Yes, No – Maybe?

Yes, No – Maybe?

“We are keeping it,” Reinhardt said. “We evaluated different options and we came to the conclusion that we continue to be the best owner.”  These words came from Joerg Reinhardt, chief executive officer of Bayer Healthcare while attending the JP Morgan healthcare conference in that beautiful city by the bay, San Francisco. The “it” Bayer is keeping is their troubled diabetes unit which was for sale and was supposedly being sold to Sanofi (NYSE:SNY).

Now this is not the first time Bayer has said the unit isn’t for sale and we suspect it won’t be the last time. Perhaps a more accurate statement by Mr. Reinhardt would have been; “Right now Sanofi can’t find their way out of the bathroom and can’t seem to make a decision. So rather than wait for them to make a decision, we’ll make one for them and keep the unit for now until a real and serious offer comes our way.”

Keep in mind this is the wacky world of diabetes and if the right offer came along, Mr. Reinhardt would make a complete reversal and sell the unit in a heartbeat. Yes the company will say all the right things about rebuilding, reenergizing and reinvigorating this troubled unit but the fact remains the unit would require a major overhaul just to get back to square one and even with such an overhaul the damage inflicted as the unit was being prepared for sale may be irreversible.

Frankly it is these same factors that could have lead Sanofi to lower their offer as they understood buying the unit was just the first step and that actually running the unit would require major additional investments. With competitive bidding in full swing, pricing pressure continuing and intense competition for the insulin using patient, Sanofi also knew that even with the additional investment the likelihood of success was suspect.

Honestly it’s better to buy Rolaids as the chance for a turnaround in the heartburn market is far greater than the chance for a turnaround in the glucose monitoring market. Although the sale of Rolaids will likely set records for anyone in the BGM market as heartburn is now just part of the job.