The Recycle Bin

The Recycle Bin

Yesterday Valeritas (NASDAQ; VLRX) announced they had appointed Peter Devlin as Chairman of the company’s Board of Directors. Now if that name rings a bell it should as Mr. Devlin was Insulet’s (NASDAQ: PODD) Chief Commercial Officer until August of 2015. Now we will not comment on the role Mr. Devlin played at Insulet all we will say is that he like every other member of the old management team has been replaced by CEO Pat Sullivan. And while Pat is many things stupid is not among them.

This announcement on the eve of our annual wacky dance severed as reminder of something we say frequently that when it comes to this wacky world of ours making the damn thing is the easy part actually running a successful company is the hard part. That in the end its not way cool whiz bang that wins but talent. That the difference between making money for stakeholders and helping patients at the same time comes down to talent not toys.

It continues to amaze Diabetic Investor just how many executives continue to get recycled. How these executives, many of whom who have never demonstrated the ability to run a successful company, continue to get rehired. They find themselves with cushy seats on corporate Boards where they continue to demonstrate they care more about their wallets than they do about patients.

We hate to dump on the many good people at Tandem (NASDAQ: TNDM) but they are almost the poster child for what we are talking about. Here you have a company with an innovative product that is liked by patients, physicians and CDE’s. The product isn’t perfect but then again, no product is or ever will be. Yet thanks to inept management and a complacent Board of Directors Tandem is headed for bankruptcy. This company has blown through millions of dollars, management has been very well compensated along with the Board members, they are not the ones who will get screwed.

No when Tandem finally implodes it will be their patients, who else, who will get screwed. It will be these people who must find a new insulin pump, a device that literally is life sustaining for these patients. It will be these patients who must not only learn a new system but deal with the getting this new system paid for. Who knows whether their coverage will pay for the new pump or how much of this cost will come out of their pockets. One thing is certain Tandem management will walk away just fine and it won’t be their responsibility.

And you know what, look for ex-Tandem management to be recycled and rehired by another diabetes device company. Look for this cycle to repeat itself just as it is repeating itself at Valeritas a company that has proven they are very good at losing money but not much else. A company which like others is paying management very well while the company loses millions.

Yet here is the real killer and we use the word killer for a reason, with all the money that’s been spent, all the fat management salaries, the cushy deals given to members of corporate Boards what has changed for the patient? Yes, we have better drugs and devices that is obvious. But have patient outcomes, what is supposed to count improved? The truth is no patient outcomes have not improved as nearly two thirds of patients are not achieving good control.

Looked at another way have these new drugs and devices been worth their additional cost? Again, we would say for most of, many of patients the answer is no. Look at the quest for an artificial pancreas a system which is used by a handful of patients and costs upwards of $8,000+. As everyone knows we are strong advocates of CGM but as great as these systems are, there is no question that cost is one reason more patients are not using this great technology. Think of the millions wasted in the pursuit of a non-invasive glucose monitor a system which even if here would do nothing to improve patient outcomes.

Listen we have no problem with executives being well paid or Board members having cushy comp packages, this is America. And we do not want to lump all executives into one group, there are a select few who have demonstrated an uncanny ability to respect the patient and run a very successful company at the same time. These ultra-talented individuals have shown that balance can be brought to the system that it is possible to help patients and make money for stakeholders. However, as we say over and over talent is short supply these days.

It’s about time that the recycle bin be replaced with the trash can.  As Momma Kliff used to say; “It’s foolish and stupid to believe that talent will magically materialize when talent did not exist before. That a change of scenery will also bring with it a sudden burst of talent.”