Abbott 2Q19 – Record FreeStyle Libre sales of $433 million rise 64% YOY, 14% sequentially; Libre 2 iCGM remains under FDA review, with clearance expected “relatively soon” – July 17, 2019

Executive Highlights

  • Abbott’s FreeStyle Libre blasted to $433 million in worldwide revenue, rising 64% YOY as reported (+73% operationally) and an impressive 14% sequential gain from 1Q19. FreeStyle Libre now makes up 72% of total Diabetes Care revenue ($602 million), up from two-thirds in 1Q19. In the US, Libre is now reimbursed for ~75% of private covered lives in the pharmacy, up from “ over half” in 1Q19. Abbott is investing significantly in manufacturing expansion, starting in the next few months.

  • CEO Miles White confirmed in Q&A that FreeStyle Libre is currently “highly profitable,” with a gross margin “over 60%” and “rising.” He also agreed that FreeStyle Libre could ultimately be a $5+ billion product (annual sales), with a potential market of 80 million people globally. It’s now annualizing at nearly $2.0 billion, and we certainly would not put the “ceiling” at $5.0 billion given the value of the product and all its potential use in type 2, where penetration is still incredibly low (globally, it’s still low in type 1 also from a population perspective). The Q&A from Mr. White and COO Robert Ford is well worth a read on Abbott’s laser focus on global access and mass market appeal – we appreciate that management did acknowledge that it’s hard to speculate about numbers as large as multiple billions over $5 billion (see Q&A for specifics).

  • Diabetes Care sales of $602 million rose 28% YOY as reported (+35% operationally), a record for the eighth straight quarter – including six straight quarters of >25% YOY growth. 2Q19 even included a highly difficult comparison to 40% growth in 2Q18 – a testament to Libre’s momentum as BGM is now less than one-third of the business. Record OUS sales ($444 million) rose 24% YOY and 7% sequentially, supplying 65% of Diabetes growth; US sales ($158 million) rose 41% YOY, with a softer 4% sequential gain.

  • FreeStyle Libre 2 remains under FDA review as an iCGM, and management is confident 510(k) clearance will come “relatively soon.” Like 1Q19, COO Robert Ford again expressed confidence it meets the iCGM standards. Notably, FDA “encouraged” Abbott to file as an iCGM, another sign that this is only a matter of when – not if. The capacity expansion could help drive a large-scale US launch of Libre 2.

Abbott reported 2Q19 financial results this morning in a call led by CEO Mr. Miles White, headlined by a record $433 million in global FreeStyle Libre sales. Get the press release, listen to the webcast, download the infographic, and read our coverage below.

FreeStyle Libre Sales and User Base

1. Record $433 million in Worldwide FreeStyle Libre sales, up 64% YOY

Sales of Abbott’s FreeStyle Libre reached a record $433 million, rising 64% YOY as reported (+73% operationally). The impressive 14% sequential gain came off the previous record of $379 million (1Q19), which was the first time FreeStyle Libre sales were broken out. Libre now represents nearly three-quarters (72%) of Abbott’s total Diabetes Care sales ($602 million), up from 67% last quarter. This means Abbott’s BGM sales dropped by 10% sequentially and ~18% YOY. As a sign of its huge growth contribution to Abbott, FreeStyle Libre is the first featured item on Abbott’s 2Q19 infographic along with its 73% YOY operational growth. Global sales of FreeStyle Libre will exceed $1.6 billion this year, and there is no sign of this franchise slowing down.

  • There was no mention of FreeStyle Libre user numbers during the call, but given the strong sales growth, Libre’s user base has almost certainly crossed the 1.5-million mark. Last quarter, CEO Miles White said that Libre had “almost 1.5 million” users during Q&A, with roughly two-thirds type 1 and one-third type 2 users. Based on 2Q19, we estimate there are ~1.7 million FreeStyle Libre users now globally, with ~1.2 million OUS and ~0.5 million in the US. Presumably the next update won’t come until it closes in on 2 million – a remarkable number for CGM category.

