All the votes have been counted and the results are not promising

All the votes have been counted and the results are not promising

This morning Bayer became the last of the Big Four glucose monitoring companies to report results. While Bayer appears to be doing better than the either Abbott (NYSE:ABT) or Roche, it’s obvious they too are feeling the effects of an overall slowdown in the market.

While Diabetic Investor sees Bayer continuing to gain share in the market, the future for each member of the Big Four is cloudy at best. As we previously reported only Johnson and Johnson (NYSE:JNJ) and their LifeScan unit has a strategy that deals realistically with changing market dynamics. Diabetic Investor also reported that Abbott is looking to sell their Diabetes Care unit, perhaps to Bayer.

Taking a closer at Roche, it’s difficult to ascertain if the struggling unit even has a strategy. First quarter results were horrible. About the only good thing was the company didn’t even mention their insulin pump business. However, instead of outlining a strategy on how they planned on fixing their diabetes unit, they offered one of the lamest explanations for poor performance Diabetic Investor has ever heard.

According to the company the reason first quarter results were so bad was due to competitive bidding. Roche wants everyone to believe that orders slowed because distributors and wholesalers were waiting to see what happened with competitive bidding. The only problem was when questioned about this the explanation it didn’t hold up and was exposed. The company had to acknowledge that even though 40 to 45% of their business comes through the Medicare channel, only a minor portion of this business will be affected by this first round of bids.

The company offered no explanation as to why they continue to lose market share and even worse offered no plan on what they were doing to turn this unit around. Simply launching new versions of old monitors is not a strategy, it’s more of the same old thing which obviously isn’t working. At one time Diabetic Investor believed that there was no way Bayer could catch Roche and grab the number two spot in glucose monitoring. We reasoned that with their size and resources they would take the necessary steps to reinvigorate the unit. Instead they appear to be taking a page out of the Abbott playbook on how to turn gold into sand.

As badly as Abbott has mismanaged their diabetes unit, at least they have the good sense to sell the unit before there is nothing left to sell. Roche on the other appears content to follow Abbott’s lead in running their unit into the ground. If the company truly believes the manure they used to explain first quarter results, things are even worse than Diabetic Investor suspects. Diabetic Investor already knows the company has no sense of direction but if they really believe competitive bidding is the root of all evil, they are near brain dead.

Based on the current situation in BGM it wouldn’t surprise us at all if Bayer actually gives Roche a serious run for the number two spot. Given the solid management at Bayer and the head in the sand management at Roche this is no longer the Herculean task it once appeared. In fact, Bayer needs to do nothing more than sit back and continue to execute, while the mismanagement at Roche does all the heavy lifting.

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