I am pleased with the move to enter into an atractive adjacency. I also believe the AgaMatrix technology provides some solid benefits to users. My two cents...For those familiar with this business space, you already know that it is the 'razor/blade', 'printer/ink' business model. The revenue and profits are based on the sales of test strips - not the monitor. The monitor is key since the strips are not interchangeable. Most users switch to new monitors if there is a benefit to them...regarding functionality and/or the cost of the strips.
So, the move is a nice and I'm very interested in understanding how this will evolve between PRGO and AgaMatrix. The benefits will be more visible when PRGO and AgaMatrix lay out the details that will drive the costs, pricing and margins for the key players in this model. Yes, the market share (penetration) of the monitoring system will be key so users and influencers will select the AgaMatrix system.
For the OTC pain category, everyone wins when the retailer and customer are motivated to switch to (or continue to buy) store brands due to higher margins on an equivalent product (same AIs and product forms available). Store brand test strips exist today...PRGO now has exclusivity for the AgaMatrix system. Today, the market share leaders are Roche >30%, J&J (Lifescan) with >30%, Bayer >10% and Abbott >10%. [If someone has additional insight (public info of course) regarding market share of the less invasive systems - please post]. So, there are several smaller players competing in the remaining 10-20%, growing with the overall market and trying to steal share from the bigger players. With a $2.8 Billion market (estimate), this leaves a significant amount in play (an optimistic view is perhaps >280 Million for AgaMatrix if they achieve 10% share in 3 years)...but how much revenue and profit for PRGO is the question. What is the longer term strategy for PRGO in this space...I have some ideas. Again, a good move that I applaud...but the devil will be in the details. Disclaimer - I am not an expert in the glucose monitoring space and would be interested in thoughts from others.