  • Importantly, Abbott is investing significantly in FreeStyle Libre manufacturing capacity expansion – the first wave will come in the next few months with incremental increases afterwards. The production increase could be related to anticipated US launch of FreeStyle Libre 2. The production expansion will clearly be a significant investment, as it was even mentioned as a factor in Abbott’s adjustment of gross margin for the year. A Reuters/NYT article specifically said Abbott’s plan is to increase FreeStyle Libre manufacturing capacity “by three to five times” in the “next few years”; that exact stat was not given today.

2. ~75% of US Privately Insured Lives Now Covered; FreeStyle Libre is “highly profitable” with 60%+ Gross Margin and Rising

During opening remarks, Miles White shared that Libre is now reimbursed for “approximately 75% of people with private pharmacy benefit insurance” in the US. We take this to mean that Abbott has pharmacy contracts in place for 75% of US private covered lives – a remarkable number. US reimbursement and access for Libre has even increased since last quarter, when we heard “well over half” of commercial lives were covered. Abbott has set the standard in CGM for access and affordability – something Dexcom will not be able to address fully until G7 in late 2020.

  • In Q&A, Mr. White agreed with an analyst that FreeStyle Libre could ultimately be a $5+ billion product (annual sales), with a potential market of 80 million people globally. The user split, he said, could move to ~50% type 1 and ~50% type 2. Given the obvious potential of FreeStyle Libre in prediabetes, gestational diabetes, and obesity, these numbers could also be much higher, especially as the average manufacturing cost will continue to drop. FreeStyle Libre will exceed $1.6 billion in sales this year, meaning it would reach $5 billion in sales in five years if it grows 30% YOY every year. (At higher growth rates, it would get there sooner.) CGM penetration still has a long way to go – especially in type 2 diabetes – and we expect a huge benefit for the field will come from an over-the-counter indication in the US that would not require a prescription. (This would create pull demand from patients interested in trying CGM, overcoming HCP prescribing as a gating factor. Abbott already has this indication in Europe and we suspect it helps a lot.) In the US, patients on Medicare still have to perform four SMBG tests daily for 90 days to prove they’re ready for CGM – an absurd requirement that will hopefully go away at some point.

  • Mr. White also confirmed in Q&A that FreeStyle Libre is currently a “highly profitable product,” with a gross margin “over 60%” and “rising.” This came in an very valuable portion of Q&A portion in which Mr. White and COO Robert Ford clarified misconceptions about Libre – it’s well worth a read, as it shows how laser focused this team is on access, affordability, and scalability. For comparison, Dexcom expects gross margins of 64%-65% for 2019, reaching 70% exiting the year. In other words, these two companies appear to have near equal margins on CGM – a very impressive nod to Abbott’s investment in capacity and manufacturability.

    •  “…A lot of the [CGM] discussion is focused on accuracy at this level and accuracy at that level. The reality is, accuracy is obviously important, but our goal here is to make this massively available without having to sacrifice accuracy. And the fact that we priced it at a different price point wouldn’t necessarily imply that it’s somehow missing something, we just have a different strategy, a different view, of what we could do.”

  • A Reuters/NYT article from earlier this week included a comparison of the retail and out-of-pocket costs for Medtronic, Dexcom, and Abbott CGMs. The piece was well-written and got pricing comments from all three companies – summarized in the table below, and implying FreeStyle Libre is one-third of the price of Medtronic and Dexcom. (It was not clear if the Dexcom and Medtronic pricing includes the transmitter.) In that article, there was also confirmation that FreeStyle Libre 2 will be priced the same as the original FreeStyle Libre in the US. We remain highly impressed with Abbott’s commitment to add important features (e.g., alarms, Bluetooth) without raising the price.


