Liberty Medical Sold Once Again
Back in August of 2007 Medco Health Solutions, who has since been acquired by Express Scripts (NASDAQ:ESRX), acquired PolyMedica, the owners of Liberty Medical Supply in an all cash deal which valued PolyMedica at $1.5 BILLION. Today Diabetic Investor has confirmed that Liberty management has bought the company from Express Scripts. According to a spokesman from Express Scripts; “Liberty was divested this week via a management buyout”. Although terms were not disclosed Diabetic Investor has confirmed that the initial asking price sought by Express Scripts from other possible buyers was in the $400 million neighborhood.
Now we know Express Scripts was anxious to sell Liberty and that Liberty never really fit with Medco but talk about the destruction of value; only in the wacky world of diabetes will we see a company acquire a company for $1.5 billion, run it into the ground and then dump it off for a fraction of the original purchase price. What’s even more amazing is that this isn’t the first and likely won’t be the last time a diabetes company turns gold into sand. Frankly the diabetes landscape is littered with companies and/or units of companies that prove this point, i.e. Roche quickly comes to mind as a company that has also taken a billion dollar franchise and turned it into a $400 million franchise.
The fact is the diabetes business is really no different than any other business, in that, if a company fails to adapt to changing market conditions, continually living in the past they don’t stand a chance and will get eaten alive in the marketplace. Thankfully a company like Express Scripts realized they couldn’t make this work and was willing to do whatever was necessary to get rid of what was becoming an albatross. This is in stark contrast to Bayer who overplayed their hand, got greedy and is now stuck with their glucose monitoring unit, a unit which frankly should have been sold long ago.
Seeing all this transpire Diabetic Investor can only wonder if companies like Sanofi (NYSE:SNY) or Abbott (NYSE:ABT) understand just how rapidly the diabetes market is changing. Or what about Lilly (NYSE:LLY) another outstanding example of a company who has taken a legacy franchise, once the core of the company only to see it become an example of what not to do in diabetes.
Only in the wacky world of diabetes do we see with regularity companies destroying rather than creating value. Only in the wacky world of diabetes, where anything can and usually does happen, do we see hubris run rampant among too many in the executive suite. Only in the wacky world of diabetes, do we see management forget that diabetes cannot be learned from looking at a PowerPoint presentation or spreadsheet. The companies that succeed in this market succeed not just because they have good products rather they understand that when it comes to diabetes it’s all about the patient and making their lives better. Or put another way, they understand that profits and patients go hand and hand and don’t see patients as a necessary evil that they must deal with.
Far too many companies are now being run or managed by people who may be very smart when it comes to business but know nothing about what it’s like to live with diabetes. Worse they fail to listen to actual patients with diabetes and what they really want and need. Frankly it is not surprising that Medco ran Liberty into the ground or that Express Scripts was willing to do whatever it took to get rid of this unit. Sometimes it’s better to admit that a mistake has been made and move on. A lesson which should not get lost among those still in the business but likely will be ignored. As diabetes is not just wacky but full of people who think they are smarter than everyone else and it’s only the other guy who’s an idiot. The sale of Liberty and the constant destruction of value in the market is living proof of this; facts don’t lie.