Connect the dots…

Connect the dots…

Yesterday Johnson and Johnson (NYSE:JNJ) severed ties with Children With Diabetes, according to a Facebook post from Jeff Hitchcock the founder of CWD; “As of today, December 6, 2013, Children with Diabetes is no longer a part of Johnson & Johnson. Moving forward, CWD will operate as an Ohio-based not-for-profit corporation. We thank Johnson & Johnson for nearly six years of support during some very challenging economic times, and look forward to what’s sure to be a healthy continuing relationship.”

Now this may seem like a non-event in the scope of all the other changes JNJ has made recently, moving LifeScan their glucose monitoring unit into Janssen, shutting down the LifeScan headquarters in Milpitas, California and making Animas their insulin pump a stand-alone unit but looked at collectively what this signals is that JNJ wants out of the diabetes business and Diabetic Investor really can’t blame them one bit. Although the company has publicly stated that their recent loss in patent court has nothing to do with all these changes, Diabetic Investor suspects this too factored into their decision making process.

Now we know several people will read this and think Diabetic Investor is the one who’s gone wacky here but looked at realistically this is a smart move. As we have chronicled over the past few years the glucose monitoring market has been circling the bowl and competitive bidding merely pushed it further down the toilet. Animas, although second to Medtronic (NYSE:MDT) in terms of insulin pump market share has never, allow us to repeat that, never made money for the mother ship.  CWD never fit well within the corporate button JNJ culture and as Diabetic Investor noted back when JNJ acquired the company competitors would be foolish to advertise on the site as they would be basically supporting JNJ, which unfortunately is exactly what happened.

Now for those who think Invokana, JNJ’s new type 2 drug which is off to a better than expected start is an indication the company remains committed to diabetes, think again. Invokana while off to a good start is not the savior and could easily be sold to Novo Nordisk (NYSE:NVO), Sanofi (NYSE:SNY) or any other number of drug companies who already have a diabetes drug portfolio.

The reality here is that JNJ has seen the handwriting on the wall and doesn’t like what they see. They know the timing to exit the business is less than ideal but they also are smart enough to know not to throw good money into a bad market. As we have noted in the past JNJ is not just good at getting into a market but equally adept at knowing when to get out of a market.

The broader question here is what will everyone else do, which really has been the question all along. The fact is other than JNJ, no one else in the BGM has clue as to what to do. Abbott (NYSE:ABT), Bayer and Roche continue to flounder and can’t seem to come to grips with the fact that the BGM market as they knew it is over and nothing and we mean nothing will change that fact.  The fact is the Fat Lady is beginning to sing the BGM swan song.