Memorandum

Abbott 1Q18 – Over 650,000 Libre users globally, one-third type 2, over 50,000 in US; “Obviously” >1M users and $1B revenue by end of 2018; record sales of $421M rise 33% YOY (+39% OUS) – April 18, 2018

Executive Highlights

  • Abbott reported blowout, record-high sales of $421 million, rising 44% as reported YOY (+33% operationally) on a tough comparison to 20% growth in 1Q17. US sales of $86 million grew 15% YOY, and international sales of $335 million rose a remarkable 54% as reported YOY (+39% operationally, partially reflecting a favorable 11.3% effect of foreign exchange). Both US and international performances came against tough comparisons to 9% and 25% growth, respectively. Sequentially, global sales rose 2% from a strong 4Q17 (US -7%; OUS +4%). The 7% US sequential decline was surprising, though could reflect Q4 inventory stocking in retail pharmacies.

  • There are currently >650,000 FreeStyle Libre users worldwide! – up a remarkable ~44% from ~450,000 at the end of 2017. There are also >50,000 users in the US, impressive adoption following the late November launch! CEO Mr. Miles White expects the user base to “obviously” surpass one million by the end of 2018, implying more than 115,000 new users per quarter, on average, for the remainder of the year (1Q18 added ~150,000-200,000 new patients, so 1 million is reasonable). He also noted that two-thirds of users are type 1s and one-third are type 2s – a very good sign that the device’s usability, affordability, and ease-of-access are expanding CGM into type 2. Two-thirds of OUS sales are reimbursed at this point, though at differing rates globally.

  • Mr. White expects at least $1 billion in FreeStyle Libre 2018 revenue (!), implying a sales ramp through the year. Assuming ~10% of US Libre users are obtaining the system through Medicare at the cost of ~$8/user/day (Libre received Medicare reimbursement in January), and Abbott realizes ~$4/user/day in revenue for the remaining US and international users, FreeStyle Libre’s 1Q18 revenue with 90% utilization would total ~$210 million. Mr. White suggested that 2018 US FreeStyle Libre revenue would be “at the higher end” of the $50-$100 million range reiterated in January, and that “we’re tracking that way now.”

  • Abbott expects to file a FreeStyle Libre pediatric claim with the FDA in 2018. To this end, we noticed that Abbott just today posted a US pediatric safety and effectiveness study (n=85) on ClinicalTrials.gov to be completed in August. Mr. White also commented that alarms and “a steady cadence of improvements, variations, claims, etc.” are coming for FreeStyle Libre in 2018-2019.

Abbott reported breakout 1Q18 earnings in a call led by CEO Mr. Miles White early this morning. This report expands on the First Look we posted this morning with a detailed analysis on the call’s diabetes highlights. Those of you with our Closer Look app and who follow our Twitter feed saw it the moment it was published!

Download the one-page earnings infographic here, which has FreeStyle Libre’s CMS reimbursement and LibreLink EU launch for iPhone featured. 

FreeStyle Libre User Base and Expected US Revenue

1. >650,000 Worldwide FreeStyle Libre Users, with 50,000 in US; Two-Thirds Type 1; Est. ~$210 Million in 1Q18 FSL Revenue

Mr. White shared that there are now >650,000 FreeStyle Libre users worldwide – up a remarkable 44% from ~450,000 at the end of 2017. There are also >50,000 in the US, very impressive adoption following the late November launch in retail pharmacies. We expected a big quarter for global FreeStyle Libre adoption, but ~150,000-200,000 new patient additions over a three-month stretch is far beyond expectations! With this tremendous run rate, Mr. White expects the user base to “obviously” surpass one million by the end of 2018, implying more than 115,000 new users added per quarter, on average, for the remainder of the year. He pointed out that this level of adoption is unprecedented in the CGM industry, and emphasized that the company is “investing significant capital” to expand manufacturing capacity. For context, Dexcom’s worldwide installed base at the end of 2017 was 270,000+, meaning FreeStyle Libre has more than twice as many users globally.

  • See immediately below for the user base growth to date and a projection through the end of the year, assuming users are added equally across the remaining quarters of 2018 and between the US and outside of the US. The growth looks exponential!

