Medtronic 2018 Analyst Meeting – Drive into MDI via standalone CGM, insulin dose capture, decision support, new business unit; CGM gamification (Inner Circle); 670G OUS, Sugar.IQ hypo prediction by next April – June 5, 2018

Medtronic held its biannual 2018 Analyst Meeting earlier today, following previous iterations in 2016, 2014, and 2012. Diabetes Group President Hooman Hakami shared a 25-slide presentation, with a more realistic (less ambitious) pipeline than we saw in 2016.

His remarks mostly focused on current/imminent launches (MiniMed 670G in the US, Guardian Connect mobile CGM, Sugar.IQ app in the US) and the company’s stronger focus on building a product ecosystem for MDI users. This greater focus on MDI – included a renamed business unit within Diabetes – is terrific to see and will keep Medtronic competitive with what Bigfoot/Abbott, Lilly/Dexcom, and others are doing with dose capture + CGM + titration. Also, we felt it was a negative to call a division “non” – anything (!) and “non-intensive diabetes therapies” didn’t ever roll off the tongue or feel very aspirational. Though it’s less visibility, we love the sound of the new name and reporting.

We include key highlights from the entire day below, with relevant slides inserted throughout. Medtronic’s current fiscal year, FY19, starts and ends in late April. In this report, we’ve used calendar timing rounded to the nearest month for simplicity – e.g., FY19 = “launch by April 2019” and “FY19/FY20” = launch between now and April 2020.

Pipeline Highlights

Note in the slide below, the key FY19/FY20 (middle) column refers to a launch any time between Now and April 2020. “Beyond” means after April 2020. These pipeline slides were only flashed briefly and not accompanied with product-by-product commentary or a more specific launch cadence. The highlights below piece together the pictures and recent Medtronic commentary. We’re glad to see further improved sensors on the timeline and this is notice for Dexcom and Abbott and Senseonics and others.

MDI Solutions Pipeline

This is a new business unit explained in more detail in the strategy section below.

1. Very Cool “Inner Circle” program: earn “points” for more time-in-range – Launch Between Now and April 2019 (in the next year)

• Within the next year, Medtronic plans to launch “Inner Circle,” a new gamified patient engagement program leveraging CGM data - both for Guardian Connect and 670G users. This was the coolest and most out of the box product the Diabetes group showed today. (Not shown above; it received its own dedicated slide shown below.) “The more time someone spends in range,” said Mr. Hakami, “the more points they will accumulate.” It was unclear what the points can be redeemed for – copay discounts? gift cards? Digital badges? – though we think this is smart and differentiated from other software in CGM. We think this is ambitious and aspirational and we bet there was arguing about it – we are SO happy to see Medtronic push people toward doing better. The devil is also in the details – how is the “inner circle” defined differently for narrower vs. broader ranges? (Kelly’s range starts at 80 and goes to 180 – Adam wouldn’t dream of his upper range anywhere above 140 and even that seems high to him. No judgment.) Mr. Hakami hoped that the combo of Sugar.IQ and Inner Circle will drive better adherence, higher engagement, and better outcomes – they will also overcome the shortcomings of Medtronic CGM relative to Abbott and Dexcom (i.e., more daily calibrations, clunkier on-body experience, iOS only app – for now!). Mr. Hakami repeatedly emphasized that CGM is about more than just displaying a number, hence Medtronic’s big focus on adding software to contextualize the data. We think this is very smart.

• We see definite potential in this gamified approach to CGM for some users – mySugr has had success with this (though its points cannot be redeemed), and Fitbit/UHC have a similar program with the Motion program (offering cash for hitting daily activity goals). We love the focus on time-in-range and hope it also shifts the payer lens towards this metric over A1c alone – it’s time! We’d love to know more about Medtronic’s planned business model, incentives for patients, and the payer relationships here – Will there be shared savings? How much will this motivate patients, particularly those not spending much time-in-range right now? And what should time in range be? No consensus yet, though see diaTribe’s piece on this subject from 2017: “CGM and Time-in-Range: What Do Diabetes Experts Think About Goals?”

