Simplicity, in a word that summarizes why the diabetes care unit of Bayer is doing so well. Unlike their competitors who continue to roll out new glucose monitors that do everything but the patient’s laundry, the two main Bayer monitors Contour and Breeze are simple to use and do what the patient wants; deliver an accurate reading. Sales of the Contour increased 14.3% while Breeze sales climbed an impressive 29% albeit some of this increase can be attributed to stocking ahead of a price increase.
The question for the diabetes care unit remains the same as it was last quarter, what will they do next? As Diabetic Investor has been reporting we believe it’s only a matter of time before the company buys Abbott’s (NYSE:ABT) diabetes diagnostic unit and make a play for the insulin using patient, currently the domain of LifeScan, a unit of Johnson and Johnson (NYSE:JNJ). Given the current economic conditions Diabetic Investor doesn’t see Bayer rushing to get this deal done especially since both Abbott and Roche continue to lose share and neither company is anywhere close to turning things around.
Although it was not a big deal the company has made a move into the continuous glucose monitoring space by acquiring privately held iSense. Just what Bayer plans to do with this technology is not clear at the moment. Without an insulin pump relationship it’s difficult to see Bayer entering a market already dominated by Medtronic (NYSE:MDT) and Dexcom (NASDAQ:DXCM).
As well as the unit is doing at some point they will have to pull the trigger on the Abbott deal before Roche gets their act together and realizes that they too must make a move to shore up their declining market share. While Diabetic Investor is not optimistic that a Roche Abbott combination would work over the long term, this combination would have an immediate impact on the overall market and could make life difficult for Bayer.
Still the unit should be commended for its impressive performance. Like LifeScan, Bayer not only has a clear strategy they are executing the strategy to near perfection. At some point Diabetic Investor also believes the company will make a move into the insulin pump market perhaps by acquiring Insulet (NASDAQ:PODD). As we pointed out yesterday Insulet continues to gain share in the insulin pump market and insulin pump patients are the most frequent users of test strips. It doesn’t hurt any either that the OmniPod already has an Abbott FreeStyle monitor built into the system. In the hands of Bayer’s larger sales force OmniPod would make even greater gains.
All in all one cannot argue with results and positive market share gains. For a unit that was once given up for dead due to several major marketing blunders this turnaround should send a message to Abbott and Roche. Realizing that changes needed to be made Bayer didn’t stick their head in the sand and let the problems fester. The company broke from the past, revamped their management team and let them implement a clear and well thought out strategy.
The message to Bayer should also be clear, as well as the unit is doing today now is not the time to rest on their laurels. Competition is intensifying, pricing pressure will continue and market dynamics are changing. They would be wise to look at their own history as well as what’s happened at Roche to understand that what works today is by no means a guarantee it will work tomorrow. Or as William Randolph Hearst said; “Whatever begins to be tranquil is gobbled up by something that is not tranquil.”