The Fat Lady is singing

The Fat Lady is singing

Yesterday Abbott (NYSE:ABT) posted the following notice on their Abbott Diabetes Care web site:

“Important Note To Customers: FreeStyle Navigator® Continuous Glucose Monitoring System

Thursday, April 8, 2010

Abbott Diabetes Care is committed to quality in its products and to providing the best level of customer service. We take seriously our role in helping people with diabetes monitor their blood glucose. That’s why we designed the FreeStyle Navigator Continuous Glucose Monitoring System, which established a new level of accuracy in continuous glucose monitoring.

We are currently experiencing a supply interruption with the FreeStyle Navigator Continuous Glucose Monitoring System. This interruption means we have been unable to follow our normal complaint resolution process, which is to provide patients with replacement receivers and transmitters. We also have been unable to provide FreeStyle Navigator Continuous Glucose Monitoring System kits to new customers.

At present, we cannot estimate when the supply of the FreeStyle Navigator Continuous Glucose Monitoring System will resume.

We recognize that customers are frustrated with the delay and we regret the inconvenience. We are proactively contacting customers who need replacement receivers and transmitters to advise them of the actions we are taking to meet their needs.

If you are a customer who needs a replacement FreeStyle Navigator receiver or transmitter, we are offering a range of options to meet your needs. Please contact customer service at 1-800-221-7700 begin_of_the_skype_highlighting , 1-800-221-7700 end_of_the_skype_highlighting and we will assist you.

It is important to note that this does not affect working FreeStyle Navigator receivers or transmitters currently in use by patients. Furthermore, no other Abbott Diabetes Care or FreeStyle® products are affected by this situation.

We are committed to doing everything we can to resolve this situation quickly.

Thank you for making Abbott Diabetes Care your partner of choice.”

(Diabetic Investor added the highlighting and bold.)

Diabetic Investor really doesn’t want to gloat or say we told you so, but from the beginning we doubted that Navigator would survive. Looking back, Navigator’s fate was sealed when Abbott made the foolish decision to seek a replacement indication rather than an adjunct indication when they originally submitted Navigator to the FDA. All the mistakes made after that point merely compounded this critical miscalculation.

With Navigator fading into the sunset this leaves Dexcom (NASDAQ:DXCM) and Medtronic (NYSE:MDT) as the remaining players in continuous glucose monitoring. Based on various field reports Diabetic Investor believes Dexcom stands to be the major beneficiary from Navigator’s demise and will likely gain the majority of Navigator customers.

In some respects this move by Abbott is one of the better decisions the company has made. Although their conventional glucose monitoring business continues to face tough sledding, by shedding the Navigator the company will no longer be wasting valuable resources. Diabetic Investor continues to believe that eventually Abbott will sell this unit and while the Navigator may be shut down the company still owns the IP. It’s quite possible that an acquiring company could fix the issues with the Navigator and re-launch the product.

In one respect Diabetic Investor is sad to see the Navigator go as market dynamics for CGM are actually improving. Reimbursement is no longer the major issue it was, while physicians and patients are finally figuring out how to translate all this information into better outcomes. CGM will never be standard care but can be a valuable tool for patients on insulin pump or multiple daily injection therapy.

While some will view this move as another Abbott misstep however Diabetic Investors actually see this as one of their smarter moves, as Mao Tse-Tung once said; “The object of strategic retreat is to conserve military strength and prepare for the counteroffensive.”