What’s the plan?

What’s the plan?

As we count down to the beginning of the annual ADA conference it needs to be asked what’s the plan for Abbott and the future of the Libre. While the company contends that the Libre 2.0 will receive an iCGM designation as of this writing there has been nothing official from the FDA. No matter what happens with the Libre 2.0 and the FDA our question becomes why is Abbott content to basically go it alone with just one insulin delivery partner. Bigfoot their lone partner has stated they won’t even have a system on the market until 2020 at the earliest.

Meanwhile Dexcom has partnered with multiple players most of whom either have systems on the market or will soon have a system on the market. Some of their partners i.e. Novo Nordisk has publicly stated their version of Tyler will be open to all CGM’s but Abbott has been relatively silent about whether they plan on becoming more open with the Libre platform. Therefore it does make sense to ask what’s the longer-term plan for Libre.

A question which should be answered when taking into consideration that the G7 from Dexcom will soon be here a product many, including Diabetic Investor, believe will adversely impact the Libre platform. Lacking multiple insulin delivery partners Abbott seems content to go it alone which makes us wonder what the long-term strategy really is. As we have stated on multiple occasions Libre has exceeded everyone’s expectations and Abbott has bet the farm on being a value oriented CGM option. However once the G7 arrives Abbott will no longer be able to stake claim as the lone value option.

As much as we believe CGM will become the standard for glucose measurement that day is not yet here and for the near to mid-term CGM usage and insulin using patients go together like bread and butter. This is one reason we see Dexcom having a major advantage given their multiple insulin delivery partners. There is no question longer term BGM will go away but until that time CGM usage will be the domain primarily for insulin using patients.

Not to get off track here but the growing usage of GLP-1’s, the coming of Novo’s oral GLP-1 and systems such as the Intarcia micropump will also adversely impact CGM growth for non-insulin patients. This will further restrict CGM usage and non-insulin using patients to those on orals alone, a large market but a difficult nut to crack when it comes to CGM.

We further anticipate the many Dexcom wannabes will hurt Abbott more than Dexcom. Listen you don’t hear any of these companies stating they want to be as good as Libre, yet nearly everyone wants to be as cheap or cheaper than Libre. Dexcom has become the standard for performance and features, Libre the standard for price point. Not to be redundant but with its performance edge Dexcom stands a better chance of with insulin using patients.

Near as we can tell Abbott is not oblivious to all of this. Hence the reason they are committing major resources to expanding Libre production, which in turn should lower cost of goods helping expand the installed patient base before any of these cheaper versions arrive. While we don’t see Abbott officially surrendering the high ground, they are doing everything in their power to keep the CGM market a two-horse race. As we have noted many times when it comes to CGM both Dexcom and Abbott can peacefully and profitably coexist. The CGM market is not a winner take all market.

That being said we aren’t sure however there is room for multiple CGM players no matter how good or cheap they are. As we predicted the CGM market is developing much like the insulin pump market which is now narrowed to three basic choices. Just as the insulin pump graveyard is filled with Medtronic wannabes so to do, we anticipate the CGM graveyard will be filled with Dexcom wannabes. Yes, it’s true the CGM market is much larger than the insulin pump market however given the capital requirements to compete effectively the competitive dynamic is much the same as the insulin pump market.

This is one reason we pay so much attention not to whether these wannabe systems work. It’s one thing to get the damn thing through the FDA and onto the market. It’s a quite a different story to run a commercially successful CGM company. The simple fact is Dexcom and Abbott besides gobbling up patients by the boatload have more resources and access points then the wannabes. In this respect the CGM market likely will mimic the BGM market with Dexcom and Abbott effectively controlling 70 to 80% share and everyone else fighting over the remaining 20%.

Getting back to Abbott, it’s not like the company is without options the question really becomes which path they choose and for how long. Here are we see as the most likely options;

1. Stay the course, continue to build the installed base and play to their strengths in international markets.

2. Seek additional insulin delivery partners either with direct partnerships or opening the Libre platform allowing it to work with multiple versions of Tyler and additional insulin pumps.

3. Set up the platform for sale. Keep in mind that we don’t see this as short-term option but with all the cash rich high techies playing in this sandbox this option cannot be ignored. Our belief is none of the techies would make this move without also acquiring other insulin delivery assets. Besides expanding their own platforms this fits perfectly into the future as reimbursement moves towards a monthly subscription model.

About all we know for sure is that for the foreseeable future CGM is the domain of Abbott, Dexcom and to some extent Senseonics. We don’t talk about Senseonics much but there is a place for an implantable system limited as it may be.

See everyone in San Francisco.