Okay. Good morning. I'm Ryan Weispfenning, Vice President of Investor Relations at Medtronic. Thanks for coming to our diabetes investor briefing here at the American Diabetes Association Conference here in San Francisco, and welcome to those joining us around the world on our webcast. So before we get started, I want to note that we could make some comments that may be considered forward looking statements, and actual results might differ materially from those projected in any forward looking statement.
Additional information concerning factors that could cause actual results to differ is contained in the periodic reports and other filings that we make with the SEC, and we do not undertake to update any forward looking statement. I encourage you to go back and read the slide, which is number 3 for those that are listening on the webcast. And the slides we are presenting today, along with our non GAAP reconciliations, are available on our website at investorrelations.medtronic dotcom. So today's webcasted event will last about an hour. Omar Ishrak, our Chairman and CEO, will kick things off.
And then Hooman Hakimi, our Executive Vice President and President of Diabetes Group will walk through our performance and outlook. And then Ali De Anadi will cover the 670 gs update as well as our product pipeline and Hooman will close things before we have a panel here of diabetes management and Mike Weinstein, our Senior Vice President of Strategy will take your questions. We plan to wrap up about noon Pacific Time, so about an hour from now. So with that, I will turn the presentation over to Omar. It's not synced there.
Okay.
There we go. All right. Good. Thanks. Thanks, Ryan, and welcome to all of you.
Great to see all of you here. And I just wanted to say a few words to kick this off. And then it's really over to the team to go through in detail about our pipeline and road map and the excitement that we have about this business. To start with, look, I remain confident in our FY 'twenty growth outlook, both for the company that we laid out as well as for diabetes, which you'll hear a lot about. And in diabetes, a few points that I want to give initial perspective on that you should all bear in mind.
First, our international growth for 670 gs is only beginning. We had a pretty strong year last year internationally. It was in the well into the double digits. And there's many countries where we're just launching the 670 gs. So that momentum is one that we're pretty confident about, and we're seeing pretty good signs as we go into FY 'twenty.
The other thing is that our installed base continues to grow. And with that installed base, there's some business dynamics that you'll hear about, some of the business that we can actually predict to a fair degree of accuracy that Hooman will lay out for you. But much more important than that is the pipeline and the acceleration that, that will create towards the end of this fiscal year and really kicking into next year. We're excited about it. I'm excited about it.
It's got great products. It's a market that we've got a lot of insight in, a technology that we spent decades building, learning and getting experience with real patients in and one that we truly are excited about and I'm really anxious and excited about sharing some of these concepts in greater depth than before with you today. That pipeline is really robust. And I also want to point out that this is not just in the closed loop, but also in CGM. The closed loop obviously is a market that we created.
It's a vision that we've had for decades and one that came to reality several years ago and one that spurred a lot of excitement in the industry amongst both patients and our competitors and one that we will we are committed to continue to lead and continue to grow and one that's got a long runway ahead of us, and you'll hear about that in-depth today from the different presenters. And the panel will have, I'm sure, excellent insight into that. But I want to also close by saying that the CGM area as well is one that's important. I mean, that's a big piece of diabetes. That's got a close connection to the closed loop system itself.
And I know that we've had some level of issues there where we've been behind in some areas, but one that we're committed to catching up and eventually leading. And you'll hear a pretty clear and exciting roadmap in that area as well. I'm just going to leave it with that and now I'm going to introduce Humana to really go into the real meat of the matter today. Unfortunately, I cannot stay. I've got I don't come to the ADA that often, but I happen to be here this year, and I've got some appointments with some key customers that I want to spend some time with.
But you're in great hands here. And thank you again for your interest as you show in Medtronic for being here and such good representation. And I'm sure you'll have a great afternoon here today. Thank you. So, Humayun?
Thanks, Humayun. Yes. Great. All right. Good morning, everybody.
All right. It's great to actually see everybody here and really excited to talk to you about some of the exciting things that we're doing within diabetes. We're going to spend a little time doing a little bit of a retrospective talking about FY 2019, but also spending even more time kind of drilling into FY 'twenty and sort of peeling things back. But the bulk of what we're here to talk to you about is the innovation pipeline that Omar laid out. And I think you will be hopefully as excited as we are about this innovation pipeline and all the things that are in store for us.
So let's get into it. If you look at the track record of the diabetes group within Medtronic, it's actually been a story of, I think, very strong organic growth. And if you go all the way back, as you can see, back to FY 'thirteen to where we are and where we left FY 'nineteen, this is a business that has delivered over $1,000,000,000 about $1,000,000,000 of incremental organic growth to the company. And if you take a look at how we performed last year in particular, there's a lot of things that we're excited about. FY 'nineteen for us was a year where we exited with our highest revenue ever.
FY 'nineteen was a year where we continued to have very, very strong worldwide market share. It was a year where we grew our installed base, and we'll talk a little bit about this dynamic and why this is so important for us. And it's a year where we grew the installed base in the mid single digit range, both globally as well as in the United States. And while, as Omar mentioned, it's clear that we have some gaps in our CGM portfolio and we're addressing those gaps in the stand alone space, CGM as a category is still a business for us on a stand alone basis that is growing and growing incredibly well. And last year, we grew that business in the triple digit range, and we're very confident in our ability to continue to grow that business and, as new innovation comes, accelerate that growth.
Now as excited as we are about where we left FY 'nineteen, I know sitting in your chair, it was probably hard to model the diabetes business for Medtronic. There was a lot of lumpiness and choppiness with respect to the quarter to quarter volatility and fully recognize that. There's a number of different dynamics that were in play, and you heard these on our conference calls around sensor capacity in FY 'eighteen, us trying to ramp that up, getting it up in FY 'eighteen, satisfying a bolus of back orders that we had and then dealing with the comp dynamics of all of this in FY 2019. It led to choppiness and, as I said, total recognition that this is hard to model. But if you take a look at it and you start to adjust for those dynamics and look at it on a 2 year stacked basis and look at this business and its revenue and adjust for the dynamics around capacity and comps and all of those things, Animas, that we've talked about.
