Memorandum

Abbott 2Q18 – Over 800,000 Libre users globally, >1M users by end of 2018; $90-$100M in expected US Libre 2018 revenue; record sales of $470M up 34% YOY – July 18, 2018

Executive Highlights

  • Abbott reported record-high sales of $470 million, rising a remarkable 40% as reported YOY (+34% operationally) on an already tough comparison to 19% YOY growth in 2Q17. Wow does Libre have momentum: Diabetes Care sales have grown >30% YOY for the past three consecutive quarters from an increasingly higher base! US sales of $112 million grew 38%, while international sales of $358 million rose 41% as reported YOY (+32% operationally). Both US and international performances came against challenging comparisons to 11% and 25% in 2Q17. The international business’ continued growth at this pace is unprecedented! Sequentially, global sales rose 12% from the previous record high (US +30% on Libre’; OUS +7%). Share of overall Diabetes Care growth shifted dramatically, with US sales now contributing 53% to growth, up from just ~9% in 1Q18 as the Libre real-time launch hits its stride in the US.

  • There are now over 800,000 FreeStyle Libre users worldwide, rising an extraordinary ~23% sequentially from 650,000+ users in 1Q18. Since 3Q17 (!), the worldwide FreeStyle Libre user base has doubled! CEO Mr. Miles White continued to guide for over one million Libre users by the end of 2018 – last quarter, we noted that that sounded conservative and we emphasize our view on that again. He reiterated previous estimates that two-thirds of users are type 1s and one-third are type 2s, reflecting the device’s usability, affordability and ease-of-access. We were also pleased to hear Mr. White refer to those “trying not to be insulin dependent” when describing the FreeStyle Libre market – a reminder that CGM has value across the type 2 diabetes spectrum. We also love he doesn’t say “insulin requiring” – that’s not a useful or apt term but one some of the other industry leaders have used historically.

  • Mr. White anticipated $90-$100 million in 2018 US FreeStyle Libre revenue, on the far upper end of the $50-$100 million range provided on the 1Q18 call – here too, we suspect it’ll be higher. We estimate FreeStyle Libre’s 2Q18 worldwide revenue was ~$260 million, with ~$45 million in the US and ~$215 million OUS. Our model has a number of assumptions baked in, so these could be under- or overestimates of FreeStyle Libre’s true global revenue. Assuming we’re not far off, Abbott might exceed $1 billion in Libre revenue globally in 2018, along with >1 million patients. That is what we’re thinking, but we’re glad they are guiding conservatively.

  • Mr. White hinted that “planned” FreeStyle Libre enhancements include some features “already available overseas.” We expect he’s referring to FreeStyle LibreLink (reader app) and LibreLinkUp (remote monitoring app), which as of February became available for iPhone and Android in 12 EU countries. No US timing has ever been shared. There was no mention of a pediatric claim for FreeStyle Libre in the US, though we learned at Keystone last week that it is currently under FDA review.

Abbott reported 2Q18 earnings in a call led by CEO Mr. Miles White this morning. Get the press release here, and download the one-page earnings infographic here, which features expanded real-world data from 250,000+ FreeStyle Libre users. “Libre” was mentioned 12 times on the call – all very enthusiastically following yet another breakout quarter. Yes – standard of care is changing – not just CGM but also connected meters that help enormously in personalizing and individualizing diabetes management.

FreeStyle Libre User Base and Expected US Revenue

1. >800,000 Worldwide FreeStyle Libre Users; Two-Thirds Type 1; Estimated ~$260 Million in Libre Revenue

