Once again lotto fever is upon us as the Powerball jackpot has grown to $650 million. According to the Powerball web site the odds of winning of the jackpot are 1 in 292,201,338.00. Which when you think about it are about the same odds as Tandem (NASDAQ: TNDM) remaining a viable insulin pump company. But with a market cap of just under $34 million the winner could buy Tandem and still have plenty of money to spare. So just for grins and giggles let’s assume just for a moment that Diabetic Investor wins and buys Tandem, what would we do to turn this struggling company around.
First and this is so obvious it should go without saying gone would be the current management team along with the current Board of Directors.
Next and this should also be obvious renegotiate with the company’s lenders. Hey better to get something than nothing and we could always hold the threat of bankruptcy over their heads. Listen when it comes to fixing this mess if the lenders want a friend they should get a dog, after all we are from Chicago and know a thing or two about extortion.
Ok now comes the harder part turning the company around. To help buy time step one is to cut expenses, sorry but this will mean layoffs. Each expense would be looked at with one thing in mind will the money being spent help sell more pumps, if the answer is no it’s gone. This includes research and development expenses as developing way cool whiz bang systems that have a dubious chance of success must go too. After these steps are implemented the company will be leaner and ready to move forward.
The real hard part is changing the paradigm, developing a culture that’s dedicated to helping insulin pump patients. This includes getting over the fact that Medtronic (NYSE: MDT) owns this space and there isn’t much in the near term that can be done about this. Heck if need be we’d hang signs in the corporate headquarters that said, “DEAL WITH IT OR GET THE HELL OUT.” These would be hung along other signs that state “RULE ONE: THE PATIENT COMES FIRST. RULE TWO: REREAD RULE ONE.”
It goes without saying that we would bring in the best available talent, talent whose compensation would be directly linked to selling more pumps and patient satisfaction metrics and would have NOTHING to do with the price of the company’s stock. Experienced talent who get it and understand what these patients go through each and every day.
We’d also find companion products that help patients who prefer not to use an insulin pump, products that work with our existing infrastructure, i.e. a “smart” insulin pen. Tandem would be transformed from an insulin pump company to an insulin delivery company and it does not matter how that insulin is delivered. This is what the company will excel at.
The most difficult aspect would be dealing with payers. However rather than viewing them as the enemy we would seek common ground and look for ways to develop win-win pricing scenario’s. These include but are not limited to discounts for exclusivity, value-based contracting and monthly fee for service pricing. Some of this will create short term pain but ultimately create long term value.
Keeping with the mantra of putting the patient first while also being cost effective we will transform the entire patient experience. This will also create some pain as it will mean fewer human interactions and greater virtual interactions. Under the current dynamics of the insulin pump market it is no longer a sustainable business model to have CDE’s sitting face to face training patients. CDE’s will remain a vital part of patient training but a greater percentage of the training and support will be virtual. While we aren’t thrilled with this but we must live in the real world and frankly we don’t think the patient will mind as long as they are being put first.
When it comes to developing new products the quest for an artificial pancreas will be de-emphasized while the quest for more patient friendly system will be over-emphasized. There are two reasons for this, we view the market for an artificial pancreas as too small and second, insulin pumping is still too complex. Keep in mind the goal is not to reinvent the wheel or have the coolest thing, the goal is to serve the patient and make money for stakeholders. Our belief is that this quest for way cool whiz bang has hurt patients and instead of way cool whiz bang how about KISSING patients, you know Keep It Simple and Stupid.
We will also be realistic about how long this will take but we are firm in our belief that once transformed the company will serve the patient and make money. While we are not delusional about defeating Medtronic neither would be afraid of them. This is still America and there is nothing wrong with healthy competition. This is not a battle for bragging rights this is all about making the insulin pump experience, correction insulin delivery experience better for the patient.
Just by way of example why not offer pre-filed insulin reservoirs, heck if Lilly (NYSE: LLY, Novo Nordisk (NYSE: NVO) or Sanofi (NYSE: SNY) don’t want to sell more insulin then we’ll find a company that does. The move towards bio-similar short-acting insulins will help and if these companies can’t see that well too bad. Or what about a real monthly pricing option not just to make the system more affordable but a model that includes everything the patient needs and we mean everything. Supplies are just the tip of the iceberg what about FREE, yes FREE upgrades IF the patient wants it. Yeah payers don’t like this but then again with value-based contracting with verifiable metrics why would they care if they save money.
Our investment in advanced technology would not just be about new pumps or smarter pens but the process of getting on a pump. Our customer here isn’t the patient but the physician and their team who must deal with all the insurance paperwork. We will NOT just make patients life easier we’ll also help physicians who love pumps but hate the demands of pump patients. Once the decision has been made to use a Tandem system, the company takes over handling everything while keeping the physician in the loop. Tandem will not be the enemy, just as we want to make money so too do they physicians and we’ll do whatever we can within the law to ensure this a win-win relationship.
The problem with Tandem is and continues to be they forgot why they are in the business, they have put the interest of the patient behind the interest of the company and this is and has been a recipe for disaster. Their problems are huge but also fixable and it’s not just about having money. As Momma Kliff used to say; “All the money in the world can’t fix stupid.”
Now given the odds of winning the Powerball are crazy it’s unlikely we’ll get the chance to execute this plan. Which is too bad given that Tandem patients are going to suffer when the company finally implodes.