The 2 year stacked performance for this business on a quarter over quarter basis is actually very strong. And you can see the last 6 quarters, in particular, we have been in the double digit range from a growth perspective. And so fully appreciate it's been hard to model, but I leave you with this just to hopefully share with you why we have continued confidence in this business. Now let's talk a little bit about FY 'twenty. And in order for us to understand FY 'twenty, I think it's important for us to sort of peel back some of the elements that are part of our global business, okay?
And these elements of the business are critical to understanding sort of the outlook that we have talked about for the business as well as our confidence in that outlook. And I want to spend a little bit of time talking about these elements because we'll double click on each of them as we go. So in FY 'nineteen, we exited the year with $2,400,000,000 of revenue. And really, the way to think about it is there's an international business and a U. S.
Business. And if you just start there and look at how much of each contributes to the overall, you can see the international element of our portfolio is about 45% of our global business, and our U. S. Business is the remainder, the 55%. Now within the U.
S. Business, it's important to understand that there's 2 dynamics to the U. S. Business that drive that. The first one is our installed base.
And when we talk about our installed base, these are patients, our patients that are on pump therapy. And since they're on pump therapy, these patients are actually every 3 days using infusion sets. They're using reservoirs. Every 7 days, they're using continuous glucose monitors, right? So they're reordering these things over and over again.
And so as that installed base grows, this piece grows. And we'll double click on this and explain to you why we how we think about this. That's the installed base. Now the other piece of our U. S.
Business is new patients and renewals. So let's start with renewals. As patients come out of their 4 year warranty cycle, they renew their pumps. If the pump breaks and it's a medical necessity and they need a new pump, these are patients that are eligible for renewal. That goes in the far right bucket.
In addition to that, we have patients that are converting from multiple daily injection. We have patients that are converting from our competition. That makes up the remainder. And you can see that's about $600,000,000 And obviously, as we renew these patients, as we acquire new patients from MDI or competition, they start to use consumables and CGM and all of that. And so it's not just a pump shipment.
It's a whole set. And so when you put this all together, these are the big components of our overall revenue stream. So now let's talk a little bit about each of these three pieces. First, the international revenue. When you look at the international revenue, as I mentioned, this is 45% of our global business.
We feel very confident in this portion of our business' ability to grow and to grow at double digit rates. And we feel confident about that ability for a number of different reasons. 1, if you just look from a financial standpoint historically, we grew double digits in FY 'nineteen, number 1. Number 2, we grew double digits in FY 'nineteen largely without the benefit of the 670 gs in these geographies. So the 670 gs is just starting to ramp up in Europe, in Australia and in other markets around the world.
In addition to the 670 gs launch dynamics, we also have increased CGM adoption and increased CGM penetration in the international markets, which is a catalyst for growth. So when you take our historical performance, the fact that 670 gs is going to be ramping up even more in FY 'twenty, You look at CGM penetration and adoption in these markets, we feel very good about our ability to grow 45% of our business in the double digit category. So that's number 1. Now let's turn to the U. S.
Revenue. And instead of trying to attack the U. S. Revenue in aggregate, let's talk about it in its respective pieces. And then the first piece is the installed base.
The installed base for us, when you peel it back, is about onethree, 30 percent of the overall global revenue, right? I mentioned U. S. Is 55%. 30% of the overall global revenue is the installed base component.
And as I mentioned, this is a function of the installed base size. It's a function of reordering rates. It's a function of CGM penetration into that installed base. Now you can see we expect modest growth in the installed base. And now if you from a modeling perspective, if you think about an installed base at scale, this is not a number that grows dynamically.
And honestly, this is something that makes us very, very different from our competition. We have a large established installed base that is going to grow in the mid single digit range. Our competition, on the other hand, particularly the ones that are still in the early stages of growth, are going to be accelerating their installed base as they grow. But for us, it's in that range that you saw in FY 'nineteen. So it's not a growth catalyst in that it's going to allow us to grow in the double digit range, but it's actually quite stable.
And so we expect continued modest growth in FY 'twenty, and we feel comfortable with this and confident in this. Why? As I mentioned, our installed base grew in FY 'nineteen. That's one big reason. 2nd, as we look at our attachment rates in that installed base, the attachment rates in the installed base are not only stable, they actually continue to grow.
And then the reorder rates for things like infusion sets and for reservoirs are very stable. So the fact that the installed base is growing, the fact that CGM penetration in that installed base is growing and the fact that patients are ordering in a stable way based on what we've seen historically makes us confident in our ability to grow onethree of our business in line with how our installed base grows. That's the 2nd piece. Now the 3rd piece, the new patients and the renewals. Now admittedly, this is the most volatile element of the overall business.
This is about 25%, a quarter of our total revenue globally. Now what we are projecting for the U. S. Business for new patients and renewals in FY 'twenty is flat to slight growth, as you can see. Now why do we think that the U.
S. New patients and renewals are going to grow in this range? Well, there's a number of reasons for that, and I'll walk you through. 1st, we actually have more patients that are up for renewal in FY 'twenty in the U. S.
Than we did in FY 'nineteen. Now why is that a dynamic? Well, to understand that dynamic, you have to go back 4 years ago to what we sold 4 years ago and how many patients came under our warranty. And so when you go back 4 years ago and compare, this is why we have more patients this year coming out of renewal than what we did last year. It's just a function of that dynamic.
The second is that we see constant pretty steady constant and consistent renewal rates in FY 'nineteen. So when we look at our FY 'nineteen, our ability to capture our patients coming out of warranty and compare those with historical rates over the past several years is actually pretty consistent. And then the last one is around new patients. Now new patients for us, there's a number there's a couple of different dynamics that are going to be critical for us in FY 'twenty that will help us with new patient acquisition. 1 is we expect actually to get Medicare expansion through non adjunctive labeling in FY 'twenty.
