What it all means

What it all means

It’s no surprise that shares of Insulet are skyrocketing today after the release of what can only called an incredible quarter, and frankly incredible is an understatement. As outstanding as these numbers were and as positive as the future looks, we thought we’d go beyond the numbers and provide some deeper insight into not just what this means for Insulet but the insulin pump and CGM markets. So here goes ;

First and foremost kudos to the entire Insulet team for a job well done. While everyone has been clamoring for them to get a sensor augmented system onto the market, they ignored the white noise and stuck with getting more OmniPod’s sold. The Horizon will be here soon enough, and it will help Insulet, but their success proves that while sensor augmented pumps may be where the pump market is headed this like everything else in diabetes is all about money.

Moving aggressively into the pharmacy channel combined with the pay as you go pricing proves this point. As we have noted in the past one of the biggest obstacles to getting more patients onto insulin pump therapy has been its higher than average cost. Even patients with “good” insurance who have unlimited access can find this cost onerous. Insulet has removed this barrier allowing more patients who were interested in pump therapy to give it a try and thankfully for Insulet after they try it, they like it.

Of the three major insulin pump companies Insulet is the most insulted from the impact of Tyler because of their pay as you go model. As the company noted yesterday, they continue to have great success converting patients currently on multiple daily injection (MDI) therapy to the OmniPod. This is Tyler’s bread and butter market and while his arrival will impact Insulet somewhat it will be muted compared to how he will impact the competition.

The scary part here, scary that is if you are in Northridge or San Diego, what happens when Horizon gets here a system which works with the Dexcom sensor and will be favored by patients currently on either the 670G or the Basal IQ. With the Control IQ coming soon from Tandem we’d say they have less worry than our friends in Northridge who’s list of worries seems to be growing exponentially.

The Insulet and Tandem results combined show just how the competitive landscape has changed. Medtronic has gone from king of the mountain to humpty dumpty. The rebel forces through persistence, tenacity, a little luck and solid thinking are bringing down the evil empire. Medtronic proved that yes patients do want a sensor augmented system, but they want a system that WORKS more. When the final chapter is written in the Medtronic saga it will show that it was arrogance and hubris that ultimately lead to their downfall.

This is also obviously great news for Dexcom and not just because the Horizon and Control IQ are coming but because Tyler is coming too. Dexcom has positioned themselves as the go to system for any sensor augmented insulin delivery system. Abbott is clearly surrendering this market to Dexcom and while we don’t know this for sure the still unapproved Libre2 is an example. Our gut tells us that the FDA isn’t ready to give the Libre2 the iCGM designation that Abbott is seeking and will give it another designation more in line with Libre really is, a flash monitor not a true continuous monitor.

The FDA cannot go backwards and change what they did when Libre was approved, and they called it a CGM, but they can now in their own make up for that. To be quite honest and Abbott will never say this publicly they are perfectly content with how things are going with Libre and while the iCGM designation for Libre2 would be nice in the overall scheme of things it won’t make much of a difference. Abbott sees the CGM market as we do in that it’s like Apple and Google two giants peacefully coexisting with Apple staking out the premium side of the aisle and Google more of a value/volume play. In CGM Abbott is the value/volume play Dexcom the premium brand.

Looking ahead the results from all the major insulin pump companies make clear a structural shift is occurring in this market. We have long maintained that without formulary domination Medtronic would be in very serious trouble and this is even truer today. However Insulet has proven that there are ways around this barrier. Which puts the ball into Tandem’s court. Do they convert to a pharmacy benefit pay as you go model ala Insulet or do they hammer away at payors breaking down that final barrier?

Medtronic seeing all this has to decided which front of the war should be fought and which territory should be surrendered. Using history as guide the company will do whatever it takes to protect that goose that lays all those golden eggs, their installed user base. They will continue their dogged pursuit of exclusive contracts with payors who we believe will begin to push back this time around. This will open the door for Tandem and others should they have the stones to accept this opportunity as it will initially come with risk.

Even better for the competition the problems faced by Medtronic have no quick solutions, Control IQ will be here before the year is over and Horizon the following year. Medtronic could solve this problem immediately by surrendering to Dexcom allowing their sensor to work with Medtronic pumps. This my friends isn’t going to happen for no other reason than this would be admission by Medtronic that their sensor flat out sucks, and the standalone version will never reach that billion dollars in sales once promised by Bevis and Butthead.

As we said before hubris and arrogance will bring down the empire as much as what the competition has done and is doing. They would be better off selling the unit but likely won’t do that either as this too while the right strategic move would also be admission that they failed. The harsh reality here is that at Medtronic the emperor has no clothes.

One word of caution before we close for, we have seen this movie before so some words of advice for Tandem and Insulet. You do not gain the heavyweight title by decision you must knock out the reigning champ. Do not allow the death star to be rebuilt destroy it while you have the chance. You have done a great job, restored hope in the galaxy but you must finish the job if peace is to exist over the long term. The door is open now it’s your turn to walk through it without looking back.