The Big MO – Lifescan Expands Their Lead
This morning Johnson and Johnson (NYSE:JNJ) announced their third quarter results and for their LifeScan franchise the news was very good. Worldwide sales grew 16% when compared to the third quarter results of 2006. The company specifically noted the success of the UltraMini blood glucose meter and a nearly 30% increase in sales of Animas insulin pumps.
Several years ago Diabetic Investor noted that the blood glucose monitoring market was transforming from a medical device model to consumer product model. Back then blood glucose monitoring companies were just beginning to advertise on television. In fact, JNJ was one of the first BGM companies to regularly use television advertising as a component of their marketing plan. JNJ has now taken the next step as the market continues to move further into the consumer product model.
The UltraMini is prime example of how this strategy is working. The ads for the UltraMini stress the small size of the meter and the fact the meter comes in a wide variety of colors. Unlike others in the space who continue to add more fancy features that only a minority of patients care about, JNJ is stressing simplicity. The company understands that when it comes to meters the majority of patients want a product that is easy to use and non-threatening.
Diabetic Investor see the success of the Animas insulin pump unit having more to do with market dynamics than the building a better mouse trap. Prior to being acquired Animas had already figured out that pump patients wanted more than just advanced technology, they wanted a pump they could customize to fit their own personal tastes. Although color screens, a small foot print and custom ring tones have nothing to do with better outcomes they do make the pump more consumer friendly. Now part of JNJ the company has the resources it needs to more effectively get their message to patients and physicians.
The success of the Animas franchise, combined with the continued growth of Insulet’s (NASDAQ:PODD) OmniPod, is further evidence that market leader Medtronic (NYSE:MDT) now has a battle on their hands in the insulin pump market. Although Medtronic still has a commanding lead in terms of market share we are beginning to see cracks in their armor. It wasn’t that long ago that Diabetic Investor commented that the insulin pump market as a battle for second place and this still may be the case. Still, stranger things have happened here and it’s no longer a foregone conclusion that Medtronic will remain in the top spot.
Finally, Diabetic Investor was extremely pleased when the company announced a major commitment to diabetes education. This commitment shows the company understands that education is the only proven method for patients to reach better outcomes. While others talk about patient education JNJ is actually doing something about it and correctly understands that a better educated patients uses more test strips and insulin pumps. We can only hope that others in diabetes will follow JNJ lead here.
Looking towards the future things should get even better for JNJ. Although it was not mentioned during today’s call, their deal with Medtronic that allows the Ultra meter to communicate with the Paradigm line of insulin pumps should enhance test strip sales. Insulin pump patients check their levels more frequently than any other patient, on average checking their levels 7 times each day compared to less than twice a day for non-pumpers. With an exclusive in the United States and nearly 300,000 Paradigm pumps in the market this deal will only expand LifeScan’s lead in BGM.
Given their resources and correct read of the market JNJ is well positioned for the future. When it comes to diabetes JNJ has the BIG MO and is on a roll.