Uninsured Retail Cost
(one-month supply)

Insured Out-of-Pocket Cost (one-month supply)

Abbott FreeStyle Libre


Average US copay not given, though “many pay as little as $10 out of pocket”

Dexcom G6



Medtronic Guardian 3


(not covered under Medicare)

Financial Highlights

1. Record Diabetes Care Sales Reach $602 Million, Up 28% YOY and 6% sequentially

Abbott’s Diabetes Care division reported total worldwide revenue of $602 million, up 28% YOY as reported (+35% operationally). This was the eighth straight quarter of record revenue, and the graph below says it all – this business is really firing on all cylinders! The robust 28% growth came on a very tough comparison to 34% YOY growth in 2Q18. Diabetes Care has now grown above 25% since 4Q17 – a testament to FreeStyle Libre driving most of the business as BGM continues to decline. Revenue from FreeStyle Libre ($433 million) made up 72% of Diabetes Care revenue, putting BGM sales at $169 million – down 18% from $210 million from BGM in 2Q18. Fueled by Libre, Diabetes Care is now Abbott’s fastest growing division by a significant margin (Heart Failure is next closest at 23% reported growth).

  • The international business supplied 65% of Diabetes Care growth, up from 55% in 1Q19 – this is not too surprising, as the OUS business comprises 74% of global Diabetes Care sales and the growth is still strong on the large base. US revenue grew a larger 42% YOY, but the business is about one-third of the size. FreeStyle Libre had a three-year delay in entrance to the US market, and the current trajectory does not see the gap in sales closing. (Dexcom is also much larger in the US, so the competitive landscape is different.) The gap between Abbott’s OUS and US sales actually increased this quarter to $286 million, up $24 million from 1Q19. International sequential growth also beat US growth (+7% vs. +4%).

2. Record International Sales of $444 Million, +24% YOY, +7% Sequentially

International Diabetes Care sales totaled $444 million, increasing 24% YOY as reported (+33% operationally). International sales grew 7% sequentially, outpacing the sequential US growth rate (+4%) for the first time since 1Q18. International revenue has now risen for ten straight quarters. Management did not discuss specific countries today, nor did it mention the reception for FreeStyle Libre 2’s early launch (in at least Germany and Norway, and possibly other European countries). Abbott’s international business ($444 million) is about six times the size of Dexcom’s OUS business; by contrast, Dexcom’s US business is about 25% larger than Abbott’s ($211 million vs. $169 million). International launches of Dexcom’s G6 in “multiple countries” are aimed for this year, and those will most certainly help expand the OUS CGM market.

3. Record US Sales of $158 million, +42% YOY Growth, +4% Sequentially

US sales Diabetes Care totaled $158 million, increasing 421% YOY and 4% sequentially. US YOY growth rates have been >35% since 1Q18, the first full quarter in which FreeStyle Libre (real-time) was available in the US market. By our estimate, US revenue from Libre likely crossed $100 million for the first time this quarter. FreeStyle Libre now has its scanning app (FreeStyle LibreLink) and remote monitoring (LibreLinkUp) both available on Android and iPhone – matching Dexcom’s G6. (LibreLinkUp just launched yesterday for Android, following the iPhone release earlier this year.) It will be fascinating to see what impact FreeStyle Libre 2 has on US sales and competitive dynamics – will Abbott have any new features in the US? Will it be compatible with smartphone apps out of the gate? How will it change patient preferences and prescribing patterns?

Pipeline Highlights

1. FreeStyle Libre 2 remains under FDA review as iCGM, with clearance “relatively soon”; FDA encouraged Abbott to file as an iCGM

During Q&A, COO Robert Ford confirmed FreeStyle Libre 2 remains under FDA review as an iCGM, with 510(k) clearance expected “relatively soon.” He re-affirmed 1Q19 confidence that it meets the iCGM special controls:The standards and special controls for the iCGM are very clear and very transparent as it relates to accuracy thresholds, alarms, sensor shutoffs, etc. And we wouldn't have filed an iCGM if we felt that were going to fall short of those special controls. In fact, we were encouraged by the agency to file Libre 2 as an iCGM. I know people want to speculate and kind of tie it to the exact date. We're not behind our timelines, so we're not going to expect an exact date here, but we expect it relatively soon.

