It isn’t often that when a company like Johnson and Johnson (NYSE:JNJ) reports earnings as they did this morning that the primary beneficiary of the call is another company. Well that was exactly what happened today when JNJ noted that sales of the Animas VIBE insulin were doing quite well, which quite frankly is better news for Dexcom (NASDAQ:DXCM) than it is for JNJ. Shares of Dexcom have been on a roll recently and today’s news from JNJ added even more momentum to a stock that has momentum to spare.
Yet when it comes to their bread and butter LifeScan business the news isn’t good as the company noted that pricing pressure continues to intensify negatively impacting overall results. On the flip side sales of Invokana continue to exceed expectations even with new competitors in the market.
Taken collectively for JNJ diabetes Diabetic Investor would call the quarter a push. Yes it’s nice to see that the Animas VIBE is doing well but in our eyes this just makes the diabetes device franchise easier to sell. As we have noted the insulin pump market is highly competitive and like the glucose monitoring market prices continue to come under pressure. Medtronic (NYSE:MDT) the market leader continues to hold onto the majority of their share and Tandem (NASDAQ:TNDM) will soon have a sensor augmented pump of their own, as well as Insulet (NADSAQ: PODD).
We don’t see the company making any major investments in diabetes devices and continue to believe if the right offer came along they would sell the franchise in a heartbeat. Although given the ultra-low multiple Panasonic/KKR put to Bayer’s diabetes device business we wouldn’t hold our breath on any private equity firm coming along and buying the JNJ franchise anytime soon.
Frankly the real test for JNJ diabetes will be when everyone has a sensor augmented pump. Invokana will be tested as well as the competition will have already begun using price as weapon to gain share. The best news for JNJ is they continue to hold onto share in the BGM market a market where scale is everything.
When it’s all said and done this was really a better day for Dexcom than it was for JNJ diabetes.