Nothing will change until it hits the bottom line

Nothing will change until it hits the bottom line

Remember that death is not an option; which is worse listening to another boring Medtronic (NYSE:MDT) earnings call or wondering when Sanofi (NYSE:SNY) will get around to closing the Bayer deal?

Although things aren’t great at Medtronic, the fact remains that while diabetes revenues aren’t growing all that much they aren’t declining either.  While everyone else in the insulin pump business fumbles about trying to figure out how to profitably take share away from Medtronic, the company continues to plod along with incredible consistency. Yes, there are signs that unit is having issues and there are the usual grumblings from their field sales force but the fact remains that unless management totally screws up there is nothing to indicate the unit is in danger of losing serious market share.

The harsh reality for Medtronic is nothing much will change until their mistakes cost them where it hurts most, the bottom line. We’ve said it before and will say it again; their systems by all reasonable measures aren’t the best available. This is true for both their insulin pumps and continuous glucose monitoring systems. It is also true that while not the best there is nothing out and out wrong with them either and put in the hands of a well-trained patient they will get the job done.

The fact is the enemy isn’t Animas, Insulet (NASDAQ:PODD), Tandem, CellNovo, Roche or Dexcom (NASDAQ:DXCM); the enemy is their own management team. If management continues to take their eyes off the prize then there is a chance for the competition to slowly eat away at their huge installed user base. If management returns to what made MiniMed great in the first place; putting the patient first, then they really don’t have much to worry about. And just to be clear here going back to the MiniMed name is nice but doesn’t mean squat if the company puts profits ahead of patients. Medtronic would be wise to remember that there was reason MiniMed was worth billions and not just because Al Mann could sell ice cubes to Eskimos.

Switching gears for just a moment Diabetic Investor, and everyone else in diabetes, continues to wait for the Bayer deal to become final. As we reported last week Sanofi (NYSE:SNY) has emerged as the leading candidate to buy Bayer’s diabetes device unit now that Panasonic has publicly acknowledge they have dropped out of the process. Yet in typical Sanofi fashion the deal is taking forever to close.  Under normal circumstances we would view this delay as a good sign; a sign that management has come to their senses and realized that paying over a billion dollars for this fourth place troubled unit whose customer base is not aligned with the existing Sanofi customer isn’t really a good deal after all. But this is the wacky world of diabetes and the word normal should never be used when talking about a diabetes device deal.