  • Mr. White also provided a first look at FreeStyle Libre user demographics: approximately two-thirds of users are type 1s and one-third are type 2s. This means >215,000 type 2s are using FreeStyle Libre, a very good sign that the device’s usability, affordability, and ease-of-access are broadening the market. (We do wonder if the level of attrition differs between type 1s and type 2s.) VP of Investor Relations Mr. Scott Leinenweber commented that there is also a “nice balance” of CGM-naïve patients, “expanding that overall category” – given the tremendous user base growth, we assume the vast majority of FreeStyle Libre users are new to CGM. 

  • Mr. White expects at least $1 billion in 2018 FreeStyle Libre global revenue, possibly implying a sales ramp through the year. Assuming ~10% of US Libre users are obtaining the system through Medicare at the cost of ~$8/user/day (Libre received Medicare reimbursement in January), and Abbott realizes ~$4/user/day in revenue for the remaining US and international users, Libre revenue with 90% utilization would total ~$210 million. This equates to roughly ~50% of total Diabetes Care revenue. Under these assumptions, Libre sales grew ~116% YOY on a tough comparison to ~260% growth in 1Q17 (we estimated ~$90 million in 1Q17 Libre sales). Geographically segmented, we estimate that 1Q18 Libre revenue was ~$15 million in the US and ~$195 internationally. Mr. White confirmed today that this US estimate is in the right ballpark, suggesting that 2018 US Libre revenue would be “at the higher end” of the $50-$100 million range reiterated in January, and that “we’re tracking that way now.” See the appendix for a more detailed list of assumptions.

FreeStyle Libre User Base Through 1Q18, Projections for End of 2018 Based on Today’s Call

  • Pale colors and text represent projections based on Mr. White’s statement that the user base will surpass 1 million by the end of 2018. Estimates assume equal distribution of new users across the remaining quarters of the year and between US and outside of the US.

FreeStyle Libre User Base and Estimated Quarterly Sensor Revenue

 

 

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

FreeStyle Libre User Base

Global

125,000+

200,000+

250,000+

“about 300,000”

~350,0003

400,000+

~450,000

650,000+

US

0

0

0

0

0

0

~3,000*

50,000+

OUS

125,000+

200,000+

250,000+

~300,000

~350,000

400,000+

~447,000

600,000+

Est. sensor sales, assuming ~90% utilization (rounded to nearest $5 million increment)

Global

~$40 million

~$65 million

~$80 million

~$90 million

~$115 million

~$130 million

~$145 million

~$210 million

US**

$0

$0

$0

$0

$0

$0

~$1 million

~$15 million

OUS***

~$40 million

~$65 million

~$80 million

~$90 million

~$115 million

~$130 million

~$145 million

~$195 million

*Close Concerns’ estimate; **Assuming ~10% of US patients obtain FreeStyle Libre through Medicare; (~$240/user/month sensor pricing) and 90% obtain it commercially (~$120/user/month sensor pricing); ***Assuming ~$120/user/month sensor pricing, not including readers

  • Mr. White shared that two-thirds of all international sales are reimbursed. This is very impressive, though not totally surprising – as of January, FreeStyle Libre was fully or partially reimbursed in 20 countries – but still speaks to excellent payer traction for the BGM replacement. In July 2017, prior to major positive coverage decisions in Japan and the UK, ~half of Libre sales were to patients with partial or full reimbursement.

  • Mr. White twice emphasized that FreeStyle Libre is “not as sales and marketing intensive from an expense standpoint as you might think.” He credited customers with being “strong as marketers” and referred to social media as a huge plus. We saw first-hand the impact that patient-fans of FreeStyle Libre have had on the company’s success at Diabetes UK in March. Diabetes UK’s major petition effort was massively influential in accelerating the national coverage. Still, in the UK, there are over 200 local Clinical Commissioning Groups (CCGs) which have to agree to put a new product on formulary, so Diabetes UK has started an influencing campaign (normally the job of the drug or device company) and has published a Flash Map so people with diabetes can see where they can obtain the Libre. For those who do not have access to the Libre in their area, Diabetes UK makes it quick and easy to send an email to local NHS healthcare decision makers – nice!

