Old school vs New School
Before we get into the gist of our post today a few hopefully final thoughts on the Dexcom technical glitch which has created somewhat of a social media firestorm. First it was nice to see Dexcom acknowledge that they need to do a better job with the system. As has become their SOP the company isn’t running away from the issue but running towards it. This is just another reason we believe hands down Dexcom has the best management team in diabetes devices.
While we weren’t surprised by the social media reaction it does show just how deeply CGM has become the most valuable tool in diabetes. It’s not an understatement to say that CGM and its ability to communicate information to parents and caregivers has become as indispensable as a smartphone. It also makes one wonder what life was like before all this connectivity as given the uproar over this loss of connectivity many have forgotten it wasn’t that long ago this technology didn’t even exist.
It’s also good to see that shares of Dexcom have recovered from the initial sell off, as this event as unfortunate as it was will not impact sales. Quite frankly we believe what was seen as a negative will actually benefit the company. As Momma Kliff used to say and she’s been quoted by many there is no such thing as bad FREE publicity. Talk about increasing product awareness.
Moving onto another somewhat shocking development shares of Dario Health skyrocketed yesterday on news that Wal Mart was offering their system online. Now just in case anyone is unfamiliar with Dario it’s one of the many conventional glucose monitors that you guessed it communicates with a smartphone and offers you guessed it patient coaching. Also like just about everyone else Dario is offering a program that …. wait for it …. provides unlimited test strips to the user.
Dario now joins every other conventional meter company plus all the digital diabetes companies like Livongo and Onduo in offering patient coaching. Let’s face it folks you can’t swing that poor dead cat without hitting a company that offers some sort of patient coaching. We hate to overstate the obvious here but maybe this is the reason short interest continues to grow in Livongo. How many examples do we need to prove that what Livongo is doing is hardly unique? How many examples do we need to show that Livongo has lots of competition, which will only drive prices lower crimping margins and increasing the cost of acquiring patients?
As we noted yesterday it’s only a matter of time before someone perhaps Onduo will go 100% at risk offering their whiz bang way cool program for FREE and only getting paid for producing verifiable results. A model that will just kill Livongo as no matter how many employers offer their program FREE is a lot cheaper than any monthly per patient cost Livongo could come up with. The reality is a company like Onduo could force Livongo to play on their terms as they know Livongo does not have the financial resources to compete.
The fact is, yes, those pesky facts yet again, patient coaching is becoming just another commodity. Thanks to connectivity, when it works, and algorithms, when they have data, patients have a plethora of options for coaching. This is one reason we think Onduo may actually have an advantage over Livongo and the others as they are using CGM not SMBG to get patient data. Honestly, we are shocked, well not that shocked, that the analysts haven’t figured out that one of the biggest flaws with Livongo is that whole system collapses if the patient doesn’t test their glucose on a regular basis. These analysts seem to have forgotten that these patients weren’t testing in the first place and no amount of coaching is going to get them to test.
What Onduo has correctly figured out is that CGM not only provides better data but it’s also easier for the patient. Just slap the sucker on, wait two hours and boom readings are sent to the patient’s smartphone. When the G7 gets here it will be even easier as the wait time will likely decrease to an hour or less and the sensor likely will last longer than 10 days. Needless to say this slightly easier than a patient pricking their fingers multiple times per day.
To put this in terms everyone can understand Livongo is asking patients to go to the library to get information while Onduo is telling them to Google it.