Memorandum

One Drop obtains FDA clearance and CE Mark for Chrome BGM; unlimited strips launches for $39.95 per month or less in US, EU – December 6, 2016

Executive Highlights

  • One Drop has received FDA clearance and CE Mark approval for its Bluetooth-enabled Chrome BGM. Launch of its Premium service begins today in the US and EU, offering unlimited strips and in-app CDE support for a compelling $33.33-$39.95 per month without insurance (cash pay). The Chrome meter is $79.99-$99.99 and English only for now.
  • The Chrome meter and strips will be sold directly from the One Drop app and on Apple’s online store in the US (an impressive win). One Drop is bringing a more consumer friendly and design-focused experience to BGM, particularly with the ease of ordering strips.
  • CDEs Dr. Mark Heyman and Rachel Head will lead One Drop Experts, offering users a nine-week, in-app educational program and an on-call chat interface for support.
  • The free One Drop app on Apple iOS and Android has ~120,000 users in 195 countries, very strong adoption just 20 months following initial launch. The logging app has a strong 4/5 stars in each app store. More than half of One Drop users have type 2 diabetes.

Tomorrow morning (Tuesday), One Drop will announce FDA clearance and CE Mark approval of its Bluetooth-enabled Chrome BGM, reflecting a fairly quick four-month FDA review. Simultaneously, One Drop Premium will launch in the US and EU, offering users unlimited BGM strips and 24/7 in-app support from CDEs for an impressive $39.95/month without insurance ($33.33/month with a prepaid 12-month strips subscription). One Drop’s Chrome BGM will retail for $79.95 for those purchasing at least one month of strips ($99.95 otherwise).

$39.95 or less per month is compelling cash pay pricing for unlimited strips, particularly because One Drop Premium users will avoid the hassle of prescriptions and dealing with payers – usage is tracked in the app and strips are delivered straight to a user’s door automatically. Copays for strips in the US is $50 or more with insurance for some users, so One Drop Premium may also be less expensive than current BGMs with insurance, plus give users more strips and in-app CDE support (“One Drop Experts”). We’re not sure if the company will pursue formal insurance reimbursement, but if this pricing is sustainable, the hassle related to working with insurance may not be worth it for those that can afford either ~$480 paid upfront (Chrome BGM + one year of strips ) or an ongoing $39/month.

One Drop Premium also brings a refreshingly strong consumer feel (pics below) – a “vegan leather” carrying case, a Chrome-encased BGM and lancing device – that will be welcome to many people with diabetes tired of utilitarian-looking medical devices and a lot of stuff to carry.

The Chrome meter communicates via Bluetooth with the free One Drop mobile app on Apple iOS and recently launched Android, which combined have ~120,000 users in 195 countries. This represents strong adoption ~1.5 years following One Drop’s launch on iOS in April 2015. (For context, mySugr, has ~850,000 users since launch in 2012.) According to One Drop’s info graphic, 54% of its users have type 2 diabetes, 27% have type 1 diabetes, and 11% have prediabetes – a clear sign it’s bringing digital health to a broad population. CEO Jeff Dachis told us type 1s are “a major priority.” We wonder how significantly adoption and engagement will expand with the Premium service.

One Drop’s Chrome BGM and strips will be sold directly from the One Drop app on iOS and Android, and notably, Apple (!) will sell the meter at store.apple.com starting in mid-December in the US. One Drop has always had a tight relationship with Apple, including being featured in the App Store earlier this year, offering an Apple Watch app very early on, and launching Care Kit integration in tandem with Apple’s announcement earlier this year. Apple’s commitment seems like a positive sign for diabetes, and certainly, a vote of confidence in One Drop. (We also wonder if lessons from Apple’s prior iBGStar work with Sanofi will be integrated in this launch.)

The Chrome BGM launch is in English only, meaning the UK will be the biggest target market in Europe (mg/dl and mmol/l are supported); the app is currently available in English, Spanish, Chinese, and Arabic. US shipments began today to the company’s 258 Indiegogo crowdfunding backers (nearly $60,000 raised), while EU shipments will begin in several weeks as production ramps.

