After embecta was spun out of Becton Dickinson in April, the company is navigating a changing market for diabetes devices as a standalone company.
Franklin Lakes, NJ-based embecta is the largest maker of disposable pen needles, which patients use to inject insulin, and of insulin syringes. It also has plans to develop an insulin patch pump for patients with Type 2 diabetes, similar to the tubeless devices made by Insulet and Roche for patients with Type 1 diabetes. Embecta has more than 2,000 employees and reported $291 million in revenue last quarter. CEO Dev Kurdikar, who joined the company in 2021, talks about how the spinoff is progressing and what’s next for embecta as more automated diabetes devices enter the market.
This interview has been edited for length and clarity.
Why did you join embecta?
There was this large market with a lot of unmet need, and here you have this business that has been in the center of that market for almost 100 years. [But] this was a business that was competing within BD for resources — really BD’s strategic priorities were going to be different.
For me, it was a chance to separate this business from BD, make it its own independent company. That allows us to attract talent, it allows us to get capital as needed, and more importantly, [it] allows us to choose how that capital is going to be deployed.
Given the strength of the business, given the large opportunity that we had, in terms of serving hundreds of millions of people with diabetes, and then given that we could actually chart our own destiny, [it] was just too attractive an opportunity to pass up.
Embecta spun out of BD in April. Is the process complete?
Even when [embecta] was operating within BD, our commercial people, the people that call our customers, were already separate. Our manufacturing plants, which make the syringes and pen needles, were largely dedicated to diabetes care products. And then our R&D center, just outside of Boston, was already separate.
So those things came with us, but obviously what we need to build up and stand up as our own independent company has been the back office functions. So we had to build up our own finance infrastructure, our own IT infrastructure, HR.
You’ve had about two quarters operating as a standalone company. How is that going?
The global operating environment has been challenging. We're not immune to it, just like other companies [that] are working through it. That is on top of all the added standup work that we’ve done.
We'll be reporting our Q4 results here [in December]. Our fiscal year ends in September, but if you look at our Q3 results, what we were able to do was show pretty strong performance. Just immediately post-spin, the business remained as per our projections, and then we actually were able to increase our guidance.
We'll see what the new year brings, I mean, there's just so much uncertainty in the marketplace right now. But I feel like our team is focused, they are energized by the fact that they are an independent company and can chart their own destiny.
Now that you’re operating as a standalone company, do you have any M&A plans?
Yes, we are looking at acquisitions and partnerships. In fact, in the U.S., we announced a partnership with Intuity. It’s an automatic BGM [blood glucose monitor]. Compared to the other BGMs where there are multiple steps, you have to take the lance and prick yourself, then you've got to take your streak of blood, put it on the strip.
This is one step: You put your finger on the meter, and it measures your blood glucose. Now, there's still a needle that comes and pokes you. But it's all integrated into one system. You don't have to worry about disposing of the strip, disposing of the needle separately and all of that. By the way, the marketing of that is through our existing channels.
That's an example of a partnership that we just cultivated. But those are the kinds of things that we will continuously be looking for.
In the past few years, we’ve seen companies launching more automated devices like continuous glucose monitors and insulin pumps. How is that affecting your business?
We are a very global company. Half of our revenue comes from outside the United States. So if I think about markets in three categories — you’ve got the US, you’ve got other developed markets and then you've got emerging markets — the trends are different in those markets.
So in the U.S., there has been significant adoption of pumps. In Type 1 [diabetes], we estimate 35%, maybe 40% penetration of pumps. In Type 2, it's a lot less — I would think it's in the single-digit range.
In other developed markets, the penetration rates are lower — there are reimbursement challenges often — and in emerging markets, it's a lot lower, because that tends to be a market where affordability and cost concerns rate pretty high.
