Dive Brief:
- Embecta said Tuesday that it will cancel its insulin patch pump program just months after receiving clearance from the Food and Drug Administration for its first product.
- The Parsippany, New Jersey-based diabetes tech company announced plans to discontinue the program as part of a restructuring intended to reduce costs. Embecta expects pre-tax charges of up to $45 million in fiscal year 2025 from the move.
- “The decision to cease the pump program may come as a surprise,” Embecta CEO Dev Kurdikar told investors. “However, it is important to understand that we did not intend to do a full-market launch of this product, as the open-loop product currently cleared requires additional announcements to be commercially competitive, including extensions of the product’s shelf life as well as enhancements in the form of making the device compatible from a bring-your-own-device perspective.”
Dive Insight:
Embecta received FDA clearance for its insulin patch pump in September. The device is indicated for people with Type 1 or Type 2 diabetes and includes a 300-unit insulin reservoir to support people with higher daily insulin needs.
However, the version Embecta received clearance for was an open-loop patch pump, where users manually control insulin delivery, while the firm’s goal was to develop a closed-loop version, which automatically delivers insulin when needed.
Kurdikar said it would take “several more years of significant investment” to complete a clinical study, obtain FDA clearance for that device, and build up commercial and support functions. The CEO also expects competition in closed-loop devices for people with Type 2 diabetes to intensify, with Insulet receiving FDA clearance for its Omnipod 5 patch pump for Type 2 diabetes in August.
After Embecta received FDA clearance for the open-loop pump, the company performed a market check to identify potential opportunities to monetize the asset.
“Since this did not surface any viable options, we acted promptly,” Kurdikar said.
Embecta expects to complete the restructuring in the first half of 2025. It expects annual pre-tax cost savings between $60 million and $65 million.
The company will focus on its core business and prioritize its free cash flow toward paying down debt.
“This is something many investors we have spoken to over the past several quarters have wanted to see, as there was skepticism about the attractiveness of this market for [Embecta] and the level of spending needed to compete effectively,” BTIG analyst Marie Thibault wrote in a research note on Tuesday.
Embecta expects to incur pre-tax charges of from $35 million to $45 million in fiscal year 2025 related to the restructuring plan. Of that total, it expects to pay from $25 million to $30 million in cash charges for planned workforce reductions and other associated costs from discontinuing the patch pump program.