The King is NOT Dead

There is no question that our friends in San Diego are getting ready to do the happy dance. Of course after a 5am PST call this morning they might need a nap before hitting the Gaslamp district. This well deserved celebration might also include our other friends in that beautiful city as their pump is now hooked up with coolest toy in the toy box. Ironically the folks from the evil empire might join in the celebration as they too are having a meeting in sunny San Diego.

Yet judging from the questions asked this morning we’re not sure everyone understands just how big of a deal this approval was. Yes we got the typical when will it be launched and how much will it cost questions, these are short term issues. The most important aspect which of course went largely over looked is the new standards the FDA has set and likely will be released soon.

Knowing Dexcom (NASDAQ: DXCM) they would not mention these standards and feel comfortable talking about future systems if they weren’t 100% confident they can meet them. Although they did not come out and say; “Hey folks are you getting this we just made it harder for Abbott (NYSE: ABT), Medtronic (NYSE: MDT) and the many Dexcom wannabes to compete” they could have so we said it for them.

Dexcom may have been caught napping when Libre was approved in the USA especially with the label it got but what’s that old saying about waking a sleeping giant. Folks CGM is as much a story about the ability to run a commercially viable CGM company than it is about who has the best technology. This is about manufacturing prowess, dealing with Medicare, getting reimbursement and fending off competitors who could care less if they lose money on their system. Simply put this is as much about talent as it is about way cool whiz bang and in Dexcom’s case they have both.

Just as Abbott raised the bar with no calibration, Dexcom has now leapfrogged Abbott. They have not just cleared the bar already they have cleared the next bar too. As we have noted the Libre has a well known issue in the low range which Abbott must address in future versions. While the Libre may be cheaper for the moment this supposed price advantage will only take them so far and Dexcom will compete on price too. So the question for Abbott is which road do they travel down. Do they try to replicate what Dexcom has and compete head on? Or do they go balls to the wall and initiate an all out price war or what we call the nuclear option.

While it might seem difficult to believe Medtronic has an even bigger problem. As they get set to launch their stand-alone CGM the Guardian Connect with the train leaving the station they find out that the track ahead has a huge obstacle that cannot be averted. So the choice is do they slowdown and wait until the track clears? Or do they keep going forward knowing full well that a train wreck is coming? Even before this news came out the question for Medtronic was other than price why would anyone chose the Guardian Connect? Now the question is would any patient want this system if it was given away for free?

We can only imagine what the many Dexcom wannabes are thinking. While a limited few have something real most do not. The ones that are real will anxiously await the release of the new standards from the FDA, while the ones who have nothing will do what they always do try and BS their way along.

As much as Momma Kliff told us not to gloat this time we must as we are so sick of these people failing to understand how this wacky world works. As one ex-device CEO once said making the damn thing work is great but what happens after that it has to be sold, supported and paid for. Or as we like to say the hard part is not building a CGM the hard part is running a commercially viable CGM company. Go back and read what everyone was writing when the Libre got approved here, better still look at what it did to Dexcom’s share price.

Now this does not mean that it’s smooth sailing for Dexcom from now on. They must contend with the coming price war while making sure the G6 launch goes off without a hitch. They cannot rest on their laurels and continue to be innovative. And we’re very confident they will do this and more.

The company kept getting hit below the belt – first Animas is shut down, next Tandem (NASDAQ: TNDM) seemed to be on the brink of closure, Insulet (NASDAQ: PODD) was becoming their only insulin pump option which not a bad thing but not a good thing either, next along comes Libre and all of a sudden everyone starts saying the King is dying. Needless to say Dexcom was not dying, it may have been sick but they have surely recovered and look stronger than ever.

The King is back on the throne and ready for his troops to do battle.