The Blackberry Tale

The Blackberry Tale

Yesterday former smartphone titan Blackberry warned investors of a huge quarterly operating loss (almost a billion dollars and yes that billion with a B) and also announced they would be axing nearly 4,500 employees. Now some may say this announcement which was widely expected has nothing at all to do with the wacky world of diabetes. Well at first glance Diabetic Investor would agree with that feeling but on second thought it should send an ominous signal to all the so-called market leaders in diabetes.

At one time BlackBerry was the unquestioned leader in smartphones, back in the day having a Blackberry was way cool. That was until the way cooler iPhone came along and became the leader in smartphone coolness. Interestingly even the oh so cool iPhone is no longer the smartphone leader on and on it goes. The simple lesson of the Blackberry demise is that when it comes to technology no lead no matter how big is safe and failure to adapt to changing trends can cripple even the biggest companies.

Take a look at the current market leader in the insulin pump market, Medtronic (NYSE:MDT).  Medtronic is the unquestioned leader in this market owning nearly a 70% market share. The company has faced multiple threats yet remains entrenched in the top spot. However as Diabetic Investor has been reporting cracks in the armor are emerging and while we don’t see the company surrendering the top spot anytime soon the possibility exists this could actually happen. Truth is Medtronic’s pump technology is old and outdated and their overly fascinated with being the first to develop and commercialize a closed-loop system.

Leadership in the insulin space is divided, Sanofi (NYSE:SNY) owns the world’s best-selling insulin, Lantus while Novo Nordisk (NYSE:NVO) has a deeper portfolio and broader coverage. The problem for Sanofi is actually quite simple other than Lantus the company can’t seem to do anything right when it comes to diabetes and Diabetic Investor does not consider selling special lunch bags for patients diabetes doing something right. Novo on the other hand must come to grips with the fact the reimbursement environment has changed forever and they cannot command premium prices for their premium products. Both companies also must acknowledge that biosimilar insulin will be a major threat and failure to deal with that situation today will have devastating consequences later.

LifeScan, a unit of Johnson and Johnson (NYSE:JNJ), is the current leader in conventional glucose monitoring which isn’t exactly an honor given the dynamics of this market.  The question for LifeScan, actually JNJ is their future commitment to diabetes. Animas, their insulin pump franchise has undergone drastic cost cutting moves and has never, let me repeat this, never made a profit since being acquired by JNJ.  The company has a new drug for Type 2 diabetes which could be a minor hit but truth be told LifeScan is king of the hill when it comes to generating cash or at least it was. The real question for LifeScan is whether they will press their lead while everyone else is running around like chickens with their heads cut off or will they fall into same trap everyone else has and try and cut their way to growth.

The fact is no leadership position in diabetes whether it be devices or drugs is safe. The market once booming only a few short years ago has undergone a major transformation. While diabetes continues to grow at epidemic rates increasing the number of patients with the disease issues such as healthcare reform, an uncooperative FDA and reimbursement challenges are wreaking havoc for the companies in this market. Whether the leaders in diabetes suffer the same fate as Blackberry will come down to the ability to adapt to the changing nature of the business. While this may seem obvious as the troubles at Blackberry make clear change isn’t easy. Many of the current market leaders seem to be struggling with just what to do next and this lack of a clear strategy could come back and haunt them in the future.

As Charles Merriam wrote; “The future belongs to those who fuse intelligence with faith, and who with courage and determination grope their way forward from chance to choice, from blind adaption to creative evolution.” It will be interesting to see which of today’s market leaders heed this advice and remain market leaders in the future.