Abbott announced Thursday that its continuous glucose monitoring system, requiring no routing fingerstick calibration for type 1 diabetes patients, will now be available to eligible Medicare patients.
The coverage from the Centers for Medicare and Medicaid Services for the Freestyle Libre comes sooner than expected, wrote Danielle Antalffy, an analyst with Leerink Partners who noted that rival Dexcom’s shares are trading lower today as a result.
“Investors had viewed Medicare as an area where Dexcom would not have to compete with Libre for at least some time. This also fuels the concern about pricing durability regarding commercial pay given that CMS is essentially viewing both products as equal,” she wrote in a research note published Thursday after Abbott’s announcement.
As of 11:30 a.m. Pacific time, Dexcom’s shares had dropped nearly 10 percent to $52.46.
Still Antalffy does not view this as all bad news for Dexcom.
We view the competitive landscape for Medicare as we view the broader landscape – to us, Abbott’s Libre is a market expander and its availability to these patients should not hinder Dexcom’s ability to add new patients in line with or more than our expectation for less than 5,000 new Medicare patients in 2018 once the current ~20,000 backlog is worked through. And our initial take on commercial pay pricing … is that while the pricing gap may close slightly, payers are willing to pay more for a CGM (continuous glucose monitor) with alerts and alarms and the ability to prevent expensive hypoglycemic events.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Abbott’s FreeStyle Libre CGM System
Continuous glucose monitoring has been widely considered as a major step forward in maintaining glycemic control in type 1 diabetes patients many of whom are children. They are also convenient and require only a few fingerstick pokes to properly calibrate. Libre takes it a step further by mostly eliminating the routine and painful fingersticks – they are now only warranted to make treatment decisions as opposed to daily management of the condition.
“CMS’s recognition of this revolutionary health technology, which removes the need for any user calibration, is ultimately going to empower Medicare beneficiaries with diabetes to live better, healthier lives,” said Jared Watkin, senior vice president, Diabetes Care, Abbott, in a news release.
While Abbott will find new takers of its Libre device, Antalffy still thinks Dexcom is valuable and maintained her outperform rating on the stock.
“… ultimately, we believe Dexcom shares warrant at least a modest premium to other small-cap MedTech stocks in our universe, given: (1) A massive and highly underpenetrated TAM (total addressable market) of ~$6B+; (2) consistent upside potential; and (3) a top-tier growth outlook longer term,” she concluded.
