Welcome to the new world

Welcome to the new world

This morning insulin pump market leader Medtronic (NYSE: MDT) announced a collaboration with Qualcomm. According to a jointly issued press release;

“Medtronic plc (MDT) and Qualcomm Incorporated (QCOM) through its wholly-owned subsidiary, Qualcomm Life, Inc., today announced a global, multi-year collaboration to jointly develop future generation continuous glucose monitoring (CGM) systems that aim to improve health outcomes for people with diabetes.”

The release goes onto to state;

“The initial focus of the collaboration will be to develop a single-use CGM system designed for broader practice by general practitioners who manage care for the vast majority of the 400 million people worldwide with type 2 diabetes. This collaboration supports Medtronic`s strategy to develop comprehensive CGM solutions that not only measure glucose but enable the delivery of actionable insights to both patients and providers.”

It goes without saying that this collaboration by Medtronic is in direct response to Dexcom (NASDAQ: DXCM) deal with Google. This move also pushes Medtronic further into the Type 2 world and away from their core insulin delivery business.

What Medtronic/Qualcomm and Dexcom/Google see is a huge opportunity as they believe that CGM technology is not just for insulin using patients. Think of it this way by most estimates there are approximately 5 million insulin using patients in the United States. That means there are another 25 million or so who don’t use insulin. The reality is while CGM usage continues to grow with insulin using patients this is a finite market. Should either partnership capture even a small percentage of the non-insulin using market it would translate into huge sales volumes.

This collaboration is also another sign of just how important big data is becoming in diabetes management. As we noted yesterday big data will yield some interesting arranged marriages between diabetes device and Silicon Valley (although it should be noted that Qualcomm is in the beautiful city of San Diego).

Already facing tough times this moves is another nail in the conventional BGM coffin. One has to wonder how the folks at Abbott (NYSE: ABT), Roche and Johnson and Johnson (NYSE: JNJ) are feeling right now. Everywhere these companies turn they see nothing but problems and few solutions. Abbott may actually have the best chance at sticking around as of three they are the only company with a CGM on the market plus they own a boatload of CGM IP. Roche has stated they will soon launch a CGM of their own but given the lead Dexcom and Medtronic have in this market we doubt Roche will have much luck.

This sets up an interesting scenario for JNJ who already has a relationship with Dexcom through Animas their insulin pump unit. The success of the Animas Vibe is directly linked to the fact it works with the Dexcom sensor. JNJ also has a “dumb” patch pump coming to market and like everyone else they are moving more aggressively into interconnected diabetes management (IDM). We’ve said it before and we’ll say it again if JNJ is serious about diabetes they might have no other choice but to acquire Dexcom.

Speaking of possible deals here is another that just might take place. As everyone knows Medtronic desperately needs to upgrade the user interface for their insulin pump franchise. Now many, including Diabetic Investor, had speculated this would be the reason the company would acquire Tandem (NASDAQ: TNDM). Yet this might not be necessary as Qualcomm is also invested in Telcare. Think of what it would be like if a Medtronic sensor augmented pump worked with a Telcare device, a device which is basically a cell phone that does everything but make phone calls.

It’s just a matter of time before the FDA allows an insulin pump to be connected to a smartphone and a Medtronic/Telcare combination would be an inexpensive interim step. Plus, such a combination would allow Medtronic to design their own whiz bang iPhone like patient friendly user interface. An interface which could also be customized by the patient, something the Tandem t: slim does not allow. With its built in connectivity the Telcare device could serve as the hub of the patient’s diabetes management system.

The only thing that Telcare does not bring that Tandem does is insulin pump patients. Yet Medtronic just might end up with these patients anyway given the financial issues facing Tandem.

In just a few weeks the diabetes world will gather in hot and steamy New Orleans for the annual ADA conference. Although we do not expect a return to the glory days when these conferences were must attend all out crazy events. However, it will be interesting to see if this conference is transforming from being drug focused to data focused. As we noted yesterday big data is not just transforming the device world but also the drug world too.

The fact is Dexcom/Google are out front on this but with this collaboration Medtronic/Qualcomm shows they aren’t about to surrender this lucrative market opportunity.  Things are getting more interesting by the day, very interesting indeed.