According to a story that ran in Globes Online; “ D Medical Industries Ltd. (TASE:DMDC) subsidiary NiliMedix Ltd. has received EU CE Mark Certification to market its multiple-use insulin pump in Europe.
NiliMedix’s insulin pumps are smaller and lighter and they break down less as they have no moving parts such as motor, or reduction gear. The company has not yet indicated whether it has a distributor or marketing partner in Europe, and this will probably be the next step. NiliMedix is also moving forward its application to the US Food and Drug Administration (FDA) for approval to market the pump.”
Strangely OmniPod maker Insulet (NASDAQ:PODD) is down over 13% on this news. This reaction to the approval only further demonstrates the Streets lack of understanding of the diabetes market. While this good news for NiliMedix, this news will not hurt Insulet one bite. First of all, the pump hasn’t been approved in the US, by far the largest market for insulin pump therapy. Diabetic Investor estimates there are approximately 500,000 insulin pump patients worldwide 350,000 in the US. Medtronic (NYSE:MDT) dominates the insulin pump market owning nearly 75% of the market, followed by Animas (A unit of Johnson and Johnson (NYSE:JNJ)) who has about 14% of the market. Second, getting a pump approved and having the infrastructure in place to run a pump company are two totally different items.
Quite frankly there are many OmniPod wannabes out there but the fact remains that Insulet was first to market a tubeless disposable pump and this is one category where being first allows you to capture a significant share of the market. The OmniPod is quickly gaining traction in the marketplace and is becoming a serious competitor. The OmniPod is also doing something Diabetic Investor thought impossible; expanding the market for insulin pumps.
Diabetic Investor sees this sell off as an opportunity for investors and a vast overreaction to news that really isn’t that big of a deal. Even if NiliMedix announced a partnership with a major player in diabetes tomorrow they still don’t have a product approved in the US. No matter how big this player would be they will not be able to launch any system overnight.
As impressed as we are with Insulet and what they have been able to accomplish, one fact remains true – THE INSULIN PUMP MARKET IS NOT BIG ENOUGH OR GROWING FAST ENOUGH TO SUPPORT ALL THE CURRENT PLAYERS LET ALONE ANY OF THE MANY COMPANIES LOOKING TO ENTER THE MARKET. If you don’t believe this statement just ask the people at Roche who spent over a billion dollars to acquire Disetronic who at the time was number two in the market. Even with all of the resources at their disposal, the new Accu-Chek Spirit pump has been a dismal failure. Or perhaps you might look at what happened to Deltec, a unit of Smiths Medical, and makers of the Cozmo insulin pump. A company that was crippled after Medtronic won an intellectual property fight.
Looking towards the future Diabetic Investor sees JNJ eventually acquiring the insulin pump business from Medtronic and using their considerable marketing skills to make pump therapy more viable. We also see Insulet being acquired at some point in the future as the OmniPod is literally changing the way patients and physicians think about insulin pump therapy. Besides its innovative design the OmniPod also carries an attractive pricing model. Although Medtronic is currently the only company with a pump/CGM combo it won’t be long before Insulet has a similar system. The reality of the insulin pump market is this is really a three horse race between, Medtronic, Animas and Insulet. While there may be other horses on the track they can’t even see the leaders.
Keep in mind when it comes to understanding the diabetes market these people who think the NiliMedix pump will hurt Insulet are the same people who thought Exubera would be a $3 billion product and no one would use Byetta because the drug is an injected. Insulet is a winner and this is an opportunity.