2. Sugar.IQ Hypo Prediction (“within the next four hours”) – Launch Between Now and April 2019 (in the next year)

• By April 2019: Sugar.IQ with Hypoglycemia Prediction: “You are expected to experience a low within the next four hours.” While the actual pipeline slide shown above indicated a launch by April 2020 (FY19/FY20), Mr. Hakami clarified in his remarks that this will launch by the “end of this fiscal year” (FY19). This hypoglycemia prediction has long been a big – and cool! – selling pitch of Medtronic/IBM’s Sugar.IQ, but is running almost two years behind the 2016 Analyst Day hope to launch by “summer 2017.” It will be fascinating to see how much of a value-add this feature is for its standalone CGM – Medtronic claims ~90% hypoglycemia prediction accuracy, though notification fatigue and continued Sugar.IQ engagement will be key to watch. Of course, for those at high risk of severe hypoglycemia, this could make a very meaningful difference. And four hours is great, though we wonder how accurate that can be in real life use.

3. Sugar.IQ Dosing Assistant and Insulin Pen Dose Capture – Launch Between Now and April 2020 (within two years)

• By April 2020, Medtronic expects to launch the “Sugar.IQ Dosing Assistant” and “Automated Capture” (insulin dose capture and advanced food logging) – both MDI products are new and notable and were not shared at the 2016 Analyst Day. Knowing Medtronic’s difficulty in hitting many next-gen product timelines, a launch within two years sounds very ambitious (even unlikely, though who are we to say what’s possible with great investment and a standout team) – this is the first time we are hearing about these MDI-focused titration products. That said, this is a great smart strategic move, given where Dexcom/Lilly, Abbott/Bigfoot, and others are moving – providing app-based insulin titration and CGM to those not on pumps. It’s unclear from the slide if Medtronic will use another company’s insulin pen dose capture solution (e.g., Common Sensing, Companion Medical, etc.), or if it has its own solution. Nevertheless, this is a strong move into the CGM+MDI ecosystem, well within Medtronic’s wheelhouse, and it could emerge as strong competition for the field – especially with IBM Watson-powered artificial intelligence and Medtronic’s already-strong payer relationships.

4. Project Unity sensor (no-cal, 10-14 day wear, disposable) and Glucose Prediction for MDI users – Launch “Beyond” April 2020 (2+ Years Out)

• Medtronic’s square-shaped on-body CGM sensor patch, now code named “Project Unity,” aims to be smaller on the body, no-calibration, 10-14 day wear, and disposable. It is more than two years away from market (beyond FY20), already delayed a year from the January’s goal to launch after FY19. The size on the body still looks quite large, especially relative to the penny-sized wearable that Dexcom and Verily have planned for their gen two sensor (launch in 2020). Overall, Medtronic continues to play catch-up in CGM, especially on the hardware side. Still, how much better does this look vs. the old days!

• The “glucose prediction” for MDI users presumably takes the Sugar.IQ platform a bit further, combining current CGM data with insulin dose capture to give forward-looking predictions and dosing guidance. Notes the slide, “Hey Dave, A little low right now but you’ll be back in range in 30 min.” The MDI ecosystem slide adds “therapy guidance” - AI-based meal and correction bolus – we love the idea of this. Contextual is one of our favorite words, particularly how it’s characterized here.

Automated Insulin Management (AIM) Pipeline

Beyond the two Medtronic Diabetes AIM products currently launching (670G in US, Mio Advance inserter OUS), six products are now listed in Medtronic’s AIM pipeline - three targeted for launch in the next two years (by April 2020) and three more “beyond” that.

