Simple Math

This morning per a press release;

“DarioHealth Corp. (DRIO), a leading global digital health company with mobile health and big data solutions, announced today the launch and first sales of its Dario™ Blood Glucose Monitoring System on Amazon.”

Now just in case anyone has forgotten the Dario system is one of the many way cool whiz bang conventional glucose monitors. You know the ones we’re talking about those way cool whiz bang systems that does everything for the patient, it slices, it dices and makes soup too. Ok it doesn’t make soup.

Anyway, this news comes on the heels of the just ended ATTD conference which featured tons of way cool whiz bang systems for patients. And it got us thinking, hey it does happen sometimes.

While all this technology is way cool and whiz bang has anyone given any thought about patients who cannot afford this technology or do not have access to it. Of course, they haven’t as everyone just assumes that this technology is so damn cool that patients will do whatever they must to get it. No one has given any thought to patients who have high deductible plans or patients who do not have coverage or patients that even with decent coverage just can’t afford it. Nor do they give any thought about patients who do not own a smartphone and yes there are people who do not have smartphones.

Try as we might to explain that all this technology is worthless if patients don’t use it or don’t have access to it no one seems to be listening. As per usual all the toy makers are fascinated with the toys and not the people who are supposed to play with them. It does not dawn in the toy makers that without users there are no revenues and therefore no sustainable business. Nope they assume that some other company will buy them, and it will be their problem to find users.

Again, as we keep saying the key to commercial success for any of these way cool whiz bang toys is not the damn toy but patients. Patients are the most valuable commodity in diabetes. This is why Johnson and Johnson (NYSE: JNJ) who’s in the midst of trying to sell LifeScan might actually get over $3 Billion for this unit. LifeScan has nearly 25 million patients globally and while we do believe CGM will replace BGM as the standard for glucose measurement there is still a place for conventional BGM. And contrary to popular belief BGM will remain a fixture even in developed countries and not just emerging markets.

Yes, it is true that here in the US and most developed countries the reimbursement environment sucks and prices continue to decline. However, as we keep it noting not everyone will have access to or be able to afford CGM systems. We do see this changing over time as CGM systems become cheaper, but that day is not here just yet and until that happens BGM will excuse the expression stick around.

There has been so much focus on the toys that everyone has forgotten about the patients who are supposed to play with them. They continue to focus on the minority of patients, mostly intensively managed Type 1’s, a group which is not a representative sample of the diabetes market. In fact, this is by far the smallest group of patients. As some point the toy makers to stay valuable most move beyond this group. They must start thinking about patients who are not intensively managing their diabetes, patients who really don’t want to think about managing their diabetes, patients who today view managing their diabetes as one big pain in the butt.

This is not just true with glucose monitoring it extends to “smart” insulin pens as well. What good is a cloud enabled “smart” pen to a patient who does not own or cannot afford a smartphone?

Now we’d recommend sitting down here as we’re going to say something nice about Livongo, as the company can fulfil a need here. Unlike other systems like OneDrop, iHealth or Dario it does not interact with a smartphone everything is contained on the meter, in effect the meter is a de-facto smartphone. Messages aren’t sent to the patient’s smartphone rather the meter is the hub of this system. Although we do not believe the system yet has a bolus calculator on it that can be easily added or done by the patient’s coach. And we see no reason why a “smart” pen cannot also communicate with the system too.

Yes, CGM is a much better method for capturing glucose data and yes it will become the standard for glucose measurement. However, it is also true that many patients won’t use it even when it becomes affordable. These patients should not be ignored as they are being ignored today. This is a real and large market which if properly catered too can produce a very nice revenue stream. Think of it this way which would you rather have 25% of 1 million patients or 10% of 10 million patients. Simple isn’t it yet you’d never know it by the way things are going these days.

Hopefully at some point the toy makers will realize that there are many roads to success. That yes way cool whiz bang is important but sometimes stupid elegance is the shortest distance between two points. As Momma Kliff used to say there is no need to overcomplicate a peanut butter and jelly sandwich yet it’s amazing that so many people try to.