Wednesday, September 20, 2023

Abbott Acquires Bigfoot Biomedical. Unity has a new home. Some Bigfoot employees might not like it.

In mid-September 2023, the medical technology startup known as Bigfoot Biomedical, reached a definitive agreement to be acquired by Abbott Laboratories (see the official press release at for details). Financial terms of the deal were not disclosed. The acquisition closed just 2 weeks later (see for the announcement on that), which suggests the amount of cash paid for the company did not require significant financing.

Bigfoot's CEO Was Fired from JDRF

Some people with diabetes might recall that Bigfoot Biomedical was co-founded by Jeffrey Brewer, whose previous job was as CEO of the JDRF. But Mr. Brewer was shown the door at JDRF. Jeff Brewer left JDRF in July 2014, and he became CEO of Bigfoot Biomedical in November 2014, which was roughly 4 months later. His unannounced departure from JDRF occurred rather suddenly, and yet full details on his departure were never made public. Bigfoot Biomedical began in November 2014 on the other side of the country (JDRF is based in New York, while Bigfoot was based in the San Francisco Bay Area in the Santa Clara County town of Milpitas, which is adjacent to San Jose. My only recollections of Milpitas was when the Great Mall opened back in 1994, as I was living in the Bay Area at the time). Such timing would be impossible unless Mr. Brewer was working on it while he was still employed at the JDRF. I must presume Jeff Brewer was conducting business for his startup while still on JDRF's payroll, and the JDRF Board discovered that, and therefore they wanted him fired immediately. The JDRF International Board of Directors quickly named Mr. Brewer's successor (Derrick Rapp) just weeks after Jeff Brewer's departure, which was vastly quicker than new CEOs of the JDRF had been named previously. But it is also likely that Mr. Brewer negotiated to keep the events which lead to his sudden and unexpected departure from JDRF undisclosed.

Bigfoot Biomedical CEO and Co-Founder Jeffrey Brewer

While Bigfoot was privately-held, therefore its financial statements were unavailable for any public scrutiny, there is reason to believe the company had been struggling financially. In fact, Bigfoot sells just one FDA-approved product, specifically a smart insulin pen cap system known as Unity which functions with Abbott's Freestyle Libre CGM system rather than with Dexcom. Unity received FDA approval on May 10, 2021. But Bigfoot was funded almost exclusively by venture capital, and honestly, those investors won't keep the cash spigot running indefinitely. On February 13, 2023, we started to see the first signs of financial distress when Bigfoot sold the company's intellectual property assets related for Bigfoot Biomedical's pump-based automated insulin delivery technologies to Insulet in order to strengthen the company's balance sheet (see for the press release), although Bigfoot (and presumably, now Abbott) retained a lifetime license to those patents, they were assets which could be sold to raise money. But that was kind of our first clue that things were not looking so healthy at Bigfoot Biomedical.

Bigfoot's decision to partner with Abbott rather than Dexcom was unusual given that in 2014, Dexcom commanded the U.S. market even though Abbott was the clear winner on a global basis, dominating markets outside the U.S. and Canada (such as Europe, which does not struggle with lack of coverage or even more endemic under-insurance issues thanks to high-deductible insurance plans which continue to plague the U.S. market; but European payers were never prohibited from negotiating process as they were in the U.S. until recently). Theoretically, Bigfoot could have done as Abbott did, which was to focus primarily on the European market, but Bigfoot did not do so, and that may have contributed to the company's decision to sell itself to Abbott in 2023.

While Bigfoot's Unity smart pen caps did something technologically impressive given that mobile devices can generally only have one Bluetooth connection working at a time and it required its technology to navigate a CGM which uses the Bluetooth connection as well as the smart insulin pen cap. But they used what's known as near-field communication (NFC) to get around that single Bluetooth limitation. On the marketing side, Bigfoot's Unity caps are color-coded, so the white pen caps work for prandial insulin varieties while black pen caps work for basal insulin varieties.

