A New “Day” at Roche

A New “Day” at Roche

This morning Roche announced that  – “Daniel O’Day currently Chief Operating Officer (COO) of Roche Diagnostics has been appointed as COO of Roche Pharma effective September 1, 2012. He will succeed Pascal Soriot, who will leave Roche and take on new responsibilities outside the Group. Daniel O’Day will be succeeded by Roland Diggelmann, currently Head of the Asia-Pacific Region within Roche Diagnostics, who has been appointed as a new member of the Executive Committee by the Board of Directors.”

Diabetic Investor isn’t quite sure what this change at the top of Roche Diagnostics means for their struggling diabetes device unit but the timing of the announcement seems a bit odd. As everyone knows Roche’s glucose monitoring unit has seen its revenue decline by almost 50% here in North America and there are now signs that their ex-US business is also losing share. For reasons only the company seems to understand they have decided to re-enter the highly competitive and already over-crowded insulin pump market; and in typical Roche style they have hired people with no insulin pump experience to run this unit.

Given that Bayer is getting set to sell their diabetes device unit to Sanofi (NYSE:SNY), that is of course assuming Sanofi can actually make a final decision and stop screwing around, and that the pump business is getting more crowded by the day, Mr. Diggelmann has some decisions to make the moment he takes the helm. He faces a beleaguered unit whose reputation in the diabetes community has taken some serious hits. Right now Diabetic Investor isn’t sure who has a worse reputation Roche Diabetes or Bobby Valentine manager of the Boston Red Sox.

After spending over a billion dollars to buy Disetronic and another $200 million for Medingo the company has zero presence in the insulin pump market and therefore must build presence from ground zero. While their new combo pump is ok, it joins a long list of new pumps entering the market. Looking over the competitive landscape and excluding market leader Medtronic (NYSE:MDT), Diabetic Investor sees Tandem and CellNovo standing a better chance of gaining share in the market than the new Roche offering. And let’s not forget that Insulet (NASDAQ:PODD) at some point will have their new pod approved, Animas has new systems on the way and did we mention that Medtronic owns the market and no one has been able to successfully take share away.

The situation isn’t much better with glucose monitoring market which as we pointed out again yesterday continues to see conditions deteriorate. (Which makes Diabetic Investor wonder why Sanofi is so anxious to spend a billion or so euro’s to buy the fourth place player in this already commoditized market? But we digress.) As we have stated previously if we didn’t know better the Roche strategy for their glucose monitoring unit was to turn a very large fortune into a very small fortune. Truth is it takes real talent to loss nearly 50% of your business; the only question is can Mr. Diggelmann finish the job Mr. O’Day started.

The bottom line here is that it really doesn’t matter who runs this unit as unless there is a real commitment to change from the folks across the pond nothing much will change. Diabetic Investor cannot imagine a company based here in the US that’s lost 50% share and not having their stakeholders up in arms and ready to ripe the heads off management. It amazes us that the Roche stakeholders sit ideally by and allow management to run this unit into the ground. That they are not demanding something be done and done yesterday. It’s not possible that these stakeholders are as stupid as management; but then again…………