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. 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 this slide, which is number three for those that are listening on the webcast.
The slides we are presenting today, along with our non-GAAP reconciliations, are available on our website at investorrelations.medtronic.com. Today's webcasted event will last about an hour. Omar Ishrak, our Chairman and CEO, will kick things off. Then Hooman Hakami, our Executive Vice President and President of Diabetes Group, will walk through our performance and outlook. Then Ali Dianaty will cover the 670G update as well as our product pipeline. Hooman will close things before we have a panel here of diabetes management. Mike Weinstein, our Senior Vice President of Strategy, will take your questions. We plan to wrap up about noon Pacific Time, about an hour from now. With that, I will turn the presentation over to Omar. Omar?
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There we go. All right. Good. Thanks. Thanks, Ryan, and welcome to all of you. Great to see all of you here. I just wanted to say a few words to kick this off. Then it's really over to the team to go through in detail about our pipeline and roadmap and the excitement that we have about this business. To start with, look, I remain confident in our FY 2020 growth outlook, both for the company that we laid out as well as for diabetes, which you'll hear a lot about. 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 the 670G is only beginning. We had a pretty strong year last year internationally. It was well into the double digits.
There's many countries where we're just launching the 670G. That momentum is one that we're pretty confident about and we're seeing pretty good signs as we go into FY 2020. The other thing is that our installed base continues to grow. 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. Much more important than that is the pipeline and the acceleration that that'll 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, 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. 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, one that came to reality several years ago, one that spurred a lot of excitement in the industry amongst both patients and our competitors. One that we're committed to continuing to lead and continue to grow.
One that's got a long runway ahead of us. You'll hear about that in depth today from the different presenters and the panel will have, I'm sure, excellent insight into that. I want to also close by saying that the CGM area as well is one that's important. That's a big piece of diabetes that's got a close connection to the closed-loop system itself. 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. You'll hear a pretty clear and exciting roadmap in that area as well. I'm just going to leave it with that. I'm now going to introduce Hooman to really go into the real meat of the matter today. Unfortunately, I cannot stay.
I don't come to the ADA that often. I happen to be here this year. I've got some appointments with some key customers that I want to spend some time with. You're in great hands here. Thank you again for your interest that you show in Medtronic, for being here and such good representation. I'm sure you'll have a great afternoon here today. Thank you. Hooman.
Thanks, Omar.
Yeah.
Great. All right. 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 2020 and sort of peeling things back. The bulk of what we're here to talk to you about is the innovation pipeline that Omar laid out. 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. 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. If you go all the way back, as you can see, back to FY 2013, to where we are and where we left FY 2019, this is a business that has delivered over $1 billion, about $1 billion of incremental organic growth to the company. 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 2019 for us was a year where we exited with our highest revenue ever. FY 2019 was a year where we continued to have 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.
It's a year where we grew the installed base in the mid-single digit range, both globally as well as in the U.S. While, as Omar mentioned, it's clear that we have some gaps in our CGM portfolio and we're addressing those gaps in the standalone space, CGM as a category is still a business for us on a standalone basis that is growing, and growing incredibly well. 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. As excited as we are about where we left FY 2019, 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, you heard these on our conference calls around sensor capacity in FY 2018, us trying to ramp that up, getting it up in FY 2018, satisfying a bolus of back orders that we had, 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. If you take a look at it and you start to adjust for those dynamics and look at it on a two-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 two-year stacked performance for this business on a quarter-over-quarter basis is actually very strong.
You can see the last six quarters, in particular, we have been in the double-digit range from a growth perspective. 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 2020. In order for us to understand FY 2020, I think it's important for us to sort of peel back some of the elements that are part of our global business. 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. 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.
In FY 2019, we exited the year with $2.4 billion of revenue, really the way to think about it is there's an international business and a U.S. business. 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%. Within the U.S. business, it's important to understand that there's two dynamics to the U.S. business that drive that. The first one is our installed base. When we talk about our installed base, these are patients, our patients that are on pump therapy. Since they're on pump therapy, these patients are actually every three days using infusion sets. They're using reservoirs. Every seven days, they're using continuous glucose monitors.
