More changes at Medtronic Diabetes

More changes at Medtronic Diabetes

It seems like Medtronic (NYSE:MDT) isn’t wasting any time when it comes to changing the way their diabetes unit does business. As Diabetic Investor reported last week Medtronic eliminated more a hundred positions in the unit. At the same time the company has brought in seasoned industry executive to reinvigorate sales and marketing efforts. (Wonder how the field force must feel about this, bringing in a hired gun at the executive level while casting off hundreds of entry and mid-level employees.) Not that the company doesn’t need help here but the timing is just a little strange.

It also looks like Bayer has replaced LifeScan as the meter that will communicate with Paradigm line of insulin pumps. This is not really that much of as surprise as Bayer was already working with company on their ex-US business and it makes perfect sense for them to replace LifeScan for the US business. Now before everyone at Bayer jumps for joy and thinks that all of a sudden they’ll see a major increase in test strip sales, keep in mind that it was LifeScan who decided to terminate their relationship with Medtronic as the deal never lived up to expectations. Additionally Medtronic is aggressively pushing their integrated continuous monitoring pump systems, which require fewer glucose tests by the patient.

The company also got some good news as Diabetic Investor is hearing that Novo Nordisk (NYSE:NVO) has terminated their patch pump project. Still it’s anyone’s guess, and that’s all it would be, as to when or if Medtronic will ever get their much hyped and much delayed patch pump to the FDA, let alone to the market. We should get a better glimpse into how the patch pump market is doing when Insulet (NASDAQ:PODD) reports first earnings this upcoming Monday. Given the way things are going the patch pump world belongs to Insulet for the foreseeable future, the question is can they take advantage of the problem at Medtronic?

Looking ahead it will be interesting to see whether the company is serious about change or will they once again become bogged down in the Medtronic corporate meat grinder. The folks at Medtronic corporate in Minneapolis view the diabetes unit as a cash cow and see little reason to invest precious dollars upgrading the Paradigm line or getting things right with the patch pump. They are also well aware that while the insulin pump market isn’t that great, to date no one has been able to figure out an effective strategy that would eat into their huge and very profitable installed user base. They may not be winning the majority of patients new to pump therapy but this really hasn’t hurt their bottom line.

There are some who believe that all this change will be good for the company and they will stronger over the long term. Diabetic Investor does not necessarily share this view at the moment as this is not the first nor will it be the last time the company restructures.  We continue to believe that this new streamlined diabetes division is being made over for a possible sale in the future.  Time will tell which scenario will play out and expect more changes in the coming months.

Happy Mother’s Day.