D. Medical Pumps Up Diabetic Infusion Sets

| About: D. Medical (DMEDF)

D. Medical Industries (DMED) is rolling out its Spring Universal Infusion Set in North America and selected European markets, representing the initial launch of its Spring line of diabetic medical devices, with plans to introduce several new insulin pumps in the developing world in the next few years.

"Being a small company, we have realized that with the change in global economies, we should emphasize building up revenues and positive growth margins as soon as possible, and the easiest, low risk way to achieve our goals is to introduce the infusion set first,” CEO Efri Argaman says in an exclusive interview with BioTuesdays.com.

In terms of marketing, we are putting all of our efforts into introducing the Spring brand through our infusion set, where a commercial launch is now in progress,” he adds.

The Spring Universal Infusion Set, which connects the body to an insulin pump, is compatible with most insulin pumps now on the market. Going beyond the minimum requirements of subcutaneous drug delivery, the Spring Universal features a hidden, auto-retractable needle, 360-degree connector, and smallest one-click, all-in-one inserter, all designed to reduce pain and scarring.

The core of the infusion set is the proprietary Detach-Detect mechanism, which stops the flow of insulin if the device detaches from the body, triggering an occlusion alarm in the pump. The unique feature provides reliability for continuously controlled and monitored insulin delivery, providing additional safety and peace of mind for athletes, active individuals and parents of pediatric patients.

To facilitate the marketing of the infusion set, Israel-based D. Medical has established a U.S. subsidiary, Spring Health Solutions Inc. , with a head office in New Jersey and logistics center in Boston. It also has signed distribution accords with Cleveland-based RGH Enterprises, the parent company of Edgepark Medical Supplies and Independence Medical last August, and Doubek Medical Supply of Alsip, IL in October.

“This is not the final word on distribution and in the next few months, we expect to extend our distribution network to have a handful of very skilled distributors covering various segments of the U.S. market,” Mr. Argaman says. U.S. diabetes industry veteran Zoe Myers came on board a year ago as chief commercial officer.

“It took us some time to put the infrastructure and logistics in place to support the U.S. market, which has different characteristics than non-U.S. markets, especially in terms of supply chain management,” Mr. Argaman adds. “But we are ready in this aspect.”

Sales in Canada began at the end of October through distributor Dex Medical, Canada’s largest distributor of diabetes care products. D. Medical is also targeting Mexico with the Spring Universal.

Economic conditions also prompted D. Medical to close its manufacturing facilities in Israel during the third quarter, about six months ahead of its original plan, and move all of its production to contract manufacturing partner, UPG (Suzhou) EPZ of China, a subsidiary of Oak Brook, IL-based United Plastics Group.

“Regretfully, it was nearly impossible for us to manufacture efficiently in Israel,” Mr. Argaman says, adding that the closing generated a significant reduction in D. Medical’s burn rate. “In our arrangement with UPG, we pay per finished goods,” he notes. “We are planning our capacity according to our forecast of demand, so it allows us to have very high efficiency.”

UPG of China began producing the Spring Universal last March and is currently in the process of quadrupling production capacity by the end of this year.

D. Medical figures the estimated annual market for infusion sets is $650 million to $730 million in the U.S. alone. At a retail price of $11-to-$14 for the Spring Universal, D. Medical is targeting existing insulin pump users, “who either are not happy with what they’re using or are not aware of the risk of detachment,” Mr. Argaman contends. “So, providing them with a new product may help resolve their issues.”

The company expects its cost of goods to be less than $3 per infusion set, as manufacturing scales up. “This allows us to introduce and promote the Spring brand at a relatively low cost and low risk in a sustainable business model,” he adds.

While it’s too early to estimate conversions to the Spring Universal, Mr. Argaman says “early interest shown by patients, doctors and diabetes educators has been high.” The company is using conferences, exhibitions and social media to get the word out. “We are already established in several European markets, where the business continues to grow,” he adds.

While the infusion set represents D. Medical’s immediate go-to-market plans, its Spring Zone Durable insulin pump is set for a commercial launch in the mid-term in the U.S., Europe and the BRIC countries of Brazil, Russia, India and China, as well as Mexico. The company filed a CE Mark application for the pump last June and plans to submit a 510(k) application with the FDA early in 2012. The previous version of the pump was CE Marked and FDA cleared.

The Spring Zone would be the smallest and lightest insulin pump with tubing on the market, replacing D. Medical’s first generation Spring ADI insulin pump. Among its key features are superior blockage and detachment detection, environmental adaptability to pressure and temperature, air bubble detection and a continuous insulin dose delivery check.

In 18-months-plus, the company expects to release the Spring Hybrid Patch Pump in the U.S., Europe, Mexico and BRIC countries. The base technology already has been CE Marked. The small, waterproof device can be operated with or without tubing. A 510(k) application is set for 2013. “We have high hopes that the Hybrid Patch could be approved in the U.S. in the same year,” Mr. Argaman says. “As we have done with all of our other products, we initially will approach European regulators because it is a more straightforward process and opens the door to other jurisdictions.”

At the core of all of D. Medical’s products is its Intellispring technology, which eliminates the need for a motor-and-gear train that is the industry standard in insulin pumps. All of the moving elements are in the disposable unit, providing service and reliability advantages, a razor-razor blade business model and a low cost-of-goods-sold structure.

(Click to enlarge)

DMED's Patented Intellispring Technology

The pump generates the drive energy required to deliver insulin by loading a reservoir cartridge, which results in compression of the spring. The insulin pump is controlled by a pressure-sensing technology, which monitors the pressure both inside the reservoir cartridge and in the infusion line. A micro controller-triggered mechanism then calculates, delivers and controls accurate dosages of insulin through a series of valves and sensors.

Bottom line: D. Medical is poised for market penetration, in both the developed and developing worlds, with a strong product portfolio. It also has a sustainable business model, with a low cost structure.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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