Mr. White shared that there are now “more than 800,000” FreeStyle Libre users worldwide, up an unprecedented 23% sequentially from 650,000+ users in 1Q18. Remarkably, this also means FreeStyle Libre’s global user base has doubled since >400,000 in 3Q17. Wow! Mr. White reiterated his previous estimate of reaching one million FreeStyle Libre patients by the end of the year, noting that the level of patient adoption is “unprecedented.” At this rate, adding ~200,000 new users by the end of this year seems conservative considering the uptake so far. Mr. White commented that Abbott is “investing heavily in capacity expansion.” Although he did not provide a geographic split for the user base, he mentioned during Q&A that “we like the geographic mix” of Libre users. Given that 2Q18 revenue share of growth was roughly 50/50 between US and international markets (53% US vs. 47% OUS), our model estimates that the 150,000 increase in Libre users was evenly split. With this reasoning, we’ve estimated ~125,000 US FreeStyle Libre users (up 150% sequentially from >50,000 in 1Q18) and ~675,000 OUS FreeStyle Libre users (up 13% sequentially from 600,000). For context, Dexcom’s worldwide installed base at the end of 2017 was 270,000+, meaning that FreeStyle Libre has more than double Dexcom’s global user base. See 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.

  • Mr. White reiterated his previous estimates of FreeStyle Libre user demographics, noting a global split of approximately two-thirds type 1s and one-thirds type 2s. That means >260,000 type 2s are using FreeStyle Libre, reflecting the device’s “accessibility, affordability, and ease of use.” As Mr. White put it, the diversity in userbase “speaks to the clinical efficacy and benefits of the product.” Mr. White again highlighted the “mass market” applications for FreeStyle Libre, duly noting those who are “insulin dependent” and those “trying not to be insulin dependent.” It’s a great point, and we think FreeStyle Libre would be beneficial for both groups (prediabetes included)!

  • During Q&A, Mr. White confirmed guidance of $90-$100 million in 2018 US FreeStyle Libre revenue, tightening 1Q18 expectations forthe higher end” of the $50-$100 million range. 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 2Q18 revenue with 90% utilization would total ~$260 million, up 90% YOY worldwide on a very tough comparison to ~188% YOY growth in 2Q17 (we estimated ~$115 million in 2Q17 sales). Per our geographic user estimates described above, we’re estimating Libre revenue of ~$45 million in the US and ~$220 million internationally, with the OUS market contributing ~75% of total Libre sales. Abbott may already be more than halfway to its goal of reaching $100 million in 2018 US Libre sales – our estimates place 1H18 US Libre revenue at ~$60 million. Of course, it’s possible we may are under- or overestimating depending on the assumptions – e.g., 80% global sensor utilization with the same modeling puts revenue at ~$235 million. See the appendix for a more detailed list of assumptions, which we caution are estimates, do not include revenue from readers, and do not reflect pricing discounts to payers, etc.

    • In line with 1Q18, we estimate global FreeStyle Libre sales accounted for more than half of total Diabetes Care revenue (56%), and the gap is growing – starting in 1Q18 and again this quarter, our model estimates Libre sales (~$260 million) are ahead of estimated BGM-only revenue (~$210 million).

FreeStyle Libre User Base Through 2Q18; 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 reach one million patients by the end of 2018. The steadiness of Libre’s quarterly use base is absolutely striking! Estimates on the right side assume equal distribution of new users across the remaining quarters of the year and between US and outside of the US. Abbott seems very much poised to exceed one million users by the end of 2018 – perhaps even in Q3.

FreeStyle Libre User Base and Estimated Quarterly Sensor Revenue

 

 

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

FreeStyle Libre User Base

Global

“about 300,000”

~350,0003

400,000+

~450,000

650,000+

800,000+

US

0

0

0

~3,0001

50,000+

~125,0004

OUS

~300,000

~350,000

400,000+

~447,000

600,000+

~675,0004

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

Global

~$90 million

~$115 million

~$130 million

~$145 million

~$210 million

~$260 million

US2

$0

$0

$0

~$1 million

~$15 million

~$45 million

 

1. Close Concerns’ estimate; 2. 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); 3. Assuming ~$120/user/month sensor pricing, not including readers; 4. Assuming increase in userbase was evenly split between US and OUS given ~50/50 division in share of total revenue growth; More assumptions are included in the appendix at the end of this report. We note these sales figures exclude reader sales.

