The betting window is now open
With just 16 days until the circus arrives in San Francisco, also known as the ADA Scientific Sessions, we are trying to handicap the betting line favorites for who or what will garner all the attention. Something always seems to captivate everyone’s attention, some years it’s a study others it’s a way cool whiz bang toy. Just as the last episode of Game of Thrones has captivated social media, and not to digress but we enjoyed the last episode and had no problem with how it ended, something always grabs everyone’s attention.
However this year the story could well be who isn’t officially attending the circus. Given the proximity to Silicon Valley, home to Google and Apple, once again the companies who could forever change the diabetes paradigm aren’t officially attending. The same can be said for Amazon. Oh they will be there all right they just won’t have an “official” presence.
Not to digress again but we have always gotten a good chuckle over these companies’ obsession with secrecy. One just might get the impression that they are working on something truly revolutionary, something that would change the diabetes paradigm. As smart as these techies can be, they have yet to learn that there are only so many ways to skin a cat. That this isn’t, never has been, never will about the toys in the toy chest or the drugs in the medicine cabinet.
For years now we’ve been speculating about what these cash rich techies would do. They are making the deep dive into the diabetes pool but so far NONE of them have made much of a splash. Amazon is now in the toy business, but the toys aren’t going over all that well. Google has a partnership with Sanofi which gets lots of attention but again hasn’t done all that much. Apple has thrown some of their money around but like Amazon and Google has little to show for their efforts.
Now if these were ordinary companies who did not have billions in cash sitting around, we’d say they are in serious danger. But they are not ordinary companies and that’s what makes this intriguing. At some point all the cash rich techies will have a decision to make if they want to keep swimming in the pool. Do they continue on their present path to nowhere or do they spend some of that cash and acquire the assets they need? Do they wake up and realize that without clarity of purpose they will continue on a path to nowhere? Or will they get out of the pool entirely?
It’s this last point that is worthy of closer examination. From the beginning we have stated that besides having gobs of cash all the techies had a major advantage as they did not NEED to be in diabetes. They did not NEED their diabetes efforts to be successful from the beginning as they make plenty of money from their other business units. They could take their time and do it right. However things are changing in tech land.
Apple the maker of all things way cool and whiz bang is finding it increasingly difficult to sell more iPhones. Google’s core business seems fine yet the many bets they have made in other areas appear to be struggling somewhat. Amazon is also doing ok but can’t seem to decide in diabetes what they want to be when they grow up. Put simply a few years ago these companies could afford to stray from their core competencies without worry. That is not the case today. No they are not in real danger but in the tech world there is a history of throwing money at a problem, not getting the results expected only to abandon these efforts completely.
Patience may be a virtue but it’s also something in short supply in the Valley.
Our gut is telling us that none of these techies will jump ship just yet. The diabetes patient population continues to grow at epidemic rates. Sadly the majority of patients are not under good control. Plus there are plenty of companies who’d be thrilled to get acquired. Let’s face facts there’s a reason these techies wanted to be in diabetes in the first place and it wasn’t for grins and giggles. They saw and we believe continue to see diabetes as platform play.
Apple is a great example of how this could work. The company has already stated since they are having issues selling more iPhones, they need to transition their revenue model somewhat generating more reoccurring revenue from their huge installed user base. Apple could easily acquire all the pieces of a Tyler or make an aggressive move towards building an Austin. Heck with their cash they could do both.
Even better the revenue model for diabetes management is also changing to the Shave Club for Men model which fits perfectly into what Apple needs. While we are not there yet the days of paying upfront for the toys in the toy chest or the drugs in the medicine cabinet are beginning to disappear. Diabetes management is moving ever closer to the subscription payment model, with added incentives for producing better patient outcomes.
Apple, Google and Amazon all have the ability to sell the patient, and the payor, Austin. A diabetes management system which provides everything the patient needs for a low monthly cost. With their huge scale and deep pockets Austin and his brother Tyler are a perfect fit.
Just for grins and giggles let’s speculate a little as Apple for example could easily acquire Dexcom, Tandem and Companion Medical. Rather than charge a huge upfront cost for each toy they could allow the patient to choose their toy charging a monthly fee which of course would include coaching, so we might as well throw Livongo into the pot too.
There is an estimated 7 million insulin using patients in the America so let’s say Apple captures say 40% of these patients or 2.8 million. Let’s then say they charge these patients $25 per month or $300 per year, that’s a nice chunk of change $840 million to be more exact. And this does not include any incentive payments received for producing better outcomes.
Truth be told Google and Amazon could do the same thing. The point here is IF these companies were truly visionary, they would see we really don’t need more toys in the toy chest or more drugs in the medicine cabinet. That patient access to the toys and drugs is a bigger issue that would be solved by making these toys and drugs more affordable and therefore more accessible. This would forever change the paradigm, and these are the companies have the scale and capital to make it possible. The question is do they have the vision?