JNJ Reports

JNJ Reports

This morning Johnson and Johnson (NYSE:JNJ) reported second quarter results and for their diabetes franchise there were no surprises. The real question for the company isn’t whether their strategy is working, the results clearly indicate everything is going well. The real question is what can they do to sustain their momentum.

The company has achieved market leadership in blood glucose monitoring and holds the second spot in insulin pumps. As previously reported Animas, their insulin pump company, has a deal with Dexcom (NASDAQ:DXCM), which will integrate Dexcom’s continuous glucose monitoring system with future Animas insulin pumps. Also in the insulin pump area the company recently launched the OneTouch Ping a glucose monitor that wirelessly communicates with the Animas insulin pump.

About the only thing missing is a wireless or patch pump. With their vast resources and experience in doing deals JNJ could easily enter this area. Diabetic Investor sees this move as a strong possibility as it would round out their insulin pump offerings and allow Animas to grab more share from market leader Medtronic (NYSE:MDT). Medtronic has already indicated they plan on entering the wireless/patch pump market and it’s well known that Insulet (NASDAQ:PODD) continues to gain share with their OmniPod system. When it comes to the insulin pump market the largest market opportunity is the wireless/patch pump area and JNJ won’t sit ideally buy and let the competition win this valuable market segment.

While the company has some early stage diabetes drugs in the pipeline it will be a few years before we gain a better understanding of their market potential. This leaves the door open for a what could be a game changing deal should JNJ decide to pursue a deal with an established diabetes company. Based on their strategy for the diabetes care unit it’s clear they understand the changing dynamics of the diabetes market. Furthermore, Diabetic Investor believes JNJ will be the first company to develop and market a complete diabetes care solution. As we have reported before the day is coming when physicians will prescribe a diabetes care kit which will contain all the items a patient needs to manage their diabetes, both drugs and devices.

The company has long coveted Novo Nordisk (NYSE:NVO) however it’s unclear with Novo’s ownership structure if a deal could be done. Looking over other potential candidates and their respective positions in the market Diabetic Investor isn’t sure even JNJ can get what they truly need.

As it stands today there is no hurry to rush into a blockbuster deal. The diabetes care unit is performing well and baring a letdown should continue its winning ways.

David Kliff
Diabetic Investor
847-634-4646 fax
224-715-3761 mobile