Sanofi Joins Medtronic to Develop Devices for Diabetes

Jun 15, 2014 1:31 pm ET

(Adds detail on Covidien bid in last paragraph)

June 15 (Bloomberg) -- Sanofi, the maker of the insulin product Lantus, and Medtronic Inc., the world’s biggest maker of heart-rhythm devices, will work together to develop combinations of medicines and devices to battle diabetes, which kills a person every six seconds.

People with the disease must closely track their sugar intake to keep it under control, and often need multiple insulin shots a day to survive. The Sanofi-Medtronic pact, announced June 14, will focus on ways to simplify insulin use and improve treatment compliance, the companies said.

The arrangement comes as Medtronic is seeking to buy Dublin-based Covidien Plc for more than $40 billion, according to a person familiar with the talks. That deal would add more hospital equipment to the Minneapolis-based company’s products while the Sanofi pact helps broaden its diabetes offerings. Sanofi, meanwhile, needs new avenues of growth because its patent on Lantus, which last year amassed 5.72 billion euros ($7.6 billion) in sales, expires in 2015.

“Patients don’t really prick their finger enough during the day,” Sanofi Chief Executive Officer Chris Viehbacher said by telephone, referring to how diabetics check their blood glucose levels. “If you don’t get that right, because of the progressive nature of the disease, you’re not getting full control of it. If you don’t control it, you develop these neuropathies that lead to blindness, that lead to amputation.”

Viehbacher created the diabetes unit for Paris-based Sanofi in 2009, and two years later introduced blood-metering devices, including one that links to Apple Inc.’s iPhone. Medtronic makes the MiniMed 530G artificial pancreas device for Type 1 diabetics.

Broad Thoughts

“Both our companies realize that we’ve got to think more broadly than just providing therapy,” Omar Ishrak, Medtronic’s CEO, said in a telephone interview. “Our ability to have an impact depends on our willingness to go beyond our historical areas of strength.”

The two companies said they signed a memorandum of understanding for the global alliance in diabetes, without providing financial details. If the partnership is successful, the companies may explore other areas for potential collaboration, Viehbacher and Ishrak said.

While Sanofi has some of its own diabetes devices, the company decided “there was a limit to what we could do by ourselves,” said Pascale Witz, Sanofi’s executive vice president of global divisions & strategic development.

“While there are a lot of devices on the market, they’re all quite similar,” Witz said. “There is an opportunity here to think out of the box and be more innovative and have devices that are much easier for the patients.”

Other Pacts

Other pharmaceutical companies have joined forces to gain critical mass in diabetes, a global market worth about $40 billion, but large-scale partnerships with device makers are rarer. Eli Lilly & Co. and Germany’s Boehringer Ingelheim GmbH struck a deal in 2011 to work together on diabetes drugs.

Diabetes is diagnosed in about 21 million people in the U.S. About 5 percent of adult patients have Type 1 diseases, in which the body fails to produce the insulin it needs. The Type 2 variant tends to strike later in life, brought on by obesity and sedentary lifestyles, as people become resistant to the insulin their own body produces.

Medtronic’s Covidien deal may be structured as a tax inversion, the person said. Such a move would allow Medtronic to move its legal residence to Ireland, where the business tax is lower than in the U.S.

--With assistance from Michelle Fay Cortez in Minneapolis.