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In my ongoing research of small companies, I came across a company called LabStyle Innovations Corp. (OTCQB:DRIO) that had a product called Dario. I wrote an extensive informational article on the company in August and how Dario may become a "market leading diabetic management tool" when it was introduced in Europe later this year. The company recently passed an important milestone in its ability to market itself in Europe and should be on the market very soon. Let's take a summary look at the company's progress and its plan to market Dario in Europe.
The company is getting closer to what I would describe as its "initial soft launch" in Europe as it just received its "CE mark approval" to market Dario. This is getting the company closer to generating a consistent revenue base. If you are familiar with the genesis of a company at all, you will know that LabStyle Innovations Corp. is in its research and development stage, preparing to enter the commercial enterprise stage which is the beginning of revenue generation.
How important is this CE mark for the company's initial launch?
Receiving the CE mark for Dario, its flagship product, indicates that Dario complies with the health and safety requirement that has been established for the European Union. Dario can now be sold throughout the countries that belong to the Union. The CE mark is mandatory for certain types of equipment to operate within any country within the European Union.
There are 32 countries across Europe as well as other countries around the globe where Dario will be marketed. To give you a better long-term perspective on where the company is taking Dario, I believe it's important to point out that the company is aggressively preparing to file with the US FDA -- its 510 K application for marketing in the United States. After this, the company is working on opening markets in South America and Asia.
As an investor, it's important to understand how organized this company is in its marketing approach and what its plans are. Let me summarize what I know about how the company is approaching its initial launch.
- The company has its "third-party manufacturing" for the Dario device and its test strips set up, and is prepared to scale up production as needed for the launch and afterwards.
- Major distribution agreements have been made with "distributing companies" in the UK, Belgium and Italy.
- The company has a well organized online marketing strategy using "social media" in all the major markets in Europe.
- Third-party reimbursement, which is also a key to the success of these types of products, will be in place for all its key geographical targets when the "soft launch" begins.
Why am I using the term "soft launch" here as the company begins its marketing strategy? Initially, the company has a goal to collect important information through customer feedback in an effort to refine a better long-term rollout strategy. The feedback that the company gets from its initial marketing will be used and evaluated with its partners. The company will use this feedback for refining the design, develop a better marketing strategy and launch its intellectual property programs within the next year as the company pushes a full scale commercial sales plan.
A Social Diabetic Management Community
One of the innovative approaches that LabStyle Innovations is making with Dario is the creation of a social diabetic management community through the use of social media. Dario is smartphone-based and is designed to monitor glucose as well as create a comprehensive diabetic management system for patients and/or caregivers.
The Dario application for smartphones can be used in conjunction with other glucose monitors and customers can experience all the features of the software. It has already been approved for use in Apple (AAPL) phones and the (free) Dario app will educate the community on how functional it is without even having to buy the Dario device itself.
The fact that the Dario app is being released before the device is no accident, but planned. This is the best way to educate the "diabetic community" on what Dario can accomplish for them. Through the Dario app, users will experience that Dario is intended to be more than just a device that makes sterile recommendations based upon glucose readings. The software does more than collect glucose data; it acts like an "artificial diabetic brain" collecting much more information. It then utilizes that data to help users live a better lifestyle managing their diabetes. It will provide tips not only for better glucose doses, but also for treatment.
Experiencing the potential of what Dario can do to assist the "diabetic community" with the app is intended to become a "hook" for the device when it is released. The Dario app is expected to become a dominant app for users of other devices and it seems logical that people would naturally switch to the Dario device when it is released.
The goal of this type of marketing is to create "communities of users" who will learn about it, and share the attributes and benefits of Dario. It will become the new standard of care for diabetic data management.
This innovative approach is very doable since Dario is an "all - in - one" self-monitoring blood glucose device. It has its own lancet to obtain blood samples, a disposable test strip vial and a glucose reader adapter to hold the strip and interface with a smartphone, smartphone application, and internet-based data services. It also includes other user-friendly features such as a data log for blood glucose, food intake, insulin recommendation and analysis, and data sharing tools.
The Market for Dario
If you are unfamiliar with the "target market" for Dario, there are the two types of people LabStyle is marketing to:
- Type I diabetics
- Type II diabetics who are also insulin-dependent
These two types of diabetic patients typically test their glucose levels multiple times during the day and make excellent candidates for interacting and sharing in a social diabetic interactive community. They also represent roughly 15% to 30% of the diabetic population. Dario does represent an alternative to a more cumbersome and traditional standalone SMBG test kit which is the traditional market standard.
The International Diabetes Foundation estimated that the number of diabetics between the age of 20 and 79 in Europe in 2011 was 52.8 million. That number is expected to climb to 64.2 million people by 2030. Using the statistics I mentioned above, the target market for Dario is roughly: 8 million to 16 million people. This is just type I diabetes. The population that has "impaired glucose tolerance" is already at 63 million according to the IDF.
Having an impaired glucose tolerance has been said to be a precursor to full-blown diabetes. It has been estimated that up to three out of four people with impaired glucose tolerance can develop full-blown diabetes within 10 years.
The market is large in Europe for Dario. They will target population centers that account for a majority of the test strips sold in Europe.
Summary & Risk Reminder
Although I personally like LabStyle and its potential for generating revenue with Dario, I would encourage investors to spend time in their own prudent study.
I must also remind investors that the company is just now leaving the research and development stage and moving into the revenue generating stage as a corporation. Whether I like the company or not, I must admonish investors that it has yet to prove it can generate steady revenue and remain profitable.
From my observations, the company has good long-term investment potential.