Roche Enters the $100B CGM Market, Challenging Abbott and Dexcom

CGM (Continuous Glucose Monitoring) is arguably the most focused细分 market by medical technology giants today.

This high-growth track has attracted diagnostic giant Roche to enter the market, as Roche plans to compete with CGM "powerhouses" Abbott and Dexcom for the vast CGM market.

Roche Diagnostics is one of the major players in the global traditional blood glucose meter (BGM) market. For instance, the blood glucose monitoring market within Chinese hospitals has long been dominated by four giants: Roche, Johnson & Johnson, Abbott, and Bayer. The diabetes business is one of the five core businesses of Roche Diagnostics, contributing 1.367 billion Swiss francs in revenue in 2023, accounting for approximately 10% of the total diagnostics business revenue.

Roche has high hopes for the dynamic blood glucose market, positioning its CGM product as a core growth driver in the diabetes field over the next few years. The product is expected to be commercialized in 2024 and is currently applying for CE certification. Recently, Roche Diagnostics unveiled details of its CGM, which can be worn for 14 days, requires fingertip blood calibration, and features a blood glucose prediction algorithm with up to two hours of forecasting.

Roche's Entry into CGM Market to Directly Challenge Abbott and Dexcom. The CGM market, which boasts a growth rate of up to 20%, has long been dominated by Abbott and Dexcom. In 2023, Abbott generated $5.7 billion in revenue with its FreeStyle Libre series, while Dexcom reported revenue of $3.62 billion, representing a year-over-year increase of 24%.

Can the Latecomer Roche Shake the Market Positions of Abbott and Dexcom? In the Absence of Disruptive Technology in Blood Glucose Monitoring, Participants Are Bound to Be Caught in Internal Competition—What Changes Will Occur in the CGM Market Landscape?

From a timing perspective, it seems quite late for Roche Diagnostics to enter the CGM market now. This large market already has two mature players. In 2017, Abbott launched the first self-calibrating CGM product, FreeStyle Libre, and in 2018, Dexcom introduced the G6. Even Medtronic, which has deep expertise in this field, does not hold a dominant position. In the Chinese market, companies such as Silicon Bioelectronics, YuWell Medical, Sinocare, and Jiuno have received approval for their CGM products. Why does Roche Diagnostics still see growth potential in this market and decide to enter it?

In terms of sales, CGM is already one of the most successful medical device products in history and is still maintaining rapid growth.

In 2023, Abbott achieved $5.7 billion in annual sales with its CGM product series, recording year-over-year growth of over 20% for multiple quarters. In the fourth quarter of 2023, sales reached $1.4 billion, representing a year-over-year increase of 25.5%.

In terms of market growth potential, the global CGM penetration rate remains relatively low, indicating significant room for growth. The United States represents the most mature diabetes market, with CGM penetration rates in 2020 at 25.8%, 9%, and 4% for Type 1, Type 2, and gestational diabetes, respectively—still considerably lower compared to the over 90% penetration rate of fingerstick blood glucose testing. Meanwhile, CGM penetration in other regions around the world is only about 10% or even lower. Overall, the global CGM market presents vast opportunities.

Inclusion in Medicare in Europe and the US drives rapid expansion of the CGM market.In the US and European markets, where CGM penetration is relatively high, the insurance business is well-developed, personal expenses for residents are low, and there is a strong willingness to purchase CGM. Taking the US as an example, as of May 2023, the US further expanded Medicare's reimbursement coverage for CGM. Currently, most diabetes patients only need to pay 20% out-of-pocket when purchasing CGM, significantly reducing the treatment costs for patients.

Traditional blood glucose meter businesses, however, are facing growth pressures as the blood glucose monitoring market shifts from BGM to CGM. From 2015 to 2020, the share of CGM in the global blood glucose monitoring market increased from 9.8% to 21.3%, gradually expanding its market share year by year. Given the significant advantages of CGM over other blood glucose monitoring methods, the CGM market is expected to grow further. According to VCBeat, by 2030, CGM is projected to account for 49.5% of the global blood glucose monitoring market, signaling the gradual transition into the CGM era. Currently, the overall market growth rate for BGM globally has slowed to around 5%.