2. CEO Miles White Brings Characteristic Passion for FreeStyle Libre

Mr. White described FreeStyle Libre with trademark optimism and excitement. We always look forward to hearing his commentary – see below for some our favorite quotes from the call.

  • “Libre offers a true mass market opportunity with its unique combination of affordability, accessibility and ease of use, and is achieving a level of patient adoption that's unprecedented in the industry with more than 800,000 current users globally.


  • “With regard to Libre, we can't be anything but pleased. It's going extremely well. We're on track with where we want to be in terms of patient acquisition and growth etc. There are no real market dynamics to compare ourselves to other than the acquisition of patients and we expect to go out of the year with over a million patients, which is unprecedented and unseen.

  • “We think [Libre] is a mass market product, as opposed to a very “niche-y” medical device type product, because there are so many people that are either insulin dependent or trying not to be insulin dependent. I think the opportunity here remains enormous. I think the growth is quite sustainable. There's quite a lot more to do to keep enhancing, and not only the products you're offering the market. We like the mix of patients we're getting. We like the geographic mix. We like the geographic advancements. The reimbursement has been very good. Just about everything about this is going better than planned. So I think this is one of the key big sustainable growth drivers of the company.”

  • “We have carved out a very economic position that's extremely profitable for us, but we're in a very economically accessible price point which has made the uptake and the reception via the patient or even reimbursing bodies pretty attractive. And I think we've found a real value proposition point here with the product. Our manufacturing is extremely automated. It gives us a big advantage in terms of costs.”

  • “I'm pretty excited about this product. It’s got so much potential, because I think a lot of times whether it's a pharmaceutical or medical device they can be expensive in the healthcare system for recovery of cost because the numbers of patients may not be that great. And yet, there's a lot of diabetics in the world, including me. This product hits the sweet spot. To be a mass market product, it's got to be accessible, it's got to be affordable, and it's got to be affordable in a way so that it's not hard for people to commit to it and use it and find out what it can do for them.”

  • “There’s no way to look at market share. We've looked at sensor days and we're already well above 90% globally. There’s nothing to compare it to. We're comparing to ourselves and how fast we can run and that's really exciting. It's nice to see a product that has that kind of impact. And this one is just fun. It's just fun.

    • We initially though the “90%” was a comment on global sensor utilization, but we think it’s really a comment on CGM market share based on share of worldwide sensor days – e.g., 800,000 users at 10-14 days per sensor = 10 million days of sensor wear. Since Abbott has both a larger user base than any other company, along with 14-day wear outside the US, it makes sense its share of worldwide sensor days would be so high.

Financial Highlights

1. Record Global Sales of $470 Million Rise 34% YOY; US Revenue Contributes ~53% of Overall Growth

Abbott’s global Diabetes Care business reported another fantastic quarter, with record sales of $470 million up 40% as reported and 34% operationally YOY. This standout performance came on a tough comparison to 2Q17 when sales of $336 million grew 19% YOY as reported and 21% operationally. As Mr. White proudly noted, Diabetes Care sales have exhibited over 30% YOY growth for the past three consecutive quarters, driven by FreeStyle Libre sales now humming along in the US and internationally. On a sequential basis, sales grew 12% from the previous record-high of $421 million in 1Q18 – impressive!

Global, US and International Quarterly Sales (1Q12-2Q18)

  • Share of overall Diabetes Care growth was evenly split geographically, with US sales accounting for 53% of growth and OUS sales contributing 47%. Relative to 1Q18 when international revenue contributed ~91% of the Diabetes business’s overall growth, this change reflects strong ramping of FreeStyle Libre in the US following the consumer version’s launch in pharmacies in late November. Plus, after five months of FreeStyle Libre Medicare reimbursement in the US, it’s not too shocking to see the share of growth tilt more in the US’s favor. It will be interesting to see if Libre sales start to hit a saturation point outside the US – how much runway is left? Or put differently, what is the total potential market for FreeStyle Libre?

