Must be something in the water

Must be something in the water

Well it seems as though investors aren’t as dense as we thought they might be. We mention this as Valeritas has postponed their upcoming IPO which based on the mid-point of the offering would have raised $75 million. Valeritas joins Asante as the second insulin pump company to postpone their IPO.

Now Diabetic Investor does not take any particular delight in these postponements however this should send a strong signal to the many insulin pump wannabes that investors aren’t as dumb as they might think. That after looking at these offerings and the insulin pump market investors decided not to throw good money into a bad market.

Yet when it comes to Valeritas we can think of an additional reason investors are shying away. Location. Yes it seems the company is headquartered in … wait for it … Bridgewater, New Jersey. Now if that town rings a bell it should as it’s also home to another diabetes company which isn’t doing all that well. Yes Bridgewater is not just home to Valeritas but to that soap opera turned three ring circus Sanofi (NYSE:SNY). According to Google maps the two companies are less than 7 miles from each, a mere 12 minute cab ride.

Although we cannot confirm that potential IPO investors mentioned this fact among the reasons as to why they were shying away from the IPO but Diabetic Investor suspects it was on their minds. We can just imagine a potential investor coming out to Bridgewater to meet with management. Given the proximity of the two companies it’s a better than 50% chance this potential Valeritas investor would pass Sanofi’s headquarters.

Imagine for a moment the thoughts that must be going through the mind of this potential Valeritas investor. Given Sanofi’s track record in diabetes it’s not as if this investor would have positive feelings about the diabetes market. They likely are aware that other than Lantus, Sanofi has pretty much screwed up anything else they have touched in diabetes. They are also aware that without a major overhaul this once promising franchise will become irrelevant.

Yet on the flip side they also have hint of optimism as they also know that Sanofi has a habit of doing some very stupid diabetes deals. The most recent of course being their partnership with MannKind (NASDAQ:MNKD). Yes it would be easy for this potential Valeritas investor to think that they should buy shares as Sanofi is one of the few, perhaps only company, who would be stupid enough to acquire Valeritas. Remember Sanofi is the same company who believed that special lunch bags would sell more insulin so it’s not a stretch to believe they would blow a few billion to actually acquire a company with an insulin delivery system.

The fact that this system really doesn’t have a place in the market is of no consequence. The fact that payors won’t pay for it doesn’t matter either. The fact that insulin pens and syringes do the same job only cheaper doesn’t matter either. No if we have learned anything at all from the MannKind deal it’s that Sanofi is spending way too much time drinking wine and not enough time doing their due diligence. Now we have nothing against drinking wine and let’s be honest this is something Sanofi is very good at. However we’re not exactly sure it’s a good idea to make important decisions when the due diligence team has one Makers Mark too many.

Yet being headquartered in Bridgewater is not the only connection between these two companies. Nope according to the Valeritas web site CEO and President John Timberlake; “Before joining Valeritas, John was the Vice President of Diabetes Marketing at sanofi-aventis. In this role, John was responsible for the success of the diabetes franchise, which included brands such as Lantus®, Apidra® and Amaryl®. He also had extensive experience and commercial responsibilities for new products in development across multiple therapeutic areas including inhaled insulin and a wide range of other metabolic products and disease areas.”

Now we hate to break the news to whoever is writing John’s bio but we don’t think it’s a good idea to mention any association with Apidra – a colossal failure – or inhaled insulin – a colossal failure in the making.

Still the potential Valeritas investor just might think – ok looked at without the possible Sanofi acquisition there is no way we would touch the IPO with a ten foot pole. However Sanofi has done some pretty stupid things in the diabetes and the CEO of Valeritas knows this so even though an acquisition makes no sense whatsoever this is the wacky world of diabetes where anything can and usually does happen.

Given the delay with the IPO Diabetic Investor would guess that potential Valeritas investors did not see this connection between the company and Sanofi. That they likely looked at the deal and said thanks but no thanks, just as they did when they looked at the Asante IPO. Unlike the folks at Sanofi these investors do their drinking after a deal is done and not while analyzing a deal.