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Medtronic (MDT) Inks Value-Based Deal for Guardian Connect

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Medtronic plc. MDT recently made a major development in the field of diabetes management. The company reached an outcome-based agreement with Blue Cross and Blue Shield of Minnesota in relation to the company’s Guardian Connect smart Continuous Glucose Monitoring (CGM) system.

Per the terms of the deal, the members of the Blue Cross and Blue Shield of Minnesota plan, who are diabetic patients, will have better access to the Guardian Connect.

The Deal at a Glance

Medtronic noted that the Guardian Connectsystem will now be available through a Blue Cross and Blue Shield of Minnesota member's pharmacy benefit. Per the report, under this contract, the value-based payment of using the Guardian Connect system will depend on the amount of time spent on a healthy glucose range. The key metric to be considered here is Time in Range (TIR), a standard measurement in diabetes management that tracks the amount of time a person's glucose staysin the target range (considering 70-180 mg/dL as the standard range).

In other words, according to an article published in Cardiovascular Business, if the Guardian Connect CGM system fails to keep the patient’s blood sugar levels within a specified range, the company will pay back the insurer.

Such a move claims to improve the speed of delivery and lower costs for members, who use the device.

This apart, Blue Cross and Blue Shield of Minnesota members, who are on the Guardian Connect system or the MiniMed 670G insulin pump system, will be able to participate in Medtronic’s patient engagement program known as Inner Circle.

How the Deal is Strategic Fit

Medtronic is highly optimistic about its first value-based partnership with a health plan. This alliance is expected to lend Medtronic’s CGM business a significant boost with a large patient base of the Blue Cross and Blue Shield of Minnesota.

Medtronic Guardian Connect So Far

In 2018, Medtronic announced the receipt of an FDA approval for the Guardian Connect CGM system pertaining to the diabetes patients aged between 14 and 75 years. This is thefirst and the only standalone CGM system to help diabetes patients be wary of the potentially high or low-level glucose events up to 60 minutes in advance.

Around the same time, the company announced that the regulatory body approved a new arm indication for the Guardian Sensor 3 CGM, which is used alongside the MiniMed 670G insulin pump.

Since its launch, the Guardian Connect system has successfully demonstrated a strong customer adoption.

During the last reported quarter, CGM as a category surged more than 30%. Guardian Connect registered third consecutive quarter of triple-digit growth.

Huge Potential in Diabetes Management Market

Ageing population, unhealthy lifestyle, rising awareness and higher expenditure in healthcare are likely to drive the highly competitive diabetes market.

Per a report by Mordor Intelligence, the global market for diabetes care devices is projected to reach a value of $30.25 billion by 2021 at a CAGR of 5.93%. Considering this bullish market trend, we believe that the latest development is a strategic fit for the company.

Stock Performance 

Over the past three months, shares of Medtronic have underperformed its industry. The stock has returned 4.5% compared with the industry’s 12% growth.

Zacks Ranks and Key Picks

Medtronic currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are Stryker Corporation SYK, Penumbra, Inc. PEN and Amedisys, Inc AMED, each stock currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker’s long-term earnings growth rate is projected at 10%

Penumbra’s long-term earnings growth rate is estimated at 20.9%.

Amedisys’s long-term earnings growth rate is expected at 19.7%.

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