The joint is jumping

This morning Senseonics is before an FDA panel with their Eversense implantable CGM. Also, this morning Bigfoot announced they have closed their series B $55 million financing round. Yesterday the FDA approved Dexcom’s (NASDAQ: DXCM) G6 system pushing shares in the company higher in early trading. And while they didn’t announce anything our friends at Tandem (NASDAQ: TNDM) are feeling the love as shares continue to surge higher on anticipation of their new system which has low glucose suspend.

Simply put when it comes to diabetes devices CGM and insulin pumps the joint is jumping. Now before everyone starts doing the hippy hippy and breaks into an unstoppable happy dance some advice from our friend loopy Lou; slow your roll. Yes, there is reason to celebrate but there is no reason to start drinking Cristal just yet. Listen anyone who knows us well knows we like a good party, but some perspective is needed.

Although they are not directly related we’re going to lump Senseonics and Tandem into the same bucket as we believe the FDA will approve the Eversense and the t:slim X2 Pump with Basal-IQ technology. We believe this not just because both systems have good data. We believe this as the FDA has undergone a major attitude adjustment. In the past the agency looked for reasons NOT to approve new stuff, today the attitude seems to be let’s approve everything.

The first indication of this new attitude adjustment came when they approved the FreeStyle Libre from Abbott (NYSE: ABT). While the approval didn’t surprise many the label and dosing claim was a stunner. This is also why we weren’t that surprised with their approval of the G6 and won’t be surprised when the Eversense is approved or the new Tandem system. Unless there is clear evidence that a system is killing patients, the FDA is going to approve it.

Now let’s move onto the Bigfoot news which really isn’t big news, yep the play on words is intentional. Per the press release;

“Bigfoot Biomedical, Inc., a diabetes solutions company harnessing the power of artificial intelligence to optimize the dosing and delivery of insulin for people with insulin-requiring diabetes, today announced that the company has completed a $55 million Series B equity financing with new investments from Abbott and other new and existing investors, bringing the total amount of equity raised by the company to over $90 million.”

A couple of quick observations as the wording of the release says much about where we’re going. Yes, in the future expect to see the words artificial intelligence a lot, yep AI is the latest buzz phrase. Same goes with the term wearable technology something else we’ll be seeing a lot of. Just as alternate site testing and “smart” insulin pumps were all the rage years ago AI and wearables are todays buzzwords.

It’s no surprise that Abbott threw more money into Bigfoot as they are the only “CGM” company who has no pump company to dance with. Tandem and Insulet (NASDAQ: PODD) have aligned themselves with Dexcom and Medtronic (NYSE: MDT) has their own CGM. And let’s face facts right now everyone sees CGM and pumps like they do peanut butter and jelly, two things that naturally go together. That dead cat which gets a serious workout in our wacky world is being swung with impunity in the sensor augmented pump category.

Now some might say all this news is great but is it not true that Medtronic effectively controls the insulin pump market and while their CGM may not be that great they have the power and scale to be a serious player. We don’t know if some would say that, but we just did. Could it be that everyone is waking up to something else we said long ago, that while Medtronic may have a monopoly in insulin pumps they are more vulnerable than ever. That even with Animas out of the picture the force is now with the rebels. Here’s why;

As we stated that dead cat is now hitting sensor augmented insulin pumps, pumps which now have way cool whiz bang algorithms. Algorithms which work and are getting even better. Algorithms which are so good that the insulin delivery system, be it an insulin pump or insulin pen, has become immaterial. The two most critical components when it comes to insulin delivery are a way cool whiz bang algorithm which learns combined with an accurate and reliable CGM. While we’ll never know this our guess is had you taken the TypeZero algorithm and the Dexcom G6 and used the Medtronic 670G to deliver the insulin the data would be just as great as the data we witnessed at ATTD only difference was it was a Tandem pump delivering the insulin.

In the very near future Tyler – a “smart” insulin pen/CGM/App system- will be here. Dexcom and Novo Nordisk (NYSE: NVO) are running studies on a Tyler right now. And we’ll go out on a limb here and state when the results are released it will show patients on a Tyler do just as well as patients using a way cool whiz bang insulin pump that costs way more than a Tyler.

Think about this just for a moment from a payors perspective an insulin pump costs them around $7,000 add in the cost of sensors and pump supplies putting the startup cost north of $10,000 and annual costs in the $5000 neighborhood. Let’s say the “smart pens” – remember we need two – each cost $500 – what else does the patient need other than sensors – pen needles which might cost $25 if that. That puts the start up cost for a Tyler at around $4,000, annual costs around $2,500. Now we may not have an advanced degree in mathematics but even with our limited knowledge $4000 is less than $10,000 and $2,500 is less than $5,000.

However, Tyler is not the only threat to Medtronic as think of what happens when someone builds a better mouse trap, a better hybrid closed loop insulin delivery system. Someone who just might have offices in beautiful San Diego is for the moment is financially secure and just so happens has the best damn data we have ever seen for their hybrid closed loop insulin delivery system. A system which when updates are made do not require a change in hardware. We hope everyone is sitting down as Tandem could have a Bayer like resurrection.

Way back in the day Bayer was the top BGM company only to fall from grace and was on the verge of extinction. The company brings in Sandra Peterson, now at Johnson and Johnson (NYSE: JNJ), who does the impossible and brings the company back from the brink of death. Bayer went from becoming a lost cause to a player again. This “could” happen at Tandem. No, we don’t see them dethroning Medtronic, but we can see them being a huge thorn in their foot. The key for Tandem is to lock up a tighter agreement with TypeZero and don’t do anything stupid.

The best news here is thankfully the future for insulin using patients looks very promising. Thanks to these new and very smart algorithms combined with even better CGM systems an insulin using patient will live a much better life. The fact is companies like TypeZero and Dexcom are more valuable than a company like Medtronic as while Medtronic makes a great product that product has become a commodity. Even worse that commodity is about to face an even cheaper system that does about the same thing just in a different way.

Just as we weren’t worried about Dexcom when everyone had declared them dead. We aren’t digging the grave for Medtronic either as the company has a talented team, scale and resources to compete. The key for Medtronic is for this team to recognize these threats and deal with them now. Failure to act and act now could well have serious consequences.

This is about to get very interesting indeed. Yep, the joint is certainly jumping.