It wouldn’t be an ADA without rumors
Yes it seems with each ADA there are rumors, scuttlebutt and speculation about who is buying whom. Well this year was no different so let’s get right too it – a word here however – given the nature of this business Diabetic Investor will not cite any sources nor reveal where we came upon this information – as everyone knows Diabetic Investor has a panache for getting great information the main reason being we never burn our sources – so with that covered let’s get on with it.
It seems the insulin and patch pump business is a hot area these days as Diabetic Investor is hearing that Tandem (NASDAQ:TNDM) is quietly shopping the company. As we have stated the insulin pump market is ultra-competitive and dominated by market share leader Medtronic (NYSE:MDT). Tandem not only competes with Medtronic but Insulet (NASDAQ:PODD), Animas which is still surprisingly a unit of Johnson and Johnson (NYSE:JNJ) and Roche yes Roche has an insulin pump although one would never know it.
According to many Tandem isn’t doing all that great and has some rather serious financial issues. After watching Asante pull their IPO and Valeritas who’s delayed their IPO they are smart enough to realize that doing another offering isn’t exactly a great idea. They also know that insulin pump market isn’t large enough nor is it growing fast enough to support the existing players let alone the many who still crazy as it seems want to play in this very crowded sandbox. The goal all along was to sell to a bigger player so why not now when they still have something to sell.
Another company looking to be acquired is the aforementioned Valeritas, yes the same Valeritas who was supposed go public but had to delay their IPO. The general belief is like Asante who pulled their IPO, potential investors don’t see much value in Valeritas at least not at the levels the company is seeking. Like Tandem the company has some financial issues and without more capital could be forced to close their doors as Asante did. If this is all beginning to sound wacky just wait it gets wackier.
Now just in case anyone is unfamiliar with Valeritas and their main product the V-Go, and we can understand why as not many have been sold, this is not a true insulin pump but rather a patch pump. Unlike a real insulin pump which is basically a computer that is programmed to meet the needs of the patient the V-Go delivers a set basal rate and pre-set bolus rates activated by the patient. Valeritas is under the impression that patient’s currently on insulin, mostly insulin using Type 2’s, would prefer a patch pump rather than … wait for it .. suffer through multiple painful insulin injections. Or put simply the supposed value proposition fewer injections. The company also believes these same patients and their physicians don’t want to use a true insulin pump.
Frankly Diabetic Investor has never understood these products, and the V-Go isn’t the only one, as we just don’t see a market for them. As we have been stating insulin pens are gaining ever more traction and by our way of thinking are actually easier to use and better for the patient. Unlike the V-Go which has pre-set bolus rates an insulin pen patient can actually dose the exact amount of insulin they need. Pen needles have become smaller and as we have been stating for some time injections really aren’t that painful, they may not be pleasant but they certainly aren’t as painful as many seem to believe.
Truth is if a patient really wants to follow basal bolus therapy where the insulin is delivered constantly then a real insulin pump is far superior option. Yes the patient would have to go though some additional education and training but really not much more than what’s involved with the V-Go. We would even argue that a real insulin pump is easier to use as the tools a patient needs are on the pump. Patients using the V-Go either have to calculate their bolus rate, even if it’s with a way cool app they app must know insulin on board, duration of insulin action, insulin to carb ratios, target glucose, etc. The exact same things a real insulin pump needs to know the main difference once again is a real insulin pump can dose the exact amount of insulin the patient needs. Even better with a real insulin pump patients can dose some of this insulin immediately and some later giving them even greater flexibility and better control.
Listen if a physician wants to dumb down insulin therapy, and many do, the easier more cost effective option is a disposable insulin pen. On the flip side should the physician sees that a patient can handle continuous insulin delivery a real insulin pump is the way to go. The V-Go and others in this space are all based on the theory that patients want insulin therapy but don’t like injecting themselves every day, that they will prefer injection themselves once every three days. This is the same theory when Patton Medical introduced the I-port a device many not remember because well it didn’t do so great.
