How Can Medtronic Gain With The Development Of Hybrid Closed Loop System For Type-1 Diabetes?
At the forefront of the development of a hybrid closed loop system for controlling type-1 diabetes is Medtronic (NYSE:MDT), which is likely to launch the product by as soon as 2017. As compared to a conventional insulin pump, the hybrid closed loop, which is also being termed as artificial pancreas, will have a fully automated sensor which can automatically suspend insulin delivery when sensor glucose levels are predicted to approach a low limit, and automatically resume insulin delivery once sensor glucose levels recover. The company recently presented the trial data related to its artificial pancreas to the American Diabetes Association.
This product can gain strong adoption in the market because of the fact that the current method of injecting insulin to control diabetes needs to be very carefully monitored and timed. Improper timing of injecting insulin, can result in excess glucose levels that might cause blindness or kidney failure. Even excess insulin dosage due to improper monitoring can result in a condition called hypoglycemia, which might result in extreme circumstances of coma or even death. The pump monitors blood sugar levels through algorithms to control the release of insulin, thus acting like our natural pancreas.
According to sources, 5-10 percent of 18.1 million diabetic patients have type-1 diabetes. Our current model for Trefis assumes the global diabetes market will increase from $10.5 billion to $14.1 billion in 2022. However, the launch of this hybrid closed loop system should spur adoption, given its safety and convenience over the alternatives. Further, we expect this product to be priced higher than other alternatives, owing to its benefits over other alternatives. Moreover, Medtronic hardly has any big competitors planning to enter this market soon. Even if the number of people suffering from type-1 diabetes remains constant, the launch of this product has the potential to cause a surge in the market size due to the strong adoption and higher price of this device.
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Below we try to estimate the upside to Medtronic’s current price estimate, in the above scenario:
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