Modular Medical: Everyone Loves a Ferrari, but More People Drive Honda Civic’s
Article #3 - Ticker: MODD
Summary
MODD has pioneered a novel insulin delivery system for diabetes management.
On September 4, 2024, MODD received FDA approval for its innovative patch pump.
MODD’s device offers a structural 50% cost-of-goods-sold (COGS) advantage at scale, compared to industry incumbents.
Exploring a new application for short-duration GLP-1 therapies, which may enhance weight loss outcomes and reduce side effects relative to existing long-acting GLP-1 treatments.
We see a high likelihood that MODD will be acquired by a competitor at a significantly higher valuation than its current trading price.
Introduction
Diabetes is a significant challenge for the U.S. healthcare system. According to the 2024 Seagrove Diabetes Bluebook, roughly 25% of all healthcare spending in the U.S. goes toward diabetes management. Despite this, only about one-third of U.S. Type 1 diabetics use an insulin pump, and for Type 2 diabetics, that figure is just 10%. This indicates a large, untapped opportunity to expand pump usage, particularly in the Type 2 diabetes market, which has more patients but lower pump adoption.
The insulin pump market is currently dominated by three key players: Medtronic, Tandem, and Insulet, each holding approximately one-third of the market. These companies offer full-featured pumps, all based on a similar syringe-based design. However, MODD has taken a different approach. Rather than using a syringe mechanism, MODD’s pump employs a linear peristaltic pump system to deliver insulin to patients.
MODD's recently FDA-approved design offers several key advantages over its competitors, including enhanced safety and ease of use, comparable accuracy and low-flow capabilities, and lower manufacturing costs. These benefits align with MODD’s goal of expanding the market by simplifying the process and lowering costs. We will discuss these advantages in more detail later, but overall, MODD’s device is easier to use and cheaper to manufacture compared to existing products.
While MODD’s approach is unique in the insulin pump market, linear peristaltic pumps are commonly used in other medical devices. This provides MODD with differentiation and stronger intellectual property (IP) protection, while still relying on a proven technology. Although the act of pumping insulin cannot be patented, MODD holds eight patents covering the methods and design of its pump, creating a strong moat around its technology.
Two major barriers to wider insulin pump adoption are the steep learning curve and high cost of the current feature-rich platforms. MODD’s Gen 1 pump, has just four basic settings compared to the thousands of options available in competing devices. This simplicity makes MODD’s pump much easier to use, especially for patients who might be intimidated by the complexity of other pumps.
Cost is the second hurdle. MODD aims to offer a lower-cost pump with comparable accuracy and key features such as low-flow capability, NFE, and Bluetooth connectivity. However, MODD focuses on delivering these features without requiring users to navigate complicated systems or connect to a smartphone—offering simplicity alongside functionality.
We will delve deeper into how MODD addresses these issues in the next section, but it's clear that solving these problems positions MODD uniquely in the market. Rather than competing directly with the "big three" for the 25-30% of diabetes patients who already use a pump, MODD is targeting the “almost pumpers”—those who would like to use a pump but have chosen not to, due to cost or complexity.
MODD’s strategy is to let the big players target existing pump users while educating Nurse Diabetes Educators (NDEs) about its product as a simpler, more affordable alternative for patients who can't afford or commit to the current options. In essence, MODD is bringing previously luxurious features to the everyday consumer. Everyone loves a Ferrari, but more people drive Honda Civics.
What if We Did Something Different? A Novel Approach to Patch Pumps
There are several key benefits of MODD’s design compared to the three leading competitors. First, MODD’s pump is designed to "fail closed," meaning it will stop delivering insulin if it malfunctions. In contrast, competitor pumps have the potential to "fail open," which could cause too much insulin to be delivered, leading to dangerous or fatal outcomes. This safety feature significantly reduces the risk of a life-threatening failure, making MODD’s pump a safer option.