A well-traveled path
As we watch investors boost shares of Livongo to what we believe are unsustainable levels we harken back to the past and remember other times when Diabetic Investor stood alone in the wilderness. This is not the first nor likely will it the last time when we went against the tide. The question is will be right about Livongo or will we eat crow.
The first time this happened came after our very first ADA in New Orleans. Back then Diabetic Investor was a print publication and in an effort to boost awareness we actually had a booth in the exhibit hall. As luck would have it the booth directly across from us belonged to Amira Medical a glucose meter company that offered something called alternate site testing.
As it turned out this was very lucky indeed as Amira was the hottest company at the show and our booth benefited from the overflow crowds. We also got to know many of the folk at Amira and found out that this way cool whiz bang toy really didn’t work all that well. Yet everyone else was falling in love with Amira with one competitor telling us this company would forever change glucose monitoring and would be bought or go public. Everyone believed this would be a billion-dollar company.
Well we went home and wrote that Amira wasn’t all it was cracked up to be. That as way cool as their toy was it would help if the damn thing actually worked. Did Amira go public? Nope. Did they get acquired? Yes Roche came along and bought the company as it was on the verge of collapsing and all they wanted was the IP. Amira this darling of the show turned out to be just what we said it would be, a failure.
We wondered back into the wilderness when Pfizer was getting ready to launch Exubera, the first FDA approved inhaled insulin. Again people were in love with Exubera as they reasoned it would be a surefire blockbuster as patients would no longer have to inject insulin. Analysts were going crazy trying to estimate sales of Exubera some claiming it would reach $4 billion in sales.
Once again we went against conventional wisdom and said Exubera would be a disaster, which is exactly what it turned out to be. Pfizer eventually pulled it from the market and then took a $4 billion write down.
This happened again with Exubera 2.0 when Al Mann started MannKind. Once again everyone was going gaga as Afrezza had a much better delivery system, not the bong like device used with Exubera plus it was a faster acting insulin that worked very well. Shares of MannKind skyrocketed and again analysts were projecting sales of $4 billion or more. Once again we swam against the tide noting that while Afrezza was a huge improvement over Exubera it would suffer the same fate. Which is exactly what happened.
More recently we were both right and wrong about Tandem. This company was on the verge of collapsing and had they not diluted the crap out of the stock they would not be where they are today. We never wanted the company to fail but the truth is the clock was ticking and very close to striking midnight. Tandem is a story of a company who lost their way, had a near death experience then found religion. We were right about the facts and thankfully wrong about them collapsing.
We could go on here as there are other examples besides betting against Livongo we are watching Rybelsus the new oral GLP-1 from Novo Nordisk. The drug works just fine our concern is its rather complex dosing regimen. Will it be the blockbuster many think it will be time will tell we just aren’t as convinced as the analysts appear to be.
Livongo is a much different story as it has all the earmarks of irrational exuberance. We continue to believe there are only two options here, the company gets bought or the share price collapses as results delivered fail to meet results promised. We do not see a third option. Will time prove us right as it has in the past or will Livongo stakeholders be doing a happy dance when a greater fool comes along? Again time will tell.
