On the prowl
Now that the House has passed the bailout package and at least for the moment everyone can take a deep breath, the business of diabetes continues to move forward. The latest news comes from Bayer Healthcare, in an interview Arthur Higgins, CEO of Bayer Healthcare said that the company is interested in acquiring businesses that make over-the-counter drugs, medications for animals and medical devices. This news should come as no surprise to readers of Diabetic Investor as we have been reporting for some time that Bayer covets Abbotts (NYSE:ABT) diabetes diagnostic unit.
According to Mr. Higgins “We think in coming months, despite some of the uncertainties that are obviously in financial markets at the moment, we’re in a very strong position to take advantage of the weakness in some other companies, the uncertainties in the marketplace, and look at strengthening our health-care business.”
Although Mr. Higgins did not discuss any specific company’s or business units, the Bayer Abbott combo makes perfect sense. However, Diabetic Investor isn’t sure Bayer will stop with just Abbott’s unit. There is an equally strong chance Bayer will make move for Insulet (NASDAQ:PODD) the makers of the OmniPod Insulin Management System. Adding an insulin pump to the Bayer family of diabetes devices will strengthen the company’s ability to compete with market leader LifeScan, a unit of Johnson and Johnson (NYSE:JNJ) who also owns insulin pump marker Animas.
It should also be noted that the company has already made a strategic investment in iSense a privately held company who has a continuous glucose monitoring system, The Glycemic Signature TM under development. This may seem a bit odd as when they acquire Abbott’s unit they will also acquire the Navigator. However, one of the major issues with the Navigator isn’t whether the unit works, the real issue is that Abbott cannot manufacturer sensors consistently or with any scale. Bayer properly understands that when it comes to the insulin pump market it’s critical that pumps have the ability to communicate with a CGM system.
Looking ahead one has to wonder what Roche will do. The company continues to lose share in the US, as both LifeScan and Bayer continue to steal users of the Accu-Chek line of glucose monitors. With the addition of the FreeStyle user base Bayer can more effectively compete for formulary placement putting even more pressure on Roche. Based on their public comments it appears the company has yet to develop a coherent strategy that will stop the bleeding.
Although Abbott’s diabetes device unit is sinking and the moral of what’s left of the sales force has fallen into the abyss, Bayer’s solid management team can start fresh. While it may take some time getting used to a management team that understands the market and who’s not micro-managing every aspect of what the sales rep is supposed to do, the reps who remain with the company will have the tools they need to get the job done. Unshackled from the chains of Abbott management these reps will be able to do the job they were trained to do, sell more units. This may seem like selling 101 but it’s something that Abbott never really understood and what put them in this mess in the first place.
