|Trends & Perspectives|
Johnson & Johnson (J&J; New Brunswick, NJ) has announced its intention to purchase Animas Corp. (West Chester, PA), a manufacturer of insulin pumps and blood glucose meters. Under the terms of the cash-for-stock agreement, worth approximately $518 million, Animas will operate as a stand-alone entity under J&J's LifeScan Inc. (Milpitas, CA) division. The merger was scheduled to close pending a February 17 approval vote by Animas stockholders.
“The combination of Animas's insulin-delivery systems and LifeScan's glucose-monitoring systems will allow us to offer more-comprehensive disease management solutions for our patients,” says Eric Milledge, J&J group chairman with responsibility for LifeScan. “We have worked in partnership with Animas Corp. since 2003 and know they share our commitment and passion for advancing the standard of care for people with diabetes.” Under a previous partnership, J&J offered its OneTouch UltraSmart blood glucose meters free to Animas insulin pump customers in exchange for old meters.
Animas, which was founded in 1996 and raised $65.7 million in a 2004 initial public offering, garnered attention last year when it purchased Cygnus Inc. (Redwood City, CA). The $10 million deal gave Animas the GlucoWatch G2 Biographer, the only completely noninvasive blood glucose meter approved by FDA. Although the GlucoWatch has been hounded by regulatory and technical problems, the device has also been widely hailed as a breakthrough in the $4 billion glucose-monitoring market.
LifeScan, for its part, has made its intentions of competing in the continuous blood glucose–monitoring market clear. In a 2005 earnings presentation, J&J estimated that the insulin-delivery market would skyrocket from $805 million to $3.6 billion between 2004 and 2014. Most of this growth, the company said, would come from next-generation devices and technologies.
In a January 12 presentation to Animas employees, Milledge presented an overview of market opportunities and laid out a mission for the combined company: “To fundamentally change our business from measurement to management, and transform LifeScan from an episodic monitoring company to a true diabetes management company.”
According to Mark S. Vreeke, PhD, a senior partner at Rational Systems LLC (Granger, IN), Animas's technologies give J&J immediate market clout. “The purchase really puts Roche Diagnostics (Basel, Switzerland), J&J, and Abbott (Abbott Park, IL) out in front in terms of being able to offer a complete diabetes management solution from testing to insulin delivery,” he says. “It indicates that LifeScan is going to continue to fight for market share and is not content to simply extract the value from their existing product line. The purchase also leaves companies like Bayer HealthCare (Tarrytown, NJ) and BD Diagnostics (Franklin Lakes, NJ) without a partner in the insulin-delivery area. BD does offer syringes, which are still the primary insulin-delivery method, but not the pumps.”
In potentially developing a combination glucose monitor and pump device, LifeScan will be able to draw on technologies already in place at Animas. In its 2004 annual report, Animas discussed its plans to bring an implantable wireless continuous glucose sensor to market. The company said that such a device would measure near-infrared spectra of blood and transmit data to an external display worn on the wrist. A third-generation GlucoWatch (G3) Biographer has received FDA approval, but has not yet been slated for commercialization.
Vreeke also says that the purchase of Animas raises questions about other possible acquisitions, especially as the glucose-measurement and insulin-delivery markets converge. “I think that the industry is ripe for consolidation. The market probably cannot support five branded players. Looking at Roche's current market share, and the acquisition activities of Abbott and J&J, one would believe that BD and Bayer are the most likely targets for industry consolidation,” he says.