A way out, a way in

This morning Zealand Pharma announced they were acquiring the assets of Valeritas. Per a company issued press release;

“Valeritas Holdings, Inc. (NASDAQ: VLRX) (“Valeritas” or the “Company”), a medical technology company and maker of the V-Go® Wearable Insulin Delivery device, today announced an agreement to sell substantially all of the business to Zealand Pharma A/S (NASDAQ: ZEAL) (“Zealand”), a Denmark-based biotechnology company. The transaction contemplates the retention of nearly the entirety of the Valeritas workforce.”

For $23 million and the assumption of certain liabilities Zealand has basically purchased the infrastructure necessary to launch their HypoPal® rescue pen. It should also be noted that Zealand is partnered with Beta Bionics who makes the iLet dual chamber insulin pump. Therefore it makes sense that since Valeritas was in the dumb pump business the sales force acquired by Zealand could be taught to sell a smart pump.

Even with this acquisition we don’t see Zealand overcoming the hurdles faced by Valeritas with the V-Go. Nor do we see them overcoming the hurdles that will be faced when the iLet comes to market. Yes, the iLet offers an interesting approach to insulin pump therapy however given its dual chamber design this forces a patient to have two infusion sets attached to their body, unlike a traditional insulin pump which only requires one infusion set.

Prior to the introduction of the 670G and the Control IQ many had high hopes for the iLet. However with these two-hybrid closed loop system in the marketplace we see a tough road ahead for the iLet. The Control IQ in particular which is off to a strong start will make it difficult for the iLet to gain much traction in the marketplace.

The same can said for the HypoPal, which will face stiff competition from Lilly’s new nasal glucagon Baqsimi®. The fact is the rescue market is not large enough nor is it growing fast enough to support all the players currently in the market. The HypoPal may be better than a traditional rescue pen but with Baqsimi now on the market we doubt it will achieve substantial penetration.

Basically Zealand had a choice build the infrastructure necessary to launch their coming products or buy it. They choose to buy it and quite honestly would have spent more than $23 million to build it. Plus they do get the additional benefit of acquiring a revenue generating product in the V-go plus all the payor relationships that Valeritas had. So all in all it’s not a bad deal for Zealand we just don’t see their portfolio of upcoming products being all that great.