Pain at the pump
Yesterday afternoon provided confirmation of something we’ve been saying with frequency – practically anyone can build an insulin pump however it takes real talent to run an insulin pump company and right now talent is in short supply. This was evident when looking over the results of Insulet (NASDAQ:PODD) and Tandem (NASDASQ: TNDM) reported late yesterday. Looking at the companies individually there is no other way to describe Insulet results as just plain awful. Tandem on the other hand held their own and unlike Insulet seems to have a better handle on where they are going.
Given that Pat Sullivan is no longer new to Insulet we cannot necessarily say that these poor results were inherited from the previous management. The fact is at some point Pat and his newly assembled team must accept ownership for the decisions they make. Blaming the previous management team will only buy so much time and quite honestly time is not something Insulet has.
As we noted after the last earnings call Pat is desperately trying to transform Insulet from a diabetes company into a drug delivery company. That his main goal is actually the same as the team he replaced, make Insulet an attractive takeover candidate. Yet in his zest to transform Insulet he must remember that like it or not diabetes is the main source of revenue and this portion of the company must do well if the drug delivery side is ever to stand a chance at developing.
This is why Pat faced questions about his newly assembled team, a team which is notably devoid of any diabetes experience. As we have noted in the past while experience in this wacky world is not a prerequisite to helping transform the company this decision to assemble a team completely devoid of diabetes experience is looking questionable. The simple fact is the insulin pump market is unlike any other segment of the diabetes market. While we’re sure these people are talented we’re not sure this baptism under fire, this lack of diabetes experience can be viewed as a positive.
Considering shares of Insulet are getting hammered today, rightfully so we might add, the question is will this team be given the time they need to transform the company and as we noted earlier time is not something Insulet has on their side.
Tandem on the other hand is holding their own. Unlike Insulet, the company is focused on running an insulin pump company. The company also has another advantage as they are much closer than Insulet at integrating the Dexcom (NASDAQ:DXCM) CGM system with their system. They have seen how well the Animas Vibe is doing and realize that to remain competitive they must get this integration completed. They know that the future for the insulin pump market is sensor augmented pumps.
Unlike other segments of the diabetes market, insulin pump patients are the most educated and proactive. Given the nature of insulin pump therapy this is understandable. No other group of patients are as vocal and right now the hottest thing going is sensor augmented pumps. This is another reason why the Vibe is off to such a strong start as these very vocal patients are thrilled there is now a pump that works with the Dexcom system. These are the same patients who have also been talking about the Apple like interface of the Tandem pump.
Again as we stated before the Vibe isn’t doing well because of the pump, the Vibe is doing well because it works with the Dexcom sensor. Given the more patient friendly interface of the Tandem pump Diabetic Investor would anticipate that when combined with the Dexcom sensor this integrated system will do equally as well.
This situation is another reason Insulet does not have time on their side. Yes they are still the only commercially available wireless or tubeless system on the market. However this one advantage will not offset the fact they system is not yet integrated with the Dexcom system. As much as patients may prefer to be tubeless they also understand the value of a sensor augmented pump. Given the option Diabetic Investor suspects that patients would rather have a Tandem pump that works with the Dexcom system than an Insulet system which does not.
Looking ahead given where Insulet seems to be going we see things getting worse, possibly much worse, before they get better. On the flip side should Tandem play their cards right it will be them and not Insulet who becomes an attractive takeover target. The harsh reality is it looks like more pain at the pump for Insulet.
