The Rumor Mill
Rumors are swirling that Johnson and Johnson (NYSE:JNJ) is getting to set to buy MiniMed from Medtronic (NYSE:MDT). While Diabetic Investor does not normally comment on rumors, this particular rumor may have some substance. JNJ has recently reorganized creating a Comprehensive Care unit which includes LifeScan and Animas. The two companies recently announced a deal giving LifeScan glucose monitors the exclusive right to communicate with MiniMed insulin pumps in the US. It has also been speculated that the two companies have been working on a second agreement which would allow the Guardian RT continuous glucose monitor to communicate with future versions of Animas insulin pumps.
Diabetic Investor found it interesting during Medtronic’s most recent conference call they publicly stated their continuous glucose systems were generating sales at a $50 million run rate. As per their usual style the company provided no specifics on how they arrived at that number or how many systems are in the market or what the sensor usage rate is. Based on our knowledge of the CGM market we believe this number is on the high side as users of the MiniMed system have reported several issues with the product.
However, it is well known that MiniMed is having a difficult time in the insulin pump market. Animas recently introduced a new pump that has been well accepted and the OmniPod from Insulet (NASDAQ:PODD) continues to gain traction. While MiniMed still holds a commanding presence in the market competitors are slowly nibbling away.
The company has also experienced a high turnover rate in their sales force and have placed greater demands on their sales people. Insulin pump sales are difficult enough without the added pressure of ever increasing quotas.
Finally the company has always struggled with 24x7x365 customer service demands of running an insulin pump company.
Adding credence to this rumor is JNJ’s well known preference to acquire company’s rather than build systems. JNJ also understands the diabetes market very well and has the human and financial capital to drive sales. Further driving this deal could be the lack of progress JNJ has seen in their own CGM project. The company knows the future for the insulin pump market is integrated systems which combine an insulin pump with a CGM. Medtronic is well ahead of the competition in developing a closed loop insulin delivery system and owns a wealth of intellectual property.
While this is just a rumor for now Diabetic Investor senses something in the works. Stay tuned.