It really doesn’t matter whether a company sells drugs, devices or diabetes management services in the end the company with the most patients win. As we have seen many times it also doesn’t matter if a company has the best drug, device or platform as long as they have lots of patients. Diabetes has become a business where scale matters. Simply put scale drives efficiencies and without it making money is next to impossible.
We mention this as we’ve been giving a great a deal fo thought to the upcoming Livongo IPO, an IPO which we suspect will be successful. Digital health is the hottest thing going and Livongo is taking full advantage of the markets huge appetite for deals in this space. However what hasn’t been mentioned not yet anyway is that as hot as digital health has become Livongo is not the lone diabetes solution. Not by a long shot.
OnDuo, WellDoc, OneDrop are just some of the names that come quickly to mind. And lets not forget that Walgreens and CVS are also battling for patients. Simply put the competition in this space is intense.
The question we have with Livongo is not whether their platform is better than the competition rather do they have the financial resources to compete. Livongo could be caught in a similar situation to what Dexcom experiences with Abbott. As we have noted in the past Abbott is far larger than Dexcom and has the luxury of selling other things besides Libre. This has helped Abbott as they have pursued a low cost grab as many patients as possible pricing strategy with Libre.
As we have seen Dexcom is doing just fine but like it or not they are forced to play on Abbott’s turf when it comes to pricing. Thankfully the CGM market is as hot as digital health allowing both Dexcom and Abbott to somewhat peacefully coexist. The question is will this same scenario develop in digital diabetes. Will the market develop as the CGM market has with two companies dominating the space while everyone else fights for the scraps left behind.
Livongo may be the first digital diabetes company to hit the capital markets but being the first to ride the wave does not always translate into surviving the ride. Way back in the day when the insulin pump market was in its infancy the market was dominated by two players, MiniMed and Disetronic. While many believed Disetronic had the better technology MiniMed was winning where it counted as they had more patients. Roche believed they could reverse this trend acquiring Disetronic for over a billion bucks and then being Roche ran the company into the ground.
Looking over the digital diabetes space and the many players in the space history may just repeat itself. Given that Walgreens is already aligned with OnDuo it possible that CVS could strengthen their digital diabetes portfolio by acquiring Livongo.
Yes we know we are getting way ahead of things as Livongo has yet to go public. However as Momma Kliff used to say ignoring the future and concentrating solely on the present is foolish as the future tends to come quickly.
About all we know for sure is this is going to be one wild ride. So sit back, fasten your seat belts and hold on tight.