How Dexcom And Abbott Are Moving Beyond Diabetes

Over 37 million people in the U.S. have diabetes. That's a little over 11% of the entire population. One out of every 16 people globally has diabetes. It's a big market. The most important thing you can do to manage diabetes is regular blood sugar monitoring. This has been traditionally done with glucometers by pricking your finger over and over several times a day. But over the last decade,

over year in the US. We still have a strip meter business and we still obviously have now the the Freestyle Libre portfolio of products. So about 4.5 million people every day using one of those products to help monitor their diabetes in 60 countries. Dexcom, which unlike Abbott exclusively makes cgms, saw full revenue growth of 19% from $2.4 billion in 2021 to 2.9 billion in 2022. We

have 1.7 million users around the world. We've certainly more than doubled our user base since we met in 2019. All cgm's are prescription only and insurance coverage, even for people living with diabetes, has been slow to expand. But numerous studies have shown the health benefits of diabetics using one. Medicare recently expanded coverage for type two diabetics who manage their diabetes with insulin. The benefits of this

technology are also being marketed by several health and wellness apps like Levels, as many companies see benefits to those who don't have diabetes. Dexcom recently changed its mission statement from empowering people to take control of diabetes to health. We'll never lose our focus on people with diabetes, on people with intensive insulin therapy. That's who's made our company. That's our customer base. But as we look at

this technology and the benefits it has for others, it's a big deal. Abbott said it's fully focused on diabetics with its LIBRE sensor. But the company announced a new product called Lingo, a bio wearable that will track more than just glucose for a better look at a user's metabolic health. We've always thought of Libra as a platform, you know, obviously concentrated in diabetes at the moment,

but there's certainly opportunities out there to measure other analytes, whether that's in diabetes or in other medical needs. Meanwhile, Apple, who's been making a huge push into the health care space, has been working on a noninvasive CGM for years. Domestically, we spend $50 billion on diabetes related medications. So on a relative basis, the 4 billion for CGM, still a relatively small piece of the market. But

then again, zooming back out to the half a billion people with diabetes, really, really long runway to go and well over $100 billion potential. CNBC spoke with both Abbott and Dexcom about the technology inside CGMs and how they see it expanding. Diabetes is a disease that results in high levels of glucose or sugar in the blood. Elevated blood sugars over time can cause serious damage to

the heart, blood vessels, eyes, kidneys and nerves, among many other complications. Out of the 37 million diabetics in the U.S., 1.9 million are type one or type two. Diabetics lose the ability to make insulin and need to inject it for the rest of their life. Type two can largely manage blood sugar with medication, diet and exercise, although some do need to take insulin. CGMs work by

inserting a small sensor under the skin, which then measures the amount of glucose within interstitial fluid. The value is then transmitted over Bluetooth to a phone receiver or insulin pump. I've had type one diabetes for over 25 years and getting a CGM over the last decade has been one of the greatest improvements to my blood sugar. Devices like CGMs allow diabetics to see their blood sugar

24/7. It can help users keep their glucose in a normal range and warn them ahead of time. If you're heading to a dangerous level. The amount of data gained by wearing a CGM has created a new way to manage diabetes. It allows users and their doctors to see how often their blood sugar is in range, or between 70 to 180mg per deciliter. It can predict when

you're about to go too low or too high, so you can try to prevent it and stay within range. Research has suggested staying at least 70% in range will help prevent complications down the road. So from a market share perspective, we think that there's 7 million, maybe a little over 7 million patients or users of CGM globally today. On a global basis, Abbott is maybe two

thirds of that and Dexcom's probably just about under a third. So Medtronic certainly has a CGM and has been a big diabetes device manufacturer in the past. And then there's a smaller company called Senseonics and then a handful of others that are trying to create their own devices. Dexcom's G7 and the Abbott Freestyle Libre three are the two newest sensors on the market, and both have

evolved over the last several years. To develop G7. It's based on decades of R&D around glucose sensing. So G7 is a really significant technology leap from G6 as. Access expands and more people get are able to get hold of a CGM. It's proven to be very important in helping them manage their diabetes more effectively than they can do with with conventional strips and meters. Since there

