Devices & Diagnostics

Diabetes monitoring devicemaker seeks funding, hopes to prove it’s still relevant

Has Diabetes Sentry Products Inc.’s time finally come? Or has the start-up already missed the […]

Has Diabetes Sentry Products Inc.’s time finally come? Or has the start-up already missed the boat?

The Orono-based company, a semi-finalist in this year’s Minnesota Cup, hopes to raise $1 million to $1.5 million to develop a portable device that alerts diabetic patients when their blood sugar levels fall dangerously low. But some experts wonder if the technology is outdated given today’s advances in integrated glucose monitors and insulin pumps.

That wasn’t the case in the 1990s when a group of engineers at Teledyne Avionics in Virgina created the watch-like device, whose sensor monitors skin temperature and perspiration. The device then alerts the patient to  possible signs of hypoglycemic shock.

Back then, diabetes treatment was much less sophisticated so there wasn’t a whole lot of use for the device, said Michael Russin, Diabetes Sentry’s vice president of sales and marketing and one of three founders.

“It sat on the shelf,” Russin said. “They didn’t know what to do with it. They were well ahead of their time. The medical community still did not have the ability to control blood sugar. This is a big issue in diabetes management right now.”

But Dr. Ward Godsall, an endocrinologist with Allina Hospitals & Clinics, didn’t sound too impressed. Major medical device companies like Medtronic Inc. (NYSE: MDT) have developed increasingly advanced glucose monitoring devices and insulin pumps, which they are integrating into a sort of an artificial pancreas, he said.

“It’s technology that probably going to be outpaced,” Dr. Godsall said.

In addition, Dr. Godsall questions the reliability of the device, noting it could give false positives when a person sweats because of exercise instead of low blood sugar.

Russin concedes the possibility of false positives but the device, which approved by the Food and Drug Administration, could especially be useful at night when the patient is sleeping and stationary. The company hopes to raise money to help develop a second generation device that the company can better customize to a patient and reduce false positives.

The device’s real benefit, Russin says: a low cost, non invasive alternative to the systems sold by a Medtronic. Diabetes Sentry costs about $500. Medtronic estimates total out-of-pocket start-up costs for its new Revel technology to be $1,500 with another $1,000 a year for consumables.

“There might be some value to that,” Dr. Godsall said. “If [Diabetes Sentry] can do it cheaply, there might be some benefit to that.”

If anything, Medtronic has helped create a lot of demand for diabetes monitoring technology that didn’t exist with Diabetes Sentry was created, Russin said.

“Medtronic has put a lot of  product into the market,” he said. “We don’t have to create a sales channel.”

Diabetes Sentry does face a significant problem: it has no product to sell. The company has a backlog of 300 to 400 orders it can’t fill  unless it raises at least $250,000 to ramp up production. At $500 a device, that means up to $200,000 in sales is currently in limbo.

The back order could hurt the company by driving away potential customers, said Peter Birkeland, chief financial officer of Rain Source Capital Inc., a network of angel funds based in St. Paul. People will go to the website and wonder why they can’t purchase the device, he said.

Diabetes Sentry must also convince people that the device is a medical necessity, a critical component to diabetes care, Birkeland said.

“If the company can show that [the device] is more than an medical accessory, there is a large addressable market,” he said. “I would like to see how they can get into a distribution or partnership agreement that will help them grow.”

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