Abbott Reports – Diabetes Care Continues to Struggle

Abbott Reports – Diabetes Care Continues to Struggle

Abbott (NYSE:ABT) reported results for the second quarter 2007 and the diabetes care unit continues to struggle. Domestically the unit grew a dismal 1.6% when compared to 2Q06 and for the first half 2007 sales actually declined 2.1% when compared to 1H06. In sign of just how bad things have become for this unit the company has given up on giving any guidance on when Navigator might receive FDA approval.

Although Bayer (NYSE:BAY) will not report their results until August 7th, Diabetic Investor suspects Bayer results will confirm what everyone in the BGM market knows already, Abbott has fallen further behind and is now firmly in fourth place in a four horse race. To say the reps in the field are unhappy is like saying it’s hot in the desert. The fact of the matter is Abbott has once again run a great company into the ground and wasted shareholders money in the process.

The question is where do they go from here? As Diabetic Investor pointed out yesterday many of us had given up on Bayer only to see the company rebound under new management. Abbott Diabetes Care also has a new management team but we are seeing little in the way of action. Diabetic Investor was told when the new team was announced they would spend the first 90 days analyzing the business before implementing any changes. Well here we are half the year is over already and it appears management is clueless. Market share continues to erode, Navigator remains at the FDA and it’s highly unlikely their new all in one device will be of any help that is of course if they are able to get it through the FDA. Based on past performance this is by no means a certainty.

Using history as a guide it seems possible the company would make an acquisition to reinvigorate the unit. This is what happened after they ran Medisense into the ground and acquired Therasense. Now that they have taken a winner in Therasense and turned it into a loser, which company will they screw up next? There has been a great deal of speculation that the company would move into the over-crowded insulin pump market with the most likely candidate being Insulet (NASDAQ:PODD). The OmniPod system is gaining momentum and Abbott already has an agreement with Insulet to combine the OmniPod with Navigator, if Navigator ever gets out of the FDA. Given the move towards semi-closed systems in the insulin pump market a OmniPod Navigator combo would give Medtronic (NYSE:MDT) a run for the money.

Thankfully for Insulet, they are not tied to Abbott as Navigator’s inability to gain FDA approval has opened the door for the company to do a deal with Dexcom (NASDAQ:DXCM). With Terry Gregg now at the helm at Dexcom it would come as no surprise to Diabetic Investor if Dexcom and Insulet formed an alliance. Unlike Abbott, Dexcom already has an FDA approved product and their recently approved second generation 7 day sensor is a perfect compliment to the OmniPod system. Such a move would come as a major blow to Abbott.

There’s also the possibility the company could make a run at privately held AgaMatrix or perhaps Home Diagnostics (NASDAQ:HDIX). The reality is the company better do something soon as they are in serious danger of becoming an after-thought in the glucose monitoring market.

Given their dismal track record with acquisitions in this area Diabetic Investor isn’t optimistic that any acquisition can save this sinking ship.

David Kliff
847-634-4646 Fax
224-715-3761 Mobile