The silence is deafening

The silence is deafening

Since Insulet (NASDAQ: PODD) has decided to go radio silent we can only speculate as to why they have chosen not to defend themselves against some very serious charges. Why they chose to issue a statement to only a select few. Why they did not address this issue at their investor day. Why after repeated attempts to tell their side of the story they have chosen to remain silent.

By way of comparison look at what Amylin did while facing a similar situation over Byetta usage and pancreatitis. When these reports started to surface, the company did not go silent they did the exact opposite. Amylin played offense not defense, going to great lengths to show that patients using Byetta had a lower incidence rate of pancreatitis than patients with diabetes overall. Yes, some damage was done but the company limited the damage and was able to change the narrative.

What’s more perplexing in the Insulet case is the reaction or should we say the lack thereof from analysts. It is well known that the first report concerning child deaths and OmniPod usage was read by the majority of analysts attending Insulet’s investor day. As we noted before we can understand management not addressing this issue in their prepared remarks. What we cannot fathom is why not one analyst who attended the event asked a public question on the report. Why they chose to ask these questions privately and why those asked basically dismissed the question.

This silence is even stranger when it appears management knew this was coming. Diabetic Investor has received several reports from physicians all of which indicate that the company was aware this attack was coming. According to these physicians OmniPod sales reps “telegraphed” that bad news was coming but not to be worried.

Now comes more serious allegations and still management refuses to tell their side of the story. Diabetic Investor has sent several emails to CEO Pat Sullivan offering him the chance to tell Insulet’s side of the story. Since the emails were not returned as undeliverable we can only assume that Pat has read them and chosen to stay silent. Diabetic Investor has also called Insulet but again no response to our request.

Since Insulet has decided to go silent on these serious allegations let’s examine what they have been saying as it’s not that great. At the much-ballyhooed investor day the company stated they won’t have any new products until 2018 at the earliest. That the focus near term will be improving margins while lowering manufacturing costs. That is what they did say, here is what they didn’t say.

They did not say how they would compete against the 670G. They did not say why it is taking so long to integrate the OmniPod with the Dexcom (NASDAQ: DXCM) sensor. Although we did find it ironic that management did throw Dexcom under the bus noting that the Libre is an excellent product and they have a great relationship with Abbott (NYSE: ABT), the implication being that they could well do a deal with Abbott.

We also found it laughable that the company noted they have not been impacted by the 670G. Listen Tandem (NASDAQ: TNDM) and Dexcom have publicly acknowledged the impact and Animas has done so privately. To think that Insulet is immune to this impact is absolutely ludicrous. Let’s face reality Medtronic (NYSE: MDT) is on a roll and while the 670G is not an artificial pancreas it has generated a ton of free publicity and is definitely having a major impact. We’ve said it before and we’ll say it again sensor augmented pumping is the hottest thing going and Insulet doesn’t have one and won’t have one until 2018 at the earliest.

With Tandem now imploding and Animas twisting in the wind, the door has opened for Medtronic not just to extend their dominance but to effectively own the insulin pump market. Oh, and should we mention that the OmniPod is still NOT covered by Medicare.

The simple fact, yes, those pesky facts again, is that the only unique selling proposition the OmniPod has is that its wireless. That’s it. Given the choice between being wireless or sensor augmented, patients, physicians and CDE’s will choose sensor augmented. Look Medtronic is basically giving away the 670G to any patient who selects the 630G, they have the resources to do this. What besides being wireless can Insulet offer?

Insulet made a big deal that after 11 years they had finally crossed the 100,000-patient threshold. It should be noted that the company did NOT state they have 100,000 active users. And as we noted previously Tandem who has been around for just a few years has nearly half as many patients as Insulet. Oh, and should we mention that while we think it’s crazy Becton Dickenson (NYSE: BDX) is getting ready to enter the insulin pump market with a product that looks to be a copy of the OmniPod. Perhaps we should also mention that Bigfoot looms on the horizon as well.

The fact is, we do love facts, even without these very serious allegations Insulet faced a tough road ahead. What’s worse is the company seems ambivalent to what’s going on around them. That they are somehow immune to the competitive dynamics of the insulin pump market. That patients will chose being wireless when everyone else is talking about sensor augmented systems.

Perhaps the reason Pat won’t talk to Diabetic Investor is that we will not ask layup questions. We are not like the analyst at the investor day who didn’t have the balls to ask the questions they were asking privately publicly. To Diabetic Investor this is shameful behavior.

Listen Insulet management and their board of directors can dance around these facts all day long. They can choose to be silent, that is their right. But our gut and experience tells us there is more to this story, much more. In Insulet’s case the silence speaks volumes.