Ypsomed has been the exclusive distributor of Insulet‘s (NSDQ:PODD) Omnipod insulin management system in Europe since 2010. But today, the companies announced that the arrangement is slated to end on June 30, 2018, after the pair could not agree on extending the contract based on the price set by Insulet, according to Ypsomed.
Insulet said it will assume the distribution, sales and marketing activities for Omnipod across Europe after the contract expires in 2018. At that time, Ypsomed plans to develop a tubeless insulin pump system, the mylife YpsoPump, using the insulin pump that is already a part of its portfolio.
Until July 2018, Ypsomed remains the exclusive distributor of Omnipod across Europe. Details of the transfer are still being worked out, according to the two companies.
“We are deeply committed to providing our Omnipod customers with the highest level of service and are confident our high-quality team has the skills and experience to assume direct distribution and commercial support in Europe,” Insulet’s chairman & CEO Patrick Sullivan said in prepared remarks. “In addition, we expect this to further strengthen our financial position, as part of our multi-pronged approach to accelerate revenue growth and drive margin expansion.”
“We are excited to establish a direct local presence in Europe. This will allow us to be closer to the diabetes community, deepen our understanding of European customer needs, and further incorporate these into our innovation pipeline,” Insulet’s president & chief operating officer Shacey Petrovic added. “This is a natural step forward for Insulet, as we continue to expand access to Omnipod to benefit more people living with insulin-dependent diabetes around the world. We look forward to building on our existing relationships and developing new ones within the European diabetes community.”
Insulet said that it doesn’t expect this move to have a material impact on its 2017 financial guidance.
“The separation from Insulet Corp. is unfortunate as we will be losing a large proportion of sales and profit in our Ypsomed Diabetes Care segment during the business year 2018/19. Based on last year’s final figures this amounts to CHF 120 million in sales and CHF 24 million in operating profit. However, we will be compensated for our successful work with approximately USD $50 million, two year’s profit and the profit won’t be diluted through this trade product in the future,” Ypsomed CEO Simon Michel said in prepared remarks.
“Furthermore, this gives us a number of opportunities: we will be able to respond much more flexibly on the market with our current and future portfolio and are not dependent on a contractual partner. Distribution agreements severely restrict freedom of action. The fact that the products belong to us and are manufactured by us, has a positive effect on the future margins in the segment of Ypsomed Diabetes Care. During the past years we were able to follow up on the former success of Disetronic in the distribution of insulin pumps and re-establish ourselves as insulin pump company on the European market. This acceptance and our established distribution network will form the foundation of our future success,” Michel added.