  • It was especially notable to hear the additional comment that FDA “encouraged” Abbott to file as an iCGM – a positive sign that iCGM clearance will ultimately come through (this is not a regulatory stretch), and presumably the company and FDA are just working through the submission. Many expected FreeStyle Libre 2 to be cleared before ADA (Abbott had a product theater on it), and some have read this as a delay. It’s unclear when the FDA filing for FreeStyle Libre 2 actually went in; both 4Q18 and JPM said FreeStyle Libre 2 would come to the US “shortly,” but it wasn’t until April’s call that we heard confirmation of the iCGM filing. For context, Dexcom’s G6 had a de novo FDA review of ~six months (to establish the iCGM pathway) – assuming FreeStyle Libre went to FDA late in the first quarter, it’s still only a few months into the review.

  • Per the article noted above, FreeStyle Libre 2 is expected to be the same price as the current FreeStyle Libre in the US – a huge win to add alarms and still remain much less expensive relative to Dexcom, Medtronic, and Senseonics in the US.

  • FreeStyle Libre 2 will join Dexcom G6 as the only iCGMs currently available, with Medtronic and Senseonics planning for the indication but not close to filing yet. The iCGM advantages of interoperability and faster innovation in the lower-risk 510(k) pathway will be important for Abbott, who has historically had lengthier FDA reviews than Dexcom; obtaining 510(k) status will help close the gap. The indication will also be useful for marketing similar FreeStyle Libre 2 accuracy as G6 (mainly, improved hypoglycemia accuracy), in making it easier to integrate into automated insulin delivery systems (will Abbott integrate with Tandem or Insulet or Tidepool Loop?), getting FreeStyle Libre data integrated with smart pens (e.g., Novo Nordisk partnership), and innovating more quickly on mobile apps and software.

3. “Other Analytes” Still in R&D for FreeStyle Libre

R&D continues to invest into enhancing FreeStyle Libre, including expansion beyond glucose into “other analytes” – a topic now mentioned in two straight calls, but without specific. The European version of the FreeStyle Libre reader already has ketone testing capabilities, which could make continuous ketone monitoring a likely step. Certainly the growing popularity and outcomes with the ketogenic diet could make this quite exciting. Continuous insulin monitoring could also be interesting for better understanding the pathophysiology of hyperinsulinemia in type 2 diabetes.

  • We’re excited by the prospect of fine-tuning AID and decision support with additional continuous sensor inputs. Given at least 42 factors that impact blood glucose, there is huge potential for additional signals – assuming they are accurate and matter enough for titrating insulin. (To date, heart rate measurements have not meaningfully improved AID algorithm performance.) At ATTD, Dr. Eyal Dassau detailed a Helmsley-funded project to include additional sensors for biomarkers such as glucose, lactate, insulin, and cortisol in future closed loop systems. Perhaps Abbott is considering incorporating one or more of these analytes into the FreeStyle Libre sensor.

4. No mention of FreeStyle Libre 3, Bigfoot Partnership, US Pediatric Indication

There was no mention of FreeStyle Libre 3, the Bigfoot partnership, or the ongoing FDA review of a pediatric indication. In 1Q19, FreeStyle Libre 3 was said to have already have been in development for “quite some time.” We’re not sure if the second- or third-gen device will be used in Abbott’s partnership with Bigfoot Biomedical to development an automated insulin delivery system (Autonomy) and MDI auto-titration through a connected pen cap (Unity). In an email update from March, we learned that Bigfoot is prioritizing Unity for a 2020 launch, with the AID system coming after. It’s possible that FreeStyle Libre 2 could be used in at least one of these Bigfoot systems, since it does communicate constantly via Bluetooth with the reader to trigger an alarm (if a high/low threshold is reached). A user must physically scan to obtain the real-time value, but from a technical perspective, the communication does seem like it could drive AID with the Libre 2 configuration.

