Is Roche getting ready to phase out the Comfort Curve?
Thanks to our friends at the Indianapolis Business Journal (IBJ), Diabetic Investor has learned that Roche is expanding their manufacturing facility for Aviva test strips, located in Indianapolis. Once completed Roche will be able to produce 3 billion Aviva test strips per year, up from current capacity of 1.8 billion strips per year. According to the IBJ this expansion will take place over the next three to five years.
Additionally with this expansion Roche will also be switching to a different enzyme for the Aviva test strip. As we have previously reported Roche is one of the few sole remaining BGM companies who continues to use the GDH-PQQ enzyme, a move that has further weakened sales of Roche BGM products. The company has publicly stated they were moving away from this enzyme and apparently seeks to make this transition to coincide with the Aviva plant expansion.
Looking at this move Diabetic Investor believes Roche will soon begin to phase out the Comfort Curve test strip and convert patients to the Aviva. We further suspect that the company in a cost saving move will eventually close their strip manufacturing facility located in Puerto Rico, which currently produces both Aviva and Comfort Curve test strips. This move also makes sense as Roche would not have to replace the GDH-PQQ which is also used with the Comfort Curve test strip.
The real question is with the BGM market growth continuing to slow and Roche continuing to lose market share in BGM, is this expansion a wise allocation of resources or is the company once again throwing good money into a bad market? While it’s quite possible the company will be able to manufacturer Aviva test strips more efficiently at these increased volumes, it remains to be seen given all the other factors if these savings offset the costs of the expansion. A critical question considering these efficiencies will not materialize for another 3 to 5 years, an eternity in the BGM business.
This move also is indicative of the fundamental problem with Roche and their troubled diabetes unit, in that management seems to make critical business decisions without taking a realistic view of the future. Rather than look ahead and move towards the future, the company continues to react to past events. This would be like Apple trying to make desktop systems cheaper when the market is clearing moving towards tablet systems and mobile devices. As Diabetic Investor has noted previously the surest way to the poor house is to capture an increasing share of a declining market. In the end Roche may have the slickest, most efficient manufacturing facility on the planet producing a fraction of its capabilities because the market has moved on and no one is using the Aviva anymore.
This move is so Roche, a company that consistently makes the wrong move at the wrong time while wasting millions along the way.
