Round and round we go

Round and round we go

Well it seems like everyone in the diabetes space and some who would like to be in the space are sniffing around the two diabetes properties currently up for sale, Amylin (NASDAQ:AMLN) and the diabetes device unit of Bayer. In a somewhat ironic twist there is at least one company, Sanofi (NYSE:SNY) who is looking at both properties.  Although Diabetic Investor still believes it is way too early in the process to pick a winner, we can start to look at who the big losers will be. As we have stated for some time now the deals for Amylin and Bayer are just the beginning as to what could be a seismic shift of power in the diabetes world, both drugs and devices.

It should go without saying that Lilly (NYSE:LLY) once the dominate diabetes franchise is the biggest loser of all. No longer aligned with Amylin and their partnership with Boehringer Ingelheim going nowhere in a hurry, the company is floundering for a cohesive diabetes strategy. When the Lilly story is written it will go down as perhaps the best example ever of corporate hubris. Diabetes is supposed to be a legacy franchise however one would never know this given how badly the company has managed this franchise and their unwillingness to take a realistic assessment of the franchise. Things have become so bad at the company that competitors are openly questioning their strategy. While it would have unthinkable to state this even a few years ago but it’s getting to the point where the company should seriously considering selling their diabetes division.

Although we don’t even know who will eventually own Bayer’s diabetes device unit, the winner will ultimately be a loser. Yes it is true that the company does offer some fine systems but the Bayer name once the pillar of glucose monitoring has lost its cache. Even worse their market share and customer base really does not fit well into the future of glucose monitoring which is clearly centered on the insulin using patient. The ContourUSB a truly fine meter was the company’s last stand to gain share in this critical demographic, however in the end it was too little too late. The fact is whoever ends up owning this unit will need to spend millions revamping not just the product line but marketing efforts. The harsh reality is even if the new owner pumps in the money there is no guarantee this spending will yield the desired results. The glucose monitoring market continues to change and it’s an open question whether the new owner of Bayer’s unit will see a reasonable return on their investment.

Another loser, albeit on a lesser scale, is Novo Nordisk (NYSE:NVO). Not known for making major acquisitions, the company has relied on their continued ability to produce premier products. However after many years of success the company is facing two very large issues. For the first time in recent memory the company’s pipeline is devoid of any truly innovative or exciting products. Plus reimbursement has become problematic as the company can no longer command premium prices for their premium products.  A third issue is due to market dynamics the company is now being forced to play a game they are not used to playing as the competition in effort to gain share is using the heavy hammer of price. For a moment it seemed as if the company was not sure how to deal with these issues but has since regained their footing, although Diabetic Investor still believes they are on shaky ground.

Some may believe that whoever ends up owning Amylin will be an automatic winner given the market potential of Bydureon.  While it is true that Bydureon has the potential to become a mega-blockbuster we have stated consistently the drug will not sell itself and the competition will not let whoever owns Bydureon grab share without a fight.  The fact is when it comes to the fight for supremacy in diabetes therapies this is not a fight governed by Queensberry rules, this is a street fight.  This is one reason Diabetic Investor believes it would be much better if Amylin is sold to a company with a keen understanding of the diabetes market. In the hands of diabetes neophyte, a company who must learn the diabetes market, Bydureon will face a much tougher road.

No matter what happens and who buys whom, Diabetic Investor is looking forward to the future. This transformation of the diabetes sector is long overdue.