Medtronic Plc (MDT) has announced that the Blackstone Group’s (BX) life sciences division will invest $337 million into the research and development of its diabetes device technologies.
Under the terms of the agreement, Medtronic will receive funding for four diabetes R&D programs over the next several years. Medtronic’s engineering, clinical, and regulatory teams will conduct the development work for the programs.
Blackstone’s investment is sought to pull forward specific programs for its diabetes pump and continuous glucose monitoring (CGM) pipeline devices that aim to address unmet patient needs. If the programs are successful, Medtronic will pay royalties which are expected to be in the low- to mid-single digit range as a percentage of sales. Additional terms of the arrangement were not disclosed.
Medtronic’s diabetes device portfolio is tailored to provide greater lifestyle flexibility to Type 1 diabetes patients, which includes about 22 million individuals worldwide and 1.5 million individuals in the U.S.
Separately, the medical technology company over the weekend announced positive results from its US pivotal trial of its MiniMed 780G Advanced Hybrid Closed Loop (AHCL) insulin pump at the virtual American Diabetes Association (ADA) conference. The investigational MiniMed 780G system is designed to automate the delivery of both base-level insulin and correction doses to help people with diabetes avoid highs and lows.
“This investment is important for people living with diabetes, as we expect it will expand our offering of future insulin delivery and sensor innovations that have the potential to improve patients’ management of their diabetes,” said Sean Salmon, president of Medtronic’s Diabetes Group. “Over the past 12 months, Medtronic has significantly increased its investment in Diabetes R&D, including investments in a series of near-term programs such as the MiniMe 780G insulin pump system, our Personalized Closed Loop (PCL) system, our extended wear infusion set, and our Zeus and Synergy sensors.”
For Blackstone’s life sciences division, the investment represents the first of its kind in the medical devices space.
Shares in Medtronic rose 2.6% to $93.21 at the close on Friday, trimming its year-to-date decline to 18%. Blackstone advanced 1.3% to $55.73.
SunTrust analyst Kaila Krum last month cut Medtronic’s price target to $105 from $130, while maintaining a Buy rating on the shares after Q4 earnings missed the Street’s expectations.
However, Krum is confident that the investments the company is making today will have a long-term positive growth impact.
Overall, Wall Street analysts have a cautiously optimistic Moderate Buy outlook on the stock. This breaks down into 16 Buy ratings versus 5 Hold ratings and 1 Sell. The $111.05 average analyst price target implies 19% upside potential over the coming year. (See Medtronic stock analysis on TipRanks).
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