Roche Reports – Ouch!
Late last night or very early this morning, depending on what time zone you live in, Roche reported full year 2008 results and the numbers for the Diabetes Care unit showed continued weakness. On a global basis sales for the unit declined 1%, lead by a 12% decrease in North America. Compared to last year sales in fourth quarter fell 7%. OUCH!
Based on reports from the field Diabetic Investor knew the unit was experiencing major problems. However, these results are even worse than we anticipated.
According to the company they are taking three steps to turn this struggling unit around. Increasing their commercial presence by investing in their field sales forces, cost cutting and new products. In the new product area the company mentioned four product launches for 2009. The Accu-Chek Nano, a new version of the Accu-Chek Active, Accu-Chek Mobile an integrated system that combines 50 test strips on a tape and 6 lancets on a drum and finally the Accu-Chek Combo a meter that works as a remote for the Accu-Chek insulin pump.
Looking over the planned product launches it appears the company has fallen into the all too common trap of promoting fancy technology as a way to reinvigorate growth. Given current market conditions where there are too many meters, slower market growth and intensifying pricing pressure Diabetic Investor doesn’t see how new technologies will do anything more than give Roche newer products that don’t sell rather than older products that don’t sell.
One might think with the unit performing so poorly the company would seek something different rather than relying on the same old strategies that have failed in the past. Frankly the company has little to lose as their market share continues to decline. Without a major change in strategy, and new products are not a change but more of the same, Diabetic Investor sees more problems ahead. Additionally Diabetic Investor believes without a major change the company is in serious danger of falling to third position in BGM, a shocking turn of events for a company that once was the market leader. OUCH!
At this point Diabetic Investor believes the company should seriously consider abandoning the BGM market entirely. Market conditions being what they are combined with their lack of vision Roche just might better off finding a buyer and concentrating on their diabetes drug portfolio which looks more promising. The unit still has value and with a new vision could return to market prominence, something Bayer demonstrated when under new management they turned around their BGM unit that many, including Diabetic Investor, had given up on.
The news wasn’t all bad for Roche and diabetes as their GLP-1 taspoglutide has moved into Phase 3 trials. The company is watching developments in the GLP-1 market closely indicating it may be necessary to increase the number of participants in the trails to satisfy the new FDA guidelines on diabetes drugs. It’s becoming quite clear that the upcoming FDA panel meeting for liraglutide will be a major event for the entire GLP-1 market. As Diabetic Investor reported yesterday in our special issue on the Amylin (NASDAQ:AMLN) situation our sources tell us that Novo Nordisk (NYSE:NVO) may be required to run additional studies as there appears to be a structural issue with liraglutide.
All in all, it was disappointing to see that the company continues to believe that somehow new products are the answer for their sinking BGM unit. New products without a change in strategy, is like painting your car when it really needs a complete tune-up. It might look better but it won’t run any better. As the old saying goes if it walks like a duck, talks like a duck then it’s a duck. Without a major shift in BGM pretty soon Roche just might be a dead duck. OUCH!