They're reordering these things over and over again. As that installed base grows, this piece grows. We'll double click on this and explain to you how we think about this. That's the installed base. The other piece of our U.S. business is new patients and renewals. Let's start with renewals. As patients come out of their four-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. You can see that's about $600 million.
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. It's not just the pump shipment, it's a whole set. When you put this all together, these are the big components of our overall revenue stream. 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's ability to grow and to grow at double-digit rates. We feel confident about that ability for a number of different reasons. One, if you just look from a financial standpoint, historically, we grew double digits in FY 2019, number one.
Number two, we grew double digits in FY 2019 largely without the benefit of the 670G in these geographies. The 670G is just starting to ramp up in Europe, in Australia, and in other markets around the world. In addition to the 670G launch dynamics, we also have increased CGM adoption and increased CGM penetration in the international markets, which is a catalyst for growth. When you take our historical performance, the fact that 670G is going to be ramping up even more in FY 2020, 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. That's number one. 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.
The first piece is the installed base. The installed base for us, when you peel it back, is about a third, 30%, of the overall global revenue. Right? I mentioned U.S. is 55%, 30% of the overall global revenue is the installed base component. 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. You can see we expect modest growth in the installed base. From a modeling perspective, if you think about an installed base at scale, this is not a number that grows dynamically. Honestly, this is something that makes us 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. For us, it's in that range that you saw in FY 2019. 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. We expect continued modest growth in FY 2020, and we feel comfortable with this and confident in this. Why? As I mentioned, our installed base grew in FY 2019. That's one big reason. Second, 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. The reorder rates for things like infusion sets and for reservoirs are very stable.
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 a third of our business in line with how our installed base grows. That's the second piece. The third piece. The new patients and the renewals. Admittedly, this is the most volatile element of the overall business. This is about 25%, a quarter of our total revenue globally. What we are projecting for the U.S. business for new patients and renewals in FY 2020 is flat to slight growth, as you can see. Why do we think that the U.S. new patients and renewals are going to grow in this range?
There's a number of reasons for that, and I'll walk you through. First, we actually have more patients that are up for renewal in FY 2020 in the U.S. than we did in FY 2019. Why is that a dynamic? 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. 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. This is just a function of that dynamic. The second is that we see pretty steady, constant, and consistent renewal rates in FY 2019.
When we look at our FY 2019, our ability to capture our patients coming out of warranty and compare those with historical rates over the past several years, it's actually pretty consistent. The last one is around new patients. New patients, for us, there's a couple different dynamics that are going to be critical for us in FY 2020 that will help us with new patient acquisition. One is we expect actually to get Medicare expansion through non-adjunctive labeling in FY 2020. This is a dynamic that did not exist in FY 2019. We expect it to exist in FY 2020, and we think that is going to help us. In addition to all of that, there are some other approvals out there that we feel good about that are going to help us.
You put all of that together, flat to slight growth in the new patient and the renewal category. 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 2020. You put all of that together and you see our guidance? 6%-8% for the diabetes business in FY 2020, and it's exactly why we feel confident in our ability to do this.
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. That's FY 2020. We're even more excited about the future for this business. 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. What my colleague, Ali Dianaty, our Vice President of R&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. 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 roadmap 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 standalone market. 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. With that, I'll turn it over to Ali. Thanks.
It'd be remiss to not talk about 670 as a starting point. With it, knowing that this was first of its kind, a lot of firsts have come. First, starting with the number of patient days, we're now up to 8 million patient days worth of data against 180,000 patients. We have maintained our performance as it relates to time and range of 71%. That's not an easy endeavor for anybody to do. Knowing that, all of our competition currently is still in clinical trial, we have an abundance of data for us to create the future on. What I'll be talking to you about is essentially that. 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. In all cases, the 670G exceeds those guidelines, not only in time and range, but also in A1C. 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. We've changed the narrative a lot with 670, and now we're all talking about time in range. There's a reason for that. It's important. A1C by itself, being a three-month to three-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. 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 as I'm sure you've been hearing as well out in the field. This notion of BG 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. That's consistently been improving as a result of this change. Again, that one change, that one fix made a significant improvement. More importantly, I think 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. Where we're going here is actually a number of others. First, we believe, to have a target of 100 mg/dL, and I'll explain what that means. More importantly, first to actually predict when patients are eating. 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.
