More bad news for Medtronic

Not like we needed any additional evidence that the Medtronic diabetes franchise is having a very difficult time more came along yesterday when IntriCon, one of their key suppliers reported results. Per the earnings release;

“Revenue in IntriCon’s Medical business in the first quarter of 2020 was $16.4 million, a decrease from $20.8 million in the comparable prior-year period. The year over year decline was driven primarily by the COVID-19 impact on diabetes, one-time revenue recognition adjustment, partially offset by medical coil demand.”

Just as a reminder Medtronic is Intricon’s single largest customer. With sales of the 670G lagging and more 670G patients converting to the Control IQ sensor demand, the component IntriCon makes for Medtronic have been declining. This was reinforced during the company’s prepared remarks when CEO Mark Gorder stated;

“In the U.S. Medtronic signaled further challenges presented by COVID-19 pandemic in resulting continued challenges in insulin pump starts that carry glucose transmitters. In Europe, new insulin pump system starts also remained notably impacted.”

Medtronic may be using COVID as its explanation for declining sales and there is no doubt it has hurt but COVID is not the sole reason sales are slowing. The fact is the 670G is no longer the coolest toy in the toy chest and once patients can get back and see their doctor, we anticipate further erosion to the company’s installed user base. The main beneficiary being Tandem whose Control IQ is proving to be a more attractive option for patients.

The question remains will Medtronic remain committed to diabetes or will they find a way to jettison this franchise while it still has value.