Too Many Cook’s

Too Many Cook’s

On Monday Apple CEO Tim Cook will deliver the opening remarks for the Apple Developers Conference in San Jose, CA. This is the same Tim Cook who has been wearing his company’s latest toy, a non-invasive continuous glucose monitor. Since that news became public the diabetes world has been speculating as to just what does Apple have in mind for this wacky world of ours. Some believe that Apple won’t look for FDA approval of their way cool whiz bang toy; that the device will merely be used to show glucose trend data. Others believe the exact opposite and Apple will go full bore into the diabetes orchard.

As per usual we have a different view of Apple’s entry into the diabetes sandbox. Yes, we do believe that the company would like nothing better than to sell millions of their new toy. But this is not where the company plans on making money. No Apple will join a growing list of companies who see hardware as just a means to end. That as way cool and whiz bang this toy may be, it’s just part of overall diabetes management system. That the real money will come from driving better patient outcomes.

Here as well we have a different view point as we see Apple going the same route as their Mountain View neighbors, Google who have also jumped into the diabetes pool. Both Apple and Google will obviously target insulin using patients but their true target market is less intensively managed patients and their goal ultimately is to improve therapy adherence or compliance or whatever the latest politically correct term is for getting patients to take their damn meds.

Now we do see Google having the early advantage as they are already partnered with Dexcom (NASDAQ: DXCM) who just so happens has the best CGM system on the planet. They do however have a major handicap as they also partnered with the Keystone Cops of diabetes our merlot chugging friends at Sanofi (NYSE: SNY). Still the Google/Dexcom slap it on turn it on disposable Band-Aid sensor has several advantages over the Apple toy. Still it would foolish to count out Apple even though Google/Dexcom are ahead.

Considering Apple has more money than just about anyone the speculation that they may well buy the Libre from Abbott (NYSE: ABT) should not be dismissed. The Libre has exceeded expectations and while not yet approved here in the US it’s clear the system does work. As we have noted there are some issues with Libre but none that cannot be overcome with money and as we keep saying that is something Apple has in abundance. The real question is will Miles White Abbott’s CEO part with Libre.

An overlooked item with Apple’s dive into the diabetes pool is the impact it will have on companies like Livongo or One Drop. The Achilles heel of all these conventional meter companies who want to become diabetes management companies is their core technology, the technology their systems are based on are quickly becoming outdated. That CGM provides better data and soon will become not just very patient friendly but also very cheap. The question for these companies whose only long-term chance is to get acquired is will they be valued on their systems that analyze patient data and not the hardware that gathers the data.

Should this be the case they are in serious trouble as this something that can easily replicated by Apple. Listen we don’t want to minimize what Livongo or One Drop are doing but let’s be honest it’s not brain surgery and so far, they have not cracked the toughest nut in diabetes; how to engage non-intensively managed patients. Again, we don’t want to minimize what they have done but improving outcomes and saving money isn’t that hard with insulin using patients, as we have stated all along insulin using patients are the low hanging fruit on the diabetes tree.

The real money, the big bucks, the money Google and Apple are both going after comes from engaging non-intensively managed patients. As the old saying goes this why people rob banks as that’s where the money is. Well the biggest bank of all in diabetes are non-intensively managed patients.

Heck for grins and giggles Apple could buy LifeScan from Johnson and Johnson (NYSE: JNJ) and use their installed user base as a launching pad for their new toy. Google could also go this route. The fact is the real value perhaps the only value LifeScan has is it huge installed user base. A user base which in the hands of either Apple or Google becomes fertile ground for selling tons of stuff not just way cool whiz bang diabetes toys.

Think for a moment what Apple could do if they combined their way cool whiz bang toy with apps they already have.  Imagine a patient and CDE interacting through FaceTime and the CDE having access to the patient’s glucose data, data which has already been analyzed. Given their scale and remember scale is everything here, Apple could charge a small monthly fee for this type of service. They would not necessarily have to dive into the messy world of reimbursement. Of course, Google could do the same thing.

Given that Roche would also love to rid themselves of their diabetes unit and KKR/Panasonic would dump Bayer or whatever they are called these days if the right offer came along Apple or Google could achieve massive scale in a hurry. Patients who can be converted to their diabetes toy which just so happens is connected to their diabetes management system – CHA CHING.

We’ve said it before and we’ll say it again this isn’t about all the way cool whiz bang toys – this is all about diabetes management systems.  As Momma Kliff liked to say; “Don’t focus on the toy, instead focus on whether the toy is being played with and how it is played with.”