Memorandum

FDA approves Dexcom Share system for remote monitoring of G4 Platinum CGM data – October 20, 2014

Executive Highlights

  • Today, Dexcom announced FDA approval of Share, its docking cradle for remote monitoring of G4 Platinum CGM data on Apple devices.
  • The Share cradle is already available for order on Dexcom’s website for $299, no prescription required, and will begin shipping this Wednesday.
  • The approval is a win for Dexcom as it looks to improve sensor utilization, build its pediatric penetration, and pave the way for Gen 5 (same back-end software architecture).

Today, Dexcom announced FDA approval of Share, its docking cradle for remote monitoring of G4 Platinum CGM data on Apple devices. This reflected an ~15 - month review following the filing in July 2013. The Share cradle is already available for order on Dexcom’s website for $299, no prescription required, and will begin shipping this Wednesday. The Share and Follow apps are not yet available on the app store, but we assume they will be soon. We had been expecting this approval for some time, as Dexcom’s 1Q14 call in May said that Share was “in the final stages of review,” and the 2Q14 call in August said it was deemed “approvable” by the FDA. This still demonstrates the complexity of getting something through US regulatory channels.

As we have covered in detail previously, the Share system consists of three components: a docking cradle for the G4 Platinum (plugged into a wall power outlet), the Share app, and the Follow app. To use Share, a patient would plug her G4 Platinum receiver into the Share docking cradle, which both charges the receiver and transmits CGM data every five minutes to a nearby iPhone or iPod touch via Bluetooth. The Dexcom Share app on the nearby smartphone then receives the CGM data and sends it up to a secure Internet server. Once there, the real-time CGM data can be shared with up to five followers’ Apple devices, including notifications and alerts. An Android version is in development, though there is no formal timeline. Though the SweetSpot cloud-based retrospective data management platform is currently under FDA review, Share will not send data to it; however, that is a possibility with Gen 5.

Overall, the Share approval is a win for Dexcom as it looks to improve sensor utilization, build its pediatric penetration, and pave the way for Gen 5 (same back-end software architecture). We do not see Share as a significant revenue (or profit) stream, since the margins on the very favorable $299 pricing are very low, and Dexcom is not charging a subscription fee to use the Share service, as one has to pay for Nightscout (since a separate phone is needed). There is no reimbursement at this stage (“it’s a CGM accessory”), and we do not expect to see Dexcom pursue it – Gen 5 will likely come to market before Dexcom can collect enough data to prove Share’s value (e.g., reducing severe nocturnal hypoglycemia) and collecting the data itself may well be a distraction given all Dexcom has to focus on. While some uptick in new patient adds is possible with Share, we imagine the major inflection point in new patient adds will come with the Gen 5 mobile system, which is now easier with this approval. 

The target market for Share is children with type 1 and their parents, as well as type 1 adults with involved partners/caregivers – use cases include CGM monitoring at night, while a child is at a sleepover or at school, and while a loved one is on a business trip. The Share cradle is intended to be plugged into a wall outlet, which does limit portability; however, we assume that with an external USB battery pack (e.g., Mophie), the cradle could easily be carried classroom to classroom, brought on a camping trip, outside, etc. As a reminder, Medtronic launched its own remote pump/CGM monitoring product, mySentry, though the high price ($3,000) and limited range (50-100 feet in house, no cloud connection) have significantly limited commercial uptake. Dexcom clearly learned from the high price strategy in offering Share at a modest $299.

Below, we include more details on Share, Gen 5, what this approval means for Medtronic, comparisons to Nightscout, implications for patients, and our key questions.