1. MiniMed 670G outside the US – Launch Between Now and April 2019 (in the next year)

• A MiniMed 670G hybrid closed loop launch in Europe, Middle East, and Africa is now expected by April 2019 (“FY19”), a more specific update than the 1Q18 call. This is the same launch timing as we heard at JPM, but quite a big delay from the initial goal to launch in summer 2017. The call two weeks ago vaguely said Medtronic was “moving towards … launching 670G in new geographies,” and the February call said it was in the CE Mark process. We’re not sure if Medtronic has a regulatory hold-up, reimbursement challenges, or if it is simply learning as much as it can from the US launch before it moves OUS.

2. Bluetooth-enabled 670G pump and mobile app display – Launch Between Now and April 2020 (within two years)

• Per the picture, this product appears to simply add Bluetooth to the existing 670G pump hardware, enabling secondary display of pump information on the phone. That said, the first picture below kind of implies a user could “resume” a suspended pump – will it enable smartphone control? And the more vague closed-loop ecosystem slide does note "data viewing and pump control," though it's not clear if those will launch together or sequentially. We also assume it will the paired Accu-Chek Guide Link BGM, moving off the Ascensia BGM. Secondary display of pump information on the phone would bring Medtronic’s 670G up to speed with Insulet’s FDA-cleared Omnipod Dash Display app (see yesterday’s coverage) and Tandem’s upcoming t:slim X2 mobile app (launch previously expected in 2H18). We assume this could launch closer to the FY20 end of the range (by April 2020), but no specific target was provided

3. Project Harmony CGM sensor with “adaptive calibrations” and “non-adjunctive” claim – Launch Between Now and April 2020 (within two years)

• The next-gen Harmony sensor will presumably improve accuracy and appears to retain the reusable clamshell transmitter currently in the Medtronic Guardian Sensor 3. Medtronic’s 2016 Analyst Day was more specific about Harmony, sharing a goal to launch it by “April 2019” with a 10% MARD, 10-day wear, and one calibration per day. We assume this wear length and accuracy could still apply, though the launch timing has now expanded to one year later than the 2016 Analyst Day. It’s unclear if 10-day wear and one-calibration per day are still the plan.

• Getting a non-adjunctive claim will allow Medtronic to penetrate into Medicare. The greater accuracy and smarter calibration could also help Harmony obtain iCGM classification, which is “absolutely” in Medtronic’s pipeline. For context, Guardian Sensor 3 currently falls slightly short, per our analysis. Said Mr. Hakami in Q&A, “We definitely applaud the FDA for the iCGM category. It accelerates the cadence of innovation for CGM, making it a 510(k) device. We feel really confident that we are largely there with respect to our ability to do this, particularly with our arm-indicated product. There are two components to this. There is software, which is not something we feel is overly complex. And then making sure we have the manufacturing controls and processes to do this. We’re working on both of those things. It is absolutely in our roadmap to have this designation.” What a great statement from this impressive leader – he’s all over it!

4. MiniMed 620G Pump (630G sans low glucose suspend?) – Launch Between Now and April 2020 (within two years)

• We assume the MiniMed 620G is a sensor-augmented, non-automated version of the current 630G low glucose suspend platform. The picture does show a CGM trace on the pump, but no highlighting or shield to indicate automation. We wouldn’t really consider this a meaningfully new product at all, but it does help fill up the FY19/FY20 box on the slide shown above.

5. Auto Bolusing Closed Loop, New CGM, Combo set with Extended Wear, and Personalization Through AI & Cloud – Launch “Beyond” April 2020 (2+ Years Out)

• Medtronic’s next-gen closed-loop, adding auto bolusing, now appears to have the same pump hardware as the 670G, a different CGM sensor (see above), and a mobile app. The goal is >80% time-in-range, up from ~70% right now with the basal-only 670G. The hardware is a departure from the next-gen pump shown at the 2016 Analyst Day, which had a sleeker touchscreen design and a smaller form factor. The plan to add automatic correction boluses was not discussed today, though presumably Medtronic feels it needs a better CGM sensor to do so (we’d guess that is the gating factor). An NIH funded IDC/Schneider Children’s Hospital study of auto bolusing vs. 670G is expected to start later in 2018, per an ATTD 2018 update. Given Tandem’s plan to launch in 1H19 with automatic bolusing (Control.IQ/Dexcom G6), Medtronic appears to be at least a year behind and potentially further.

