JPM Day Two – The Good, The Bad and The Ugly
It isn’t often that Diabetic Investor is impressed by a well done PowerPoint Presentation and as we have said often you can steal more money with a good presentation than you can with a gun, however kudos goes out to Tandem Diabetes today as they had the BEST presentation that we have seen in years. The company did a tremendous job of taking the audience through a short but comprehensive history of diabetes and showed how their t:slim insulin pump could become the insulin pump of choice for current Medtronic (NYSE:MDT) patients who are getting a little tired of using 19th Century technology when they live in 21st Century. Perhaps no slide was more telling than Tandem showing the Medtronic insulin pump next to a pager and their t:slim comparable to the popular iPhone.
As everyone knows Diabetic Investor has long maintained that until someone comes along and figures out a way to take share away from Medtronic they are doomed to fight for their share of the 30% of the insulin pump market that Medtronic does not control. While there are still several hurdles Tandem must overcome; reimbursement, building a sales and support organization, etc. – actually running an insulin pump company which is no easy task – there is absolutely no question that when put side by side the Tandem t:slim is light years ahead of the aging Medtronic Paradigm line of insulin pumps and the choice based on design, user interface and ease of use is clearly in Tandem’s favor.
Tandem now joins the Diabetic Investor list of start-ups who stands a great chance of forcing the major established companies of changing their ways or risk seeing their once dominate diabetes franchises fall into the abyss. Sitting and enjoying the Tandem presentation Diabetic Investor could not help but think of something our friend MC once said; “Tandem is like a fresh pair of panties when everyone else is turning their panties inside out or trying to wear each other’s.”
Speaking of dirty underwear, the presentation for Insulet (NASADQ:PODD) was almost the exact opposite of the Tandem presentation. As everyone is beginning to understand the company is betting the ranch on their new smaller and less costly to make Eros pod. After answer a host of questions from the FDA, the company noted that on January 2nd, the FDA has come back to them with even MORE questions. Questions which they stated will be answered sometime this month although they did not provide a specific date. Yet the company maintains they are confident the FDA will approve the new pod sometime in the first quarter and that the Eros pod will be launched at this year’s ADA conference in June.
Just how much have they bet on Eros? Well with $90 million of cash in the bank it’s not an understatement to state that the future of the company is at stake and that any delay with the FDA would be a critical blow to the company. To illustrate just how critical Eros is to Insulet’s survival consider this; the company has put everything else and we mean everything to get the Eros through the FDA and intro the hands of patients. Anyone who wanted the OmniPod system integrated with Dexcom’s (NASDAQ:DXCM) cgm system – forget about it.
Perhaps the best illustration of how desperate the company has become can be seen in how the company dealt with the FDA approving the “new” FreeStyle test strip for use with the OmniPod PDM. While this approval came back on December 15th of last year, the company has not bothered to inform their patients that they can now use the “new” strip with their PDM, nor have they taken the time to change their web site which still warns patients NOT to use the “new” test strip with their PDM- All this from a company that continues to state that the insulin pump business is all about customer service.
The reality here is that for Insulet it is now a race to see what happens first, whether they run out of money and once again have to go to the street for even more money or get the Eros pod approved on time and into the hands of patients as quickly as possible. Listening to their presentation, their answers to questions and looking at their body language Diabetic Investor is not optimistic they can pull this off. Nearly every statement made by the company came with a qualifier and quite frankly they sounded more like a politician running for office rather than a company who felt confident that they were on the right track.
There is no question that the OmniPod is a truly innovative system and under the proper management could be a major player in the insulin pump market. However, as it stands today Diabetic Investor believes Insulet is in serious danger of becoming another example of a great idea that got screwed up because management took their eye off the prize.
Just when you thought things couldn’t get any uglier in the insulin pump business today several news outlets reported that Animas, the insulin pump unit of Johnson and Johnson (NYSE:JNJ), continued to sell defective systems after learning of malfunctions and that the FDA has issued a warning letter to the company. According to a story that was posted on Bloomberg; “The agency faulted the J&J unit for not adequately explaining “why your firm continued to manufacture insulin pumps” after they “had known failures.”
As we noted yesterday 2012 could well go down as the year when start-ups like Tandem, CellNovo, Telcare and Intuity give the big boys a serious run for their money. This latest issue with Animas, a unit that has NEVER turned a profit since JNJ bought it, shows that surest way to create a small fortune is to start with a big one. JNJ, Medtronic and now Insulet are perfect examples of what NOT to do if you are running an insulin pump company. Of what happens when you stop putting patients first and start believing that patients are part of the problem and not part of the solution.
The simple truth is these companies will have no one but themselves to blame when Tandem and CellNovo come in and kick their collective kesters. (And their not the only insulin pump startups who are actually listening to patients.) Medtronic, JNJ and Insulet have forgotten that when it comes to insulin pumps the needs of the patient comes before anything else and that patients are getting tired of systems that have an unacceptable failure rate, are not user friendly, based on outdated technology and add the cherry on top of horrible customer service.
It’s about time someone taught these companies a lesson and took them to the woodshed for the beating they so deserve. Perhaps Medtronic, JNJ and Insulet just might realize that just because you can get a system onto the market, grab some market share and make some bucks does not mean you can ignore the people who are using your system and treat them with contempt. Because as sure as night follows daylight, companies like Tandem and CellNovo are getting ready to steal their thunder and there isn’t a damn thing they can about it. All of them pretend to care about the patient but truth be told, they have become self-absorbed, arrogant and selfish. They have put their interests ahead of the patient and that is a recipe for disaster.
