Health Care

Ahead of the Curve ™

Cowen 2017 Diabetes Device Survey – Fourth Annual

Jun 8 2017

Report by Doug Schenkel, Ryan Blicker, Joshua Jennings, M.D., Chris Lin, CFA & Adam Wieschhaus, Ph.D.

 

We surveyed 101 CDEs and Endocrinologists. Our survey suggests that annual US CGM market growth is likely to exceed 30% through 2020; ABT is set to gain share, though DXCM remains the CGM leader and share loss is baked into estimates with an upward bias (CMS, G6). MSD-HSD pump growth is expected through 2020; MDT’s 670G and future CGM-automated pumps should drive solid annual growth.


Annual CGM Volume Growth To Exceed 30% – Medicare A Huge Catalyst
Type 1 market penetration is likely to grow from ~17-18% at YE16 to ~30% at YE18 and ~45-50% in 2020; the “CGM First” message continues to gain traction. CMS reimbursement is a significant market catalyst, and we expect rapid uptake amongst Type 1 users (from <5% at YE2016 to 20% at YE18); our respondents were also very positive on the outlook for CMS intensively managed Type 2 uptake. Both intensively managed and broader Type 2 use could drive significant upside to our estimates.

We Expect DXCM To Remain Market Leader, Grow >30% In 2018
DXCM is well positioned to generate >30% Y/Y revenue growth in 2018 via (1) rapid CMS uptake (only reimbursed CGM), (2) international reimbursement expansion (Germany, others), and (3) the launch of G6. Our above-consensus revenue estimates assume DXCM loses ~5% share of the total US market by YE18 and ~10% by YE21. Given what should be dominant CMS market share, this implies even greater share loss outside of CMS, which could prove conservative. Share loss appears baked into consensus revenue estimates; we believe the bias is to the upside.

ABT Libre Viewed Favorably; We Expect Success, Though Questions Remain
ABT’s Libre (FGM) continues to be viewed favorably by our survey respondents, albeit slightly less favorable than our 2016 survey. We can see ABT capturing as much as 20% of the US CGM/FGM market over the next 3-5 years, although uncertainty lingers on the commercial strategy, product label and reimbursement. Our respondents viewed Libre as best suited for the intensively managed Type 2s, and it’s possible Libre helps catalyze broader Type 2 use, good for ABT and all market players.

MDT 670G Should Boost CGM Share Amongst Pumpers Near To Medium Term
670G should help protect and potentially increase MDT’s CGM share among pumpers over the near to medium term; we still expect modest share loss over the next 3-5 years (poor MDI positioning; no visibility on dosing claim/CMS reimbursement). Even incorporating ~12% CGM market share loss over the next 5 years, our market model still implies that Medtronic’s US CGM installed base increases at a 25% CAGR.

Pump Volumes To Grow MSD-HSD; Bigger Barriers Than CGM-Automation
Pump penetration is expected to grow modestly over next few years; this should support MSD-HSD volume growth through 2020. Cost and support remain more important barriers to broader adoption than CGM-automation among our survey respondents; CGM automation is an important market driver, but we are still far from “plug and play” systems. Sentiment for use amongst intensively managed Type 2s remains encouraging; could drive overall growth to HSD.

MDT 670G Should Increase Pump Share Over Next 1-2 Years

MDT is positioned to gain pump market share in 2017 and 2018 with the launch of 670G; it also helps that the near term competitive environment has improved with two key competitors facing unique circumstances (TNDM, JNJ). We remain cautious longer term as other competitors come to market with CGM-automated solutions using DXCM CGM beginning in 2018/2019. That said, even assuming share loss MDT should continue to grow its pump revenues MSD+ in the US, with international growing faster.

Mixed Results For Other Pumps – PODD, JNJ, TNDM, VLRX

TNDM once again fared well in our survey, but financial uncertainties are an overhang. That is better than JNJ, which fared poorly and also has business uncertainty. Enthusiasm for PODD was once again below our expectations, although historically there seems to have been some negative survey bias against OmniPod in our survey; pediatric results were a bit better. We continue to view PODD as the best non-MDT positioned pump player. We also note that our survey suggests an eventual CMS coverage decision for PODD could be a material growth catalyst. VLRX fared well, albeit not as good as last year; however, it is important to note that interest in pump use for Type 2 patients remains encouraging.

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