Executive Summary / Key Takeaways

• Modular Medical ($MODD) is a pre-revenue medical device company targeting the significant, underserved "Almost Pumper" segment of the diabetes market with an innovative, user-friendly, and potentially more affordable two-part patch insulin pump.
• The company has achieved key regulatory milestones, receiving FDA clearance for its initial MODD1 pump in September 2024 and planning submission for the improved, tubeless Pivot pump by October 31, 2025, with expected clearance and national launch by March 31, 2026.
• MODD's proprietary technology offers tangible advantages over competitors, including a larger 3mL insulin reservoir, lighter weight, removability, simplified 9-step setup (vs. 42 for average pumps), and an expected 50% lower cost of goods at scale compared to the leading patch pump.
• Despite recent financing activities providing approximately $18.7 million in net proceeds in fiscal 2025, the company's significant operating losses ($18.8 million in FY2025) and cash burn raise substantial doubt about its ability to continue as a going concern without securing additional capital.
• Success hinges on successful commercialization of the MODD1, timely regulatory clearance and launch of the Pivot, securing adequate insurance reimbursement, scaling manufacturing with partners like Phillips Medisize, and effectively competing against larger, well-established players like Medtronic (MDT), Tandem (TNDM), and Insulet (PODD).

The Underserved Market: A New Approach to Insulin Delivery

Modular Medical is poised to enter the dynamic and growing diabetes care market, specifically targeting individuals who require insulin but have historically been reluctant to adopt traditional insulin pumps. The company defines this significant segment as "Almost Pumpers" – patients with Type 1 or Type 2 diabetes who are aware of the clinical benefits of pump therapy (improved glycemic control, reduced hypoglycemia, better quality of life) but are deterred by the perceived complexity, cumbersome nature, high cost, and steep learning curve associated with currently available devices. This group represents a substantial opportunity, estimated to include 28% of Americans with T1D and 25% of intensively treated T2D patients who are interested in pump adoption if existing objections can be overcome.

The company's strategic foundation is built upon addressing these specific barriers. Modular Medical's journey began in earnest in 2017 with the acquisition of Quasuras, Inc., founded by Paul DiPerna, a veteran with deep experience in the diabetes device industry and a key figure in the development of Tandem Diabetes Care's initial pump. This history informs MODD's focus on innovative design and user experience, aiming to fundamentally alter the trade-offs that have limited pump adoption to primarily highly motivated "super users."

Technological Innovation: Simplicity, Capacity, and Cost

At the heart of Modular Medical's strategy is its differentiated technology, embodied in its initial product, the MODD1, and its planned successor, the Pivot. Unlike many existing pumps that rely on complex syringe and plunger mechanisms or discard all electronics with each use, MODD employs a new, proprietary method of insulin measurement and delivery. This technology is designed using parts from high-volume consumer electronics manufacturing lines, a key factor intended to break the traditional cost-vs-functionality curve in the insulin pump space.

The MODD system features a two-part design: a reusable component and a disposable cartridge/set that snaps together. This modularity offers several tangible benefits:

• Simplified User Experience: The system utilizes a simple one-button interface for bolus delivery, requiring only nine steps for setup and refill every 72 hours, a significant reduction compared to the average 42 steps required by existing pumps. Optional smartphone software provides additional data access.
• Enhanced Capacity and Form Factor: Despite a slim profile, the MODD1 holds 3mL (300 units) of insulin, 50% more than the 2mL reservoir in Insulet's popular Omnipod patch pump. This volume advantage is critical for a substantial portion of both T1D (24%) and T2D (>50%) patients who require more than 2mL of insulin over a typical three-day wear period. The MODD1 is also lighter than the Omnipod (20g vs 26g empty, 23g vs 28g filled), a reduction of 23% and 18% respectively.
• Removability: Unlike some patch pumps, the MODD system is removable from the needle during its wear time, addressing a point of dissatisfaction for users of existing patch pumps where accidental dislodging can lead to wasted insulin.
• Cost Efficiency: The reusable component and use of high-volume consumer electronics parts are expected to result in a cost of goods approximately 50% lower than the closest patch pump competitor at production scale. This cost advantage is central to MODD's strategy of making pump therapy more affordable and accessible.
• Even Basal Delivery: The proprietary pumping modality is designed to provide a more even delivery of basal insulin, aiming to mimic the function of a healthy pancreas more closely.

The company's technology roadmap extends beyond the initial MODD1 and Pivot. Future iterations of the Pivot are planned to incorporate phone-based control (ACE) and Automated Insulin Delivery (AID) capabilities for integration with Continuous Glucose Monitors (CGM), expanding the target market to include existing pump users seeking advanced features. Longer-term aspirations include multi-chamber pumps for complex therapies and a drug prefill model for cartridges to further simplify the user experience.

Strategic Execution and Market Positioning

Modular Medical's strategy to penetrate the market is multi-faceted, focusing on accessibility and ease of adoption for the "Almost Pumper" segment. The company received FDA clearance for the MODD1 in September 2024 and is actively preparing for its initial commercial launch in a single US region during the quarter ending September 30, 2025. This limited launch is intended to gather user experience before a broader rollout.

The company's go-to-market strategy is differentiated from the large direct sales forces employed by incumbents. MODD plans to utilize distributors to target primary care physicians who manage daily insulin users and a small direct sales force to engage with diabetes educator practices. This approach leverages the product's ease of use and minimal training requirement (30 minutes), aiming to incentivize healthcare providers to recommend the pump to patients who previously found existing options too daunting.

