Having been around this wacky world for 20 some odd years now Diabetic Investor has seen more than our fair share of companies that once looked like world beaters only to fade away into oblivion. We can remember fondly our very first ADA Scientific Sessions, so long ago that Diabetic Investor back then was a print publication, having a booth across from the Amira Medical. Amira seemed to have the hottest product at the show an alternate site all in one glucose monitor called the AtLast. The way people were talking about the AtLast it seemed like a sure fire hit, that it was only a matter of time before Amira was acquired by one of the big boys.
Only problem was the damn thing as innovative and whiz bang as it was didn’t work all that well. This didn’t seem to bother anyone at the show but it did seem important to us.
As it turned out Amira was the just the first of many companies to make a big splash, seem to have the world as its oyster only to flame out and never be heard from again. Anyone remember Cygnus, the makers of the famous GlucoWatch, another product that everyone fawned over, another product that didn’t work. A more recent example is AgaMatrix, a company still in existence which also has some damn good products which actually work. Only problem AgaMatrix was late to the party and now like everyone else in BGM is struggling to survive.
We could list more companies but why bother. The sad reality is many of the new companies that have whiz bang way cool products will also fall by the wayside. Like the companies before them they will raise millions of dollars, attract tons of attention and then never to be heard from again. The commonality we see with most of these flame outs is they were built not to be great companies rather they were built to be acquired.
Back in the day when everyone was fat and happy, when margins were obscene and money seemed to be falling from the sky it really didn’t matter all that much if the product worked all that well. It didn’t seem to matter much if the company had any clue about how they were going to manufacture, market and support their product. The mantra back then was come up with a good idea, add in a fancy PowerPoint presentation, go out raise some money, make a big splash and one of the big boys would come along and buy the company. Actually running the company for the long term never entered into the equation.
This is exactly what happened at Insulet (NASDAQ: PODD). The truth is no one at the company nor any of their investors believed the company would remain independent for long. And for a time it looked like they were going to follow the typical path, good idea, raise money, go public and get acquired. Only problem was like AgaMatrix Insulet missed their window and market conditions changed. Simply put this company which was built to be acquired all of sudden found themselves having to actually run the company.
The same can be said for Tandem (NASDAQ: TNDM), another company with a good idea, who raised millions, went public and now is struggling for its very survival.
This is also the reason we have so much respect for a company like Dexcom (NASDAQ: DXCM). Once Terry Gregg took over and righted the ship the company has set an example for how a diabetes device company should be run. Although no longer at the helm Terry left the company in very capable hands as the company continues to exceed ever rising expectations.
What this all boils down to is something we have said before when it comes to running any diabetes company it’s talent that matters and sorry to say talent is in short supply these days. Far too often when we interview new companies they don’t speak of how they will run the company, how they will navigate the treacherous waters that lie ahead. They talk about how way cool and whiz bang their product is, failing to acknowledge that 9 times out 10 others have exactly the same thing that’s equally way cool and whiz bang.
We hate to say it but many of these new companies will soon fall into the whatever happened to category. Sad but very true.