Medtronic Reports – Problems in the making?

Medtronic Reports – Problems in the making?

This morning Medtronic (NYSE:MDT) reported their second quarter results which for their diabetes unit were actually a little underwhelming. According to a company issued press release: “Diabetes revenue of $393 million grew 3 percent on a constant currency basis or 4 percent as reported.” Yet this less than stellular performance masks a bigger problem facing the company, a problem which like so many problems was self-inflicted.

The problem rests largely with the new MiniMed® 530G insulin pump with Enlite® CGM sensor which was launched late in the quarter. Back when the 530G was approved the company stated; “Medtronic, Inc. (NYSE:MDT) today announced the U.S. Food and Drug Administration (FDA) approval of the MiniMed® 530G with Enlite®, a breakthrough, first-generation artificial pancreas system with Threshold Suspend automation for people with diabetes.”

Now as everyone knows Diabetic Investor isn’t overly enamored with the whole artificial pancreas quest. Not because we do not see value in such a system rather because this quest has been filed with too much hype and not much in real tangible results. Given the reports Diabetic Investor has been receiving from physicians who have prescribed the 530G and patients using the system, Medtronic may have set back this quest even further. To put it simply, the system doesn’t work all that well.

Based on the reports we’ve received the problem rests with the Enlite CGM Sensor which quite frankly doesn’t work as advertised. Contrary to what the company has stated in the past the sensor just isn’t accurate enough and this lack of accuracy is creating headaches for patients. Unlike in the controlled setting of a clinical trial, in the real world patients get very annoyed when their sensor is inaccurate. Now it’s bad enough these inaccurate readings set off annoying alarms and alerts that the patient must respond too, but keep in mind that Medtronic is advertising this system as the first generation artificial pancreas; a system which is supposed to shut off insulin delivery when the sensor detects a possible hypoglycemic event.

Well conceptually this is a good idea as hypoglycemic is a dangerous, even life threatening event, it’s equally dangerous however to stop insulin delivery when the patient is not experiencing a hypoglycemic event. Think of it this way, shutting down insulin delivery when the patient is not hypoglycemic is like fighting a fire and turning off the water before the fire is put out. Not only will the fire continue to burn but the possibility exists that the fire will get worse making it even more difficult to extinguish.

This is one of the reasons Diabetic Investor has been stating for years that the problem with the whole artificial pancreas idea isn’t the idea but getting the damn thing to actually work. The system is a collection of moving parts, like links in a chain, all it takes is for one of these links to fail and the whole system fails. In the case of the 530G the pump is functioning just fine but that means little when the CGM sensor isn’t. These two components are designed to work together and function as one unit.

Now the problem is so bad that many of the physicians who spoke with Diabetic Investor have stopped prescribing the 530G and many of the patients have stopped using the Enlite sensor. But that’s only the beginning of the problem as Diabetic Investor is hearing that the proponents of the quest for the artificial pancreas are mad as hell as they see these problems giving their quest a very black eye. Privately many of these folks are truly upset with Medtronic touting the 530G as an artificial pancreas when in reality it isn’t even close to being one. The general attitude is that if this is the best we can do we’re in a world of hurt.

Given that Medtronic is betting the ranch on being the first company to successfully develop and commercialize a true closed loop insulin delivery system and really has nothing else in their pipeline it would not be an overstatement to say they are also in a world of hurt. Rather than under promise and over deliver the company has done the exact opposite and in the process may have set back the efforts to develop a true artificial pancreas even further.

Diabetic Investor has tried to warn everyone that this quest as noble as it may be is fraught with peril, that the there was too much hype and not enough substance. But as so often happens in the diabetes device world everyone has become enamored with the technology and failed once again to understand when the technology doesn’t work as advertised it’s worthless. As the old saying goes you can put lipstick on a pig but it’s still a pig no matter how it’s dressed.