What’s next for Roche?

What’s next for Roche?

Yesterday Roche announced they were halting the development of aleglitazar, a dual PPAR agonists, due to safety concerns. This really shouldn’t have come as much of a surprise given the checkered history of this class of drugs.  The bigger question is what’s next for the company. According to various reports the company has been actively shopping their beleaguered diabetes device unit but as Diabetic Investor has been reporting this is an almost impossible task as there just aren’t any interested buyers. It should also be noted that aleglitazar isn’t the first diabetes drug from the company to see development halted, as the company also gave up on their once highly touted yet ineffective long-acting GLP-1.

Without aleglitazar the company’s pipeline in diabetes is weak and given the BGM unit continues to lose share, one has to wonder if Roche will remain in diabetes at all.  The reality is the company really doesn’t have a whole host of options and the options that are available won’t be easy to stomach. Now just in case anyone out there believes the way out of this mess is for the company to double down and go out and acquire either another troubled BGM company or diabetes drug company, forget it.  Roche, like Abbott (NYSE:ABT), has spent billions buying companies only to run them into the ground. While Abbott has a fondness for ruining glucose monitoring companies, Roche has a unique talent for screwing up insulin pump companies. Roche management screwed up their glucose monitoring unit all by themselves.

We should also note that yes it’s likely the company like everyone else will make even deeper cuts in diabetes devices but this is only a short term fix for what is a long term problem. The harsh reality is the company must exit diabetes even if that means selling at fire sale prices. Yes that is tough pill to swallow but honestly it’s the only viable option available. The longer this drags on the worse it will get. Even with more cuts the unit is wasting resources which could be reallocated to other areas where the company excels.

As to whom the buyer might be Diabetic Investor has no idea, this is how bad the situation has become. We suppose at the right price a private equity firm is a possibility but even that’s a stretch given that Bayer went down this path with their troubled diabetes device unit without success. Another possibility albeit remote is that some company who isn’t yet in diabetes devices could come along and use this unit as part of broader diabetes strategy, a strategy where the devices would part of larger diabetes management system.  But then again why would any company not in diabetes today want to buy Roche’s troubles; especially when one considers that no matter how cheap the acquisition price is whoever acquires the unit would need to spend millions more fixing it.

The one and perhaps only saving grace is that this is the wacky world of diabetes where anything can and usually does happen.