Memorandum

Medtronic 2Q20 (F1Q21) – Diabetes sales of $562 million, declining 5% YOY; MiniMed 780G European launch “this fall” and 770G approval in US this “summer”; committed to turnaround of Diabetes and CGM business – August 25, 2020

Executive Highlights

  • Medtronic reported 2Q20 (F1Q21) total Diabetes revenue of $562 million, declining 5% YOY (-3% operationally) on a comparison of 4% global growth in F1Q20 and roughly flat (down 1%) sequentially. At $562 million, 2Q20’s Diabetes revenue fell to its lowest point in three years (since 3Q17). However, compared to Medtronic’s overall 17% YOY decline across all Groups in the quarter, Diabetes fared comparatively well – Medtronic’s other businesses are primarily procedure based. As expected with the impact of COVID-19, Medtronic noted “delayed new patient starts” for its insulin pumps, though the impact wasn’t quantified. For some context, Insulet saw new patient starts down ~50% in the quarter, while Tandem appeared to see slightly less impact in the quarter.

  • Medtronic’s US Diabetes revenue totaled $287 million in the quarter, and although this fell 6% YOY, it also 5% sequentially on an easy comparison with 1Q20 as Medtronic Diabetes’ US sales fell 1% in the US. After 1Q20, when Medtronic Diabetes sales outside the US exceeded sales inside the US, US sales again won out in terms of sales just slightly – by about $13 million! See graph below. International Diabetes revenue of $274 million declined 4% YOY and 7% sequentially – we note that both YoY and sequential sales had tough comparisons as international sales grew in both 2Q19 and 1Q20, up 15% and 5%, respectively.

  • During Q&A, incoming Medtronic CEO Mr. Geoff Martha, in his fourth month on the job as CEO (and in his 11th year at Medtronic) emphasized the company’s commitment to its Diabetes business. On one analyst’s speculation that Medtronic would exit the diabetes field (a funny “day late and dollar short” comment in our view for multiple reasons, particularly given the recent acquisition of Companion Medical – see local Minnesota coverage here that reinforces the commitment), Mr. Martha stated, the rumors “didn’t come from us … we’re committed to this and we’ve never blinked and we’re not going to.” In addition to the company’s commitment to diabetes, Mr. Martha suggested the turnaround for Diabetes would be quicker than “three-to-five years.” As a reminder, Medtronic purchased MiniMed Diabetes in 2001 for just under $4.0 billion.  

  • On the product front, we were glad to hear that MiniMed 780G is slated to launch “in the fall” in Europe, in line with the plans shared after the device was CE-Marked in June. On the US side, approval of MiniMed 770G is expected “later this summer,” which will make it the first AID (automated insulin delivery) system available for two- to six-year-old patients in the US. The MiniMed 770G system is the pump hardware used in the MiniMed 780G system (submitted for FDA review in 3Q19) but with the same algorithm as the MiniMed 670G system. Today’s 2Q20 call didn’t offer any updates on the US timeline for MiniMed 780G. As of 1Q20, the 780G system and algorithm were set to launch in the US “later this fiscal year” (FY21 ends in April 2021). From our view, although there’s much more excitement about the more advanced algorithm than the hardware, Medtronic is smart to try to work through FDA in different waves to get to the 780G approval; this is kind of taking a page from Abbott’s book, where the company got approval for the FreeStyle Libre 2 for everything except the ability to combine the sensor with AID. While we would by no means position this as a top choice for Abbott Diabetes Care, it’s far better to have an approval of this kind and to get the last part of it separately. There has been no timing update the last part of the approval for Abbott, and while we could see the 780G taking longer than April 2021 to be approved – that’s only eight months! – that would be speculation on our part entirely.

