An Artificial Pancreas for Diabetics is Almost Here
If you’ve ever taken an introductory cultural anthropology class, you might recall reading a paper on “Body Ritual among the Nacirema.” Written in 1956, it’s an account of an anthropologist who visits a tribe and observes all kinds of weird behavior – like medicine men who jab coated needles into the flesh of the natives. Some of these natives actually poke themselves with needles, multiple times a day, an act that draws blood which they then use to perform some strange ritual with. Long story short, after students read this paper, they’re then asked what they think of the Nacirema, to which most usually respond “what a bunch of savages.” Then the punchline comes out. Nacirema is simply the word “American” spelled backwards. The paper is actually describing modern-day Americans, and even though stabbing yourself with a needle four times a day sounds extremely primitive, it’s what millions of diabetics do every day.
We sat down to talk with a veteran medical professional who has spent the majority of his 30-year career in an Intensive Care Unit (ICU) watching patients file in, many suffering through problems relating to improper blood sugar management. Given their condition, diabetics are treated differently, and it creates problems when medical staff are unaware if someone is a diabetic or not. He talked about how sometimes a test for blood sugar turns out to be the answer to the patient’s problem, yet this can get easily overlooked. Some patients – think about your teenage kids – choose not to be compliant and consequently end up in ICU so often that they’re sometimes referred to by medical staff as “frequent flyers.” There’s an immediate need for a technology solution that can monitor glucose and simultaneously administer insulin as needed. In other words, we need an artificial pancreas for diabetics.
If we can build a medical device with an 11-year battery that helps you manage sleep apnea with a remote, then why can’t we develop a device that solves diabetes once and for all? What we need is a closed-loop automatic insulin delivery system that would perform the functions of a pancreas by monitoring glucose and administering insulin. Let’s talk about glucose monitoring.
Continuous Glucose Monitoring (CGM)
We recently wrote a piece on When Will There Be a Cure for Diabetes? in which we talked about companies that are developing therapies for diabetes. Let’s assume for now that the problem isn’t going away anytime soon. In order to make life easier for the 450 million diabetics living around the world, we need a system that monitors glucose and administers it as needed such that the patient can live a worry-free life without having to prick their fingers all day like those superstitious Nacirema do. The use of technology to monitor blood sugar levels is hardly innovative. It’s called Continuous Glucose Monitoring (CGM), and an $11 billion company called Dexcom (DXCM) has built an entire business around the idea. A CGM solution involves placing a sensor on or in a patient’s body that then connects to a transmitter which continuously sends regular intervals of glucose readings to a receiver or compatible smart device via Bluetooth technology.
While we don’t need to worry about finger sticking anymore with the latest version of this FDA-approved device, we still need to worry about administering insulin as needed. If we can combine CGM with an insulin dispensing system, then we’re just about there. Let’s talk about insulin dispensers and Type I diabetics.
Automatic Insulin Dispensers
Type 2 diabetes is a condition where the body produces some insulin but not enough, and accounts for around 90% of all diabetes cases. Type 1 diabetes is more difficult to manage because the body produces no insulin at all. Many type 1 diabetics need to worry about administering two types of insulin: basal and bolus. An article from Verywell Health describes the difference between these two types as follows.
- Basal insulin – replaces the background insulin that your body would normally make between meals to maintain constant blood glucose levels.
- Bolus insulin – replaces the extra insulin the pancreas would naturally make in response to glucose taken in through food. The amount of bolus insulin needed depends on the size of the meal.
Today’s insulin pumps serve to manage the basal insulin requirement by administering a steady amount of insulin over time, or the bolus insulin based on a patient’s command. About four years ago, we wrote about a company called Cellnovo that was developing a system that would continuously monitor glucose levels and administers insulin when needed as opposed to a steady stream. Just last month, Cellnovo went into bankruptcy proceedings. One reason for that may be the competition.
The Start of an Artificial Pancreas
While there may be any number of companies working on insulin delivery systems, we’re going to focus on a $117 billion medical device company, Medtronic (MDT), that’s a giant in the insulin pump market with a forecasted 2019 share of 63.1%. We’ve held shares of Medtronic for a long time as part of our Dividend Growth Investing (DGI) strategy that focuses on investing in a diversified portfolio of stocks that have a track record of not only paying but increasing dividends over time. Medtronic is one of those companies, having increased their dividend for 41 years in a row now.
