Abbott struggles to navigate difficult waters
As Diabetic Investor noted after the recent FDA meeting on glucose monitor accuracy, one of the few winners coming out of the meeting was continuous glucose monitoring (cgm). As Diabetic Investor predicted when CGM technology first came on the scene it would take some time for this new technology to be embraced by patients and physicians. Like the insulin pump market which received a huge boost from the DCCT trial, the CGM community is getting a boost as more studies are published demonstrating the benefits of CGM. Leading the way here is Dexcom (NASDAQ:DXCM) and Medtronic (NYSE:MDT), while the FreeStyle Navigator from Abbott (NYSE:ABT) struggles to gain traction in the marketplace.
While Diabetic Investor has documented the troubles facing the Navigator in the past, recent field reports show that Abbott continues to have issues with the product. Failed sensors and poor customer service are just the latest issue to plague this troubled product. According to Abbott officials they remain committed to the Navigator but the real question we should be asking is why. Of the three FDA approved CGM systems Dexcom has the most robust system and the deepest product line. Medtronic has done a decent job with their system however based on field reports Diabetic Investor believes the system still has some kinks. Both Dexcom and Medtronic also have a major advantage over the Navigator as the Medtronic systems works with Medtronic’s line of insulin pumps and Dexcom will soon have their system working with an Animas insulin pump and the OmniPod system from Insulet (NASDAQ:PODD).
Given that Dexcom and Medtronic have already picked the low hanging fruit off the CGM tree, the question becomes, why Abbott is continuing to throw good money after a bad product. Even if they fixed their manufacturing issues making the sensors more reliable and improved their customer service issues, the damage has already been done. Diabetic Investor also doesn’t buy the statement that the company is committed to Navigator as they have already decimated the Navigator sales team. The fact is the Navigators fate was sealed long ago when the company made the disastrous decision to seek a replacement indication when they originally submitted the product to the FDA. The blunders that occurred after that just made a bad situation worse and further doomed what was once a promising technology.
The continued issues with Navigator are just part of bigger problem at Abbott. The company continues to wait for the FDA to approve their new glucose test strip which will be called the Omni. The Omni will replace the current test strip and does not use the now infamous PQQ enzyme. According to various reports the FDA’s recent audit of the Abbott manufacturing facility did not go well and has further delayed the introduction of the Omni. This reminds Diabetic Investor of the issues the company had getting the FreeStyle Freedom approved at the FDA. In what should have been a rather simple approval the company submitted incomplete paperwork to the agency which delayed the Freedom.
Considering the current state of both the BGM and CGM markets it might be time for the company to reconsider their strategy going forward. Diabetic Investor is aware the company is considering introducing a new BGM system similar to the ContourUSB from Bayer hoping to capture a greater share of the important insulin using patient population. As Diabetic Investor has reported the insulin using patient is critical to all the BGM companies as insulin users test their glucose levels with greater frequency. This makes the decision to continue with Navigator even stranger.
Perhaps the company is holding on hoping that Sanofi-Aventis (NYSE:SNY) will make their move into diabetes devices setting off a series of events which would allow the company to unload this struggling unit. Although Lilly has expressed no public interest in entering the device world it is unlikely they would stand pat should Sanofi make their move. It is also well known that Novo Nordisk (NYSE:NVO) has an active interest in moving beyond insulin delivery systems and into BGM. As Diabetic Investor predicted long ago the day is fast approaching when patients will no longer buy individual products from different companies, rather their physician will prescribe a diabetes management system that includes everything they need all from one company. For the folks at Abbott this day can’t come fast enough.
