Some good news, some bad news

Some good news, some bad news

Now that Insulet (NASDAQ:PODD) has received FDA approval for their new smaller, less costly to make pod the company has cleared an important hurdle. That’s the good news. Unfortunately the impact of competitive bidding is hurting the company with one of their more questionable moves the acquisition of Neighborhood Diabetes. According to the company due to the impact of competitive bidding Neighborhood will no longer service Medicare patients. With a box of 50 test strips being reimbursed at less than $11 we don’t question this decision, however looking back one has to wonder what exactly did Insulet get for $63 million.

The company also made it pretty clear that their unnamed partner who will replace Dexcom (NASDAQ:DXCM) is none other than Abbott (NYSE:ABT). While the company did not name Abbott specifically they did state they were working with an existing blood glucose monitoring company who has experience in continuous glucose monitoring, and the only company that fits that description is Abbott who just happens to be trying to re-launch the Navigator.  It is also known that Abbott had been shopping Navigator to other companies. Lastly it should not go unnoticed that Navigator was originally developed by Therasense, the former domain of  Charlie Liamos and Mark Lortz both of whom are now associated with Insulet.

While Diabetic Investor does not have an issue with the company working with Abbott, however we have a real issue with the proposed design. According to Insulet the sensor will become part of the pod, which basically means the patient will have insulin delivered out of one side of the pod and the glucose sensor will come out of the other side of the pod. Additionally with the sensor being built into the pod this also means the sensor will be disposed of every three days when the pod is disposed of. Yes it is true that patients would prefer to wear fewer devices, but is also true that patients using CGM regularly wear their sensor for longer than 7 days and that readings actually become more accurate the longer the patient wears the sensor. (We are obviously speaking of the Dexcom system here.)

Having spoken with several establish experts in CGM technology many question the wisdom of locating the glucose sensor so close to wear insulin is being delivered.  Theoretically it is possible but as we have seen so many times before what looks good in early development fails to work over the long term. Even if they do clear this hurdle there is also the issue of cost, as a combo pod will likely cost much more and patients would not have the luxury of extending the life of the sensor, as they do now. Finally given Insulet’s history one has to wonder what happens if the glucose sensor fails, does this mean the entire pod must be replaced or does it mean that the patient must go without continuous readings until the insulin delivery side of the pod expires.

The harsh reality here is that Insulet got greedy when it came to a combo product and in our opinion made a major mistake ending their partnership with Dexcom. The company can dance around this all they want and provide every explanation for ending this partnership they can think of. Yet once again this partnership ended not because someone else had better technology, this partnership ended because Insulet wanted to make more money from the sale of more expensive pods. Never mind that the product their developing is years away and might never make it to market, this is all about money.

On balance Insulet continues what has become standard operating procedure for the company, one step forward then two steps back. Yes it’s great that the Eros pod is finally here but the $63 million spent to buy Neighborhood has been exposed for what it always has been, a major waste of money and ending the partnership with Dexcom, no matter how they explain it is another less than brilliant move. Perhaps one day the company will learn that if they really want someone else to come along and buy them, better to keep moving forward than to have this constant roller coaster ride filled with way too many ups and downs.