What’s the benefit?

What’s the benefit?

It may seem just a little crazy but perhaps the best question to ask about every new whiz bang way cool device or app is; “What’s the benefit?”  This is a more important question than “Can this device/app actually make money? Or “Does this device/app actually work?” Or “Why is the device/app different than all the other device/apps that seem to do exactly the same thing the same way.”

We mention this as this thought crossed our mind while reading the S-1 for Senseonics. Now for those who aren’t familiar with Senseonics they are one of many companies working on an implantable continuous glucose monitor. Like so many of these companies after they have blown threw their venture money they move on and become a publicly traded company. According to Crunchbase.com the company has raised over $30 million to date.

The real question here is not whether their product works, based on all available public information it seems to work just fine. Nor is there any question about the benefits of continuous glucose monitoring. While some may question whether the CGM market is large enough or growing fast enough to support yet another player in the market, there is always room for a product that is better and cheaper. Given that the product is still in the development stage we have no idea whether the company can manufacturer it in greater quantities or put another way can they actually run the company should the product make to market.

Like so many of these companies Senseonics has an experienced and talented management team, a solid Board of Directors and the obligatory Scientific Advisory Board. But as we state with regularity anyone can build an implantable sensor it takes real talent to run a continuous glucose monitoring company and as talented as this team seems to be we have no idea if they have the talent to run a profitable CGM company.  Building something is one thing, running a company is another.

Yet even with all these questions the overriding question is “What’s the benefit?” What happens if the product makes it all the way through the regulatory process, receives FDA approval and is ready for commercialization. Let’s take it one step further as more than likely the company will need a partner to help sell and support the product, let’s assume they find one and by some miracle it’s a good partner, which obviously rules out Sanofi (NYSE: SNY).

Ok their all set to go and now they must compete with Dexcom (NASDAQ: DXCM), Medtronic (NYSE: MDT), perhaps Abbott (NYSE: ABT) and lord knows who else will on the market by then. What’s the benefit? The quick answer is the sensor is implantable, that a patient does not wear the sensor on the outside of their body, that the patient does not have to worry about changing their sensor every week, 10 days, etc.

Well just as an FYI Senseonics isn’t the only company with an implantable sensor and may not even be the first to receive regulatory approval. Second while the sensor may be implanted the patient still must wear a device which receives the readings and then transmits the readings to a smartphone/receiver. And while it is true the patient doesn’t have to change the sensor every week or so, what happens when the sensor fails and this being a medical device they do fail. The biggest issue with any implantable is when something goes wrong what goes in must come out.

So we ask again What’s the benefit?

The fact is the Senseonics product and others being developed ae just a new twist on an old idea. Looked at realistically and honestly there is no compelling benefit over what they have and what’s on the market right this very moment. The reality is as much as we would like an implantable sensor, this is not because what we have doesn’t work just fine rather it’s a lifestyle choice. This is the same reason we like the OmniPod from Insulet (NASDAQ: PODD) it’s not any better than a conventional pump but we do like the fact it is wireless.

Frankly Insulet is the perfect comparison here. Back in the day before the OmniPod was commercialized Insulet hosted a meeting outlining the upcoming launch. The company noted many differences between the OmniPod and the pumps that were on the market back then. Besides the obvious difference of being wireless, the company noted their pricing model was also unique. That is until someone did the math and noted that after approximately 36 months the OmniPod was no cheaper than a conventional pump. So the major difference was the fact that the OmniPod was wireless – this was the “benefit”.

Yet looking back this benefit was not really a benefit at all, it was a convenience no more tubes to worry about but the harsh reality was and is the OmniPod is an insulin pump which does the same thing as any other insulin pump. It’s not like the patient using the OmniPod experiences better outcomes than someone on a Medtronic pump.

The simple fact is that the Senseonics sensor being implantable is not really a benefit it’s a convenience, it’s not like it will deliver more accurate readings than a Dexcom sensor. It’s not like a patient would see better outcomes using it over the Dexcom system.

The reality is nearly every product which supposed benefit was merely convenience hasn’t done very well in the market. Besides the OmniPod, Exubera and now Afrezza have failed commercially because the supposed benefit they offered was really no benefit at all it was just a convenience. This is why the late Al Mann kept trying to convince everyone that Afrezza was a better short -acting insulin which just happened to be inhaled rather than injected. Al knew that the fact that Afrezza was inhaled rather than injected was not a real “benefit” yes it was nice but it would be a real “benefit” if patients using Afrezza experienced better outcomes.

Now given the interest in CGM and the fact that most investors are enamored with whiz bang way cool technology, and heck what’s cooler than an implantable sensor, we’re pretty sure Senseonics will have no trouble with their IPO. This as they as say is how the diabetes device world rolls. Now whether Senseonics becomes the next Dexcom or another Insulet, that’s a whole different story. It would help if they could answer one simple question- “What’s the benefit?”