  • Once again, Medtronic focused in on CGM during the call, with Mr. Martha calling CGM “the weak spot” for Medtronic’s Diabetes business and recognizing that the company has “got to catch up on the sensor side.” It’s fantastic to hear this acknowledgement and reminds us of the days in which BGM technology was still very heterogeneous – and then, the field got to the point where the technology differentiation was more unusual. Now, a range of other benefits differentiate BGM like coaching, decision support, etc. Encouragingly, during prepared remarks, Mr. Martha shared that the US pivotal for Synergy CGM is “now under way.” Enrollment is “going well” and Medtronic has received “great feedback” on the product thus far. As a reminder, the Synergy device has a new fully-disposable form factor, seven-day wear, and day 1 calibration only.

    • There were no updates on Medtronic’s Zeus iCGM (regulatory submission previously expected by “end of summer”) or non-adjunctive Guardian Sensor 3 (filed back in July 2019).

Medtronic reported its 2Q20 (F1Q21) financial results this morning on a call led by CEO Geoff Martha and CFO Karen Parkhill. Diabetes Group head Sean Salmon was also on the call during Q&A. Diabetes is on slide #11 here and read on below!

Financial and Business Highlights

1. Worldwide revenue of $562 million, declining 5% YOY (-3% operationally); US revenue down 6% YOY to $287 million; international revenue declines 4% YOY (-3% operationally) to $274 million

Medtronic reported 2Q20 (F1Q21) total Diabetes revenue of $562 million, declining 5% YOY (-3% operationally). At $562 million, 2Q20’s Diabetes revenue was its lowest in three years (since 3Q17). However, compared to Medtronic’s overall 17% YOY decline across all Groups in the quarter, Diabetes fared relatively well. Medtronic’s other Groups, Cardiovascular, Minimally Invasive Therapies, and Restorative Therapies saw YOY declines of 13%, 14%, and 15% respectively. As expected with the impact of COVID-19, Medtronic noted “delayed new patient starts” for its insulin pumps, though the impact wasn’t quantified. For some context, Insulet saw new patient starts down ~50% in the quarter, while Tandem appeared to see slightly less impact in the quarter. Medtronic released data last month on its experiences with virtual pump training, though it seems the pandemic is still impacting patients’ and providers’ willingness to initiate pump therapy. By our estimate, pump sales made up ~$332 million of Medtronic’s 2Q20 diabetes revenue while CGM sales provided the other $230 million.

  • US Diabetes revenue totaled $287 million in the quarter declining 6% YOY, but increasing 5% sequentially. US revenue declines were attributed to “delayed new patient starts and competitive challenges” in both AID and CGM, though they did bounce back from the seasonal 4Q-1Q drop-off from deductibles resetting. This quarter marks the sixth consecutive quarter of YOY decline for Medtronic’s US Diabetes sales. With a delayed roll-out of Medtronic’s MiniMed 780G in the US, we would be surprised to see any YoY revenue growth in the next quarter (3Q20) since sales would need to increase to $600 million, which we view as unlikely given the double whammy of COVID-19 and competition as well as the loss of sole-source UHG. That said, it’s clearly just a matter of time before the 780G will be approved at which point sales of automated insulin delivery devices should really expand; while they’ll be doing so anyway with Tandem’s Control IQ alone, anyway, when PWD have a choice of several systems, we expect this to prompt massive expansion in the entire market.

  • International Diabetes revenue came in at $274 million, declining 4% YOY and 7% sequentially. During 1Q20, as noted above, Medtronic’s international revenue overtook US sales, but this quarter US sales were back on top, though both geographies remain fairly close. Declining international revenue was attributed to pressure from COVID-19, something Medtronic expects to diminish in the coming months, especially in Europe where countries have had greater successes re-opening. In contrast to its US and emerging markets, Medtronic’s non-US developed markets actually saw slight YOY growth operationally (+0.4% YOY).

