Can’t Figure This Out

Can’t Figure This Out

Since it’s Good Friday and we have nothing better to do we decided to revisit what’s going on with our good friends at Abbott (NYSE: ABT) and Roche. We’re also a little tired of continually dumping on our wine drinking friends in France, listen we all know it’s a complete cluster (insert your own adjective) as management continues to remain clueless. So for today anyway we will not call Sanofi (NYSE: SNY) one of the dumbest companies in diabetes.

Now back to our friends at Abbott and Roche and just what the heck is going on with their beleaguered diabetes device franchises. Yes, both franchises have been in a freefall over the past few years doing a great job of transforming billion dollar franchises into million dollar franchises.  Both have shown the incredible knack for doing the exact wrong thing at the exact wrong time. Both have watched as LifeScan, a unit of Johnson and Johnson (NYSE: JNJ), has basically kicked their backsides and now dominates the US market.

It’s also incredible that both Abbott and Roche have done an equally great job of screwing up their respective insulin pump units. Yes, besides showing incredible talent for running glucose monitoring franchises into the ground, this talent for turning gold into sand also extends to the insulin pump market. Here Roche has an edge over Abbott as they actually have pumps on the market while Abbott never actually launched their system. Then again spending millions to develop a pump only never to launch it isn’t exactly a wise move either.

Now there was a time when it looked as though both companies were ready to exit diabetes devices, the only problem was unlike Bayer they couldn’t find anyone stupid enough to buy their troubled units. There was also a time when it appeared that Roche was ready to spin off their unit into a privately held company. Yet so far anyway this has not happened which begs the question just what the heck is the long term strategy for these units.

For their part Abbott seems to be banking their future on continuous glucose monitoring and has bet the farm on their FreeStyle Libre system. Given the failure of the FreeStyle Navigator this is like betting on the fourth horse in a three horse race. Yet not content to admit failure and move on Abbott has decided to double down on the Libre.

Now to be fair here the Libre is not a bad product and does have some value. However, it is also a product heavily subsidized by Abbott. Granted Diabetic Investor does not have an advanced business degree nor are we the brightest blubs on the tree yet it doesn’t seem like a sound business strategy to lose money on every system sold. Again we aren’t that bright but we’re not sure which business school teaches that the path to success is to lose money on every product sold. Probably the same business school that taught Sanofi management how to market Afrezza.

Also to be fair Roche does have some good products yet these products have come late to the game. This is like the captain of the Titanic asking for more lookouts after the ship has struck the iceberg. Nice idea in retrospect expect for the fact the ship is already sinking and all these extra lookouts can do is watch the ship sink.

Way back in the day we speculated that it would be interesting if these two troubled units combined into one larger troubled unit. We knew this made no sense whatsoever but given this is the wacky world of diabetes where anything can and usually does happen why not.

We also speculated that once Bayer found a buyer for their unit both Abbott and Roche would put their units back on the market. A move which seemed like a good idea given that our friends in France seemed interested in delving deeper into the device area. Yes, not content to rest on the failure of the way cool iBGStar, Sanofi appeared set to prove beyond a shadow of a doubt that the surest way to make a small fortune is to start with a large one. Listen these are the same people who partnered with MannKind (NASDAQ: MNKD), launched a new long-acting insulin Toujeo which was supposed to replace Lantus and now has decided that the sales team they have thrown under the bus because they couldn’t sell should starting selling … wait for it … Lantus. Honestly Sanofi buying either or both of these units would have been a dream come true for Diabetic Investor as it would have provided some of the best copy ever.

Ok let’s pause for a moment and review. After running their respective diabetes device units into the ground and being unable to dump these units on anyone else, the long term strategy is …. The path to success is ……. Selling products at a loss helps how?

Listen we’ve been covering this wacky world for some 20 years now and we just can’t figure this out. We can figure out easily the numerous mistakes by both companies but hindsight is always 20/20. What about the future as after all there is one thing about the past that we know for sure as Momma Kliff used to say, “We can’t change the past we can only learn from it and move on.”

But the question for Abbott and Roche is move on to what. Anyone who can figure that out deserves a prize which we will be happy to provide. So help Diabetic Investor figure this out and the winner will get their choice a case of Prisoner, a big and bold red wine, a year’s supply of Grey Goose or Miller Lite or a fun filled trip to Disney World accompanied by two great tour guides Storm and Chase.

Happy Easter