Abbott/TheraSense: A Subtext Beyond the Diabetes Market?

The rationale behind Abbott Laboratories Inc. 's $1.2 billion, all-cash acquisition of TheraSense Inc. [See Deal] is both obvious and subtle. It gives TheraSense, which has a powerful alternate-site blood glucose monitoring technology, more resources to compete with market leaders in diabetes self-testing. It also expands the global reach of the smaller company, via the international sales organization of Abbott's existing MediSense Inc. unit. (Currently, TheraSense only sells directly in the US and Canada.) And it allows TheraSense to dedicate more resources to R&D and the development of integrated systems, including its continuous glucose monitoring system. Indeed, many believe TheraSense is the first to overcome the technology hurdles that have stalled other companies, including Medtronic Inc. 's MiniMed Inc. division. The hefty price tag for the TheraSense transaction includes a premium based on that possibility. It may also signal a new aggressiveness for Abbott as it emerges from the long shadow of an FDA consent decree.

The deal clearly helps resurrect Abbott's flagging MediSense Inc. diabetes device business. "It was a move Abbott had to...