Strange Times Indeed

There is no question we live in very strange times. Yesterday JNJ reported earnings and this was not a diabetes event. This morning Abbott reported results, and this was a major diabetes event. Even stranger and we’d recommend sitting down for this are we are about to say some very nice things about Abbott.

As we have noted before Libre has exceeded everyone’s expectations and continues to do so. However, given Abbott’s history- remember they have run not one but two BGM companies into the ground and before Libre had a dubious history in CGM, we worried that history would repeat itself with Libre. That the company would find a way to screw up what is turning into a very good thing.

Yet based on what we are hearing from the company, excuse the expression, they have found their sweet spot with Libre. The company sees what we see, the market continues to grow, CGM is replacing BGM, they only have one main competitor and they currently have a cost advantage. Additionally, again based on their remarks they seem to be seeing how this market is developing and understand they don’t need to win over every patient for Libre to be successful.

The reality is, and we keep saying this both Abbott and Dexcom can both win in this market. Abbott with the value segment, Dexcom in the premium segment. Abbott with less intensively managed patients, Dexcom with more intensively managed patients. In fact, each system helps the other, some patients will start with Libre realize they want more and switch to Dexcom, the reverse will also happen.

It was great to hear that Abbott has no delusions of becoming a Dexcom. They are very comfortable having a lower cost option. They really see no reason to add all the functionality which Dexcom now has. Will they do it eventually? We suspect they will but to their credit they see no rush to do it. The goal right now is pretty simple, make it cheap, sell it cheap and get on as many formularies as possible.

Looking ahead they will run into more serious competition when Dexcom gets their slap it on turn it on sensor to market. However, until then these two companies can peacefully coexist with both doing quite nicely. Perhaps the best way of thinking of this is to look at two Valley giants who also peacefully coexist, Apple and Google. Apple owns the premium segment when it comes to way cool toys while Google is content to own the value segment. Apple does not want to be Google and vice versa.

The biggest loser here is not Dexcom but our friends in Northridge. We will go into much greater detail with a separate post later today let’s just say for the moment that their stand-alone CGM is not just dead in the water but any chance it may have had is sinking faster than the Titanic.

So, kudos to Abbott and their CEO Miles White. Yes, strange times indeed.