Time for an eye exam

Time for an eye exam

“Roche commits to diabetes testing and sees 2017 return to growth” this was the headline of a story posted on the Reuters web site this morning. Now after we stopped laughing, which did take some time, we did read the story which contained the following;

“Roche has no plans to sell its diabetes testing business, despite a pummeling in the past three years from U.S. price cuts, and the Swiss drugmaker expects the unit to return to sales growth in 2017.

Roland Diggelmann, head of Roche diagnostics, said the fundamentals for blood glucose meters remained strong given the growing incidence of type 2 diabetes, which is linked to obesity, especially in emerging markets.

“You shouldn’t expect growth this year, but next year I think it will go back to growth. That’s definitely our vision,” he told Reuters during a visit to London.”

Although we don’t know Mr. Diggelmann we would recommend he get an eye exam for if his vision is a return to growth then there is something seriously wrong with his eyesight. Even crazier is his assertion that the type 2 market will drive this growth. But wait the good Mr. Diggelmann had more to say;

“It’s still a good business. We don’t disclose the margins but it is a cash flow-generating business and it’s a business with a future,” Diggelmann also believes the U.S. pricing pressure is moderating.

“I can’t say where the bottom is but I think we are pretty close to it,” he said.

Now we know that Roland has gone off the deep end and is smoking some seriously good weed. Yes, the BGM market does generate cash but nowhere the amount it used to. However, there is no evidence, none whatsoever, that price pressure is moderating and there is strong evidence the exact opposite is happening.

Yet in true Roche fashion, a company that has become particularly adept at turning gold into sand Roland noted for Reuters the company would be throwing good money into bad ideas. The article states; “It is also launching new products into a crowded field, including a continuous glucose monitor later this year.” This tells Diabetic Investor that Roland does not need just an eye exam but a therapist too.

The reality here is Diggelmann is doing his best to put lipstick on pig. He knows that no one wants to buy this unit or at least not at a multiple Roche would accept. He knows that there isn’t much reason to be optimistic but given they are stuck with this unit he must project optimism. Hopefully he knows that this move into CGM has an ice cubes chance in hell of being successful.

Having been with Roche for some 8 plus years Digglemann has seen this once hugely successful unit fall from grace. He has watched the BGM market transform itself into a full blown commodity market that is now circling the bowl. He has witnessed first-hand the many mistakes made by Roche. However, like it or not he must maintain a positive outlook as the ship continues to take on water. Honestly we get that.

Still it would be refreshing if just once one of these executives actually told the truth, acknowledge that this market sucks, the party is over and as fun as it was its time to cherish the memories and move onto the future.  Or as Momma Kliff used to say; “Better to be thought a fool than to open your mouth and remove all doubt.”