Zacks_Analysts' Blog : Medtronic Actively Checks Diabetes - Analyst Blog

In a positive development, research findings presented at a recent conference mirrors the effectiveness of Medtronic’s (MDT) insulin pump therapy for improved glucose control in type 1 diabetic patients. The company offers sensor-augmented insulin pump therapy that integrates continuous glucose monitoring (CGM) into one device.

In the fourth quarter of fiscal 2011, revenues from Medtronic’s Diabetes segment increased 11% year over year (9% at CER) to $368 million driven by 20% growth in CGM sales and robust growth in global insulin pumps. Both its Veo and Revel pumps continued to perform well.

During the last reported quarter, Medtronic launched the Enlite Sensor in more than 35 countries outside the US and expects it to drive growth in the CGM business in fiscal 2012. The product is an advanced glucose sensor for CGM and helps type I diabetic patients to predict and detect hypoglycemia (low blood sugar).

The Enlite Sensor can be used with MiniMed Paradigm Real-Time system, MiniMed Paradigm Veo system, Guardian Real-Time CGM system, and the iPro2. Medtronic is working with the US Food and Drug Administration (FDA) for approval of the Enlite Sensor in the US.

Results from the STAR 3 trial revealed that patients with diabetes could monitor glucose level better when sensors are integrated with insulin pump therapy. Recent studies also suggest that patients can achieve better glucose control without increasing hypoglycemia by using the CGM system more often.  In this scenario, the Enlite Sensor should witness greater acceptance as its improved design makes it more comfortable and increases its ease of use.

Medtronic’s two largest segments – Cardiac Rhythm Disease Management (CRDM) and Spinal have been witnessing several challenges over the past few quarters. As a result, the company is now focusing on its other segments such as CardioVascular, Diabetes and Neuromodulation to increase its top line.

Meanwhile, Medtronic is increasing its focus on emerging markets and emerging therapies and expects these to be major growth drivers going ahead. Besides, acquisitions should enable the company to record higher revenues in the forthcoming period. However, the company faces stiff competition from players such as Boston Scientific Corporation (BSX), St Jude Medical (STJ) among others.

Weare currently Neutral on Medtronic, which also corresponds to the Zacks #3 Rank (hold) in the short term.