  • Particularly in the US, Medtronic continues to face strong competition on both the CGM and insulin pump fronts. As seen in the graph above, Medtronic’s Diabetes revenue has been steady or slightly declining for several quarters (though still at a large base). This comes in stark contrast to the hypergrowth seen by Abbott’s FreeStyle Libre and Dexcom and the strong momentum behind Tandem and Insulet

  • Notably, during prepared remarks CEO Geoff Martha discussed Medtronic’s Diabetes Group saying, We're missing out on the better growth of this market, and nobody at Medtronic is comfortable with this dynamic, and we're pushing on several fronts to advance our technology. We're actively increasing both our near- and our long-term growth opportunities through increased organic investment, innovative funding with our recently announced Blackstone partnership and inorganic activity highlighted by the announcement earlier this month of our pending acquisition of Companion Medical. Companion's smart pen technology expands our ecosystem to include the multi-daily injection portion of the diabetes market with a patient population that is nearly 12 times larger than that that use insulin pumps. But make no mistake, we are still very focused on regaining technology leadership in the pump and the sensor market. However, we're also going to meet patients where they are and provide them with real-time, data-guided support.” These were incredible words to hear from Medtronic’s new CEO, obviously particularly scripted.

2. Medtronic management still not giving US or OUS guidance though general commentary instructive; overall 3Q20 revenue expected to decline 9% YOY due to lingering effects of COVID-19

Due to lingering uncertainty around COVID-19, Medtronic continued its suspension of guidance, instead providing more general commentary on the business. CFO Karen Parkhill acknowledged that while there is “still uncertainty regarding the recovery,” Medtronic currently expects growth rates to continue their upward trajectory, from a base that has clearly declined. For the overall company, 3Q20 revenue is expected to decline approximately 9% YOY, compared to the 17% YOY decline this quarter and 25% YOY decline in 1Q20. Despite declining growth in the quarter, Ms. Parkhill also commented that “May was better than April, and June was better than May” and that these improving trends “continued into July and August.” Looking further ahead, Ms, Parkhill said Medtronic expects to see continued sequential improvement through 4Q20 and early 2021 returning to “normal growth” in the first half of 2021.

  • Breaking down 3Q20 expectations by group, Ms. Parkhill noted that Diabetes is expected to be “in-line” with the company average. Given that Diabetes has fared better than Medtronic’s other Groups in both 1Q20 and 2Q20, we’d expect Diabetes to see a slight decline or flat YOY in 3Q20 – reaching $600 million is what it would need to reach to see any growth, which we imagine is unlikely given COVID-19 and competition, though as noted, anything is possible since CGM and AID as markets should certainly see growth in 3Q20 ovearll. Medtronic’s Minimally Invasive Therapies group is likely to perform “better than the company average” due to “continued increased demand in [Medtronic’s] Respiratory business and increased volumes in surgical innovation,” while the Restorative Therapies group could “be a little below the total company” in the third quarter due to its larger reliance on equipment sales. Despite continuing potential YOY declines, Medtronic expects to see continued sequential growth across all Groups.

3. Investor and Analyst Day rescheduled for October 14th; “structural” and “cultural” changes to Medtronic coming, but committed to Diabetes (“not a three-to-five years turnaround [story], it’s going to be faster than that …” )

Notably, originally scheduled for June, Medtronic announced it will host its Institutional Investor and Analyst Day on October 14 this year. According to Mr. Martha, Medtronic will use the Investor Day as an “opportunity to lay out where we’re headed, including a deeper dive in our pipeline now that it’s coming to fruition as well as the actions we’re taking to simplify the company.” That is an interesting strategic shift for Medtronic to be taking.  On the second point regarding changes to the company, Mr. Martha noted that though he didn’t want to “go to deep” on them today, but broadly speaking, these changes will center around “structural changes that empower [Medtronic’s] businesses to make decisions.” The changes are aimed to enable the company to be “nimbler and faster” recognizing Medtronic’s often “smaller-focused” competitors. And, Mr. Martha also emphasized that Medtronic is capitalizing in the areas where its larger scale is beneficial such as “technology platforms” and encouraged listeners curious about these updates to attend the company’s Investor Day in October.

  • In addition to the hints at some changes coming to Medtronic, during Q&A, Mr. Martha emphasized Medtronic’s commitment to its Diabetes business. We thought, again, this was meaningful, since it would’ve been easy to skip. In addition to the commitment, Mr. Martha expressed strong optimism for the Diabetes Group, saying it won’t take “three-to-five years” to turn around the business, but would actually happen faster. Martha was also quick to express obvious admiration for Mr. Salmon as a leader at Medtronic – Salmon has been fast to gain admirers in diabetes (see here for more background).

