Tyler Is growing up

Tyler Is growing up

Here it is;

“Medtronic plc (NYSE:MDT), the global leader in medical technology, today announced the planned acquisition of privately-held Companion Medical, manufacturer of InPen — the only U.S. FDA-cleared smart insulin pen system paired with an integrated diabetes management app on the market. The addition of Companion Medical’s InPen to the Medtronic portfolio expands the company’s ability to serve people where they are in their diabetes journey and offer them a unique and expansive ecosystem of support — regardless of how insulin is delivered.”

First before we get into what this really means congrats to the good people at Companion. As we have stated many times the InPen system is the only FDA approved connected durable pen and the closet thing there is to a real Tyler. Second and this shows pigs do fly congrats also too Medtronic for having the common sense to realize that insulin pumps aren’t the only insulin delivery system that make money. Medtronic likely realized what we have been saying consistently Tyler is the biggest threat to their core insulin pump franchise and with this franchise struggling mightily better to have a Tyler than not have one.

The reality here is that when it comes to insulin delivery it’s not which system is used rather how many patients use the system. Or put another way the company with the most insulin using patients wins the game. This is after all about money.

Now if Medtronic is smart and let’s not get ahead of ourselves the addition of the InPen can be a boon to their insulin pump franchise, again this assumes they are smart. As Insulet noted during their last earnings call the majority of their patients come from those following multiple daily injection (MDI) therapy, which just so happens is Tyler’s sweet spot. Played correctly Medtronic could use the InPen system as a transitional tool, a pathway if you will to convert these InPen patients to insulin pump patients. The key as we just said however is to capture the patient first. Even if the InPen patient does not transition Medtronic still makes money.

Ok with that out of the way here are the implications of this deal and there are many;

1. Dexcom has a long relationship with Companion and we don’t see this necessarily changing. Medtronic may not publicly acknowledge their CGM is inferior when compared to the Dexcom system but privately they aren’t stupid. They also see what’s going on around them with interoperability all the rage. Abbott, who is aligned with Bigfoot (more on this in a moment) will eventually solve the AID issue with Libre2 while Novo Nordisk (who also has a connected pen) Sanofi (who has a few as well) and Lilly have all stated their Tyler’s will work with all FDA approved CGM systems that don’t have any AID issues. Bottom line Dexcom may not be thrilled but they don’t really lose anything with Companion now part of Medtronic. Maybe one day but that day is not today.

2. Since we just mentioned Bigfoot we have to say they are losers here. As of this writing the company still has NOT submitted their connected cap cover to the FDA. A system which we have noted in the past has numerous limitations and in its current form is nowhere close to being a Tyler. The company also got screwed with the Libre2 given the AID issue. Bigfoot unfortunately is suffering from their past actions of overpromising and under delivering.

3. This is great news for all the Companion wannabes who are out raising money right this very moment. Just as the CGM world has become a game of musical chairs so too has the connected pen space. Just as there are a host of companies who want to be in the CGM market there are an equal number who want to have a Tyler. Just as there are lots of Dexcom wannabes to choose from in CGM there are plenty of Companion wannabes to choose from. So the music continues to play so let’s see which chair gets landed on next.

4. With Medtronic now in the Tyler race perhaps this will light a fire at Lilly, Sanofi and Novo Nordisk. As we have stated consistently the insulin companies could own the Tyler market IF they got their system to market. Until Medtronic entered the picture they really had no rush to do so as with the insulin market commoditizing and their GLP-1 franchises growing like weeds. Yet all three of the insulin companies now have a real competitor with Medtronic, a well-capitalized competitor with deep roots in diabetes. Will they act now before Medtronic gets going or will they continue to move at glacial speed?

5. Going back to Dexcom they too could enter the Tyler arms race, the same goes for Abbott. The difference being that Medtronic wants to capture as many insulin using patients as possible, the insulin companies want to protect their insulin franchises while Dexcom and Abbott want to sell more sensors. Again each has different reasons for wanting a Tyler but as always this comes down to money.

We should add that we do not necessarily see this deal as changing Medtronic’s longer-term thinking. The fact is this is not a large investment for the company and more than likely this deal received Blackstone’s blessing before it was done. It could be argued that the deal actually increases the chances that this franchise will be sold as it is no longer just an insulin pump company rather it is now an insulin delivery system company. Time will tell.

The fastest to act just might be Tandem and Insulet. Medtronic may be wounded in the insulin pump arena but as we just noted they have the resources to make Tyler a reality. Boy we hate being redundant but with Tyler producing pump like outcomes at a fraction of the cost of a real insulin pump it will be a hit with payors. Medtronic knows this and could use the InPen system to blunt the gains now being made by Tandem and Insulet. All along we have stated that all the insulin pump companies should have a Tyler if for no other reason than as defensive move.

Again not to repeat ourselves but this happens when get old and a grandfather this game isn’t about the toys in the toy chest. This game is all about patients and the company with the most patients no matter which toy they play with wins the game.

Kudos to Companion and kudos to Medtronic. The game of musical chairs continues and the song now playing in San Diego is “Buy me a boat.”