There comes a point in every business when reality hits you like a ton of bricks. When it comes to diabetes Medtronic seems to have reached that point. Just as quick review after years of absolutely dominating the insulin pump market, owning formulary and bringing out innovative product offerings the company has since been leapfrogged by the competition. The Control IQ from Tandem now is the coolest toy in the insulin pump toy chest becoming the standard from which all hybrid closed loop systems will be judged against. Insulet with their move to the pharmacy continues to gain share and will soon have their own hybrid closed loop system.
The biggest blunder of all came in the expanding CGM market, a market which Medtronic at one time claimed would generate billions in sales. Something that hasn’t exactly happened with Dexcom and Abbott owning CGM and sadly for Medtronic the troubles here have also cost them valuable insulin pump sales. Simply put the Medtronic CGM has been an albatross hanging from the franchises neck.
During today’s investor day presentation Sean Salmon outlined the future for the franchise, a franchise which he says is “getting competitive again.” Now before we go any further that statement from Mr. Salmon shows just how much things have changed at Medtronic, a company which in the past never ever admitted any weaknesses. Everyone else knew this franchise had some major issues and quite frankly it’s refreshing that the company itself is no longer sticking their head in the sand. As Momma Kliff used to say the first step in fixing a problem is to admit you have a problem. So kudos to Mr. Salmon for the honesty.
That being said getting competitive again won’t be that easy especially for their core insulin pump franchise. First they have lost the most valuable asset they had and no longer own formulary. Second they no longer have the coolest toy in the toy chest and quite frankly have fallen to third position in terms of advanced insulin pump technology. Worst of all they continue to lag well behind in terms of CGM technology.
To fully illustrate how far behind they are in CGM the company that a goal for Zeus, their newest CGM sensor is to reduce or eliminate finger sticks. Their next generation product Synergy seems targeted at the Libre as it’s supposed to have a profile 50% smaller than Zeus, easy insertion and is fully disposable.
Now before any in Minneapolis or Northridge starts doing the happy dance a few pesky facts. Neither the G6 or Libre require finger stick calibrations. The fact Medtronic has yet to overcome this hurdle is quite frankly embarrassing. While Synergy sounds nice it will come to market way late as the G7 and Libre3 will be here ahead of it.
The harsh reality for the company is that their new products are NOT BETTER than the competition and when it comes to CGM aren’t even on par with the competition. The company had fallen so far behind in terms of technology they are now playing catch up just to get on the same level as the competition. The problem being of course once they get on par their competition has moved ahead and this cycle continues. In the past this wasn’t a huge issue given their formulary dominance but with that gone the company has a very steep hill to climb.
Now things aren’t all bad as one area where the company is ahead of the competition is Tyler. With their acquisition of Companion Medical Medtronic appears ready to be the first company to launch Tyler. As we have noted in the past if executed correctly Medtronic has a huge opportunity here especially since Lilly and Novo Nordisk continue to move at glacial speed with their version of Tyler. Medtronic is also aware of the impact Tyler will have on the insulin pump market and how it can also be used as transitional tool to increase insulin pump sales.
The key here of course is can the company execute, get Tyler to market and then fend off the competition.
The reality here is the franchise may have a new attitude, but the damage inflicted by previous management was so serve we’re not sure this new attitude will help all that much. The dynamics of the insulin pump market have changed dramatically. The advantages the company once had are gone forever. Try as they might to rebuild the Death Star the rebels are not surrendering their dominance.
Perhaps the best way to describe this situation is try as they might to be young again, try as they might to recapture their youthful exuberance this franchise has not aged very well. The changes we’re seeing today are merely cosmetic surgery designed to make the franchise look better on the outside but cannot hide fact inside they are a senior citizen. This does not mean they cannot have success rather they will never be what they once were.
Just as we have seen with the seniors playing in the NFL this year, all the experience in the world, all the Super Bowl rings won cannot change the fact these once great players while still good are showing signs of their age. We don’t see Patrick Mahomes or Russel Wilson forgetting what down it is.