  • Given our estimates for FreeStyle Libre revenue, underlying global BGM sales totaled just over ~$205 million, down ~6% YOY on an easy comparison to a ~9% decline in 2Q17. This performance breaks an estimated three-quarter streak of consecutive YOY growth in BGM revenue. (it’s also possible we’re underestimating FreeStyle Libre.) Of course, as Abbott increasingly drives FreeStyle Libre globally and builds in further enhancements, we expect the BGM business to decline naturally.

2. Record OUS Sales of $358 Million Rise A Remarkable 32% YOY, Up 7% Sequentially

Record-high international sales of $358 million rose an incredible 32% operationally and 41% as reported on a very tough comparison to 2Q17 when sales of $255 million rose 21% YOY as reported (+25% operationally) – yes, in a year the OUS business has added $100 million to the topline, and it has seen positive YOY growth for the past ten consecutive quarters. Revenue rose 7% sequentially from the previous record high of $335 million in 1Q18, reflecting five straight quarters of consecutive sequential growth. The strong uptick demonstrates impressive, sustained global interest in FreeStyle Libre, which as of April is reimbursed “about two-thirds” of the time outside the US (on today’s call, Mr. White mentioned “very good” reimbursement in general). As expected with the large base of sales, sequential growth has started to taper a bit – from 2Q17-4Q17 the OUS market saw consistent double-digit sequential growth, but beginning in 1Q18 more modest single-digit growth has been reported. However, OUS growth has exceeded 35% for four straight quarters, meaning the business has accelerated relative to 2Q17, and from a higher base of sales. Now that the Dexcom G6 with zero-calibrations has received a CE mark and was slated to begin its launch in the UK and Ireland in June, we wonder how much competition it will offer FreeStyle Libre. Outside the US, the products are actually more competitive with each other, since FreeStyle Libre has its smartphone apps available (compete with G6), and Dexcom has no required receiver OUS (to compete with FreeStyle Libre).     

  • We estimate that Abbott’s international BGM revenue totaled ~$140 million, declining ~1% YOY on an easy comparison to a ~10% YOY decline in 2Q17. This performance breaks three quarters of consecutive YOY international BGM growth, although it’s possible we were previously underestimating FreeStyle Libre sales and/or overestimating BGM sales.

3. US Sales of $112 Million Rise 38% YOY and 30% Sequentially

Strong US sales of $112 million rose 38% YOY on a tough comparison to 2Q17 when sales of $81 million increased 11% YOY. This performance reflects three consecutive quarters of strong YOY growth, following the late November launch of FreeStyle Libre real-time in US pharmacies. Sales increased 30% sequentially, the largest sequential rise in US revenue since +32% in 3Q16, likely driven by pent-up demand for FreeStyle Libre plus Medicare reimbursement achieved in January. 1Q18 US revenue saw a 7% sequential decrease, likely more to do with seasonality than depressed demand .

  • The no-calibration Dexcom G6 has begun its US launch, and it will be interesting to watch how patient and provider preferences play out. The G6’s factory calibration (with a four-digit sensor code at startup) allows similar “no fingersticks” marketing to FreeStyle Libre (very key for driving this market). G6 brings a shorter two-hour warmup time than the US Libre’s 12 hours, similar 10-day wear, and the advantage of having apps for iOS, Android, and smartwatches. (Abbott has not given timing on FreeStyle LibreLink in the US. Libre does have the advantage of Medicare, as only G5 is covered for now while G6 is under Medicare review (a decision expected this fall; as of June Medicare users can use apps in conjunction with CGM). The recent FDA approval of Tandem’s t:slim X2 pump with Basal-IQ and G6 integration may offer some tailwind for Dexcom among pumpers, but FreeStyle Libre’s market is arguably a different population. There’s clearly room for both companies – plus Medtronic’s now-launched Guardian Connect/Sugar.IQ and Senseonics’ about-to-launch Eversense – to make a meaningful impact, with the ultimate goal of expanding CGM access to as many patients as possible.

