When will they learn?

When will they learn?

This morning Medtronic (NYSE:MDT) released third quarter results which were less than spectacular for their diabetes unit which grew by less than 5%. According to the company’s earnings announcement; “Diabetes revenue of $377 million grew 3 percent on both a constant currency basis and as reported. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products. Insulin pump system growth slowed in the quarter, as the Company is awaiting approval of its new products, the MiniMed® 530G in the U.S. and MiniMed® 640G in Europe.”

Now before everyone starts wondering if these less than impressive results, which are becoming a trend, are the signs of the beginning of the end of the company’s dominance in the insulin pump market; stop wondering …. they are. As Diabetic Investor has been reporting for some time Medtronic has been losing the battle for new pump patients and their grip on their huge installed user base is loosening as well. The simple fact is patients have more choices in the insulin pump arena and these newer systems offer a more compelling set of benefits.

The company continues to hang their hat on more advanced systems that combine their much lampooned continuous glucose sensor with their pump. They continue to believe that patients want systems with features like auto-suspend when the sensor detects a possible hypoglycemic event, which they do IF the system actually worked as advertised. We’ve said it before and we’ll say it again while insulin pump patients love advanced technology they like systems that actually work consistently more. This in short is Medtronic’s big problem as sensor performance which is critical to their newer systems has been dismal.

The company also continues to live in the past with the poor design of their newer systems which continue to look like an old-fashioned pager while newer systems such as the Tandem t:slim look like an iPhone and come with state of the art touch screen technology. Medtronic seems to believe that their brand, which has been losing its luster and their huge installed user base, would insulate the company from the competition. What they didn’t count on was the fickle nature of the insulin pump patient, patients who by far are the most engaged with their diabetes management.

Diabetic Investor has always said that Medtronic would not be in any danger as long as they could hold onto the majority of their huge installed user base. This base is the gift that keeps on giving as over 7%% of these installed users receive their pump supplies automatically, supplies which are very profitable and basically an annuity for Medtronic. However, the company continues to do everything they can to kill this goose that lays the golden eggs. Worse they seem to be ignoring how their newer supposedly more advance systems stack up against the competition.

One of the biggest differences with the insulin pump market today as opposed to five or ten years ago is the impact of the internet. Insulin pump patients as noted earlier have always have been a very active group of patients. Today this activism has reached a higher leave thanks to the many web sites, blogs and Facebook pages devoted to insulin pumps.  These sites are filled with loads of information and provide a real life perspective on the pros and cons of the various pump and CGM systems available.  Looking through the more popular blogs it’s obvious that Medtronic is losing the patient PR battle.

The company’s reputation, once stellular with physicians and Certified Diabetes Educators (CDE), has taken a major blow. As Diabetic Investor has reported in the past things have become so bad that some physicians’ have banned Medtronic reps from their offices. CDE’s who play a major role in pump selection have also complained of the poor treatment their receiving from the company.

Slowly but consistently the competition is gaining on Medtronic and from all outward appearances they seems oblivious to what’s going, unable to understand the changes that happening before their eyes. They seem to believe that the answer to their slowing sales numbers is to come out with ever more complex systems with lots of fancy features, features which would be great IF they worked as advertised. They seem to believe that their huge installed user base insulates them from the how the market is changing. They also seem to believe that the opinion of the physician or CDE does not matter when it comes to pump selection.

Diabetic Investor hates to be repetitive but as we have noted on many occasions the company has forgotten what made MiniMed so great. Up until recently this didn’t seem to matter all that much as the company was holding onto their installed users. Now what seemed like a slow trickle of patients leaving the fold has turned into a more consistent trend. The company still owns a commanding lead when compared to their competitors but that small leak in the damn is showing signs of growth and the walls, without much needed repairs, could soon burst open and turn into a serious flood.

The harsh reality is Medtronic once owned the insulin pump market and given the how the market operates it didn’t seem even possible that they could lose this dominance. However like so many companies in the diabetes space they took their eye off the prize and now face some serious competition. The question is does the company see this or will the follow the well-traveled path of ignoring the problem until it’s too late. Given this is the wacky world of diabetes, where anything can and usually does happen, we’re betting on the latter not the former.