This is a dynamic that did not exist in FY 'nineteen. We expect it to exist in FY 'twenty, and we think that is going to help us. And in addition to all of that, there are some other approvals out there that we feel good about that are going to help us. So you put all of that together, flat to slight growth in the new patient and the renewal category. Now you put all of those pieces together, double digit growth in 45% of our business, modest growth in our installed base, right, and in line with what we have seen historically and with our installed base growth and flat to a slight increase in our new patient and renewals in the U.
S. In FY 'twenty. You put all of that together, and our you see our guidance, 6% to 8% for the diabetes business in FY 'twenty, and it's exactly why we feel confident in our ability to do this. So hopefully, that helps sort of peel back the diabetes group, what the dynamics are for our business, helps you understand it from a modeling perspective and also gives you some confidence in our ability to deliver on what we had guided to on the last earnings call. Now that's FY 'twenty.
We're even more excited about the future for this business. And the reason we're even more excited about the future for this business is because we have never had a richer pipeline of innovation in the diabetes group. Never. And what my colleague Ali Diannotti, our Vice President of R and D, is going to walk you through is just a sample of what is in that funnel. What we're going to show you is a window into the next 24 months.
We could expand that window and go next 60 months, but for the purposes of this discussion, we're only going to talk about the next 24 months. And what we're going to talk about in the next 24 months is incredible. We are going to talk about systems that are going to continue to improve outcomes for our patients, better time in range. We're going to talk about systems that are going to continue to reduce the burden for our patients. We're going to talk about our sensor road map and how we are going to address some of the limitations that exist today and create something that we feel is going to be incredibly competitive in the stand alone market.
And so I'm very excited by this. Ali is going to walk you through it, and then I'll be back up to close out and answer any of your questions. So with that, I'll turn it over to Oli. Thanks.
So it would be remiss to not talk about 680 670 as a starting point. And with it, knowing that this was first of its kind, a lot of firsts have come. 1st, starting with the number of patient days, we're now up to 8,000,000 patient days' worth of data against 180,000 patients. And we have maintained our performance as it relates to time in range of 71%. That's not an easy endeavor for anybody competition currently is still on clinical trial, we have an abundance of data for us to create the future on.
And what I'll be talking to you about is essentially that. And with it and you can see this in our booth as well if you had a chance to walk through it. Recently, the ADA put out guidelines. And in all cases, the 670 gs exceeds those guidelines, not only in time and range but also in A1c. And I think the more important thing, if we go back in history a couple of years and think about those ADAs, everybody was actually only talking about A1C.
And we've changed the narrative a lot with 670, and now we're all talking about time and range. And there's a reason for that. It's important. A1C by itself being a 3 month to 3 month marker doesn't do justice by the patient. They need to see what's happening with their diabetes on a day to day basis and make the necessary adjustments to deal with that.
And as such, we've also learned quite a bit from what has happened with 670. We've made some changes with the agency's help as well to fix some of the issues that I'm sure you've been hearing as well out in the field. This notion of VG loop is something that we have taken care of with our new transmitter, and we're seeing good outcomes as a result of that as it relates to the time which the algorithm is in control of the management of their insulin, so what we call time in auto mode. And that's consistently been improving as a result of this change. And again, that one change, that one fix made a significant improvement.
But more importantly, I think it's important it's good for us to explain where we've been and where we're going. There's a lot of firsts that Medtronic has been able to deliver. We were the first with sensor augmented pump, first to stop the dosing of insulin once patients were going low, of course, first with basal insulin delivery with hybrid closed loop. And where we're going here is actually a number of others. First, we believe to have a target of 100 mgdl, and I'll explain what that means.
And then more importantly, 1st, to actually predict when patients are eating. And as a result of that dose for their meals and simplify that whole carb entry. And I'll go into some detail as to what that is. This is such a big deal that the FDA granted us a breakthrough designation for it because they also agree that being able to predict what a patient is doing as it relates to their lifestyle is life changing. And because it's life changing, they wanted to work with us interactively on what's called personalized closed loop and get it to market as quickly as possible.
So thinking about the context of what makes a good closed loop algorithm, there's a number of things that go into it. 1st and foremost, thinking about the target or what we're trying to get the patients to be on a day for day basis as it relates to their glucose levels. This drives not only their time and range but also their safety performance. So it's both that we have to worry about as it relates with that target. The second is how much automation are we actually doing for the patient relative to them being handling their disease on their own.
And this is what we have been calling time in auto mode. And with it, if they're in our algorithm, we're obviously managing their insulin for them. And if they're not, they have to take care of management of not only their meals but making sure they have to do corrections and the like. And then last but not least, it's trying to get around probably the one place where there's the biggest error in the system because the patients are involved, and that's carb counting and making sure that they're calculating what they're eating the right way to match their insulin dosing. And all of that in this next gen system is going to be improved upon.
So starting with the target. With the agency in the original 670 gs timeframe, we actually wanted to have the device go to 100 MGDLL or a target of 100. And the reason for that is patients actually are trained to shoot for 100 on a day for day basis because that's the place that they're going to get the best outcomes. Unfortunately, because of the safety margin from 100 to where hypoglycemic occur below 70, there's not a lot of safety margin there. It's only 30 MGDL.
And so the agency was uncomfortable with us going that low as a first of its kind. And therefore, we set our target to 120 to give us more room. Well, ironically, when we talk to patients about this, this is the single biggest complaint that they have about
the system. They want to go lower.
They all want to
be at 100. And think, So its safety as it relates to reducing this target is identical to that of 670. And with it now, patients are going to feel more comfortable and feel like they're actually managing their disease better as a result of being at 100. Next, if we think about this time in auto mode, and we've shown this data in a number of places, when patients are in auto mode, their outcomes are better. And of course, that's because we're dosing their insulin directly.
