The things that cannot be said

The things that cannot be said

Looking back on yesterday and the Tandem event it occurred to us that some things in our wacky world are not easily explained to someone who does not have diabetes. The insulin pump space in particular is a world onto itself with several unique perspectives. What sounds whiz bang and way cool to a non-diabetic is greeted with a yawn by those of us who use an insulin pump. We can’t think of ay market in diabetes where the patient plays such an important role impacting the fortunes of insulin pump companies.

Here are just a few examples of what we are talking about;

Yesterday the company fielded several questions with analysts worried about the company’s relationship with TypeZero now that it’s owned by Dexcom. Others over the renewal/replacement/upgrade cycle. Along these lines everyone wants to know what Animas patients are going to do and who they are going to do it with. While the company did their best to answer these questions the reality there are things they can say, others things they can’t and still others that are unknown.

Given that we do not have a vested interest in the outcome allow us to provide some answers with clarity. Let’s take the biggest question first, what will Animas patients do and who will they do it with? As Tandem correctly noted Animas patients have until September 2019 to make a decision and as everyone knows Medtronic has the inside track to these patients. Although no one knows for certain as there is no available public data the general belief is so far the Animas patients who have converted are split into three equal buckets a third each going to Medtronic, Tandem and Insulet.

While we do believe Medtronic will ultimately capture almost 60% of these patients that number is down from our previous estimates of 80%+. With the new Basal IQ here which works with the Dexcom G6 patients have an alternate credible option to the 670G. That is assuming Medtronic will give them a 670G it all really depends on where the Animas patient is with the warranty cycle. No question free is better than paying a few hundred or perhaps a thousand bucks but Tandem will give Medtronic a serious run for these patients.

Yesterday another question was what the upgrade/renewal cycle looked like for the existing Tandem patient base an important question as out of warranty patients generate revenue for the company. What gets missed here is there is no set time frame for these patients, sure they can get a new system for free but they may not want one even if its better than what they have. This is one of the most misunderstood aspects of pumping that once a patient gets comfortable with a system and it works they have no major reason to change. There is always a group that wants the latest greatest thing but for the most part once a patient gets comfortable and the damn thing works they tend to stick with it.

Looking at the company’s relationship with TypeZero there is nothing to worry about here as it’s everyone’s best interest to keep a good thing going. Dexcom does not want to be in the pump business and Tandem has no desire to be in the CGM business. This is a win-win relationship that no one wants to change.

The reality here for Tandem if they truly are to grow is to take share away from Medtronic while at the same time hoping insulin pump usage increases. Last take the second part of that first as thankfully the company did not set their sights on getting more insulin using Type 2 patients onto a pump. They do however believe that penetration in the Type 1 market can increase from 30% to 50% and at first glance that seems reasonable especially with all the great new technology we have now. However in the real world that’s not how it works as payors play a major role and insulin pumps aren’t cheap. Nor are they getting any cheaper now that sensor augmented systems are here which increase the cost when sensors are added to the mix.

Another hurdle is physicians who understand pump therapy but hate all the damn requirements to get it covered. Even today a physician cannot simply write a script for a pump many payors require gobs of paperwork which takes away the one thing the physician cannot get more of, time. There is a reason 20% of the endo’s generate 80% of pump placements.

A future hurdle is Tyler which will combine a smart insulin pen/pens with a CGM with an app which will deliver pump like outcomes at a fraction of the cost of a pump It cannot be understated the impact Tyler will have on the future of the insulin pump market and Tandem along with every other insulin pump company would be wise to follow what Bigfoot is trying to do and have a Tyler of their own.

All this basically means that if Tandem is to grow in a meaningful way they must take away share from Medtronic and that as we consistently note will not be easy to do. They have leveled the playing field in terms of technology and when the Control IQ gets here they will surpass Medtronic. But this is isn’t about who has the “best” system this is all about who SELLS the most systems and Medtronic still owns the formulary.

A few other thoughts from yesterday;

1. Tandem now has a market cap of $2.6 Billion Insulet $6.2 Billion – the worldwide market for insulin pumps is about $3 billion and Medtronic alone controls about 2 of the 3 billion. Not saying that Tandem and Insulet are overvalued but this does make one wonder.

2. We are still flabbergasted that Lilly, OnDuo, CellNovo and heaven knows who else want to get their heads bashed in. Bigfoot we get but all the others not so much.

3. It still hasn’t dawned on anyone that insulin dosing algorithms and an accurate reliable CGM are more important than how the insulin gets delivered. Yep another reason to like Dexcom as they have best of both.

4. The Medtronic $25,000 “guarantee” is good marketing but nothing else. Will someone please read the damn details here instead of reading the damn headline yes we know this requires some effort but seriously.

5. We keep wondering what Miles is going to do- will he buy Bigfoot (yawn), will he turn the Libre into a REAL CGM (he better) or will Abbot do what Abbott does and screw up a very good thing – will they do the unthinkable and screw up not just two BGM franchises but also a CGM franchise too?

6. We also wonder when everyone will realize that Apple does NOT have a CGM will likely NEVER have a CGM and they will work closer and closer with Dexcom.

7. With EASD next week who will have the best toy – yep everyone loves the toys in the toy chest.

Next up for us Berlin stay tuned.