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. Thinking about the context of what makes a good closed loop algorithm, there's a number of things that go into it. First 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 in range, but also their safety performance. 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 handling their disease on their own. This is what we have been calling time in auto mode.
With it, if they're in our algorithm, we're obviously managing their insulin for them. 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. 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. All of that in this next gen system is going to be improved upon. Starting with the target. With the agency in the original 670G timeframe, we actually wanted to have the device go to 100 mgdL or a target of 100.
The reason for that is patients actually are trained to shoot for 100 on a day-to-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 can occur below 70, there's not a lot of safety margin there. There's only 30 mgdL. 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. Ironically, when we talk to patients about this is the single biggest complaint that they have about the system. They want to go lower. They all want to be at 100.
In order to do that, you have to prove through your mechanisms within the algorithm that you can have that airbag on the bottom there to keep them out of hypoglycemia. With 780G, we're being able to do that. Its safety, as it relates to reducing this target, is identical to that of 670. With it now, patients are going to feel much 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, we've shown this data in a number of places, when patients are in auto mode, their outcomes are better. Of course, that's because we're dosing their insulin directly. If you can keep increasing that time where they're inside of the algorithm, the likelihood of their outcomes being better is much higher.
Currently, with this new transmitter that I just mentioned, we're getting 85% time in auto mode. With the advanced hybrid 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. 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 ±50%, which means that their insulin dosing is off ±50%. With this system, we're simplifying that altogether and allowing it to take control of these corrections.
I'll go into that and what that means in a little bit. Ultimately, what it means in the near term is that their outcomes will be better, even though they're terrible carb counters. 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 670G, and therefore, get those better outcomes. In our data that we see today, anywhere between one to four meals are missed within a week. As a result of that, patients then go very high and then have bad outcomes. 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.
First and foremost, they still want better outcomes beyond the 72% that we're able to give today in terms of time and range. 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.
On top of that, the system, and you probably have heard this before, it will also have Bluetooth built into it, and we'll have the means of upgrading them over-the-air. Wirelessly being able to talk about our future technology with them, and as a result, within that four-year warranty period, they can grow as we grow. 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. 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.
Think of it as the means to be able to take one algorithm today in a patient population that spans from two-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. Therefore, we can optimize the algorithm for those individuals and how they manage insulin. With it, aside from that personalization, they'll also get this meal prediction. We'll get higher times in range. We believe that it'll be above 85% time in range. Anybody that's looked at the data, a healthy person is about 90%. It's pretty close to closing the loop altogether. 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.
Once again, not to belabor the point, the FDA has given us the breakthrough indication as a result of it. 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. 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 from that because when you sleep, your insulin sensitivity changes. Typically what they will do is actually correct themselves with a bolus to get them back down to that 100 target. 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. It's lunchtime, you got to go through that same cycle again. I 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, that cycle continues for dinner. 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. You got to think about that.
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 target 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. In that day, you're making tons of decisions. Tons of them. This is where automation comes and helps them. If we think about advanced hybrid closed-loop, all of those corrections get eliminated. Much of the carb counting is not needed because we manage it. 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. 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?" They say yes or no. As a result of that, we take care of their dosing. No more carb counting, no more thought, no nothing. We're handling it end to end. None of this could be possible without the means of making these predictions. Part of the reason why we decided to go after the acquisition of Nutrino was to get that knowledge base. Nutrino is a startup that we had purchased out of Israel. They have about 30 engineers working for them.
The big thing that attracted us to them is, number one, 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. We're integrating that technology into Personalized Closed Loop so that we can make those predictions. With it, we're expecting to get those outcomes. 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. In the near term, actually this month, we'll be submitting on our non-adjunctive label. I'm sure many of you are familiar with that.
