Medtronic’s Futuristic Approach In Diabetes

by Trefis Team
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In a relatively somber quarter recently reported by Medtronic (NYSE: MDT), the diabetes segment posted strong performance. It is the company’s smallest business segment, contributing about 7% to the firm’s revenue and close to 5% to its valuation, according to our estimates. Yet it has the opportunity and wherewithal to grow. With a slew of new products and technology-driven initiatives in the pipeline, Medtronic seems to be doing all the right things. As per the International Diabetes Federation, there are about 415 million people worldwide suffering from diabetes and this number is expected to grow further. Medtronic’s management plans to increase the number for patients served to about 20 million patients, from the present 1 million.  In tandem, it expects to grow the segment revenue from about $2 billion to $4 billion by 2021. We will take a close look at some of the strategic actions the company has taken recently to make these goals realistic.

Our price estimate for Medtronic is $94

Strong Product Line-up Keeps Medtronic Ahead On The Curve

Medtronic has been a leader in the area of continuous glucose monitoring (CGM) system and insulin pumps. The company has stayed ahead of its competitors with its Minimed family of products. In near term, we expect strong performance of Minimed 640G in markets outside the U.S., and 630G in the U.S. But it is the launch of Minimed 670G scheduled in 2017 that is under the analyst’s scanner. The device will take Medtronic just one step away from designing artificial pancreas. We believe it may take at least a couple of years more for the competition to catch up.

Alliances For Hi-Tech Product And Market Penetration

Medtronic has been entering into alliances with technology companies to develop advanced products and orient itself as a diabetes management company. The company has entered in a partnership with Qualcomm Life to leverage the latter’s 2net design platform. It has also entered into alliance to use IBM’s Watson computing technology. The idea is to use real time data to generate insight using IBM’s cognitive computing, which in turn will enhance uses of Medtronic’s portfolio of services and products. Other than these, Medtronic has also entered into partnerships with  digital health tools providers such as Canary Health, Nutrino, Glooko, etc. Furthermore, the company has entered an alliance with UnitedHealth Group, one of the largest health insurer in the U.S., and has become its preferred supplier of insulin pumps. It has also entered into a distribution agreement with Henry Schein to increase penetration of its Professional Continuous Glucose Monitoring (CGM) systems. These alliances will provide two-way benefits to Medtronic — bring out novel technological products and  services and increasing penetration.

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