aren't many choices on the market. Users must choose the sensor based on its accuracy, size, price and other features. It is a competitive space and that's good, I think, for people with diabetes. We focus on on a number of key areas here. I think the ease of use and the affordability and accessibility will always be a design feature that we continue to look at. Cost is

a huge consideration for users. As a type one, I wear mine 24 over seven 365 days a year, so the cost adds up because the sensor must be replaced after a certain amount of days. The Freestyle Libre three sensor can be worn for 14 days versus ten days for the Dexcom G7. The cost does depend on insurance coverage. Abbott says users with insurance can expect to

pay $30 to $35 per month for two sensors, while Dexcom ranges from 0 to $40 per sensor with insurance. Despite there being 450 million diabetics around the world, only 7 million are using Cgms, which leaves a lot of room for both companies to gain market share. These devices are also becoming popular among Non-diabetics looking to monitor all aspects of their health. Where do you see the

most growth coming from? Most of our new users right now. The fastest growing segment is in fact type two patients and intensive insulin users. Still, we always grow very strongly amongst pediatric patients as they start therapies and get on maintenance and delivery systems. And then over time, we do believe the technology is applicable across all the type two diabetes, and that is not slowing down from

a growth perspective either. You've been expanding your partnerships. Know, you just partnered with Garmin last year. Talk to me about who else you're partnering with and how that strategy is helping you to get maybe out beyond the diabetic, you know, user base. We have a retrospective API where people can get data after the fact. Data can be analyzed and crunched. We've partnered with numerous entities on

that front. We have a live API where you can simultaneously look at your Dexcom app, but there's live data in another app right there and we partnered with several companies on that front. I think over time you can see us putting this data in a number of different formats, merged with activity data or cardiovascular data or food libraries and things of that nature. And we'll look

at our own apps and design features into them that would be meaningful like that going forward as well. Diabetics benefit greatly from using Cgms, but with the rise in interest in metabolic health, these devices are seeing use in other areas of health care. During the pandemic, you know, there was some allowance to use cgms in hospitals where they at this moment are not formally approved for

use. So it's something we're certainly looking at the innovation landscape. We look across the whole gamut of that, including those areas we're working with the leading pump manufacturers to to bring the products now to closed loop systems. We have partnerships with smart pen players as well. So so Bigfoot Biomedical and also Novo Nordisk, where we're linking our sensor data to their their smart pen insulin information.

And obviously a key one for for the type two diabetes is an ongoing partnership now with Weight Watchers WW where we bring in their expertise in in terms of material science and weight management and linking that to the benefits of glucose monitoring as well. The company's CEO has said he thinks Libre could be a $10 billion product in the next five years as the company uses

the technology to expand outside of diabetes. There's certainly been some interest out there for people outside of diabetes in terms of metabolic health monitoring. Obviously, that's not what we look at or get products developed for within the diabetes care part of Abbott. We do have the lingo business that's been set up to take a look at that. That's obviously an emerging space. But within diabetes care

itself, we're singularly focused on on diabetes. Abbott announced it's developing a dual sensor to measure glucose as well as ketones that will be the same size as the LIBRE. Three Elevated ketones are a sign of diabetic ketoacidosis or DKA, a life threatening complication that develops when your body doesn't have enough insulin. We're trying to develop and design these products here to be affordable and accessible for

everybody so they can meet the needs of somebody with type one diabetes on a pump or somebody who's recently diagnosed with type two diabetes. So the important thing for us is to be always thinking about that user. If I look at what can this market grow at, we've argued that it can grow over 20% for several years, but from a stock perspective, you've got to kind

of different entities to beings, right? So why would I own an Abbott? It's a conglomerate, probably arguably the fastest kind of true large to Mega-cap medtech conglomerate. And it's growing very, very quickly. And they've created a number of great franchises, the diabetes franchise being one of them at Dexcom. On the other hand, this is a pure play not only on diabetes, but specifically within CGM, which

arguably has had one of the fastest growth profiles in the past. How do you, as a company that is solely focused on your one product compete with a company the size of Abbott? People often ask me what keeps me awake at night and it's infrastructure. How do you marshal the resources to go do things, particularly as you look at the international world in different geographies and