• The combo set with extended wear ("Project Duo") looks exciting and has a fairly slim on-body form factor – we assume this would be 7- or 10-day wear, though the key will be getting the insulin cannula to last 2-3x as long as it currently does and having patients like it. The 2016 Analyst Day was also more specific here, calling for a combo seven-day CGM-insulin infusion set by April 2021, including a single insertion housing the Harmony 1 CGM sensor and a cannula for insulin infusion. As a reminder, Medtronic’s MiniMed Duo combination insulin infusion-CGM sensor set launched in Europe in June 2014, but the three-day wear set was not ideal for the CGM sensor. We assume the company learned a great deal from this product that it will integrate into a more commercially viable, longer lasting set.

• Through personalized closed loop via AI and cloud, Medtronic hopes to boost time-in-range beyond 85%. This is listed in the "long" term pipline (certainly more than two years away), but would be quite exciting!

Non-Intensive Diabetes Therapies (Type 2) Pipeline

1. Envision Pro (formerly called iPro 3) outside the US, Personalized Guidance, and Intelligent Therapy Recs – Launch Between Now and April 2020 (within two years)

• We confirmed with Medtronic that “Envision Pro” is actually a rebrand of “iPro 3”, and the targeted OUS launch is now by April 2020 – up to a two-year delay from the 2016 Analyst Meeting goal to launch iPro 3 by April 2018. (CEO Omar Ishrak’s pipeline slide today still used “iPro 3”, per the second picture below – that’ll be changed soon, no doubt). The 2016 analyst meeting expected this professional CGM to be single-use, blinded, clamshell transmitter, and MARD: ~11%; we’re not sure if that is still the case, but the picture does retain the clamshell transmitter.

• We assume the personalized guidance and intelligent therapy recommendations will continue to build on Pattern Snapshot and the professional CGM logging app that launched with Fitbit. SO much could happen with Fitbit – look out!

2. Real Time Coaching and Envision Real Time (iPro 3 real time) – Launch Beyond April 2020 (2+ Years Out)

• In the longer-term type 2 diabetes pipeline are “real time coaching” and a real time professional CGM (Envision/iPro 3), both more than two years away. The coaching ambition is new since the 2016 Analyst Day, but not surprising considering how much that landscape has changed in two short years (mySugr/Roche, One Drop, Onduo (Sanofi/Verily), Dexcom/UHC, Virta, etc.). Medtronic’s real-time professional CGM, previously called iPro 4 at the 2016 Analyst Day, is now delayed at least a year from the previous expectation to launch by April 2019. The mobile app suggests it will be accompanied by real-time education, “Do you know a normal sugar level after a meal is below 160 mg/dl? You did a GREAT JOB :)”

Overall Pipeline Comparison: 2018 vs. 2016 Analyst Day

By our count, Medtronic’s pipeline now includes at least 17 (!) upcoming product launches. Seven products have launched on time/early since 2016, while between 6-9 products have been delayed from the 2016 Analyst Day and three products had no change in timing. Five new products were announced today that we did not hear about two years ago. See the product-by-product analysis below, which is compared to our 2016 Analyst Meeting Coverage. We emphasize this may not be perfect, as it is difficult to keep track of Medtronic’s changing product names and fiscal year timing.

