Things are just too quite
Benjamin Disraeli once noted that; “Silence is the mother of truth.” Given the deafening silence coming out of Roche Diabetes Care, Diabetic Investor suspects it is Roche who is approaching their moment of truth. For the first time in recent memory Diabetic Investor is not hearing the normal rumor that the company is getting set to jettison this unit or do the exact opposite and buy yet another diabetes device company.
Here’s what we do know for sure, based on their most recent public announcements the company plans to expand their production at their Indianapolis plant which makes the Aviva glucose monitor and test strips. The company has also confirmed they will phase out production at their manufacturing facility in Puerto Rico; this facility currently makes both Comfort Curve and Aviva test strips. Although the company has not made any definitive statements regarding when or if we’ll ever see the Solo patch pump, it’s pretty much a forgone conclusion the Solo won’t hit in the market this year and likely won’t be here in 2012 either.
Diabetic Investor will not bother to list the many issues facing the company as they are well known. What we will do is speculate a little on what the company will announce when they break their silence. First, as much as we’d like them to sell this unit, we just don’t see this happening anytime soon. As bad as they have managed this unit it still makes money and quite frankly no one wants to buy a unit that is considered damaged goods. Put another way, Roche would sell if the right offer came along but no one, so far, has been dumb enough to make such an offer.
Second, while the company continues to state they want to be in the insulin pump business, the Solo, as Diabetic Investor predicted long ago, will never see the light of day. There are just too many issues with the Solo not the least of which being the folks at Medingo who invented the Solo and sold their company to Roche for nearly $200 million are no longer in control over the project. In classic Roche style the company is seeking to reengineer a product that was already over engineered.
Third and most importantly, the company will likely pursue a value strategy here in the US while doing whatever they can to prevent share erosion from spreading to overseas markets where the company remains strong. The competition is gaining on Roche in overseas markets but the situation has not reached the dramatic loss of share the company has seen here in the US. Should that occur, this once mighty cash cow will become an albatross around Roche’s neck which will be difficult, if not, impossible to unload.
So rather than admit defeat or take a realistic view of the situation they company will simply milk this cow until the well runs dry. The company will never admit this publicly and will continue to make public statements about all the great new products they have coming, but don’t believe it. The harsh reality is the company has proven it is incapable of doing what’s necessary to reinvigorate this franchise. Management continues to ignore what’s going on before their very eyes and seems content to allow their reputation in the diabetes arena to sink into the abyss.
They sad truth this company who once held the Tiger by its tail and years ago seemed unstoppable will allow this unit to die a slow and very painful death. Finally when the end comes, these brilliant executives will sit back and wonder aloud just what went wrong. When all they need to do is stand in front of a mirror to get an answer.
