Medtronic details artificial pancreas plans, as well as Mazor, Qualcomm deals

Medtronic CEO Omar Ishrak

Medtronic ($MDT) is making moves on a number of innovative fronts right now. It plans to submit the first artificial pancreas to the FDA next month. And, in the last few weeks, it's made deals to enter robotic surgery focused on the spine partnered with Israeli company Mazor ($MZOR) and to target the massive potential Type 2 diabetes personal monitoring market in emerging countries in a deal with Qualcomm Life ($QCOM).

Executives at the company offered some details on all these initiatives--which could translate into billions in revenue for the company. As the mega-player in medical devices after its merger with Covidien, Medtronic needs to make big moves--either internally, externally or both--in order to really move the needle on roughly $29 billion in annual revenue. 

The first FDA-approved artificial pancreas would obviously be a good first step on that front. Medtronic is a market leader in continuous glucose monitors and insulin pumps. Its MiniMed 670G with Enlite sensor is headed to the FDA before the end of June, the company confirmed on its May 31 earnings call.

"Once launched, this will be the world's first hybrid closed loop system," noted Medtronic chairman and CEO Omar Ishrak. The company expects the device could be transformative to its diabetes business, which grew 10% in constant currency last quarter driven by sales of its MiniMed 640G system and insulin pumps outside the U.S. The Diabetes business had revenues of $496 million in the most recent quarter.

In the U.S., Medtronic expects a rough competitive environment to continue--at least until it gets FDA approval for the MiniMed 670G hybrid code loop system, the company's CFO Gary Ellis noted.

Last week, Medtronic partnered with Qualcomm to make a single-use, Type 2 diabetes continuous glucose monitor for emerging markets--where individual blood glucose monitoring is typically restricted to in-clinic efforts, if at all. Medtronic EVP and Group President of Diabetes Hooman Hakami offered some further insights and promised even more at the company's upcoming investor day on June 6.

"The Type 2 population is 90% of all patients with diabetes. So it's a huge market opportunity. And when you take a look at those 90% of the patients, what we have decided to focus on is really monitoring those 90%," he said. "Our goal isn't just to deliver a sensor to those patients or just the product.

"It's really to deliver an integrated solution to those patients where we bring not just a technology but capability through analytics and insights that can give those patients actionable information so that they can better manage their disease and also to do the same thing for physicians who are managing those patients," Hakami continued. "So we're really excited about the opportunity. As you said, we're just getting started, but we think there's a tremendous amount of runway in this business."

Another recent, potentially transformative change for Medtronic was its entrance into robotic-assisted surgery with a deal focused on spinal applications with Israeli small cap Mazor. Medtronic hopes that this will be part of really being able to set itself apart in its Spine business.

"So, hitting the Mazor deal, we are very excited about that," said EVP and Restorative Therapies Group President Geoff Martha on the call. "That is, I'll call it, one leg of a multipronged strategy around what we call surgical synergies. And we feel as we move out into the future, these surgical synergies will be in Spine our calling card. We've also got very strong enabling technology platforms in navigation and imaging."

The company also said it has launched its Micra leadless pacemaker in the U.S., which was the first to be approved by the FDA in April.

Medtronic was down about 2% in early trading on its earnings news--despite coming in a bit above EPS and revenue expectations. It gained 6% on a constant currency bases to $7.49 billion in the last quarter with EPS of $1.27.

- here is the earnings release

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