Memorandum
Earlier this week, Medtronic shared in an email to healthcare providers that due to global sensor demand and storm-related manufacturing disruptions in Puerto Rico, the company’s manufacturing remains quite constrained. Patients in the 630G to 670G Priority Access Program can now expect to receive pumps and transmitters in the second half of November, with Guardian 3 sensors to follow “soon” after, based on patients’ sensor re-order date. For those with new 630G or 670G orders, pumps are now expected to ship by the end of October, with sensor and transmitter orders expected to ship by the end of 2017 (for orders made before September 5) or in early 2018 (for orders placed after September 5). Some patients on sensor-augmented pumps that use the Enlite (i.e., 530G, 630G, 640G) are experiencing intermittent delays in sensor shipments, and the company is working to correct this; no timeline was given. Healthcare providers using iPro2 may also see a delay in receiving Enlite sensors, to ensure that patients have personal access first. As of the August financial update, there were 35,000+ patients enrolled in the 630G->670G Priority Access Program, all of whom were expected to receive shipments in the fall – it sounds like that timing will still be hit, since fall technically ends December 21.. Shipments to non-Priority Access members were previously expected to occur in November 2017-January 2018, meaning some users are on the later side of that timing now. This email update doesn’t reflect a huge delay from the already disappointing 2Q17 update, but it represents yet another challenge for Medtronic’s CGM sensor manufacturing – which was already stretched before Hurricane Maria hit. With Abbott’s FreeStyle Libre launching in the US in the fourth quarter, along with strong competition from Dexcom, Insulet, and Tandem, Medtronic will need to instill a lot of confidence users patiently waiting…
- As a reminder, Medtronic’s 2Q17 sales fell 1%, the first decline in over a decade and the lowest total ($449 million) in two years. This included a surprising 8% decline in US sales, a surprise considering all the upside we expected from the 670G. With this manufacturing delay, we’re assuming very few patients still have the hybrid closed loop. Presumably the updated, much lower guidance for 1%-4% YOY growth in FY18 (May 2017-April 2018) has not changed.
- The email began with a positive update: Medtronic has made contact with its 5,000+ employees in Puerto Rico, providing them with food, water, generators, and fuel, and the facility is back to full operations. We certainly appreciate the commitment to (i) employee wellbeing and (ii) getting products to patients as soon as possible.
-- by Brian Levine, Adam Brown, and Kelly Close