Roche Reports – How long can this go on?
It’s becoming increasingly difficult for Diabetic Investor to come up with new and creative ways to say basically the same thing; when it comes to their diabetes care unit Roche continues to deliver horrible results. This morning the company announced that on a year to date basis sales in the unit are down 12%, with sales in the US declining 6%.
To understand the true depth of their problems all you need to do is listen to the conference call where the biggest news coming out of the unit is the FDA’s approval of the new Aviva test strip; an event that was long overdue and won’t do a thing to improve sales. One piece of advice should anyone decide to actually listen to the call, something not recommended by Diabetic Investor, pay very close attention when Daniel O’Day, the head of the diagnostics unit speaks, as he spends less than 60 seconds talking about the diabetes care unit.
What dumbfounds Diabetic Investor is the lack of outrage from Roche stakeholders. One just might think that these stakeholders would be asking some very tough questions and demanding an explanation as to why the unit continues to struggle and what the company plans to do about it. Given that management doesn’t seem to care that the unit is being run into the ground, one just might think Roche stakeholders would give a damn. Based on the fact that there wasn’t even one question about this unit it seems as if not only has Roche management given up on the unit but Roche stakeholders have given up as well.
Granted the unit has several problems, some of which Diabetic Investor does not believe can be overcome; we don’t see how continued sales declines would be considered a sound business strategy. At minimum one might think that stakeholders, understanding that the unit is losing value would ask the company why it continues to hold onto this loser. Perhaps they have been reading Diabetic Investor and believe as we do that even if they put the unit up for sale there is no one out there who would be dumb enough to buy it.
Quite frankly Diabetic Investor believes Theo Epstein will have an easier time bringing a World Series championship to the Chicago Cubs than Roche has of turning around or selling their diabetes care unit. Keep in mind that the Cubbies have not won a World Series for over 100 years and many believe the club is actually cursed.
Things have become so bad at the unit that Diabetic Investor has been trying to find something, anything that could be considered a positive. As much as we have enjoyed covering what we consider is the perfect of example of how not to run a glucose monitoring company, we actually would prefer to have something else to write about. Yet, try as we might we cannot find one single positive item. Management continues to ignore the pink elephant in the room and seems content to see their sales decline. While we would have never considered it possible that a company could go from number one in the world to a complete and utter disaster Roche has proved us wrong.
Perhaps we have been misreading the situation all along and for reasons unbeknownst to anyone but Roche management this has been the plan all along. As crazy as this may sound, nothing else makes sense.