Diabetes Monitoring Start-Ups:Building a Better Mousetrap or a Whole New Paradigm?

Diabetes company DexCom Inc. filed in early February for an initial public offering of up to $70 million. [See Deal] It's operating in one of the more exciting areas of diabetes testing, with an ambitious goal of developing a continuous blood-glucose monitoring system based on a proprietary implantable sensor. The IPO calls attention to the divergent pathways that companies take to the diabetes market. One group chases the dream of making the lives of diabetics easier with disruptive technologies like continuous monitoring and artificial pancreases. The other group focuses on incremental improvements to existing approaches. While the former group has a more tantalizing mission that would be a big step forward in diabetes treatment, implantable blood glucose monitors have been fraught with technological failures. On the other hand, the incremental approach has resulted in several notable successes.

The most recent cautionary tale is that of Cygnus Inc. , a high-profile start-up that developed and was the...