A Top and a bottom
With Christmas over our attention turns towards a look back at the year gone by and a look ahead to year about to begin. As always, our New Year will begin in that beautiful city by the bay at the JP Morgan Healthcare Conference. A conference which we suspect will be one of the more interesting and since we’ve attended nearly 20 of these suckers that’s saying something. Lots is going on behind the scenes in our wacky world and given the nature of JPM we suspect the veil of secrecy will be lifted.
Looking backwards 2017 has seen it’s fair share of wackiness but to us the biggest story came from the insulin pump market and not just because we are now down to just three players, soon to be two. This market represents much of what we talk about day in and day out. That diabetes is big business and that the management of diabetes can be adversely impacted by this fact.
Here is a quick summary of some of the more notable events in this market:
1. Medtronic (NYSE: MDT) officially launches the 670G, a product which was hailed as an “artificial pancreas”. As we anticipated this launch hasn’t been a smooth one with many problems created by Medtronic others by Mother Nature. The Empire will eventually fix the various issues and get ready for the next company, most likely Tandem (NASDAQ: TNDM) to implode.
2. Speaking of implosion, more like surrender, Johnson and Johnson (NYSE: JNJ) demonstrated something we didn’t think was possible, that it’s better to get nothing than something. Yes, after years of losing money the company concluded that it was time to sell Animas. Only problem being they screwed up the sale process to such an extent that they calculated that it was better to shut down this unit than to sell it. In any other year this fact alone would have won JNJ the silver pickle given out to the company who does the wackiest thing during the year.
3. Although Tandem was already on their way to the insulin pump scrap heap, JNJ’s decision to close Animas and give these patients to Medtronic sealed their fate. It was long believed that JNJ would find a buyer which would then clear the way for Tandem to be sold. Now that Medtronic will effectively control 80% plus of the insulin pump market potential buyers of Tandem have basically decided to let nature take its course.
4. Seeing their core insulin franchises becoming nothing more than a commodity all the insulin companies, Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO) and Sanofi (NYSE: SNY) are looking at entering the insulin pump market with Lilly being the most public about their efforts.
5. Insulet (NASDAQ: PODD) who by default will become Medtronic’s main competition continues to exceed expectations. The company has fixed many of the issues it faced but still hasn’t made any real money. The street loves the company, as shares have increased nearly 90% this year, but we see cause for concern going forward. Simply put the company has taken all the easy steps and now the real hard part begins.
6. Two other companies, Dexcom (NASDAQ: DXCM) and Abbott (NYSE: ABT), have also been heavily impacted although neither, at least for now, is directly in the insulin pump market. Dexcom is aligned with Animas, ouch, Tandem double ouch and Insulet. Abbott has hitched their wagon to Bigfoot.
7. Companion Medical received FDA approval for their InPen smart insulin pen, Sanofi has aligning themselves with Common Sensing, Bigfoot acquired Timesulin and many others loom on the horizon which means the biggest threat to the future of the insulin pump market will become a reality, we’re not sure when Tyler will get here but he’s on his way.
All of this happened in one year which when you think about it is amazing. Yes, there were other notable stories but none that structurally changed the landscape of an entire market. Diabetes drugs even with the approval of Semaglutide continues to commoditize. While there was lots of hype and chutzpah nothing truly substantial happened in the interconnected diabetes management (IDM) space other than OneDrop trying to pass themselves off as a real diabetes company when they aren’t. No other market has been shaken to its core like the insulin pump market.
Now a couple of predictions for 2018;
1. This is an easy one, Tandem will cease to exist, how this happens we’re not quite sure. But this cat is running out of lives the question becomes will the cat have a new owner or be resurrected after declaring bankruptcy.
2. 2018 will not be the year Tyler gets here, he’ll grow in 2018 but we don’t see him walking and talking until 2019.
3. The CGM market will start as a brawl and end with both Dexcom and Abbott bruised, a little bloodied but still fighting.
4. One of the major players in IDM will get acquired but at a valuation much lower than anticipated.
5. The cash rich high-tech players will become even more vocal about their deep dive into our wacky world. And we just might see a major realignment between one of these players and their current partner.
Most of all we see 2018 as year of realignment and positioning. Put simply we see 2018 as the year everyone prepares for battle. A battle which will begin in 2019.
From all of us at Diabetic Investor, Momma Kliff included may 2018 bring us all good health and happiness. Happy New Year and see you in San Fran.