And so if you can keep increasing that time where they're inside of the algorithm, the likelihood of their outcomes being better is much higher. And currently, with this new transmitter that I just mentioned, we're getting 85% time in auto mode. But with the advanced hyper closed loop system, through our feasibilities, we have shown that patients stay in the algorithm 99% of the time. The only time they have been out actually is when they're making set changes, filling their reservoir and replacing sensors. Otherwise, we've been able to keep them within the algorithm.
And then last, this whole notion of meal handling. On average, patients, number 1, as it relates to counting their carbs so that they can get their proper insulin dosing, are not great at it. Their error sometimes is plus or minus 50%, which means that their insulin dosing is off plus or minus 50%. With this system, we're simplifying that altogether and allowing it to take control of these corrections. And I'll go into that and what that means in a little bit.
But ultimately, what it means in the near term is that their outcomes will be better even though they're terrible carb counters. Or better yet, if they happen to miss a meal, we'll be able to keep them in the algorithm and dose them harder than we can today with 670 and therefore get those better outcomes. Because in our data that we see today, anywhere between 1 to 4 meals are missed within a week. And as a result of that, patients then go very high and then have bad outcomes. So if we were to look at a side by side relative to what we think the competition are going to be, there's a number of differentiators here that are important to our patients, and this is directly correlated to what they're asking us for.
1st and foremost, they still want better outcomes beyond the 72% that we're able to give today in terms of time and range. And with the 780, we're expecting over 80% time and range. I think the other big one is maintaining them inside of the algorithm so that we are taking good control of their insulin delivery and doing that with a target that's lower that they have been trained to at 100. Both of those things together actually drive good outcomes and more comfort for the patients. The third being this meal handling and the notion of it being more automated to allow them to not have trouble thinking about having that pizza or having that quick snack and management of that.
And then on top of that, this system, and you probably have heard this before, it will also have Bluetooth built into it and will have the means of upgrading them over the air. So wirelessly being able to talk about our future technology with them and as a result within that 4 year warranty period, they can grow as we grow. And they're not making that one time decision as to the technology that they have. They can get the future pieces of the puzzle as well. So talking about those future pieces, the other thing that we're working on in parallel right now is called personalized closed loop, where not only are we going to try and predict when patients are eating so that we can handle their dosing even better, but more importantly, individualize the algorithm to the patient themselves.
So think of it as the means to be able to take one algorithm today in a patient population that spans from 2 year olds all the way up to, whatever, 65 year olds. How you metabolize food is different. As a kid, you need more insulin faster and on demand, whereas an adult may not need it as quickly. And therefore, we can optimize the algorithm for those individuals and how they manage insulin. So with it, aside from that personalization, they will also get this meal prediction.
We'll get higher times in range. We believe that it will be above 85% time in range. And anybody that's looked at the data on a healthy person is about 90. So it's pretty close to closing the loop altogether. And with it, we're doing some special things in order to maintain auto mode 100% of the time so that patients will always be within it.
And once again, not to belabor the point, the FDA has given us the breakthrough indication as a result of it. So let me step you through a day in the life of a typical diabetic and then explain how these technologies are going to simplify that for those patients. And so get up in the morning, you're looking at what your glucose level is. And many of our patients suffer what's called from the dawn phenomenon. What that means is that their typical insulin level is higher than they would like it to be in the start of the day, and they need to recover for that because when sleep, your insulin sensitivity changes.
And so typically what they will do is actually correct themselves with a bolus to get them back down to that 100 target. Then you eat. You got to figure out how many carbs were in that meal that you ate. You dose against that. Chances are you did that wrong, and therefore, you're going to need a correction to deal with that later in the day.
And then it's lunchtime, and you got to go through that same cycle again. You got to figure out how many carbs I had, dose against it, hopefully I got it right as a result of not getting it right. I have to make a correction again and then that cycle continues for dinner. Then lastly, if you like to exercise, again, your insulin sensitivity changes when you exercise, and therefore, your target needs to go up. You have to manage that because otherwise you'll go hypoglycemic if you're doing a whole bunch of exercise.
And so you got to think about that. And then last but not least, before you go to bed because you want a sound night of sleep, you make sure that you're back at your 100 targets so that things don't change too much while you're sleeping because you're not in control of your diabetes when you're asleep. So in that day, you're making tons of decisions, tons of them. And therefore, this is where automation comes and helps them. So if we think about advanced hydro closed loop, all of those corrections get eliminated.
Much of the carb counting is not needed because we manage it. And therefore, it comes down to just them choosing what they want to eat, putting a number in if they choose. If not, we'll handle it. And then we recover everything else for them. When we go to personalized closed loop, because we're going to be predicting meals, we're actually going to ask the patient, Hey, are you eating right now?
And they say yes or no. And as a result of that, we take care of their dosing. No more card counting, no more thoughts, no nothing. We're handling it end to end. Now none of this could be possible without the means of making these predictions.
And part of the reason why we decided to go after the acquisition of Neutrino was to get that knowledge base. Now Neutrino is a startup that we had purchased out of Israel. They have about 30 engineers working for them. And the big thing that attracted us to them is, number 1, they have the biggest food database in the world on one end. And on the other end, they have probably the best prediction techniques of how to manage meals and figure out what time patients are eating than anybody else that we've seen.
And so we're integrating that technology into personalized closed loops so that we can make those predictions. And with it, we're expecting to get those outcomes. So we would be remiss if we didn't talk about our sensor portfolio as well, now that we've talked to you about where we're going with automation. And in the near term, actually this month, we'll be submitting on our non adjunctive label. And I'm sure many of you are familiar with that.
This eliminates the need for mealtime finger sticks and then allows for Medicare expansion since the CMS requires that we have a non adjunctive label in order for us to get paid. 2nd to that, and we just announced it, I think, yesterday, is that the trial has started for our new calibration algorithm. Internally, we call that ZEUS. And what it is, we'll eliminate 95 of the finger sticks that we have today with Guardian Sensor 3. What remains is actually finger sticks on the 1st day of wear.
