Dexcom and Insulet – Are we moments away from a deal?
Shares of Dexcom (NASDAQ:DXCM) have been surging on huge volume over the past few days, as are shares of Insulet (NASDAQ:PODD)- could a deal between the two companies be coming?
Since the beginning of the month Dexcom shares have risen from $7.43 to $9.90, while shares of Insulet have gone from $14.21 to $15.54. Although Diabetic Investor can’t say for certain that the two companies are working on a deal, a combination or partnership does make perfect sense.
As Diabetic Investor has written in the past without an insulin pump partner the road ahead for Dexcom would be difficult. Insulin pump patients are the low hanging fruit when it comes to using a continuous glucose monitoring system. This is one reason Medtronic (NYSE:MDT) has a built in customer base for their CGM system. However, if Dexcom and Insulet were to combine their two systems it would provide a powerful alternative that would give Medtronic a serious run for their money.
Diabetic Investor has learned that because Navigator is stalled at the FDA, Insulet can get out of their deal with Abbott (NYSE:ABT) and do a deal with Dexcom. Some may recall that Abbott and Insulet had an agreement to work together IF Navigator made it through the FDA. Sources inside Abbott claim that the FDA has everything they need and approval should be soon. Given the company’s track record with Navigator Diabetic Investor isn’t putting much credence into these statements. Frankly even if approval came within the next few days Diabetic Investor doesn’t see much hope for Navigator, a situation which will only be made worse should Dexcom and Insulet come together.
Without a pump to go with Navigator, Abbott will face the same problem Dexcom has today. A problem that is solved by combining their system with the OmniPod.
Based on recent industry events and chatter in the pump community the OmniPod system is gaining momentum. By adding the Dexcom CGM to the OmniPod it would provide pump patients with a low cost alternative to the Paradigm 722, currently the only semi-closed loop system on the market. Should the two companies merge, partner or do some type of joint venture they would instantly become more valuable than Animas, currently the number two player behind Medtronic.
Many though that after Johnson and Johnson (NYSE:JNJ) acquired Animas they would quickly give Animas pumps the ability to communicate with LifeScan glucose meters, something that they say is in the works but still is not here. By the time this comes about it may well be too late as the market is moving towards semi-closed loop systems like the Paradigm 722.
With Terry Gregg now running Dexcom a deal with Insulet is ideal. From his days at MiniMed he is intimately familiar with the insulin pump business and would be a valuable asset to Insulet.
Diabetic Investor also sees cost savings with a combined OmniPod/Dexcom product. Although there would be some technological hurdles to overcome it may be possible to place the Dexcom sensor on one side of the Pod, with insulin being delivered out of the other side. Additionally patients would no longer have to worry about proper insertion of the sensor as it could be done automatically as the Pod does now with the cannula. The OmniPod PDM could be reconfigured to accept readings from the sensor so the patient would not have to carry around the receiver that the Dexcom device currently uses. Finally with the senor being part of the Pod, it guarantees sensor sales as users could no longer extend the life of the sensor beyond the 3 day life of the Pod.
The last piece of the puzzle would be replacing the FreeStyle meter which is currently part of the PDM. Diabetic Investor does not see this as much of an issue as Dexcom has already indicated they want users to have the ability to use any meter to calibrate the device. It would not be stretch if Insulet were to replace the FreeStyle with a meter from their neighbors at AgaMatrix.
The bottom line here is this deal makes too much sense not to happen. Insulet needs Dexcom and Dexcom needs Insulet, a true win-win situation. There would also be one added benefit for Insulet as at least for the time being it would keep them from being acquired by Abbott, who based on their track record with previous acquisitions would take this great system with tons of potential and run it into the ground as they have done with Therasense.
David Kliff
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