What happened to Animas?

What happened to Animas?

There was a time, not that long ago, when Johnson and Johnson (NYSE:JNJ) made a point to mention the solid performance of their insulin pump franchise; Animas. Recently, however, the company seems to be ignoring this unit and have gone silent on the unit’s performance. Considering that sales for LifeScan, their glucose monitoring unit, are plodding along it’s pretty obvious that the synergies JNJ had hoped for between these two units never materialized.

Considering that insulin pump patients monitor their glucose more than any other type of patient, on average eight times each day and account for nearly 25% of all test strips sold, the combination of Animas and LifeScan seemed as natural as peanut butter and jelly. Yet for several reasons this combination performed more like oil and water. From the very start, when JNJ initially acquired Animas the two units acted more like competitors than compatriots. It didn’t help matters any when LifeScan signed a deal with Medtronic (NYSE:MDT) to develop a monitor that communicated with Medtronic’s line of insulin pumps. While it is true that Medtronic dominates the insulin pump market, this deal was basically a very public admission that Animas, a distant second in the market, really didn’t stand much of chance to overtake Medtronic.

The folks at Animas most likely felt it was poetic justice that the LifeScan/Medtronic partnership failed miserably. A move which marked a noticeable shift in the way JNJ felt about this two units, all of sudden corporate decided it was time for these units to work together. The only problem being is the obvious animosity that had developed between these two units. For all the corporate speak and happy faces put on at diabetes conferences behind the scenes these two units never felt comfortable together.

It remains to be seen if JNJ can pull these two units together and take full advantage of their wide range of diabetes related products produced by other units that are part of the JNJ estate of companies. And let’s not forget that JNJ is about to enter the diabetes drug market with canagliflozin, an oral, once-daily, selective sodium glucose co-transporter 2 (SGLT2) inhibitor, which is now at the FDA.

As Diabetic Investor has been stating the diabetes market with the epidemic growth rate of the disease has become the domain of large, well-capitalized companies like JNJ. The harsh reality is, it is difficult for smaller players to effectively compete in this market and is the reason why there are so many partnerships between companies. While size does have its advantages, there are an equal number of issues that size creates. Not the least of which being that the left hand often has no idea what the right hand is doing, or worse the left hand is working against the right hand. Having covered this industry for almost 20 years Diabetic Investor firmly believes that for all the potential size brings these corporate behemoths often times can’t get out of their own way and spend too much time on process.

The real question for JNJ isn’t whether or not they have the pieces they need, there is no question they have everything they need. The real question is can they turn a battleship on a dime. Based on what we have seen with the LifeScan/Animas combination the company still has a long way to go. That doesn’t mean they can’t get where they want to be but it does show the difficult task that lies ahead.