Medtronic Reports
This morning
Medtronic (NYSE:MDT) released results for their first quarter of fiscal year
2010 and for their diabetes unit it really is more of the same. The unit
continues to plod along with international sales showing solid results. Here in
the US the unit continues to deal with strong competition from Animas and
Insulet (NASDAQ:PODD) who continue to eat away at Medtronic’s insulin pump
market share.
Listening to
this morning call Diabetic Investor was amused by the company’s explanation of
the Quick-Set recall. Once again company officials tried to minimize the recall,
first by calling it a field action and second by stating they responded quickly
to rectify the problem. For reasons only Medtronic officials seem to understand
they cannot come to grips with the fact that it’s ok to say the word recall. The
fact is this was a full blown recall and calling it a field action only
reinforces Diabetic Investor’s belief that company has lost its focus.
The fact is
the insulin pump/continuous glucose monitoring market is becoming increasingly
competitive. This is no longer a market where MiniMed rules and everyone else
is an after-thought. Besides Animas and Insulet making inroads in the insulin pump
area, Dexcom (NASDAQ:DXCM) is proving to be a formidable competitor in the CGM
market.
It is also
becoming quite clear that the company has strayed from the values that made the
company the dominate player in the insulin pump market. As Diabetic Investor
has mentioned several times it’s no big deal to make a pump, it is however a
huge deal to sell to and support insulin pump patients. Under tremendous
pressure from management to increase sales, Medtronic sales reps have resorted
to childish sales tactics to meet their ever increasing sales quotas. Hardly a
day goes by when Diabetic Investor doesn’t hear that these reps are telling
physicians and patients that either Insulet or Dexcom is going out of business.
To Diabetic Investor this just one more sign that the company has no coherent
strategy to stop share erosion.
Looking
towards the future Diabetic Investor can see why the company is worried as
their patch pump which was supposed to come to market in 2010 has been pushed
back to 2011. This delay comes on the heels of the recent approval of the Solo
MicroPump from Medingo. It is also well known that Insulet will soon launch an
updated version of their OmniPod insulin management system with a new smaller
pod. This new pod has the additional benefit of carrying a lower cost of goods.
The company
is also aware that Animas will soon have a pump that communicates with the
Dexcom CGM. Should Johnson and Johnson
(NYSE:JNJ) decided to pull the trigger and buy either Insulet or Medingo, the company
would be well positioned to take even more share from Medtronic.
This leaves
Medtronic with their continued effort to develop a closed-loop insulin delivery
system as a way to differentiate themselves from the competition. Given the
current economic environment and healthcare reform Diabetic Investor doesn’t
see a closed-loop system as the answer. Conventional insulin pumps are already
quite expensive and the trend is moving towards lower cost systems not higher
cost systems.
Back in the
day MiniMed was the undisputed leader in the insulin pump market because they
put the patient first. Today the company is mere shell of what it once was.
Customer service once the best in the business has become so bad that it is now
costing the company to lose customers. Besides offering products that are on
par and in many cases better than what Medtronic offers, the competition hasn’t
lost sight of the fact that when it comes to the insulin pump market technology
comes second to taking care of the customer.