One Drop says it has capacity to “easily” support 100,000 Premium users or more, and we assume it has a very proven BGM manufacturing partner to make the Chrome meter and supply the strips (the meter does resemble AgaMatrix’s Jazz Wireless 2; see below). A One Drop FAQ says 99% of Chrome BGM measurements were within 15% of lab results, with 93% within 10% – quite accurate and well within FDA’s tighter, just-finalized BGM guidance.  

CDEs Dr. Mark Heyman and Rachel Head will lead One Drop Experts, and the “solid and scalable” coaching infrastructure (humans + technology) is expected to deliver 10x or more interaction/user volume than in-person/telephone diabetes education. All Experts will be CDEs at minimum, and the app also includes a nine-week educational program. The communication is a chat-like interface, and presumably won’t be real-time once it’s at scale.

Combined, this is very ambitious for a 20-person company – commercializing a just-cleared medical device, changing an industry’s business model, and launching in multiple countries – and we look forward to watching the execution. Unlimited strips for a reasonable cash pay price (plus low hassle ordering and in-app educational support) should be quite meaningful for many people with diabetes frustrated with the current BGM business model. CEO Jeff Dachis certainly thinks big and brings serious Big Data, marketing, startup growth, and web/mobile expertise from his days at Razorfish. We can’t wait to see the start of the data analysis …

We include more details on One Drop Premium and One Drop Experts below, including pictures, results from a preliminary analysis (an estimated 1% A1c reduction over four weeks), background on the company, and our questions.

One Drop Chrome BGM and Premium Service

  • We got a deep dive on One Drop Premium and Chrome BGM at SXSW in March and again at AADE, and the clearance comes just a week following the most recent expectation to launch in November. The Premium service with unlimited strips was originally expected to launch “early 2016” (the timing shared when One Drop launched in April 2015), though things always take longer than expected. The meter was submitted to FDA in July 2016 and we wonder if FDA review also took longer than expected (perhaps with the new BGM guidance). We weren’t previously aware of the company’s EU plans, which makes today’s news impressive – announcing both regulatory approval and simultaneous launch in the US and EU.
    • As shown above, the no-frills Chrome meter is about the size of a thumb drive, has a black-and-white backlit screen, and a contains single button. The meter is stripped down from the iPhone-like color touchscreen device in the original artist rendering One Drop displayed in 2015, which is not a surprise at this price point and a good tradeoff in our view. We continue to see a trend of down-featuring diabetes hardware and up-featuring the paired apps (e.g., OneTouch Verio Flex, Accu-Chek Connect) – it’s a smart way to iterate more quickly, capture better margins, and leverage the phone to offer a better user experience.
  • One Drop has an interesting comparison slide deck, highlighting its Premium service at $33-$40 per month (unlimited strips + in-app CDE support + education) vs. paying cash for brand name BGMs at $162-$330 per month (no education and no CDE support). Two slides are shown below, though the deck also includes meters from Abbott, One Touch, and Bayer (now Ascensia). The source for the prices was not provided, but these are on par with the cash pay prices we’ve seen in pharmacies; we’d note an exception is Ascensia Contour Next strips are often sold on Amazon at ~$0.23 per strip, meaning 150 strips is more like $35.

  • Like other Bluetooth-enabled meters and devices, the One Drop Chrome meter will only send values to the paired app if it is open somewhere on the phone (it can be open in the background like Fitbit or Dexcom’s G5). If the app is not open, the Chrome meter will store the values until the next time the app is launched and then transfer them. We believe companies often underestimate this nuance – it’s easy to just use a device without opening the paired app – though users will of course be more likely to keep the app open somewhere on the phone if it is providing value, as long as it doesn’t take up too much phone bandwidth. This is never a given with apps, since the bar to trying is so low.
  • One Drop does not specify who is making the Chrome meter or strips, but we’d note the close form factor resemblance to AgaMatrix’s Jazz Wireless 2. The Chrome BGM screen and device shape looks similar, although One Drop has obviously added a nicer finish around the edges. [Note: This is our speculation, as One Drop will not confirm its partner.] AgaMatrix has historically very accurate and inexpensive strips, and certainly has experience making strips at scale for store brand juggernaut Perrigo.

One Drop Experts

  • In a preliminary four-week analysis of One Drop Experts beta users, participants reduced their average blood glucose value from 185 mg/dl to 158 mg/dl (equivalent to a 1% drop in A1c); increased their average number of in-range blood glucose readings by 40%; and reduced their average percentage of high blood glucose readings from 18.5% to 3.7%. This last one in particular blew us away! We’re not sure how many users or CDEs participated, but we’re glad to see a focus on proving clinical efficacy with real-world data at launch. We look forward to broader analyses once One Drop Premium more fully launches.  

