Be like Mike?
Years ago, when the Chicago Bulls were winning Championships by the handful, Michael Jordan was becoming a sponsor’s dream. So much so that Gatorade started airing commercials with the Be Like Mike theme. No question everyone likes a winner and back then millions wanted to Be Like Mike.
We thought about this when we ran across yet another continuous glucose monitoring company. Since we’re still in our due diligence phase we will not mention the company’s name but will say this they have all the requirements to raise millions of dollars and produce absolutely nothing. Of course, they have a well-done web site which promises the moon, the stars and a date with Halle Barry – ok no date with Ms. Barry.
Although we haven’t seen it we’d bet they have a very well-done PowerPoint presentation. Yet what they have, what everyone has in this space is that now famous statement; “Hey we’re just as good as Dexcom (NASDAQ: DXCM), but we’re faster, smarter and of course cheaper.
We’re not sure how many Dexcom wannabes are out there right now all we do know is that dead cat is getting a workout. Yet giving it greater thought, we really aren’t that surprised as the CGM market is following the same path as BGM. Back in the day when money was falling from the sky and companies were making test strips for pennies and selling them for dollars everyone wanted to be in the BGM business. Just as that dead cat can’t miss a CGM wannabe today it couldn’t miss a BGM wannabe back in the day.
Just as the current crop of CGM wannabes have no clue about running a CGM business, none of the BGM wannabes back then knew anything about running a BGM business. Allow us to share how this works- first you get some egghead who comes up with an idea, the idea looks good on paper which allows the egghead to raise some seed capital, the initial work looks good which allows the egghead to form a real company with a cool sounding name and raise more money, realizing that egghead is just that an egghead a face man is brought in as President and CEO, this person really knows nothing about the technology but he or she has connections and knows how to raise more money.
Now 9 times out of 10, the story ends there but on rare occasions the company can go public. They hit the capital markets or find some serious private equity or venture money or both. This allows them to start making the rounds at the various conferences where they will have a fancy booth. All this money also allows them to proceed with clinical trials and in some very rare occasions begin making the damn thing.
On a very rare occasion, well actually not that rare, the company finds a partner a big boy whose already in the diabetes device market or wants to be in the market. They sign a partnership agreement and all of sudden people begin to take the company seriously. Some even get their way cool whiz bang toy approved, usually in Europe first and begin commercialization.
Yet just as the BGM wannabes that came before them these CGM wannabes, even the ones who make it to the commercialization phase run into the cruel realities of the diabetes device market. When this goes from being a science project to running a commercially viable business. This is the stage where one of two things happen, either a new team is brought in to run the company giving it a chance or the old team overstays their welcome and the company fails.
We have seen this scenario play out not just in BGM or CGM but also in the insulin pump market. The difference being in the insulin pump market everyone wants to be like Medtronic (NYSE: MDT).
Listen we do not wish to cast any aspersions on any of these CGM wannabes as who knows one of them just might have something real. One of them might have that rarest experience and not just have a technology that works but also understands how to run a commercially viable business. Given the many failures, the millions wasted this is indeed rare. However, our experience tells us that this latest CGM wannabe will be like so many others, a flash in the pan.
Or put another way, it won’t be like Mike.