    • “Speaking on Diabetes, you said three-to-five years. I'm not even going to ask Sean [Sean Salmon, Diabetes Group President] this question because I know the answer is not three-to-five years. It's going to be faster than that. I think when we get 780G out there, it's going to be a big step forward. Like I mentioned, our sensor pipeline is the weak spot here. We feel good about that, and again, I wish it were faster, but it isn't three-to-five years. The rumors about Diabetes [about potentially exiting], they didn't come from us. I mean, we're committed to this and we've never blinked and we're not going to.” – Mr. Martha

Pipeline Highlights

1. MiniMed 780G “launching in the fall” in Europe; MiniMed 770G slated for US approval “later this summer”; no updates on MiniMed 780G in US

MiniMed 780G is slated to launch “in the fall” in Europe, in line with the plans shared after the device was CE-Marked in June. A fall launch would be a nice win for Medtronic: getting the second-generation hybrid closed loop system in European markets before Tandem’s Control-IQ and Insulet’s Omnipod Dash would certainly strengthen Medtronic’s OUS position. According to Tandem’s 2Q20 call, Control-IQ is now available internationally in the UK and South Africa, with broader rollout through the rest of the calendar year. Insulet’s Omnipod Dash has launched in the UK, Netherlands, and Italy, but broader rollout has been pushed back to 2021. Though Medtronic didn’t share a user base update for MiniMed 670G, the first-generation system’s growth has flattened due both to COVID-19 as well as the Tandem’s highly competitive Control IQ, which was approved by the FDA last December and covered by NEJM last October (virtually unprecedented for diabetes technology, particularly the inclusion of an editorial in the hallowed journal) – see more details in our Tandem 2Q20 quarterly report. Launching the upgraded 780G system should help boost Medtronic’s international pump sales and we’ll certainly be looking for dQ&A to update the field on patient preferences in and around Europe – contact dQ&A CEO Richard Wood if you aren’t receiving their reports.   

  • US approval of MiniMed 770G is expected “later this summer,” which will make it the first AID available for 2-6-year-old patients in the US. The MiniMed 770G system is the pump hardware used in the MiniMed 780G system (submitted for FDA review in 3Q19) with the same algorithm as the MiniMed 670G system. While this will be an exciting AID advancement for Medtronic in the US, we see the algorithm as the key differentiator between the 670G and the 780G rather than the hardware, meaning that the real advancement will come with the approval and launch of MiniMed 780G in the US. As a reminder, those who purchase the MiniMed 770G system will be able to upgrade to the 780G algorithm for free when that algorithm is launched.

  • Today’s 2Q20 call didn’t offer any updates on the US timeline for MiniMed 780G. As of 1Q20, the 780G system and algorithm were set to launch in the US “later this fiscal year” (FY21 ends in April 2021). The ~3.5-month, single-arm (n=175) adult pivotal trial was read out at ADA in June and showed a 1.4 hour/day gain on Time in Range and a 0.5% A1c improvement compared to baseline (either sensor-augmented pump therapy or MiniMed 670G), as well as a very impressive 95% time in closed loop. At ADA 2020, Medtronic also highlighted a 780G study from New Zealand, which was used for the system’s CE Mark submission and compared the 780G system to the predictive low-glucose suspend MiniMed 640G system. That study found that with 780G and a set point of 100 mg/dl, Time in Range increased 3.3 hours/day and that participants spent 96% of time in closed loop. The US pediatric pivotal (ClinicalTrials.gov page) is now slated for a September 30, 2020 primary completion date with the full study complete in January 2021, a further delay from 1Q20 expectations for primary completion in August.

