Abbott Reports, Lilly Cuts and announces a deal

Abbott Reports, Lilly Cuts and announces a deal

Diabetic Investor knows of no other company that tries so hard to turn lackluster results into outstanding results than Abbott (NYSE:ABT). Evidence can found in their earnings announcement today, “Worldwide Diabetes Care sales grew 14.3 percent.” Like most things with Abbott this statement is only partially true, reading the announcement more closely this 14.3% growth rate does not take into account currency exchange, again referring to the announcement “Without the positive impact of exchange of 12.3 percent, Abbott Diabetes Care sales increased 10.9 percent internationally.” It’s understandable that the company is doing their best to put a positive spin on a bad situation. As the Diabetes Care division continues to flounder.

Diabetic Investor is also considering launching another contest as the company continues talk about their device pipeline and their fully integrated blood glucose monitoring system combining a meter, test strips and lancing capabilities in one device. Like the just approved Navigator, this is not the first time the company has mentioned this new device. Unlike the Navigator the company has given no guidance as to when we will actually see it or when it might go to the FDA. Perhaps this is actually a good sign as maybe, just maybe the company has learned a valuable lesson from all the misstatements made with Navigator. Given the Diabetes Care division is in total disarray with no signs of improvement Diabetic Investor is not optimistic that they have learned anything from the Navigator debacle, nor do we have much confidence that will see this so-called all-in-one device anytime in the near future. About the only thing anyone can really count on from Abbott is for management to stick their feet firmly in their mouths almost anytime they talk about improving sales or getting new products to market. This is something they are very good at.

Turning to other news in the diabetes world, just a day after Diabetic Investor speculated as to the possibility of Johnson and Johnson (NYSE:JNJ) making a run at Novo Nordisk (NYSE:NVO), Lilly (NYSE:LLY) announced they were “streamlining” their manufacturing operations in Indianapolis. According to a company issued press release “These actions which affect sites that manufacture active pharmaceutical ingredients for the insulin products Humalog® and Humulin® as well as for the osteoporosis medicine Forteo®, will align manufacturing capacity and engineering support services with the needs of the business.” Translation, Novo is kicking our backsides and we better do something quick because we can’t effectively compete.

The company also announced a strange deal with Pelikan Technologies to promote diabetes education. According to a press release from Pelikan, “Under terms of the co-promotion agreement, the companies will promote awareness and education in the management and treatment of diabetes, including insulin therapy, insulin delivery devices and technological advancements in lancing designed to optimize Finger Health and Glucose Monitoring.” While Diabetic Investor applauds any effort to improve diabetes education promoting finger health isn’t exactly what we had in mind.

For those unfamiliar with Pelikan they manufacture a unique lancing device called the Pelikan Sun™. According to the company it is the first and only electronic lancing system. What the company does not mention is besides being the first and only electronic lancing device it also costs $300 and is not widely reimbursed. Having used the device Diabetic Investor agrees it is virtually painless, however we’re also well aware that like glucose monitors it’s a rare day when a patient actually pays for a lancing device. This does not mean there isn’t a market for the device, just that market is smaller than the market for old Exubera delivery devices which are now in hot demand at college campuses across the country.

This announcement actually brings back memories for Diabetic Investor when a company came out with a laser lancing device. The mainstream media went gaga over the device but failed to ask a simple question, “Why would a patient pay a $1,000 for a device when they get their current lancing device for free?” Is lancing that painful of an experience that patients are willing to spend $300 let alone $1,000 out of their own pockets? In reality the answer is yes but Diabetic Investor bets you could fit them all in small high school classroom.

Diabetic Investor has nothing against the good people at Pelikan and believes if they could combine a glucose monitor into the Sun they might actually have something. However, without a glucose monitor attached it’s just one more whiz bang piece of technology that has little application in the real world.

Given that Pelikan already has mastered electronic lancing and Abbott is developing their own all-in-one device here is the new Diabetic Investor contest question;

Which will happen first?

A. Abbott will get their all-in-one device to the FDA before Pelikan.
B. Pelikan will get their all-in-one device to the FDA before Abbott.
C. Abbott will sue Pelikan for patent infringement.
D. Pelikan will sue Abbott for patent infringement.
E. Abbott will acquire Pelikan and run the company into the ground. (This is actually a trick answer as Abbott only knows how to turn gold into dirt and not dirt into more dirt.)
F. Another company will get to the FDA before both Pelikan and Abbott. (Whoever it is being sued along the way by both Abbott and Pelikan.)
G. None of the above.
H. We really don’t need an all-in-one device as it will do nothing to improve average testing frequency.

Since no one won the Navigator contest we will up the ante this time giving away a two year subscription to Diabetic Investor to the winner. Seeing as the price of a two-year subscription will likely increase by the year 2025, this is a very valuable prize.

David Kliff
Diabetic Investor
847-634-4646 fax
224-715-3761 mobile