TRENDS & PERSPECTIVES
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FreeStyle Freedom blood glucose monitoring system by Abbott
Diabetes Care. |
BD announced that it was exiting the blood glucose monitor market. The company said it would stop distributing its BD Logic monitors immediately, but will continue distribution of its BD test strips until the end of 2007 to give its customers time to transition to new monitoring systems.
Among those IVD companies offering free monitors and a starter supply of test strips to BD users are the blood glucose monitor market leaders, LifeScan Inc. (Milpitas, CA), Roche Diagnostics (Indianapolis), and Abbott Diabetes Care (Alameda, CA). Another company with a growing market share, Home Diagnostics Inc. (Fort Lauderdale, FL), also announced that it was offering free starter supplies to diabetics using BD products for self-testing.
Bruce Jackson, a senior research analyst at MJSK Investment Securities (Minneapolis), said such a strategy should pay off. The IVD companies make their money from sales of test strips, which are disposable, not meters, just as razor manufacturers make money from sales of blades not handles. The giveaways would be worthy investments if they converted BD users to their products, he said.
Also, Jackson said, because of product advances, the differentiation among blood glucose meters has declined, so capturing a competitor’s customers should be relatively easy.
Mark Vreeke, a senior partner at Rational Systems LLC (Houston) and a member of IVD Technology’s editorial advisory board, said he found it curious that BD did not sell its blood glucose monitor business. “It had to be worth something to someone,” he said.
However, in a conference call following the announcement, Edward Ludwig, chairman, president, and chief executive officer of BD, said that after exploring its options, BD found “there really was no viable alternative in that direction.”
Ludwig said BD was exiting the blood glucose monitor market, which it had entered in 2003, because it could not justify the levels of investment and additional resources it would need to stay competitive. He added that the marketplace had become too competitive and a decline in pricing had occurred more rapidly than BD had anticipated.
The blood glucose monitor market represented a little more than 1% of BD’s revenues for fiscal 2006. (Its total revenues for the fiscal year were $5.834 billion.) BD estimates its blood glucose monitor revenues to be in the range of $30 million to $50 million in fiscal year 2007, as its customers transition to alternative blood glucose monitoring products. The estimated impact on its earnings per share should be negligible, the company said.
Analysts were divided over what, if any, further changes the IVD industry is likely to see in the blood glucose monitor market.
Vreeke believes the marketplace cannot successfully support the four major brand labels and that more companies may follow BD’s lead and exit. Also, he said, “Generics will continue to capture market share, putting additional pressure on the market brand leaders.”
However, Jackson said he expected little to change, at least among the market leaders. “The market for whole blood glucose strips is already pretty concentrated with four companies holding 90% of the market, so I wouldn’t expect much more consolidation,” he said.
Jackson also said he thought BD made the right decision under the circumstances. “Given the choice between investing in whole blood glucose monitoring, which is essentially a commodity product, and new product areas like continuous glucose monitoring or therapeutics, BD made the right choice for its shareholders by exiting the business,” he said.
BD spokeswoman Colleen T. White said that BD remains committed to its diabetes care business and that it would continue to focus its efforts on insulin delivery, which grew more than 9% during the last fiscal year. Its revenues derived from insulin-delivery products exceed $500 million annually.
