Embecta outperforms its own revenue estimates with $566M in first 6 months of BD spinout

It can be difficult for a spinout to distinguish itself from its parent company—especially if that company has been around for a century. Just ask Embecta CEO Devdatt Kurdikar, Ph.D., who discussed the slow process of emerging from BD’s shadow in an interview with Fierce Medtech earlier this year, only a few weeks after the diabetes devicemaker had left the nest.

But so far, at least, Embecta seems to be well on its way to carving out its own path within the medtech industry. In an earnings report this week covering the fiscal year that ended Sept. 30, the company posted full-year revenues of nearly $1.13 billion.

That’s a decrease of about 3% compared to the previous fiscal year’s earnings, but in a call with investors about the report, Jake Elguicze, Embecta’s chief financial officer, warned against pitting Embecta’s earnings against those of the diabetes business when it was still under the BD umbrella, calling them “not meaningfully comparable.”

“The financial results during the pre-spin periods were based on carve-out accounting principles and do not reflect what Embecta’s financial results would have been had Embecta operated as a standalone public company,” Elguicze said, according to a transcript of the call.

Kurdikar, meanwhile, zoomed in on Embecta’s six months as a standalone operation on the call. Between the separation date of April 1 and the end of the fiscal year, he reported, the company took in $566 million.

Again, that tally represents a year-over-year decline—in this case, about 5.1% lower than what the diabetes business took in as part of BD last year—but it outdid Embecta’s own forecasts. Shortly after going solo in the spring, it released six-month estimates of $555 million in revenue, and it stuck by that forecast through the following months, Kurdikar noted on the call.

The CEO attributed the better-than-expected results to Embecta’s performance in both the North America and Europe, Middle East and Africa regions, “as well as more-than-anticipated contract manufacturing revenue with BD,” he added.

Looking ahead to its first full year as a standalone company, Embecta isn’t necessarily expecting to claw its way out of the red. Elguicze, the CFO, said on the call that the company is expecting to see its revenues either stay flat or drop another 2% year-over-year in 2023.

In the latter case, he said, “We are assuming about half of the decline will result from reduced contract manufacturing revenue of non-diabetes care products to BD, with the remainder coming from slight volume pressure within developed markets as well as periods of uncertainty in emerging markets due to the potential for lingering COVID-19 restrictions.”

The year will be spent doubling down on the base business Embecta inherited from BD, while also building out its own independent R&D and expansion efforts.

“We remain excited about our patch pump that is being developed for the Type 2 market,” Kurdikar said on the call, adding, “At the same time, we plan to continue to seek partnerships and acquisitions where we can use our manufacturing strengths and commercial capabilities to add value.”

The patch pump is directed specifically at helping people with Type 2 diabetes manage their insulin intake and blood sugar levels. It has already garnered the FDA’s breakthrough device designation and is meant to be part of a closed-loop system, a chain of devices and algorithms that aim to all but eliminate the need for human interaction in diabetes management.