A method to their madness
Way back when we attended the ATTD conference in Vienna we heard rumors that Roche, who reported results this morning, was getting set to launch the Solo patch pump. Try as we might we could not confirm the rumor, but everyone believed it to be true. Well we can now say that yep Roche is going to launch the Solo as there it was right on slide 41 of their presentation which was titled Key Launches 2018;
“Diabetes Care Solo Patch Pump – Small and tubeless insulin delivery device operated through a remote control which includes a blood glucose meter”
Now let’s state upfront we did not listen to the call this morning for what’s the point. Just as the Johnson and Johnson (NYSE: JNJ) earnings calls have become non-events so too has the Roche earnings calls. Which for us is so damn ironic as these two companies used to rule the BGM world. And both ironically have had their share of disappointments when it comes to insulin pumps.
After acquiring Animas for a little over $500 million back in 2005, JNJ is shutting down Animas and sending Animas patients to the evil empire. A decision that has not been well received in the diabetes community but a decision that had to made given that Animas NEVER and we mean NEVER made money for JNJ.
Roche on the flip side spent over a BILLION bucks to acquire what was then the number two player in insulin pumps Disetronic. An acquisition that was a complete disaster and that is an overly kind description. Yet not content to blow a BILLION bucks the company doubled down and acquired Medingo, the makers of the Solo, back in April of 2010 for a mere $160 million. Chump change when you think about it.
So here we are 8 years after the acquisition and for reasons only Roche seems to understand they have decided to launch the Solo. Yep they have decided to enter one of the most, if not the most, competitive markets in diabetes which just so happens is dominated by Medtronic (NYSE: MDT). Which is ironic in and of it itself as that’s why they bought Disetronic back in 2003 to compete head on with MiniMed. So here we are in 2018 and Roche has lowered their sights and now wants to take on Insulet (NASDAQ: PODD) and the OmniPod.
Why we have no idea for if we’ve said it once we’ve said it a million times the insulin pump market is not large enough nor is it growing fast enough to support all the players in the market let alone the many who want to enter the market. Keep in mind that besides competing with Medtronic and Insulet Roche must also compete against Tandem (NASADAQ: TNDM). But wait Ypsomed is coming as is Lilly (NYSE: LLY) as is Bigfoot as well as CellNovo as well as …. That poor dead cat as it cannot be swung without hitting some newbie who wants to be in the insulin pump market.
Yet we think there is a method to Roche’s madness as its well known that they have been trying to unload their diabetes device franchise for some time. JNJ just unloaded LifeScan for $2.1 Billion and as we just stated everyone wants to have an insulin pump. Well Roche has a BGM franchise and now an insulin pump so if JNJ got $2.1 Billion for just a BGM franchise management at Roche reasons they can fetch a tidy sum for a BGM and insulin pump franchise sold together. If completed this would also be a feather in their cap as they would have done something JNJ couldn’t do.
Honestly it still boggles the mind that JNJ screwed things up so badly with Animas. Animas was no fly by night franchise as they had real patients and a real revenue stream. The Solo on the flip side has what? Which likely means Roche will get an even bigger multiple as in our wacky world companies seem to pay more when you have nothing than they do when you have something. And people wonder why we have lots of gray hair, go figure. But we digress.
Seriously folks we wish we were making this up but there is no other logical explanation as to why Roche would want to launch the Solo. But as Momma Kliff used to say; “It’s a huge mistake to use the word logic with any company in your wacky world. If there is one thing you should know by now is that logic has nothing to do with the wacky world of diabetes.”
