Interesting choice and remember death is not an option
The other day someone asked Diabetic Investor which would be a better company to sell for; Tandem or Insulet (NASDAQ:PODD). Although the system is not yet available here in the US might as well add CellNovo to the list as it’s just a matter of time before this system reaches our shores. While Diabetic Investor believes that t:slim from Tandem is one slick system, the fact is Tandem is a new and relatively unheard of company. Although this does not necessarily knock them out of the ring, it is a very real drawback that Tandem reps will need to address.
Frankly things aren’t much better on the Insulet side even though the OmniPod system is established in the marketplace and remains the only wireless insulin pump available. Here we are in mid-March when the country is about to become obsessed with college basketball and we have no real clue as to when or if the new Eros pod will ever reach the market. As we have noted previously, even with an approval, one has to wonder if the quality problems that have plagued the OmniPod will come back to haunt the company. Although Insulet management doesn’t get it, the fact is patients, insulin pump patients in particular, are very vocal and the quality problems are very real.
Actually what every sales person should be asking is not whether the company they are considering working for has a good system, what they should really be asking is what plans do they have to take on and defeat Medtronic (NYSE:MDT). They could add how they plan to attack Animas, but Animas is doing a pretty good job of screwing things up all by themselves.
In some respects Diabetic Investor actually believes history could be repeating itself. Some may recall that when Medtronic first purchased MiniMed and then got rid of the MiniMed management team, the new MiniMed team foolishly cut way back on customer service , a move that created an opening for two pump newcomers Animas and Cosmo. Some may also recall that the then number two player Disetronic, which had been acquired by Roche, wasn’t able to sell systems in the US due to some quality issues. (Sounds familiar doesn’t it.)
With customers, physicians and nurse educators ticked off at MiniMed due to the changes made to customer service and Disetronic a non-factor due to FDA issues, the door was opened for Animas and the Cosmo to grab some market share. At the time each system was considered innovative and a possible threat to the Medtronic stranglehold on the insulin pump market. Although neither Animas nor Cosmo became a serious threat they did grab some very valuable market share, market share that made Cosmo enough a threat to become the target of Medtronic lawsuit and push Animas into the hands of Johnson and Johnson (NYSE:JNJ).
Fast forward to today and it’s Animas who’s having some major quality issues, the Cosmo was forced out of business because of the powerful Medtronic intellectual property portfolio and Medtronic continues to own the insulin pump market. Add in the quality issues for the OmniPod and the fact that we haven’t seen any real improvements to insulin pumps since the OmniPod came to market; there is a real opportunity for companies like Tandem and CellNovo. While Diabetic Investor does not see either dethroning Medtronic we can see a scenario were one or both is eaten up by a bigger player seeking to enter this market. We also see the very real possibility that Medtronic will once again use their vast IP portfolio as a blunt hammer to stop both from establishing themselves in the marketplace.
When it’s all said and done, we’re likely to be where we were when this whole thing stared only the names may have changed; instead of Animas and Insulet chasing Medtronic it could be Tandem and CellNovo chasing Medtronic. As we’ve said before until someone, anyone comes up with a way to steal share from Medtronic the battle in the insulin pump market is for second place. Thankfully for companies like Tandem and CellNovo, whoever holds the second or third position continually screw things up while Medtronic happily watches and thanks their lucky stars that the original MiniMed management team did such an outstanding job.