Mike Polark

Mike Polark asked for clarification on the reported increase in cannula costs, Embecta's progress in sourcing alternative suppliers, and the potential for mitigating future cost pressures. He also sought more details on the $7 million unfavorable U.S. price impact in Q4 2025, specifically inquiring about the nature of 'milestone payments' to a large U.S. pharmacy customer.

Answer

Dev Kurdikar (President and CEO, Embecta Corp) explained that the current cannula supply is sole-sourced from BD until 2032, but Embecta is making significant progress in qualifying alternate suppliers to diversify supply and improve cost profiles. Jake Elguicze (CFO, Embecta Corp) added that increased cannula costs were the primary driver of gross margin decline from pre-spin 67% to 64% in 2025, and account for half of the anticipated 180 basis point adjusted operating margin decline in 2026. Dev Kurdikar clarified that 'milestone payments' are part of U.S. pharmacy contracts, often tied to achieving specific volume levels, which can lead to year-over-year price unfavorability depending on payment timing.

Mike Polark from Wolfe Research sought further clarification on the impact of geopolitical tensions in China, specifically the trend of preferring local manufacturers. He also asked whether Embecta benefits from syringe demand created by compounding pharmacies selling GLP-1 medications in vials.

Answer

CEO Devdatt Kurdikar explained that the updated guidance reflects revised distributor demand in China, driven by the challenging geopolitical environment that may favor local brands and by potential inventory rebalancing. Regarding GLP-1s, Kurdikar stated that while Embecta's syringes could be used with compounded drugs, the company is strategically focused on the much larger, officially indicated opportunity of co-packaging its pen needles with generic GLP-1 therapies, which is expected to be a more significant long-term revenue driver.

Mike Polark asked for clarification on Kestra Medical Technologies' expanded clinical specialist role, seeking details on how it differs from previous roles, its responsibilities, incentive structure, and whether it will be deployed across all territories or focused on key accounts. He also requested high-level specifications of the FDA post-approval study, including its size, patient focus, enrollment period, and the anticipated 'so what' or narrative-changing impact of its late-breaker presentation at the American Heart Association Scientific Sessions.

Answer

President and CEO Brian Webster explained that the expanded clinical specialist role aims to transition account management responsibilities from sales reps, allowing reps to cultivate new prescribers and accounts. This strategy will initially be deployed in high-performing territories to provide leverage for sales expansion, with future deployment determined by observed progress. Regarding the FDA post-approval study, he noted it concluded enrollment after approximately three years, with 24,000-25,000 patients. Key endpoints include shock success rate, inappropriate shocks, false alarm rate, and patient compliance. The presentation at AHA will be significant as it will be the largest study ever published in the WCD category, directly addressing competitive arguments about Kestra's clinical data and validating the Assure system's promise.

Mike Polark from Wolfe Research, LLC asked for more details on the recently won sole-source contract with a risk-bearing provider network and whether this could be an emerging trend. He also inquired about underlying revenue seasonality for the upcoming fiscal year.

Answer

President and CEO Brian Webster explained that the provider network aims to leverage Kestra's solution for more effective patient and hospital bed management, but noted it's too early to call it a broader trend. CFO Vaseem Mahboob addressed seasonality, stating they expect average quarterly prescription growth of 40% in fiscal 2026, with higher conversion rates in the first half of the year and lower rates in the second half.

Mike Polark from Wolfe Research, LLC asked for more details about the recently signed sole-source contract with a risk-bearing provider network and inquired about expected revenue seasonality for the upcoming fiscal year.

Answer

CEO Brian Webster explained that the sole-source contract is a positive sign, as it allows the provider to manage patients more effectively and provides Kestra with highly efficient revenue cycle management, though it's too early to call it a trend. CFO Vaseem Mahboob projected an average 40% quarterly prescription growth in fiscal 2026 and noted that seasonality would likely result in higher conversion rates in the first half of the year compared to the second half.

Mike Polark of Wolfe Research, LLC questioned the discrepancy between a competitor's reported softness in low-temp sterilization and STERIS's strong results, the drivers of higher employee healthcare costs, and the current stage of the Ambulatory Surgery Center (ASC) build-out trend.

Answer

Daniel Carestio, President & CEO, confirmed STERIS has not observed any slowdown in its sterilization business and noted the ASC trend is a positive driver for its capital equipment business. Michael Tokich, Senior VP & CFO, clarified that increased healthcare costs are primarily due to higher employee utilization of benefits, not significant premium hikes.