stuff? You know, people ask me, how much do you sell in X country? And I go, well, we don't have anybody there. We'll have a distributor there that will represent us, but they're probably not certainly not as big as a Medtronic or an Abbott or JNJ or one of the drug companies were in the space. So we have to build the infrastructure and we build it

very selectively and very thoughtfully. Patients can use a CGM as a standalone device or connect it to an insulin pump. While Abbott and Dexcom dominate the market share, Medtronic, another medtech conglomerate who once dominated the diabetes space, offers a CGM as well. William Blair estimates that they have 150,000 CGM users in the US, compared to 1.5 million at both Dexcom and Abbott. Medtronic has been around

for decades. They have one of the first cgms on the market. They had probably the first kind of early stage data combining a CGM with a pump, and yet somehow they've been both a sure loser from a pump perspective, and then they haven't been able to capitalize on the gains that we've seen within CGM. And part of that has to do with accuracy and unfortunately they've

lagged behind that now they've put a lot of money into their diabetes franchise. So as we look at the next several generations of sensors that Medtronic has spoken to, they look pretty compelling. They should close a lot of those gaps against something that we've seen with Dexcom and Abbott. Apple has been working on a noninvasive style glucose monitor, too, although the product has not been announced

yet. If somebody were to make a noninvasive glucose sensor that was as accurate as in a watch, it would be a miracle. So let's be clear. That would be a great outcome for the world. It also be a catastrophic event, if you will, for us. So we look at all these technologies. We are not stupid enough to put our heads in the sand and say, no

one's ever going to solve this problem. We look at numerous ones from radiofrequency to lights to whatever, but we've not found anything that performs the way that we do. It's something we monitor. Absolutely. And it's been it's been a holy grail of diabetes monitoring now for many decades. You know, we do think that in the end, these systems need to be accurate and reliable and affordable.

So whereas we're always interested in seeing what emerges in these in these these spaces, you know, we still think there's a know there's a long future here for, for Freestyle Libre portfolio. We haven't seen enough accuracy on those systems because you're dosing yourself with insulin, which is both a life sustaining drug, but also a risky drug if you take too much of. You need that accuracy

to be able to be very high. So when I think about diabetes and Apple's role in diabetes, not that they won't have a place for type one diabetics or type two diabetics, but I think one of the big advantages of Apple in the space is growing awareness and getting people like my dad to know that he has diabetes earlier get treated better, get managed better, and

then ultimately reduce the risk of death. So that way it doesn't have to be competitive. It actually could be additive to the market as a whole. Continuous glucose monitors have seen incredible enhancements over the last few years, but there's still lots of room for improvement. Getting access to all those patients who currently don't have access is. With 4.5 million people using it every day, that's still

really scratching the surface of what the burden of diabetes is across the globe. So I think for us at Abbott, the ability to make these products appeal and be accessible and affordable to a much broader group of patients and to increase the number of people who can use it every day. We have 60 countries, for instance, at the moment, and there's always more we can do

there. Do you think there would be a time where there were more non diabetic users of the Dexcom than diabetic users? Not full time users, but maybe more users in a given year who use a few sensors? I do think, again, the majority of our products will still be manufactured for people with diabetes. You might have many, many people who use sensors for a period of

time while they're trying to lose weight or while they're trying to decide if they have prediabetes. I can see use cases like that across the board. I do think that the bigger picture market, even outside of metabolic health and the advantage is going to be what can you do with this glucose data? What if I pair that with something like an EKG device and so I

can tell what your glucose levels were when you went into AFib? What could that teach me or tell me? And so if I think about big tech and what's the race in the future, where is the puck going in health care? The puck is going towards more artificial intelligence and deep learning data mining and trying to understand real time, patient level data and how can you

end up driving that, either to diagnose the patient early, but also things that we don't understand today that maybe could lead to fewer diabetic related deaths, lower costs for the system? When I think about that, I think CGM is right in the heart of having that accuracy data on patients and being able to fit as one major piece of the puzzle.