is like asking a high school baseball player to go up against major league pitching and expect them to get hits. Some may able to do it but most cannot.

As much as we hate to jump back on our soapbox what Dexcom/Google needs to do is what the conventional monitor companies didn’t do, educate these patients. Explain to them in language they understand not just what their system does or why the data is valuable rather how this data directly impacts their personal situation. How it can make managing their diabetes easier. How they will be able to live their life with their diabetes and not for their diabetes.

This in essence has been the problem facing every glucose monitoring, conventional or continuous, from day one. How do they engage a huge group of patients, how do they turn them from disinterested bystanders into patients who at least somewhat engaged with their disease state. We have long maintained that testing supplies could be given away for free and it would not get this group of patients to test more. We have also believed glucose tests could be completely painless and that would not increase testing frequency.

Glucose monitoring comes down to getting patients to value data. Getting them to understand not just what these numbers mean but how they can use them to better manage their diabetes and what that means to them individually. This is one reason we have also believed that non-insulin patients need some sort of incentive to get them into the habit of testing. That once they see how this data can directly impact their lives in a positive way the need to be incentivized will go away.

Thankfully we believe Dexcom understands this and with Google’s help they just might be able to do something no one else in glucose monitoring has been able to do, engage non-insulin patients and get them to value this data. For if that does happen then this product will be the final nail in the conventional glucose monitoring coffin and major revenue generator for Dexcom/Google.