Yet Another CGM Approval

Yet Another CGM Approval

OrSense Ltd. announced today that it received European CE Mark approval for its NBM-200G, a non-invasive continuous monitor of blood glucose for people with diabetes. OrSense becomes the fourth company to receive approval for a CGM, although the company did not disclose any plans on a possible submission of the device to the FDA.
Currently there are only two CGM devices approved in the US, the Guardian from Medtronic (NYSE:MDT) and Dexcom’s (NASDAQ:DXCM) STS, Abbott (NYSE:ABT) like OrSense has received European approval for the Navigator device but has yet to hear from the FDA.

While the CGM market becomes more crowded, and there others waiting in the wings, one has to question the business model for the CGM market. Unlike conventional blood glucose monitors which are widely reimbursed and have hefty profit margins, CGM devices are still waiting for wide spread reimbursement and margins are acceptable but nowhere near the margins on test strips. The market also faces a host of problems; two that stand out are what is the real market size and just how often patients will use the device.

There is no question that largest users of CGM technology will be insulin pump patients. Diabetic Investor estimates of the nearly 500,000 pump patients worldwide less than 5% will use CGM technology on a regular basis. We further estimate that on average CGM users will go through 2 sensors per month. With sensors costing $35 each, that puts the total market size for sensors at approximately $21 million. While there will be a very small percentage of multiple daily injection patients using CGM, their usage will be less than pumpers. Diabetic Investor does not see even a small percentage of non-insulin using patients using CGM.

The bottom line here is even if we’re underestimating the total size of the market by 100% the market is not large enough or growing fast enough to support all the current and many future players expected to enter the market. If that phrase sounds familiar it should as Diabetic Investor has been saying the same thing about the insulin pump market. And just like the insulin pump market look for Medtronic to grab the low hanging fruit and become number one in CGM while everyone else struggles for the number two spot. Dexcom currently occupies that spot yet lacks the resources to effectively compete with Medtronic, something that could change if their device communicated with any of the insulin pumps on the market an unlikely prospect in the near term. Even if Dexcom’s system worked with all the non-Medtronic insulin pumps the company would still have an uphill battle. Diabetic Investor remains firm in our belief that the company will eventually be acquired by either LifeScan, a unit of Johnson and Johnson (NYSE:JNJ) or Roche, who need a CGM system to go with their insulin pump franchises.

For anyone who believes that wide spread reimbursement will change the dynamics of this market, think again. Insulin pumps have been around for over 20 years, reimbursement is not a problem and clinical studies have proven that insulin pump therapy is extremely effective. Still new pump starts, not replacements or upgrades, are growing at less than 10% per year. The CGM market is still developing and it will likely take years before there is wide spread reimbursement and enough clinical data to prove that CGM usage helps patients effectively control their diabetes. CGM is an interesting technology that has potential but as we stand today that’s all it has.

David Kliff
Diabetic Investor
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