Embecta’s U.S. Revenue Slumps 7.6% Amid Pricing Pressure

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $261 million, reflecting a 0.3% decline year-over-year on an as-reported basis, or a 2% decline on an adjusted constant currency basis
• EPS: $0.71 adjusted diluted earnings per share, compared to $0.65 in the prior year period
• Gross Margin: 62.6% adjusted, compared to 62.7% in the prior year period
• Operating Margin: 30.4% adjusted, compared to 30.7% in the prior year period

Guidance:

• Revenue for FY2026 on an adjusted constant currency basis expected to be flat to down 2% as compared to 2025 levels, with expectation to be closer to the lower end of that range.
• As-reported revenue guidance range of $1.071 billion to $1.093 billion.
• Adjusted operating margin expected between 29% and 30%, with expectation closer to the lower end.
• Adjusted EPS expected between $2.80 and $3, with expectation closer to the lower end.
• Expect to repay approximately $150 million in debt and generate between $180 million and $200 million in free cash flow, closer to the low end.
• First half of the year expected to generate approximately 46% of adjusted revenue dollars; second half approximately 54%.

Business Commentary:

Revenue Performance and Geographical Trends:

• Embecta Corp. reported revenue of $261 million for Q1 fiscal 2026, reflecting a 0.3% decline year-over-year on an as-reported basis, or a 2% decline on an adjusted constant currency basis.
• The U.S. revenue declined by 7.6% on an adjusted constant currency basis, driven by lower pricing and channel dynamics, while international revenue increased by 8.4% on a reported basis, led by strength in EMEA and Latin America.
• The decline in U.S. revenue was attributed to lower pricing and volume due to channel and contractual dynamics, whereas international growth was driven by strong execution and market performance in EMEA and Latin America.

Product Segment Performance:

• Pen needle revenue declined approximately 4.4%, syringe revenue grew by 5.3%, safety product revenue increased by 7.3%, and contract manufacturing revenue declined by 16.7%.
• The decline in pen needle revenue was driven by lower pricing and volumes in the U.S. and China, while syringe revenue growth was supported by improved performance in Latin America, EMEA, and Asia.
• The performance of contract manufacturing was impacted by continued insourcing of products by Becton Dickinson.

Financial Guidance and Pricing Dynamics:

• Embecta reaffirmed its fiscal 2026 revenue guidance range of flat to down 2% on an adjusted constant currency basis, with expectations to be closer to the lower end due to incremental U.S. pricing headwinds.
• The company's adjusted gross profit and margin saw a slight decline due to unfavorable pricing dynamics and mix, partially offset by manufacturing cost improvements.
• The pricing headwinds were primarily due to a different customer and product mix than anticipated, affecting net pricing.

Market Strategy and Expansion:

• Embecta is focused on expanding its portfolio with market-appropriate pen needles and syringes, leveraging its existing strengths in insulin delivery.
• The company is engaged in collaborations with over 30 pharmaceutical partners for co-packaging pen needles with generic GLP-1 therapies, with more than one-third of partners having selected Embecta as a supplier.
• The strategic focus is on positioning Embecta as a broader medical supplies company and a drug delivery partner, capitalizing on the GLP-1 opportunity and expanding into emerging markets.

Sentiment Analysis:

Overall Tone: Neutral

• Management stated results were 'largely in line with our expectations' and 'played out... pretty much largely as we expected.' However, they noted 'incremental U.S. pricing headwinds' and reaffirmed guidance while shifting expectations closer to the lower end. The tone was focused on execution and strategic progress without strong positive or negative indicators.

Q&A:

• Question from Sam, Analyst, BTIG: Hi, good morning. This is Sam, one from Marie. Thanks for taking the questions here, Dev and Jake. Maybe I can start on the quarter and, you know, maybe more of a deeper dive in terms of some of the dynamics we saw, whether it was distributor ordering, maybe what you’re seeing in that U.S. business, you know, the pricing impact that you’re now calling out, volumes, and then also maybe a piece on China in terms of the recovery in the back half that you’re expecting.
  Response: U.S. decline driven by lower pricing (due to customer/product mix) and lower volumes (channel dynamics, partially offset by advanced purchase). China performance in line with Q1 expectations; recovery expected in second half, with first half remaining a headwind.

• Question from Sam, Analyst, BTIG: Yeah. Yeah, very helpful. Appreciate the details, guys. Maybe just a quick follow-up, Dev. You mentioned, you know, the new oral GLP-1s that are starting to roll out at this point. Obviously, there’s a place for injectables also. So maybe you can, you know, lay out, you know, what gives you or, you know, why injectables still have in place, in this broader market, with new orals, you know, now in place? Thanks.
  Response: Oral GLP-1s are seen as expanding the market (new patients), not cannibalizing injectables. Injectables have better weight loss profiles and are a key part of many branded pipelines. Recent auto-injector to pen injector conversion (e.g., Zepbound) creates additional pen needle demand. The $100M+ opportunity remains intact.

• Question from Gracia, Analyst, Bank of America Securities: Hey, this is Gracia on for Travis. I wanted to follow up maybe on the strength in the international market this quarter. You called out EMEA and Latin America. Just kind of wanted to see specifically any more color on what improved versus the outlook three months ago and gives you the confidence to... and visibility there, that that strength continues throughout the rest of the year.
  Response: Strength attributed to 'superior execution' by local teams, including winning a large new customer in Latin America.

