[IP] Profit Potential in the Insulin Pump Market (Was Pump Protector)
Actually it can cost them more than manufacturing the original pump
new. The FDA requires that the pump meet ALL of the original pump
specs. In practice that means that the "used" pump must be inserted
into the original mfg process and run all the way through with
special handling. If it is a pump that is out of production then all
those steps must be done manually in the lab by a tech which is even
more costly. In practice my guess is that they just throw the broken
ones away unless it is something relatively simple like a software
upgrade or a broken clip, case, something easy to spot.
Given the realities that Michael outlined as well as data from David
Kliff of diabeticinvestor.com, I would expect future profits in the
insulin pump market to only provide modest improvements in
technology. The research dollars appear to be going towards Type 2
diabetes management options, which has much more profit potential
than managing Type 1 only options.
The David Kliff interview states that there are only about 500,000
pumpers worldwide with about 350,000 in the US. They also estimate
the annual growth of pumpers in the US to be about 10% or about
35,000 new US pumpers per year. Minimed is estimated to have
approximately 70% of the market (about 25,000 new pumpers per year),
which only leaves an annual market of 10,000 pumpers for the
remaining pump companies to capture. He predicts the current pump
manufacturers will undergo consolidation, leaving less competition.
He also states that there are 4.5 million US insulin users, with 2.5
million on the so called "Poor Man's Pump", Lantus, which also
serve's to lessen pump use.
He points out that even though Johnson & Johnson own LifeScan and
Animas, the divisions are so small that failures in these diabetes
divisions do not significantly affect the J&J stock price. There are
few diabetes only companies out there whose fortunes rely solely on
their success with diabetes management. Advances in pump technology
came when the pump companies were independent and their fortunes
relied on their track record for innovation and customer service
(e.g. the old Animas and MiniMed ventures).
David states that the Type 1 population is not growing fast enough to
sustain the pump business. He predicts that Byetta LAR (Long Acting
Release), the supposed once per week injection for Type 2, will
compete with pumps as a Type 2 pump alternative, when it is released
in 2009 - 2010, which will also serve to lessen the current 10%
annual growth for the pump market. If Byetta LAR proves successful,
the insurance companies will love the economics of a once per week
injection vs. the cost of pumps and newly diagnosed Type 2s will love
the idea of only having to think about their diabetes once per week.
He also points out that non-diabetic patients are going to doctors
asking to be placed on Byetta for weight management, which furthers
its profit potential.
FYOO (Form your Own Opinion)
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