If you look at the growth in the number of people with diabetes, the majority of that growth is projected to occur in emerging markets. And so my view is that is going to remain our bread and butter, the insulin injection devices market, and we have great strength in that area. If you look at the other extreme, in the U.S. where there has been pump adoption, even there, more people [are] entering the funnel as more and more people get diagnosed and start insulin therapy.
So there is some draw from people in the pool that were using insulin injection devices but then [moved] to pumps, but our U.S. business historically has remained stable in spite of that. We estimate the number of people that use our products in millions and certainly tens of millions if you count our global population. But when you're thinking about pumps, the number of people using pumps are probably in the low-single digit millions. So there's an order of magnitude impact there as well.
You’ve also been developing your own insulin patch pump for people with Type 2 diabetes. Where are you in that process?
We've shared that the pump is being developed under a breakthrough device designation of the FDA. It's one that's designed with the user needs of a Type 2 [diabetes patient] person with diabetes in mind. And that's important, because what a typical Type 2 needs is different than what a typical Type 1 needs. For example, they need more insulin a day on average. They may not need all of the bells and whistles and the technological complexity that a Type 1 pump has. Certainly Type 2 users are using pumps as well, but they're [currently] using pumps that have been designed for Type 1.
In terms of timing, when we did our investor presentation in March, we laid out our projections through FY 24. And what we said was, we're not including any revenue from the pump through fiscal 2024.
Why did you decide to focus on Type 2 patients for that device?
A couple of reasons. First of all, Type 2 is 90% of all people with diabetes, right? And if you look at the market opportunity of the insulin-intensive Type 2, people who need more than just one shot of insulin a day, the number of people that are insulin-intensive Type 2 is equal to or maybe even greater than the number of people that have Type 1.
Type 2 is a progressive disease. You're not going to get diagnosed and immediately move to a pump. You're typically going to start with diet and exercise, and then drugs. We get to insulin and maybe start with basal insulin before you go to multiple daily injections of insulin. And so people that are in that early stage of insulin use might be using our product anyway. This gives us a chance to provide them a product offering from the same company that was providing them the insulin syringes that they use.
Other companies that make insulin pumps have talked about expanding into more patients with Type 2 diabetes. Insulet, for example, plans to seek FDA clearance for a pump for patients who only use basal insulin. How are you thinking about the competition?
One, the market is large. So it has room for multiple players. Secondly, there is only one patch pump in the US right now. It’s a disposable wearable pump. The others have a tube pump.
One of the early choices [patients] have to make is, do you want to patch pump or a tube pump? Do you want to wear something that you can wear, three days later dispose of it and get another one, or do you want to have something that you're going to wear for several years? And then the fact is that the currently available patch pump has been designed toward Type 1.
One of the channels the product can be delivered through to the user is through a pharmacy channel. And that's the channel we already have because our products are bought from the pharmacy. We already contract with payers, so there are elements of the go-to-market market ecosystem that you need that we already have. We have to build up a field sales force. We have a medical affairs team on the ground, we will have to build [that] up as well.
Given the fact that we are designing for Type 2, that the market opportunity is large and the penetration at this point in Type 2 is low, and the fact that we have elements in the channel, [all of that makes] it an attractive opportunity for us.
What else are you watching in the market?
Over time, I think companies like us and others will figure out how to help people manage their diabetes throughout their journey. Right now, maybe you start off with a blood glucose monitor and an insulin pen. You move to an automated blood glucose monitor and maybe a smart pen. Then you move to a pump. But can you capture all that data in an ecosystem so you can preserve your data, and can you share it with your healthcare provider so they can monitor it?
I do see technology evolving to a point where you can get more real-time information as well as real-time assistance in how you manage your diabetes.
Diabetes, it takes a lot to manage, because everything you do can affect your blood glucose levels. What time you sleep, what time you eat, whether you're exercising, whether you're traveling, all of it affects it, so it's a constant juggling act. I think [artificial] intelligence and technology can help alleviate just the emotional burden that a person with diabetes has.