New Products/Timing Announced at Today’s Analyst Day (2018)

• Inner Circle patient engagement app – Launch Between Now and April 2019 (in the next year)

• Sugar.IQ Dosing Assistant with Insulin Pen Dose Capture – Launch Between Now and April 2020 (within two years)

• MiniMed 670G with Bluetooth and paired mobile app – Launch Between Now and April 2019 (in the next year)

• MiniMed 620G – Launch between Now and April 2020

• Real-Time Coaching: Launch Beyond April 2020 (2+ Years Out)

Promises Met/Exceeded from 2016 Analyst Day

• Met (limited launch) – MiniMed 670G FDA Submission and US launch by April 2017

• Met (limited launch) – Guardian Sensor 3 (Enlite 3) as part of 670G by April 2017

• Exceeded – Professional CGM logbook app by April 2017 (it launched in December 2016)

• Exceeded – Mio 30 infusion set launch by April 2019

• Exceeded – New Quick-serter device by April 2019

• Exceeded – Mio Advance infusion set (Formerly “Solo”) by April 2019

• Met? – Outcomes Snapshot, which we assume is the MiniMed Outcomes app that Medtronic showed with 670G data at AACE a few weeks ago.

Promises Missed/Delayed/Not Mentioned from 2016 Analyst Day

• ~1 Year Delay: Guardian Sensor 3 in Guardian Connect (Enlite 3) by April 2017; Actual US Launch is now slated for May-July 2018

• ~2-Year Delay: Sugar.IQ first-gen launch by Summer 2016; actual US launch is now slated for May-July 2018

• ~2 Year Delay: Sugar.IQ “glucose prediction” by Summer 2017; actual launch for “hypoglycemia prediction” is now slated by April 2019

• ~2+ Year Delay: Sugar.IQ “therapy dialogue” (Q&A) launch in ~summer 2018; actual launch with full “glucose prediction” and therapy advice for MDI users is now slated for “beyond” April 2020.

• ~1-2-Year Delay: iPro 3 (Envision Pro) by April 2018; actual launch is now slated Between Now and April 2020

• ~0-1 Year Delay: Harmony 1 by April 2019; actual launch is now slated between Now and April 2020

• 0+ Year Delay: MiniMed Pro-set (with BD) by April 2019; actual launch has not been mentioned by Medtronic in some time. BD’s last update expected launch by September 2018.

• 0+ Year Delay: Harmony 2 (presumably now “Unity”) by April 2020; actual launch is now slated “beyond” April 2020

• 1+ Year Delay: iPro 4 by April 2019 (adding real-time data to iPro 3); Actual launch is now slated beyond April 2020

• No longer in pipeline? iPro 5 previously expected in April 2019-April 2020

• No longer in pipeline? “SC2” infusion set

No Change In Timing

• No Change: Combo seven-day CGM-insulin infusion set by April 2021; Actual launch is now slated “beyond” April 2020

• No Change: Auto-Bolusing Closed Loop, launch “beyond’ April 2020

• No Change: Patient Snapshot by April 2020 (personalized care plans via proCGM and Biometrics) – we assume this is now the Personalized Therapy Recommendations in the Type 2 Business

Diabetes Group Reorganization and Strategy Highlights

1. Group rebranding and reporting: “Advanced Insulin Management” and “Emerging Technologies,” with Much Bigger Focus on “MDI Solutions”

• Going forward, Medtronic Diabetes will report revenue in its core business, now named “Advanced Insulin Management (AIM)” and in “Emerging Technologies” – the latter includes a vertical newly named as “Multiple Daily Injection Solutions (MDIS)” and the existing Non-Intensive Diabetes Therapies (type 2; NDT) division. The AIM division seems to be the same as the previous Intensive Insulin Management (IIM) division, which includes pumps and closed loop and pump supplies. As shown below, the newly named MDIS vertical will include standalone CGM (Guardian Connect/Sugar.IQ, the i-Port injection port) and NDT will continue to include professional CGM; both MDIS and NDT will be bundled into “Emerging Technologies” and boy is this branding better though we liked following three areas rather than two areas. All three divisions will have “diabetes management programs and services,” broadening the previous “Diabetes Services and Solutions” focus under Anette Brüls. According to LinkedIn and this press release, Ms. Brüls left Medtronic Diabetes as of April to become CEO of a non-diabetes med tech company based in Switzerland (Medela) -  they are so lucky and we hope this is a temporary departure from diabetes as Ms. Brüls was very highly respected. Alejandro Galindo will continue to lead AIM (formerly IIM), Laura Stoltenberg will now move over to lead MDIS (formerly in charge of the type 2) business, and Sheri Dodd will lead the NDT division – in addition to her current as the lead for Medtronic Care Management Services (MCMS) – given that the later manages patient populations through remote patient monitoring services for both acute care and chronic conditions, it seems like good carryover. While NDT and MCMS will operate independently, under Ms. Dodd, there will be plenty of expertise in chronic care management.

