At first glance it would appear that the Johnson and Johnson (NYSE:JNJ) diabetes franchise continues to perform well. Looking at third quarter results which were released this morning their LifeScan franchise grew 8.7% domestically and 12.3% internationally after accounting for the impact of currency fluctuations. On the surface these results appear to indicate that the company continues to expand their lead in diabetes devices.
What’s unknown is how the individual franchises inside LifeScan are performing. While the company continues to state that their insulin pump franchise, Animas, is doing well it’s difficult to gauge exactly what impact Animas is having on the overall LifeScan results. While Diabetic Investor understands the reasons why JNJ lumps the two units under one banner more clarity is needed to get a grasp on where the growth is coming from.
Given the current state of the blood glucose monitoring market Diabetic Investor sees no evidence that LifeScan has lost their number one position. However, the market is undergoing some fundamental changes and more clarity in the company’s reporting would provide a glimpse into how these changes are impacting their BGM unit. By breaking out results for each unit we would also have a better understanding of the insulin pump market.
In the end this may be much to do about nothing as LifeScan is one if the few diabetes device companies that actually understands what’s really going on in the market. Besides holding the number one position in BGM, the company continues to benefit from the inept moves made by their closest competitor, Roche. Roche continues to lose market share and has absolutely no strategy or vision for getting back in the game. Until Bayer makes their play for Abbott’s (NYSE:ABT) diabetes device unit, LifeScan can continue to execute their well thought out strategy without worrying about a serious competitive threat.
JNJ is also making the move into the diabetes drug area with two early stage compounds under development for the treatment of type 2 diabetes. Like so many others JNJ sees the type 2 drug market expanding and wants in on this lucrative market.
To Diabetic Investor it’s only a matter of time before JNJ becomes the first company to offer a complete diabetes care kit that includes monitoring devices, delivery systems and/or drugs. Long ago Diabetic Investor predicted that one day patients would chose such a system rather than a collection of individual produced products and/or drugs. This move into type 2 medications is just a small part of this strategy and it would come as no surprise to Diabetic Investor if the company completes the move by acquiring an insulin or GLP-1 franchise.
Although Diabetic Investor would prefer more clarity in reporting we continue to see JNJ as one of the few companies that actually get’s it.