According to data which is now a few years old from MedTech Insight (see for more), Abbott was actually the largest player in the global CGM market with a 30% market share as of 2020, followed by Dexcom with 20% market share as of 2020. The remainder belongs to companies including Medtronic and Senseonics/Ascensia.

Dexcom CEO Kevin Sayer told investors in February 2023 when Dexcom released its fourth quarter 2022 earnings data that it had a total of 1.7 million customers globally in 2022 (see for more), hence we can estimate that Abbott Freestyle Libre has approximately 4.5 million customers globally. Meanwhile, outside the U.S., there are several companies based in Asia which have their own native companies selling CGMs. So far, none have expanded offshore, but it's quite possible we could someday see China's Zhejiang POCTech and/or South Korea's i-SENS try to enter the U.S. CGM market. Zhejiang POCTech was planning to enter the U.S. with a partner. However, CGM developer Senseonics took a financial lifeline from Ascensia Diabetes Care a few years ago, hence POCTech was out.

Meanwhile the recent acquirer of Bigfoot Biomedical, Abbott Laboratories is kind of also approaching the U.S. market as a virtual newcomer. When the CGM market first began back in 1999, Abbott decided to focus on markets outside the U.S. (such as Europe). That strategy worked brilliantly for Abbott. Because of its focus on markets abroad, it is Abbott, not Dexcom, which dominates the global CGM market everywhere on earth except for the U.S. and Canada. Abbott also sells far more CGM's each quarter than Dexcom, and its cost of goods sold is therefore quite a bit lower. In recent quarters Dexcom has been telling investors it is now working to reduce its costs to $10 on a per sensor basis. That means Abbott Freestyle Libre sensors apparently cost less to make and sell. 

Let's be clear: Abbott and Dexcom are practically identical in terms of their accuracy. The MARD values are marginally different, and some of that may be impacted by the denominator (wear-time) in the calculations. But, for example, in comparative real-world data (included in multiple, peer-reviewed studies), Abbott's Freestyle Libre system was shown to achieve comparable reductions in HbA1c levels and acute complications (notably hypoglycemia) compared to Dexcom's CGM systems. Indeed, the studies showed there were no significant differences between Freestyle Libre and Dexcom in post-CGM diabetes events. But, critically, many payers tend to prefer Libre because of its 35% lower price-point (thanks to its 14-day wear-time compared to Dexcom's much shorter 10-day wear-time). The U.S. does not function like rational markets should, where rebate-driven, legally-exempted kickbacks are more likely to win formulary placement rather than lowest aggregate costs, and guess who pays for that? Patients and employers alike.

Abbott's newest Freestyle Libre 3 model (see for the press release on the Libre 3's FDA approval) not only matches Dexcom on its core product features (notably, it features automated alarms without scanning, as well as data-sharing with others), plus it one-ups Dexcom on a few major features, specifically Libre 3 updates readings every minute compared to Dexcom's every five minutes [which translates into Libre 3 giving users 1440 new readings every day compared to only 288 new readings from Dexcom G6/G7 each day], and its 14-day wear-time, combined with a nearly equal retail price translates into Libre 3 costing 35% LESS than Dexcom.) Dexcom is aware of the price differential, but seems to be focused on bringing a less costly product to the Type 2 market as that population does not have widespread usage of CGMs because insurance companies don't see the economic benefit of paying 3x as much for CGMs vs. fingerstick tests. But the price differential may cost it business with the Type 1 population if Abbott can get around the legally-exempted kickbacks Dexcom pays CVS Caremark and United Healthcare OptumRx to keep Libre off-formulary.

As the Federal Trade Commission (FTC) noted in its June 16, 2022 revised "Policy Statement on Rebates and Fees in Exchange for Excluding Lower Cost Drug Products" (see for more), FTC has several legal authorities that may apply to such practices deemed to be commercial bribery, including Section 5 of the FTC Act, Section 3 of the Clayton Act, Section 2 of the Robinson-Patman Act, and the Sherman Act. It noted that the FTC has a long history (dating back to the 1930's) of addressing commercial bribery and will continue to do so. It awaits the conclusion of its 6(b) study on PBM business practices before it acts.

