Too many cooks or maybe that’s crooks

Too many cooks or maybe that’s crooks

It’s almost ironic on the day when Lilly (NYSE: LLY) reports results that we have yet another company chasing the dream of building an artificial pancreas. Yesterday per a company issued press release;

“Senseonics Holdings, Inc. (SENS), a medical technology company focused on the development and commercialization of transformative glucose monitoring products, today announced a collaboration with TypeZero Technologies, Inc., a personalized diabetes management company, and Roche Diabetes Care, Inc., a global leader for diabetes management systems and services, to develop a long-term automated insulin delivery system.”

Ok let’s count’em up besides Medtronic (NYSE: MDT), we have Insulet (NASDAQ: PODD), Tandem (NASDAQ: TNDM), Abbott (NYSE: ABT) via their connection to Bigfoot and yes even Animas developing some type of closed loop insulin delivery system i.e. the Holy Grail of diabetes devices a true artificial pancreas. All these projects to reach how many patients?

Let’s get something out of the way right now we are not against the development or pursuit of a closed loop insulin delivery system. What we are against are stupid business decisions which have no hope of being commercially successful.

Yes, the Type 1 community will be up in arms over this view but then again, they are not stakeholders in these companies for if they were they just might ask management why they are spending precious time and money on these moonshot projects. Projects which even if successful have little if any chance at making money.

Worldwide there are approximately 1 million insulin pump patients, approximately 30% of all Type 1 use an insulin pump, the insulin pump market is growing in the mid to low single digits. Put in simple terms the insulin pump market is not large enough nor is it growing fast enough to support all these projects. It’s also a myth to believe that a true closed loop insulin delivery system will increase the number of patients who select insulin pump therapy.

Just look at the launch of the 670G, Medtronic is not adding new patients because of the system they are simply moving patients from one system to another. They are NOT expanding the number of insulin pump patients. They may be taking share from the other players but they are NOT converting patients from multiple daily injection (MDI) therapy to the 670G. Heck they can’t even supply the limited number of 670G patients with sensors now which basically makes the 670G just another insulin pump.

For the past 20 or so years we’ve been hearing the same thing from every insulin pump company, that there is lots of room for growth as only 30% of Type 1’s use a pump and less than 5% of insulin using Type 2’s use a pump. And for the past 20 years or so we’ve been telling everyone there are several reasons why this market hasn’t grown all that much. Reasons that won’t change even with the introduction of new toys like a closed loop insulin delivery system. The fact is we do not need six of these suckers.

Now at this point we’ll hear that familiar refrain that “our system is better than their system” that “we stand a chance of going head to head against Medtronic”. That is complete and utter bullshit and we’re sorry we must be this blunt it just happens to be the truth. None of these companies have the access, scale and huge installed user base that Medtronic has. None of these companies can leverage their existing user base as Medtronic is doing. None of these companies, apart from Insulet, have proven they can run a conventional insulin pump company successfully let alone handle the additional complexities an artificial pancreas brings to the table.

Listen just ask any Medtronic patient on the 670G what it’s been like and they will tell you that even with all the advanced planning done by Medtronic customer service is overwhelmed and as we have mentioned the sensors that run this toy are now on back order.

We find it laughable that these companies who can’t even make a simple peanut butter and jelly sandwich think they can get this complex toy through the FDA, onto to the market, successfully compete with Medtronic and make money. Seriously these companies stand a better chance at winning tonight’s Mega Millions jackpot – a nice $262 million which come to think of it is about how much money Tandem needs to survive, but we digress.

Now the surest way to know these projects are nothing more than pipe dreams, publicity stunts really, is the West Coast Mafia will fall in love with them. Yes, they will hail these efforts as a major advancement for the Type 1 community, which they aren’t. They will talk about all the major benefits of these toys, which aren’t that big of a deal. And they will completely ignore the fact that this is all about money and that none of these projects stand a chance. To be completely honest these people have never met a toy they didn’t like.

Keep in mind that these are the same people who seem to believe that Tandem will survive. They believe the lies being told by Tandem management. What was that P.T. said?

Listen we hate to use those pesky facts but in the face of ignorance facts have a way of setting the record straight, so here we go-

1. Animas has NEVER made money for Johnson and Johnson (NYSE: JNJ) – it’s for sale and no one wants to buy it
2. Tandem is also up for sale has blown through millions and no one wants to buy them either
3. Roche blew a little over a billion to buy Disetronic and where is Disetronic today?
4. Roche doubled down and bought Medingo and where is the Solo pump today?
5. Smiths Medical had to close Deltec and the Cozmo.
6. Asante was sold to Bigfoot in what basically was a fire sale.

Do we need to continue? Is there not a pattern developing? And people think these companies will be able to develop an artificial pancreas why?

The truth is and we know people don’t want to hear the truth is we do not need all these projects and we could argue that we don’t even need an artificial pancreas at all. Yes, there is a small set of patients who will benefit from this way cool whiz bang toy but this small group does not justify the massive investment in this moonshot. The reality is people are fascinated by the Star Trek like projects without considering whether these way cool whiz bang toys are even needed in the first place.

The 670G launch should be lesson to everyone this is not a simple if we build it they will buy it strategy. Yes, it is an advancement but it is no means an artificial pancreas and proving to be a problematic launch for Medtronic. As we stated even if the company did everything right, which they haven’t, this was a major undertaking.

There’s an old saying that too many cooks spoil the broth. Or as Momma Kliff liked to say; “The only difference between a cook and a crook is the tools they use.”