Dive Brief:

Medtronic agreed to buy EOFlow, a company based in South Korea that makes a tubeless, disposable insulin pump on a patch.

The company will make a public tender offer to acquire all of EOFlow's outstanding public shares for 971 billion South Korean won ($738 million).

The purchase will allow Medtronic to compete with Insulet, which has gained market share with its tubeless insulin pumps, and Tandem Diabetes Care, which agreed last year to buy patch pump-maker AMF Medical.  

Dive Insight:

Medtronic, with a warning letter recently lifted from its U.S. diabetes business, aims to bring new products to market. The company plans to integrate its new insulin dosing algorithm, which is used in the 780G pump, with EOFlow's pump.

"We've never lost faith in our technology," Medtronic CEO Geoff Martha said on a Thursday earnings call, adding that "the patch segment is a good segment and we look forward to having multiple options." 

EOFlow's technology currently is authorized in Europe, South Korea, Indonesia and the United Arab Emirates, with a smartphone application that allows users to monitor and control the patch directly from their phone.

Medtronic is offering to buy all outstanding shares of EOFlow, including those held by CEO Jesse Kim and President Luis Malave, for 30,000 won per share. That's about 20% more than EOFlow's closing share price of 25,050 won on Thursday, before the firms made their announcement.

To fund EOFlow's ongoing operational and research and development needs, Medtronic said it will buy new shares at 24,359 won each.

Kim, who is also EOFlow's founder, said in a statement that the transaction would accelerate the company's next phase of growth. "With a global footprint in over 100 countries, ability to scale up manufacturing quickly, and advanced software and sensor capabilities, Medtronic is the ideal strategic partner for EOFlow," Kim said.

Medtronic said the acquisition is expected to be less than 1% dilutive to its adjusted earnings per share in the first three years, with most of the costs coming from integrating the patch with Medtronic's CGM and algorithms. The transaction should close in the second half of 2023, subject to meeting the minimum tender condition and regulatory clearances, it added.

In its 2023 fiscal year, Medtronic's diabetes business brought in $2.26 billion in revenue, a 3.3% decrease from a year earlier, the company reported on Thursday.