Pipeline Highlights

1. “Planned” Enhancements for Libre Include “Some Already Available Overseas”

Mr. White shared in Q&A that “planned” FreeStyle Libre enhancements include some features “already available overseas,” likely referring to FreeStyle LibreLink (reader app) and LibreLinkUp (remote monitoring app), which as of February became available for iPhone and Android in 12 EU countries. We’re not sure if the FreeStyle LibreLink “suite” has been filed with FDA, though we view the value of doing so quite favorably, especially for patients (decreased hassle of carrying the reader; ability to share seamlessly data with caregivers and providers; and input for a FreeStyle Libre-centric data ecosystem of apps on the phone).

  • Other highly-anticipated updates include the next-gen FreeStyle Libre CGM with Bluetooth and alarms, which Bigfoot CEO Mr. Jeffrey Brewer noted at Friends For Life is coming “sooner than people realize.” There was no mention on today’s call of the next-gen CGM, and we’re still unsure if the device might launch as a standalone product or only in collaboration with Bigfoot’s AID system. Last we heard during the 1Q18 call in April, alarms are “coming” and “a steady cadence of improvements, variations, claims, etc.” are slated for FreeStyle Libre in 2018-2019.

    • Many DIY users have taken to using Ambrosia’s BluCon or the newer Miao Miao to get continuous communication– neither has CE Mark nor a partnership with Abbott, as far as we know. Of course, these reflect early adopter market demand for a continuous communication solution, which Abbott is obviously going to provide at some point. (In many ways, this is just like the Nightscout community before Dexcom Share.

  • We also assume planned US enhancements include iCGM labeling (FreeStyle Libre’s accuracy falls a bit short by our analysis), extended sensor duration (currently 10 days) and shorter warmup time (currently 12 hours); the OUS FreeStyle Libre is indicated for 14-day wear and 1-hour warmup. Abbott may have to make a tough decision on these fronts, since getting iCGM designation will require an accuracy improvement, and shorter warmup/longer wear put additional pressure on accuracy.

  • Now that Medicare has finally updated its coverage policy to allow use of smartphone apps in conjunction with CGM, Dexcom has a near-term advantage on remote monitoring with G5 until FreeStyle LibreLink is available. (G6 is currently under Medicare review, with a decision expected this fall.) Since both G5 and Libre are the same cost in the Medicare market, they can compete on features alone – we’ll be interested to hear how uptake compares between the two devices, and of course, there are so many that could benefit from CGM in this population! Remote monitoring, loud alarms, and high-visual accessibility CGM are certainly key features in this hypoglycemia-prone population.

2. FreeStyle Libre Pediatric Claim Filed with the FDA and Under Review

Last week at Keystone, we learned that a FreeStyle Libre pediatric (4+ years-old) claim has been submitted with the FDA and is currently under review – great to hear, as the device is approved down to four years-old in Europe and is safe and effective in this population (SELFY). There was no mention of the indication on today’s call, although the news confirms timing shared in April that pediatric filing would occur this year. Abbott has three US pediatric FreeStyle Libre trials listed on ClinicalTrials.gov, all in the recruiting phase: (i) an accuracy study (n=85 6-17-year-olds) slated for an August completion; (ii) a post-approval safety study (n=400 4-17-year-olds) slated for February 2021 completion; and (iii) an accuracy study (n=100 4-17-year-olds) slated for a July completion. It’s unclear whether any of the data from these studies has already been included in the FDA submission.

  • The pediatric market is another interesting arena on the segmentation front – we’ve heard many who love FreeStyle Libre’s form factor, while others find the lack of alarms/remote monitoring to be a big downside. CGM has higher penetration in young children in the T1D Exchange – 45% in the <6-year-old age group, per last fall’s update from Roy Beck – presumably much of it from the alarms and peace of mind from remote monitoring. Still, there are many others for whom the current on-body form factor of CGM is difficult, and we’ve (anecdotally) heard of some teens with diabetes who are willing to wear FreeStyle Libre but not other systems. In Abbott’s ENDO 2018 booth, we heard some pediatric endocrinologists have been using FreeStyle Libre off-label peds, which is not surprising.