• Question from Gracia, Analyst, Bank of America Securities: Great. And then maybe just one follow-up on the pricing headwind. Any way to sort of quantify that incremental headwind that you’re seeing and, maybe what’s baked in on the top end and low end of the guide, in regards to that now, since those dynamics-have changed around?
  Response: The shift to the lower end of revenue guidance is due to incremental U.S. pricing headwinds. Previously, pricing was expected to be flat; now it is negatively impacting. Volume outlook has improved (now flattish vs. prior down expectation), and new product contribution is slightly positive (50 bps) vs. prior flattish expectation.

• Question from Ryan Schiller, Analyst, Wolfe Research: Good morning. Thank you for taking my question. I want to click on the auto-injector project. Can you give us an idea of how long something like this takes and when this might put dollars on the board? And any comments on TAM or market sizing would be much appreciated.
  Response: The pen injector project is in early phases; management has the capability to develop and present the product but provided no timing or market sizing details at this stage.

• Question from Ryan Schiller, Analyst, Wolfe Research: Thank you. And then just one more for me on the GLP-1 opportunity. So you sized this as $100 million revenue by 2033 at the Investor Day. You know, the guide seems to include roughly $10 million for 2026. Can you put any finer points on what the penetration curve might look like to reach that $100 million of revenue?
  Response: The $100M+ opportunity was based on certain assumptions (patient mix, reimbursement, delivery format). Upsides exist from expanding indications, improved reimbursement/pricing, and potential shift from auto-injectors to pens (e.g., Lilly's KwikPen approval). Ramp-up timing is driven by patent expirations in key markets (2026 for China, India, Brazil, Canada).

Contradiction Point 1

China Market Recovery and Headwinds

Contradiction on the severity of China's near-term challenges and the expected recovery timeline.

What were the key factors driving the quarter's performance, including distributor orders, pricing, and volumes, and what is the expected timeline for China's recovery? - Marie Thibault (BTIG)

2026Q1: China was a headwind in Q1, aligning with expectations after a difficult 2025. Recovery is anticipated to begin in the second half of the year... H1 2026 will remain a headwind. - [Dev Kurdikar](CEO)

How is consumer willingness to purchase non-Chinese products in China amid geopolitical tensions? - Marie Thibault (BTIG, LLC)

2025Q4: The 2026 guidance incorporates headwinds, but expects them to be less severe than in 2025. - [Devdatt Kurdikar](CEO)

Contradiction Point 2

GLP-1 Revenue Opportunity and 2026 Contribution

Contradiction on the expected contribution from new GLP-1 revenue streams in 2026.

What is the penetration curve to reach $100M+ by 2033 with the 2026 $10M guidance, and how has the estimate evolved? - Ryan Schiller (Wolfe Research)

2026Q1: The company remains confident in the GLP-1 opportunity. - [Dev Kurdikar](CEO)

How many GLP-1 partners have signed purchase orders, and how will their orders impact FY2026? - Marie Thibault (BTIG, LLC)

2025Q4: The low end of the 2026 revenue guidance assumes a negligible impact from new revenue streams (mostly GLP-1). The high end assumes a ~1% positive contribution from these new streams. - [Jake Elguicze](CFO)

Contradiction Point 3

U.S. Pricing Dynamics and Revenue Guidance

Contradiction on the pricing environment and its impact on revenue guidance.

What is the incremental pricing headwind, and what factors are included in the guidance ranges? - Travis Steed (Bank of America Securities)

2026Q1: The main driver for the lower-end expectation is the recent deterioration in pricing dynamics in the U.S. business, as pricing is now expected to be unfavorable for the full year, contrary to the initial flat expectation. - [Jake Elguicze](CFO)

How many GLP-1 partners have signed POs, and what impact could this have on FY2026? - Marie Thibault (BTIG, LLC)

2025Q4: The year-over-year revenue decline of 7.6% was driven by lower pricing (impacted by customer and product mix) and lower volumes... Some volume decline was offset by advanced purchases ahead of a January 1 price increase. - [Dev Kurdikar](CEO)

Contradiction Point 4

U.S. Revenue Performance Drivers

Contradiction on primary factor causing U.S. revenue decline.

Can you detail Q1's dynamics, including distributor orders, pricing effects, and volume trends, as well as expectations for China's recovery in H2? - Marie Thibault (BTIG)

2026Q1: The year-over-year revenue decline of 7.6% was driven by lower pricing (impacted by customer and product mix) and lower volumes... - [Dev Kurdikar](CEO), [Jake Elguicze](CFO)

How should fiscal Q4 revenue and pricing dynamics be modeled considering reversed Q3 timing benefits and equal pricing contributions, and what drives the expected sharp sequential decline in gross, operating, and EBITDA margins? - Marie Yoko Thibault (BTIG)

2025Q3: Q3 revenue exceeded internal estimates by ~$14M, driven equally by pricing (including rebate reserve adjustments) and timing of distributor orders. - [Jacob P. Elguicze](CFO)

Contradiction Point 5

China Market Dynamics and Outlook

Contradiction on the main factor impacting China revenue and the recovery timeline.

Can you provide details on distributor ordering, pricing, and volume trends this quarter, along with expectations for China's recovery in the second half? - Marie Thibault (BTIG)

2026Q1: China was a headwind in Q1, aligning with expectations after a difficult 2025. Recovery is anticipated to begin in the second half of the year, driven by sales force reorganization and a new competitive pen needle launch. - [Dev Kurdikar](CEO), [Jake Elguicze](CFO)

Considering recent tariffs and geopolitical factors, how will they affect the P&L, and are there any demand impacts in China? - Anthony Charles Petrone (Mizuho Securities USA LLC)

2025Q3: The Q4 China revenue guidance (lower than Q3) reflects two main factors: 1) A challenging geopolitical/trade environment potentially leading to a preference for local brands, and 2) Distributors rebalancing inventory towards the end of the fiscal year. - [Devdatt Kurdikar](CEO)