Another CEO bites the dust

Another CEO bites the dust

Granted change is the one constant in life but change in the wacky world of diabetes has gone overboard. Late yesterday Insulet (NASDAQ:PODD) announced that Duane DeSisto would be “retiring” and that Patrick Sullivan would be taking over as President and Chief Executive Officer, effective immediately. In what’s becoming a reoccurring theme with recent management changes Mr. Sullivan has a very impressive resume yet no diabetes experience.  Looking over this impressive resume it’s clear to Diabetic Investor that Mr. Sullivan was brought in to accomplish one thing and one thing only, sell the company.

Just in case anyone doesn’t believe this take a look at this passage contained in the press release which announced the change; “Mr. Sullivan and the Company have entered into an employment agreement that provides in part that he will be issued on October 1, 2014 a stock option to purchase that number of shares of the Company’s common stock equal to $11,000,000 divided by the product of 59.83% multiplied by the closing price of the Company’s common stock on the date of the grant.  The exercise price of this stock option will be the closing price of the Company’s common stock on the date of the grant.  This stock option qualifies as an employment inducement grant and is not being issued under an equity compensation plan approved by the Company’s stockholders.”

Frankly Diabetic Investor isn’t buying this whole retirement thing with Mr. DeSisto either. Honestly when was the last time a CEO who’s been in place for the past 13 years all of sudden decides it’s time to retire and does so immediately. About the only way this happens is for health reasons and given that this subject was not addressed in the press release we don’t see that as a possibility.  More than likely the Board of Directors got tired of waiting for the company to be sold and forced Mr. DeSisto to “retire.” Lucky for Mr. DeSisto Insulet is based in Massachusetts and not Chicago where being asked to retire is akin to asking what type of funeral service the family wants.

This move by Insulet also follows the recent management changes at Medtronic (NYSE:MDT), the market leader for insulin pumps. It also comes at a time when Johnson and Johnson (NYSE:JNJ) is actively trying to sell Animas, their insulin pump company that has never made a profit since being acquired by the company, never ever. It also comes just as it appears Tandem Diabetes (NASDAQ:TNDM) is about the only insulin pump company doing ok and not considering a management change, at least not yet.

Diabetic Investor has said it before and we’ll say it again the insulin pump market is not large enough nor is it growing fast enough to support not just the existing players in the market but the many who want to enter the market.  This market unfortunately is following the same path as the conventional blood glucose monitoring (BGM) market did years ago. A path that turned meters into commodities making price more important than performance. Just as competitive bidding was the final nail in the BGM coffin, it may have the same impact when insulin pump market goes through this same process.

Diabetic Investor would like to wish Mr. DeSisto well during his “retirement” as he should be comforted by the fact he will no longer have to play in the wacky world of diabetes. This may not have been an amicable split but at the end of the day Mr. DeSisto will realize he’s better off in the long run. Like other diabetes markets things in the insulin pump market are getting nasty, prices are eroding, growth is slowing and competition is increasing. Let’s hope that Mr. Sullivan has a very strong stomach as he’s next up. The question is will he rise to occasion or become another in long list of those who tried but failed.