Memorandum

Cellnovo raises 32 million euros in IPO on Euronext stock exchange – July 15, 2015

Executive Highlights

  • Pump maker Cellnovo raised 32 million euros (~$36 million) in an IPO on the Euronext stock exchange in Paris on Friday. The company’s market cap is now 139 million euros.
  • The patch pump system launched in the UK and France in 2014 via a direct sales force. Further launches in Europe are expected in 2015-2017. Cellnovo hopes to launch in the US in 2017 via distributors.

Pump maker Cellnovo raised 32 million euros (~$35 million) in an IPO on the Euronext stock exchange in Paris on Friday. The company’s market cap now sits at 139 million euros ($153 million), up from 114 million euros as of the IPO, a nice increase (too big an increase means money left on the table and too small an increase doesn’t drive confidence). Cellnovo is still at a very early stage of commercialization:

  • The patch pump system launched in the UK and France in 2014 via a direct sales force. Further launches in Europe are expected in 2015-2017.
  • Cellnovo is planning to introduce a next generation handset in early 2016. The handset will incorporate Bluetooth and run Android software.
  • The company hopes to launch in the US in 2017 via distributors. [The previous considerably older guidance was an FDA filing by the end of 2014; that has now been pushed back to incorporate the new handset.]
  • By 2020, Cellnovo aims to have 45,000 patients on its pump globally, which would fill 75% of its installed production capabilities.

As a reminder, the Cellnovo system consists of three components: (i) a durable, rechargeable pump worn on the body and connected to a disposable insulin cartridge (reservoir and part of the pumping mechanism); (ii) a color touchscreen, app based handset with an integrated meter; and (iii) a web-based data management system. Cellnovo’s system is more of a patch pump than a traditional pump, though the on-body pump component still requires a very short 0.4 inch (1 cm) infusion set.

Cellnovo’s big differentiator is the handheld controller, which has cellular connectivity that enables remote monitoring and automatic data upload. It’s possible to see all historic data from the handset and pump via an online web portal in near real-time, including blood sugars, insulin dosing, trends, and exercise levels. The system can trigger text message alerts and allows clinics to view all patients on the pump on a single page – a big advantage from a population management perspective. The customer service interface is also cool, and it’s very easy to connect real-time with support. This cloud-connectivity and integrated data management set Cellnovo apart from other pumps on the market right now, though this will change once Medtronic’s MiniMed Connect is launched (this fall), Insulet’s next-gen, Bluetooth-enabled PDM comes out (FDA filing by end of 2015), and some of the first AP systems are potentially commercialized (e.g., Bigfoot Biomedical, Bionic Pancreas [iLet], and Type Zero might all include remote monitoring components). The touchscreen is unique to European pumps for now (Tandem is only available in the US).

On the patch pump design front, Cellnovo’s on-body form factor is not as slim as the second-gen OmniPod, since it does require a very short 0.4 inch (1 cm) infusion set. On the upside, it can track activity, which is unique among currently available pumps. The pump can also be removed if desired without throwing out the patch nor the insulin, unlike the OmniPod. Cellnovo says its paraffin wax pumping mechanism is highly accurate, with proven success in aerospace. Cellnovo has dipped its toe into the artificial pancreas market as a Diabeloop consortium partner. The first clinical trials will start at the end of 2015, and development and CE marking programs will run until 2018.

  • Overall, the insulin delivery market has never been more challenging or more competitive, perhaps most evidenced by Asante going out of business in May (though Bigfoot acquired its assets two weeks later) and Valeritas postponing its IPO in March. We are fans of Cellnovo’s focus on ‘cool factor,’ integrated data management, and a color touchscreen interface, all advances that should appeal to many patients and time-strapped clinicians.
  • Still, it’s a very crowded pump environment right now – will there by enough US/EU demand to support 6+ companies (Animas, Cellnovo, Insulet, Medtronic, Roche, Tandem; potentially Bigfoot, TypeZero, and MGH/BU)? Tandem’s US launch suggests a new entrant with a contemporary design and modern user interface can carve out a niche; perhaps Cellnovo can do the same in Europe.
  • Below, we’ve conducted a SWOT analysis of Cellnovo:

Strengths

  • Handheld (color touchscreen, app-based, cellular-enabled, built-in BGM)
  • Data management, remote monitoring
  • Accurate insulin delivery mechanism
  • Pump battery unit must be recharged* (two rechargeable pumps provided)

Weaknesses

  • Not a truly tubeless design
  • On-body form factor (comparable to original OmniPod)
  • Pump battery unit must be recharged* (two rechargeable pumps provided)
  • Limited manufacturing scale

Opportunities

  • Underpenetrated EU Pump Market
  • Automated insulin delivery
  • Advanced pattern recognition, clinical decision support

Threats

  • Increasingly crowded pump market
  • Better insulins (Toujeo, Tresiba, Afrezza)
  • Insulet OmniPod’s new PDM
  • Cloud connectivity expanding to other pumps (e.g., MiniMed Connect)
  • Other automated insulin delivery systems coming to market first

* Patients tend to vary on whether rechargeable is perceived as a strength or weakness.

  • Cellnovo has signed a distribution agreement for certain European countries with its main French customer, Air Liquide. Air Liquide also participated in the IPO with a 4.5 million euro (~$5 million) investment.
  • Flextronics will manufacture Cellnovo’s disposable insulin cartridges, with the first supplies expected in 1Q16. Flextronics also contracts with Insulet to make the OmniPod.
  • Cellnovo hired Steve Bubrick to lead the US business last April, an important hire given his diabetes experience at Asante, Insulet, Abbott, Therasense, and LifeScan and his history as a leader on the new product front in diabetes. Mr. Bubrick is the VP of Strategy & Business Development and the VP of North America. He brings the biggest diabetes background on Cellnovo’s management team.
  • Cellnovo cites a combined 3.5 million type 1s in the major EU countries + North America, with 17% pump penetration (~610,000 pumpers). The source is a Renub Research Analysis report from January 2014. For type 2 diabetes, Cellnovo cites an estimate of 9.2 million patients on insulin therapy, half of whom are poorly controlled and only 1% of whom are on pumps.
  • Euronext is continental Europe’s biggest stock exchange in terms of market capitalization, and is roughly the seventh largest in the world (following NYSE, NASDAQ, London Stock Exchange, Japan Exchange Group, Shanghai Stock Exchange, and the Hong Kong Stock Exchange).

Close Concerns Questions

Q: How many patients are currently on Cellnovo’s system?

Q: What were revenues in 2014?

Q: How much had been raised to date prior to the IPO filing?

Q: How large is the direct sales force?

Q: What EU countries are slated for 2015-2017 launches?

Q: What does it cost patient out-of-pocket to start on the Cellnovo pump on average? What does it cost on an ongoing basis? Is the system fully reimbursed like other pumps?

Q: Does the Cellnovo handheld still use LifeScan Vita strips?

Q: How does Cellnovo’s pricing compare to the mylife OmniPod in Europe? 

Q: When will a US filing occur? (It was last expected by the end of 2014.)

Q: What are the plans for CGM integration?

Q: What are plans on the closed-loop front? Would the Diabeloop program help Cellnovo develop a commercializable closed-loop product, or is this more of an academic support arrangement?

Q: How will Cellnovo differentiate from the OmniPod, particularly once the Bluetooth-enabled, touchscreen PDM handheld is out?

 

-- by Adam Brown and Kelly Close