  • Age comparison to other systems: Dexcom currently has the only standalone CGM in the US with a broad pediatric indication (down to age 2). Medtronic’s Guardian Sensor 3 (GS3) in the MiniMed 670G is now approved for use in 7+ years, while the standalone Guardian Connect mobile (with the same GS3) is only initially approved for 14+ years. Tandem’s Basal-IQ/G6 (PLGS) is approved for 6+ years. Senseonics’ Eversense is 18+ years.

3. No Mention of Bigfoot Partnership; US Pivotal Trial in 2Q19

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). At Friends for Life Mr. Brewer shared that a pivotal of the Loop system will start in 2Q19 – more specific timing than previously shared (“2019”) – with a launch ambitiously maintained for 2020. The pivotal has been pushed back meaningfully from December guidance for a “2018” pivotal start, which was the timing we heard when Bigfoot and Abbott first announced the partnership last July. The Bigfoot slide at FFL implied a Loop “phased pivotal” would actually initiate in 2018, though this was not stated. Inject (MDI auto-titration) is also expected to launch in 2020.

  • Also at Friends For Life last week, we got the most comprehensive update ever on Bigfoot’ planned portfolio and product features: (i) the Inject insulin dose capture cap (acquired from Timesulin) now includes a screen; (ii) we were impressed by the monthly Bigfoot supplies packaging, which was all color-coded and looked extremely consumer friendly (kind of like Pill Pack); (iii) Bigfoot shared plans for a portfolio of device offerings ranging from type 2 basal-only (BGM, app, smart pen cap) to AID with a pump/CGM. Many images of the compelling slides are enclosed in our report, alongside a number of meaningful product updates on the algorithm, continued plans for a monthly subscription model, and beyond. In Q&A, Mr. Brewer highlighted that the price of the 670G is the “high-water mark of what any insurance company will ever pay for automated insulin delivery. Everything in the future will have to cost less. We’re building a business that will do that.”

  • Bigfoot’s AID system starts with a single input (total daily basal dose), and then proceeds to adjust all systems settings and glucose targets on an hour-to-hour basis. The main user interface is the Bigfoot app, with very little interaction on the pump. It will use Abbott’s next-gen CGM with Bluetooth, which will talk directly to the pump and keep users in closed loop even when the phone is out of range. With Dexcom’s G6 clearance for zero-calibration, G6 sensor-integrated systems like the recently approved and soon-to-launch Tandem Basal-IQ (predictive low glucose suspend), Tandem Control-IQ (pivotal now recruiting), Beta Bionics iLet (see FFL 2018), Lilly’s AID system, and Insulet’s Horizon (see ADA 2018) will be more competitive with the no-fingersticks Bigfoot-Libre system. Of course, Bigfoot has many other advantages relative to these systems, as noted in our FFL report. G6’s iCGM designation will allow for accelerated rollout of future integrations and system updates, a competitive gap we expect Abbott to close as it presumably goes for its own iCGM designation at some point.

4. FreeStyle Libre Trials: 50 Posted, Up from 42

There are at least 50 studies on “FreeStyle Libre” or “Flash Glucose Monitoring” on ClinicalTrials.gov, up from 42 studies in 1Q18. Studies added or updated since April are highlighted in yellow.

FreeStyle Libre trials on ClinicalTrials.gov

Trial

Trial Population

Primary Outcome(s)

Status

Efficacy of Flash Glucose-Sensing Technology on the Occurrence of Cardiac Arrhythmias Associated with Hypoglycemia (SPIDER-STYLE)

200 type 2 patients (ages 45-85) treated with intense insulin therapy with high risk of hypoglycemia and resting heart beat >60 bpm

Prevalence of cardiac arrhythmic evens during 14-days continuous ECG monitoring

Not yet recruiting; Completion slated for May 2020

Flash Glucose Monitoring Study for Diabetes (FUTURE)

2331 patients (ages 4+) using FGM after entering in the new diabetes reimbursement program in Belgium

Quality of life

Active, not recruiting participants; Completion slated for August 2019

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

Study complete (July 2018); Results not posted

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 March 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

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

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); Results not posted

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. David Lewis (Morgan Stanley): Where is Libre relative to your plan and your comfort with $100 million in US Libre this year?