    • We also think the psychology of using FreeStyle Libre – it sort of feels like magic – plays a role in the word of mouth marketing. From Adam and Kelly’s original diaTribe.org test drive on FreeStyle Libre: “There is a certain fun quality, cool factor, and psychological pleasure to scanning the sensor patch. Each scan is accompanied by an encouraging “ding” sound, followed by seeing the data on the reader. It feels almost like magic to be cheating the hassle of traditional blood glucose meters, especially because there is no limit or cost associated with additional scans. And importantly, FreeStyle Libre displays the number and trend arrow in black, no matter how high or low it is – it’s a very non-judgmental product, which takes some of the stress away from obtaining such detailed glucose data.”

  • To put FreeStyle Libre’s massive user base into context, our 2017 industry roundup shows that FreeStyle Libre is used by more people than the combined bases of Dexcom (270,000+), Medtronic (estimated: 185,000), and Senseonics (2,000). Of course, these other systems bring in approximately two-times the revenue as Abbott on a per-patient basis (estimated), but the more exciting realization from this exercise is that CGM now likely reaches over one million people globally! This is surely a major milestone for the field, and it also shows the tremendous opportunity for continued growth and penetration. The 8th IDF Diabetes Atlas estimates that 425 million people have diabetes globally, and only half are diagnosed – that means that 0.5% of people who have been diagnosed with diabetes have turned to CGM, and the vast majority of those are type 1. Considering the possibilities with and benefits conferred by CGM, the field could be ten times larger and still not help everyone who needs it.

2. CEO Miles White Brings Trademark Passion and Enthusiasm for Libre

Mr. White described FreeStyle Libre with characteristic charisma and enthusiasm. We always look forward to hearing his comments – see below for some of our favorite quotes from the call.

  • Libre now has over 650,000 users across the globe, which represents an unprecedented level of patient adoption in the industry. As we've discussed previously, we're investing significant capital to expand manufacturing capacity, which will allow us to meet anticipated demand over the coming years. Libre offers a true mass-market opportunity with its unique combination of affordability, accessibility and ease-of-use, and we're positioning ourselves to maximize its impact.

  • “…anticipating that the growth legs on this product are going to be long because it's got a real mass-market appeal and fit.

  • I think that the opportunity in the category is quite large and the category gets a lot of attention, and for us it’s a future growth driver. But the nice thing is it's the kind of growth challenge you like to have. We're not having to over invest in SG&A because the customers are as strong as marketers, and given social media and so forth, that's been a huge plus. So, everything about it is doing really well. I think we'll see this be a major growth driver for the company for quite a long time.”

  • Let's just say, we're ahead of our expectations here, and you can see that in the growth rates, in the numbers, in the patient acquisition rates and so forth. I think we'll go out at the end of this year with $1 billion or more in run rate and 1 million patients or more. In fact, I think we're going to have well over 1 million patients at that point because our patient acquisition rate right now is pretty steady and rising.

Financial Highlights

3. Record Global Sales of $421 Million rise 33%; International Revenue Contributes ~91% of Growth

Abbott’s Global Diabetes Care business pulled off another fantastic quarter, with record sales of $421 million up 44% as reported YOY (+33% operationally) on a very tough comparison to 20% growth in 1Q17. This performance marks eight consecutive quarters (~two years) of positive YOY growth. Sequentially, sales rose 2% from the previous all-time high of $413 million in 4Q17. International revenue contributed ~91% of the Diabetes business’s overall growth in 1Q18, reflecting the first sign of ramping FreeStyle Libre sales, marketing, and distribution in the US (in 4Q17, international business contributed ~95% of overall growth). Now that FreeStyle Libre has launched and received Medicare reimbursement in the US, we expect to see the share growth tilt more in the US’s favor over time. However, as detailed below, US sales actually decreased 7% sequentially – we assume this relates to pent-up demand in 4Q17 and perhaps some inventory stocking in the retail pharmacy channel late last year.

