Device Firms Eye Rx Markets; Medtronic Moves Toward “Organ Restoration”

Medtronic's long-term strategy is likely to include a much more prominent role in biotechnology, Senior VP-Medicine & Technology Stephen Oesterle told the recent Wharton Health Care Business Conference in Philadelphia.

"There is a promise out there in biotechnologies. It has been out there for 25 years or more," Oesterle said during a keynote address Feb. 20. "Our choice is: do we become a pawn in this game, or a rook?"

For biotechnology companies "to realize their promise, they need delivery tools," Oesterle said. Site-specific delivery of cell, gene and protein therapies is critical to development of biotech products, he noted. "Believe me, we have a large pipeline of delivery tools for biologics."

In the longer term, biologics delivery technologies will permit Medtronic to advance beyond its current core strengths in electromechanical implants into new frontiers of medicine, Oesterle suggested.

Oesterle indicated Medtronic's current mission to "restore health, alleviate pain, extend life" is incomplete. He proposed "organ restoration" as another long-term objective.

To underscore the commercial significance of the strategy, Oesterle listed seven disease markets where Medtronic does not currently have a presence, including obesity, degenerative joint diseases, cancer, depression, epilepsy, hearing loss and visual loss.

The vision outlined by Oesterle goes beyond the simplest conception of "combination products," like drug eluting stents.

One example offered by Oesterle is the potential to combine Medtronic's insulin pump technology with implantable insulin sensors using wireless communications technology to create an "artificial pancreas."

One of the themes of the Wharton conference was the evolving focus of large health care technology companies from developing new drugs or devices toward, in the words of a J&J executive, offering "product solutions" (¹ (Also see "J&J Focusing On “Product Solutions”; Diabetes Care May Be Early Model" - Pink Sheet, 1 Mar, 2004.), p. 16).

J&J's diversified profile makes it a logical candidate to explore markets where drug and device technology can both contribute.

However, as more companies begin to think about disease management or other novel business models, firms that have developed into "pure plays" in either sector - like Medtronic in devices or Pfizer in drugs - are looking at market definitions differently.

Pfizer is talking about using its new scale to help "evolve" its business model from selling medicines to a broader health care focus (² (Also see "Pfizer “Evolves” From Rx To Health Care Company: Fla. Medicaid Is Blueprint" - Pink Sheet, 19 Jan, 2004.), p. 19).

As Pfizer begins to approach markets from the point of view of broad disease definitions, the competitive landscape changes.

For example, Pfizer hopes to launch the first inhaled form of insulin. From a product-focused standpoint, the competitors are injectable versions of insulin sold by companies like Lilly, Novo Nordisk and Aventis (Pfizer's partner for the inhaled product, Exubera ).

From a broader market standpoint, competitors would include oral antidiabetic agents sold by a host of companies.

From a "product solutions" standpoint, competitors would include Medtronic's insulin pump/sensor technology - and companies like J&J that hope to make progress on treating obesity and reducing the occurrence of diabetes.

[Editor's note: A version of this story first appeared in F-D-C Reports' ³ "The Gray Sheet" Feb. 23.]