A Picture of the future

A Picture of the future

Now that the American Diabetes Association annual conference has ended (more on this later today) the diabetes world can now get back to business. A business which will look vastly different in the future. Just how different, well take a look at the comments made by Kazuo Ushida, Nikon’s incoming chief executive. According to Ushida the company plans to spend nearly $2 billion on mergers and acquisitions targeting medical and instruments businesses. According to Ushida “There is a huge potential” in this area.

Although Ushida did not specifically identify any company nor any disease state that would be targeted, it would not shock Diabetic Investor if diabetes was on the company’s radar. Nikon would be just the latest electronics company seeking to enter the wacky world of diabetes. As Diabetic Investor has previously reported Apple, Samsung, Google and Phillips are all looking to enter this space.

What all these newcomers to diabetes see is a growing patient population and a move towards interconnected diabetes management. They see the reimbursement model moving away from fee for service to outcomes based reimbursement. Each is aware that the technology already exists to make interconnected diabetes management a reality. They are also cognizant that the existing companies in this space have failed to adapt to the changing nature of the market. That these companies continue to live in the past, fail to innovate and are just going through the motions.

Diabetic Investor is firmly convinced that in the not so distant future the major players in glucose monitoring won’t be Johnson and Johnson (NYSE:JNJ), Roche and Abbott (NYSE:ABT). That we will have a whole new set of market leaders who will come from the electronics world. The same could happen in continuous monitoring and insulin pumps. Diabetic Investor actually believes this changing of the guard will lead to better, more patient friendly devices. The simple fact the existing players in this space have grown a little long in tooth and are just plain worn out.

This move by electronic companies into this space also offers hope to the old guard who want out of the space and the many newbies seeking to enter the space. While the diabetes device arena is ripe for innovation, it’s also a space where scale is critical. It would not come as surprise to see Nikon, Apple or Google pursue a dual acquisition strategy. Given the need for scale it would not be unimaginable to see these companies pursue a major player i.e. JNJ and then supplement this acquisition with the addition of smaller more innovative companies.

As we noted in the past there are several smaller players in this space who do have some truly innovative offerings. The problem so far is no matter how way cool and innovative these offerings are these companies lack the scale to turn a good idea into a profitable business. With the old guard moving away from acquisitions they faced the additional problem of not having a realistic exit strategy. This interest in the diabetes device space by companies like Apple and Google provides them with hope.

Let’s just hope that as companies like Nikon, Google, Apple and the like enter this space that they have learned from the mistakes made by other non-traditional diabetes players who have tried to enter this space. Some may recall that GE at one time sought to become a player in the diabetes device world. A decision that proved to be costly as they invested $8 million in the now defunct C8 Medisensors. Like so many newcomers to this space GE fell into the trap of investing first and asking questions later. They either failed to perform serious due diligence or believed that since they were GE they could overcome the issues C8 had. As we say all too often when it comes to the diabetes device space more money is stolen with a good PowerPoint presentation than it is with a gun.

It’s ironic that just as the ADA annual convention has ended, a convention that many believe has outlived its usefulness, that this changing of the guard is taking place. That the annual Consumer Electronic show could well become the must be at event for diabetes device companies. The fact is anyone who is serious about this space has seen this transformation coming for some time. That it was only a matter of time before the diabetes device world and world of advanced technology melded together.

Diabetic Investor for one welcomes this transition. There is no question in our mind that interconnected diabetes management will become a reality. We also know that try as they might the old guard is ill equipped to adapt to the future. We’ve said it before and we’ll say it again new blood is desperately needed. The honest truth is consumer electronics companies are better suited to handle how diabetes management will be handled in the future. They understand not just the technological aspects of diabetes management but also that design matters. That patients with diabetes are really no different than any other consumer of electronic devices. That patients not only want devices that work but also want a device that is easy to use.

The future is quickly approaching and a much clearer picture is emerging as to just who will be leading the way.  To Diabetic Investor this wacky world of diabetes is about to see a whole new set of players and just in time.