So when a patient puts on the sensor, we want to verify that everything's okay, and so they take one finger stick for that. And then 8 hours later, because they just made a puncture in their body, we want to make sure that it's still stable, they take a fingerstick for that and that's it. Nothing else over the life of the sensor. We're expecting that enrollment to go pretty quick and hopefully get it out into the field as soon as possible. But beyond that, and we talked to you about this in our previous analyst presentations, we also have a new sensor platform altogether that we're calling Synergy.
This is actually right here. I'm wearing 1. Huenan's wearing 1. If you want to go see it, you can. It's about half the size of what we have with Guardian Sensor 3.
It's fully disposable. To put it on the body is very simple. It's literally just a cert and it's on and then you just connect it to your phone. It has no more overtape and similar to what we had in ZEUS, that same day 1 calibration. And we're working as diligently as we can to get this out into the marketplace right now, so much so that it's probably the most important program that we have resources on within the walls of Medtronic diabetes.
In addition to the sensor road map, we also know that the MDI patients need a lot of help. Again, going back to that notion of all the decisions that they have to make on a day for day basis, we have the technologies to support them in a way where they can make better decisions and as a result, have created a pipeline of smart CGM add ons that will really drive improved outcomes for those patients. Specifically, we just about 6 months ago launched the predictive alerts. Everybody knows how important those are for fighting hypoglycemia. But also, we've extended the window on that up to 4 hours for patients so that they can make some lifestyle changes to avoid those hypoglycemia as well.
In addition to that, our next gen system on that front will help them dose their insulin better. So based off of where their sensor glucose is, essentially come up with how much insulin they would need for a given meal and then on top of that, help the health care practitioners to manage their basal and bolus delivery of their insulin. And then last but not least, because we're doing all this work on the prediction side, we can help patients also get bumps or know that they're about to eat and not forget that they went ahead and need the bolus for them. And that in itself is a big driver for their own bad outcomes and we want to make sure that
we can cover for it.
So that's all I have. I'll invite Humana back up.
Thanks, Ali. Sure. Just to round it out and before we get to your questions, hopefully, you're as excited as we are. We have a lot to be proud of in the here and now. We've learned a lot, certainly, from the 670 gs.
We're learning a lot with our Guardian Sensor 3 on a stand alone basis as well. And you see some of the results. 180,000 patients were benefiting from the system. The time in range across 8,000,000 patient days that matches what we saw in our pivotal trial in the U. S.
And we're helping people, we're changing lives. It's amazing. But what gets us even more excited is that this is just the beginning of our journey. 670 for us was never intended to be the end. It's actually intended to be the beginning.
Now fast forward 12 months from now. We're together next year's ADA. Think about what we're going to be talking about. We're going to be talking about an advanced hybrid closed loop system that does all of those things that Ali mentioned, a system that is completely differentiated from what anyone has and more important than the differentiation, a system that's going to be a step change in terms of outcomes and ease of use and burden for patients. In addition to that, on the sensor side, 12 months from now when we're together at ADA, we're going to be talking about our expansion into the Medicare market.
We're going to be we're not going to be talking about non adjunctive anymore with respect to our sensor. That's just 12 months from now. Fast forward 12 more months, 24 months from now. At that next ADA, we're going to be talking about personalized closed loop. This is going to be a game changer in technology and innovation for patients around the world, so much so that the FDA has designated it as a breakthrough device.
We feel great in our ability to deliver this. And at that same ADA, we're going to be talking about sensor innovation that dramatically reduces burden for patients and completely changes the form factor of a legacy sensor that I think is going to usher a completely new era for Medtronic diabetes and CGM technology, both for CGMs attached to pumps as well as those that are there on a stand alone basis. So we're thrilled. We're incredibly excited. We feel confident in our FY 'twenty guidance.
We feel incredibly excited by what the future has to hold, and we hope you are, too. So with that, we'd love to do some Q and A. So Ryan is going to moderate the show for us.
And because we're webcasting, please wait until we get you a microphone, a handheld. We'll start with Joanne.
Joanne Wuensch from BMO Capital Markets. When we were together last year, it seemed as if the non adjunctive claim was somewhat imminent or near term and we're here 12 months later still talking about it and we're talking about a very full sensor pipeline. Could you please explain what's different this year versus last year? What gives you confidence in that sensor pipeline? And then you announced on Friday an agreement with Tidepool, if you could just dig into that for a bit.
Sure,
sure. Thanks for the question, Joanna. Yes, we've gone through what I would call a few different rounds with the FDA with respect to non adjunctive labeling, Joanna. We had initially talked to them about getting sort of a rapid approval for non adjunctive labeling for our existing sensor. That was sort of the first discussion.
The next discussion was they had us take a look at and encouraged us to look at non adjunctive with iCGM labeling together. And we looked at that, and we shared with them that this was going to take actually a little bit longer for us. And we went back to them and proposed, look, wouldn't it make sense in order for us to access and enable access to the Medicare population for the 670 gs for us to split those two things, non adjunctive and ICGM, and go non adjunctive first and then ICGM second. They ultimately agreed with that. But the reason it took as long as it did is because we went through 2 or 3 rounds of sort of back and forth with the FDA around strategy for CGM approval.
So hopefully, that explains it. Now with respect to Tidepool, yes, we're actually thrilled by this. This the backdrop of this, for those of you that don't know, is that there is a do it yourself community that is out there today that has developed a hybrid closed loop algorithm that's called LOOP. It's not a regulated algorithm, but it's essentially open sourced. And there are a number of patients in the United States, but also some outside the United States that are taking that algorithm and actually putting it on pumps and on sensors.
And they're actually packing in, if you will, into those pumps and into those sensors in order to be able to do it. Obviously, that's not a safe mechanism. We want that regulated. The FDA wants that regulated. And what Tidepool has done is they're now working with the FDA in order to basically take that loop algorithm and get it through the FDA process.
