Some good news for Dexcom
Late yesterday the FDA approved Dexcom’s (NASDAQ:DXCM) seven day sensor for their continuous glucose monitoring system. The company said it plans to launch Seven by the end of the summer. The company also received approval for software that allows physicians and patients to monitor glucose levels with their computers.
While this is good news for Dexcom it does not however change Diabetic Investor’s outlook for the company or the CGM market. Even under the most optimum circumstances the CGM market is still a niche market. There just aren’t enough patients who will use the device on regular basis and the seven day sensor may actually compound this problem. Although the company did not disclose the cost of the seven day sensor it is expected to be priced at a premium to their current sensor. Current Dexcom patients have found that although the current sensor is only approved for 3 day usage the sensor actually lasts much longer. Diabetic Investor is aware of patients who have worn the current sensor for as along as 14 days with accurate readings. It stands to reason that patients will also push this new sensor beyond its approved life which could limit replacement revenue.
Physicians are also struggling with CGM. While many see the value of continuous readings, others complain of data overload. This not totally unexpected as CGM is still a work in progress and it will take some time for both patients and physicians to become comfortable with the product. Not unlike the early days of insulin pump therapy, physicians are learning which patients will benefit the most from CGM and how to fit CGM into their patient base.
Still this good news for a company that has had it share of problems. After a rocky start Dexcom appears to have corrected their earlier problems as product performance has improved. The question now becomes can they hang on long enough to enjoy the benefits of their hard work. Reimbursement for CGM is still a long ways off and they are not the only players in the market. Medtronic (NYSE:MDT) also has a CGM system. In the end Diabetic Investor continues to believe that Johnson and Johnson (NYSE:JNJ) or Roche will buy the company and combine Dexcom’s CGM technology with their existing insulin pump franchises.
One company that does not see this as good news is Abbott (NYSE:ABT) who is still awaiting approval of the Navigator. The people at Abbott must be kicking themselves for their foolish decision to seek a replacement indication when Navigator first went to the FDA. The company wisely changed course and is now seeking an adjunct indication but still Navigator sits at the FDA. Although many researchers believe Navigator is a solid product this really doesn’t matter as Dexcom and Medtronic are grabbing the low hanging fruit in this rather limited market. Even if Navigator were to be approved tomorrow it is unlikely they would gain major inroads into the market.
Not surprisingly the company has said little about the Navigator after they embarrassed themselves back in January when they said the device would be approved in two months. Here we are on the first day of June and no Navigator approval. The Navigator is just one more problem for Abbott as they have now fallen behind Bayer in the conventional blood glucose monitoring market.
Under new leadership the Abbott Diabetes Care division has a host of issues to deal with. The question is can this new team turn the situation around or did previous management poor decisions do irrespirable harm? Rumors are flying around the division that layoffs are coming and no one seems quite sure just what to do to get the company back on track.
After the company bought Therasense many wondered how the entrepreneurial spirit at Therasense would mesh with the conservative Abbott culture. Based on what we are seeing it appears the Abbott culture won out. This is too bad as the Therasense purchase could have reinvigorated Abbott and made them a serious player in diabetes. It’s not easy to turn gold into sand but Abbott is trying.