  • As a reminder, MiniMed 780G adds: automatic correction boluses (in addition to basal modulation), an adjustable target down to 100 mg/dl (most of the data shared at ADA focused on 780G with the lower 100 mg/dl set point), fewer alarms, and simpler operation. Medtronic is catching up to Tandem by adding remote software updating and a mobile app for secondary display and wireless data uploads. As a reminder, the Guardian Sensor 3 has already been submitted to FDA for a non-adjunctive indication, but we didn’t hear any updates on that timeline this quarter (see below). The Guardian Sensor 3 CGM is the one piece that is significantly behind competitors, as it will require two fingersticks per day and only offer seven-day wear.

Slide taken from Medtronic’s ADA 2020 Analyst Day

2. US pivotal for Synergy CGM “now under way” with enrollment “going well”; no updates on Zeus iCGM or non-adjunctive Guardian Sensor 3

Once again, Medtronic focused in on CGM during the call, with Mr. Martha calling CGM “the weak spot” for Medtronic’s Diabetes business and recognizing that the company has “got to catch up on the sensor side.” Encouragingly, during prepared remarks, Mr. Martha shared that the US pivotal for Synergy CGM is “now under way.” Enrollment is “going well” and Medtronic has received “great feedback” on the product thus far. As a reminder, the Synergy device has a new fully-disposable form factor, seven-day wear, and day 1 calibration only. The ongoing US pivotal for Synergy CGM is clearly the bright spot for Medtronic’s CGM pipeline, and neither the Zeus iCGM nor the non-adjunctive Guardian Sensor 3 were mentioned.

  • During Q&A, Mr. Martha shared that in terms of CGM, “there’s lots of opportunities for R&D investment and that’s probably, 70%/80% of what we’re talking about internally is this pipeline and how do we feed it, how do we speed it up.” Of course, accelerating Medtronic’s sensor pipeline will have dual benefits: building better AID systems will require better CGM technology, and the Guardian Sensor 3 CGM is clearly the weak link in Medtronic’s current AID offerings. Guardian Sensor 3 is far behind Dexcom G6 and FreeStyle Libre 2, requiring twice-daily fingerstick calibrations, is adjunctive and not interoperable, has only a 7-day wear length, lacks a pediatric indication (only 14+ years) and Medicare coverage, and is not available in pharmacies. We have long speculated that Medtronic will need a non-adjunctive CGM to enable MiniMed 780G’s automatic bolus feature. Of course, Medtronic is working on getting Guardian Sensor 3 approved for non-adjunctive use, but the company offered no updates on that timeline, which will likely have to come before MiniMed 780G approval.

  • Medtronic didn’t offer any updates on the regulatory submission of its Zeus iCGM, which was expected by the “end of summer” in 1Q20. In May, the pivotal trial was either finished or expected to finish by the end of the month. Zeus isn’t a big step forward from Guardian Sensor 3 – it has the same form factor, reusable transmitter, and 7-day wear – but drops to day 1 calibration and likely meets iCGM criteria, both of which are huge for the stand-alone CGM product and for its integration into an AID system (e.g., Tidepool Loop).

3. Companion Medical acquisition “expands our ecosystem” to include MDI and creates pipeline for user transition to AID systems; Companion + Digital Surgery + Medicrea acquisitions total ~$1 billion

Medtronic’s recent Companion Medical acquisition was clearly a highlight for the Diabetes Group in 2Q20 – announced just two weeks ago (exactly), in what is clearly an extremely exciting strategic purchase. The acquisition was the first bullet of the company’s diabetes slide of its 2Q20 earning presentation, which noted that the InPen is the only FDA-cleared smart insulin pen that is paired with an integrated diabetes management app. During his prepared remarks, Mr. Martha shared his enthusiasm for the acquisition’s potential and Medtronic’s plans to build a system combining in-pen with smart CGM tech and Nutrino and Klue AI algorithms: “Companion's smart pen technology expands our ecosystem to include the multi-daily injection portion of the diabetes market with a patient population that is nearly 12 times larger than that that use insulin pumps.”

