Wacky for sure

Wacky for sure

Just yesterday we wrote about Unilife (NASDAQ:UNIS) launching their Imperium patch pump. Well not to be outdone this morning privately held CeQur who has a patch pump of their own announced they have raised an additional $100 million. This means since January of 2010 the company has raised over $156 million over three different funding rounds. This funding announcement proves conclusively that when it comes to diabetes devices some truly wacky deals get done.

Now we have nothing against CeQur and have a great deal of respect for their Chairman Eric Milledge, who did a fine job running LifeScan for Johnson and Johnson (NYSE:JNJ). Nor can we blame Mr. Milledge for striking the iron while it’s hot as the non-programmable patch pump is the hottest thing going in the diabetes device world. With the way money is being thrown around in this space one might just get the impression that these patch pumps will revolutionize diabetes management for insulin using Type 2 patients who currently follow multiple daily injection (MDI) therapy.

During the Unilife presentation the company noted that there are 7.5 million patients worldwide following either MDI or real insulin pump therapy. The company projects this number will grow to 12.2 million by 2025 and 17.7 million by 2035. As we noted yesterday the company believes they can quite well capturing a small percentage of a very large and expanding market.

CeQur feels the same way as according to the press release they issued this morning;

“CeQur has developed PaQ, a simple, three-day, patch-like insulin infusion device. The discreet device will offer an alternative to insulin injections for people with type 2 diabetes, of which there are more than 11 million total in the United States and Europe. The potential worldwide market for simple insulin devices is estimated to be worth approximately $6 billion.”

Like Unilife and everyone else in this space CeQur is also touting how these patch pump help improve patient outcomes. And like everyone else they claim their system is competitively priced with insulin pens which they see as their main competition. Also like everyone else they are short on specifics on how they plan to get their device covered by payors or how they will actually compete in what’s becoming an increasingly crowded market. And like everyone else they are active discussions with potential partners.

It should go without saying what these companies really want is for someone to come along and buy them just as JNJ bought Calibra back in July of 2012. Not exactly a new or innovative strategy in the wacky world of diabetes but a strategy that actually works. Yes the diabetes device world has numerous examples of deals being done, deals which seem to make no sense at the time and typically fail to yield the expected results. This is what happened to JNJ when they bought Animas, the makers of a real insulin pump, as only recently has this unit shown signs of life. Roche acquired Disetronic, which at the time held the second position in the real insulin pump market, only to run that company straight into the ground.

We could go on here and point out how Miles White the CEO of Abbott (NYSE:ABT) has run not one but two glucose monitoring acquisitions into the ground.  Or we could remind everyone of just how well the current MannKind (NASDAQ:MNKD) Sanofi (NYSE:SNY) partnership is going just to show that stupid deals are not limited just to the diabetes device space.

Quite frankly Diabetic Investor has never understood the need for these non-programmable patch pumps. Even before the reimbursement environment turned negative we just couldn’t see why a physician would prescribe such a system. Back in the day we thought this way not because of cost issues rather if a physician really wanted a patient to have continuous delivery of insulin why not a true insulin pump go with real thing. Yes we knew it would require more patient education but as we noted yesterday so too would these patch pumps.

Today as we look at the market we still don’t get it. As we noted yesterday not only are there several companies with a patch pump, these systems are entering a fiercely competitive market and unlike years ago today cost is a huge concern. This competition is not limited to other insulin delivery systems but also new drugs long acting GLP-1’s in particular.

Yet just because there really isn’t a need for these patch pumps that doesn’t mean companies like CeQur will fail to be acquired. This is not an endorsement that their patch pump is better than the competition rather this is acknowledgment that when it comes to deals in this wacky world anything can and usually does happen. As we have said many times in the diabetes device space it’s easier and safer to steal money with a good PowerPoint presentation than it is with a gun.

Listen we’ve been around this wacky world for 20 years and if there is one constant throughout the years is there is no cure for stupid. That deals aren’t always made for the right reasons as far too often the company who’s doing the acquiring makes the numbers fit their perspective of the facts. Other times deals are done because a company is afraid they won’t have dance partner when the dance starts.  In other words deals aren’t being done for sound, rational or well thought out reasons.

This fascination with these patch pumps is a perfect example of this. It’s not as though they are bad devices rather it’s difficult seeing any of these devices capturing a significant share of the market. The numbers just don’t add up.

Wacky for sure.