Abbott Diabetes Care Management Shake Up

Abbott Diabetes Care Management Shake Up

Diabetic Investor has learned that Abbott (NYSE:ABT) Diabetes Care is in the midst of a management shake up. Beginning in 2007 this new management team will face a host of issues. Not the least of which is what they plan to do with the Navigator, the company’s continuous glucose monitoring system which is still awaiting Food and Drug Administration (FDA) approval. Originally submitted to the FDA back in December of 2003, the Navigator continues to languish at the FDA while Dexcom (NASDAQ:DXCM) and Medtronic (NYSE:MDT) gain valuable real world experience with their continuous systems which have already been approved by the FDA.

The question has to be asked why a system that nearly every researcher considers the most accurate and better than the two currently approved systems sits at the FDA. Even after Abbott changed the filing and is no longer seeking a replacement indication for Navigator and instead is looking at Navigator as an adjunct device it sits at the FDA. While Diabetic Investor believes Navigator will eventually receive FDA, Abbott does not appear that confident in the product as they have halted hiring of sales reps for the device.

Besides the problems with Navigator, this new management comes in at time when the company’s core business in blood glucose monitoring products is under pressure. After acquiring Therasense the company embarked on an aggressive pricing strategy in an attempt to gain market share. This strategy was initially successful as Abbott gained share at the expense of market leaders Roche and LifeScan. As Diabetic Investor accurately predicted Roche and LifeScan decided to fight back and Abbott’s growth stalled and has been flat lining for some time. Just how the new team will reinvigorate growth in this important business segment is difficult to say.

The few remaining independent players aren’t large enough where an acquisition makes sense, so it’s unlikely the company can buy its way out of its problems. The company does have plans to enter the crowded insulin pump market with their Aviator insulin pump, why is the question here. Not even on the market yet the Aviator is a conventional insulin pump that offers nothing new or different that would position the product as a credible alternative to what’s already available. Finally without reimbursement the Navigator stands little chance of being more than a niche product. Even with reimbursement this market segment offers little chance of being commercially successful.

To a large extent the company has no one but themselves to blame for the problems they have. Had the Navigator filing been handled properly from the start it’s likely the product would already be on the market, yet it sits on the sidelines while others gain valuable playing time. Their aggressive pricing strategy in blood glucose monitoring is coming back to haunt the company and makes further price cuts problematic. The insulin pump market is already over-crowded and is unlikely to do anything but take valuable resources away from the company’s core business. With competitive bidding around the corner and competition intensifying in the blood glucose monitoring market this new management team will have more than their share of issues to deal with. The real question is will the problems from the past hamper their ability to deal with changing market dynamics, Diabetic Investor is skeptical to say the least.