A Blind man could see this coming

A Blind man could see this coming

As the major branded glucose monitoring companies continue to struggle with new market realities they continue to fall back on worn out over-used strategies to remain viable. Johnson and Johnson (NYSE:JNJ) the current market leader and perhaps the only major that will survive over the next 5 years, recently introduced yet another version of their Verio meter. Bayer as has been widely reported is desperately trying to find a buyer for their beleaguered diabetes device unit. Roche still intends to spin off their diabetes device unit which leaves Abbott the lone branded company without a strategy.

At first it looked as though they wanted to stay in the game and the Libre was the product that would change everything. Well after two recalls and several well-known problems with the Libre this strategy isn’t looking all that promising.  Perhaps because of this Diabetic Investor is now hearing the company is getting set to lay off even more people and the majority of these layoffs will come from their already depleted field sales force.

Years ago such a strategy would have been almost suicidal, however today such a strategy is essential. Although there may have been a time when a huge field sales force paid for itself those days are long gone. The fact is a patient’s physician rarely writes a prescription for a specific meter and even rarer do they care which meter a patient uses. Typically this decision is taken out of the patient’s hands entirely as their insurer controls this process. Yes there are rare, very rare occasions where a patient won’t care which meter their insurance reimburses for and will pay more to use a specific meter but as we noted this is very rare.

Looking at this realistically Diabetic Investor is actually beginning to think other than JNJ and perhaps Roche, neither Bayer or Abbott will exist as we know them 2 years from today.  The harsh reality is neither has the scale needed to remain viable and even with more costing cutting they cannot remain competitive.  Bayer at least sees the handwriting on the wall and realizes the run is over and it’s time to get out. Abbott however continues to flounder from one strategy to the next without a clear path to anywhere which is the surest way to go nowhere.

One has to wonder when Abbott will come to the realization that no matter how hard they try they are ill-equipped to transition to the new realities of the BGM market. Besides lacking scale they do not have a product line which is aligned to the new dynamics of the market. Yes cost control is part of this equation but as we have noted before a company cannot cut their way to growth. About all cost cutting will do at this point is keep margins somewhat reasonable.

The reality for Abbott is they should have sold a long time ago when the unit was still worth something. Even if they found religion today and put the unit up for sale this process would be more difficult given that Bayer also has their unit up for sale. Perhaps this is why rumors have been spreading that Abbott is looking to enter the overcrowded insulin pump market. Now just how such a move would sell more test strips is anyone’s guess but again this is what happens when there is no clear well thought out strategy.

With both Abbott and Roche reporting earnings later this week we just might get a clearer picture of where things are headed. Honestly Diabetic Investor isn’t expecting much from either company other than the usual sales declines and complaints about competitive bidding. While its good news that they have acknowledged the issues with the market, the bad news is they still haven’t figured out what to do about it. This lack of action isn’t surprising either and is symptomatic of the problems at both companies. The doomsday clock is ticking as the end of the BGM market as we once knew it is getting closer each day.