One Drop Mobile and Company Background

  • The free One Drop mobile app on Apple iOS and just-launched Android has 120,000 users in a striking 195 countries. This is strong adoption about 20 months following the initial iOS launch (April 2015) and two months following the Android launch. Cumulatively, One Drop users have spent over three million minutes in the app tracking their blood glucose, medication, food, and physical activity – this translates to 25 minutes per person on average, presumably because some are probably heavy users and some download it and barely use it at all.
    • One Drop Mobile is available in four different languages – English, Spanish, Chinese, and Arabic – though the initial launch of the Chrome BGM is only in English (mg/dl and mmol/l).
    • One Drop has put a major focus on integrating data from other devices automatically using Apple’s HealthKit: glucose data from Dexcom, One Touch, Accu-Chek, AgaMatrix, iHealth, and Dario; exercise data from Apple Watch, Garmin, Fitbit, Nike+, UP by Jawbone, Misfit, Pebble, Withings, Human, and Strava; and food data from My Fitness Pal, Lose it!, Lark, and Weight Watchers.
    • In 2017, One Drop plans to bring the same app ecosystem integration to Android users via Google Fit, plus other Android-based health data platforms (e.g., Samsung Health).
  • One Drop also has a “news” feed in the app (sharing articles, tips) and a community stream (sharing other users’ logged data anonymously).

 

  • The CGM data display is currently a bit overwhelming in One Drop (too many pink drops), though Mr. Dachis told us there is “lots coming” on both the CGM and automated insulin delivery fronts. We hope to see more traditional CGM data displays in the app, including modal day and pattern recognition. Of course, given the low penetration of CGM globally, this may not be the company’s biggest priority.

  • One Drop is one of the only diabetes apps to include an Apple Watch companion, a terrific form factor for logging on the go. Adam recently got on Apple Watch and has loved the motivational activity tracking, voice recognition (Siri), customizability (notifications, watch faces), and Dexcom G5 integration – we see lots of potential here for diabetes apps and salute One Drop for being ahead of the curve here. Having time in zone right on the cover will be perceived by many patients as a big win.

  • One Drop CEO and Founder Jeff Dachis (diagnosed with LADA/type 1 a couple years ago) has a pretty impressive technology background: Jeff is the Co-Founder, former CEO and Chairman of Razorfish, the world’s largest digital marketing solutions firm, where he bootstrapped the company and led it through its successful $55 million IPO and eventual $6 billion market capitalization. Razorfish, now 22 years old, currently employs over 5,000 people globally and generates over $500 million in annual revenues. Jeff is also the Founder, CEO, and Chairman of Dachis Group, where he set the vision and strategy for its Social Business consulting practice and the development of its big data social analytics platform (eventually sold to Sprinklr). According to his bio, Jeff was involved in the creation of the first banner ad, the creation of the first web animation, and has digital work exhibited as part of the San Francisco Museum of Modern Art’s permanent collection.
    • OneDrop has 20 employees and raised $8 million in Series A Funding led by RRE Ventures last June. We’re not sure if the company has done another fundraise since then.

Close Concerns Questions

Q: How much pent-up demand is there for an unlimited strips BGM subscription service?

Q: What patient segment will see the most benefit from One Drop Premium – high frequency type 1s? Type 2s desiring coaching? What product feature will be most compelling?

Q: How hard is it to get users to switch off their current meter – will One Drop’s product design and value proposition be compelling enough? Will the company secure relationships with big payers?

Q: Will the app sustain engagement over time? Right now, the One Drop app, though unique in design, puts some burden on users to manually log glucose values, exercise, carbs, and insulin. The company has done an admirable of making this as easy as possible, and certainly, HealthKit integration and the connected meter help. How many drop off and how many sustain use over time?

Q: How scalable is One Drop Experts? How rapidly will CDEs respond to patient questions? How many users can each CDE handle?

Q: How will One Drop evolve the app, including CGM integration and automated insulin delivery?

Q: How will One Drop harness Big Data, given CEO Jeff Dachis’ expertise building Razorfish?

 

--by Adam Brown and Kelly Close