The issue that just won’t go away

The issue that just won’t go away

When Abbott
(NYSE:ABT) made the decision to change the enzyme used with their blood glucose
monitors it appeared that the PQQ issue raised by the FDA had run its course.
Diabetic Investor is now hearing that the Veterans Administration has instructed
their hospitals to stop using any hospital based glucose monitoring system that
uses the PQQ enzyme. There are also rumblings that FDA is getting ready to
issue a similar statement to hospitals.

that this issue just won’t go away one has to wonder what Roche plans to do
with their Accu-Chek monitors most of which still use the PQQ enzyme. All the
major players, LifeScan, Bayer and now Abbott have stopped using the enzyme. Based
on numerous field reports this issue is putting even more pressure on the
struggling Accu-Chek line which continues to lose market share, both in the hospital
market and direct to consumer market. Although the PQQ issue affects a minor
percentage of the population it has resonated throughout the market.

Roche now
stands alone as the only major player that has yet to change their enzyme.
Given the increasingly competitive nature of the BGM market where every share
point has taken on greater importance it baffles Diabetic Investor why the company
remains committed to a strategy that will only contribute to further share
erosion. Even if this issue is minor in nature, it is not perceived that way in
the marketplace. Add in the fact that everyone seems to be aware of the issue
and that it’s no big deal to change enzymes it makes Roche’s inaction even stranger.

For sometime
Diabetic Investor has debated which company was more committed to turning gold
into sand, Roche or Abbott. Although Abbott is not out of the woods by any
means they are at least smart enough to realize you can’t fight public
perception. The company is also well aware that BGM market has become a battle to
capture insulin using patients. Roche on the other hand seems to be living in
the past falsely believing that somehow they can succeed where everyone else
has failed, non-insulin using patients. The fact is companies in BGM shouldn’t
walk away from this market segment they should run away and run fast.

The fact is
Bayer has a more compelling option for non-insulin using patients with the
Contour. They have firmly established the Contour as THE no-coding option even
though this feature is becoming standard throughout the industry.

With everyone
else making the PQQ issue a non-issue Roche has put themselves in the worst
possible situation. Should they wise up and switch enzymes everyone will ask
what took so long. Should they continue to ignore the issue share erosion will
continue. One has to wonder why the management team at Roche is taking so long
to make what seems like an obvious decision. But then again this has always
been the issue at Roche.

At one time
the company had a major hit on their hands with the Comfort-Curve test strip. However,
like so many companies they failed to develop a follow-up product to build on
the success of the Comfort-Curve. Simply put the company became fat and lazy, a
major mistake as the market was in the midst of transitioning to a full blown commodity
market. A perfect example of just how out of the touch the company is with the
realities of the market can been seen with their Smart Pix device that allows
Accu-Chek monitors to download information to a patients computer. In move that
only Roche could think up, instead of giving this device away for free like
everyone else, they decided to charge customers for the device. Basically they
are asking their customers to pay for the privilege of downloading their
readings. Yep that’s a sure way to make your customers happy by making them pay
for something that everyone else gives away for free.

Investor thought it was crazy when Abbott finally received FDA approval for the
Navigator and then priced the system higher than the competition. Thankfully
Abbott came to their senses and realized that being third to market against established
competition it isn’t exactly a good business model to ask patients to pay more
for inferior technology.  The company has
shown even better sense by pulling way back on Navigator realizing that it’s
just not worth their time and effort.

all the facts it’s becoming increasingly obvious that Roche has jumped well
past Abbott and has firmly established themselves as the leading the category
of turning gold into sand. Diabetic Investor would like to say we’re surprised
but when it comes to a company losing touch with reality it really is no surprise
at all. Roche is just one more example of a company who kept drinking the
corporate kool aid while the market was changing before their very own eyes.