What Tidepool does not have are is hardware, right? So they're going to be working with the FDA to get that loop algorithm approved. And so they need pump partners and sensor partners. And so what we have done is actually aligned ourselves with Tidepool so that once that algorithm is approved, patients can actually download that algorithm and use our pump for that algorithm, use our sensor for that algorithm. And so that's a little bit of context.
What I would say about that agreement is, look, we support interoperability, number 1. Number 2, it's one thing to have these designations that the FDA is putting out, ICGM or ACE for the pump. It's another thing actually to enter into business partnerships to actually enable that interoperability. We've actually taken that second harder step with Tidepool, and we think this is a great way to actually get to a regulated system in the U. S.
With this loop algorithm to use not only our pump and our sensor for that algorithm, but also for patients to benefit from all of our infrastructure, right? So once they put that algorithm onto that pump, they're getting the benefit of our call center. They're getting the benefit of all of the infrastructure that we have at Medtronic. And so we think it's a win win.
David,
David Lewis, Morgan Stanley. Just 2 for me, Jim, if you would. 1, I appreciate the data you gave us on fiscal 2020. So I would look at the numbers as if 670 drives international growth and you just have your recurring business in the U. S, you kind of get to the low end of your range right there.
So the question really is the new addition renewal business is really the wildcard. What's your confidence that business can grow low single digits? And that's for the investment to be focused. So what's impacting your business negatively right now? Is it more 670 gs dynamics you described in your software updates?
Or is it more sensor dynamics?
No. So I think there's 2 pieces, and it's largely, David, aligned with what we had talked about. I feel good with respect to our ability to continue to renew our patients in the U. S. So if you take a look at the renewal piece of that equation, our retention rates are in line with history.
And I feel we know those patients. No one knows those patients better than we do. So I feel good about the renewal piece of it. The new patient dynamic, I think, is impacted by a couple of things. 1, if you were to take a look at some of the headwinds that we have with respect to the new patient dynamic, I would say there's a couple.
One, we're sort of off cycle from an innovation standpoint in the U. S. That's just a fact, right? So the 670 gs is going to be 3 years old in September in the United States. Now the competition has introduced new products, and we're sort of still in the cycle of getting some of these things that we talked about.
So there's that element of it. And then there's other dynamics that we're dealing with. All of the pump companies are dealing with, CGM First and those types of things in the U. S. So those are the headwinds.
But the tailwinds are things like us getting into the Medicare market and opening up that patient cohort for the 670 gs. And so it's harder to predict. It's more volatile. But when you net those two things out, we feel good with the guidance that we
gave. Just a follow-up from me. There's one strategic question that everyone is trying to answer is, if I go back 4 years ago, Medtronic had 2 good things going forward. 1, they had software, sensor, pump all integrated under one parent organization and that was going to drive significant strategic advantage. And you had these dominant commercial links to the endocrine and the clinic, okay.
And then into the last 2 or 3 years, there's a perception that the regulatory markets changed with ICGM making best in breed the new, new thing. And then this pay as you go pharmacy benefit models kind of disintermediating the commercial infrastructure to the clinic and the endocrine. So the investors now saying what was great about Medtronic has now become a headwind for Medtronic. What would you say to those people? And why do you still believe that your particular structure is the right structure there?
Well, I think there's a couple of things. One, we just talked about Tidepool. The things that we're doing from an interoperability perspective, we support interoperability. And you saw from the road map, ICGM is something we're going to be doing. We will have an ACE designated pump through that agreement with Tidepool.
And so no matter what the regulatory framework is in the United States, our intention is to have best in class components. And so whoever wants to choose mix and match, our intention is to be the leaders in that mix and match process, whether it's the algorithm, whether it's the pump, whether it's the sensor. And I really feel good that we have a road map that allows us to actually get to that point. That's number 1. Now that's one dynamic.
The second dynamic, David, is everything that you just said is still true, right? Interoperability is a thing that's happening. But the fact remains that we develop and manufacture the pump, we develop and manufacture the sensor, we develop and manufacture the algorithm, we develop and manufacture the reservoir, We have the capability actually to do system integration in ways that nobody can actually, all right? And I can give you a spectrum of examples of why that's important from when iOS updates and you've got to go and figure out what to do with some of your apps, okay, to how we can actually bring some of these pieces together in differentiated ways for the patient that the competition simply cannot. So no matter what the regulatory environment is in the United States or no matter what the dynamics are, I think we have a road map that positions us to win.
I mean, I would add a couple of items. So number 1,
part of what
you have to realize, and this is someone who was there when they met, was independent and and lived through all the companies and took most of those companies public, subsequent. This is incredibly service intensive space to the endocrinologist, to his or her office, to train and educate those just the office, then the patient, the reimbursement support, somebody has to own all that. So even if the regulatory framework becomes more interoperable, there's just tremendous advantage to the scale that Medtronic has that even as others grow that they're going to have to try and replicate and it's incredibly difficult in one market, which is the U. S. But now try to imagine doing that globally, where the image product is 45 around the world.
And then the second thing I would add to it, Hooman, is just that I think Ali did a great job of going through the pipeline. Part of what you have to appreciate, there's stuff that we're doing that no one else is going to be able to do. The stuff that we're doing in AHCL, let alone PCL, Again, this company, Nutrino, we bought has the world's largest food database and has the algorithms to do the analysis. Who else I mean, what other pump companies going to be able to do that to get you to a custom personalized closed loop system? It's I can't see how anybody else is going to be able to get there.
I just we're thinking it's one thing to go out there and buy rights to an algorithm. But then everything else that we're doing, there's just huge benefits to our scale. And again, there's a roadmap of technology that goes beyond AHCL and PCL, which we're not going to share with you today, where I think that the advantages of having all the different components will become more evident again than it is maybe to the street today that I'm really excited about. I know the team is excited about it. At some point, we will show you that.