  • Dexcom has always positioned Share as a small step towards the Gen 5 mobile platform, and this approval is a great sign for the company’s pipeline moving forward. Share uses the same back-end software architecture as that planned for Gen 5, meaning the FDA has already sort of reviewed some of the Gen 5 submission. It’s unclear how quickly the Gen 5 review will go, but we assume the Share approval (following a 15-month review) will only help in this regard. Dexcom has been talking to FDA about sending CGM data to the phone for years now – the first public mention of a smart transmitter came at JPM 2011 – meaning the idea has been a long time in the making. FDA is well aware of Dexcom’s plans going forward, and we’ve noticed much more Agency openness to cloud-connected devices in recent months.
    • As a reminder, FDA submission of Dexcom’s Gen 5 mobile platform is expected by the end of 2014 or in 1Q15, per Dexcom’s 2Q14 call. From a sensor perspective, Gen 5 will use the G4 Platinum sensor built on the same manufacturing line and using the same membranes. The product’s smart transmitter will be Bluetooth enabled and capable of sending data to two devices – (i) to an app on a Bluetooth-enabled device (e.g., smartphone); and (ii) to a dedicated receiver that Dexcom will give to patients (i.e., “in case their backup [device] goes dead”).
  • Share seemed to be very near FDA approval for a while, and it is unclear why the review took 2.5 times the statutory six months. Management has become increasingly quiet about its interactions with the FDA, and we don’t have a sense of what held Share up. Of course, Dexcom is among the best at managing regulatory expectations, and indeed, the approval of Gen 5 came right on schedule with the “2014 launch” timing issued in August 2013 following the FDA filing. Dexcom did conduct market research and feasibility testing for Share, but not a clinical trial.
  • We see the $299 price of Share as favorable, and notably, it came in under the 1Q14 expectation of an initial price of $400. Management has emphasized in the past that the goal of Share is not to make money, but to drive sensor utilization and customer retention. Dexcom’s initial marketing emphasizes “FREE Share service,” very smart positioning in our view – though the company does not have plans to ever charge a subscription fee for patients to use Share, the “$299 + FREE service” is a persuasive message that Share is a pretty good deal. Dexcom could have charged much more, including a subscription fee, but this would have limited uptake. The strategy to price Share low to drive customer retention and sensor utilization is very laudable in our view. That said – we also wish that it could just be included gratis for all parents of kids with diabetes. For many parents, it would be an easy system to set up that could give them increased peace of mind.
  • The Share approval builds nicely on the February approval of a pediatric indication for the G4 Platinum, allowing use in patients as young as two years old. Approximately 25-30% of Dexcom’s new patient additions in 2Q14 were pediatrics, a quick ramp following the launch in 1Q14. Approximately 16% of Dexcom’s revenue came from pediatrics in 2Q14, and the long-term goal is to double that to 30%. In the 2Q14 call, management was clearly happy with the progress of the pediatric launch and emphasized that the market is very underpenetrated. Analysts questioned the sustainability of this new pediatric patient growth, to which management remarked, “This is not just a bolus [of new pediatric patients], but the start of something fabulous...When we add connectivity [i.e., Share and Gen 5] to this mix, then the show really starts.”
  • As we understand it, Dexcom chose to initially build Share for Apple devices because they are easier to work with from a data security perspective. The company is working on a Share Android platform, though there is no definitive timeline. An Android version of Share will require another FDA filing, but we assume the review cycle would be very short. We have heard that Android is also much harder to develop for given the wide variety of device manufacturers (Samsung, HTC, Motorola, LG, etc.). Pretty much that sounds like a nightmare to us and we’re assuming the iPhone might well be the smartphone of choice for parents of kids with diabetes though that is admittedly highly speculative.
  • Share could conceivably help attract new customers, though we imagine it will mostly help Dexcom drive sensor utilization as well as to retain existing customers. Management has been most vocal that Gen 5 will really move the needle in terms of new customer adoption, as it’s a truly mobile solution (i.e., CGM data straight to the phone, no receiver required). The question of customer retention becomes increasingly important, of course, as Medtronic brings its Enlite 3 sensor/MiniMed 640G to the market – this began a pivotal study this month. As well, Medtronic is working on its own Guardian Mobile system, a standalone Bluetooth-enabled CGM similar in concept to Gen 5.
