Such a deal

Such a deal

We came across this information yesterday;

“The European Investment Bank (EIB) and Cellnovo Group (“Cellnovo” or the “Company” CLNV:EN Paris), a medical technology company marketing the first mobile, connected, all-in-one diabetes management system, announce that they have concluded a loan agreement for €20 million (“the Agreement”) to support Cellnovo in its transition to full industrial-scale operations. The Agreement was signed on July 7, 2017 at EIB’s office in Paris, in the presence of Ambroise Fayolle, EIB Vice-President, and Sophie Baratte, Chief Executive Officer of Cellnovo.”

Since it’s been awhile when we last checked up on our friends in France, see Sanofi (NYSE: SNY) is not the only diabetes company that can chug down a bottle of Chardonnay, we thought we’d see how things are going. We should point out that when first started covering CellNovo it was located in the London area so we can’t necessarily blame the company for moving to Paris as London isn’t exactly known for its vast collections of wine or champagne, but we digress.

Anyway, here is what the company reported back on the 25th of July;

“Over the second quarter of 2017, Cellnovo recorded sales of €287.0k against €317.2k for the same period in 2016. Over the same period, Cellnovo shipped 59 new devices, bringing the total number of systems sold, since launch, to 688. Over the first half of 2017, Cellnovo reported a decrease in sales against the previous year with revenues of €472.6k (2016: €752.4). Sales continue to be limited by production capacity of insulin cartridges until the ramp-up to full capacity is achieved at the production line in Austria which is operated by Flex, the Company’s manufacturing partner. This decrease in sales reflects the Company’s decision to limit the number of new patients equipped with its system due to its in-house production of insulin cartridges being at capacity. As a result, the number of devices shipped in H1 2017 was limited to 97, versus 228 in H1 2016.

As of June 30, 2017, Cellnovo had a cash position of €7.0m. This amount does not include the €17.5 million raised through a capital increase from healthcare investors, nor any proceeds from the €20.0 million raised through a loan agreement with the European Investment Bank. These transactions, which were completed early July, enable the Company to extend its financial visibility to the end of the first half of 2019.”

Now we do not want to cast aspersions on our Merlot drinking friends, hey as I am constantly reminded Chardonnay is not the only wine, but again we digress. Getting back to CellNovo this report would seem to indicate that business isn’t so good so naturally the company is able to secure some additional financing. Yes, we know this seems somewhat strange but when it comes to insulin pump companies and sound financial decisions the two just don’t mix kinda like putting Miller Lite in a red wine glass. (See we even know that different wines go in different glasses, but again we digress)

It seems the folk at CellNovo have lots of faith in their ability as Sophie Barette, the company’s CEO has publicly stated Cellnovo is seeking to obtain 45,000 equipped patients by 2020. Just by way of comparison the OmniPod from Insulet (NASDAQ: PODD) became commercially available in 2005 and reached the 100,000-patient threshold back in November, or some 11 years after launch. So naturally CellNovo which has no presence in the US market and plans on a limited five city rollout here in the states will reach half that many patients in less than 3 years.

There is some precedent here however as Tandem (NASDAQ: TNDM) reached the 50,000-patient threshold pretty quickly. Let’s just hope that CellNovo does a little better running their company than Tandem has done running theirs. Yet given their respective paths and public statements these two companies do share more than a good bottle of champagne. Both have been able to bilk investors out of millions of dollars, excuse me that’s Euro’s for CellNovo. Both have shown an incredible propensity for chutzpah. And neither company or their respective Boards have a clue on how to run a commercially viable insulin pump company.

We used to wonder why these companies could secure financing. We wondered why each time they went back asking for even more they got it. We could not understand how the members of the board could be so clueless, did they not see these companies were being run into the ground. Then we realized hey this is the wacky world of diabetes where anything can and usually does happen.

Yes, we fell better when we remember that Roche blew over a billion bucks to acquire Disetronic. Or that Animas, bought by Johnson and Johnson for a few hundred million has never made money for the mothership and now cannot be sold because the mothership is suffering from valuation delusions. Let’s not forget about Deltec and the Cozmo or Roche doubling down and buying Medingo. Or what about Asante once the coolest thing around who then declared bankruptcy then bought for pennies on the dollar by Bigfoot.

Seriously it warms the sole to look back at these companies, all of whom who said they could compete with Medtronic (NYSE: MDT) only to fail miserably. Frankly this restores our faith in humanity. It makes us realize a few key facts about our wacky world;

1. There is no cure for stupid.

2. Stupid is as stupid does.

3. The surest way to get a small fortune is to start with a big one.

4. You can steal more money with a good PowerPoint presentation than you can with a gun.

5. When it comes to the insulin pump world any idiot can build an insulin pump but it takes real talent to run a successful insulin pump company AND TALENT IS IN SHORT SUPPLY THESE DAYS.

Momma Kliff used to have a phrase when something looked to good to be true and she didn’t want to insult anyone. She’s look the person straight in the eye and state; “Such a deal.” She’d then promptly walk away. Yep CellNovo such a deal.