The Business of Diabetes Creates Investment Opportunity
By David Kliff
I remember it like it was yesterday; my wife and I were attending an educational seminar put on by the local American Diabetes Association (ADA) chapter. Having been recently diagnosed at age 36, I knew nothing about diabetes. During the lunch break, as we sat around and talked, I was asked what I did for living. When people learned that I was running a successful financial planning firm, the questions came fast and furious. What did I think of MiniMed? Cygnus? Is Novo Nordisk traded on any U.S. exchanges?
Back then I knew less about these companies – several of whom I have never even heard of – than I did about diabetes. Yet I took notes, passed out some business cards, and agreed to look into the companies and offer my opinion. Sadly when I tried to research the companies, I found that many weren’t even covered and for the ones that were the research on them was very poorly written. It was apparent that the analysts who covered them knew little about diabetes and even less about what a person with diabetes goes through each day of our lives.
I do recall that as I researched these companies I was astonished to learn about the epidemic growth rate of diabetes. Actually from a business perspective diabetes was almost the perfect disease – a growing patient population, tons of disposables, and no cure on the horizon. Soon I began to look at diabetes not just as a disease that I would have for the rest of my life, but also as an investment opportunity. I sensed that actually living with diabetes would be an advantage when making investment decisions about these companies. After all, none of the research I had read up to that point seemed to understand much about diabetes.
Still I was frustrated with the poor quality of the research I did find. Once while complaining to a friend, I was told, “If really think the research stinks, do it yourself.” Hence Diabetic Investor was born. Today nearly eight years after I was diagnosed, I have sold my financial planning firm and Diabetic Investor has become my full-time business as well as the leading authority on the business of diabetes. I have appeared on CNBC’s “Squawk Box,” and I have been widely quoted in Forbes, Money, The Wall Street Journal, The Washington Post and SmartMoney.com, just to name a few.
As it has turned out I was correct. Living with diabetes has been a tremendous advantage when analyzing companies involved in the business of diabetes, a business that has become big and is getting much bigger by the day. The statistics on diabetes are staggering. The World Health Organization (WHO) estimates that by the year 2025 there will be over 300 million people with diabetes. The Department of Health and Human Services estimates there are over 41 million Americans with pre-diabetes. This is on top of the 14 million diagnosed patients here in the U.S. The ADA estimates there are an additional 6 million patients with diabetes who are not aware they have the disease.
Several Wall Street analysts now estimate that the market for diabetes devices and drugs will top $30 billion by the end of the decade. Consider for the moment that three of the top four blood glucose monitoring companies are publicly trade on the New York Stock Exchange (NYSE). LifeScan is a unit of Johnson and Johnson (NYSE:JNJ), Bayer (NYSE:BAY) and Abbott (NYSE:ABT). Roche, the maker of the Accu-Chek brand, is the only blood glucose meter company not traded on the NYSE. Eli Lilly (NYSE:LLY), Novo Nordisk (NYSE:NVO) and Sanofi-Aventis (NYSE:SNY) are the top three insulin companies in the world. GlaxoSmithKline (NYSE:GSK) makes Avandia, the top-selling oral medication for the treatment of type 2 diabetes, and Amylin Pharmaceuticals (NASDAQ:AMLN) makes Byetta, an injectable treatment for type 2 diabetes. Medtronic (NYSE:MDT) now owns insulin pump market leader MiniMed and Dexcom (NASDAQ:DXCM) recently received Food and Drug Administration (FDA) approval for a continuous glucose monitoring system. And these are just a handful of the publicly traded companies that are involved in the business of diabetes.
Over the next few months, my goal is to offer you sound advice about making investments in the diabetes sector. Please feel free to ask questions and offer suggestions. I’m looking forward to helping everyone make informed decisions before they invest their hard earned money.
NOTE: The information is not intended to be a replacement or substitute for consultation with a qualified medical professional or for professional medical advice related to diabetes or another medical condition. Please contact your physician or medical professional with any questions and concerns about your medical condition.
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As I mentioned in an earlier post, one of the benefits that made it cost-effective for me to go with the real healthcare (HSA) plan rather than the phony (HRA) plan is that my company is now covering "preventative" medicines at $0 copay. The formulary for these, as stated by CVS/Caremark (my pharmacy benefits provider), covers all test strips, lancets, and control solutions. I dutifully get my doctor to write up prescriptions for all of my testing needs, submit...