A quick reaction
Yesterday Sanofi-Aventis (NYSE:SNY) announced they had signed a long term agreement with privately held AgaMatrix to develop a series of diabetes devices. Not really a surprising move considering that Sanofi has been very public about their intention to enter the device arena beyond their current crop of insulin pens. Sanofi has also been very public regarding their intention to overtake Novo Nordisk (NYSE:NVO) as the world leader in diabetes care. As Diabetic Investor noted this move by Sanofi would be the beginning of series of events that could dramatically alter the landscape in diabetes devices. What we didn’t expect is for these alterations to come so quickly.
Diabetic Investor has learned that Roche, who had hoped to sell their struggling diabetes device unit to Sanofi, has decided in light of the AgaMatrix announcement to do an about face. As Diabetic Investor noted back when Roche conducted their investor day that the company didn’t even mention diabetes devices and it appeared they had completely given up on this unit. Apparently this silence was just a ruse to throw everyone off track.
Rather than retreat from diabetes devices Roche has decided to move full steam ahead and will make a series of moves to reinvigorate this unit. The first move will come shortly as Diabetic Investor has learned the company is set to purchase insulin pump newcomer Medingo. Well placed sources tell Diabetic Investor the purchase price will be around $400 million.
But the purchase of Medingo is just the beginning, after losing 11 share points in the important BGM market Roche has also decided to completely revamp their line of glucose monitors. In a stunning turn of events Roche has decided to buy Abbott’s diabetes device unit. The main sticking point (sorry for the pun) appears to be which management team will run this operation and where it will be headquartered. Roche is insisting that unit be based at their Indianapolis headquarters while Abbott wants the unit base at their headquarters in Alameda. According to individuals involved in the negotiations Abbott is standing firm on their demand to remain in sunny California.
These same individuals tell Diabetic Investor that should this deal fall through, and right now its 50-50 that it might, that Abbott has an alternate option as Novo Nordisk could be their white knight. Behind the scenes the folks at Abbott aren’t thrilled with the prospect of being acquired by Roche. According to one official who spoke to Diabetic investor; “I can see why Roche continues to lose market share as they just don’t get where the BGM market is going, at least the folks at Novo will let us stay in California.”
This same official said that Novo wants to trump what Sanofi is doing with AgaMatrix and develop a system that works with the new Apple Ipad computer. It seems that Novo believes the Ipad will be a major success and wants to build an entire diabetes management system which works exclusively with the Ipad.
Watching these events closely are LifeScan and Bayer. Sensing that diabetes device world is about to be turned upside down, LifeScan is making plans to go for a twofer. The edict has come down from New Jersey that it’s not good enough that LifeScan now holds the top spot in the US for BGM and more needs to be done to push Animas, their insulin pump unit past market leader Medtronic (NYSE:MDT). Therefore don’t be surprised when Johnson and Johnson (NYSE:JNJ) acquires both Insulet (NASDAQ:PODD) and Dexcom (NASDAQ:DXCM).
Bayer, realizing they are about to be the only company at the dance without a partner is going in completely different direction. For years it’s been speculated that consumer product giant Procter and Gamble (NYSE:PG) was looking at entering the BGM market. Well as it turns out this is no longer speculation and it looks like Bayer could be their way in. Bayer has done a fabulous job of bring this unit, once given up for dead, back to life and will complete this re-birth by selling their diabetes device unit to P&G.
Things are happening so fast in the diabetes device world it’s difficult to interrupt what all these events mean. In an attempt to sort through all of this, Diabetic Investor reached out to some respected and seasoned diabetes device executives who agreed to speak with DI as long as we didn’t use their names in print. (It appears that speaking to Diabetic Investor on the record is becoming very dangerous these days and according to some these executives has cost people their jobs. Diabetic Investor truly regrets that companies would take such drastic action. But then again when you call your management team a bunch of blithering idiots who couldn’t hit water if they fell off an ocean liner, Diabetic Investor can understand why these thin skinned executives who continue to ignore the realities of the market and only care about protecting their little fiefdoms would fire anyone who dares to speak the truth in public.)
Anyway, the general consensus from this group was everyone has completely lost their minds and gone off the deep. They have become so enamored with technology that they have lost all perspective that there are actual real people who must use all this complex technology. As one executive noted; “For Roche to spend another $400 million to buy Medingo and then compound their mistake by spending another billion or so to buy Abbott’s unit shows just how delusional Roche has become.” Or as another executive said; “This all could be complete B.S. as it is after all April Fool’s Day.”