The Numbers Don’t Matter

The Numbers Don’t Matter

Take a moment and think about how blissful life is at Medtronic (NYSE: MDT) these days. They have the hottest thing going in insulin pump technology with the 670G. Their main competitors, Tandem (NASDAQ: TNDM) and Animas, still a unit of Johnson and Johnson (NYSE: JNJ), are either going bankrupt or floundering. Insulet (NASDAQ: PODD) for all practical purposes has become their most formidable competition and they don’t have a sensor augmented system. In the battle for CGM supremacy their main competitor Dexcom (NASDAQ: DXCM) is under assault from the Apple pickers.

We hate to be crass about this but does it really matter what their results were for their fiscal fourth quarter. Although the comparison is not totally accurate Medtronic Diabetes is like the very first Dream Team. It was never a question of whether this team which included MJ, Magic and Larry Bird would win the gold medal, that was never in doubt. The only question was would any team come within 20 points of this team full of future Hall of Fame members. Anyone who followed this team knew that practices where tougher than the games themselves.

While we would not call the team at Medtronic Diabetes the Dream Team, they have done what they are supposed to do; namely they haven’t screwed up. They have not cooked the goose that lays the golden eggs, they continue to nourish the goose, which is getting pretty fat these days. We wouldn’t say that any idiot could run Medtronic Diabetes and make money these days but given the competitive dynamic this unit would make money if Sanofi (NYSE: SNY) owned it, well maybe not.

To their credit this team that is running Medtronic Diabetes are taking full advantage of the hand they have been dealt. Unlike past teams they fully understand that opportunities like this don’t come along every day.

To us the real question isn’t whether they will be successful or not, no the real question is can anyone come within 20 points of them. It’s just a matter of time before Tandem goes under which will only expand their market share and given that JNJ is letting Animas twist in the wind while they seek a buyer for the unit it’s up to Insulet and the fact is Insulet is seriously outgunned.

In the CGM area we aren’t overly worried about Dexcom and let’s be honest Medtronic will sell more sensors by default. Dexcom continues to have the better sensor but Medtronic has a huge installed base which is only going to get bigger. Dexcom’s future thankfully is not directly tied to insulin pumps while Medtronic’s CGM growth is.

As Momma Kliff used to say; “Not screwing up is half the battle.”