Like sands though the hourglass

Like sands though the hourglass

Many including Diabetic Investor see diabetes not just as a chronic disease state but also as a business. Yet given what we’ve been hearing recently this wacky world is fast becoming a soap opera complete with beheadings and plot twists. Given what we’ve been hearing the next episode of this soap opera things are about to get very interesting.

Let’s start with our wine drinking friends in France who will reporting earnings on Thursday morning. Word coming out of France is that Olivier Brandicourt will announce a mass beheading Thursday eliminating approximately 20,000 positions. As Diabetic Investor anticipated Olivier had little choice but to reduce headcount given the poor performance of Afrezza, Toujeo and the Lantus patent expiration. So far we have not learned whether this mass beheading will be accompanied with the company terminating their partnership with MannKind (NASDAQ:MNKD). Yet given what we’re hearing such a move seems more likely.

We’ve also heard that a major shakeup is coming at Insulet (NASDAQ:PODD) as one of the last management holdovers from the previous regime has left the company. This shakeup could well include a change at the top of the organization as we’re also hearing that CEO Pat Sullivan may be on his way out. Frankly Diabetic Investor isn’t surprised by this as the company has been struggling to transform itself from an insulin pump company to a drug delivery company. While Diabetic Investor did not disagree with the direction Pat was taking the company our concern was would the board give him the time and resources necessary to make this transformation.

As we noted many times like it or not the insulin pump business was critical to Insulet’s success. That this aspect of the company had to be fixed to make this transformation possible. Now to be fair Pat inherited a mess when he took over, a mess left behind by previous management. Try as he might to transform the company it seemed like for every step forward he made the mess left over from previous management pushed the company three steps back.

Yet some of the wounds were self-inflicted as Pat basically beheaded anyone associated with the previous regime. This mass beheading was expected however the new team consisted of people devoid of diabetes device experience, a good move had the insulin pump business been solid a bad move when the business was in major trouble. In the end this new unexperienced team made many missteps which showed their lack of diabetes device experience.

Yet Insulet isn’t the only device company undergoing a major shakeup as we’re also hearing that TelCare will soon have a new CEO. Well-placed sources tell Diabetic Investor that while the current CEO resigned, he was basically forced to resign. Again Diabetic Investor isn’t surprised by this news as TelCare like so many of the newcomers to the glucose monitoring market the company struggled to gain traction in a very crowded market.

TelCare like others who are pushing interconnected diabetes management (IDM) has been caught between two worlds. Since outcomes based reimbursement, a critical component for all IDM companies, is not here yet companies like TelCare must exist in what has basically has become a commodity market. A market where scale is critical to success. The harsh reality is none of the IDM companies stand much of a chance at gaining scale as they are competing with entrenched conventional BGM companies who own 90% of the market.

As we have noted many times for all the promise of IDM without outcomes based reimbursement IDM remains a great unproven idea. Additionally as we have noted in the past the Telcare model illustrates the problem when the device is just too damn expensive. Yes the Telcare device is way cool and very slick but it also comes with a price point out of line with today’s reimbursement environment. The harsh reality for all of these IDM companies they must be able to exist in today’s world if they are to make it to the new world where outcomes truly matter.

Just as a way to compare and contrast the iHealth model is more appropriate as their device does not carry with it a high price. This does not mean that iHealth will become the leader in IDM rather they are constructed to exist in today’s world, they are not 100% dependent on the world changing to outcomes based reimbursement.

What all three of these developments illustrate is just how difficult the diabetes market has become. They also illustrate the importance of having a solid well thought out strategy that reflects current market dynamics. While we don’t like when anyone loses their job what Olivier plans to do at Sanofi (NYSE:SNY) is needed. That if Sanofi is to be profitable it must downsize.

The Insulet saga is confirmation of something we’ve said over and over- that building an insulin pump is the easy part, the real test is running an insulin pump company.

Telcare on the other hand is yet another example of a good idea caught in bad market. Yes IDM offers tons of potential yet this potential may never be realized. Besides needing reimbursement tied to outcomes this market also must concentrate on lowering costs. The harsh reality is slick stand-alone devices like what Telcare has are just too expensive.

So welcome to the newest soap opera the wacky world of diabetes. Where like sands through the hourglass so goes the days of lives.