This eliminates the need for mealtime finger sticks, allows for Medicare expansion since the CMS requires that we have a non-adjunctive label in order for us to get paid. Second to that, we just announced it, I think, yesterday, is that the trial has started for our new calibration algorithm. Internally, we call that Zeus. What it is, it will eliminate 95% of the finger sticks that we have today with Guardian Sensor 3. What remains is actually finger sticks on the first day of wear. When a patient puts on the sensor, we want to verify that everything's okay, so they take one finger stick for that. Eight hours later, because they just made a puncture in their body, we want to make sure that it's still stable. They take a finger stick 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. Beyond that, 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 it actually right here. I'm wearing one. Hooman's wearing one. 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 insert and it's on, then you just connect it to your phone. It has no more overtape and similar to what we had in Zeus, that same day one calibration.
We're working as diligently as we can to get this out into the marketplace right now. 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 roadmap, 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 six months ago, launched the predictive alerts. Everybody knows how important those are for fighting hypoglycemia.
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 hypoglycemias as well. In addition to that, our next-gen system on that front will help them dose their insulin better. Based off of where their sensor glucose is, essentially come up with how much insulin they would need for a given meal. On top of that, help the healthcare practitioners to manage their basal and bolus delivery of their insulin. 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 to bolus for them.
That in itself is a big driver for their own bad outcomes, and we want to make sure that we can cover for it. That's all I have. I'll invite Hooman 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 670G. We're learning a lot with our Guardian Sensor 3 on a standalone basis as well. You see some of the results. 180,000 patients who are benefiting from the system. The time and range across 8 million 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. What gets us even more excited is that this is just the beginning of our journey. 670G for us was never intended to be the end. It's actually intended to be the beginning. Fast-forward 12 months from now. We're together at 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 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, in 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. 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 in CGM technology, both for CGMs attached to pumps as well as those that are there on a standalone basis. We're thrilled. We're incredibly excited. We feel confident in our FY 2020 guidance. We feel incredibly excited by what the future has to hold, and we hope you are too. With that, would love to do some Q&A. Ryan's going to moderate the show for us.
Because we're webcasting, please wait until we get you a microphone, a handheld. We'll start with Joanne. Second row.
Thank you. Thanks. 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? Then you announced on Friday an agreement with Tidepool, if you could just dig into that for a bit. Thank you.
Sure. Thanks for the question, Joanne. Yeah, we've gone through what I would call a few different rounds with the FDA with respect to non-adjunctive labeling, Joanne. 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. We looked at that, and we shared with them that this was going to take actually a little bit longer for us.
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 670G, 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. The reason it took as long as it did is because we went through two or three rounds of sort of back and forth with the FDA around strategy for CGM approval. Hopefully, that explains it. With respect to Tidepool, yeah, we're actually thrilled by 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 U.S., but also some outside the U.S. that are taking that algorithm and actually putting it on pumps and on sensors. They're actually hacking 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. 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 is hardware. They're going to be working with the FDA to get that Loop algorithm approved. They need pump partners and sensor partners.
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. That's a little bit of context. What I would say about that agreement is, look, we support interoperability, number one. Number two, 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.
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. We think it's a win-win.
David. I'll give you the mic.
David Lewis, Morgan Stanley. Just two from me, Hooman, if you would. One, I appreciate the data you gave us on fiscal 2020. My way of looking at the numbers is 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. The question really is the new addition renewal business is really the wild card. What's your confidence that business can grow low single digits? That's where the investment debate really is focused. What's impacting your business negatively right now? Is it more 670G dynamics you described in your software updates, or is it more sensor dynamics?
No. I think there's two 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. 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. I feel good about the renewal piece of it. The new patient dynamic, I think, is impacted by a couple things. One, 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.
The 670G is going to be three years old in September in the U.S. The competition has introduced new products, we're sort of still in the cycle of getting some of these things that we talked about. There's that element of it. 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. Those are the headwinds. The tailwinds are things like us getting into the Medicare market and opening up that patient cohort for the 670G. 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 give.