  • Discounting our estimates for FreeStyle Libre, the underlying BGM business saw revenue rise ~3% to ~$21o million. This performance would come on an easy comparison to a 7% decline in 1Q17. The growth could be real, or simply reflect an underestimate for FreeStyle Libre sales. The overall BGM market continued to struggle in 2017 (down 2% YOY; see our 4Q17 roundup), in part due to continued stateside devastation from CMS’s Competitive Bidding Program.

Global, US, and International Quarterly Sales (1Q12-1Q18)

4. International Revenue Rises 39% to $335 Million

International sales of $335 million rose a remarkable 54% as reported YOY (+39% operationally, partially reflecting a favorable 11.3% effect of foreign exchange). This standout performance came against a tough comparison to 1Q17, when sales of $217 million rose 25% YOY (+29% operationally). The international Diabetes Care business has now seen positive YOY growth for the past nine consecutive quarters (~two years). Revenue rose 4% sequentially from the previous all-time high of $321 million in 4Q17, demonstrating strong and sustainable interest in FreeStyle Libre, which (as of this call) is reimbursed “about two-thirds” of the time outside the US. We wonder if the February launch of Abbott’s own LibreLink app on iPhone and Android is partially responsible for the uptick in growth.

  • We estimate that international BGM revenue of ~$141 million grew 11% YOY on an easy comparison to a 15% decline in 1Q17. There was a favorable currency effect of 11%, and again, it’s possible that our Libre revenue estimations were undershot.

5. US Sales of $86 Million Up 15%; Surprising 7% Sequential Decline

US sales of $86 million grew 15% YOY on a tough comparison to 9% growth in 1Q17. It was a little surprising, however, that US revenue declined 7% sequentially from a record base of $92 million. This could indicate that FreeStyle Libre sales decelerated slightly in Q1 following the November launch – there was certainly a lot of pent-up demand out of the gates. We also assume there was some significant pharmacy stocking in the US, meaning Q4 sales were not a reflection of true end-user demand. Still, we would have expected that given the excitement, plus Medicare coverage achieved in January, 1Q18 sales would have at the very least remained flat from 4Q17. Is the 12-hour warmup period proving to be a meaningful turnoff in the US? Might US patients be waiting instead for the recently FDA-cleared Dexcom G6? With zero-calibration and alarms, the G6 has certainly raised the bar and will be tough competition once it launches late in 2Q18. The sequential decline was not mentioned specifically during the call, but Mr. White remained characteristically confident regarding the future of FreeStyle Libre in the US, claiming he has “no concern at all. We’re ahead of our expectations here and you can see that in the growth rates, in the numbers, in the patient acquisition rates and so forth.”

  • Estimated US BGM revenue of ~$68 million fell ~9% on a tough comparison to 9% growth in 1Q17. Abbott has obviously deprioritized its legacy BGM business in light of FreeStyle Libre and Libre Pro; coupled with competitive and pricing pressures stateside, we are not at all surprised to see a near-double-digit decline.

Pipeline Highlights

6. FDA Filing of Pediatric FreeStyle Libre Claim Expected in 2018; New US Pediatric FreeStyle Libre Safety and Efficacy Trial (n=85) to be Completed in August

We learned during Q&A that Abbott expects to file a FreeStyle Libre pediatric claim with the FDA in 2018 – this is great to see, as the device is indicated down to four years old in Europe. To this end, Abbott today posted a new self-sponsored US pediatric FreeStyle Libre trial (n=85) – the third to be posted since December – on ClinicalTrials.gov. The multi-center, single-arm trial began in early April, is slated for an August completion, and is open to 6-17-year-olds with type 1 or type 2 diabetes. Participants will wear two masked sensors throughout the study. Glucose readings from each sensor will be obtained from corresponding readers immediately following a fingerstick (participants will be instructed to take at least four fingersticks/day). Primary outcomes are: (i) accuracy vs. YSI evaluated over 14 days; and (ii) related adverse device effects recorded over 45 days. While the ClinicalTrials.gov posting notes that up to four research sites will be included, so far Sansum Diabetes Research Institute (recruiting), Diablo Clinical Research (recruiting), and Rocky Mountain Diabetes & Osteoporosis Center (not yet recruiting) are listed. We don’t anticipate that Abbott will have any difficulty obtaining a “yes” from FDA on the indication – a late-breaking ADA 2017 poster describing results of the SELFY study shows the system to be both safe and effective in young people ages 4-17 years-old. We do wonder if Abbott is going for a 14-day wear indication here, expanding on the current 10-day indication in the US.

