That sucking sound

That sucking sound

A few news items reminded Diabetic Investor of that sucking sound heard by investors as their money is being sucked out of their wallets into a diabetes device company that stands absolutely zero chance of providing a return on their investment. Now to be clear none of these companies have nefarious intentions and all believe they are building a better mouse trap. Yet they all suffer from the same delusion, there is something unique about what they are doing and ultimately they will be acquired.

Let’s take them one at a time with LabStyle Innovations (NASDAQ: DRIO), the makers of the way cool whiz bang cloud enabled MyDario glucose monitor up first. The company reported results yesterday which included the following statement from CEO Erez Raphael, “Our mission is to bring positive change to people with diabetes around the world, while leading the growth and innovation in the digital and mHealth market. We believe we have the right product and the right strategy to succeed in these efforts and look forward to the opportunities ahead of us.”

That sure sounds great the only problem is that there is nothing unique about the MyDario. The MyDario basically does the same thing as the Livongo, TelCare, OneTouch Verio Sync and countless other meters do.  The same thing all the other way cool whiz bang cloud enabled conventional single data point meters do.

Next let’s move onto our friends at Senseonics (NYSE-MKT: SENS) who according to a press release issued this morning have received a CE Mark Approval for their implantable continuous glucose monitor which is called the Eversense® CGM System. The release states;

“The CE Mark approval is a significant accomplishment for Senseonics as this application required rigorous regulatory review against high clinical and safety standards,” said Dr. Tim Goodnow, CEO and President of Senseonics. “The approval enables the company to market and sell the Eversense System in European Union (EU) member countries, and we are prepared to make this important medical device available to people with diabetes.”

This is obviously good news for the company and their stakeholders that is until one look at what this really means; nothing. As we have stated in the past we have changed our position on implantable devices and actually believe there will be a place for these devices. The issue here is other than being implantable is the Eversense any better than the Dexcom (NASDAQ: DXCM) or Medtronic (NYSE: MDT) systems. Is it any better than the other implantable system being developed by GlySens?

The other problem faced by everyone in CGM land other than Dexcom, is how will their system compete against the Dexcom/Google disposable sensor. We ask this as neither Senseonics or GlySens is at the FDA yet and Medtronic as far as we know does not have a disposable sensor in the pipeline.  This basically means should Dexcom/Google be successful they will a huge competitive advantage and an opportunity to own the CGM market. Yes, implantable systems would if approved have limited appeal with insulin pump patients but even here the market opportunity is limited.

This is the problem for every CGM company not named Dexcom or Medtronic, as by the time they get their system to market, assuming they can do so, there isn’t much opportunity. A major issue when one considers that scale is as critical in CGM as it is in BGM. Simply put the question for every CGM company not named Dexcom or Medtronic is not does your system work, rather can you make money? Sadly, we don’t think they can.

The last news item comes from our friends across the pond as we have new entrant in the race to develop … wait for it .. a non-invasive glucose monitor. According to report on the BBC web site;

“The new device, which is currently undergoing clinical trials, will utilize a monitor which is discreetly attached to the arm or body using an adhesive and does not require the extraction of blood, except for during the initial calibration. Once calibrated, it will monitor glucose levels using sensors which send data to a computer or mobile app.”

This device is being developed by Professor Adrian Porch and his team at Cardiff University’s School of Engineering.

Now before we go any further let’s be clear we don’t know Professor Porch, have never interviewed him or his team and we’re sure his intentions are honorable. The problem isn’t with what he’s working on; the problem is what happens if he’s actually successful.  This is the question no one asks when it comes to what everyone calls the Holy Grail of diabetes devices a truly non-invasive glucose monitor. Given that no one to date has been successful in getting such a device through the FDA it’s understandable that the question isn’t being asked.

But just for grins and giggles let’s say someone actually can succeed where everyone else has failed, will such a device be commercially successful. The theory behind this quest to discover the Holy Grail has always been the reason patients fail to monitor their glucose levels on a regular basis is the “pain” associated with performing the test. That patients had to suffer painful finger sticks.

We have never subscribed to this theory and have contended the reason patients fail to monitor their glucose on a regular basis has little to do with pain rather they do not value the information that is provided by the test. This information is neither patient relevant nor is it patient actionable.

Before we go on it would be useful to think about how conventional wisdom has always been wrong about this so-called pain factor. We heard this same argument when inhaled insulin came to market, that the reason more patients did not use insulin was the pain associated with injecting. That if insulin did not need to be injected more patients would use and ultimately experience better outcomes.

Like the quest for the Holy Grail we have never believed that pain had anything to do with more patients using insulin. Sure it would be nice if patients didn’t have to inject insulin but the fact that insulin had to be injected was not the major reason more patients did not use insulin. Yet conventional wisdom said we were wrong when in reality we were proved right not once but twice. First when we predicted Exubera would fail and again when predicted that Afrezza would not succeed commercially.

This is another reason we have never felt a non-invasive glucose monitor would be commercially successful as it does not solve a problem. It’s just a different mouse trap not a better or innovative mouse trap. This is also the same problem facing all the way cool whiz bang cloud enabled conventional point to point monitors on the market. The problem isn’t how the information is obtained, the problem is turning this data into patient relevant, patient actionable information.

We can understand how someone without diabetes would think an insulin injection or finger prick is not a pleasant experience. Yet what these people fail to understand is that when you have diabetes this is part of daily routine and that if a patient wants to practice good diabetes management these steps are necessary. Simply put patients who are engaged with their diabetes value the information provided by a glucose test.  This information is patient relevant and it is actionable.

Yet money continues to pour into this quest to find the Holy Grail. Investments being made under the flawed premise that people would actually test more if there was no pain. The same flawed premise made with inhaled insulin.  The reality here is that pain, whether it be with a glucose test or insulin injection, is not a major issue at all. The real pain comes when the people who invested in these projects find out that even if by some miracle the Holy Grail is discovered, it’s a hollow victory.

Just ask all the patients who are using Afrezza who are now wondering whether they will be able to get this drug a year from today. These patients who kept telling Diabetic Investor that Afrezza would be successful, that this wasn’t a story about the business of diabetes that this was a story about an innovative new therapy option that was helping patients better manage their diabetes.

We hear these same arguments from the non-invasive crowd, that this isn’t a story about the business of diabetes, that this is about bringing an innovative new device that can help millions of patients.

The fact is like it or not this about the business of diabetes, that if a product no matter how innovative cannot be commercially viable it helps no one. That way cool whiz bang means nothing if there is not a market that can support way cool whiz bang. Our as Momma Kliff used to say; “Just because I’m right doesn’t mean you have to listen to me.”