While the number of Insulet (NASDAQ:PODD) wannabe’s continues to expand, Insulet remains the sole credible player in the patch pump arena. Listening to today’s conference call it also appears the company is content to bid their time while everyone else scrambles just to get their product to market. The company realizes there is no rush to bring their next generation pod to market. Rather than spend recklessly the company can conserve cash and move methodically towards bringing the new pod to the FDA.
The reality is Insulet can afford to take their time as their biggest threat, a patch pump from Medtronic (NYSE:MDT) is well behind schedule. Insulet sees what’s happening in the market and how the diabetes device arena is entering a new phase with players like Sanofi-Aventis (NYSE:SNY) entering the market. From day one Insulet’s goal has been to be acquired by a larger player and that day is quickly approaching. The company continues to improve gross margin and the new pod which is cheaper to make only makes the company more attractive.
As much as everyone believes Sanofi to be the most aggressive entering diabetes devices, it would be a mistake to count out companies like Johnson and Johnson (NYSE:JNJ) and Novo Nordisk (NYSE:NVO) from taking a serious look at Insulet, albeit for different reasons. Like Sanofi, Novo would view Insulet as a vehicle to sell more insulin, while JNJ sees the OmniPod as another tool to sell more glucose test strips.
With an installed user base of 16,000 plus Insulet has what all the wannabes lack, real world experience in the patch pump market. While many of these wannabes have attractive ideas and cool looking interfaces they don’t have a single patient, no presence in the market, no customer service and worst of all no name recognition with diabetes educators and endocrinologists. The insulin pump market overall continues to experience sluggish overall growth and Insulet is about the only company that has been able to actually expand the market.
Frankly it will take years and cost millions of dollars for any of the Insulet wannabes just to reach where Insulet has already been. This is the reason why Medingo sold out to Roche and why CellNovo partnered with Home Diagnostics. The fact is financially none of these Insulet wannabes have the resources they need to duplicate what Insulet has accomplished. The economy may be improving but the days of easy money and deals being done just because someone has good idea are over. Companies looking to make acquisitions want to see a proven track record with an opportunity to expand and capitalize on something that’s proven itself. This is what makes the Roche Medingo deal so strange as the Solo is unproven and will cost millions more just to get the product market and that won’t come until 2012, maybe.
Insulet may not have everything a company is looking for but what they don’t have should not prevent the company from being acquired. Diabetic Investor still believes that strategically JNJ is the most logical buyer as it fills a whole in their Animas product portfolio and sells more LifeScan test strips. Sanofi remains a contender as would Novo, as Insulet’s costs could be cut even further if either company converted an insulin pen cartridge into a pod reservoir filler. No longer would patients have to worry about air bubbles or carrying around an insulin vial. The patient would simply use this pre-filled cartridge to fill their pod. While it may seem trite the fewer steps a pump patient needs to perform the better and while it may not seem like a big deal filling an insulin reservoir isn’t as easy it seems.
So while everyone else continues to figure out how to get where Insulet has already has been, Diabetic Investor sees the company getting closer and closer to their ultimate goal. At the end of the day this is what Insulet has wanted all along.