  • The company is also executing a US “post approval” safety study for pediatrics (n=400 patients ages 4-17 years-old) with type 1 and type 2 diabetes. The study appears to be in the recruiting phase still, and is expected to complete in February 2021. Sansum Diabetes Research Institute was added earlier in April as a second trial site alongside Rocky Mountain Diabetes & Osteoporosis Center. According to FDA’s post-approval study listing, Abbott’s protocol is “pending.” Abbott initiated a separate pediatric trial (n=100) in December to assess accuracy and adverse events in this age group. We’re assuming the FDA will look more specifically at this study – set to wrap up in July – when evaluating a pediatric indication.
  • Even with a pediatric claim, it remains to be seen how families will view Libre’s lack of alarms and remote monitoring at the moment. CGM has higher penetration in young children – 45% penetration in the <6-year-old age group in the T1D Exchange – presumably from the alarms and remote monitoring capabilities. In addition, asking a child or adolescent to scan repeatedly and make behavioral or medication adjustments (outside of the context of a clinical trial) may be a big ask. We imagine penetration in younger people would accelerate (i) with the future approval of the LibreLink app in the US and (ii) with Abbott’s next-gen CGM with continuous communication (note that Abbott has never said whether the next-gen sensor will launch as a standalone device outside of Bigfoot’s bundles).

  • There’s been a lot of impatience surrounding a pediatric FreeStyle Libre claim – at ENDO, the Abbott booth representative noted several pediatric endocrinologists’ frustrations regarding a lack of pediatric indication. A number of these endocrinologists openly admitted to prescribing it to their young patients off-label. Acquiring a pediatric indication is a critical step for Abbott to remain competitive with other CGM companies – Dexcom’s G6 was recently cleared by the FDA for use in those as young as two years-old (Medtronic’s standalone Guardian Connect was approved by the FDA in 14-75 year-olds). More importantly, a pediatric claim would meaningfully expand the CGM segment, driving improved outcomes across the board.

7. Alarms “Coming,” and Steady Cadence of “Improvements, Variations, Claims, etc.” Expected in 2018-2019

During Q&A, Mr. White commented that alarms are “coming” and “a steady cadence of improvements, variations, claims, etc.” are coming for FreeStyle Libre in 2018-2019. Although Mr. White was responding to a question regarding Abbott’s collaboration with Bigfoot, it wasn’t clear whether his comment on alarms was specifically referring to the Bigfoot partnership, or whether he was referencing a standalone, alarmed CGM (see the exact exchange below). We note that Mr. White paused and temporarily fumbled with his words as he was discussing the alarms – this could’ve been nothing, or possibly an indication that he has further updates not ready to go public just yet. Regarding other system modifications, our minds jump to the possibility of FreeStyle LibreLink (reader app) and LibreLinkUp (remote monitoring app) submissions and/or launch in the US – as of February, Abbott’s in-house-developed mobile apps became available for iPhone and Android in 12 EU countries. We’re not sure if the LibreLink “suite” has yet been filed with FDA, though we view the value of doing so quite favorably, both for the company (increased revenue from additional customers) and especially for patients (decreased hassle of carrying the reader; ability to share data with caregivers and providers; and input for a FreeStyle Libre-centric data ecosystem of apps on the phone). We also assume that, at least from the US perspective, longer sensor duration (currently 10 days) and shorter warmup time (currently 12 hours) are in the consideration set. What else might Abbott build in to future sensors – even smaller form factor? Sensors that toggle between real-time and flash glucose monitoring? Option to input a calibration if values are drifting? Improved accuracy, particularly in hypoglycemia?

