After comeback, Medtronic diabetes spinoff aims to perfect artificial pancreas

Medtronic’s diabetes division was navigating sweeping recalls. Sales were shaky. And America’s top medical device inspectors had taken issue with its business decisions.

Que Dallara compared the state of the diabetes business when she took over in May 2022 to a “somewhat neglected, prime real estate location on the waterfront,” ripe for renovation. Now, it’s posting double-digit growth and its innovation pipeline is pumping out wins.

As the diabetes franchise is set to spin off from Medtronic into a new company called MiniMed, more than 24 years after Medtronic first acquired a company with the same name, Dallara still has to navigate the operation through emerging challenges. Competitors have gained ground, and the emergence of GLP-1 drugs including Ozempic threatens to disrupt the entire diabetes care market.

Dallara said in an interview that her focus isn’t necessarily glued to the markets for continuous glucose monitors or high-tech insulin pumps — the company dominated the market for the latter until recent years. Rather, her long-term vision is automated insulin delivery systems using both technologies. These could essentially serve as an artificial pancreas, keeping a patient’s blood sugar in check with little user input.

“Our vision ultimately is to make it so simple that all a patient needs to do is put in insulin and wear the device, and it will take care of itself,” Dallara said.

For customers such as Denise Plank of California’s Central Valley, a lot is at stake. Device users hope for better algorithms and simpler technology as they face high costs.

“It costs a tremendous amount of money for me to stay alive,” said Plank, 50.

An entire medtech sector has emerged around the disease, with companies creating pens and pumps that inject synthetic insulin into the body and glucose monitors to track blood sugar in real time.

In 2001 Medtronic acquired MiniMed, a Northridge, Calif., company that was among the first to commercialize insulin pumps. Analysts called the acquisition, costing more than $3 billion, a good strategic move.

Under the Fridley-based medtech giant, MiniMed created new insulin pumps and continuous glucose monitor systems, producing billions a year in sales despite being Medtronic’s smallest business.

The unit now has more than 8,000 employees and $2 billion in annual revenue.

Over the years, Medtronic’s systems became increasingly high-tech and typically were used by patients with the rarer form of the disease, Type 1 diabetes, an autoimmune condition that happens when the pancreas stops making insulin.

Juliane Ray, general manager of medtech at analytics firm Clarivate, said a single mistake in health care can have long-term effects, especially when there are competitive products on the market.

“People have long memories, and the health care industry is very conservative,” Ray said.

The company’s dominance in insulin pumps started to slip, with Insulet overtaking its leadership position in U.S. market share by 2023 for the first time, according to Clarivate data.

Dallara joined the company in May 2022, following a winding career that took her from McKinsey to Microsoft to Honeywell. She built on a background in mathematics, learning skills in computer science and leadership; “when you add them together, it turns out that it really is very helpful within diabetes,” she said.

Under her watch, the Food and Drug Administration approved the long-delayed MiniMed 780G insulin system, a next-generation device Medtronic says is the first in the world with technology accounting for blood sugar changes due to meals. Last month the same device got an expanded approval in Europe to be used to treat the more common Type 2 diabetes, in which the pancreas makes too little insulin, often due to lifestyle factors. Medtronic also launched the world’s first seven-day infusion set delivering insulin to the body.

Medtronic may have maintained or modestly improved its insulin pump market position in 2024, Clarivate’s Ray said. The company posted double-digit percentage growth in recent quarters, prompting some Wall Street analysts to question the timing of the high-profile spinoff announced in May.

In an investor call in May, Medtronic CEO Geoff Martha called Dallara “instrumental” in turning around the diabetes business, and he explained that the spinoff helps focus Medtronic. Spinning off the company when its performance was at a low could have been bad for shareholders and patients, he said.

The new company will be headquartered in Northridge, Calif., where the business unit is based. Ray said MiniMed can accelerate innovation as a standalone company, as it’s “not competing for resources with other fast-growth or much larger business units within Medtronic.”

The company will launch in a diabetes-care landscape that’s rapidly changing.

Ray said GLP-1s, drugs that can help patients manage obesity and blood sugar, could affect some companies in the short term. Some patients with Type 2 diabetes may take longer to incorporate insulin into their care and receive smaller doses, she said.

These people are contending with rising health care costs and hope for more seamless technology that can keep them alive.

Plank, the California resident, said her Type 1 diabetes makes it difficult to work, as she must stay laser-focused on hydration and monitoring meal intake to manage the disease. She uses Medtronic’s 780G insulin pump.

“When it’s working well, I feel like a different person than I’ve been for most of my life,” Plank said, “because I can just do things.”

The pump is one of the most expensive things she owns, she said. Another 780G user, Kurt Dilley of Tennessee, recalls a month when “trying not to die” cost him thousands of dollars when his insurance disappeared between jobs.

The price of the MiniMed varies based on insurance. Dallara said the company has financial assistance programs and a team that helps customers work with insurance coverage. “Navigating the U.S. health system takes a Ph.D., probably, to understand it,” she said.

He called the MiniMed 780G system “absolutely life-changing.”

That doesn’t mean Dilley sees no needs for improvements. The system’s long cable, he said, can latch onto objects.

“I go into a room looking like, ‘OK, what can I hook my stuff on? And what is gonna rip this set out?’” he said.

Plank said her system isn’t perfect, as it sometimes doesn’t precisely account and adjust for meals.

Dr. Richard Bergenstal, a longtime research clinician at HealthPartners’ International Diabetes Center in St. Louis Park, said companies can further improve their algorithms to achieve a truly closed-loop system.

Automation does the “dirty work” in the background of “almost every sector of our lives,” Dallara said. “780G, which is our flagship product, goes a very long way in our view towards that. And of course, we’re working on things beyond that.”

Medtronic, she said, is the only company to have all the components that could potentially make up completely automated insulin delivery, including a smart insulin pump, an interoperable glucose monitor and an algorithm.