This is a stretch even for Roche
As everyone knows Diabetic Investor has
been less than complimentary towards Roche. While we must admit it takes real talent to take a blood glucose
franchise from nearly 30% market share to 20%. And even more talent to spend
over a billion dollars to acquire an insulin pump company that was firmly in
second place and today is barely a factor in the market. However, Diabetic
Investor doubts Roche, who is known for making questionable moves, would be
dumb enough to buy Medingo.
Yesterday reports form an Israeli web site
reported that Roche was the company interested in buying Medingo. Before we
examine this somewhat suspect report, let’s take a leap into lala land and see
just what Roche would be buying.
Medingo has received FDA approval for their
Solo™ MicroPump insulin delivery system. The Solo is the second wireless
insulin pump to receive FDA, the first being the OmniPod from Insulet
(NASDAQ:PODD). While the two systems have many similarities, there are some
notable differences. Unlike the OmniPod which is one of the most patient friend
insulin pumps ever to hit the market, the Solo seems to have been designed by
engineers to be used by engineers. The Solo has so many moving parts and steps
involved to use the system Diabetic Investor can only imagine the training
headaches that will face their customer support team.
Contrast that to the simplicity of the
OmniPod, where the patient simply fills the pod with insulin, hits a button on
their PDM which primes the pod, the primed pod is then placed on the body
another button push and the cannula is automatically inserted. That’s it. No
special assembly, no special training. Even better when it’s time to replace
the pod, the old one is either thrown away or sent back to Insulet to be
recycled.
While it may like inconsequential to some
Medingo has no paying customers, no managed-care contracts and is just now
hiring sales and customer support staff. Unlike Insulet which has successfully
navigated these areas and has over 14,000 patients, Medingo has nothing more
than an unproven product with some serious issues.
As screwed up as Roche may be, does it make
any sense at all for the company to pay $150 million for an unproven company when
they could easily do a deal with Insulet. Could Roche be that desperate to sell
more test strips that they would buy Medingo put an Accu-Chek glucose monitor
into the Solo PDM and believe that somehow this would reinvigorate strip sales?
Keep in mind that the $150 million is just the start of what would be an enormous
capital investment for Roche. The company would have to invest another $150
million or more to market and support the Solo.
Let’s assume for a moment that Roche has
gone completely mad and really wants to buy Medingo, consider the market their
about to enter. The insulin pump market is dominated by Medtronic (NYSE:MDT)
who in spite of many blunders still controls nearly 70% of the market. In
second place and coming on strong is Animas, a unit of Johnson and Johnson
(NYSE:JNJ). Next is Insulet who continues to do what was once unthinkable as
they are actually expanding the market. All three are firmly established in the
market and all three continue to develop new, more advanced systems.
Could Roche be so delusional that they believe
they can succeed in a market that is barley growing fast enough to support the
existing players let alone the many players getting set to enter the market? Is
it even possible that Roche who has already spent over a billion dollars for
what was once a pretty good insulin company; they would spend another $150
million for an unproven insulin pump company? Is there thinking so convoluted
that they somehow believe that Medingo is the answer to the many problems facing
their insulin pump unit? Doesn’t it make more sense to go back to Insulet and
try and resurrect a deal for international distribution of the OmniPod?
Unless the management team at Roche is
smoking crack, this “supposed” deal makes no sense at all.
All Diabetic Investor can say at this point
is should this deal truly take place there would no way anyone could steal from
the Roche the title of being the dumbest diabetes device company ever. It can’t
be that Roche is that dumb, but as we’ve noted before stranger things have
happened. And this one would be the strangest of all.