  • Now that FreeStyle Libre has CMS reimbursement, it will be interesting to see how Abbott approaches approval for LibreLink and LibreLinkUp in the US. Current CMS reimbursement policy prevents use of the smartphone app for viewing data. Might Abbott build WiFi or cellular into its receiver? This Medicare coverage criteria has served as a notorious source of frustration for many Dexcom G5 CGM users, and we’re hopeful that the combined pressure from Abbott, Dexcom, the patient community, and congressional leaders may be sufficient to reverse the stipulations. Calls from congress grew louder in March, when the Senate and House Diabetes Caucus (U.S. Senators Susan Collins and Jeanne Shaheen and Representatives Tom Reed and Diana DeGette) penned a letter to CMS Administrator Dr. Seema Verma, applauding the decision to cover therapeutic CGM, but urging CMS to “revise its decision to support the full spectrum of use.” “Many innovative technologies work in tandem with smartphone applications, and current Medicare coverage policies do not support this usage.” We hope this moves the needle. Dexcom’s 4Q17 call in February said Medicare discussions continue on remote monitoring (Share), with a “hope to resolve in the next six months.” Presumably a Dexcom G5 win here would also help Abbott.

8. No Updates on Bigfoot Partnership; US Pivotal Trial Pushed Back to Early 2019

No updates were provided on Abbott’s partnership with Bigfoot to develop a next-gen continuous communication CGM intended for automated insulin delivery with a pump (Loop) and MDI auto-titration with a Bluetooth-enabled pen cap (Inject). In March, Bigfoot CEO Mr. Jeffrey Brewer shared with us via email that a US pivotal trial of the Loop (pump) system is now expected to begin in early 2019, following an IDE filing by the end of 2018. The pivotal was pushed back meaningfully from December guidance for a “2018” pivotal commencement, the same timing we heard when Bigfoot and Abbott first announced the partnership last July. Reasons for the delay are unclear, as Bigfoot still ambitiously has no plans to conduct interim studies. The Inject MDI auto-titration system has to undergo at least one feasibility trial before entering its pivotal.

  • For the first time, Abbott was included in the list of investors for Bigfoot’s $18 million incremental Series B funding announced in March. Given that other new and existing investors also participated in this second Series B tranche (the first raised $37 million in December), we’d estimate that Abbott’s contribution was <$10 million. Still, it’s a huge vote of confidence and de-risking for Bigfoot – without a great CGM sensor, Bigfoot cannot effectively carry out its bundled subscription business model.

  • Our last update on the Bigfoot AID system came at DTM in November, where we learned that the Bigfoot algorithm starts with a single basal rate, carb ratio, and insulin sensitivity factor, and then proceeds to adjust basal rates, carb ratios, insulin sensitivity factors, and glucose targets on a remarkable hour-to-hour (!) basis. As per our email correspondence with Mr. Brewer, Bigfoot will not be sharing any data at ADA and there is none planned for DTM. Given Dexcom’s G6 clearance for zero-calibration last month, Dexcom-integrated systems will be more competitive with the Bigfoot-Libre system  - a change that we certainly did not expect last July. The AID landscape will become increasingly crowded, making Libre’s inclusion in Bigfoot’s AID and auto-titration bundles a smart move for both companies.  

9. FreeStyle Libre Trials: 42 Posted, Up from 24; New US Safety and Effectiveness Pediatric Trial (n=85)

There are at least 42 studies on “FreeStyle Libre” or “Flash Glucose Monitoring” on ClinicalTrials.gov, up from 24 studies in 4Q17. As noted above, Abbott just posted a new US safety and effectiveness pediatric study today (n=85) open to 6-17 year-olds with type 1 and type 2 diabetes. The study began on April 5 and is slated for completion in August.