  • During Q&A, Sean Salmon elaborated on the Companion Medical acquisition, sharing that the MDI market is “very, very under-penetrated” with ~13.5 million people with diabetes using MDI worldwide for whom Medtronic has the opportunity to “add value” through the acquisition. As we had previously speculated, Mr. Salmon also sees the smart pen acquisition a pipeline for patients who could move from MDI with InPen to Medtronic’s AID systems like MiniMed 670G and 780G as they become increasingly comfortable with insulin delivery technology. 

  • Mr. Martha also noted two other tuck-in acquisitions outside Medtronic’s Diabetes Division, Digital Surgery and Medicrea, both surgical AI companies that Medtronic acquired or is in the process of acquiring this calendar year. Together, the three acquisitions total ~$1 billion in total consideration. We noted during the company’s last call that it might be an opportune time to look at acquisitions, given many company valuations were reduced by the COVID-19 pandemic.        

4. Not mentioned: Extended Wear Infusion Set, Personalized Closed Loop, Tidepool Loop, Sugar.IQ app improvements, Novo Nordisk smart pen integrations

Outside of Companion, Synergy CGM, and MiniMed 780G and 770G, there were no updates on the rest of Medtronic’s Diabetes pipeline.

  • At ATTD 2020, Medtronic announced CE-Marking for its 7-day extended-wear infusion set with launch in “selected countries” slated for “early 2021.” In the US, the extended-wear infusion set has IDE approval and according to this ClinicalTrials.gov page, the trial is still expected to complete in October 2020. The multi-site, non-randomized, prospective, single-arm pivotal study (n=150) compares current 2-3-day infusion sets to the new 7-day extended wear sets. In early July, Medtronic announced the US launch of its MiniMed Mio Advance infusion set, an all-in-one, fully disposable, 3-day infusion set, which received FDA approval last year. The early OUS feedback for the product has been “fantastic” with 85% of users preferring Mio Advance over previous infusion sets.

  • Personalized Closed Loop – FDA submission in November 2020-April 2021 and launch by ADA 2021. This will have a lot of investment in the algorithm, leveraging the Nutrino and Klue acquisitions. Both of these acquisitions should help Medtronic strengthen its efforts to advance the Personalized Closed Loop which is supposed to include meal prediction (“no more carb counting”).

  • Since the announcement, we have not heard any updates on Medtronic’s partnership with Tidepool Loop. Though there is certainly at least a remote possibility the 780G hardware (already submitted to FDA) was filed as an interoperable ACE pump, this hasn’t been confirmed. The initial interoperability announcement caught some off guard, and while we certainly applaud Medtronic for recognizing the value of and supporting a growing interoperable ecosystem, we wonder the degree to which the announcement was just marketing (the company knows this is a popular topic) and to what degree it’s actual dictating product strategy.

  • Medtronic had previously mentioned that it planned on launching “smart-guide” system for Sugar.IQ by April 2020, but of course, we’ve past that deadline and haven’t heard any updates on the product. The system would add basic” CGM-based insulin dosing guidance, a predictive trace, and some advising. By April 2021, Medtronic plans on adding a “virtual optimizer” to bring more personalized dosing with the Synergy disposable sensor. Given the lack of updates on this product, we are not certain if these timelines are still current.

  • Medtronic’s CGM and Novo Nordisk’s smart pen data integration partnership, announced at EASD 2019, went unmentioned. As of DTM 2019, Novo Nordisk’s smart pens were expected to launch in 2Q20, presumably beginning OUS, and we haven’t heard updates of whether that is actually happening. While we are also officially unsure of how the Companion Medical InPen acquisition might impact that partnership, Medtronic management was clearly very clear at the time of the acquisition that its relationships were of the utmost importance.

Q (Robbie Marcus, JP Morgan): You're clearly leaning in on R&D. I was wondering where are these dollars going? What are the projects that you're seeing and your investing in? And then maybe along those lines, you're also clearly investing heavily in Diabetes. There was speculation a while ago maybe you'd exit that business. It looks to me less likely given how much you're putting into resources here. What's the latest thoughts? You have new management, lots of investment there. How should we be thinking about this business? And is this a three-to-five-year turnaround story or is it something we could see in the shorter term?