  • Share will not be able to send real-time CGM data to online data management platforms that enable retrospective review (e.g., Dexcom’s SweetSpot, currently under FDA review; Tidepool, Diasend). Share’s goal in this iteration is simply transmission of the real-time data to followers. As we understand it, it is possible that the Gen 5 mobile system will send the real-time data to SweetSpot, via the smartphone app that will act as the receiver.
  • The approval of Share is a negative for Medtronic in the short-term, though potentially positive long-term. Share is priced far lower than mySentry ($299 vs. $3,000) and offers more functionality (ability to send the data to five followers’ smartphones vs. sending to a single monitor located within 50-100 feet). Longer term, however, the approval of Share signals increasing FDA comfort with sending CGM data into the cloud, a quest that has been in the works for at least three years. Medtronic is working on its own version of Gen 5, Guardian Mobile, and one could argue that the approval of Share is potentially a positive for the regulatory review of that device. Time will tell, of course, how that pans out. Dexcom’s Gen 5 is further along in development, as an FDA submission is expected by the end of 2014 or in 1Q15, per Dexcom’s 2Q14 call; Medtronic’s Guardian Mobile is slated to start a pivotal trial later this fall (no official timeline on FDA submission).
  • Prior to the approval of Share, some patients in the Nightscout/CGM in the Cloud Facebook group built do-it-yourself software/hardware to take Dexcom CGM data and send it the cloud and smartphones in real-time – see Kerri Sparling’s review here in diaTribe; our Closer Look coverage from last week and at ADA 2014; and the recent article in the Wall Street Journal. Overall, we’d emphasize that Nightscout and Share have the same goal – sharing CGM data with loved ones (especially parents of type 1 children) mainly to increase safety. We have heard some in the Nightscout community criticize Share as inconvenient (e.g., must be plugged into a wall), sentiments that we believe are highly unproductive. To us, the points of difference (level of setup, expense, FDA approval, portability, etc.) are far, far less important than the overall message Share’s launch brings to the diabetes community: a new solution to help patients and caregivers monitor their glucose levels with increased safety and more peace of mind. Some patients may prefer the do-it-yourself, grassroots, slightly-more-work Nightscout system; others may choose to use Dexcom’s Share, which looks fairly simple to set up and use. Ultimately, we are fans of more options for patients, since not every tool appeals to every single patient or family. We salute Dexcom for pushing Share through the FDA and moving ahead to Gen 5 – we look forward to testing Share and sharing more details.
    • The informal Nightscout group met with the FDA on October 8 – see the blog post here for details. Overall, the meeting sounded very positive, and there was no indication that the FDA would shut the group down even if it wanted to, which we do not think it could do at this point. Said attendee Scott Leibrand in a blog post, “Now that we have actually had our first meeting with the FDA and heard what their major concerns are, I am even more confident that we are on the right track. The FDA’s initial questions were mostly focused on making sure that we have good processes, procedures, and systems in place to make sure Nightscout is safe as it can be, even in rare and challenging circumstances...The FDA has not yet indicated to us that they have any problems with what Nightscout is currently doing, but rather indicated they want to learn more, discuss internally, and keep communications open. We are currently in the process of writing up formal minutes based on the notes I took at the meeting and getting those over to FDA so they can review them for accuracy. Once they approve the minutes, we plan to post them, along with the raw notes, for everyone to review.”

Close Concerns Questions

Q: What fraction of Dexcom’s installed base will purchase Share?

Q: Will Share accelerate Dexcom’s new patient adds? Will Share improve sensor utilization?

Q: Will the FDA approval of Share accelerate the review of Gen 5?

Q: How much will Bluetooth-enabled CGMs (Dexcom’s Gen 5, Medtronic’s Guardian Mobile) boost penetration of CGM?

Q: What will ultimately happen with Nightscout from a regulatory perspective? Now that Dexcom Share is out?

 

-- by Adam Brown and Kelly Close