Just the follow-up from me is just if there's one strategic question that everyone's trying to answer is, if I go back four years ago, Medtronic had two good things going for it. One, they had software, sensor, pump, all integrated under one parent organization, that was going to drive significant strategic advantage. You had these dominant commercial links to the endocrine and the clinic. Into the last two, three years, there's a perception that the regulatory markets change with iCGM, making best in breed the new thing. This pay-as-you-go pharmacy benefit models kind of disintermediating the commercial infrastructure to the clinic and the endocrine. The investor is now saying what was great about Medtronic has now become a headwind for Medtronic.
What would you say to those people, why do you still believe that your particular structure is the right structure?
I think there's a couple things. One, we just talked about Tidepool. The things that we're doing from an interoperability perspective, we support interoperability. You saw from the roadmap, iCGM is something we're going to be doing. We will have an ACE designated pump through that agreement with Tidepool. No matter what the regulatory framework is in the U.S., our intention is to have best-in-class components. 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. I really feel good that we have a roadmap that allows us to actually get to that point. That's number one. That's one dynamic. The second dynamic, David, is everything that you just said is still true. Interoperability is a thing that's happening.
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. All right. I can give you a spectrum of examples of why that's important from when iOS updates and you 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. No matter what the regulatory environment is in the U.S., or no matter what the dynamics are, I think we have a roadmap that positions us to win.
I would add just a couple items. Number one, part of what you have to realize, and this is someone who was there when MiniMed was independent 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 just the office, then the patient, the reimbursement support. Somebody has to own all that. 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. It is incredibly difficult in one market, which is the U.S. Now try imagine doing that globally, where Medtronic is 45% around the world.
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. What other pump company is going to be able to do that to get you to a custom, personalized, closed loop system? I can't see how anybody else is going to be able to get there. It's one thing to go out there and buy rights to an algorithm, everything else that we're doing, there's just huge benefits to our scale.
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, at some point, we will show you that. There's just things that we're doing that I just can't see how anybody else is going to do. That to me, is what gives us this competitive advantage as I look forward, that's going to be hard for anybody to match.
Yeah. 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 now put the patient in the middle-
It's a huge issue
of trying to figure out what to do. 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. Yeah. Matt.
Thanks so much. Matt Miksic here from Credit Suisse. Hooman, thanks for the overview with 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'll be this connection. I guess, maybe walk us through a timeframe as to when that might happen. As part of that question, just one of the things we hear in the community is sort of the access to the algorithm. 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? I had one follow-up.
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 to deliver a pump that 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 roadmap from Ali, that that's in our plans, and we're very confident in our ability to do that. Our elements of this is, we feel great about.
Now, with respect to 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. It's actually things we're considering. There will be a day where there is an AccuRhythm AI. There's no doubt about that, okay? 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've put out there. One of the resistance points has been around the sensor with the current system, obviously, among the community. You talked a couple of times about interoperability. You have a long-term plan. 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. We're going to be doing that actually with the Zeus algorithm. Okay? 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. Now, we are going to have a sensor 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. 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 nine seconds to put this thing on. It stays on. It's beautiful. In the gym, it's no over tape anything. 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, I've got one too.
Yeah.
Let's go to Kristen.
Hi, Kristen Stewart from Barclays. Thanks for the session today.
Yeah.
Just going on the sensors, will Zeus and Synergy both be still that seven-day sort of time frame? With Synergy, with the 50% reduction and fully disposables, will that also allow you to have greater margins or greater flexibility just from a pricing perspective?
Yeah, both of them will be seven-day. In our conversations with patients, whether it's seven days, whether it's 14 days, seven days is fine. Certainly 14 days helps with economics. From a patient perspective, if they're changing it once a week or once every two weeks, it doesn't seem to be as great of a need. That's number 1. Now, the second part of your question, Kristen, was around the economics with respect to-
Just with the Synergy, since it's now disposable and 50% reduction-
Yeah
in size and everything else.
Yeah. Look, as the sensor industry 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, it's absolutely our intention to do that.
Okay. 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?
Maybe explain to people what that is.
Yeah. 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. 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 one package. 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. For that patient, they have two insertions.
