Lifescan Accelerates its Dealmaking
Less than a month after the LifeScan subsidiary of Johnson & Johnson said it was buying Inverness Medical Technologies, one of its main suppliers, it solidified another old friendship, this time with Novo Nordisk, the Danish maker of insulin and insulin delivery systems. The two companies announced a global alliance to develop and market a series of diabetes management devices--but withheld details. The two companies had previously teamed up in 1995.
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The goals being touted in the treatment of diabetes are lofty, with the development of a functional and affordable artificial pancreas topping the list of ambitious undertakings in the industry. The pursuit of such a device has been a Holy Grail quest for some time now, and over the years the feasibility of developing a man-made mechanism to take the place of a faulty body organ has been treated with a share of optimism and skepticism. However, based on recent FDA approvals for multiple manufacturers, it appears the industry is closer than it has ever been to making this goal a reality.
Inverness Medical Technology's purchase of struggling diabetes testing start-up LXN fits well with the larger company'stwo-pronged strategy of cementing its relationship with J&J's LifeScan Inc. business unit and diversifying into emerging areas of diabetes testing. Inverness also announced that the partners have amended their distribution and marketing agreement to give LifeScan bigger discounts on meters in return for bigger purchase orders.
Despite its attraction, diabetes glucose monitoring remains a tough field for newcomers, who face competition from four major-league, entrenched players. But two of the newer entrants appear to be succeeding--not because of revolutionary technology, but because of partnering savvy, efficient execution, and technological competence. Analysts expect Inverness Medical's symbiotic relationship with LifeScan to help Inverness's diabetes sales grow 30% a year as LifeScan pushes Inverness-made products as a major part of its fight to regain its market leadership. Home Diagnostics Inc.'s success with co-branding raises the prospect that discounting, until now not a significant factor, will become much more common in the field.