A JPM Pump Preview

A JPM Pump Preview

Looking over the roster of companies who will be presenting here at the J P Morgan Healthcare Conference Diabetic Investor was somewhat surprised with just how many insulin pump companies made the list. Medtronic (NYSE:MDT), Roche (yes Roche does have an insulin pump), CeQur, Insulet (NASDAQ:PODD) and Valeritas all are presenting. Although not on the list Diabetic Investor knows the good folks from Tandem Diabetes are in town as well. Animas, the insulin pump unit which at the moment is still part of Johnson and Johnson (NYSE:JNJ), is not listed however there will some JNJ executives in attendance.

It should be noted that Tandem officially became a player in the pump market when last week they announced their first recall. Given the many recalls issued by their competition over the years Diabetic Investor really doesn’t consider any company officially in the market until they issue their first recall.

Now if someone could explain to Diabetic Investor why all these companies are hear or just what they will talk about please feel free to do so. The fact is the insulin pump market is going nowhere and going nowhere in a hurry. Medtronic remains the 800 pound gorilla in the space and even with less than an appealing product line up they maintain a huge advantage over their competition. Insulet remains the only player with a wireless system and while there are many OmniPod wannabes so far no one has stepped up to challenge Insulet.

Perhaps the most ominous sign for this market is JNJ’s decision to shed Animas. While JNJ officials continue to insist Animas has a bright future and will be part of the JNJ estate, it’s obvious to everyone Animas is on the block. While we realize that sometimes thinking can be difficult for the many companies in the insulin pump market and the many who want to enter the market, but it should send a pretty clear message that something is seriously wrong when a company with the resources of JNJ decides to exit. Yes we know that JNJ didn’t exactly do a great job running Animas but even with the many mistakes made they would not be getting out if they felt the unit could make money.

Stranger still is all this interest in companies like CeQur and Valeritas as they are not really insulin pump companies in the true sense. These patch pumps are directly targeted at insulin using Type 2 patients with the so-called advantage being that these patients would no longer be subjected to the daily ritual of injecting themselves. That these patients would not forget to take their insulin as they wouldn’t have to carry around an insulin pen or a vial and syringe. That patients suffer public embarrassment when they are forced to inject their insulin. To Diabetic Investor this is absolute hog wash.

The fact is these companies, and CeQur and Valeritas are just two of many, just want to get acquired by someone, anyone who is stupid enough to believe the hog wash they are trying to sell. Like many of the techy device companies they are clueless about where this market is and more importantly where it is going. They have built systems that quite honestly fail to fit into any treatment paradigm. The fact is an insulin pen is about the easiest diabetes device there is and requires scant patient training. While an old-fashioned vial and syringe may not be ideal payors love this method as it’s cheap. True insulin pumps may not be cheap nor easy to learn but they do fill a very important purpose for a large segment of the patient population.

That’s the problem with all these patch pumps, they are not true insulin pumps. They aren’t easy to learn and nowhere near as convenient as an insulin pen. Now if they were more cost effective than an insulin pen or vial and syringe that would be another story but there not.

It’s about time people to begin to accept certain facts about where this market is and where it is going. While we hate to be repetitive we’ll say what we’ve been saying for years; the insulin pump market is not large enough nor is it growing fast enough to support all the current players let alone the many who want to enter the market. The coming sale of Animas proves this. It should also be noted that insulin pumps are about to experience competitive bidding a move which will only hasten more pricing pressure. But most importantly of all Medtronic is going nowhere and until someone figures out a cost effective way to take share away nothing much will change.

Perhaps this is the reason companies like CeQur and Valeritas are positioning themselves as not competing against Medtronic but against insulin pens and syringes. Understandable but also foolish. The fact is both of these companies are stuck with a product that really has no easy fit into the marketplace. There products offer no compelling advantage over what’s already well-established in the market nor do their systems save money. The truth is what these are companies banking on is the wacky world of diabetes where anything can and usually does happen. Based on history, plus the greater fool theory, they know there is a company out there who will think these worthless systems are the greatest thing since sliced bread and soft soap.

Quite honestly Diabetic Investor can’t blame them one bit as we’ve seen this happen over and over again. As we’ve said before there is no cure for stupid.