What we are able to do is actually bring those things into a unified device so that all the patient has to do is insert once. With that one insertion, they have both the sensor and insulin delivery all at once. Much simpler for that patient. The need for that in the diabetes community is massive. Some of the challenges with respect to us getting to this is that today, you have to change your infusion set, that tube, every three days. You change your sensor every seven days. If you put them into one device, you'd have to throw it away every three 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've figured out actually how to put them into a very small envelope, figured out how to insert them. 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.
Yeah.
The timeline is more than a few months?
Yeah, a timeline.
Yeah. It's, I would say, plus 24. We're just focused on the 24-month window. That'll be outside of that.
If you asked patients about something, what they're excited about.
It's off the charts.
not having to do two insertions, it's just one.
It's off the charts.
Yeah. The patient response is off the charts.
Great. Let's go to Robbie. In the front.
Thanks. Robbie Marcus, JPMorgan. Hooman, it sort of looks like two 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 beyond and faster than what your competition's 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. Maybe just talk to the different strategies and maybe internally, how does Medtronic think about the CGM sensor importance relative to the algorithm and the pump?
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. Hopefully you get the sense from the roadmap that we're going to be able to do that and then some. Let's talk about CGM. Medtronic, and MiniMed before it, have traditionally been not CGM-only companies. It's been a pump company, admittedly. If you really think about the strategy with respect to CGM for Medtronic, I just ask you to take a look at the 670G as one prime example. If you were to go back, two years or before, 670G was a huge priority for the company for obvious reasons. 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. If you look at our experience with our sensor prior to the 670G, accuracy was actually one of our bigger challenges. 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 were able to accomplish that. As I said, our accuracy goes head to head with anybody. All right. That was important at that point in time. 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 standalone CGM. Synergy's just the first step. We didn't give you the window into the roadmap 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. 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. 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.
Yeah. We've talked about getting to that day, right? Look at Synergy. Synergy, again, I think we may have described it 288 from now, we have Synergy. Okay? 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 seven day, so it's not 14 day. We can all discuss whether or not that matters. You still will have calibration on the first day, but we could all go through the literature on reality as patients probably should calibrate on the first day because if you look at the data for Libre or you look at the data for even Dexcom, the first day is not very good. You could argue that it's actually better for the patient to calibrate the first day.
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. 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. It's going to be, "Okay, well, beyond just giving me a CGM, a blood glucose reading, what else are you doing?" That's where Ali and his team have been making investments, and that's the stuff that we believe.
Nutrino
Is going forward.
Nutrino as well.
Oh.
This is not just capability for a closed loop system. All of that food capability that Nutrino has.
Yeah
pair incredibly well with a standalone CGM.
Yeah.
Maybe just a quick follow-up to that point. PCL, if it happens the way you've laid it out, that could be a game changer and leapfrog you well ahead of the competition.
Yeah.
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, Robbie, yeah. We truly believe PCL is going to be a game changer. Do not underestimate advanced hybrid closed-loop either. The 780, what he showed you with respect to what it can do and the comparisons versus the competition, this will also be a step change.
Yeah. Two things before I give it to Ali. One, everybody go back to that chart that compares 780.
Control-IQ
to Control-IQ.
Yeah.
Look at that chart. Okay? It's not comparable. Right? If you just go back and study that chart. When we have 780, when we introduce 780, the one thing that it's going to have that we really didn't spend time on is Bluetooth. What does that mean? From that point on, our systems become upgradable. Getting 780, you have a system that's then upgradable to PCL when we come out with PCL.
Ali?
If you want PCL and we'll lay out the future, you get 780, there's a pathway to get PCL, there's evolutions beyond that too. That's game changing.
As it relates to the confidence in PCL, we have two feasibilities that are planned for this year, we go into study basically at next ADA. 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, the other is for the meal prediction. 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, we've already done all the bench level tests to show that it works. We're not worried about that aspect of it at all, to be honest with you. It's really the meal prediction where the magic happens, that's why we have Nutrino on board.
They have probably two years of experience ahead of us doing that. 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.
You understand my point is that with 780G, the patient who goes on 780G then has a pathway to upgradability to PCL, there's versions beyond that. That, to me, changes everything.
Absolutely. Yeah.
Okay. We're at eight minutes after the hour, 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.
Thank you.
Thank you.
Doc Parker