Rodman & Renshaw Believe LabStyle Innovations Is Driving Digital Diabetes Solutions

Rodman & Renshaw analyst Raghuram Selvaraju believes LabStyle Innovations Corp DRIO could more than double in a year from the current levels. The brokerage initiated coverage with a rating of Buy and a price target of $12.00 on valuation.

The optimism was due to the development of an integrated system of LabStyle Innovations to allow diabetics to monitor their blood glucose levels on a continual basis, providing real-time data with the help of smartphone interface capability (via both Android and iPhone devices). Selvaraju said the system's compilation could subsequently allow broad-based analysis of user behavior and thus maximize disease management.

There's An App For That

Selvaraju said, "This approach, the Dario Smart Diabetes Management Solution, is the only product currently available that combines a multi-feature software application ('app') with a pocket-sized, combinatorial blood glucose monitoring device called the Dario Smart Meter."

The brokerage believes that there exists a rapidly-growing market opportunity LabStyle Innovations could and has begun to capitalize on. The analyst cited the mobile health (mHealth) app market is estimated to be $10 billion. Selvaraju pointed out Research2Guidance data project 15 percent year-over-year growth should drive this niche market to $31 billion per year by 2020.

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He also cited the BGMS market has the potential to increase to $24.6 billion a year by the turn of this decade. While pointing out that close to 400 million suffer from diabetes, total diabetes care costs top $250 billion a year. Selvaraju concluded, "Based on sales projected in type 1 diabetes (only 5 percent of the total diabetes population, we believe that LabStyle could generate peak annual Dario product sales (based only on test strips) of roughly $90 million."

The analyst added, "LabStyle has obtained approval for the Smart Meter in both the United States – via 510(k) certification from the FDA – and in several ex-U.S. countries, including the United Kingdom, the Netherlands, Canada, New Zealand and Australia. Currently, the company is in the process of ramping up sales of the Dario™ Smart Meter, including the disposable test strips that constitute the principal revenue driver through a 'razor/razor blade' model. Going forward, LabStyle aims to leverage its strengths in the blood glucose monitoring system (BGMS) sector to begin generating revenue primarily through software sales and data monetization."