More problems for Roche’s insulin pump unit

More problems for Roche’s insulin pump unit

Yesterday Disetronic, the insulin pump company now a part of Roche, announced a voluntary nationwide recall of D-TRONplus power packs used in D-TRONplus insulin pumps. According to a press release issued by the company, “There is the real potential that the power pack could shut down the D-TRONplus Insulin Pump without any warning. If a shut down occurs, insulin delivery is interrupted. An interruption in insulin delivery may lead to uncontrolled diabetes mellitus, resulting in hyperglycemia, which may lead to serious patient injury and/or death. This is an Urgent Device Correction notification to health care professionals and their patients not requiring product removal at this time”

Since Roche acquired Disetronic, the company has had a series of missteps, not the least of which being their new Spirit which appears stalled at the FDA.

The insulin pump market has become a crowded and competitive field. Insulet’s OmniPod system continues to gain momentum even though the system is not yet available on a nationwide basis and the company has spent little on direct to consumer advertising. Medtronic (NYSE:MDT), the market leader in insulin pumps, received FDA approval for their Paradigm® REAL-Time system which combines insulin pump and continuous glucose monitoring technology. Animas, currently number two in terms of market share, is now owned by Johnson and Johnson (NYSE:JNJ), giving them the resources they need to compete more effectively. Even Deltec, a unit of Smiths, is getting set to introduce software improvements for their Cozmo insulin pump. Not to be left out is Abbott (NYSE:ABT) who has received FDA for their Aviator insulin pump which they hope to combine with their Navigator continuous monitoring system, another product that appears stalled at the FDA. Finally there are a host of companies looking to enter the insulin pump market either by copying the OmniPod or by giving away the pump and making money on the continued sales of pump supplies.

While the companies in the insulin pump business maintain that the market is growing at 15% per year, Diabetic Investor sees the growth rate being closer to 10% or 12% per year. With less than 400,000 insulin pump patients worldwide it makes one wonder why so many companies are chasing such a small percentage of the total diabetes population. For a company like Insulet, the hope lies in what happened with Animas, namely being acquired. JNJ, Roche and Abbott see the insulin pump business as way to increase sales of test strips for their glucose monitors. Insulin pump patients check their glucose on average 7 times each day, more than any other segment of the diabetes population. With a dominate market share of nearly 70%, Medtronic is content to maintain their dominance while they move closer to having the first closed-loop system.

Back when Roche acquired Disteronic the general belief was that the company would combine their line of Accu-Chek glucose monitors with Disteronic pump technology. Like JNJ, Roche has the financial and human capital to effectively compete in this crowded market. However, it’s unlikely Roche anticipated that more than 2 years would pass and they would still be awaiting FDA approval to market their new Spirit pump in the United States. Even if the Spirit received approval Diabetic Investor sees the Spirit as dead on arrival as the pump offers nothing new or exciting that would entice new or existing pump patients to use the system.

Diabetic Investor sees the insulin pump market as a two horse race between market leader Medtronic and newcomer Insulet. While Animas is working on their version of a disposable/wireless pump the system is still along ways off and their existing pump technology is basically me too technology. The company could also be facing intellectual property issues as Medtronic could claim the bolus calculator on Animas pumps violates Medtronic’s patents. Medtronic has already established precedent in this area after successfully forcing Smiths to settle a patent infringement lawsuit based on a similar claim. A settlement which has put Smiths in the uncomfortable position of basically paying Medtronic a share of the profits for every Cozmo pump sold.

Roche could salvage their Disteronic investment by taking an about face and acquiring Insulet. This would give the company state of the art technology and a leg up on JNJ, their closet competitor in the glucose monitoring market. The real truth about the insulin pump market is something Diabetic Investor has been saying for some time; the insulin pump market is not large enough or growing fast enough to support all the existing players. Without a bold move Roche could see their investment in Disteronic vanish before the Spirit pump makes it to market.

David Kliff
Diabetic Investor
847-634-4646 fax
224-715-3761 mobile