Vanishing from view
There was time not that long ago that diabetes care was an important part of Abbott (NYSE:ABT), for a time after acquiring Therasense and when Navigator was submitted to the FDA it appeared the company just might become a major player in glucose monitoring. Sadly those days have and gone, today it appears that diabetes care is mere afterthought at Abbott. Listening to the company’s earnings call this morning and reading through the results the diabetes care is slowly disappearing from view.
Thankfully the company no longer talks up the unit and seems to have acknowledged what everyone else already knows; it’s just a matter of time before the company sells the unit and moves on.
The real question is who will buy the unit, and what can be done to turn things around. These days you can’t mention a diabetes acquisition without mentioning Sanofi-Aventis (NYSE:SNY). Sanofi is at the center of every rumor and as Diabetic Investor has stated previously the company has the resources and vision necessary to change the competitive landscape in diabetes. However, even with their vast resources Sanofi is not your typical company who buys firsts and asks questions latter. One of their strengths is their due diligence and methodical approach to acquisitions. Simply put Sanofi is a company with a plan and vision who will not be rushed into making any decisions without fully investigating all aspects of a potential acquisition or partnership. Frankly a refreshing approach given what Diabetic Investor has seen from others in the space.
But what happens if you take Sanofi out of the picture whose left? There was time Diabetic Investor believed Bayer could come along but this possibility now appears remote. It’s also highly unlikely that Johnson and Johnson (NYSE:JNJ) or Roche would step up to the plate. Although this would appear to narrow Abbott’s options there are other possible suitors. Here are a few scenarios that could play out:
1. Sanofi does buy a BGM company other than Abbott. Although neither Lilly (NYSE:LLY) or Novo Nordisk (NYSE:NVO) has expressed an interest in being in the BGM space they may have no choice if they hope to compete with Sanofi.
2. For years we’ve heard the consumer product giant Procter & Gamble (NYSE:PG) has been snooping around the space. Diabetic Investor believes a consumer product company like P&G would bring some fresh ideas to the space, has the marketing expertise necessary to succeed, they have vast retail experience and are used to dealing in highly competitive markets.
3. Abbott spins off the unit as a separate entity and sells it to a private equity group.
Diabetic Investor views it as highly unlikely that Abbott would decide to throw more money at the unit in the hope of a Bayer type turnaround. As we noted yesterday Abbott is not the type of company who is willing to throw caution to the wind and completely start over with a new management team brought in from outside the company.
The bottom line here is that with each passing quarter Abbott Diabetes Care is slowly vanishing from view and it’s just a matter of time before it completely disappears.
