Rearranging deck chairs on the Titanic

Rearranging deck chairs on the Titanic

This morning Abbott (NYSE:ABT) announced an agreement with Smiths Medical to promote and distribute the FreeStyle Navigator continuous glucose monitoring system. According to an Abbott press release “To supplement Abbott’s own promotional efforts, a non-exclusive distribution agreement will allow Smiths Medical representatives to promote Abbott’s FreeStyle Navigator System to its growing customer base in the United States. Financial terms will not be disclosed”

As Diabetic Investor has reported Smiths Medical has been actively shopping their Deltec unit which makes the Cozmo insulin pump. Although a fine insulin pump the Cozmo has fallen on hard times as Smiths has made the decision to move in another direction. It’s no secret that the Deltec unit has seen a mass exodus of sales and management talent. While competitors continue to introduce new products and ramp up their sales efforts due to the lack of commitment by Smiths Deltec has been unable to keep pace. When it comes to the insulin pump market boots on the ground are just as important as innovative technology. The bottom line for Deltec is they are badly outgunned and lack the resources to effectively compete.

Diabetic Investor is not surprised by this announcement as the two companies already work together as Abbott provides the CozMonitor for the Cozmo. However, given the dismal state of affairs at Deltec it’s unlikely this agreement will do little to help Abbott establish the Navigator in the market place. The bottom line for Abbott is there many blunders with Navigator has cost them dearly. Once considered the most promising CGM product, Navigator has come to the market late allowing competing products from Medtronic (NYSE:MDT) and Dexcom (NASDAQ:DXCM) to grab the low hanging fruit in what we believe is a niche market.

Abbott compounded their Navigator mistakes when the product was finally approved last month by pricing Navigator higher than the competition. This move further reinforced Diabetic Investor’s belief that Abbott’s management is clueless when it comes to succeeding the diabetes market. Just why anyone would pay more for a product that is already technologically behind its competition is something only Abbott seems to understand.

The fact of the matter is the Abbott Diabetes Care unit is a sinking ship and aligning themselves with another sinking ship is only a move Abbott would see as beneficial. In actuality the Abbott Diabetes Care unit has much in common with Smiths Deltec unit. Sales reps at both companies are unhappy with management and are leaving in droves. Both companies have taken once promising products with bright futures and run them into the ground. Neither company appears to understand what it takes to be successful in the diabetes market. Finally both companies are looking to sell their diabetes units before there’s nothing left to sell.

To Diabetic Investor this nothing more than rearranging the deck chairs as the ship sinks into the ocean. Like the supporters of the Titanic who believed the ship was unsinkable and sank due to their teams own arrogance. Abbott Diabetes Care mismanagement has badly damaged the possibility of success. The ship is taking on water at a rapid rate and Abbott is bailing with a teaspoon.

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