The lull before the storm

Since it’s Sunday and most of us will be watching football most people will likely read this after JPM is underway. As we head to that beautiful city by the bay which just so happens has one hell of a football team our thoughts turn an issue that many won’t want to talk about but needs to be discussed.

Although we didn’t report on it during CES several funding deals were announced the most recent being Companion securing more capital. Before that Vitra Health announced more money coming in and of course Livongo did another deal this one with Higi Smart Stations. On top of all this the three amigo’s Dexcom, Insulet and Tandem all had a pretty good week last week.

The pink elephant in the room that no one wants to talk about is are we dangerously close to a bursting valuation bubble. Now as Momma Kliff used to say something is worth is whatever someone else is willing to pay for it however she also noted that people sometimes lose their perspective. To be clear here we have no problems whatsoever with any of the three amigos and we so get it that digital health continues to hotter than Georgia asphalt. Still check this out-

Dexcom now carries a market cap of over $22 BILLION, Insulet over $11 BILLION and Tandem almost $4 BILLION. While Livongo has come down from its outrageous IPO level the company is still valued at $2.5 BILLION. Is it any wonder that 2020 could be the year that Google decides to cash out of Verily letting this unit do an IPO of their own? The same could happen for any of the other digital players which in our book includes Vitra and Companion. Yes, we know they technically aren’t digital per se but in this environment does that really matter?

For the publicly traded players Dexcom, Insulet and Livongo (Tandem is not presenting at this year’s JPM) we have to wonder what these companies can say that won’t be considered a disappointment. Expectations have been set so high we wonder can any of these companies clear what is becoming a very high and perhaps unrealistic hurdle. The story is a little different for Livongo as unlike Dexcom and Insulet they don’t have a track record and are looked at differently given the newness and buzz around digital health.

Listen we are not by any means stock market prognosticators. Nor will we claim we understand how some of these investors are justifying the valuations they are placing on some of the privately held companies. However just as no one expected the Tennessee Titans to beat the New England Patriots or the Baltimore Ravens, we would proceed somewhat cautiously moving forward. Again we have every confidence in the three amigos and believe if they play their cards right Companion could beat the insulin companies to market with a real Tyler.

Still we can’t help but think of what Momma Kliff said long ago – Just when you think you’ve got this all figured out something wacky comes along that throws you for a loop you should have seen coming but were unwilling to see coming. We hope we are dead wrong and are just being overly cautious, but we can’t help but wonder when this incredible ride will take a pause.