Flying under the radar
Now that
Bayer has launched their new Contour® USB glucose monitor which is targeted
directly at insulin using patients, many are wondering when LifeScan, a unit of
Johnson and Johnson (NYSE:JNJ), will finally launch a no-coding monitor of their
own. LifeScan is one of the few glucose monitoring companies that has been
successful at penetrating the insulin using market, a move that has vaulted the
company to the number one position in the US market.
As Diabetic
Investor has noted previously about the only hole in LifeScan’s portfolio of
products is a no-coding monitor. No-coding is becoming a standard feature
throughout the industry and it seems strange that LifeScan remains one of the
few companies without a no-coding option. Bayer was the first to exploit
no-coding technology which helped the company resurrect their once struggling
BGM franchise. The only issue for Bayer, now corrected by the ContourUSB, was
how to capture insulin using patients.
Besides being
no-coding the ContourUSB has a host of features contained in a small, easy to
operate unit. Unlike non-insulin patients, patients on insulin pay greater
attention to their readings and are more likely to download their readings to
their PC. While nearly every monitor has this capability the ContourUSB makes
this process simple as the patient simply hooks up the monitor to their PC
using the USB port which is part of the monitor. No cords or interim devices are
needed.
Given the
troubles at privately held AgaMatrix, Diabetic Investor has speculated that
LifeScan could easily afford to scoop up AgaMatrix and incorporate the company’s
no-coding technology into the LifeScan portfolio. Although AgaMatrix does bring
with it a large portion of the market, their monitors fit nicely into LifeScan’s
strategy of reaching insulin using patients, plus the company has recently
launched an app for the popular iPhone® which would help attract younger
patients. AgaMatrix carries and added benefit that their monitors and test
strips are manufactured off-shore making them very cost competitive. Finally,
this is a relatively inexpensive move while the company awaits their new system
from Universal Biosensors (ASX: UBI.AX).
As Diabetic
Investor reported some time ago LifeScan has gutted their R&D department
and has basically made the decision to out-source future monitor development.
This move began with their relationship with UBI which began way back in 2002.
The agreement between LifeScan and UBI has been amended several times since
that time and it now appears that we will soon see some results. According to
the most recent UBI investor presentation the first product is scheduled to be launched
sometime in 2010 and could generate over $20 million in revenue for UBI over
the next 12 months after the product is launched.
Looking over
the monitor that is shown in the presentation it appears it’s not yet ready for
primetime. Diabetic Investor suspects that the final version will be smaller
and more user friendly by the time the unit comes to market. It is also quite
likely that the initial version will not been seen in the US as the company
indicated that LifeScan which markets and at what time the monitor will be introduced.
LifeScan pursued a similar strategy with the UltraMini® which was perfected in
India as the Horizon monitor before it came to the US market.
LifeScan is
no rush here as they see what’s happening in the US market and they know their leadership
in the US market faces few, if any, serious threats. Even without a no-coding
monitor the company has benefited from a solid, well thought out strategy and
the many blunders by their competition. They know they have time to allow UBI
to perfect their system and see no reason to rush UBI. For the time being UBI
can continue to fly under the radar which also makes it a good time for
investors to jump at UBI shares.
