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So far--hopefully only the beginning Would love for this to run up to .05--we'll see soon enough.
ET, I just bought in at 29 last Thurs. Thx for your straightforward, no-nonsense approach and advice on VGPR-I appreciate it. Looks like good timing to be in on this one.
I'm expecting good results in the next year, but 2-3 years would be my plan to hold for excellent results.
Here's the full article:
Blood Glucose Self-Monitoring Market Not As Bright As It Seems
Feb. 23, 2014 8:06 PM ET | 2 comments | Includes: ABT, BAYRY, DECN, JNJ, RHHBY
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.
Two things guaranteed over the next ten years are that both the population and the number of people with diabetes will grow. This leads to an ever growing, and changing, market for blood glucose self-monitors. According to GlobalData, the entire monitoring market will reach $12.2 billion by the year 2017. As a point of reference, in 2010, the test strips themselves accounted for close to 90% of the total market value. Therefore, over $11 billion will be up for grabs in 2017 on the sale of test strips alone.
In order to gain further insight into who the players will be in this market and what the landscape will be in the future, it is necessary to dive into the geographic breakdown of diabetes growth and spending on monitoring systems. In 2011 the International Diabetes Foundation estimated that over 8% of the world's population were suffering from some form of diabetes, and this number is expected to grow to 10% by 2030.
(click to enlarge)
At the turn of the century the highest incidence of diabetes was found in China and India and the gap between developing and developed countries is projected to grow over the next 20 years. The total number of people in developing countries who have diabetes is projected to grow by 150% in this time frame. Even with the majority of inflicted people live in BRIC regions, it is currently developed nations including the United States, Europe, and the Caribbean that account for 75% of the global healthcare expenditures associated with diabetes. Where as developed country's market for self-blood glucose monitors has become somewhat saturated within the last decade, developing countries, specifically India and China, offer vast growth potential if one of the major players is able to gain a foothold.
Currently four large companies control the majority of the market. According to a report compiled by industry and Roche analysts; Roche controls 29.1% of the blood glucose market, Lifescan 26.5% (Lifescan is owned by Johnson and Johnson, JNJ), Bayer (OTCPK:BAYRY) 14.6%, Abbott (ABT) 14.6%, and all others 15.2%. In order for one of these companies to gain momentum in developing countries it is necessary for them to drive down price points and to offer a more affordable option. However, even if they were able to accomplish those product offerings there are many challenges still to over come.
Potential Headwinds
Both Bayer and Roche (OTCQX:RHHBY) have attempted to sell their blood monitor business within the last two years. Neither one was able to find an adequate offer and ended up holding onto their respective diabetes care divisions. This indicates there is not a great demand to break into the blood glucose monitoring market.
Sales of blood glucose monitors have been declining. Globally the sales peaked in 2011 and have been declining by over 5% annually since. Domestically sales have been declining since 2007. However, this alone is not sufficient to conclude that the business is souring since the majority of sales come from blood glucose strips, not the monitors themselves.
Changes within government medical aid programs in Canada and the United States have begun to put a strain on the sales of blood glucose strips. The Canadian Agency for Drugs and Technologies in Health in 2009 reported that the use of blood glucose test strips have a limited clinical effect for many patients who do not use insulin. Due to this, and other studies of a similar kind, the Canadian government in 2013 limited the number of blood glucose strips that a patient who is not on insulin is reimbursed for. Additionally, the United States adjusted its Medicare reimbursement program. Under the new rules Medicare will only reimburse $10.41 for a box of 50 strips, where in the past it had reimbursed $34. While this does decrease the cost that the customer has to pay it puts more pressure on retail pharmacies, especially the smaller ones. It is expected that many of the pharmacies will move towards additional lower end products, which will cut into the larger brands retail network. As these reforms have been enacted less then a year ago, it is unclear how much pressure will be placed on sales of the larger companies.
Generic options have begun to hit the market both domestic and internationally. Target's (TGT) Up & Up, and Wal-Mart's (WMT) ReliOn have both released their own blood glucose monitoring devices and strips at significant discounts to those offered by the big four. Tests have also shown that these devices are every bit as accurate and reliable as those offered by the larger brands. Internationally, the Indian government began supplying kits for the monitoring and detection of glucose levels. These kits will cut the cost of care down to 1/4th the previous cost for the average patient and will lower the cost of test strips to 2-4 Indian rupees, or about 3-6 cents, where before they were paying 18-35 Indian rupees for imported strips. The government has said that they will not increase this price and that they have access to an in house manufacturer, as well as interest from external companies to produce these kits. These new entrants into the blood glucose monitoring field are already reducing margins and sales domestically, as well as taking away potential markets for growth.