• Though it seems small, this is a meaningful change for three reasons:

  • First, this strategic reorg emphasizes a greater Medtronic focus on MDI, in line with broader trends in CGM, competitors, and insulin titration. Addressing MDI is the most logical adjacent move for Medtronic, given the current pump/CGM focus. It also sets up Medtronic to better define a strategy to be even more directly helping people and to compete directly with Abbott/Bigfoot and Dexcom/Lilly.

  • Second, this reorg aligns all three business verticals around therapy type, which makes more logical sense. Previously, the middle division was called “Diabetes Services and Solutions,” which included standalone CGM but didn’t really align around a particular type of therapy. Now, all three groups align around a therapy, and each division will include services and programs.

  • Third, this reorg will now obscure how the type 2 business is doing, as NDT will now be blended with the higher-growth MDIS business (which includes standalone CGM). The type 2 business has had a couple of rough quarters, presumably from the sensor manufacturing shortage and perhaps competition from FreeStyle Libre Pro. Given the pipeline noted above, this division will not have something competitive with FreeStyle Libre Pro for quite a while.

• The greater focus on MDI, standalone CGM, and decision support was apparent throughout the Diabetes slides. See relevant screenshots below.

2. Not mentioned: previous 2020 goals for 20 million patients, $4 billion in revenue – both seem unlikely at this stage

• The headline goal shared at the 2016 Analyst Meeting – to hit $4 billion in revenue and serve 20 million patients by 2020 – was not mentioned at all today. At the time, we characterized this goal as ambitious, and we’d up that to “extremely ambitious” here two years later though presumably it’s not necessarily a goal anymore. Medtronic’s FY18 revenue was $2.1 billion, growing 9% YOY – this puts the company halfway to the revenue goal, meaning it needs to see sustained 25% YOY growth every year for the next three years to hit $4 billion. It’s possible, but given the pipeline it showed today and the strong competition in standalone CGM and AID, this kind of growth seems highly unlikely. There was no firm Medtronic worldwide installed base shared today, though we’d generously guess it’s around 1.5 million patients globally, which would reflect a generous 25% increase from the ~1.2 million shared in April 2016. If that is true, the company needs to see a 13x increase in the patient base to hit 20 million – possible but unlikely within three years.

MiniMed 670G Launch Highlights

1. MiniMed 670G Rising CGM “Pull Through”, 100,000 670G’s Shipped in US

• Medtronic is seeing ~65% of its US pumpers getting on CGM (as they renew their pump warranty), nearly double the 35% use of CGM in its US installed base. Wow! This translates to an additional ~$3,000 in CGM revenue per pump patient annually, on top of ~$5,000 in revenue per year for a pump-only user. This is the first we’ve heard these CGM attachment metrics, which are very encouraging for Medtronic’s future growth. (Obviously this doesn’t take into account Medtronic pumpers that use Dexcom CGM – this group is getting smaller although Dexcom has many other growth trajectories.) Still, if Medtronic can continue to get CGM on two-thirds of its pump renewals, it will do very well and hold share against Dexcom-integrated Tandem and Insulet pumps. Since only ~25% of it’s the base is up for a warranty renewal in any given year, Medtronic has a lot of runway ahead. Of course, it’s also quite likely that the 65% metric will decline, since most of these early converts are eager 670G adopters and there are no competitive AID systems available yet. Still, a rising tide …