But there's just things that we're doing that I just can't see how anybody else is going to do and that's to me is what gives us this competitive advantage as I look forward that's going to be hard for anybody to match.
Yes. No, I think that's great. Maybe one just minor thing to add to that. Not only is the service scale important, the first part of Mike's response, but in an interoperable world, if something goes wrong, who are you going to call, right? Is it the pump?
Is it the sensor? Is it the algorithm, right? You've now put the patient in the middle of trying to figure out what to do. And so it's not only our size and scale of our infrastructure, it's the fact that we're essentially a one stop shop for that patient. So yes.
Matt? Thanks so much. Matt Micks here from Credit Suisse. So Tuma, thanks for the overview of the Tidepool. And just wanted to make sure, as you sort of lay that out, maybe a little bit more color on you mentioned when they get approval of the algorithm, there will be this connection, I guess, maybe help us walk us through a timeframe as to when that might happen?
And then one as part of that question, just one of the things we hear in the community is sort of the access to the algorithm. And this obviously opens up access to the algorithm. Is there a parallel development process that you may not have talked about in terms of opening up your algorithm a little bit more in terms of customization? And I had one follow-up.
So I think they're both excellent questions. Let's take the first one. With respect to their timeline, they're currently in the process of working with the FDA on the safety and the efficacy of that algorithm. That's a track that they're on. What our obligation is, is to deliver a pump that is essentially meets the ACE interoperable standards, is Bluetooth capable and can receive that algorithm once it's ready.
We're incredibly confident we're going to be able to do that. The second obligation is for us to have an ICGM sensor, and you saw from the road map from Ali that that's in our plans, and we're very confident in our ability to do So our elements of this is we feel great about. Now with respect to your second the second part of the question, there absolutely are different techniques and capabilities and even business models that come from all of this. I would just say at this point, it's still early days and but it's actually things we're considering. There will be a day where there is an eye algorithm.
There's no doubt about that, okay? And we'll participate in that just as we are with the pump, with the sensor as well as with the algorithm.
Just if I could one follow-up on the sensor side is you have this pipeline, you have synergy that you put out there. One of the resistance points has been around the sensor, the current system obviously among the community. And I just you're talking a couple of times about interoperability. You have a long term plan, but does the interim plan include interoperating with other sensor platforms between now and when you feel like you've hit that next gen sensor?
Well, the first step is to get iCGM designation, okay? There is no interoperability discussion until we get iCGM designation. And we're going to be doing that actually with the ZEUS algorithm, okay? So first step, get ICGM, dramatically reduce the burden through ZEUS. That's check, right?
The next is, you saw from the slides, the accuracy of our sensor can go head to head with anybody. So now we are going to have a sensor that whose accuracy goes head to head with anybody, 95% reduction in finger sticks, right? ICGM capable and compatible to be used with anybody's pump and anybody's algorithm. I think there are different business models there, absolutely. And then with Synergy, I think we moved, as I said, truly a whole new era.
That form factor change, I think, is going to be significant for us, for patients. I have one on right now, as Ali mentioned. I'm a clumsy guy. It took me literally 9 seconds to put this thing on, and it stays on. It's beautiful.
I mean, in the gym, it's no overtape anything. And so it's I think it's going to be a fantastic product and allow a world of possibilities for us.
If you want to see one afterwards, that one too.
Yes, let's go to Kristen.
Hi, Kristin Stewart from Barclays. Thanks for the session today. Just going on the sensors, will ZEUS and Synergy both be still that 7 day sort of time frame? And then with Synergy, with the 50% reduction in fully disposables, will that also allow you to have greater margins or greater flexibility just from a pricing perspective?
So yes, both of them will be 7 day. And in our conversations with patients, whether it's 7 days, whether it's 14 days, 7 days is fine. Certainly, 14 days helps with economics. But from a patient perspective, if they're changing it once a week or once every 2 weeks, it doesn't seem to be as great of a need. So that's number 1.
Now the second part of your question, Kristen, was around the economics with respect to
Just with the synergies since it's now disposable and 50% reduction in size and everything like that.
Yes. Look, we as the sensor continues to evolve, as you get into things like pharmacy benefits and all of that, there's absolutely going to be the need for us to be able to compete with respect to out of pocket spend for patients and all that, and it's absolutely our intention to do that.
Okay. And then one of the things you're highlighting at the booth just in terms of forward looking projects is a duo with the sensor and then also the cannula to deliver. Can you maybe just touch on that briefly?
Yes.
So this touches on the point that David raised. It is true we're moving into an interoperable world. But as Mike and I had indicated, there are things that I think Medtronic can do that other companies simply cannot do. And so the product Kristen is talking about is actually a product that combines the infusion set, this is the tube that delivers insulin, together with the continuous glucose monitor into 1 package. So imagine today, you have a patient that puts a sensor on their abdomen.
On another part of their body, they're inserting the infusion set that's delivering the insulin. So for that patient, they have 2 insertions. What we are able to do is actually bring those things into a unified device so that once all the patient has to do is insert once. And with that one insertion, they have both the sensor and insulin delivery all at once, much simpler for that patient. And the need for that in the diabetes community is massive.
Now some of the challenges with respect to us getting to this is that today, you have to change your infusion set, that tube, every 3 days. You change your sensor every 7 days. So if you put them into one device, you'd have to throw it away every 3 days, and that's not really the greatest economics for a patient from a sensor perspective. We have figured out, we believe, how to actually get the length and the life of these devices to align. Not only have we figured out how to do that, we figured out actually how to put them into a very small envelope, figured out how to insert them.
And so we really think from an innovation standpoint that we have all of the capability to bring this to market, and we think this will be outside of everything that we talked about here, another game changing thing for patients and something only Medtronic can do.
Yes. And if you yes, a time line.
Yes. It's, I would say, plus 24. So we're just focused on the 24 month window. That will be outside of that.
But if you did if you ask patients about something, what they're excited about, that the idea of having to do 2 insertions is just one.
