No one left to blame
This morning we learned that Insulet (NASDAQ:PODD) received a warning letter from the U.S. Food and Drug Administration over some of the company’s insulin pumps. According to the company the letter was received on Monday and was related to certain lots of the EROS OmniPod’s that did not conform to the FDA’s final acceptance criteria. The company noted they did not expect the letter to have an adverse impact on operations. Although warning letters in the insulin pump space are commonplace given the way things have been going for Insulet this is last thing they needed.
Perhaps more concerning is how the company is performing, which by indications not very well. Investors should pay very close attention to the next earnings call, here’s why. Simply put they have run out of people to blame and there is no one else to throw under the bus. Yes the previous management team had a great deal to do with the current problems facing the company but they have already been thrown under the bus. Same goes for changes made to since the old regimen was given the boot. Put even more simply the current management team is now responsible for how things are going.
As we have noted in the past while we believe the new team in place is talented it’s also true they don’t know jack about diabetes. That this inexperience is costing them or as one ex-employee noted “Many of the things they are trying have been tried before and failed. It’s not like we didn’t try this stuff it just didn’t work.”
Given the current state of the insulin pump market time is not on Insulet’s side. As we noted Tandem is actively shopping themselves, Medtronic (NYSE:MDT) is reinvigorated and Animas, still a unit of Johnson and Johnson (NYSE:JNJ) is back in the game with the Vibe which thanks to working with the Dexcom (NASDAQ:DXCM) sensor is doing quite well. Insulet may be the only wireless option available but this uniqueness cannot change market dynamics or the fact the pod is still too costly to make.
Add in the fact that the usual suspects are in no mood to acquire any company which is not immediately accretive to earnings it’s highly unlikely Insulet will be acquired. This company which was promoting the fact that the OmniPod has been around for ten years still is not consistently profitable. That the uniqueness of the OmniPod has not translated into commercial success. That it’s easier to build an insulin pump then it is to run an insulin pump company. Seems we’ve heard that somewhere before.
So Pat this next earnings call is one you and your new team. There is no one else to be thrown under the bus.