Not making this up

Not making this up

“LabStyle Innovations’ Dario Diabetes Management System Featured on Numerous American News Outlets” – this is the headline from a press release. Yes LabStyle Innovations (NASDAQ:DIRO) issued a press release to tell members of the media that the company has been in the news recently. Even crazier someone actually tweeted about this press release that says the company has been in the news recently.

Having been around this space for a few years Diabetic Investor sensed that there must be a reason why Dario has been in the news so much and not just because they have a good public relations firm. Well we found out why by looking through the company most recent 10Q is issued back on August 12th. A 10Q which contains the following statement; “During the six month period ended June 30, 2015, the Company incurred operating losses and negative cash flows from operating activities amounting to $3,289 and $2,832, respectively. The Company will be required to obtain additional capital resources in the near term to support its products’ commercialization, ramp up manufacturing and maintain its research and development activities. The Company is addressing its liquidity needs by seeking additional funding from public and/or private sources and by commencing its commercial sales.”

Simply put things aren’t going well for the company even though they a way cool whiz bang product.

Given that LabStyle is a publicly traded company we decided to take a look at how stakeholders have done since the company went public back in April 2013. Well as it turns out not so well as shares have fallen almost 90% and no that is not a misprint since the company went public. Keep in mind that besides the proceeds from the IPO the company has raised over $23 million in venture money.

Now we are not necessarily dumping on LabStyle rather trying to prove a point here as it’s about time everyone begins to understand that this is called the BUSINESS of diabetes. Listen a ton of money is being thrown around these days and its beginning to look as if investors have forgotten this fact. Recently we’ve written about all the deals in the dumb pump space before that it was all the money being thrown at cloud enabled glucose monitoring companies. Before that it was diabetes app companies. As Roseanne Roseannadanna used to say, “It’s always something.”

Yet it seems many of the investors have forgotten or have ignored the fact that business of diabetes isn’t what it used to be. That companies can no longer make test strips for pennies and sell them for dollars. That when it comes to insulin delivery syringes and insulin pens work just fine and are cheaper than a dumb patch pump. That there are thousands of diabetes apps that do the same thing the same way.

Now this doesn’t mean that every company will end up like LabStyle but the reality is most will.

The truly sad part here is that investors continue to fall for the biggest scam going – the epidemic growth rate of diabetes. The small piece of a huge pie. The fact that the major players in this space and new cash rich tech companies entering this space will pay handsomely to buy these start-ups.

Frankly Diabetic Investor can’t blame them one bit as we’ve seen one stupid deal after another. That no matter how much we try and warn these people that they are making a major and very costly mistake, like crack addicts they just can’t stop themselves.

If anyone was looking for another reason why we call this wacky world of diabetes all they have to do is look at the deals that have been done in this space and not just today. Take a walk down memory lane and they will find plenty of examples of good money thrown into bad deals. They will find that investors are prone to drink the kool aid rather than perform solid due diligence. That investors just love the build the better mouse trap story.

So it really shouldn’t surprise anyone when a company issues a press release that says they have been in the news a lot lately. As much as we wish we were making this up we’re not.