Conclusion
On the surface the blood glucose monitoring business seems like an attractive opportunity for both major health conglomerates and new businesses to exploit. However, when you dig a little deeper it becomes apparent that the heyday of this market may have passed and in the future there will be more competition limiting the upside in both the established and new markets. Moving forward it will be important to see how Bayer and Roche treat these divisions after failing to divest their respective diabetes segments. These two companies in particular concern me. Bayer cited synergistic reasons for wanting to divulge of the diabetes unit and Roche has already begun to lay off workers. I would look for different opportunities within the health care sector in the short term. It will also be pertinent to look at how the sales numbers will be impacted by the new government reforms. While blood glucose monitors may not have a large impact on the balance sheets of the big boys, such as Abbott, or the retailers attempting to steal market share, such as Target, it is necessary to look at the future when analyzing smaller companies who are entering the field, such as Decision Diagnostics Corp (OTCQB:DECN). I would not initiate a position in any of the smaller players whose revenue is dependent on self-blood glucose monitors or strips until it becomes apparent how the new developments will influence future revenue.
Just mentioning DECN in the article with the big 4 is a huge endorsement!
Even if all the claims the author makes are reality (which I don't think is true), DECN has room for incredible growth because the share of the JnJ market they will get is still a huge amount of growth for the company...and will last for years to come.
In the Seeking Alpha article it states (my responses in red):
Both Bayer and Roche (OTCQX:RHHBY) have attempted to sell their blood monitor business within the last two years. Neither one was able to find an adequate offer and ended up holding onto their respective diabetes care divisions. This indicates there is not a great demand to break into the blood glucose monitoring market.Maybe, Sherlock, because with their business model they, and potential suitors know, that they are dead in the water.
Sales of blood glucose monitors have been declining. Globally the sales peaked in 2011 and have been declining by over 5% annually since. Domestically sales have been declining since 2007. However, this alone is not sufficient to conclude that the business is souring since the majority of sales come from blood glucose strips, not the monitors themselves. Maybe that's because the big 4 have been giving more of them away to make the big bucks on the strips!
Changes within government medical aid programs in Canada and the United States have begun to put a strain on the sales of blood glucose strips. The Canadian Agency for Drugs and Technologies in Health in 2009 reported that the use of blood glucose test strips have a limited clinical effect for many patients who do not use insulin. Due to this, and other studies of a similar kind, the Canadian government in 2013 limited the number of blood glucose strips that a patient who is not on insulin is reimbursed for. Additionally, the United States adjusted its Medicare reimbursement program. Under the new rules Medicare will only reimburse $10.41 for a box of 50 strips, where in the past it had reimbursed $34. While this does decrease the cost that the customer has to pay it puts more pressure on retail pharmacies, especially the smaller ones. It is expected that many of the pharmacies will move towards additional lower end products, which will cut into the larger brands retail network. DECN fills this void perfectly, for a lower cost alternative.
Thx for the link. Interesting. Do you know if DECN is one of the 20 companies Markman is following, and if so, what's the next catalytic event they would expect?
That's what I mean by building the business. These commercial spots (plus other things) will take time to have the desired affect. Patience...
I don't know when anything is expected. I just know that the business is being built big time as we speak and that's exciting.
IMO, until there is a volume increase due to some fund buying in, or significant news re. revenues, etc, the only pressure on this stock is downward. Where it goes, who knows.
HUGE PURCHASES OF DECN STOCK FOR MONTHS! Some big players are accumulating. Don't be left behind! Check the A/D charts for yourself.
Leirum, you have excellent charts. DECN will eventually show it's potential as your charting indicates. Keep up the excellent charts. They are appreciated by many on this board!!
The best things in life are worth waiting for--like DECN!
My question is why has DECN gone up 150% from early September levels? Obviously because of the huge potential and defeat of JnJ in court with much more to come. GO DECN!!
Haven't sold one share!
I think the stock is collapsing here today at DECN. Everyone look out.
