We shall go slowly

We shall go slowly

Well another week has gone by and another pump company bits the dust, well not yet but it sure seems that way. Yes, this wacky world of ours continues to flounder about with no sense of direction. Yet this lack of direction extends to the people who are invest in these companies and no we are not just talking about the extraordinarily stupid people who put more money into Tandem (NASDAQ: TNDM). These idiots deserve no sympathy.

No, this idiocy extends to the “professionals” who cover our wacky world; analysts and investment bankers. Now don’t get us wrong some of these people are incredibly smart. But even these very smart people many with advanced degrees from very prestigious schools have moments of dumbness. The latest case in point is the looming battle between the FreeStyle Libre from Abbott (NYSE: ABT) and the Dexcom (NASDAQ: DXCM) system and to some extent Medtronic (NYSE: MDT) who also wants in on the stand alone CGM market.

As we have been writing Abbott like Medtronic back when the 670G was approved is riding an incredible wave of FREE and very positive publicity. Yes, the main stream media has hailed the Libre as the second coming, a technological marvel, more powerful than locomotive able to leap tall buildings in a single bound yes, it’s SUPER LIBRE. Meanwhile Dexcom has gone from having the best system with the most talented management team to old technology with a bunch of blithering idiots running the joint. And it says something that Medtronic barely is mentioned when it comes to CGM and with good reason we might add.

The way these folks tell it the battle has been fought already and Abbott has crushed Dexcom. Now never mind the battle hasn’t even started yet which proves an adage; never let the facts get in the way of a good story.

Yet the astonishing part is no one is considering the possibility that both Abbott and Dexcom can win. When we mention this possibility to analysts they look at us as if we had two heads, that we are some type of extra-terrestrial from the planet Zola. Why this concept of two winners is so foreign to these people we’ll never know so we will outline our reasons again and will do it slowly so not to confuse these very smart people – ok take a deep breath grab a cup of coffee here it comes

1. CGM will become the standard for glucose measurement – this is a concept most can grasp

2. CGM will be used by ALL patients with diabetes not just insulin using patients – this they cannot understand. The fact, yes, those pesky again, is intensively managed patients will use CGM differently than non-intensively managed patients but these patients will use CGM.

3. Even if ONLY insulin using patients used CGM this is a nice market by itself. Look at the numbers by all accounts Abbott has approximately 400,000 patients using the Libre and Dexcom has about 300,000 or so using their system and these are global numbers. How many insulin using patients are there globally? By the most recent estimates there are some 5 million plus in the United States alone. So even if only insulin using patients used CGM there is plenty of room for growth.

4. This is not about which toy the patient uses to gather data, CGM is no different than BGM this is about transforming this data into patient relevant, patient actionable information – this is a concept they cannot grasp to them it’s all about the toy.

5. Yes, Abbott will use price as a weapon but Dexcom will not sit around eating bonbons and do nothing they will fight back.

6. Yes, the Libre does not require a finger stick calibration and right now the Dexcom system does. This is going to change and will change soon.

7. Yes, we know patients who use the Libre seem to love it but so do the patients who use the Dexcom system. Let’s face it when these damn things work they provide some empowering data and make managing diabetes easier.

8. Everyone assumes because the Libre requires no calibration that more patients will use it. They seem to forget that it also lacks some very important features such as trend data, alerts and alarms and most importantly sends data to a smartphone. Unlike the Libre which requires a separate device to collect the data, does not offer trend data and has no alerts and alarms.

9. Ok here is where these people leave the reservation – ultimately patients will choose a system that fits their needs. A decision that will be impacted by coverage and how they manage their diabetes. Some will choose Libre others Dexcom. However, given there are so many patients and more are moving towards CGM we do not envision one system clearly dominating the other. We do not see a Medtronic like monopoly in the insulin pump market in the CGM market.

10. Ultimately both Abbott and Dexcom will do quite nicely, both will win.

The real problem here is these smart folks just cannot get past their fascination with the way cool whiz bang toy. This isn’t about which toy is used to gather the data, this is about and always has been about transforming that data into patient relevant, patient actionable information. This isn’t about calibration or no calibration. Yes, to a certain extent it is about money but money alone will not be the determining factor. And as we noted Dexcom can and will fight back if Abbott is foolish enough to initiate a price war that no one will win.

The reality is both the Libre and Dexcom system have a place in the market. This is not a winner take all MMA fight with one company pounding the other into submission forcing them to tap out. (Which is what Medtronic has done in the insulin pump market with Johnson and Johnson (NYSE: JNJ) of all companies tapping out.)

Listen we know we are just a street guy with a degree from the University of Illinois, and no contrary to popular belief we did not get an advanced degree in drinking. Not that we didn’t try. And yes, it is true we do not manage millions of dollars, have a fancy title or have an office full of staffers who kiss our butt. Nope we’re just a Type 1 patient who’s been covering this wacky world for 20 plus years and have seen a thing or two. This doesn’t mean we are right it just means we have experience which is nice way of saying were getting old.But this old guy isn’t some dim bulb, no matter what his kids say.

Just as we aren’t done, not by a long shot, neither is Abbott or Dexcom. The battle is set to begin and yes believe it or not there can be two winners.