Insulet Teams Up With Ypsomed
In a deal announced this morning Insulet (NASDAQ:PODD) has selected Ypsomed as their international partner to sell and distribute the OmniPod Insulin Management System. According to a joint press release; “According to the agreement, Ypsomed will have the exclusive right to promote, advertise, market, distribute and sell the OmniPod System in eleven countries covered by the agreement, beginning in Germany, France and the United Kingdom in June of 2010. Ypsomed expects to introduce the OmniPod System to Switzerland, the Netherlands, Belgium, the Nordic countries and Australia in the second half of 2010 and in China in the first half of 2011”
If the Ypsomed name sounds familiar it should as Ypsomed was the company that developed the Disetronic insulin pump which they eventually sold to Roche. According to the press release; “ After the sale, Ypsomed retained its European distribution network and today is a leading distributor of insulin pumps, blood glucose meters and diabetes care supplies. In Germany, Ypsomed has a 40% market share of insulin pump users and access to more than 80% of the insulin pumpers in the country. “
Overall this is great news for Insulet and very bad news for Roche. As Diabetic Investor has been reporting Roche is very close to making a decision on what to do with their struggling diabetes device unit. Although no official decision has been announced Diabetic Investor has confirmed that the company has begun laying off employees here in the US. Diabetic Investor believes Roche will exit the US insulin pump market and concentrate on maintaining their international presence, a move that likely will be accelerated with today’s announcement.
The fact is Roche is now fighting a global battle for both their insulin pump and blood glucose monitoring units. Both Medtronic (NYSE:MDT) and Animas, a unit of Johnson and Johnson (NYSE:JNJ), have been gaining market share overseas and with today’s announcement will soon be facing an even greater threat. The company knows that baring a major disaster they have no chance of being a player here in the US and might as well allocate resources to markets where they still maintain more than a marginal presence.
Diabetic Investor is hoping to gain a clearer understanding of how Roche plans to deal with their problems when they present at the JP Morgan Healthcare Conference in San Francisco next Monday January 11th at 8:30am PST.
Today’s announcement is another positive step for Insulet as they continue their journey to becoming profitable. All along Diabetic Investor has maintained that the Insulet story revolves around one central issue, lowering cost of goods sold. No matter how some may wish to spin things the company cannot continue to sell the OmniPod at a loss and continue to be a viable company over the long term. The problem has never been the product which is truly innovative and should be well received overseas. Hopefully teamed with Ypsomed the company can increase sales volume which should drive COGS even lower.
This move also should help Insulet achieve their ultimate goal which is to be acquired by a larger player. The fact remains that the insulin pump market is not large enough nor is it growing fast enough to support all the existing players in the market and the many who are seeking to enter the market. In one respect both the insulin pump and BGM markets are moving in the same direction as further consolidation looms on the horizon. The question isn’t when this is coming rather who will be the first to make their move, that’s when things get really interesting.
