Embecta (Nasdaq:EMBC) today revealed its phased plan to create value and shift priorities toward broader medical applications.
The pure-play diabetes technology company has endured ups and downs since its 2022 spin-off from BD. That includes an FDA approval for a disposable insulin patch pump system in September 2024, only to be followed by the discontinuation of its insulin patch pump program. That included a restructuring effort that led to the elimination of 118 positions in Massachusetts.
The discontinuation of the patch pump program also came not long after rumors of the company exploring a sale began circulating in July. However, analysts at the start of this year said they believe the company is moving in the right direction despite its recent challenges.
Now, in an effort to transition toward growth, the Parsippany, New Jersey-based company plans to widen its reach.
While intending to remain as an insulin injection leader, Embecta aims to shift toward becoming a broad-based medical supplies company. President and CEO Dev Kurdikar unveiled the company’s plans at its inaugural Analyst and Investor Day today.
“We look forward to sharing how we are positioning Embecta for long-term success in an evolving healthcare landscape,” said Kurdikar. “Today, we reiterate our commitment to maintaining our leadership in insulin injection while outlining our long-term vision to transform Embecta into a more broad-based medical supplies company, paving the way toward a life unlimited for all.”
How the strategic priorities are shifting at Embecta
While the company continues to work through the discontinuation of its insulin patch pump program — the plan for which it says is substantially completed — Embecta still expanded its product portfolio last quarter. The company received purchase orders to co-package pen needles with potential generic GLP-1 drugs, according to a news release. Additionally, it continued making progress on expanding the availability of appropriately sized GLP-1 retail packaging for use with weekly injection therapies.
With its core insulin injection business providing a stable, recurring and diversified revenue base, the company aims to continue to strengthen this area. It said today that it plans to execute “a seamless brand transition” while identifying opportunities to bolster its leadership in injection devices.
Kurdikar at the Analyst and Investor day revealed the company’s phased plan to move toward becoming a broad medical supplies company.
Today, the company has started to pay down debt and has exited most TSAs, fully standing alone from BD. For the next three years, it plans to enter a phase of “seed growth.” That entails expanding its portfolio and increase financial flexibility by generating cost savings while maintaining a leadership position in care products.
By 2028, the company expects to become a broad-based medical supplies company supporting chronic care patients and drug delivery partners.
The analysts’ take
Following Embecta’s Analyst and Investor Day, BTIG analysts Marie Thibault, Sam Eiber and Alexandra Pang reiterated their “Buy” rating.
The analysts believe the company went conservative with its projection for around 28%-30% adjusted operating margin. They also note that management emphasized its confidence in achieving around $600 million in cumulative free cash flow.
“This will allow EMBC to continue paying down debt, reduce annual interest expenses and lower its net leverage ratio to 2x,” the analysts said. “EMBC will then have greater flexibility to pursue M&A that leverages its manufacturing and commercial expertise, including in product categories outside diabetes such as drug delivery and chronic care.”
Additionally, the analysts expect more than $100 million in annual revenue through the GLP-1 opportunity. Generics coming to market should provide a boost, the analysts say.
“With EMBC now in the second phase of its post-spin journey, we see upside opportunities to free cash flow as the company expands into broader medical supplies and rightsizes the organization as a fully integrated standalone company,” the analysts concluded.
