Mad as Hell Part Deux

Mad as Hell Part Deux

It’s getting to the point were we’re not sure who is more despicable, Jeff Dachis from OneDrop or Kim Blickenstaff from Tandem (NASDAQ: TNDM). Of the two we’d have to say that at least Mr. Dachis and OneDrop have noble intentions. As we noted the other day while we aren’t fans of self-reported data combined with fuzzy math we do believe that engaged patients who use the OneDrop system are being helped.

Mr. Blickenstaff on the other hand makes a big deal that his salary has fallen to just $1. This is a complete sham as he owns a boatload of Tandem stock and has a boatload of options too. As we noted before his salary shrank Mr. Blickenstaff has done quite nicely over the past few years raking in over $4 million in compensation while the Tandem share price was sinking, and the company kept diluting the sucker.

Well it seems that Mr. Blickenstaff has decided now that the stock price has recovered its time to cash in. Per documents posted on the SEC web site Kim has cashed in and cashed in big time selling 132,444 shares at $7.55 which before taxes will yield a tidy million bucks. It also appears he exercised some the warrants he owns too which means he can now cash out even more of his holdings. Yep guess it was getting pretty tough living on such a minimal salary.

Now some may say he deserves to cash out a little as after all the company was at death’s door and now for the moment anyway is on secure financial footing. You could say that, but you’d be lying to yourself. Yes, the shares have recovered but only after they diluted it. Yes, the company is on solid ground for the moment but who the heck do you think put them in this situation in the first place.

Listen we understand why shares have recovered. The company if they don’t screw it up, which is their history, has enough money to last them until the end of 2019. They have new whiz bang way cool system at the FDA. Animas is going out of business and while it’s more cost effective for an Animas patient to convert to a Medtronic (NYSE: MDT) system Tandem is capturing a share of the Animas patient base. IF and this is a huge IF the company plays their cards right they could grow.

Yet this as Momma Kliff used to say is the good news. On the flip side let’s look at the reality of what Tandem faces. The only way Tandem wins is to add new patients. For this to happen they have several hurdles to overcome most notably Medtronic. What no one seems to get is that the insulin pump market is not large enough nor growing fast enough so that Tandem can grow organically. For Tandem to grow they must steal share from Medtronic which is not only difficult but also very costly.

Medtronic owns the most important piece of real estate in the insulin pump market; formulary position. Even if Tandem’s new system is better than the way cool 670G, which we think it is, this guarantees nothing. As we have attempted to point out the Tandem pump is the least important piece of the new systems puzzle. The pump just does what its told, its just a piece of hardware. The TypeZero algorithm and Dexcom (NASDAQ: DXCM) CGM are more important pieces of the puzzle and Tandem DOES NOT HAVE AN EXCLSUIVE WITH TYPEZERO.

The reality is Medtronic will not just stand pat and not fight back they will fight back with the biggest bat on the rack; price. Medtronic can afford to do this Tandem can’t. And yes, it is that simple. Tandem is living under the delusion that price won’t be an issue that payors will pay MORE for their new way cool whiz bang toy. The fact is, yes, those pesky facts again, is that payors don’t care about whiz bang way cool they care about money. There is no way in hell Medtronic won’t do everything within their power to protect the goose that lays their golden eggs. Medtronic is many things but stupid is not among them.

We have said it a million times any idiot can build an insulin pump, but it takes real talent to run a commercially successful insulin pump company. Think of it this way. The Chicago Cubs are one of the best teams in baseball. Two years ago, they won a World Series and even a White Sox fan must admit they have a ton of talent. The Cubbies are off to a rough start this year, guess they don’t like playing in the snow. Still we can’t and wouldn’t count them out as the team just has too much talent.

Tandem on the flip side is like the Cleveland Browns a team which hasn’t had a winning season since 2007. Over the past three seasons the team has won a total of 4 games including a grand total of 0 wins last year. Going into this season according to the Browns are 80 to 1 to win the Superbowl. The folks in Vegas have put the over/under on the number of games the Browns will win this year at 4.5, which means unless the folks in Vegas are way off the Browns streak of futility will continue.

See if Tandem had the talent and track record of the Cubs there would be reason for hope. We’d give them the benefit of the doubt that because of their track record and talent this rough start is just that nothing more than a rough start in a very long season. There is no reason to fire Joe Madden or make any other drastic changes.

Tandem is more like the Cleveland Browns a team which has a lousy track record and is devoid of talent. Unless you’re a crazy Browns fan there is no reason to be optimistic going into the season. The Browns also have something else in common with Tandem as their head coach Hue Jackson is reportedly making about $4 million per year. Which when you think about it that isn’t bad for guy with a .031 winning percentage. A comp package even Kim envy’s, guess he’ll have to suffer with his $1 salary and boatload of stock and stock options. Poor thing.