Thanks for your reply
"Anyone seen an airing of a DECN commercial during the Olympic games yet?"
To answer your question, and lest anyone doubt that the commercials are running, the co has posted a full list of the 1st installment of all airtimes by city on their website. I'm sure you and many others have seen it already. I'm very confident these ads, along with other steps the company is pursuing such as private label deals, will result in a huge amount of sales in the future. Cha Ching! Stock price will follow at the appropriate time.
You got it right diarch.
Excellent post tpc! I've still got all my shares also.
Stryker acquires Berchtold-the company is going gangbusters! I fully expect a 2:1 stock split in June!!
Exactly raza, because JnJ knows they are DOA with the appellate court's decision. And the writing is on the wall re the anti-trust suit. They will only fight to delay what is most likely an inevitable result so they can benefit themselves in some way.
Mr S, you stated: "...in Europe where they would try to lock out Genstrip in a revised meter." I know you can't post again til tomorrow, but I don't understand how JnJ could revise and market a meter without prior approval from FDA (or CE mark). I would think DECN could pursue an injunction with the appropriate courts to prohibit marketing of such product w/o proper approvals. JnJ might succeed with that strategy in the short term, but I would not think it would be successful for more than a few months at which time appropriate courts would rule.
Good detective work Leirum!
Let me put my thinking cap on, hmmmm. I do recall reading in one of the court docs that an "expert witness," who happened to be hired by JnJ claimed product was returned because of low demand. Now if I am a thinking man, I would know by now that JnJ will do anything by hook or by crook (all IMO) to win a court case. That's the JnJ that is now about to pay bond money to DECN as a result of losing their first court case (in the only case that really mattered), and the same JnJ that has a legal fund willing to front millions of dollars for DECN to prosecute JnJ on anti-trust violations, because the case is so strong they have a good idea they will win and win big. Yes everyone, put your thinking caps on....All IMO
DECN now has JnJ over the proverbial barrel-this is going to be fun watching it unfold!
A door ding for JnJ, but cha ching for DECN! Good night and good weekend to you diarch.
Thx for your work as a Mod, T. MJ could still happen, so don't give up the ship yet. I've been in this for 4 years and don't expect much from it, but who knows??
For short term traction, and long term growth, see the dictionary for "private label deals." Those will be the bread and butter for DECN-with tons of loaves and boatloads of bars of butter to go around.
We have the looooooong weekend for him to weigh in (and others to sweat!) on the news.
That is just fine with me if there's no buyout. Will take longer to get sp up, but should be more lucrative for shareholders in the long run for the company to continue on as their own entity. Or a later buyout will be worth much more than one right now due to building the business.
You'll have to wait til at least tomorrow for Mr. S since he's been banned to Siberia and is only allowed to post once per day (which he already used up).
And I believe the bond is a separate amount from the anti-trust $$. That would mean $12.7 plus treble damages, correct?
Great call!
Wait a minute! Companies only release bad news late on a Friday afternoon. There's got to be bad news here. Give me a few days-I'll find it. Oh yeah, those blasted non-existent ads again!! LOL
Don't get caught while you're on the ground looking for bones from the past, only to be run over by the living, breathing DECN on the way to great future things! See the press release for today. Go DECN!
That's what all commercials do-present a company and product in the best possible light so people want to buy. All companies have warts-they just don't display them in front of the world to see. The issues you've been bringing up are minor in nature and don't affect the bottom line of where this company is going. IMO, you'll find this out in the near future.
It all comes down to trust-either a person trusts KB and management, or they don't. I've been at this for 4 years now, and I can say I trust what KB is doing because I've seen the incredible accomplishments...even more than that, I believe he is a man of great integrity with a strong conviction to do what is right, not just what the mooing herds desire/demand. If he didn't have those kind of convictions, he would have never stood up to JnJ successfully. I choose to let him run the business as he sees fit. If anyone doesn't trust management of a penny stock, why would they even invest in the first place?
Yes, they could provide a schedule of airings as they said. Yet as another poster has said, things change and sometimes rapidly in the corporate world. I don't know why they haven't, but I do know that KB and crew have delivered on all the major events they have pursued, beyond what I even hoped. With so many critical issues still remaining, I choose to not focus on airing schedules, etc for a commercial. Lots of great things coming IMO.