• In line with the 1Q18 call, Mr. Hakami emphasized that over 100,000 670G systems have been shipped in the US, with outcomes similar to the pivotal trial (71% time-in-range, 0.3% time in hypoglycemia, 10.5% sensor MARD – these are incredible numbers compared to pre-670G, based on 2.6 million patient-days). The slide noted 10 points of share gain since the MiniMed 670G launched a year ago, though this was not quantified, cited, or explained further.

2. Medtronic estimates: 1.1 million global pumpers with T1D, with a 70% market share; 20 million MDI users, 15 million premix, 20 million basal

• A slide on the worldwide therapy landscape estimated there are 1.1 million global pumpers with type 1 diabetes, and that Medtronic has a 70% market share. Assuming this is market share by users, that puts Medtronic’s worldwide installed pumper base at ~800,000; the slide did not indicate type 2 pumpers, though we know there are some. A second slide estimated Medtronic has 73% market share in the US, with the remaining share between Tandem and Insulet.

  • Here’s what all those stats imply, cross-checked with Tandem and Insulet’s updates:

• Medtronic estimates that pumps have 8% worldwide penetration, presumably referring to all type 1s globally. This was not actually clarified and the slide below is slightly ambiguous as to what the denominator is. Mr. Hakami added that in the US, 1/3 of “intensively managed” patients use pumps, which would imply ~1.65 million users (taking the above estimate). Obviously, this backs out to a penetration well below 8% in type 1 diabetes outside the US.

• The above slide’s estimate of 20% penetration of CGM into 20 million MDI users seems far, far too high – that would imply 4 million CGM users globally, or about 4x our current estimate of just over 1 million CGM users globally. That number increases daily but it’s still far closer to 1 million than 4 million, in our view.

• Medtronic noted the shrinking US pump group of competitors, its estimate of 73% market share, and a subjective ranking of its competitors on several metrics. We felt the Consumer-Reports-style subjective pie charts were a bit self-congratulatory and highly subjective, especially given Medtronic’s Net Promotor Score in the dQ&A panel compared to Tandem and Insulet (contact Richard.wood@d-qa.com for specifics). Overall, we were surprised at rankings like 25% for “innovation” for Tandem compared to 75% for Medtronic. The same is true for 25% for Tandem and Insulet vs. 90% (!) for Medtronic for “Service and Support Infrastructure”. Still, there is no question that Medtronic went after both the J&J and Tandem businesses with the Medtronic/BD set and UHC preferred agreement, it harmed both businesses and resulted than a higher-than-ever share. (As a sidenote, we don’t remember that in 2016 that Medtronic showed its US global market share below 60% as indicated on this slide but we’ll check.)

Guardian Connect, Sugar.IQ, and Standalone CGM Market Highlights

1. Excitement to launch Guardian Connect mobile CGM, Sugar.IQ Into $1+ Billion Standalone CGM Market Growing at 30%+

• Much of the presentation focused on Medtronic’s standalone Guardian Connect mobile CGM and the paired Sugar.IQ app powered by IBM Watson. This is a very exciting area and one that we feel could be very high-impact for patients. As of Medtronic’s call two weeks ago, both are expected to launch between now and July. Today’s slide deck was vaguer on timing, but the pipeline slide implied both Guardian Connect and Sugar.IQ have already launched and are contributing to growth; as of now, neither is actually in the US iOS app store, and we assume Medtronic will send out an official press release to mark the commercial US launch, likely at ADA, if not before. Guardian Connect is indeed available outside the US with the Enlite 2 (Enhanced) sensor, which could be what the pipeline slide was referring to.

