Lost that loving feeling

Lost that loving feeling

In the spirit of Valentine’s Day that Hallmark holiday that warms the soles of florists, jewelry stores, chocolate makers and fans of Fifty Shades of Grey news comes that some analysts have lost that loving feeling for Insulet (NASDAQ:PODD). Although Diabetic Investor did not see the company’s presentation at the recent Leerink Global Healthcare Conference reports are the company sees non-insulin delivery as a “diamond in the rough.” Even more astonishing the company believes sale of non-insulin delivery pods could reach $400 million in five to six years.

As much as we’d like to show our friends in Boston some love, especially since they have been hit by not one, not two but now three snow storms, we must agree that warm and fuzzy feeling is slipping away. That new CEO Pat Sullivan may have good intentions but these comments remind Diabetic Investor of tactics used by the management team Mr. Sullivan has replaced.

For those with short memories or blind loyalty back in the day previous management had a habit of dancing around issues facing the company.  Whether it was pod failure rates or getting manufacturing lines working properly management tapped danced around these issues whenever asked about them. Nope according to the old team all was bright and sunny even though storm clouds seemed to be gathering.

Well as Mr. Sullivan soon discovered after he took over, all was not bright and sunny. In fact those storm clouds that seemed to gathering were very real and the storm packed quite a punch. Today just as Bostonians are getting set to dig out again, Insulet is trying to dig out from the problems the previous team left behind. Sales of their core insulin delivering pods aren’t hitting expectations, competition in the insulin pump space is intensifying and pricing pressure remains a major issue.

Based on what was said at the Leerink conference it seems as if the new management team is taking a page from the playbook left behind by the old management. When all else fails tap dance. No need to dwell on the issues facing their core business or how they plan on dealing with them; nope better times are ahead non-insulin delivery to the rescue. The real question is will Insulet still be here in five or six years when non-insulin delivery comes to the rescue.

Now just in case anyone thinks Diabetic Investor is being overly melodramatic here think again. The central fact is Insulet wasn’t built for the long term, that from day one the company had one goal and one goal only – get acquired. Yet for a wide variety of reasons, some the company couldn’t control others they created, this hasn’t happened. This is not unlike what’s happened to the Chicago Bears when they replaced Lovie Smith with Mark Trestman. Trestman was supposedly a quarterback savant who could transform Jay Cutler from an interception prone quarterback into an all-pro quarterback. The team believed so much in this they gave Mr. Cutler huge guaranteed contract to boot.

Yet just two years into his tenure Coach Trestman is gone, Jay is still Jay, the defense is old and slow and the team is now handicapped by the huge contract they gave Mr. Cutler. In comes John Fox who like Mr. Sullivan must pick up the pieces and rebuild this once proud franchise. Although Mr. Fox has yet to coach a game for the beloved Bears at least he hasn’t surrounded himself with assistant coaches who’ve never coached before.

For this is exactly what Mr. Sullivan has done with his team, a team which is devoid of diabetes device experience. As we have noted previously initially we didn’t see this as a major handicap however this was before the company came clean and revealed just how bad things were. The fact is Mr. Sullivan was not inheriting a team that had just won the Superbowl, a team filled with talent and no major holes to file. No he inherited a team that just went 5-11 and had about as much chance of winning the Superbowl as the New York Knicks have winning this year’s NBA championship.

Given that insulin delivery is Insulet’s core business and that non-insulin delivery is years away one just might think Mr. Sullivan would have brought in some people who’ve been there done that. Something that wouldn’t be all that difficult to do as given all the changes to the wacky world of diabetes devices there is plenty of talent to choose from. Experienced, seasoned executives who understand this wackiness and now how to deal with it.

No instead he’s surrounded himself with what we are sure are good people who just don’t know a thing about diabetes, insulin pumps and the wacky world of diabetes. Perhaps this is the reason as the song goes analysts have lost that loving feeling.