Medtronic Investor Day – Aggressive Target for their diabetes franchise

Medtronic Investor Day – Aggressive Target for their diabetes franchise

This morning during Medtronic’s (NYSE:MDT) Investor Day presentation the company made several notable announcements the most notable being the company’s stated goal of doubling their diabetes business over the next five years. Additional the company launched their first semi-closed insulin delivery system in the United Kingdom called the Paradigm Veo. Finally the company indicated that there much awaited patch pump is set to be launched in sometime in fiscal year 2011.

Looking at the announcements individually the goal of doubling in size over the next five years is the most interesting considering how they plan on reaching their goal. According to Chris O’Connell, Medtronic’s Senior Vice President and President, Diabetes, key to this aggressive growth target is expanding pump usage among type 2 patients. While this is an admirable goal Diabetic Investor isn’t quite sure it’s achievable for two key reasons.

1.      The majority of Type 2 patients are treated by primary care physicians.

 While there is strong evidence that insulin usage is increasing among patients with type 2 diabetes, getting these patients on pump therapy is no easy task. Typically patients with type 2 diabetes follow a therapy progression often times referred to as treat to failure. Basically physicians opt to treat their type 2 patients first with oral medications, when that option fails they move onto insulin plus orals, when that option fails they move onto insulin alone using either an insulin blend or multiple daily injection (MDI) therapy. It is only when these patients reach the insulin only phase that a pump becomes a delivery option.

 Although pump therapy is very effective it is more of a lifestyle choice than an outcomes choice.  There was a time when pump therapy produced superior results but that has changed every since long-acting insulin’s came to market. Studies have proven that patients using MDI therapy can achieve results just as good as those using an insulin pump.

 The main problem with pump therapy is something Diabetic Investor calls the calibration curve. Even when patients use a continuous glucose monitoring system (CGM) properly calibrating a pump is a time consuming process. Additional patients switching to pump therapy have greater educational requirements as they must learn how to count carbs, understand the effects exercise and stress play on their levels and understand such concepts as duration of insulin action, correction factors, etc. Simply put a patient does not just slap on a pump, turn it on and off they go to better outcomes. It’s not unusual for it to take a month or more for a patient to be properly trained on insulin pump therapy.

 But this is only half the problem for primary care physicians who lack the staff and infrastructure to handle not just the training but the many questions generated by their insulin pump patients. Although pump therapy is widely reimbursed the paperwork requirements are equally burdensome and time consuming.

 The benefits of insulin pump therapy have been well known for many years and it should be noted that even with type 1 patients only 30% or so are using an insulin pump. The problem isn’t that the therapy isn’t effective with type 2’s; the problem is all the work that’s involved training and managing insulin pump patients. The reality is it’s easier and cheaper for the physician to train and manage type 2 patients on MDI therapy than it is insulin pump therapy.  

2.      New therapy options coming to market.

As Diabetic Investor pointed out yesterday when outlining the issuing facing Afresa, the inhaled insulin from MannKind (NASDAQ:MNKD) now awaiting approval at the FDA, the problem isn’t with the drug or the delivery system, the problem relates to other therapy options also before the FDA which are also targeted at the type 2 patient.

With Liraglutide and Byetta LAR both at the FDA physicians will soon have multiple options for treating their type 2 patients who are not currently achieving adequate control. Although both drugs are injected they have some compelling advantages over insulin therapy. Both Liraglutide and Byetta LAR have demonstrated solid A1C lowering capabilities with the additional benefits of weight lose and a very low incidence of hypoglycemia. Add in the fact that Liraglutide is dosed just once a day and Byetta LAR just once a week, they have the added benefit of patient friendly delivery.

Perhaps the most over-looked benefit of all is patients using either drug don’t need to monitor their glucose levels or worry about when or what they eat. Both Liraglutide and Byetta LAR are fixed dosed products, the patient simply dials the dose on their pen and injects.

Given the realities of the type 2 market and the fact that 80% of patients are treated by a primary care physician, the most patient friendly therapy options stand the greatest chance of success. Looking at the options available the GLP-1 class offers the most compelling combination of solid results and ease of use. Liraglutide at once a day is good but Byetta LAR at just once-a-week is paradigm shifting.