Roche Diagnostics' diabetes care business revenue is also declining. In 2023, Roche Diagnostics' diabetes business revenue was 1,367 million Swiss francs, compared to 1,598 million Swiss francs in 2022. As continuous glucose monitoring (CGM) continues to erode the blood glucose meter market, the pressure on the traditional blood glucose meter business will increase.

What are the advantages of Roche's first-generation CGM product in competing with Abbott and Dexcom?

From the advantage perspective, Roche's newly launched CGM product features an algorithm capable of predicting the risk of nocturnal hypoglycemia.

Roche's CGM product comes with two apps: one displays current blood glucose data, and the other features AI algorithm-based predictive functions. One of the algorithms predicts the risk of hypoglycemia when the user falls asleep, which Roche believes can address nighttime anxiety affecting some diabetes patients. Another algorithm forecasts changes in blood glucose levels within the next two hours.

Abbott's and Dexcom's apps can only predict blood glucose level changes within the next 15 and 30 minutes, respectively. This is the biggest advantage of Roche's product compared to existing ones. The algorithm can make predictions without requiring users to input information such as carbohydrate consumption or insulin dosage. If users provide this information, the algorithm’s performance improves. Roche believes that extending blood glucose prediction to two hours can reduce the fear of hypoglycemia for both type 1 and type 2 diabetes patients.

Roche CGM Product Illustration

In the long term, another major potential advantage for Roche in competing with Abbott and Dexcom for the CGM market is its integration with insulin pumps.Roche is one of the key players in the global insulin pump market. The main competitors in the global insulin pump market include Medtronic, Insulet, and Roche, among others. Both Insulet and Roche offer patch insulin pumps, with Roche's patch insulin pump having a validity period of four months, which is shorter compared to the tube-based insulin pumps from Medtronic and Tandem.

In terms of disadvantages, the shortcoming of Roche's CGM is that it still requires fingertip blood calibration.Compared with Abbott and Dexcom's products, the initial need to calibrate CGM devices using fingertip blood was a "drawback." J.P. Morgan analysts further told investors, "The global market has completely moved away from fingertip calibration, and we believe going back is not feasible at all. While algorithm improvements are an important feature, it’s unclear whether consumers will be willing to pay for it."

In terms of pricing, J.P. Morgan analysts believe that due to the scale and sales volume of Abbott and Dexcom, Roche Diagnostics has little chance of selling its products at a lower price than Abbott and Dexcom.

In the future, Roche will need to continuously iterate its products and reduce costs through economies of scale if it wants to gain more CGM market share.

In addition to Roche, CGM has been written into the strategic plans of several giants, and existing giants have also updated their products and strategies.

The biggest product strategy change for Dexcom and Abbott is to expand the market and extend their sensor technology to a broader population.

Last week, Dexcom launched an over-the-counter product to explore the broader Type 2 diabetes market. Last week, the FDA approved the first over-the-counter CGM, the Dexcom Stelo, which can be purchased and used by all adults aged 18 and above.

Dexcom CGM G7 is positioned as a high-end medical product, while Stelo is positioned as a health product. Although built on the same sensor platform, Stelo reduces medical attributes such as hypoglycemia alerts and shifts its focus to personal health monitoring, particularly for early diabetes screening. Stelo will not have the hypoglycemia alarms or software functions required by Type 1 diabetes patients.

In the past, Dexcom's CGM products were mainly used by patients with type 1 diabetes. The penetration rate of CGM products among type 1 diabetes patients exceeds 50%. It is expected that most of the future growth of CGMs in the United States will come from type 2 diabetes patients who use insulin, but generally, insurance companies do not cover these devices for people who do not take insulin.

Abbott is also gradually penetrating Dexcom's area of expertise. In March 2023, Abbott's FreeStyle Libre 2 and Libre 3 continuous glucose monitors can now be integrated with automated insulin delivery systems. Abbott is collaborating with insulin pump manufacturers Insulet and Tandem for the integration.

Abbott, like Dexcom, is also in the process of transitioning its CGM products from a medical attribute to a health attribute.