Mike Polark inquired about Insulet's perspective on the recent CMS proposal for competitive bidding in the DME channel and how the company plans to navigate potential industry shifts if the rule moves forward.

Answer

Ashley McEvoy, Director, President & CEO, stated that while Insulet supports increased patient access, its business model is fundamentally different. With a pay-as-you-go model and near 100% distribution through the pharmacy channel (Medicare Part D), she explained that the company believes its products are not eligible for competitive bidding under Part B and that they will continue to engage with CMS on the matter.

Mike Polark from Wolfe Research, LLC inquired about Insulet's perspective on the recent CMS proposal regarding competitive bidding in the DME channel, and how the company plans to stay ahead of potential industry shifts.

Answer

President and CEO Ashley McEvoy stated that while Insulet supports increased patient access, its business model is not directly impacted. She emphasized that Omnipod is distributed almost entirely through the pharmacy channel under Medicare Part D, which is not eligible for the proposed Part B competitive bidding program. She affirmed that Insulet will continue to engage with CMS on the benefits of its technology.

Mike Polark of Wolfe Research inquired about the upcoming Essence HLM launch in China, asking for its market size relative to the installed base and the potential impact of new trade restrictions. He also asked how the proposed Medicare reimbursement upgrade for epilepsy device replacements might influence new patient adoption.

Answer

CEO Vladimir Makatsaria stated that China is LivaNova's second-largest HLM market and a significant leadership position, and he does not anticipate a meaningful impact from trade restrictions. On reimbursement, President of Global Epilepsy Stephanie Bolton explained that a patient may have up to 6-8 replacements over their lifetime, making the proposed reimbursement increase a meaningful factor that could improve the overall service line economics for hospitals, thereby encouraging new patient adoption.

Mike Polark from Wolfe Research, LLC asked for a quantification of the net inventory destocking headwind included in the full-year guidance and requested the number of active U.S. implanting centers as of June 30.

Answer

VP of Investor Relations Ezgi Yagci confirmed that an Inspire IV inventory destocking headwind is factored into the second-half guidance but declined to provide a specific quantification, noting the timing element makes it difficult to pinpoint. She disclosed that the number of active U.S. centers was 'a little over 1,500' at quarter-end, a slight increase from year-end 2024, as the pace of new center openings was intentionally moderated to focus on the Inspire V launch.

Mike Polark of Wolfe Research, LLC inquired about the current site-of-service mix for Baragel and how the proposed CMS reimbursement changes might alter it. He also asked about the strategy to use price increases to offset tariffs and the anticipated customer reaction.

Answer

CEO Liam Kelly did not provide a specific site-of-service mix for Baragel but noted the proposed reimbursement uplift in the physician office setting is encouraging and could shift volume there over time. CFO John Deren explained that price increases to offset tariffs are in the early stages, with a larger opportunity expected in 2026, and that he does not anticipate 'significant pushback' from customers.

Mike Polark from Wolfe Research, LLC inquired about the new nationwide warranty program for pharmacy customers, asking if it is financially significant and if it serves as a competitive differentiator.

Answer

EVP & CFO Jereme Sylvain explained that the program is financially 'net neutral' and was implemented as the enabling technology became available. He positioned it as a key differentiator that adds value by offering customers the choice and convenience of an immediate, same-day sensor replacement at a local pharmacy.

Mike Polark of Wolfe Research, LLC asked about the mix of growth from new versus existing prescribers and questioned the risk of the CMS pay-as-you-go model influencing commercial contracts.

Answer

CFO Stephen Feider stated that growth is coming from both deeper penetration in existing accounts and expansion into new territories, but declined to quantify the mix. On the CMS proposal, Feider saw no immediate risk of it spreading to commercial plans. CEO Sean Saint added that the company has proactively insulated itself from this risk by already implementing a pay-as-you-go model in the pharmacy channel, which prepares them for such a market shift.

Mike Polark from Wolfe Research, LLC asked about a recent Medicare proposal to cut the physician fee for Left Atrial Appendage (LAA) closure by 16%, questioning the potential challenge this poses to the WATCHMAN business.

Answer

CMO Dr. Ken Stein acknowledged the concern, stating that the company believes the proposed payment undervalues the complexity of the procedure and that Boston Scientific is supporting medical societies to mitigate the impact. He expressed his firm belief that physicians will continue to choose the most clinically appropriate treatment for stroke prevention, and he remains hopeful that such a cut, if finalized, would not prevent patients from receiving necessary care.