Buying the hype – more wackiness
There’s an old saying in the venture capital community that you can steal more money with a good PowerPoint presentation than you can with a gun, a saying that was proven once again when C8 MediSensors announced the GE (NYSE:GE) has made an investment in their company. Some may recall that Diabetic Investor outlined the many issues facing C8 not the least of which being the company has absolutely no credible data that their non-invasive continuous glucose monitoring system actually works.
Yet yesterday according to the company; “C8 MediSensors, Inc. (http://www.c8medisensors.com), the leading company for noninvasive continuous glucose monitoring for diabetics, announced today that it has raised a total of [$24] million through the sale of Preferred C stock. Recognising the revolutionary potential of C8 MediSensor’s noninvasive technology to improve the lives of diabetics, existing investors as well as new investors including GE’s healthymagination Fund made a significant investment that will accelerate C8 MediSensors’ planned product introduction in 2012.”
Based on comments made by GE it appears the company has bought into the hype in a big way. In a story that appeared last yesterday on EON (Enhanced Online News) GE Vice President and GE Healthcare Chief Technology Officer Mike Harsh stated; “C8’s technology platform presents great promise for patients to avoid the discomfort of traditional invasive glucose monitoring. This investment aligns with our strategy to fund innovations focused on reducing cost, increasing patient access and improving quality in healthcare.”
GE isn’t the first large company to be fooled by the promise of non-invasive glucose monitoring. Johnson and Johnson (NYSE:JNJ) wasted millions trying to develop a conventional non-invasive glucose monitor only to walk away with nothing more a lesson learned. As Diabetic Investor has pointed out on numerous occasions the non-invasive space is littered with companies who have tried and failed. Companies which have bilked investors, both large and small, out of millions of dollars with nothing more than a good PowerPoint presentation.
One just might think that a company as distinguished as GE would have performed detailed due diligence before choosing C8 as there are other start-ups in the CGM space with much more promising technology. Not to mention the company could have reached out to a company like Dexcom (NASDAQ:DXCM) that’s already established in the market, has an excellent product which actually works and a very promising pipeline.
It’s well known that GE wants to enter the diabetes space in a big way as they have already aligned themselves with Bionime for a conventional glucose monitor. It’s also true that GE is one of the few non-diabetes companies that have the resources necessary to become a player in the space. However, one has to question their judgment given this investment in C8.
The simple truth is it takes more than a big checkbook to become a serious player in the diabetes space. Diabetes is one of the more complex markets and requires a detailed understanding of wide variety of factors. Diabetes is not like other chronic disease states given the amount of patient interaction and responsibility for their diabetes. To Diabetic Investor this investment by GE shows their inexperience in the space and will likely turn into a costly learning event. Diabetic Investor is willing to bet the ranch that C8 will come back to GE at some point and tell them the system is delayed but ever so close and with a few more million they will get over the hump. GE will likely believe C8 and like JNJ before them end up wasting millions on a technology that has no chance of becoming commercially viable.
Diabetic Investor has yet to find one credible person in the CGM arena who believes that C8 has anything of substance. We should also note that we have not only reached out to the existing players in the market but expanded our search to include several respected experts who do not have ties to the market, experts that do not have a financial interest in the outcome. As Diabetic Investor noted when we first wrote about C8 the real proof would come when the company provided credible data, and as we suspected the data in the public domain is far from credible and has more holes than slice of Swiss cheese.
Many of the existing players in the diabetes device market have been watching GE closely as they are rightfully concerned that with their vast of amount of resources and strong brand name, GE’s entry into the market has the potential to adversely impact sales. On the surface GE would seem to be a formidable competitor but as we have seem before size does not replace experience or knowledge. Or as another experienced diabetes executive likes to state the surest way to get a small fortune is to start with a big one.
When Diabetic Investor first learned of GE’s interest in the space we were excited believing that their entry would bring a much needed breathe of fresh air into a market that has become rather stale. Given that the existing players have done a pretty good job of screwing things up, the prospect of new approach and new ideas gave Diabetic Investor hope that if nothing else GE’s entry into the market would force the current players to reevaluate their current strategies. We also, falsely as it turns out, believed that a company like GE would not repeat the well documented mistakes made by the current players.
Given this investment in C8, Diabetic Investor is beginning to question whether GE has what it takes to become a serious player and will bring anything other than a big checkbook to the table. Money may buy lots of things, but it doesn’t buy common sense or cover up stupid investments. Let’s hope that GE comes to their senses, realizes they have made a mistake and does not throw good money after a very bad idea. At this point we can’t say that we’re overly optimistic and sense that GE will become just the latest company to be duped into believing that non-invasive glucose monitoring, conventional or continuous, is the Holy Grail of diabetes devices.
When will people learn!