What to do next?

What to do next?

Based on the earnings Abbott (NYSE:ABT) reported this morning it appears their diabetes business has finally stabilized. It also appears that the FreeStyle Libre is having a positive impact on sales in international markets. The company further noted that they have submitted the FreeStyle Libre Pro, the professional-use version of FreeStyle Libre, for regulatory approval. This is the good news yet the question remains what to do next.

The harsh reality is the global glucose monitoring market is barely growing and pricing pressure continues. It’s also pretty obvious here in the US that Abbott has resigned themselves to competing with Roche and Bayer as LifeScan, a unit of Johnson and Johnson (NYSE:JNJ) continues to hold a dominate market share. If approved the Libre Pro will enter a crowded market currently dominated by Dexcom (NASDAQ:DXCM) and Medtronic (NYSE:MDT).

We’re also getting the impression that Abbott CEO Miles White remains committed to the diabetes franchise.  Still one has to wonder for how much longer. Mr. White isn’t stupid and sees the same things we do, single digit growth and continued pricing pressure. He also knows that while Libre has done well internationally this success will be hard to duplicate here in the states, a much more competitive market. Finally he knows that while the franchise has been rightsized for current market dynamics there isn’t much else he can do to drive growth or improve margins.

At the end of the day we still think Mr. White would happily sell the unit if the right offer came along. The good news is with the franchise no longer hemorrhaging capital Mr. White has bought some time. So for the time being it will be more of the same but we suspect this lull won’t last for too long. That at some point Mr. White will sell the franchise he has built. The simple fact is there just isn’t a positive long term outlook for BGM and gaining share in CGM here in the US won’t be easy.

As we’ve said before the more things change the more they stay the same.