Abbott previously launched a wearable device called Lingo to help non-diabetic individuals track their blood sugar peaks and valleys. Based on the Libre CGM platform technology, Abbott is developing a new product line tailored for the health and wellness market. The current Lingo device can only measure blood glucose, but more monitoring functions are expected to be added in the future. At present, Abbott is working on a product that can simultaneously measure glucose and ketones to help people with diabetes avoid diabetic ketoacidosis, a serious complication where the body produces excessive ketones.

It can be seen that both Abbott and Dexcom are developing products that cover a wider population, expanding from providing care for diabetes patients to metabolic health.

Another major player, Medtronic, is also catching up.

Medtronic's diabetes business includes a complete set of solutions such as CGM, insulin pumps, insulin pens, and data management systems, with the goal of creating a leading closed-loop artificial pancreas. However, Medtronic's sensor technology and the form factor of its tubular pumps have lagged behind competitors. Coupled with regulatory issues faced by Medtronic, its U.S. diabetes business has been declining since 2019, despite growth in international sales. Medtronic is now in the process of reviving its diabetes care business and regaining market share. The next-generation CGM Simplera system and the MiniMed 780G insulin pump are at the core of Medtronic’s diabetes strategy.

On January 8, 2024, Medtronic announced that the MiniMed 780G system, equipped with Simplera Sync, has also received CE certification. The MiniMed 780G system with Simplera Sync sensor will be available in limited quantities in spring 2024, and Medtronic will begin a phased commercial launch in Europe in summer 2024. This marks the first time Medtronic has combined its latest automated insulin pump with its latest glucose sensor.

SimpleraSync CGM Received CE Certification in 2023. Compared to CGMs from Abbott and Dexcom, Medtronic has made the sensor smaller, reducing its size by 50% compared to previous sensors, but it only lasts for 7 days.

Since its launch in 2020, the MiniMed 780G system has been the most popular automated insulin delivery system in Europe. The MiniMed 780G system is Medtronic's most advanced insulin delivery system, automatically adjusting and correcting blood glucose levels every five minutes. The MiniMed 780G system, equipped with meal detection technology, can reduce post-meal hyperglycemia when users occasionally forget to administer insulin or underestimate the carbohydrate content of a snack or meal.

Chinese companies are also updating their CGM products and strategies.

Sinocare's CGMS product "Sinocare iCare," adopts the third-generation direct electron transfer technology, with an i3MARD value of 8.71% and an h3MARD value reaching 7.45%, meeting users' demands for high-precision blood glucose monitoring. During the Double Eleven period in 2023, 100,000 boxes were sold. Currently, Sinocare has built semi-automated and fully automated CGM production lines, and will dynamically adjust production based on the CGM product market environment and sales demand to meet market needs.

Yuwell Medical launched the 14-day calibration-free CGM product CT3 series in May 2023, which achieved outstanding performance in online channels after its launch. It is expected that related new products will be launched in 2024.

SIBIONICS Expands into Global Markets. In 2022, SIBIONICS' CGM order revenue reached approximately 150 million yuan, with hospital channels accounting for 30%. At the same time, SIBIONICS has increased its efforts in overseas market expansion, promoting the global commercialization process of its CGM products. The core product, SIBIONICS, obtained the CE MDR certificate in October 2023. Distributors from nearly 20 countries have completed contracts with SIBIONICS and received market access authorization, paving the way for full-scale commercialization in these regions.

It is foreseeable that the number of participants in the diabetes care market will increase, and the gap between product features may also narrow in the coming years. The competition for the global market will also intensify.

References:

CGM Blood Glucose Monitoring Industry Research: Chinese Enterprises Enter a Rapid Growth Phase — Guolian Securities

MinKang Bio Gan Jianmin: From Blood Glucose Monitoring to Health Management Closed Loop, Terminal Coverage is Key | Exclusive Interview —— VCBeat

2023 Xipu Conference | Li Pin from Silicon Biotech: Focus on Expanding the Category During the Growth Phase, the Future Market for CGM Lies in Retail Channels — Caixin