LifeScan – The Future and few surprises
This afternoon at Johnson and Johnson’s (NYSE:JNJ) Medical Devices and Diagnostics Business Review, Eric Milledge Group Chairman responsible for the LifeScan unit provided a glimpse of the future. Here are the highlights:
1. 1. Although Mr. Milledge mentioned that LifeScan new focus is to become a disease management company it appears JNJ’s definition of disease management is far different than conventional disease management and looks similar to Roche’s Circle of Care concept. The LifeScan approach to disease management centers around providing patients with even more tools, both hardware and software, to help them control their diabetes. Traditionally disease management centers on using a third party, i.e. diabetes educator, who serves as a patient coach. Hardware and software are tools in this process however these tools are useless if they go unused. Little insight was given how JNJ’s approach would increase usage of the many tools they offer.
2. 2. As the market for blood glucose monitoring products has matured in developed countries LifeScan has set their sights on developing countries where the incidence of diabetes is rising yet BGM is underutilized. A good idea however in developing countries cost and a poor reimbursement environment make these markets difficult to penetrate and less profitable.
3. 3. Surprisingly Mr. Milledge commented that the FreeStyle meter from Abbott (NYSE:ABT) was their “leading competitor”. It is well known that Abbott has used aggressive pricing to gain market share, an effort that appears to be working as both LifeScan and Roche have publicly acknowledged that domestic market conditions are difficult.
4. 4. Looking towards the future the company is working on an all in one device that combines the test strip and lancet, requires no calibration and “simplifies testing”. According to the company this product should hit the market in 2008. The move towards an all in one device is a goal if all the major BGM players and while such a device would be an improvement over current meters this step is hardly revolutionary. Roche already has the CompactPlus on the market and is working aggressively towards having a similar device, as are all the other major players.
5. 5. Surprise number two came when reviewing the insulin pump area, JNJ now owns insulin pump maker Animas, when Mr. Milledge mentioned that Animas has 8% of the insulin pump market a share well below what many believed.
6. 6. It came as no surprise that the company is working on a pump meter combination similar to the Paradigm link system. In an interesting twist the Animas system is designed to control dosing from either the pump or meter.
7. 7. Not to miss a market, the company is also working on a continuous glucose monitor that requires no patient calibration and will warm up within minutes rather than hours. According to the company the product will enter clinical trials sometime in 2007.
8. 8. While the company made no mention of their efforts in the disposable pump area during the formal presentation during the Q&A Mr. Milledge said he believed this area would provide a significant opportunity in two to three years. An interesting comment considering how aggressively Animas was hyping their micro pump technology prior to being acquired. Currently Insulet’s OmniPod owns this space and although there are several companies lining up to take a crack at Insulet no one will be ready to compete for quite some time. Given Mr. Milledge early comments that the insulin pump market is only growing at 10% to 11% annually and the market is already over-crowded with players why JNJ hasn’t made an effort to acquire Insulet. A move JNJ could easily afford and would provide the company with state of the art technology.
LifeScan has several interesting ideas although Diabetic Investor considers them evolutionary rather than revolutionary. With their vast resources the company will continue to compete aggressively. However the presentation failed to address a central problem with diabetes management, this continued fascination with technology. It seems that all the diabetes medical device players cannot break from the past and continue to provide more and more tools. With markets becoming increasingly competitive, competitive bidding on the way and markets maturing future growth won’t come from more fancy new tools. The key to growth will come when patients learn why they should use these tools.