The Medingo Saga Continues The Medingo Saga Continues
The Medingo Saga Continues
Many have been anxiously awaiting the emergence of a competitor to Insulet’s (NASDAQ:PODD) OmniPod system. Given the growing popularity of the OmniPod many naturally assumed that others would try and jump on the wireless insulin pump bandwagon. At nearly every conference Diabetic Investor ran into many OmniPod wannabes but none that seemed even remotely close to bringing a product to market.
The most anticipated entry into the market was supposed to come from Medingo a privately held Israeli based company. At the last ADA conference this past June the company was scheduled to make an appearance at an investors meeting put on by CANACCORD|Adams. For reasons which aren’t particularly clear the company left a packed room wanting as they never showed.
Yesterday the company announced several management changes and the departure of the company’s founder Dr. Ofer Yodfat.
Call Diabetic Investor just a little skeptical but we can’t help but think the company is having some major issues getting their Solo™ System to the FDA. Some would say that the announced management changes signal the exact opposite and that the company is establishing a US presence as they get ready to submit and ultimately market Solo. However given the company’s checkered history Diabetic Investor remains unconvinced that Solo is ready for prime time.
This wouldn’t be the first time everyone has jumped to the wrong conclusion about an OmniPod wannabe. Back before Animas was acquired by Johnson and Johnson (NYSE:JNJ) the company was touting their version of a patch pump. The same was true for market leader Medtronic (NYSE:MDT) who has publicly stated they too will have a patch pump on the market before 2010. Yet as we close 2008 and move into 2009, the OmniPod remains the only FDA approved wireless insulin pump on the market.
This first to market advantage and growing popularity of the system places a tremendous burden on whoever comes to market next. It also makes Diabetic Investor wonder why anyone would doubt that Insulet will eventually be acquired by a larger player or a glucose monitoring company looking to enter this high strip using market. The naysayers will surly point out the fact that Insulet is not yet profitable and their cost of goods is still too high. They will claim that the company cannot survive as they are burning through too much cash. Finally they will point to Medtronic the 800 pound gorilla of insulin pump market stating their system will be cheaper and more widely adopted among their huge installed user base.
All good reasons expect for some critical facts. True the company is not yet profitable but they are quickly approaching profitability. We’ll get a better picture of how their doing financially when the company announces earnings on Thursday November 6th. The earnings announcement should also provide a clearer picture on cash burn.
Diabetic Investor would normally agree that Medtronic’s entry into the market could pose a problem for the smaller Insulet. However, even with their huge installed user base one has to wonder would Medtronic aggressively pursue replacing their more profitable conventional system with a new less profitable technology. Unlike the conventional pump market where systems cost nearly $7,000 and first year patient starts adds another $2,000 in pump supply costs. Insulet has changed the pricing dynamic with their pay as you pump platform. Diabetic Investor isn’t sure that Medtronic could adapt to this new pricing structure without an uproar from their already unhappy and stressed sales force.
The fact remains that until someone else actually gets a product through the FDA and onto the market all this speculation is just that, speculation. While the supposed competition continues to stumble along, Insulet is out in the market, gaining share and developing advanced versions of the OmniPod. By the time anyone gets there, Insulet will roll out their new smaller pod and slimmer more patient friendly personal diabetes manager (PDM).
While the current economic crisis may have slowed Insulet’s path to being acquired, they remain one of the more valuable properties in the diabetes device market. The continued ineptitude of their supposed competitors only enhances their value.
