Medtronic plc MDT has completed the acquisition of Klue, a software company focused on behavior tracking of people. Medtronic aims to integrate Klue’s technology into the Medtronic Personalized Closed Loop (PCL) insulin pump system, which is currently under development.
Notably, in February 2019, PCL received Breakthrough Device designation from the FDA.
The acquisition is expected to be neutral to Medtronic’s fiscal 2020 earnings per share. However, additional terms of the deal have been kept under wraps.
The company plans to utilize Nutrino Health’s (acquired in November 2018) expertise in nutrition data science to boost the development of its diabetes arm.
With the completion of the Klue deal, Medtronic aims to strengthen its diabetes business on a global scale, using Klue’s technology.
Rationale Behind the Acquisition
Medtronic’s PCL system is engineered to automate the insulin delivery process in real time. The system, which is aimed at simplifying diabetes management in patients, has been tailored to adapt to patients’ needs. Additionally, Klue’s technology can be leveraged by Medtronic to enhance analytics and insights in the Continuous Glucose Monitoring (CGM) technology to help people, who are using multiple daily injections (MDI), stay ahead of glucose level fluctuations.
Klue’s technology can automatically identify eating patterns of people by combining analytics technology with gesture sensing via activity trackers. The identification is necessary for diabetes management because food consumption is inherently related to insulin requirements for diabetic patients.
Per a report by Reports And Data published on GlobeNewswire, the global diabetes devices market was valued at $21.93 billion in 2018 and is expected to reach $38.53 billion by 2026, witnessing a CAGR of 7.3%. Factors like increasing incidents of diabetes worldwide due to the rising level of sedentary lifestyles and obesity in global population, and rising awareness of diabetes management among patients are driving the diabetes management market.
Given the rising potential of the market, the buyout has been well-timed.
Recent Developments in Medtronic’s Diabetes Group
In September, Medtronic announced receiving the CE Mark for its Envision Pro CGM system — a fully disposable, zero calibration professional system. Further, the company secured the reimbursement for the MiniMed 670G insulin pump system with the German Federal Association of the Statutory Health Insurances.
Shares of Medtronic have gained 25.3% in the past year compared with the industry’s 15.8% growth.
Zacks Rank & Other Key Picks
Currently, Medtronic carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Haemonetics Corporation HAE, National Vision Holdings, Inc EYE and ResMed Inc RMD.
Haemonetics currently has a Zacks Rank #2 and a projected long-term earnings growth rate of 13.5%.
National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ResMed’s long-term earnings growth rate is estimated at 14%. It currently flaunts a Zacks Rank #1.
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