Mr. Miles White (CEO, Abbott): With regard to Libre, we can't be anything but pleased. It's going extremely well. We're on track with where we want to be in terms of patient acquisition and growth etc. There are no real market dynamics to compare ourselves to other than the acquisition of patients and we expect to go out of the year with over a million patients, which is unprecedented and unseen. We think [Libre] is a mass market product, as opposed to a very “niche-y” medical device type product, because there are so many people that are either insulin dependent or trying not to be insulin dependent. I think the opportunity here remains enormous. I think the growth is quite sustainable. There's quite a lot more to do to keep enhancing, and not only the products you're offering the market, and so forth. We like the mix of patients we're getting. We like the geographic mix. We like the geographic advancements. The reimbursement has been very good. Just about everything about this is going better than planned. So I think this is one of the key big sustainable growth drivers of the company.

Mr. Glen Novarro (RBC Capital Markets): Two questions on Libre. First, can you give us a little bit more color on the U.S. rollout and where you are with commercial coverage? And are you still comfortable with your Libre guidance for the year which in the U.S. I think is $90 million to $100 million?

Mr. White: Yeah, we're absolutely comfortable with the guidance for the year. We’re on track. I'd like to go even faster. As I've said before, we're even investing heavily in capacity expansion and so forth to anticipate even greater growth in the future. There’s really nothing to compare it to. There's I think the whole space is getting increasing attention.

We have carved out a very economic position that's extremely profitable for us, but we're in a very economically accessible price point which has made the uptake and the reception via the patient or even reimbursing bodies pretty attractive. And I think we've found a real value proposition point here with the product. Our manufacturing is extremely automated. It gives us a big advantage in terms of costs. And everything is kind of working well here. I'm pretty excited about this product. It’s got so much potential, because I think a lot of times whether it's a pharmaceutical or medical device they can be expensive in the healthcare system for recovery of cost because the numbers of patients may not be that great. And yet there's a lot of diabetics in the world including me. And other millions that are insulin dependent and millions that don't want to be insulin dependent. This product hits the sweet spot. To be a mass market product it's got to be accessible, it's got to be affordable, and it's got to be affordable in a way so that it's not hard for people to commit to it and use it and find out what it can do for them.

I'd say that's all going super. We like the split we're seeing a Type 1s versus Type 2s. We're probably globally about two-thirds type 1s and one-third type 2. I think that's a pretty good mix and it speaks to the clinical efficacy and the benefits of the products and the two different types of users that benefit from it. At this point it's all about how fast can we run. And I think the uptake by consumers and the retention – all of our data assess this is going well. We'll glad at the end of the year to have more than a million patients worldwide and significant number of US. Well, we're so far in the way a global leader in the space now.

There’s no way to look at market share. We've looked at sensor days and we’re already well above 90% globally. There’s nothing to compare to. We're comparing to ourselves and how fast we can run and that's really exciting. It's nice to see a product that has that kind of impact. And this one is just fun. It's just fun.

Mr. Novarro: Can you discuss what's next in terms of features for Libre and timing?

Mr. White: I could but I'm probably not going to set any expectations around that because I don't want to create trigger points or talking points. There are a number of things that we have planned and have done the work for. There are enhancements to the product – some obvious ones, some of which are already available overseas. It's a little different challenge working through the FDA here in this country. But yes, we've got plenty of enhancements and thoughts here for advancing the product still further.

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, and every US user buying three 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, 675,000 users * $120/month * 3 months * 90% = $218.70 million, which we rounded to ~$220 million for OUS sales this quarter.

  • 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. In today’s call, the geographic split of Libre users was not provided. We assumed that the increase in Libre user base was evenly divided between US and OUS markets, given that the share of growth was roughly 50/50 (US: 53%; OUS: 47%); this might also be overestimating the US.

 

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