FreeStyle Libre trials on ClinicalTrials.gov

Trial

Trial Population

Primary Outcome(s)

Status

FreeStyle Libre Glucose Monitoring System in Pediatric Populations (NCT03502174)

85 insulin-using type 1 or type 2 patients (ages 6-17) who perform BG testing at least 4 times a day

MARD vs YSI; Adverse device effect

Recruiting; study completion slated for August 2018

FreeStyle Libre Flash Glucose Monitoring System Post Approval Study for Pediatric Patients (NCT03448367)

400 SMBG-using type 1 or type 2 patients (aged 4-17)

Safety of FreeStyle Libre

Recruiting; study completion slated for February 2021

FreeStyle Libre Flash Glucose Monitoring System Post Approval Study (NCT03448380)

920 SMBG-using type 1 or type 2 patients (ages 18+)

Safety of FreeStyle Libre

Recruiting; study completion slated for February 2021

Personalized Responses to Dietary Composition Trial (PREDICT)

1,050 adults (ages 18-65) with BMI 20-49.9 kg/m2

Gut microbiome profile; biochemical profile (blood lipids and glucose); lifestyle assessment (sleep pattern, physical activity); hunger and appetite assessment

Not yet recruiting; study completion slated for April 2023

FreeStyle Libre Flash Glucose Monitoring System in Pediatric Populations (NCT03369899)

100 insulin-using type 1 or type 2 patients (ages 4-17) who perform BG testing at least 4 times a day

MARD vs. YSI; Adverse device effects

Recruiting; study completion slated for July 2018

Comparison Between Enlite and Flash Glucose Monitoring (NCT03249974)

20 type 1 patients (ages 5-18) treated with insulin pump and wearing FreeStyle Libre

Accuracy of FreeStyle Libre vs. Enlite

Recruiting; Study Completion slated for July 2018

Evaluation of a Treatment and Education Program for Flash Glucose Monitoring (FLASH)

216 type 1 or 2 insulin-treated patients (ages 16-75)

Change in A1c

Recruiting; Study Completion slated for March 2018

Flash Glucose Monitoring Study for Diabetes (FUTURE)

1,100 patients (ages 4+) using FGM after entering in the new diabetes reimbursement program in Belgium

Quality of life

Recruiting participants; Completion slated for August 2019

FreeStyle Libre Flash Accuracy Study

(NCT03257501)

104 insulin-using type 1s and type 2s 18+ years old

MARD vs. YSI; Adverse device effects

Study complete (January 2018)

Accuracy of FreeStyle Libre

(NCT02734745)

48 type 1s (18 years and up), BMI < 35 kg/m2

MARD vs. YSI during visit and vs. SMBG at home

 

Recruiting; completion slated for December 2017

Selected Questions and Answers

Mr. Mike Weinstein (JP Morgan): I was hoping you could provide some additional color on how the US launch is doing for Libre?

Mr. Miles White (CEO, Abbott): The Libre launch, I'd say, has gone exceptionally. We obviously expect it to keep going exceptionally well worldwide. As I mentioned, we're up over 650,000 patients at this point. We're adding over 50,000 patients a month. We added about 150,000, just over that, this last quarter. So, if I look at the acquisition rate of patients, we expect to obviously be over 1 million patients at year-end and trending in a pretty healthy fashion. I'm pretty gratified by that growth. It's true globally.

The mix of patients is very strong. I think we're reimbursed at about two-thirds of all sales now internationally. That's strong. We keep getting reimbursement of approvals in countries. I think that the value proposition of Libre, the affordability is particularly strong and appealing to patients, as well as the performance, ease-of-use of the product and so forth. We get a lot of feedback that way. About two-thirds of the patient base are type 1 diabetics and about a third are type 2 patients. We're seeing validation of the appeal and use of the product in both segments.

We're investing a significant amount of capital in capacity expansion, anticipating that the growth legs on this product are going to be long because it's got a real mass-market appeal and fit, and there are, as you know, tens of millions of diabetics and tens of millions of insulin-using diabetics, the majority of which are actually international. In our case, so far, the vast majority of our patients are international. But we're off to a strong start in the U.S. as well. At this point, we're little over 50,000 patients in the U.S. and trending strong. And I think as far as starts go and continuations and expansions, it's all good news.

So, we're running hard and the reception of patients here and abroad has been exceptional. I think that the opportunity in the category is quite large and the category gets a lot of attention, and for us it’s a future growth driver. But the nice thing is it's the kind of growth challenge you like to have. We're not having to over invest in SG&A because the customers are as strong as marketers, and given social media and so forth, that's been a huge plus. So, everything about it is doing really well. I think we'll see this be a major growth driver for the company for quite a long time.