  • A pediatric indication for FreeStyle Libre been under FDA review since 3Q18 – could Libre 2 receive clearance with this indication right out of the gate? FreeStyle Libre is approved for patients as young as four years old in Europe, though it remains indicated for 18+ year-olds in the US. That said, many teens use FreeStyle Libre off-label. With the addition of alarms in FreeStyle Libre 2, Abbott will have a better product to market in peds.

Selected Questions and Answers

Q: (David Lewis, Morgan Stanley): Starting with diabetes – at ADA, there were some concerns around Libre 2 iCGM designation. Should investors read anything into the lack of approval? And what’s your confidence level on iCGM approval? And what does the trend in BGM this particular quarter tell us about the Libre adoption?

Miles White (CEO): No, we shouldn't have concern. We're confident that we're going to have the approval we expect and what we applied for. So, I know that there's always uncertainty until the day comes and questions from investors. But, no, we're confident. Actually, let me ask our COO to give you a little bit more background and detail on that.

Robert Ford (COO): Yes, we filed this as an iCGM. We made that comment in our last earnings call. The standards and special controls for the iCGM are very clear and very transparent as it relates to accuracy thresholds, alarms, sensor shutoffs, etc. And we wouldn't have filed an iCGM if we felt that we're going to fall short of those special controls. In fact, we were encouraged by the agency to file Libre 2 as an iCGM. I know people want to speculate and kind of tie it to the exact date. We're not behind our timelines, so we're not going to expect an exact date here, but we expect it relatively soon.

Q (Kristen Stewart, Barclays Capital): The Medical Device business growth was phenomenal this quarter. How do you just think about the ability to sustain that level of growth? It seems that Medical Devices has a bit of a tale of two cities with several businesses reporting really nice, strong, double-digit growth but a couple of obvious businesses kind of still lagging around that flattish growth. How do you kind of think about the longer-term dynamic there?

Mr. White: Yes, you've got a mix of businesses here. You've got some that are a little more mature than others, some that have brand-new products that are terrific innovations. In general, in Medical Devices, innovation is what drives the growth over time. And different businesses are in different stages of either maturity or new innovation … Libre is that. Libre is unique. It approaches a mass market, not a niche market. Most medical devices address niches of therapy. But diabetes is something that affects more than 80 million people around the world who would benefit from Libre in about a 50/50 split of type 1s and type 2s, and that is massive. It's unlike anything seen before in device or diagnostic businesses and so there's just an enormous, enormous opportunity there. To be honest, traditional medical device companies aren't used to having to deal with at that kind of scale. And so, we're addressing that by investing very heavily in manufacturing expansion, so that we can go after the mass market, not a niche. I think the sustainability of the growth is driven not only by the innovation, but the ability to go after much bigger markets at a much more affordable level. More people will have access. There will be more growth as we make technologies and products more and more affordable.

Q (Matthew Taylor, UBS): First, you mentioned that you're working on increasing the capacity. There was an article in Reuters that said you're expanding capacity by three to five times. And so, if we think about Libre this year as approaching maybe $2 billion based on consensus, does that mean that ultimately you think it could be a $6 billion to $10 billion type product as you go mass market? And can you talk about how you can step on the gas in the second half of the year with that additional capacity and the approval of Libre 2 to more rapidly expand use?

Miles White: Man, you are one aggressive guy. I remember I got this question last quarter (can't recall if it was you) on whether we thought we could get to $5 billion and how soon. And, gosh, three months later it's $10 billion.

But, to answer your question, I think that kind of potential is there. I think it's awfully hard to speculate about a number that big. But will we – do I think we'll get the $5 billion and do I think we'll do it in a reasonable time, $5 billion sales of Libre? Yes, I do. And I think the growth rate here is reflective of not only the size of the market but the need and utility and affordability of the product.

As I've said many times, it's a very different market where affordability and the utility, the access, all those things make this a mass market product, not a niche. And it's designed for that and priced for that. It's a very profitable product. And we're going through the large scale scale-up of addressing that kind of growth, which is unprecedented for products in our space.

