Dexcom crashes as Abbott FreeStyles its way to the US

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FDA approval for Abbott’s FreeStyle Libre Flash blood glucose monitor is a huge technological advance for diabetic patients as it does not require finger sticks – except, of course, when it does. Still, the device ought to cut the frequency with which US patients must pierce their skin, and as such it will be welcomed: Abbott’s shares climbed 4% on the approval.

The loser in this situation is Dexcom, whose G5 glucose sensor formerly had the best finger stick profile – just two per day. FreeStyle Libre users can theoretically go a whole day away without doing any, and should Abbott opt for an aggressive pricing strategy it could cut Dexcom’s share markedly. The news has wiped out 35% of Dexcom’s market value so far today.

Abbott’s new device consists of a disposable sensor applied to the back of the patient’s upper arm and a handheld device that displays the readings after it is waved over the sensor. The sensor has a small needle that stays under the patient’s skin, allowing measurement of sugar levels in the interstitial fluid as a surrogate for blood glucose.

The FreeStyle Libre does not eliminate finger pricks entirely. Users must double-check their blood sugar the old-fashioned way when they have symptoms that might be due to high or low blood glucose; when their symptoms do not match system readings; when they suspect that readings could be inaccurate; or simply when the device tells them to.

How often this necessitates finger sticks in real-life use is hard to say, though Abbott said that in clinical trials it worked out at one finger stick every other day on average, so it is likely less frequent than the twice-daily finger sticks required for calibration by the Dexcom device.

Price war

FreeStyle Libre Flash gained European approval in 2014. In a classic razor/razorblade model, if paid for out of pocket the reader costs around €60 ($71), and each disposable sensor goes for the same price. The product has full or partial reimbursement across 13 countries in Europe including Germany and France, and UK NHS reimbursement is expected to kick in this November.

This is a lot cheaper than Dexcom’s system. This comprises a transmitter and a receiver as well as the disposable sensors; a pack containing a transmitter, receiver and two sensors costs around £578 ($775) in the UK. The most recent FDA approval for the G5 states that the sensors last just one week.

According to Stifel analysts more than 400,000 patients use the FreeStyle Libre in Europe, and the device now brings Abbott around $480m per year. This represents around 37% of Abbott’s worldwide diabetes care sales, which make up around 5% of the company’s overall revenues.

Abbott said that pricing would be similar in the US – but a slightly different label means that US patients will likely end up paying more. The FDA’s label calls for the sensor to be worn for up to 10 days at a time, whereas the European labelling permits 14 days’ wear. Doubtless Abbott will now work hard to obtain coverage from Medicare and private insurers, and can probably be confident of eventually getting it.

The initial US launch will be via five US pharmacies – Kroger, Wal-Mart, CVS, Walgreens and Rite-Aid – Stifel analysts say. They expect Abbott to work towards an expanded label that would allow it to be used by paediatric patients, a sizeable market as type 1 diabetes tends to strike at a young age, and to permit the sensor to be worn for 14 days.

Dexcom is working to bring an updated technology, the G6, to market.

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