Dexcom Tells Investors They're working to slash costs to $10/sensor. Abbott Freestyle Libre is forcing it to reduce its production costs.

Nevertheless, Dexcom knows it faces competition from Abbott and the FTC 6(b) study could eliminate its formulary exclusion for rival Abbott Freestyle Libre, hence its working on a cheaper product targeting the Type 2 patient universe with a cheaper, longer-wearing CGM product. For example, Dexcom CEO Kevin Sayer told MedTech Dive (see for more) on the G7 "To get to 15 days — we have the tools to get there. For most adults, the sensors last 15 days now. The biggest issue for 10 days often is the adhesive, and what somebody puts the adhesive through in their own life, or just how their skin reacts to our adhesive. We do have adhesive programs. We have an adhesive we picked for G7 that became quite good. We are testing a couple of others to be more sticky for a 15-day product offering." He added: "We don't have an electronics or battery problem going 15 days with G7."

Abbott Has Its Own Challenges in the U.S. CGM Market

Abbott itself faces some business challenges in growing the company's U.S. CGM business, even though its Libre 3 model is superior to rival Dexcom's G7 model, thanks to Dexcom-bankrolled "formulary exclusions" (catch my coverage HERE), Abbott cannot gain access to customers. While product prices for Abbott Freestyle Libre 3 and Dexcom G7 are generally comparable (yet Dexcom sensors cost about $3 more), because Dexcom sensors have a 10-day wear-time compared to Libre 3's 14-day wear-time, that means Dexcom COSTS 35.5% more money, which is a key point of differentiation. Dexcom is keenly aware of this, which is why it's been telling investors that the company is working feverishly to reduce its production costs to $10 per sensor. Evidently, Dexcom believes Abbott's production costs are about $10 per sensor, while Dexcom's production costs are probably closer to about $14 per sensor.

While Dexcom announced plans for a new 15-day CGM sensor designed specifically for people who don't use insulin, which the company says is about 70% of Americans living with diabetes. The longer-lasting sensors will be the same, but the software will be configured so they are not focused on alarms for rapidly declining (or rising) blood glucose leves, but to help guide patients to understand the consequences of their food or exercise choices. That's not to say the product could not be used off-label by a person with Type 1 who needs a lower cost (but without hypo alarms, its unclear how many would do so), but Dexcom views the needs for Type 1 patients and Type 2 patients as being distinct from one another. But that could potentially spell opportunity for Abbott whose Libre 3 product has a longer wear-time while the retail prices for Libre and Dexcom are practically the same if Abbott can fix its insurance coverage problems.

For its part, Abbott is squarely targeting the largely untapped (for CGMs) Type 2 patient universe, but has some problems with Dexcom paying key PBMs (notably United Healthcare's OptumRx and CVS Health/Aetna's Caremark rebates which are paid contingent upon "formulary exclusion" of Abbott Freestyle Libre CGMs. The FTC now has a comprehensive 6(b) study underway examining the business practices of the six largest PBMs. That study has been underway for over a year but was expanded this summer to also include PBM owned Group Purchasing Organizations.

As for Bigfoot Biomedical, let me make this observation: the company spent a boatload of other people's money. The company spent lavishly to hire all kinds of senior executives from other companies, it hired a firm named Health+Commerce (which was where Karrie Hawbaker ended up working; my peers may recall she previously worked for Medtronic Diabetes when many of us went to a social media event held in the Los Angeles area) to monitor social media on its behalf, and its headquarters are/were in one of the most costly markets anywhere. 

But think about this: what do venture capital investors have to show for all that? Selling the company to Abbott gives them a return on their investment. Abbott is clearly a better home for the product. Only some Bigfoot employees might not like how the change impacts them.

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