Enough Already

Enough Already

According to the Juvenile Diabetes Research Foundation (JDRF) website; “The goal of JDRF research is to improve the lives of all people affected by T1D by accelerating progress on the most promising opportunities for curing, better treating, and preventing T1D. JDRF collaborates with a wide spectrum of partners who share this goal.” It is also well known that the JDRF is spearheading the effort to develop an artificial pancreas, again according to their website; “In 2006, JDRF launched the Artificial Pancreas Project (APP) to accelerate the development of a commercially-viable artificial pancreas as a system to ultimately mimic the biological function of the pancreas for patients with type 1 diabetes.”

Yet the news that the JDRF along with the Helmsley Charitable Trust (HCT) is providing Medtronic (NYSE:MDT) with $17 million (over three years) to support research for the APP has not been well received in the diabetes community. Looking into this matter Diabetic Investor interviewed respected thought leaders from academia and industry and found two common themes; these people aren’t big fans of Medtronic nor are they all that thrilled with how the JDRF is handing out money. It should be noted that these same people don’t have a problem with the way the Helmsley Trust hands out their money as the general consensus is; the trust does not solicit donations. Simply put, it’s their money and they can give it to anyone they so choose.

While there is near universal agreement that developing an APP will provide many benefits to patients with diabetes, a schism is developing between the JDRF, companies in the industry and diabetes researchers. Here in a nutshell is the reason why so many of these people are not all that thrilled with what the JDRF.

Medtronic is a publicly traded company with a diabetes franchise, that according to their 2011 annual report generated $1.34 billion in revenue. In this same report it notes the company spent over $1.5 billion in research and development expenses. (The report does not provide a breakdown of where these R&D dollars were spent).

It is also well known that developing a commercially viable APP is the cornerstone of Medtronic’s long term diabetes strategy. Basically what everyone is asking is why a company with the resources of Medtronic is being given $17 million, half of which came from the JDRF and therefore the public, when they could easily afford to conduct this research on their own. Put another way; many believe it SHOULD BE Medtronic who is providing the JDRF with $17 million and not the other way around.

Here is just a sampling of the comments Diabetic Investor has heard when talking with researchers and company officials;

“I simply cannot fathom what they think they are up to.  It indeed makes no sense; as you say this is a drop in the ocean for a company that is already very well advanced with intelligent pumps and well down the path to a closed-loop system or something resembling that.”

“With the pressing research that has the potential to further unravel the disease; one must wonder out loud how and why this money was allocated.  I do hope there is a big outcry.”

“I fully agree but believe that JDRF has changed permanently for the worse. I don’t see much that can be done other than to encourage some very committed long time donors to split off.”

Given the nature of these comments Diabetic Investor reached out to Medtronic and the JDRF to get their side of the story. To their credit Medtronic did speak with Diabetic Investor, and noted they will use this money wisely as they strongly believe in the APP project and want to see APP get here as quickly as possible. They also noted that Medtronic is not the only publicly traded company to receive funds from the JDRF, a true statement as Becton Dickenson (NYSE:BDX), Dexcom (NASDAQ:DXCM) and Johnson and Johnson (NYSE:JNJ) just to name a few.

Thankfully Aaron Kowalski Ph.D, the man who is spear heading the APP for the JDRF, sat down with Diabetic Investor and explained that the JDRF is not just handing Medtronic $8.5 million. Basically the JDRF has become Medtronic’s partner here and Medtronic must hit certain milestones to receive all the money. He went out to state that should Medtronic commercialize products from this deal the JDRF will participate in the profits and therefore be able to fund even more research.

Simply put, the JDRF is not just giving Medtronic the money. Medtronic must hit certain milestones and there are payback provisions should Medtronic walk away from the research.

Given the strong sentiments on both sides here Diabetic Investor also reached out to our panel of experts to get their opinion of the technology. The general consensus; the technology isn’t very good and while no one can state with absolute certainty it won’t work this is the general belief. Now one could argue this is exactly why this technology needs to be researched for if it does work it would be a vital piece of the APP. However, Diabetic Investor does understand why so many people are upset. Consider the following:

Regardless of whether the technology is viable or not, providing a multi-billion publicly traded company funds that were raised from the public when this same company spends over a billion dollars on research and development seems a stretch. An even longer stretch when this same company who is receiving the funds has publicly stated their main goal is to develop a commercially viable APP. Now we understand that the JDRF is on a mission and we further understand that Medtronic is not the only large, publicly traded company to receive funds however we believe the JDRF needs to make some serious changes to the way they do things.

First of all, if the organization is not trying to hide anything they should have allowed Medtronic to actually disclose the amount of money they were receiving in the press release that announced this partnership. According to Medtronic they wanted to put in the amount but the JDRF said no. Looking over the press releases for the BD (NYSE:BDX) and Novo Nordisk (NYSE:NVO), two other companies that are working with the JDRF same thing not one sentence on how much money this companies are getting. In fact the only reason the numbers even came up was during the Q&A session on the announcement. This further fuels the belief that the JDRF has something to hide.

Second, given that the JDRF raises money from the public why not disclose to these donors and the public in general exactly how much they give and what they expect in return. While there will always be disagreement about who got what and which projects are worthy, transparency goes along ways towards eliminate the belief that the JDRF hands out money like a Chicago alderman does when buying votes. This is can easily be done on their website and quite frankly there is no reasonable excuse not to do this.

Third, Medtronic should either return the funds they have received so far, decline any additional funds and make a commitment to financially support future APP efforts. We further believe the JDRF should work with industry to develop clearer and more transparent policies on how money is to be given out in the future.

Finally it is time for everyone to take a step back and remember what’s most important here, helping patients with diabetes. Although it makes great copy Diabetic Investor is sickened that the JDRF and ADA do not work more closely together and actually see each other as competitors. We also believe that both the ADA and JDRF need not just to work with industry but truly LISTEN to industry. We have never understood why the ADA views the industry as the enemy or why the JDRF sees industry as necessary evil.  The fact is we would never see the major advancements we have seen without industry doing their part, this is still America and as far as we know making a profit is not against the law.

It’s also time for industry to get a grip and realize that while the Medtronic/JDRF partnership is far from ideal, Diabetic Investor does not see a way the APP could be successfully developed without involving the most dominate player in the insulin pump market. Do we believe that Medtronic should be giving the JDRF money instead of taking their money; ABSOLUTELY 100%. Do we also believe this deal and others were poorly executed, YES. However, industry and academia must too understand that there is no one clear path to success. Do we understand the uproar and concern; of course.

Diabetic Investor does not expect everyone to get along without disagreements or debates, and there is nothing wrong with constructive disagreement. However, everyone involved here has lost sight of the one thing that matters; the one thing that should be the cornerstone of everything done – what’s best for the patient with diabetes. The time has come for everyone to grow up a little and start acting like adults, playtime is over and we have some very serious work to do.