The Problem

The Problem

We have long known there is a bias towards insulin using patients, that even within the diabetes community itself those with Type 1 diabetes and insulin using Type 2 patients almost look down upon patients who do not use insulin. It’s as if non-insulin using patients are not worthy, that they don’t have the same diabetes that an insulin using patient does. Yet, it is also true that non-insulin patients vastly outnumber those which use insulin a fact not lost on many of the companies who want to play in the diabetes sandbox.

It’s also true that non-insulin patients suffer the same costly complications as insulin using patients when they fail to manage their diabetes. Another fact not lost on the companies in the diabetes sandbox and the payors who insure these patients. We’ve said it before and we’ll say it again given the choice between capturing a large percentage of a small market or capturing a small percentage of a huge market, we’ll chose the latter over the former.

Based on everything we’ve been reading about Apple’s not so secret dive into the diabetes pool it seems that Apple too sees the potential of capturing a small percentage of a huge market. Dexcom (NASDAQ: DXCM) and Google also see this potential with their slap it on turn it ion forget about it Band-Aid sensor. Although we see the Dexcom/Google effort as superior to the way cool whiz bang toy being developed by Apple, the fact that these two tech titans are going head to head sets up an interesting competitive dynamic.

However, this superiority is not limited to the fact that Dexcom is the leader when it comes to continuous glucose monitoring. Nor is it limited to the fact that Dexcom can manufacture highly accurate sensors on a large scale. While it helps that Dexcom is adapt at dealing with the FDA, understands how to navigate the complex payor environment and has an outstanding reputation with patients and physicians, these facts are not why we see them as superior.

Dexcom’s biggest advantage over Apple is they understand the wacky world of diabetes. Simply put they get it and based on what we have learned about the Apple effort they don’t. Reviewing interviews given by Apple CEO Tim Cook the impression is he does not want the Apple Watch to be a regulated device, that he does not want the device to go through the rigorous, lengthy and expensive FDA approval process. Now we can’t blame Tim for that and shows he’s smarter than the average bear.

However, it does make one ponder what the Apple way cool whiz bang toy will do. It also makes one wonder whether a patient, physician or CDE will trust any device not approved by the FDA. Apple will overcome some of this reluctance because they are Apple and as we have noted this company has almost a fanatical following. Still given that the Dexcom/Google Band Aid sensor will be approved by the FDA one would think this fact alone will give them huge marketing advantage.

Should Apple go the FDA route and develop say a wearable glucose monitor, Dexcom/Google still has the edge as the FDA approval process will slow down Apple. Based on everything we know and what’s in the public domain the Dexcom/Google Band Aid sensor will be here by late 2018 early 2019. Being fist to market is not just an edge in terms of grabbing market share but also locking up formulary position. Simply put Apple will be playing catch up assuming they can successfully navigate the FDA.

Even with everything we have noted so far Dexcom/Google has one very clear yet not so obvious advantage, well it’s obvious to us as we are not fascinated with the toy like everyone else. We on the other hand are focused on the patient as is Dexcom/Google. Unlike almost everyone else in this wacky world Dexcom gets it, they understand it’s not about the toy but how that toy is played with. They further realize that an insulin using patients have much different needs than a non-insulin using patient. Dexcom does not just have great technical people they have equally great people who understand diabetes management.

Sure, with their gobs of money Apple can buy technical expertise but the question is will they spend some of this money on what really matters; patient expertise. If they do will they make the same mistake made by everyone else and listen to insulin using patients. We have always found it funny that so many companies listen to insulin using patients when it comes to trying to understand non-insulin using patients. This is like asking a starting pitcher what it’s like to come into the game in the ninth inning with the bases loaded, no outs and the score tied.

Insulin and non-insulin patients have the same disease but they live two dramatically different lives. We have stated that non-insulin using patients want to live their lives with diabetes and not for diabetes. Whereas insulin using patients really don’t have a choice we must live our lives for diabetes or risk not having a life at all. Insulin therapy by its nature demands that a patient become more engaged with diabetes management. This is not the case with non-insulin using patients, yes it would be nice if they were engaged with their diabetes management but most aren’t.

Dexcom understands this and it’s an open question whether Apple does. Our instincts combined with experience tell us that Apple doesn’t and some of this is not their fault either. We’re sure Apple has reached out to diabetes experts, thought leaders and perhaps even patients. The key issue are they being told the truth and second if they are being told the truth are they listening. Since we have done our fair share of consulting we can say with conviction that companies don’t want to hear the truth. That far too often they are protecting their turf rather than taking care of the patient.

This is another reason we give Dexcom an edge as the very talented management team cut their teeth in diabetes at MiniMed. A company which prior to being acquired by Medtronic (NYSE: MDT) lived by one simple principle; the patient comes first. Back in the day MiniMed was not just known for building good toys but also having the best customer service. Simply put MiniMed understood the needs of all the various constituencies, the patient, the physician, the CDE, the FDA and the payor.

We’ve said it before and we’ll say it again, building the toy isn’t the hard part, the hard part is running a successful diabetes company and that requires talent. Something which is in short supply these days. Need we remind everyone of all the companies in this space who are failing or struggling mightily. Many of whom have gobs of money and great products but due to poor management decisions or what we would call a lack of talent they are failing.

It goes without saying that Apple has the bucks but this isn’t just about the bucks. Just as it isn’t about the way cool whiz bang toy. This is and always will be about the patient and there are far too few companies who get this.