Analysis
On May 14th, Asante, maker of the Snap pump, was an established player in the insulin pump industry. It had been employing bloggers to promote the Snap and was touting its new pump innovation to the press.
On Friday, May 15th, Asante announced it was closing. By the end of the month, another company was picking over its assets. News like this causes a ripple in the water in the small pond of pump users. Asante customers have been forced to switch to another pump, and those who are using other pumps might be wondering just how long their pump’s manufacturer will be around.
According to an industry source who spoke on condition of anonymity, Asante had been in financial trouble for some time. It was planning an IPO to raise capital, but chose to scrap that plan after seeing how poorly other related companies (including disposable pump maker Valeritas), fared with their IPOs. Having already exhausted all other options for generating capital, the company had no choice but to turn out the lights.
Smaller pump manufacturers must find a way to compete with the larger and financially stronger Medtronic, which is the largest insulin pump manufacturer in the world. In 2013, JDRF reported that Medtronic had a 74% share of the U.S. pump market, while it’s nearest rival, Animas (makers of the Vibe), had just a 15% market share.
Successfully competing in a market dominated by one company is a thorny issue, especially because most insulin pump makers are one- or two-product companies. In contrast, Medtronic has successful products in many sectors of the healthcare industry. The company, which is valued at $110.2 billion by Forbes, is certainly capable of outspending its rivals on marketing and advertising and has pockets deep enough to survive an occasional product failure – a luxury that its pump competitors simply can’t afford.
Competing against Medtronic has become even more challenging in the last two years as the company has gained attention for its advances in artificial pancreas technology. While Tandem’s tSlim may have become the preferred pump for artificial pancreas researchers, Medtronic has already brought pumps with artificial pancreas-like algorithms to the market, including models designed to alter insulin delivery in reaction to blood sugar trends. And it’s certainly not resting on its laurels, as evidenced by Medtronic’s partnerships with other companies developing new artificial pancreas technology, including its recent agreement with a small Israeli company.
There is always a small possibility that another pump maker can catch up to, or even supplant Medtronic on top of the hill. While Asante’s demise shows the vulnerability of secondary players in the insulin pump market, Medtronic may have vulnerabilities, too. Medtronic’s pumps and customer service receive more criticism in the Diabetes Online Community chat forums than any other company (in fairness, this may be commensurate with Medtronic’s market share). Also, when federal regulators find problems with Medtronic pump manufacturing, it receives far more press than, say, the recall of Tandem insulin cartridges. Plus, insurance companies, which may have the strongest influence in determining the insulin pump brand you’re getting, are risk averse; if they think there is a better-built mousetrap out there, they will favor it, and that could, over time, eat into Medtronic’s market share.
Of course a pump company doesn’t have to catch up to Medtronic to be successful. The rewards for gaining even a little share of the pump marketplace are enticing. One analysis found that the net value of the insulin pump market is $4 billion. Even a sliver of that pie could be deliciously profitable. The trick is how do you stay in the game to reap such rewards?
Valeritas’ strategy is to differentiate. It is offering a disposable pump targeted at the casual pump user with Type 2 diabetes. While this is an interesting idea, as mentioned earlier, Valeritas’ IPO did not generate nearly as much interest or revenue as the company had hoped. Animas, on the other hand, seems to be in good shape because it is connected to Johnson & Johnson, a company with deep pockets of its own. Tandem is touting its researchers-love-us reputation, close partnership with Dexcom, and a sleek design to appeal to the iPhone crowd. Of course, a sleek design was what Asante was selling, too.
It’s also always possible a new player can enter into the ring and make a big splash quickly. But any would-be challenger to Medtronic better have a lot of money…or a truly closed-loop artificial pancreas pump waiting in the wings.
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