Is there any reason to be optimistic?
Well it seems that Panasonic /KKR are taking, excuse the expression, their sweet time deciding whether or not to buy Bayer’s diabetes device unit. Diabetic Investor is hearing Panasonic/KKR has been touring Bayer facilities which makes one wonder just what they are looking at given that there are more empty cubicles than humans after the latest round of layoffs. While there is always the possibility that Panasonic/KKR will come to their senses and not waste a billion bucks or so buying this unit, to Diabetic Investor is looking more like when this will happen not if it will happen.
This begs the question will this deal be yet another billion dollar diabetes blunder, as we noted this morning billion dollar blunders in diabetes are nothing new. Or does Panasonic/KKR have some hidden agenda here, a secret potion that no one else has thought of or imagined. We certainly hopes it’s the later and not the former for no other reason than if they don’t have something unusual or different up their sleeve this deal makes no sense.
So let’s speculate a little as to just what Panasonic/KKR could do that would justify a billion dollar price tag. Is it possible they could be the first branded player to completely eliminate a field sales force? Will they be the first branded player to offer patients alternate payment methods, perhaps a monthly fee for an unlimited amount of test strips? Is it possible they could completely abandon middle men altogether and go strictly direct to consumer? Is it possible that the Bayer acquisition is just the first of several in diabetes devices and the company is basically buying patients that they will convert to a completely different platform?
For all the problems Bayer has the unit is not completely devoid of value. It could be that Panasonic/KKR is buying the infrastructure and scale Bayer has built over the years and then adding new platforms. Recently we have written about several new platforms that are designed to play in the expanding interconnected diabetes management (IDM) market. While these newcomers have some great systems they lack the infrastructure and scale to compete against the bigger branded players. As much as we see the market moving in the direction which favors these newcomers, this move will not happen quickly. However these platforms could be transformative in the hands of a major player with vision.
This is the real question can Panasonic/KKR break from the past and set out on a bold strategy. Can they somehow navigate between how the market is today to where the market is going? Perhaps this is why they are taking their time before pulling the trigger on this deal. Perhaps they doing something rarely done in this wacky world; actually thinking about what happens after they pull the trigger and not just about pulling the trigger. As we noted this morning the wacky world is littered with billion dollar deals gone bad. Far too often the reason these deals went bad is the acquiring company had no one idea what to do with the company they just acquired.
It would be refreshing if Panasonic/KKR is actually taking the time deciding not just what to pay for the unit but what they should do with it once they own it.
The fact of the matter is no matter what the price new ownership will only yield different results if they come with new ideas. New ownership with old ideas is just transferring a headache from one board room to another.
Diabetic Investor is hoping this deal will be different, that Panasonic/KKR is prepared to be bold, to break from the failed strategies of the past and embrace the challenge ahead. Yet we can’t help but believe this is wishful thinking, that this will be just another diabetes billion dollar blunder. There is just too much history to believe otherwise.