So What….

So What….

This morning Roche announced they have acquired MySugr. Per a company issued press release:

“Roche (SIX: RO, ROG; OTCQX: RHHBY) and mySugr announced today that the two partners have signed an agreement under which Roche acquired all shares of mySugr GmbH. Counting more than one million users globally, mySugr is one of the leading mobile diabetes platforms in the market and will become an integral part of Roche’s new patient-centered digital health services platform in diabetes care. The acquisition allows Roche to expand its leading position in the area of diabetes management.”

This is great news for the good people at mySugr but it really won’t do all that much to change the dismal dynamics of the conventional glucose monitoring business. A business Roche themselves would have sold had they been able to find a buyer. Given that no one wanted this unit the company is doing what they can to make the best of a bad market.

Like so many others mySugr is doing what they can to transform data into patient relevant, patient actionable information. And quite frankly it is mySugr’s competitors who should be thrilled by this deal. Although financial terms were not disclosed it is known that mySugr raised $4.8 million back in 2015 so we would guess the sale price was north of $20 million. No matter what Roche paid it gives the folk at Livongo, OneDrop and others hope. Hope that the greater fool theory is alive and doing very well.

The question now becomes will Roche try and transform themselves into a diabetes management company from being a diabetes device company. This is something they should be doing but something we aren’t sure they can do. This akin to asking President Trump to get off twitter, it’s a great idea but we doubt he can do it.

The problem as we see it has nothing to do with platforms like mySugr. The problem lies in transforming these platforms into money. For once a company transforms themselves from a seller of toys to a seller of services the entire revenue model changes. No longer are they paid for these toys upfront, no when services are your gig results are what matters. This the business model being used by Livongo and others, it’s not the hardware that matters it’s results that matter.

It is possible that Roche will follow Johnson and Johnson (NYSE: JNJ) who at one time claimed to be building a diabetes eco-system. A system which has fallen apart considering the company is desperately trying to unload their diabetes device companies.

The fact is other than helping management and the investors at mySugr to experience a nice liquidity moment, this isn’t that big of a deal. Sure, Roche can collect all the pieces they need to transform themselves from a device company to a diabetes management company. Yet there is one thing they cannot acquire the willingness to change.

We see this a lot in diabetes, we saw it when Sanofi (NYSE: SNY) thought they could be a device company. We are seeing this right now with Medtronic (NYSE: MDT) as they attempt to move beyond intensively managed patients. We witnessed this twice with Becton, Dickenson (NYSE: BDX) first when they went into BGM and now they are getting into insulin pumps.

The reverse of this also happening with Google, Apple and Amazon all jumping into the diabetes pool.

It remains to be seen who will win this battle or perhaps more appropriately can the old guard, companies like Roche, transform themselves so they can compete with these cash rich techies. The jury is still but our money this time is on the newbies.