Geoff Martha, CEO: In terms of the R&D increases, yeah, we want to put more into R&D both and be creative, and when I look at R&D, we're looking at traditional R&D off our income statement, these creative third-party partnerships like Blackstone, which have a very good return on them are also something we want to use and our inorganic, because most of what we're buying is technology oriented tuck-ins which are all somewhere on their path to commercialization or just been commercialized, so all this gets back to investing in areas in our business.

We just have a lot of great ideas. The old idea that our eyes are bigger than our stomach, we want to get more R&D capability here. We've got just to list some of the products. We're talking about our pipeline today that's coming out, right? But the R&D and there's some R&D that needs to go into sustaining that and iterating that things like Spinal robotics and things like that. And we're not done. We're just getting started so there's a lot more to go into there, but some of the things that are on the pipeline like RDN, that's a multibillion opportunity there, the EV ICD, I'll start with cardiac here, PulseSelect pulsed-field ablation, just those three are I'd call more medium- term for us and are very exciting and I think could use more investment to speed up and drive bigger impact.

And in RTG, there's always more to invest in neurovascular, Brett Wall and Stacey Pugh makes sure of that. There's lots of products there and it's a high-growth area. Like I mentioned DBS, we have a directional lead system coming out. We want to invest in closed-loop. I'd just – look, neuromodulation is a big growth opportunity for the industry, for the company and I think it's going to have a huge impact on patients.

And then MITG, obviously the soft tissue robot in what we talked about the timeline there, but we still have to commercialize that. That's going to take some investment. It may not show up in the R&D line, but we need to invest there and we mentioned in the commentary some of the products starting to come out from our Digital Surgery acquisition, this Touch Surgery enterprise. We're very excited about that as we move. We believe we're leading in robotics, soft tissue robotics, the AI side of it and so there's a lot of opportunity there.

And then of course Diabetes. We've got to catch up on the sensor side and I don't think everybody picked up, but we're really excited about the sensor pipeline here. I wish it were happening even faster, but it is accelerated from what we – we're well into the Synergy trial enrollment rather and getting great feedback on that, so there's lots of opportunities for R&D investment and that's probably, I don't know, 70%/80% of what we're talking about internally is this pipeline and how do we feed it, how do we speed it up. So very excited about that.

And then speaking on Diabetes, you said three-to-five years. I'm not even going to ask Sean this question because I know the answer is not three-to-five years. It's going to be faster than that and I think when we get 780 out there, it's going to be a big step forward. Like I mentioned, our sensor pipeline, which is the weak spot here, that is we feel good about that, and again, I wish it were faster, but it isn't three-to-five years. So and the rumors about Diabetes, they didn't come from us. I mean, we're committed to this and we've never blinked and we're not going to.

Q (Raj Denhoy, Jeffries): Wonder if I can ask about Companion Medical. You talked about the potential for that product in the Diabetes market, but maybe you could share a little bit about your internal projections for revenue growth for that and when it could start to be a meaningful contributor to your growth?

Sean Salmon, Diabetes Group President: Yeah, so as Geoff said, the deal's not yet finalized, but the opportunity is very attractive. You'd heard Geoff's commentary recently. There's about 12 times the number of patients. It's – we think by our modeling, it's about 13.5 million patients worldwide who are using multiple daily injections to treat their Diabetes and it's a very, very under-penetrated opportunity so for us to go into that market, and add value to those who either choose to be there or have to be there because of other consideration, is where we want to meet those patients.

And this really dovetails very nicely into our improving sensor pipeline and adding the capabilities that we've added at the company over time, those building blocks for the powerful AI and data science capabilities which we think when deployed against knowing how much insulin you're getting at what time, you can markedly improve the outcomes for patients who choose to use multiple daily injections. So those are a few things, right? We can capture more of the patients who are upstream and maybe move patients who get comfortable with technology into some other solutions that we have in our automated insulin delivery systems.

 

--by Hanna Gutow, Katie Mahoney, Albert Cai, and Kelly Close