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Medtronic (MDT) Begins Product Recall, Diabetes Group a Drag

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Medtronic plc. (MDT - Free Report) has initiated a voluntary product recall of specific series of infusion sets used with all models of Medtronic insulin pumps. Shares of the company registered a 0.57% drop to close at $81.56 following this announcement.

The company decided to recall the insulin pumps on the risk that these devices may potentially over-deliver insulin, exposing respective patients to threat of hypoglycemia.

Medtronic has taken this decision on the basis of recent field reports from patients and root cause analysis. Per the report, vent membrane — a component of the recalled infusion sets — may be susceptible to blockage by fluid during the process of priming/fill-tubing.

Medtronic plans to replace the recalled lots of infusion sets with the currently manufactured specimens at no cost. This new version has been in use since April and includes a design update of vent membrane which per the company, reduces risk of insulin over-delivery after an infusion set is changed for good.

In the press release, Medtronic has not specifically mentioned about the number of defective infusion sets. However, we apprehend about a huge chunk of disputed units to be replaced, following the statement by Pamela Reese, Medtronic senior manager for communications, published on Medscape Medical News: “Because this recall applies to all versions of infusion sets that are used with Medtronic insulin pumps, to publish a list of specific lot numbers would be unwieldy. This is why we designed the [online] lot look-up tool.”

This product recall is anticipated to act as a setback for Medtronic’s growing Diabetes business. Considering the large number of MiniMed infusion sets already being rolled out, we believe the recall of the flawed bunch may adversely impact the company’s diabetes arm’s revenue in the ongoing quarter.

Within this particular business space, the company is currently putting an all-out effort to capitalize on distinctive innovation and strengthen foothold in the market. Based on the company’s class apart strategy to move toward fully closed loop systems, algorithms and CGM sensors to automate insulin dosing, Medtronic has been of late consistently observing a strong demand graph globally for its new diabetes technology. We apprehend, with the latest recall news, this positive momentum within the Diabetes group may get interrupted to some extent.

 

Over the past three months, Medtronic has been constantly trading below the broader industry. The company has lost 6.9% versus the industry’s 2.5% gain during the period.

Zacks Rank & Stocks to Consider

Medtronic currently carries a Zacks Rank #4 (Sell).

Better-ranked medical stocks include Edwards Lifesciences Corporation (EW - Free Report) , Lantheus Holdings, Inc. (LNTH - Free Report) and Chemed Corporation (CHE - Free Report) . While Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), Lantheus Holdings and Chemed carry a Zacks Rank #2 (Buy). You cansee the complete list of today’s Zacks #1 Rank stocks here.

Edwards Lifesciences, which has a long-term expected earnings growth rate of 15.2%, gained roughly 23% over the last six months.

Lantheus Holdings, which  has a long-term expected earnings growth rate of 12.5%, rallied 19.2% over the last six months.

Chemed, which has a long-term expected earnings growth rate of 10%, gained around 4.1% over the last six months.

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