Embecta Faces U.S. Reset as CEO Bets on GLP-1, Owen Mumford Diversification

Key Points

• Interested in Embecta Corp.? Here are five stocks we like better.

• Embecta reset its U.S. outlook after a tough quarter driven by share loss at a major retailer, softer insulin pen prescription trends, and inventory adjustments. CEO Devdatt Kurdikar said the company does not see a major change in competition, but price pressure was the biggest factor in the retailer loss.

• The company is watching whether the softness is temporary or structural, with possible headwinds including GLP-1 drug affordability, changes in insurance subsidies, and retail channel shifts. Embecta believes some patients may be moving to lower-cost cash-pay or online options rather than abandoning insulin use entirely.

• Despite the setback, Embecta is pushing a diversification strategy through new lower-priced devices, a growing GLP-1 business-to-business channel, and the pending Owen Mumford acquisition. The company still expects about $100 million in free cash flow this year and is using that flexibility for debt reduction and share buybacks.

Embecta (NASDAQ:EMBC) President and CEO Devdatt Kurdikar said the company’s recent U.S. business reset reflected a combination of customer-specific share loss, softer market trends and inventory-related factors, while emphasizing that the diabetes device maker is continuing a broader diversification strategy intended to make the business less dependent on its core insulin injection franchise.

Speaking at a Bank of America event, Kurdikar described the company’s most recent quarter — Embecta’s fiscal second quarter and calendar first quarter — as “unquestionably a challenging quarter.” He said the U.S. business, which represents about half of Embecta’s global business, had been stable for years following the company’s spinout, even through COVID-related disruptions and inflationary pressures.

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That changed in the latest quarter, he said, as several factors converged and contributed to a reduction in fiscal 2026 guidance.

U.S. Reset Driven by Share Loss, Market Softness and Inventory

Kurdikar said Embecta lost share with one large U.S. retailer, though its products remain available through that customer. He said the company moved from the No. 1 position to the No. 2 position at that retailer.

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“In this particular case, I would say the single largest factor was price,” Kurdikar said, adding that the issue was not product quality and that Embecta does not believe the broader competitive landscape has changed materially.

He said the revenue impact from the share loss was disproportionate to volume because the affected patients were likely on payer plans that reimburse a range of products, where rebates are lower than on preferred or exclusive plans.

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Kurdikar also pointed to softness in insulin pen prescriptions, which Embecta tracks as a leading indicator. He said insulin pen prescriptions had been stable for a long period but recently showed signs of decline, particularly in retail. The decline was more pronounced in long-acting insulin than fast-acting insulin and was also visible in new prescriptions, he said.

Other factors included inventory adjustments as wholesalers seek greater efficiency, a return to the long-term decline in syringes and the company’s decision to discontinue swabs globally. Kurdikar said swabs were a comparatively low-margin product and Embecta was unable to find a qualified supplier for an active ingredient.

Company Watching GLP-1s, Insurance Changes and Retail Trends

Kurdikar said Embecta is still assessing whether the recent market softness is temporary or structural. He said the company has seen stabilization in the customer-specific share loss over the past several weeks, but needs more data on insulin pen prescription trends.

He said Embecta is considering several possible explanations for market softness, including increased affordability of GLP-1 drugs and the expiration of ACA subsidies. Kurdikar noted that pump adoption has been rising steadily, but said he has not seen signs of a sudden acceleration in pump adoption.

According to Kurdikar, if patients lose insurance, they may continue taking insulin through lower-cost options but may switch away from retail pen needles to lower-cost cash-pay, private-label or online alternatives. He said that could help explain why retail pen needle declines appear greater than retail insulin pen declines.

He also said GLP-1 affordability improved late last calendar year, potentially accelerating GLP-1 uptake while new insulin starts have softened. Kurdikar cautioned that Embecta has only about three months of data and said the company assumed in its guidance that current conditions persist through the rest of the year.

Diversification Strategy Remains Central

Kurdikar said the company’s current strategy dates back to its decision about 18 months ago to terminate its patch pump program, focus on debt reduction and pursue diversification. He said Embecta began developing a new pen needle and a new syringe to offer lower-priced alternatives to customers facing pricing pressure.

The new syringe has had its first commercial sale in China, and the new pen needle is under regulatory review in the U.S., Brazil and for CE mark in Europe, Kurdikar said.

Embecta is also building a business-to-business channel tied to generic GLP-1 drugs. Kurdikar said that of roughly 30 generic drug company partners Embecta is speaking with, 40% have chosen Embecta as a supplier. He said generic launches in India are largely co-packaged with Embecta pen needles, two partners have received approvals in Canada and Brazil could still occur this year. China is likely next year, he said.

Kurdikar said the company previously described the GLP-1-related B2B opportunity as at least $100 million and that, over the past year, the opportunity has appeared “more and more real.”

Owen Mumford Deal Expected to Accelerate Transformation

Kurdikar said Embecta is excited about its pending Owen Mumford transaction, which he described as a way to expand beyond insulin injection delivery into a broader medical device and drug delivery platform.

He said Owen Mumford brings medical devices sold primarily in parts of Europe and the U.S., while Embecta has global commercial infrastructure, particularly in Latin America and Asia. Kurdikar said Embecta plans to globalize Owen Mumford’s medical device portfolio through its own commercial channels.

He also highlighted Owen Mumford’s drug delivery capabilities, including autoinjectors and reusable pen injectors, and said the acquired business has developed bespoke autoinjectors for pharmaceutical companies. The transaction includes $100 million upfront and $50 million contingent on milestones tied to a new product, he said.

Kurdikar said Embecta did not model meaningful manufacturing cost synergies and only included a modest amount of operating expense synergies. Potential opportunities include manufacturing network optimization, back-office rationalization, logistics savings and distribution efficiencies, he said.

Cash Flow, Debt Paydown and Capital Allocation

Despite the guidance reset, Kurdikar said Embecta still expects about $100 million in free cash flow this year. He said that figure includes roughly $40 million in one-time costs, including about $30 million tied to the company’s brand transition.

He also discussed Embecta’s recent capital allocation changes, including reducing its quarterly dividend from $0.15 per share to $0.01 per share and obtaining a $100 million, three-year share repurchase authorization from the board.

Kurdikar said the change gives Embecta flexibility to deploy free cash flow between share repurchases and debt repayment, which he described as the two primary uses of free cash. Looking ahead, he said the company is not providing fiscal 2027 guidance but pointed to factors that could affect future cash flow, including Owen Mumford revenue, GLP-1 B2B growth, new pen needles, new syringes, integration costs and possible contingent payments tied to the autoinjector platform.

Kurdikar said the difficult quarter is not causing Embecta to deviate from its strategy. “We still believe that’s the right strategy,” he said, adding that the Owen Mumford acquisition is expected to help accelerate the company’s transformation.

About Embecta (NASDAQ:EMBC)

Embecta Corp (NASDAQ: EMBC) is a pure-play diabetes care company that was spun off from Becton, Dickinson and Company on July 1, 2021. Headquartered in Franklin Lakes, New Jersey, Embecta focuses exclusively on the development, manufacturing and commercialization of products that enable insulin delivery and blood glucose monitoring for people with diabetes.

The company’s product portfolio includes insulin infusion sets, durable and patch pumps, pen needles, infusion tubing, blood glucose test strips, lancets and lancing devices.

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