The Troubles Continue At Roche
On the same day that Johnson and Johnson (NYSE:JNJ) announced strong results for their diabetes franchise, Roche announced dismal results for their diabetes franchise. According to the company’s press release; “Roche Diabetes Care’s nine-month sales grew 4% in the face of increasing reimbursement pressures in the United Kingdom and Germany, and slower market growth in the United States and other key markets.” This compares to JNJ who on a worldwide basis grew 13% in the first nine months of 2007 when compared to 2006.
Even worse for the company was the extremely poor performance of their blood glucose monitoring business which grew by an anemic 3%. While the company stated their insulin pump franchise grew at 15% and sales in North America grew ahead of the market, this unit still faces an uphill battle.
At one time Roche was a diabetes juggernaut and appeared to be positioned to expand their lead. Starting with their ill-advised acquisition of Disteronic, the company has fallen on hard times. The recent management change in diabetes also appears to be a bust. This move has not been well received inside the company and is cause for further concern.
With JNJ on a roll, Bayer gaining share and privately held AgaMatrix making their presence felt, Roche has a serious fight on their hands in the BGM market. New products like the Compact Plus have failed to catch on in the marketplace and the company has done a poor job of dealing with the changing reimbursement environment. The failure to deal with changes in reimbursement is particularly distributing as it was widely anticipated.
The growth in the insulin pump unit is also misleading. Sales for the entire insulin pump franchise amount to less than $175 million worldwide and pales when one considers the BGM unit had sales of almost $1.7 billion on a year to date basis. Looking at their competition in the insulin pump market and the fact that the Spirit pump is sub-standard technology it’s difficult to see the company gaining any substantial market share in the United States.
Based on the facts that the company has nothing particularly exciting in their diabetes device pipeline, an unhappy sales force and hungry competitors who better understand market dynamics it’s difficult to see a silver lining here. Given the problems with the Disetronic acquisition it’s unlikely the company has the stomach to try another acquisition. Add in the fact that the company has cut back on their direct to consumer advertising at a time when others are stepping up their efforts here, Diabetic Investor isn’t sure the company fully realizes the extent of the problems or how to solve them.
J.A. Hadfield wrote; “To see a problem clearly is three parts of the way to solving it.” From what was said today it appears Roche still has blinders on when it comes to their once dominate diabetes device unit.