Some observations

We’re beginning to wonder if Livongo going public will become a watershed event. The stock itself is down over 35% since its highly successful IPO but more importantly look at what other diabetes stocks have done since that day- Dexcom initially rallied hit a high of $175.19 on August 28th and has since been selling off closing at $146.26 on Friday. Insulet continues its impressive run and is up over 15% since the Livongo debut. Tandem is basically treading water down just over 2%. The big winner has been MannKind up over 24%.

What does this all mean?

When it comes to Livongo the real question is can they recover from a subpar earnings call. We won’t say the company is using fuzzy math to come up with revenue projections let’s just say they are taking some liberties with their assumptions. All the analyst who were going gaga over the company before they went public are quickly finding out that as way cool and whiz bang as Livongo may be it will be some time if ever until they make money.

To those who are concerned that Livongo’s performance will adversely impact future digital health companies we say not to worry. Digital health like so many trendy ideas is still in the early stages and the Livongo IPO proved investors have an appetite for these deals. Investment bankers not only love trendy ideas they love their fat fees even more so look for more Livongo like deals.

Moving onto Dexcom the next big event will be when or if or perhaps what designation the FDA gives the Libre2. We have no doubt the FDA will approve the Libre2 but we aren’t quite sure what designation they will give it or even what they will call it. Frankly no matter what the FDA does or does not do we see this as a major non-event in terms of sales as Abbott is committed to a value strategy. When this happens it will make lots of noise there will be lots of pontificating but in the end, it will not change CGM market dynamics. Bottom line Dexcom will be just fine.

Looking at Dexcom’s partners Tandem and Insulet we must admit we are somewhat baffled by Insulet’s performance. Yes, the company is on a roll kicking butt and taking names but why they have been immune from the recent sell off in pure diabetes plays is a mystery. The stock is somewhat down from its peak but has held up very well when compared to their peers. Our concern with Insulet isn’t how business is doing, our concern is over valuation. By many indicators the stock is looking pricy so best to tread carefully moving forward.

When it comes to Tandem it’s all about Control IQ and yes, it is that simple. The only problem is Control IQ won’t get here until the 4th quarter and it will be difficult to judge performance depending on just when the FDA approves it. The 4th quarter is traditionally the strongest quarter of the year for med tech companies as consumers have meet their deductibles. There is a high pent up demand and strong awareness of the Control IQ so we think long term things will be fine but short-term inflated expectations may get in the way.

Now a cynic would say that MannKind had nowhere to go but up, so its recent performance isn’t all that impressive. Even though we have had our share of snarky moments we believe this upward trend will continue. The company has cleaned up their finances and now can concentrate on doing deals. To be honest we really don’t see MannKind as a diabetes story, we see them as a drug delivery story with one of those drugs being Afrezza. The key as we see it is doing more deals with drugs other than insulin. It won’t be a straight line up, but we do see this upward trend continuing.