Dividend investors might balk at Medtronic’s present yield of 2.20% (about the same return you can get from a savings account these days), but they’re not considering how fast that dividend has been growing. In the past 10 years, Medtronic’s dividend has increased 11.9% on average every year. At that rate of growth, a 2.20% yield would increase to 6.77% in just ten years’ time. That sort of consistent growth comes from a well-managed company with a portfolio of high-growth products and a roadmap to bring more such products to market. That’s exactly what Medtronic is planning for their “diabetes group.”
While Medtronic’s diabetes group accounts for less than 10% of total revenues, it’s a high-growth market where Medtronic expects the “artificial pancreas” to be a standard of care. Last summer, the Medtronic diabetes group gave a presentation about all the advancements they expect to make with details about sub-segments and the portion of the market they expect to capture for each. That starts with the MiniMed 670G.
In 2016, the FDA approved the world’s first Hybrid Closed Loop (HCL) insulin delivery system, Medtronic’s MiniMed 670G System, which is intended to automatically monitor blood sugar and adjust basal insulin doses in people with type 1 diabetes. Here’s a look at the slide from Medtronic which shows the evolution of the system going forward as more functionality gets added.
There are a few bits of terminology that need explaining here. The term “closed loop” refers to the ability of the sensor to communicate with the pump. That’s significant because it allows for insulin to be monitored and administered simultaneously. The second term is “hybrid” which refers to the fact that the patient will still need to administer bolus injections before meals. The process becomes easier with a hybrid system since it lets the patient know what dosage they ought to use. Based on the above slide, we can expect a closed-loop automatic insulin delivery system that handles bolus injections and basal injections by sometime in the early 2020s. While that’s not very specific, it makes sense to start using the present-day device which makes diabetes easier to manage – at least according to the 93% of patients who reported being satisfied with the device. But patient satisfaction isn’t enough. Insurance companies want to see value being added, and one way to show that is through something called “Time In Range.”
Increasing “Time In Range”
One term that all diabetics will be familiar with is Time In Range (TIR) which is the percentage of time a patient is within the glycemic range of 70 to 180 mg/dL. Evidence suggests that time in range is inversely correlated to risk of developing vascular complications in patients with diabetes,” according to a paper on the topic. In other words, the higher the TIR, the better.
According to an article by Diatribe, for a population of Type 1 diabetic patients, the “average time-in-range is likely 40%-50%.” The article goes on to say that “a goal of 70% time-in-range, or even 60%, is likely unrealistic without drastic changes in their diabetes management approach.” Using the Medtronic 670G brings that number up to 71%. In 2020, Medtronic plans to release the 780G which brings TIR up to around 80%. Just a few months ago, they received Breakthrough Device designation for the 890G which promises to bring that number above 85%. They’re also using artificial intelligence to improve the accuracy of their devices as well.
Every diabetic patient is different, and there’s no one-size-fits-all treatment. That’s why a “personalized medicine” approach is needed, and that’s exactly where machine learning algorithms come into play. As you can imagine, constant glucose monitoring produces huge amounts of big data that can then be munched on by hungry AI algorithms to provide predictive analytics that increase TIR according to each patient’s unique anatomy and lifestyle. Medtronic’s app – Sugar IQ – is already doing this with a little help from IBM’s Watson.
Late last year, Medtronic acquired an Israeli firm called Nutrino Health which is building the world’s largest nutritional database and had partnered with Medtronic to “improve diabetes management through understanding a patient’s Glucose FoodPrint.” Nutrino is doing some pretty cool stuff, like using Natural Language Processing (NLP) to read through more than 10,000 papers to understand nutritional recommendations. That’s just one data input stream, with others including things like genetics, social media info, blood tests, food consumption, and the list goes on.
Looks like that partnership with Medtronic worked out pretty well for Nutrino.
When it comes to which company will be first-to-market with an artificial pancreas that handles both bolus and basal injections, it’s not a stretch to think that Medtronic would be the one. They have a roadmap in place, and they’ve managed to secure FDA approval for their first-generation device which already has more than 135,000 people using it. This device serves to simplify the process of managing the diabetic condition, and further advances will only make that process simpler. In a decade’s time, it’s not hard to imagine a world where the Nacirema have vanished entirely, replaced by technology that makes their antiquated finger-pricking methods go the way of the dodo.
We're presently holding two medical device companies that also happen to be dividend champions. Become a Nanalyze Premium annual subscriber and see our 30-tech-stock portfolio and our 30-dividend-growth-stock portfolio today.