Mr. Larry Biegelsen (Wells Fargo): On Libre, I think investors want to get some confidence about the sustainability. Earlier in the year, you seemed comfortable with $50 million to $100 million for the US in 2018. Is that still the case? And second, what can you say on the pipeline? Is there anything you can tell investors to give confidence that there's more to come here? You have a collaboration with Bigfoot… You're expected to deliver next generation device to them with alarm...?

Mr. White: We previously said $50 million to $100 million of sales in year-one [in the US] seemed reasonable, absolutely. We'll be at the higher end of that range, and we're tracking that way now and it's very early in the year. I have no concern about that at all. And let's just say, we're ahead of our expectations here, and you can see that in the growth rates, in the numbers, in the patient acquisition rates and so forth. I think we'll go out at the end of this year with $1 billion or more in run rate and 1 million patients or more. In fact, I think we're going to have well over 1 million patients at that point because our patient acquisition rate right now is pretty steady and rising.

With regard to the pipeline, as you know, we've got a pediatric claim in Europe. We'll have that in the US that we'll file this year. There's improvements; alarms and so forth that are coming. There’s plenty coming out of R&D that we'll have announcements for this year and next year. So, there's a steady cadence of improvements, variations, claims, etc, in the product going forward that I think keep this going for a long time.

Mr. Chris Pasquale (Guggenheim Securities): Can you give us any color on who's using Libre in the U.S. today? And I'm thinking in particular about how the patients you've on-boarded so far break down in terms of type 1 vs. type 2, and then CGM naïve vs. competitive wins.

Mr. Scott Leinenweber (VP Investor Relations, Abbott): We estimate around two-thirds type 1 and a third type 2 in the US, just like we are internationally. We feel nice balance of competitive wins vs. people that are trying CGM for the first time and expanding that overall category. So, a nice balance across both dimensions.

Appendix A: FreeStyle Libre Revenue Estimate Disclaimers

  • Pricing: The $4/user/day pricing estimate for commercial/cash-pay users (i.e., non-Medicare) sensors may be overshooting Abbott’s realized revenue, since we’ve previously reported sensor net price to be <$3.60 per day. That said, our revenue calculations do not take reader sales into account, so the inflated sensor revenue estimate may be compensatory. The pricing obviously also does not account for discounts, different geographies/currencies, payer relationships, net pricing vs. retail price, etc. Still, we note that our FreeStyle Libre sales estimate also backs out when comparing to Dexcom’s revenue/patient, as well as FreeStyle Libre’s anticipated US run rate in 2018.

  • Utilization: We’re assuming that 100% Libre sensor utilization is unlikely – i.e., every user outside the US buying two sensors per month. Our model estimates 90% utilization, which would reflect the vast majority of users (but not all) wearing Libre 100% of the time. We then rounded the final revenue number up/down to the nearest $5 million increment, just to emphasize that these are estimates and far from exact. For instance, 600,000 users * $120/month * 3 months * 90% = $194.4 million, which we rounded to ~$195 million. This level of utilization is in line with what Insulet has reported in the past for the Omnipod, though obviously Libre could be different –  lower utilization (e.g., 75%) would drive a lot less revenue, and higher utilization would drive more revenue.

  • What we still don’t know or haven’t estimated: How does Abbott define a “user” – are all of these people currently wearing and ordering FreeStyle Libre, or is this base those who meet broader conditions (e.g., have ordered from Abbott at least once)? If the latter, revenue would obviously be less. How widely used is FreeStyle Libre Pro, and does the worldwide “user” number include professional sensor wear? (We assume not, but aren’t sure.) We’re also unsure of how pricing differs (if at all) in cases where FreeStyle Libre is reimbursed – presumably Abbott receives less than $120/month in these cases. Last, we haven’t accounted for sales from readers (~$60 each), though assume they are small.

 

-- by Maeve Serino, Brian Levine, Adam Brown, and Kelly Close