Israeli medical tech firm DreaMed Diabetes has struck a deal with Medtronic, the world’s biggest medical device company, to use its MD-Logic Artificial Pancreas algorithm in Medtronic’s insulin pumps.

Under the terms of the agreement, DreaMed Diabetes will receive undisclosed royalties from future sales of each device utilizing MD-Logic.

In addition, Medtronic has made a minority investment in DreaMed Diabetes of $2 million.

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A distribution deal with a company like Medtronic is about as big a deal as a medical technology developer of any type could hope to achieve. The company had nearly $30 billion in revenue last year, and a market cap well over $100 million, and operates in more than 160 countries.

Working with a company like that is extremely exciting, said Prof. Moshe Phillip, MD, chairman and chief scientific officer of DreaMed Diabetes. Phillip is also director of the Institute for Endocrinology and Diabetes at the Schneider Children’s Medical Center of Israel, which is located in Petah Tikvah — where the system was developed.

What was especially exciting, he said, was that the project was started a mere one year ago. “This is an extremely gratifying validation of our technology and a major milestone for our company,” said Phillip.

DreamMed will retain ownership of the algorithm, so as to be able to use it to develop other products. The algorithm is already in use in a device the company itself has developed, called the GlucoSitter, a fully automated, artificial-pancreas system for controlling glucose levels.

The system links the glucose sensor with the insulin pump through computerized control algorithms. It uses data of glucose levels from a continuous glucose sensor, analyzes them and directs the insulin pump to deliver the correct dose of insulin to be released for the body to maintain balanced blood glucose.

In effect, the software continuously monitors glucose levels, and defines precisely when and how to adjust insulin levels.

The deal falls right in with Medtronic’s long-standing efforts to develop an artificial pancreas. Over the past several years, the company has come out with several insulin pump and continuous glucose monitoring systems.

The company’s Hybrid Closed Loop Technology — named for its ability to use data to adjust insulin dosage, ensuring that the right amount is administered depending on the body’s needs — is a “major advance that will allow people with diabetes to enjoy even greater freedom and better health,” said Francine Kaufman, M.D., chief medical officer and vice president, global medical, clinical & health affairs at Medtronic.

Diabetes necessitates constant vigilance of nutrition and blood-glucose levels and that patients inject insulin throughout the day to compensate for the impaired function of the pancreas, which is supposed to regulate insulin release. Alejandro Galindo, vice president and general manager of the Intensive Insulin Management business at Medtronic, said that “collaboration with DreaMed Diabetes and researchers worldwide will allow us to continue to advance more quickly toward a commercially available closed loop system.”

The MD-Logic Artificial Pancreas algorithm was developed at Schneider in 2011. The system is comprised of an off-the-shelf subcutaneous glucose sensor that monitors the glucose level and connects the sensor to an insulin pump, both of which are connected to a computer that controls the amount of insulin to be released to the body in order to maintain blood glucose balance. This innovation “closes the loop” between the sensor and the pump and relieves the patients with diabetes from the daily burden of worrying about how much insulin to inject.

Since it was developed, the technology — which eventually morphed into the GlucoSitter device — has been tested in randomized, multi-center, multinational, controlled clinical trials in hospitals, diabetes camps and home settings on more than 220 patients, with more than 15,000 hours of day-and-night operational use. The results of these studies were published in leading medical journals, including the New England Journal of Medicine.

Eran Atlas, CEO of DreaMed Diabetes, said that “the GlucoSitter is our most advanced product. We believe future innovation in the diabetes market lies in advances in software products and sophisticated algorithms which will enable improvement in metabolic control and the quality of life for patients with diabetes.”