JPM Day One – High Security and Tuck-In’s

JPM Day One – High Security and Tuck-In’s

Once again the healthcare world has gathered in beautiful San Francisco for the 30th Annual J P Morgan Healthcare. While there are several similarities between this year’s conference and those from past years there are some notable exceptions. First while this conference is always well attended for a moment it seemed that attendance was down this year as people could actually move about freely in the halls and the lobby was not filled beyond capacity. However, this feeling that attendance was lower than past years was quickly explained as hotel security is tighter than a nuclear silo and no one and we mean no one without a badge is being admitted into the conference.

Now Diabetic Investor would not go as far and state that that security at the Westin St. Frances has gone gestapo however several attendees have discussed renting out their badges by the hour. Given the many JPM non-authorized attendees lining Powell Street outside of the hotel anxiously awaiting access it would not surprise Diabetic Investor if some these enterprising authorized attendees started selling their badges on EBay. Given that all the presentations are available online and the weather here is better than usual why not make a few extra bucks.

Diabetic Investor has also discovered the new buzz phrase of the conference- tuck-in acquisitions. Now we’re not exactly sure how a tuck-in acquisition differs from your normal everyday acquisition, but one thing is certain this won’t be the last time you hear it.  Only in corporate America do you find a team of PR people looking for new and creative ways to say a very simple thing: “we’re tired of overpaying for companies and wasting our shareholders money on over-hyped companies so this year we will wise up, perform better due-diligence and actually pay a reasonable multiple.”  A concept that should last about as long as this conference but the phrase tuck-in sure sounds good.

Although there was no major diabetes news on day one there were some juicy tidbits. Sitting through the Medtronic (NYSE:MDT) presentation Diabetic Investor started thinking that their new CEO Omar Ishrak, just might get it. In an unusually candid assessment of the company he acknowledged what the company did well and what needed improvement. For a moment we began to believe that things just might be different under this new leadership.

However, during Q&A we soon realized the more things change, the more they stay the same. When asked on the status of their much hyped and much delayed patch pump and their equally hyped replacement for the aging Paradigm line of insulin pumps, it was same old story – yes we are still working on these projects but we have no idea when they will go to the FDA. More telling was Mr. Ishrak statement that the diabetes franchise is doing quite nicely growing between 8% and 10% and they do have the new mySentry product and the Veo™ is coming to America. Translation- there is no need to invest serious money in these new products when we already own 70% of the insulin pump market and we’re not going to do anything major until someone comes along and forces us too.

We’ve said it before and we’ll say it again – when it comes to the Medtronic diabetes franchise rule number one is don’t screw things up and rule number two is read rule number one.

Amylin (NASDAQ:AMLN) also presented this afternoon and nothing much has changed here either as the story remains when will Bydureon™ get here and what impact will it have. As expected the company would not publicly comment on how things are going at the FDA other than to state that the PUDFA date remains January 28th and they are optimistic on their chances for approval.   Just as with previous public presentations they noted they are gearing up for the Bydureon launch and are encouraged with what they have seen in Europe where the drug is already on the market.

Although they are not presenting here, LifeScan also made some news today when they finally launched their new glucose meter the OneTouch® Verio™ IQ System with PatternAlert™. According to a company issued press release; “OneTouch® Verio™ IQ System with PatternAlert™ Technology helps make it fast and easy to zero in on patterns of highs and lows so patients can take action to prevent them in the future.  It is the first and only meter to display patterns of highs and lows right on screen with messages such as: “Looks like your blood sugar has been running LOW around this time.”

What Diabetic Investor finds so interesting here is the timing of the announcement as the Verio was approved long ago but until today the company said little about when this technology would be available to patients. Could it be they felt a little embarrassed by the glowing review of the new Telcare meter that appeared in the Wall Street Journal just three days ago? Is it possible this glucose monitoring behemoth is worried that a small and until just a week ago unheard of company like Telcare could possibly adversely impact sales? Has the glucose monitoring market become so competitive that LifeScan did not want to risk the possibility that this start up could steal share away?

Just by dumb luck today Diabetic Investor happen to run into the CEO of Universal Biosensors, the company that makes the Verio for LifeScan who was completely unaware that LifeScan had issued a press release. Imagine our surprise when we congratulated him on this announcement and he asked “What announcement?” and no he was not being coy. Honestly we just can’t make this stuff up.

All we can at this point is that there is a reason the big name brand companies in diabetes are in major trouble. The statements made by Medtronic and the news from LifeScan are perfect examples and illustrate why Diabetic Investor believes for diabetes devices 2012 could be the year when David beats Goliath. The simple fact is the big boys have lost sight of what’s going on in the real world and startups like Telcare, Intuity and CellNovo could beat these guys at their own game. While these start-ups may lack the resources of the big boys but what they lack in size they more than make up for with their acute understanding of what patients want.

There was a time when companies like Medtronic and LifeScan understood that there is a real live person who actually uses the devices they make each and every day of their lives. They understood whiz-bang technology is only as good as the person who uses it and that patients really want simple solutions rather than more complex technology. Yes there is a minority of patients who will use all this advanced technology as intended however there is far greater number who want a glucose meter that gives them a simple reading or an insulin pump that’s simpler to operate.  Sadly as they grew they lost track of what got them so big in the first place. They have become more concerned with the corporate process rather what’s good for the patient.

As big as the diabetes market is, and it does not matter whether its drugs or devices, the companies who will win the day are the companies who put the patient first. The simple fact is when the patient wins everyone wins, somewhere along the way the big boys have forgotten this giving the little a chance to beat them at their own game.