Who will be next?
Now that the Bayer has finally sold their diabetes device unit to Panasonic/KKR the question becomes who will be next. Will this deal be the first in a series of dominos to fall or is it just an aberration/ Are Abbott (NYSE:ABT), Roche and Johnson and Johnson (NYSE:JNJ) looking at the Bayer deal and thinking they have more value and now is the time to divest as well? What about all the newcomers to this space are they looking at the deal and speculating that they have more value as their systems fit better into the new world of interconnected diabetes management (IDM)?
The fact is the diabetes device world is awash with money. This is pretty obvious given the capital that’s been raised by BGM newcomers and diabetes app companies. Yes investors see the potential of IDM and how it fits perfectly into the coming of outcomes based reimbursement. This combined with the fact that diabetes continues to grow at epidemic rates means there won’t be a shortage of patients who will use these devices and/or apps. The margins in this business may not be what they used to be but they aren’t bad either. Given the huge patient population many believe they can do just fine by capturing a small percentage of this huge market.
As we noted during last week’s ADA it wouldn’t surprise Diabetic Investor if a newcomer makes a bold move and buys an established player. Yes this market is huge but scale still matters and the easiest and we would argue most cost effective way to attain scale is to buy it. As Momma Kliff used to say money buys lots of things.
It also helps that Abbott, Roche and JNJ would love to find someone to take these units off their hands. Although they would never acknowledge it publicly they know there time has come and gone. That they were not built for the market as it exists today. They also know try as they might it’s not in their DNA to be innovative, to think out of the box. Finally they also know they have made tons of money already and better to sell now when their units still have value.
Diabetic Investor remains convinced the private equity firms will become more active in this space. It’s also well-known that the big tech players Apple, Google, etc. are very active in this space.
This combination of motivated sellers, active buyers and access to capital makes for some very intriguing possibilities. Frankly Diabetic Investor has no idea who will buy whom or when this will be happen all we know is that it’s going to happen. As we’ve been saying for some time this wacky world is transforming once again, that the companies who were once industry titans will fade away and a new crop of players will take their place.
Stay tuned and enjoy the ride as interesting times ahead. Very interesting indeed!!!!!