Moving onto the Paradigm Veo the semi-closed loop insulin pump that the company launched today in the United Kingdom, this is just one more step in Medtronic’s quest to fully close the loop. Looking at the website for the product the company is heavily touting a feature called “Low Suspend.” According to the site; “Imagine, for example, that your glucose level begins to fall. The Paradigm Veo will recognise this using CGM data and sound an alert so that you can act to prevent a hypoglycaemic event. If you have not responded to this alert and the CGM data is now recognising a dangerously low glucose level, a warning will sound. If, however, you are unable to respond to the warning for some reason, the Paradigm Veo acts quickly to halting insulin delivery for two hours. “

This all sounds pretty cool but what happens if the CGM delivers an incorrect reading. This in a nutshell is the problem Diabetic Investor has with this whole fascination with a closed loop insulin delivery system, it’s heavily dependent on the CGM systems not only working 100% of the time but delivery highly accurate readings 100% of the time. Given the real world experience we have seen with the three current CGM systems on the market today, promise has not lived up to actual performance. Yes it’s true that performance is improving every day but we’re still a long ways away from the day when the systems are accurate enough and work well enough to take dosing decisions away from the patient.

Closing the loop sounds exciting and to those without diabetes it seems like a great idea. However, all you need to do is to ask those who have or treat diabetes and you get a much different story. There is no question that the information provided by a CGM can be invaluable and when used properly effective at producing even better outcomes. Yet we are nowhere near at the point where these systems are reliable enough to allow a machine to make decisions that impact the life of the patient. Diabetic Investor can see the day when a patient using such a system that malfunctions who ends up in the hospital or worse. This is a class-action lawsuit just waiting to happen.

Switching now to the much awaited patch pump it appears the company is taking a page from the Insulet (NASDAQ:PODD) playbook and has added automatic cannula insertion to their patch pump. Although Diabetic Investor did not see the demonstration put on by Mr. O’Connell, there was no video on the webcast, we could tell this feature has been incorporated into the design. Additionally the company took a swipe at Insulet by mentioning they will be able to manufacturer the patch pump with a low cost of goods. 

In the end however the company still could not provide a firm date for launch indicated that the patch pump is currently scheduled to be launch sometime in fiscal year 2011. (Some may recall that original launch date for the patch pump was fiscal year 2010.) Diabetic Investor does not doubt that we will eventually see the patch pump but as we’ve seen before with Medtronic and this product launch dates tend to be somewhat fluid.

There were a few other tidbits of note as the company stated they are also working on a hospital based CGM system but by all indications they are well behind Dexcom (NASDAQ:DXCM) who’s partnered with Edwards LifeSciences (NYSE:EW) for their hospital based system. Also on the CGM front the company announced they have acquired PreciSense A/S, a Danish company whose mission according to their web site is “The Company’s mission is to develop and bring to market a novel, non-invasive Blood Glucose Monitoring system. This extended duration system is intended for personal use by diabetic patients and by healthcare professionals and measures glucose accurately and in real time.” Call Diabetic Investor the ultimate skeptic but we always get a little leery when we see the words non-invasive and blood glucose monitoring used in the same sentence. This is a well traveled road that has produced a total of zero systems.

Finally the company will launch their next generation conventional pump sometime in fiscal year 2011 and they are working on a super-secret new pump line which will replace the Paradigm line entirely. This is new line is so secret that the company wouldn’t even show a mock up or picture. Diabetic Investor can’t wait for more information on that one that is of course, if it goes beyond the super secret phase. As we’ve seen with the long awaited patch pump Medtronic has the habit of announcing new products with a great deal of fanfare only to see these super duper products become bogged down and delayed.

Like so many things Medtronic much of what we heard today sounds good and there was plenty of hype for what looks like really neat technology. However, the company failed to address the underlying problem with the entire insulin pump market which really hasn’t changed all that much over the past few years. The reality is the insulin pump market is not large enough nor is it growing fast enough to support all the existing players let alone the many new players getting set to enter the market.

Targeting type 2 patients sounds good in theory but does not stand up when one looks at the realities of that market segment. CGM is promising technology but we’re still years away from it being reliable enough to power a closed loop insulin delivery system. But the real promise for CGM lies in the hospital market and Medtronic is playing catch up here. This is not to say that CGM usage will not increase, it will. Still like the insulin pump market itself, this market is not large enough nor is it growing fast enough to support all the existing players. Further evidence of this fact will be seen when the Navigator exits the market.

Given all the hype we heard today the company’s stated goal of doubling in size in five years remains the most amazing statement of all. Growth in the insulin pump market has been slowing and competition increasing, this dangerous mix will soon have a new component as soon will see pricing come under pressure. Once that happens it’s just a matter of time before the insulin pump market follows the path of the blood glucose monitoring market and we all know how that’s working out.