• Medtronic’s marketing around Guardian Connect continues to emphasize “the only smart CGM system,” given the predictive alerts (up to 60 minutes in advance) and the paired Sugar.IQ app. This makes theoretical sense, but whether patients actual perceive this as a meaningful advantage – relative to no-calibration Libre and Dexcom G6 – remains to be seen. Said Mr. Hakami, “If all a sensor does is tell you what your glucose levels are, it is not enough. This is basic, and this is largely where the competition stops. Diabetes management is about insight and action.” We’d certainly say the G6 enables this also, with its predictive urgent low soon alarm 20 minutes before 55 mg/dl is expected. Mr. Hakami noted that Guardian Connect might provide an on-ramp to encourage patients to transition to the MiniMed 670G “if and when ready” – we’ll be interested to see what the MDI+CGM -> pump+CGM conversion looks like.

• Mr. Hakami showed new real-life Guardian Connect data from Europe – predictive alerts helped users avoid 60% of low events and 39% of high events vs. 39% and 10%, respectively, without alerts. The data was collected in 2017, but no n= was shared. According to Mr. Hakami, when these outcomes are shared with non-Medtronic-CGM users, “41% of them” said they would “consider switching to Guardian Connect.”

• We appreciated more looks at the Sugar.IQ app and insights from IBM Watson – none were hugely notable or different from what we’ve seen, but they do provide cool food, insulin, and motivational insights. Still, it’s clear that Medtronic is really, really counting on this companion app to drive Guardian Connect – will this strategy work? To get maximum value out of this companion app, it must be open and actually used – i.e., including manual entry of foods and insulin. We think the AI-driven pattern recognition is very cool, but anything that requires more burden most give corresponding value (and probably disproportionately more value than the burden it adds). We cannot wait to see how it does at launch!

2. Professional CGM is a $100 million Market, Medtronic Estimates it has 50% Share Globally

• Medtronic estimates professional CGM is a $100 million market globally, that it has ~50% share, and the market is <1% penetrated among the target of ~205 million people with type 2 diabetes (presumably referring to the global diagnosed population). Presumably most of the other 50% is Abbott’s FreeStyle Libre Pro, which is a very, very strong product in terms of ease of use and upfront cost for HCPs. We liked seeing this focus on the entire spectrum of type 2 with professional CGM; of course, that also makes for a huge denominator and a market that could expand more than 100-fold! There is so much impact to come from this arena.

Diabetes & Value-Based Care Highlights

1. UHC Update: Medtronic’s Pump Market Share has Gone from 70% to 92%, Additional Profitability; Seems Like More to Come

• Notably, in Q&A, Mr. Hakami provided a candid, specific update on the aggressive preferred pump partnership with UnitedHealthcare, first announced in May 2016 and which took effect on July 1, 2016 – we were very impressed to hear this. See the quote below from the broad Q&A on economic value. Tandem was hard hit by this move, while Insulet has persevered and secured direct in-network coverage for Omnipod starting on April 1.

  • “UHC took a look at their patient base, and the data for our pumps, and saw that really no other pump system that could offer the outcomes that our sensor-augmented pump could. Only one pump had algorithms that could take action, and this was something of benefit for patients and a way to lower the total cost of care. Through the preferred partnership, we accomplished meaningful things. Our market share within UHC has gone from 70% to 92% over these two years. Obviously, the revenue that we get is up, and profitability has been accretive overall. That portion has gone incredibly well. The second component is value-based healthcare. We partnered with UHC to share in the benefits with use of our tech on their patient population. We recently accumulated data, and signed off with UHC, and what we’ve seen is a 26%-27% reduction in preventable hospitalizations. [editor’s note: wow!] For patients on pump therapy, we’ve seen a 13% reduction in total costs. We’ve shared in the savings that that has generated for United. If you take those two components, we’ve been able to do some pretty incredible things with United, and doesn’t just need to be UHC. (Editor’s note – it was not specified whether savings had been shared with patients – we’re assuming not.)

--by Adam Brown and Kelly Close