So, do I think it can grow to that sort of level? I won't jinx anything by trying to make some prognostication about $10 billion, but I would say that I think it's got enormous potential, and it's got potential beyond glucose. It's got potential as a wearable in other analytes and other products over time. We have R&D programs underway not only for the repeated enhancement, improvement, and expansion of Libre, but also into other categories beyond diabetes and other analytes and so forth.

So, I think that there's just a lot of things that will evolve over the coming years here that today people aren't even contemplating with the product. We're going as hard as we can at the glucose opportunity, which is enormous, but there's so much more beyond that that I think at least your aspirational consideration, to be honest, has validity.

Q (Matthew Taylor, UBS): When you get feedback from investors that bubbles up to you, where do you think that the internal view of Libre really differs from the Street's perception or people's perception?

Robert Ford: I think when we went about this several years ago, the challenge here, Matt, wasn't to get an accurate reading of glucose from the interstitial fluid. Navigator when we had launched it back in 2008, we were able to do that. It was very accurate and we were able to get an accurate reading.

The challenge that we went about with Libre is how to do that in a way that is cost effective for the health systems and for consumers. What we really went after was how to get that accurate reading at a cost position – that’s at the core of Libre. And you might remember at the time, Navigator was considered the most accurate sensor.

In the core of Libre is that chemistry, that core technology of Navigator which provides accurate, reliable readings, but we're able to do it at a cost position that now makes sense for the insurance and for the payer community and the health systems to cover it. It wasn't a question of whether the outcomes were right or whether the outcomes were enough. They were convinced that the outcomes were there for sensor-based glucose monitoring. It was just, ‘Can I now do it in a way that makes sense for me to do it on a mass scale?

And Miles has talked about this, about mass scale, that's what we went after 10 years ago and that's at the core. And I think maybe that's misunderstood because a lot of this discussion that's focused on well, accuracy at this level and accuracy at that level and the reality is, accuracy is obviously important but our goal here is to make this massively available without having to sacrifice accuracy. And the fact that we priced it at a different price point wouldn't say necessarily – imply that it's somehow missing something. We just have a different strategy and a different view of what we could do.

Miles White: The only product out there that the Street has been able to compare it to is expensive and high cost and aimed at a niche in the United States. Ours is not expensive and it's not high cost. It does not lack for clinical performance, accuracy, or any of the like. But because the manufacturing is so sophisticated and automated, we were able to achieve a pretty low cost in what is a pretty sophisticated product.

It's a highly profitable product, so we haven't compromised that. It's a product that is successful in terms of profit. That's not been compromised at all. It has a completely different design and approach and cost structure. It relies on scale for that cost and we've actually seen improving gross margin. We told you before the gross margin is over 60%. It is and rising. And that's with a heavy capital investment, so that we can produce the kind of volume that is broadly available. I think among the misunderstandings out there, people say, “Well, geez, how do you make money?” Oh, we make money. We do just fine, thank you. And the product is designed to be affordable and accessible.

I guess there are some days when we think if the healthcare market community, insurers, payers, Congress, patients, whatever, are always saying, “it's got be lower cost, healthcare has got to be more affordable” – here's your example. And it is. It's massively so. And so, we've gone at it with that approach to make it broadly available. Broadly, in this case, means 80 million people worldwide. That's unprecedented.

So, I'm not sure that the device community has totally understood that because it's so different. But we keep saying so and I think now as the new capacity comes online, we've also staged the capacity so that literally every 90 days we're adding another increment, significant increment of capacity. We will not be capacity constrained.

And that kind of release is a lot of freedom to market and push the product forward and even open up markets we haven't opened yet. So, I think there's a lot of opportunity here and I think too, I think there's opportunity for a number of things like this. As I mentioned earlier, what's called the wearables market, the more affordable and accessible technologies make products like this. Then I think we're going to see a very different market expand here.


--by Albert Cai, Adam Brown, and Kelly Close