It's off the charts.
That is yes, the patient response is off
the charts.
Great. Let's go to Robbie.
Thanks. Robbie Marcus, JPMorgan. Hooman, it sort of looks like 2 different strategies where on the top of the chart you have the pumps, Medtronic is by far in the lead, advancing, bringing the latest algorithms far, far beyond and faster than what your competition is doing. On the CGM side, it kind of looks like you're playing catch up and maybe not even all the way to what some of your competitors are doing. So maybe just talk to the different strategies maybe internally, how does Medtronic think about the CGM sensor importance relative to the algorithm and the pump?
So I think, Robbie, if you take a look at where we're going with respect to pumps and algorithms, Ali mentioned it, we have a history of leadership in that space. We want to continue that history. Now let me and hopefully, you get the sense from the road map that we're going to be able to do that and then some. Now let's talk about CGM. Medtronic and MiniMed before it have traditionally been not CGM only companies.
They've been it's been a pump company, admittedly. And if you really think about sort of the strategy with respect to CGM for Medtronic, I just ask you to take a look at the 670 gs as one prime example. So if you were to go back 2 years or before, 670 gs was a huge priority for the company for obvious reasons. Now what do you need for the first of its kind, first ever hybrid closed loop algorithm? You need a sensor that is accurate.
That's what you need. And if you look at our experience with our sensor prior to the 670 gs accuracy, it was actually one of our bigger challenges. So we spent a lot of time and energy and effort improving the accuracy of that sensor in order for it to be able to be used for a system, the first of its kind hybrid closed loop system. We're able to accomplish that. And as I said, our accuracy goes head to head with anybody, right?
That was important at that point in time. Now what that has meant is people who get up every morning and only think about CGM were able to innovate beyond the accuracy, right? They were able to innovate with things like factory calibration and life and all of those things. That's great. We think we're at a point in sort of our evolution that we have the capability, we have the skills and we have the bandwidth more than anything else to now go down that vector and compete head to head with anybody in stand alone CGM.
Synergy is just the first step. We didn't give you the window into the road map beyond 24 months. There is a pipeline beyond synergy, and it's not just a PowerPoint chart. This is an active program that we have people in fact working on. And that active program that we have working on is going to take us a step further beyond synergy to erase any other gaps that we have.
And on top of that, add even more smart CGM capability, analytics, insights, predictive diagnostics for our patients that we think will be able to compete with anybody.
Yes. And we've talked about getting to that day, right? It's so look at synergies. So synergy, again, I think we may have described it 280 days from now we have synergy, okay. And this isn't competing with G6, it's competing with G7, right.
This is a fully disposable. Everybody can see the size that we're talking about here. It's incredibly small. It's 7 day, so it's not 14 day. We can all discuss whether or not that matters.
You still will have calibration on the 1st day, but we can all go through the literature on reality is patients probably should calibrate in the 1st day because if you look at the data for Libre or you look at the data for EXCOM, the first day is not very good. So argue that it's actually better for the patient to count it the first day. And then so then we bring in all of these analytic capabilities in the alerts that we're already introducing today that Ali touched on and that are going to advance over the next couple of years. So we're going to get to this point with CGM where everybody's going to have products that have very comparable feature sets, right? This is the size factor, the ease of insertion is incredibly important, is going to be there.
And it's going to be okay, well beyond just giving me a CGM, a blood glucose reading, what else are you doing? And that's where Ali and his team have been making investments. And that's the stuff that we believe
Nutrino.
Goes forward. Nutrino as well. This is not just capability for a closed loop system. All of that food capability that Neutrino has will pair incredibly well with a standalone CGM.
Then maybe just a quick follow-up to that point. PCL, if it happens the way you've laid it out, I mean, that could be a game changer and and leapfrog you well ahead of the competition. So what has to happen to go from today where we are to have you already moved past proof of concept? What are the different catalysts that you have to knock down before approval?
I'll let Ali answer that. But what I will tell you actually, Ravi, yes, we truly believe PCL is going to be a game changer. Do not underestimate advanced hybrid closed loop either. The 780, I mean, what he showed you with respect to what it can do and the comparisons versus the competition, this will also be a step change. But
Yes. And 2 things before I get to it, Ali. So one, everybody go back to that chart that compares 780 to Control IQ. Look at that chart, okay. It's not comparable, right?
If you just go back and study that chart. And then when we have 780, when we introduce 780, the one thing that's going to happen that we really didn't spend time on is Bluetooth. So what does that mean? When you from that point on, our systems become upgradable. So getting 780, you have a system that's then upgradable to PCL when we come out with PCL.
So, Ali?
So, if you want PCL and we're laying out the future, it's you get 780 then there's a pathway to get PCL and there's been evolutions beyond that too. And that's game changing.
So as it relates to the confidence in PCL, we have 2 feasibilities that are planned for this year and then we go into study basically at next ADA. So that's the plan as of right now. The way that it's broken out is those two studies, one of them is just to make sure that our personalization of the algorithm itself is okay and the other is for the meal prediction. And as it relates to the personalization of the algorithm, to be honest, we have a model that has a database of 3,500 people in it, and we've already done all the bench level tests to show that it works. So we're not worried about that aspect of it at all, to be honest with you.
It's really the meal prediction that Matt, where the magic happens, and that's why we have Neutrino on board. They had probably 2 years of experience ahead of us doing that and we're just making sure that we finish off the back end of that work and get it correlated to our patient population and go.
But you understand my point is that with 780 gs, the patient who goes on 780 gs then has a pathway to upgradability to PCL and there's versions beyond that that's to me changes everything. Absolutely.
Okay. We're at 8 minutes after the hour. So I think we're going to end it there. I apologize to all the people we couldn't get to all your questions. I think some of the management can stick around up here in the front for the next couple of minutes if you want to come up and ask your questions.
Thank you everyone for attending today.
Thank you, Kathy, Stock Dock Partners.