Yet there are some rather large well-known companies taking a look at Valeritas, why we can’t understand. But as we all know this is the wacky world of diabetes where anything can and usually does happen no matter how stupid it is.
Diabetic Investor is also one of the newcomers to the blood glucose monitoring (BGM) market is actively looking to buy an established player. While we cannot say which one let’s say they think they have a way cool whiz bang idea, which really doesn’t say much as these newcomers think they have something way cool and whiz bang. Yet we digress. Well it seems this company has looked at the BGM market and discovered …wait for it .. it really helps to have scale that it isn’t so easy to build share from scratch. This company also knows that …wait for it… that Abbott (NYSE:ABT), Roche and yes JNJ would happily sell their diabetes device units. Since this company has access to mega bucks and money buys lots of things stay tuned.
We should mention at this point based on what we’re hearing the Bayer deal should be announced shortly and the winner is …. KKR/Panasonic although we’re not sure we would classify this as a win for KKR/Panasonic. No question it’s a win for Bayer who must thrilled they found a sucker, excuse us, a buyer willing to pay them $830 million to take this dog of a unit off their hands.
Another company making waves is BigFoot BioMedical who acquired the assets of now dead Asante and is actually moving into Asante old headquarters. Although Diabetic Investor is not a big fan of the artificial pancreas the old guard is watching BigFoot closely. Now the company has been very public that they believe they can have such a product on the market by 2018. Yet they have assembled an impressive team and aren’t burdened by the bureaucracy of bigness.
Just so where clear we have never been against a true closed loop insulin delivery system. What we don’t see is a commercially viable business selling true closed loop insulin delivery systems. Look at it this way there are less than 1 million insulin pump patients in the world, with about 600,000 give or take here in the United States. The market for insulin pumps is growing in the low single digits and as we noted the market is very crowded. Of the million or so patients using an insulin Diabetic Investor estimates less than 5% would use a true closed loop system.
Why? Well for one thing such a system is going to cost a small fortune and we can’t imagine payors reimbursing for it. Next there is the cost of actually running an insulin pump company which as we have stated before are substantial and would actually run higher with a true closed system. A system which consists of lots of moving parts any of which that fails can lead to some huge problems. Yes we know this way cool technology but this is also a medical device and medical devices fail. The problem with this particular medical device is should it fail it could kill the patient. Yes we know no one likes to hear this but as we have said many times insulin is a lethal drug. This is another reason patients won’t use it as at least with a conventional pump they some control and can turn the damn thing off before it kills them.
This is not to say there are no therapeutic benefits to such a system or that patients using such a system would not benefit from it. This is to say as a BUSINESS we just don’t see it.
In news that should surprise no one we’re also hearing that our wine drinking friends in France are about to restructure their diabetes unit. In typical French fashion expect some beheadings, one of the few things Sanofi (NYSE:SNY) is actually good at. Haven’t heard yet who’s headed for the guillotine but heads will roll.
Finally we couldn’t conclude without a mention of the many Afrezza/MannKind (NASDAQ:MNKD) supporters who are surly jumping for joy given how shares of MannKind have jumped recently. Yes these folk are dancing in the streets, jumping for joy giving each other high fives and belly bumps. Yep this is proof they are right and Diabetic Investor is wrong. Yes with the direct to consumer advertising campaign set to begin nothing but sunshine and blue skies ahead.
Never mind that not one of the endo’s or researchers we spoke with sees Afrezza as nothing more than a niche product. Heck even endo’s who are using and very happy with how Afrezza is working don’t see it as a blockbuster.
Since Diabetic Investor is kind hearted and truly appreciates the kindness these people have extended to us on Twitter. Honestly we’ve lost count on how many different ways we can be called an idiot or a moron. Yet since we don’t hold grudges here is some free advice for these folks, take a long hard look at a MannKind stock chart. Look at the company’s history for every time it looked like the company was in the clear that’s when the bottom usually fell out. Just saying.
