Round and round we go where we stop nobody knows

Round and round we go where we stop nobody knows

Let’s see if we’ve got this right, Sanofi (NYSE:SNY) who couldn’t pull the trigger and complete the acquisition of Bayer, has now set their sights on acquiring Roche’s diabetes device unit. But wait wasn’t it Roche who was buying Abbott’s (NYSE:ABT) diabetes device unit or was it Bayer. Yes rumors are flying about who’s buying whom, as everyone continues to struggle with how to deal with the impact of competitive bidding. The glucose monitoring world is entering full blown wackiness which is only likely to get wackier.

First off Diabetic Investor doubts Sanofi would go from spending a reported billion plus euros to acquire Bayer to spending three times that much to acquire Roche’s unit. While it’s true that Roche’s unit would provide Sanofi with the global presence and scale they would need to compete in BGM, we’re not convinced that Sanofi has made any decisions on what to do with their much hyped yet poorly executed diabetes strategy. About the only thing anyone at Sanofi knows for sure is that they will ride the Lantus horse until that horse can’t run anymore.

When it comes to Bayer, Abbott and Roche it’s anyone guess as to what will happen and who it will happen too. As Diabetic Investor has noted on numerous occasions consolidation in the BGM market is almost a forgone conclusion, or put another way we’re not sure who will be dancing with whom but the dance will happen and as has been said so often it takes two to tango.

Watching all this are the folks at LifeScan, a unit of Johnson and Johnson (NYSE:JNJ), who continue to make deals, the most recent being with CCS Medical. The company continues to reap the benefits of a strategy that was executed years ago, a strategy which basically included two key elements. First, buy up as much formulary presence as possible and second, focus on insulin using patients. The company also got a lucky break when Roche, who believe it or not was at one time a serious player in BGM, decided not to do battle with JNJ for formulary supremacy which marked the beginning of the end for Roche. A unit which at one time was producing nearly a billion dollars of sales here in the US is now producing roughly $500 million.

Also watching all this are bunch of smaller, lesser known players who think they have built a better mouse trap or at minimum have a business plan more closely aligned with today’s market conditions. The first of these is Nipro Diagnostics, who bought co-branded leader Home Diagnostics. Unlike the major branded companies who spend millions on marketing, Nipro doesn’t have that problem as their customers aren’t patients, Certified Diabetes Educators (CDE) or physicians but large retailers Walgreens, CVS and Rite Aid. These retailers bear the responsibility for marketing Nipro products which are branded for each retail chain. This one fact alone gives Nipro a huge advantage when it comes to the Medicare market. Unburdened by huge infrastructure costs and experienced in low cost systems, Nipro and their partners stand a chance of capturing a fair share of the Medicare market. Helping Nipro is the fact that retailers could well use diabetes testing supplies as loss leader, hoping to attract a greater percentage of Medicare patients, patients who use lots of drugs and make lots of trips to the pharmacy.

On the opposite end of the spectrum is company like TelCare, who unlike everyone else in BGM who has hooked their wagon to the way cool, way popular iPhone, has a system that does not require the meter communicate with a smartphone because their system is basically a smartphone which doesn’t make phone calls. Using cloud computing patients using the TelCare system can seamlessly share their readings with their physician, CDE or just about anyone. TelCare also has the ability to easily communicate with their patient base, spending messages directly to the meter. Simply put if the future of diabetes management is truly going to be an interconnected future, TelCare has a ready-made solution and it doesn’t matter if the patient uses a way cool iPhone, Samsung Galaxy or even a dumb phone.

Somewhere in-between are the folks at Intuity Medical and their yet to be approved all-in-one device the Pogo. The Pogo is hardly revolutionary but it has the potential to become an attractive product. If there is one thing patients hate is all the stuff they need to carry to perform a simple glucose test.  Being an all-in-one device the Pogo actually simplifies the testing procedure.

Next there are a host of products designed to work which attach to a smartphone, the iBGStar from Sanofi being the most well-known. While a nice idea there are number of issues with these units also well illustrated by what happened when Apple decided to change the connector for their new way cool iPhone 5 which unfortunately for Sanofi meant the iBGStar wouldn’t work with the iPhone 5 unless the patient bought a special adaptor. Some companies are trying to get around this issue by having their unit connect through the ear phone port however all these products remain unproven in the marketplace and lack any serious presence.

Like it or not for all the non-major players in BGM, this market remains the domain of the larger branded players who will only get larger in the days ahead. For all the banter about the many new way cool systems that can do everything but the patients laundry, the majority of patients prefer something simple. This does not mean there isn’t room for some of these systems, rather given market dynamics it’s difficult to imagine any gaining significant market share. Diabetic Investor does see the possibility that the larger players could partner or acquire some of the more promising new technologies as a way to offer a more comprehensive product portfolio. However, it would be mistake to believe under current market dynamics that we’ll see the major branded players paying huge multiples just so they can fill a hole in their existing product portfolio.

Still this is the wacky world of diabetes devices which basically means that while everyone figures out what to do next there will be lots of rumors about who’s dancing with whom. It may not be Dancing with the Stars but it should be good for a few laughs.