Decision Diagnostic's GenStrip Could Change the Blood Glucose Market

  The glucose monitoring industry is growing at 25% annually and could grow to over $30 billion by 2017. Four players dominate the market, with Johnson & Johnson being the market share leader with over 30% market share. J&J's glucose monitoring system is the LifeScan Ultra with consists of LifeScan Ultra meters and test strips and have annual sales over $4 billion but an upstart player, Decision Diagnostics Corp. (OTCBB: DECN), is entering the market with a new low-cost (about 50% lower), high-performance test strip, which could gain significant market share at the expense of the leaders, according to a new report by Equity Brief.

Decision Diagnostics is the exclusive worldwide sales, service and regulatory processes agent for the Shasta GenStrip, a blood glucose monitoring strip designed to be used with J&J's LifeScan Ultra meter. GenStrip was approved for patient use by the Food and Drug Administration on November 30, 2012, and began initial sales in the 1st quarter 2013. As GenStrip targets the razorblade aspect of the glucose monitoring market, they are already creating waves. J&J has sued for patent infringement on the test strip even though J&J does not have a patent on their strip, claiming a method of use patent for their meter and strip together. J&J initially won a stay, stopping DECN from selling and marketing the GenStrip, but recently Decision Diagnostic had the stay lifted on appeal. Decision Diagnostic is now in the process of shipping GenStrip to "direct to patient" sales distributors.

DECN primary business has been as distributor of prescription and non-prescription diagnostics and home testing products, selling a range of diagnostic test kits and at-home testing products, including brand name glucose test strips. Beginning in 2011, DECN began shedding their low margin products in preparation to sell GenStrip, resulting in revenues falling substantially for DECN, while not having too much of an effect on the bottom line. GenStrips are anticipated to have solid margins even though the retail price is about 50% less than the name brand teat strips.

It is anticipated that GenStrip will be well received by the distributors due to new payment changes for test strips caused by Medicare's mandated competitive bidding, which began July 1, 2013. The Medicare mandate is expected to lower reimbursement of supplies and medical goods for diabetics by nearly 67%. This change will affect the "direct to patient" services channel, which has more than 25% of the diabetes testing market. Keith Berman, the CEO of DECN, commented on GenStrip as a solution to this mandate. Mr. Berman stated, "Our new Mail Order/Competitive Bidding version of GenStrip will offer the brand name market an alternative where companies in the 'direct to patient' fulfillment business can offer high quality diabetic test strips and still make a profit without forcing diabetics to endure crippling co-payments."

Decision Diagnostics could be greatly rewarded as the company begins selling the product to their distribution networks. GenStrip has superior performance and pricing than the current generation of test strips on the market. If DECN garners only a tiny fraction of the market it will make a huge impact on the company's revenues and earnings. If DECN gains 1% of the market by 2017 they will have $300 million in revenue up from $6.2 million in 2012. DECN's management is targeting market share gains substantially greater than 1% by 2017. Management's commitment and investment in GenStrip could garner Decision Diagnostics a potentially large return on their investment. DECN could make significant headway in selling GenStrip, not only to the "direct to patient" distributors but all channels including retail over the next 6 to 12 months. If the product works as well as the company believes, and pricing is maintained, DECN, distributors and patients using GenStrip could all be significant winners in the glucose monitoring market.

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