One down, one to go
It’s now official Asante, the makers of the Snap insulin pump, has withdrawn their request to go public. The question now becomes when Valeritas, the makers of the V-Go patch pump, follows suit and withdraw their currently delayed IPO.
Now Diabetic Investor doesn’t want to say we told you so, but we did. To be honest investors should be thanking the good people at Asante and Valeritas for sparing them the pain of watching their investments decline in value. Yes we know the investment bankers and existing stakeholders are unhappy as the bankers are missing out on some nice fees while the existing stakeholders will have to find another way to cash out.
Yet when looked at realistically the last thing needed was more insulin pump companies going public. As we noted just the other day when looking at Insulet (NASDAQ:PODD) and the problems they are facing, this is not an easy market at the moment. Medtronic (NYSE:MDT) is about the only insulin pump company who’s able to make money. Animas, still a unit of Johnson and Johnson (NYSE:JNJ), has never made a profit and they have almost 20% of the pump market.
The scary part here is that while Asante and Valeritas aren’t going public, this does not mean others won’t wait till the dust settles and make a run at going public. As long as investment bankers can make nice fees combined with the ability to find suckers to buy shares we will see other insulin pump companies IPO’s. Heck it wouldn’t surprise us if Asante and Valeritas come back to the table at some point.
The fact is Diabetic Investor does not have anything against Asante or Valeritas per se. The reality is it’s the dynamics of the insulin pump market which we see as making life miserable for anyone in the market who’s not named Medtronic. Now it’s possible that companies like Asante or Valeritas have a place as part of a larger diabetes device company, someone who has the vision to sell diabetes management systems. But as stand-alone entities, sorry that dog don’t hunt.
This is the reality that is also facing Insulet, Animas and anyone else who wants to be in this market. Since no one has found a profitable formula for unseating Medtronic for market supremacy, these competitors in order to survive have to find an alternate path to grow. About the only way this happens is to become part of a system, a system which contains not just the hardware used by a patient but also contains the software and/or support the patient needs to achieve better outcomes.
As we move into the future of outcomes based reimbursement the hardware a patient is only important to the extent of how it fits into the patient’s diabetes management system. Truth is while there are minor differences between insulin pumps it really doesn’t matter which pump a patient uses. Like glucose meters all insulin pumps do basically the same thing the same way. Therefore in the future as we move away from fee for service reimbursement diabetes device companies will also have to adapt rand realize that the money isn’t in the hardware but the outcomes this hardware helps to make possible.
With every device communicating with a patient’s smartphone which in turn shares all this data with the patient’s diabetes management team which hardware is used is almost immaterial to the extent that it works properly. Again it’s not the hardware per se that matters it’s how well this hardware is used that does.
At some point in the future as interconnected diabetes management (IDM) becomes more the norm and not the exception someone will realize that better to sell diabetes management systems not individual pieces of the system. That day is coming as all the pieces are out there to Diabetic Investor it’s only a matter of time before they are comingled into one box. Until that day gets here however it’s difficult if not impossible for companies like Asante or Valeritas to grow as stand-alone entities.
