The Big Picture

The Big Picture

We would say that this been a wacky week in diabetes but that’s beginning to be redundant. Let’s start with our friends in San Diego the good people at Tandem (NASDAQ: TNDM). Over the past 5 trading sessions shares of the company have fallen 30% bringing their market cap to a miniscule $27.91 million. We attributed this fall to the simple fact that the company is running out of money and with their lenders breathing down their necks that the company was on the verge of collapsing.

Well as it turns out the company will attempt to pull a rabbit out the hat and will announce a reverse stock split when they report earnings on July 27th. This move will accomplish two things, first it will prevent shares from being delisted and second it will allow them to do another capital raise. It’s the second part of this move which seems like a stretch as the company has been shopped to everyone and anyone plus they have spoken with numerous potential investors all of which resulted in nothing.

The fact is Tandem does not need a little amount of money, by our estimates the company needs at minimum another $200 million just to have a chance. Yet this management team and the company’s board of directors is under the delusion that investors will pony up for yet another capital raise. Which given this is the wacky world of diabetes could happen. Listen we’ve been around the block a few times and have seen some incredibly stupid things happen among them we have seen millions wasted investing in companies like Tandem which have an ice cubes chance in hell of surviving over the long term.

Besides the additional capital required to survive the company itself needs a complete overhaul. Isn’t it time the board of directors realize that change is needed or are they just blind to what the current team has done to this company. The facts speak for themselves yet the board for reasons only known to them continue to ignore the facts.

The reality here is that more money will not solve anything if it is not well spent and this team has proven they are not capable of spending capital wisely. They have proven what we say all the time anyone can build an insulin pump but it takes real talent to run a commercially viable insulin pump company. Quite frankly changes should have been made long ago which proves that it’s not just the management team that lacks talent and this talent void extends to the board of directors.

Just in case anyone has forgotten the goal here is to create stakeholder value not to destroy it.

Let’s head north from San Diego up to Mountain View and our friends at Bigfoot who secured themselves a CGM. Yes, their deal with Abbott (NYSE: ABT) is a positive one assuming of course Abbott can get the Libre approved here in the United States. As we have noted in the past the Libre technically isn’t a full blown CGM system as the system lacks alarms, etc. However, like every CGM system when the damn thing works patients love it and it is fair to say that CGM as a category is the most impactful device ever invented for ALL patients with diabetes.

Still history seems to be repeating itself with Abbott who once again has miscalculated how the FDA thinks. They did this years ago when they were trying to get the Navigator approved and believed they could swing for the fences and go for a non-adjunctive claim, something the FDA clearly wasn’t ready for at the time. Well this time around the problem seems to be the fact that the Libre does not need to be calibrated and again the FDA is struggling to wrap their arms around this.

Diabetic Investor has spoken with several experts in the field and the general consensus is that the Libre for the most part is a good device but not a device devoid of problems. Now none of these problems are unfixable that’s the good news. The bad news is the FDA just isn’t comfortable approving a device that does not require any calibration when that device has holes in performance. We believe the FDA will eventually get there but just as it took them years to approve a CGM as a replacement for finger sticks we see them taking their sweet time approving any CGM without the need for calibration.

This is one reason we don’t see this deal between Bigfoot and Abbott hurting Dexcom (NASDAQ: DXCM) in any way. To us it’s funny that every time any deal is done or rumored in the growing CGM space people think this bad news for Dexcom. This not only happened yesterday but when rumors were swilling that Apple, the makers of all things way cool, would enter this space.

Well as it turns out what Apple has doesn’t work and it was the Dexcom sensor that Apple CEO Tim Cook was wearing, so much for Apple hurting Dexcom.

What hurts Dexcom is not Bigfoot/Abbott or Apple or any other of the CGM wannabes. What hurts Dexcom, and this is only in the short term, is the ineptitude of their insulin pump partners. Tandem, Animas and Insulet (NASDAQ: PODD) are the problem not Dexcom. But the funny part is no one seems capable of understanding the long-term picture for Dexcom.

The Dexcom/Google slap it on turn it on sensor is the goose that will lay lots of golden eggs. The issue for Dexcom is to keep moving this product forward while doing their best to deal with the problems created by their insulin pump partners. Given their experienced and ultra-talented management team we have no doubt they will navigate these short-term issues until this product is ready for primetime.

Since we’re still in Mountain View let’s talk about the latest news from the folks at Glooko. This week the company and Novo Nordisk (NYSE: NVO) unveiled … wait for it … yet another app that helps patients more effectively dose their insulin.

Now we don’t want to make light of this announcement and state that everyone has something just like this but well that’s true. Frankly you can’t swing a dead cat without hitting an app that helps patients better dose their insulin. Let’s be clear we are in no way saying this is a bad thing rather that apps such as these are becoming, what else, but commodities.

The events of this week are just one more example of how many miss the bigger picture as to what is going on in our wacky world. Not surprisingly the focus is on the short term and not the future. Some of this is understandable yet for those who cannot see past the short term they will miss some great opportunities. As Momma Kliff used to say; “It’s easy to see what’s directly in front of you, anyone can do that. Yet only a select few have that unique ability to see things not just as what they are but what they will be.”