The successor product, the Pivot, which integrates the set into a true tubeless patch form factor, is expected to improve usability and manufacturability. The 510(k) submission for the Pivot is planned by October 31, 2025, with anticipated FDA clearance and national launch during the three months ending March 31, 2026. The company intends to transition from MODD1 to Pivot upon regulatory clearance.

International expansion is also on the horizon, with CE Mark clearance for both MODD1 and Pivot expected in the first quarter of 2026. The European strategy involves partnering with distributors, capitalizing on the patch pump form factor, lower cost, and reduced training burden, which are particularly well-suited for European markets with fewer healthcare professionals available for training compared to the US.

The competitive landscape is dominated by three major players: Medtronic, Tandem Diabetes Care, and Insulet, holding significant market share (estimated 51%, 28%, and 19% respectively in the US insulin pump market in 2020). These companies offer a mix of durable pumps with tubing (Medtronic, Tandem) and patch pumps (Insulet). While these competitors have established market presence, extensive sales forces, and integrated systems (including AID algorithms), their products are often perceived as complex, expensive, and requiring significant user effort. MODD positions itself as a disruptive alternative by focusing on the large segment of the market that these incumbents have not effectively reached due to the barriers of cost and complexity. The company's specific advantages in ease of use (9 steps vs 42), lower expected cost of goods, and larger reservoir capacity directly challenge the offerings of its competitors, particularly Insulet in the patch pump segment. The increasing adoption of CGM devices and the shift towards Pharmacy Benefits Manager (PBM) reimbursement for patch pumps are viewed as favorable market trends that could accelerate adoption of MODD's accessible technology.

Financial Condition and Liquidity Challenges

As a pre-revenue company focused on development and preparing for commercialization, Modular Medical has a history of significant operating losses and negative cash flows. For the fiscal year ended March 31, 2025, the company reported a net loss of approximately $18.8 million, following a net loss of $17.5 million in fiscal 2024. Operating expenses totaled $19.0 million in fiscal 2025, up from $17.5 million in fiscal 2024, primarily driven by a 14.1% increase in Research and Development expenses ($14.7 million vs $12.9 million) related to increased personnel, depreciation from manufacturing equipment, and development activities for the Pivot. General and Administrative expenses saw a slight decrease to $4.4 million from $4.6 million.

The company's cash position as of March 31, 2025, was $13.1 million, with an accumulated deficit of approximately $84.8 million. Cash used in operating activities was $15.7 million in fiscal 2025, an increase from $14.0 million in fiscal 2024, reflecting the higher R&D spend.

Investing activities consumed $2.5 million in fiscal 2025, mainly for property and equipment to build manufacturing capabilities. Outstanding purchase obligations for machinery and equipment totaled $1.5 million as of March 31, 2025, adding to future cash needs.

Modular Medical has relied heavily on equity financing to fund its operations. In fiscal 2025, the company raised approximately $22.1 million from financing activities, including $11.4 million net from a private placement in March 2025, $7.3 million net from a public offering in November 2024, $2.2 million gross from ATM sales, and $1.1 million from warrant exercises.

Despite these recent capital raises, the company explicitly states that its cash and cash equivalents are not expected to be sufficient to fund operations for the next 12 months from the filing date of the report (June 20, 2025). This condition, coupled with expected continued operating losses and cash burn, raises substantial doubt about the company's ability to continue as a going concern. The company will require substantial additional funding through equity or debt financing to sustain operations until profitability is achieved, which is not assured.

Outlook and Key Considerations

The near-term outlook for Modular Medical is focused on executing its commercialization plan and advancing the Pivot product through regulatory review. The planned MODD1 launch in Q3 2025 represents the critical first step in generating revenue and gaining real-world user experience. The subsequent submission and expected clearance of the Pivot by March 2026 are pivotal milestones, as the Pivot is intended to be the primary product for national and international expansion.

The company's ability to secure adequate insurance coverage and reimbursement for its products will be paramount to commercial success. While a proprietary survey suggests payor willingness for preferential coverage with discounts, navigating the complex reimbursement landscape, particularly with Medicare, Medicaid, and private payors, remains a significant challenge.

Scaling manufacturing through the partnership with Phillips Medisize is essential to meet anticipated demand and realize the expected cost advantages. However, reliance on third-party manufacturers and suppliers introduces risks related to quality control, production yields, and component availability, as highlighted by past delays in obtaining integrated circuits.

Competition from established players with greater financial resources, manufacturing scale, and existing customer relationships poses a continuous threat. While MODD's focus on the "Almost Pumper" segment and its differentiated technology offer a potential wedge into the market, competitors are also innovating, introducing new products and features.

The company's financial health remains a critical concern. The need for additional capital introduces the risk of significant dilution for existing stockholders and uncertainty regarding the terms and availability of future funding. The company's ability to manage its cash burn and achieve sufficient revenue growth to reach profitability will be key determinants of its long-term viability.

Risks to the Investment Thesis

Investing in Modular Medical involves significant risks, primarily stemming from its status as a pre-revenue, development-stage company in a highly competitive and regulated industry. The most immediate risk is the company's ability to continue as a going concern, which is dependent on raising additional capital in the near term. Failure to secure sufficient funding would severely impact its ability to execute its commercialization and development plans.

Regulatory risks are substantial, including potential delays or failure to obtain FDA clearance for the Pivot or future product iterations, as well as challenges in securing CE Mark clearance and approvals in other foreign jurisdictions. Changes in regulatory policies could also adversely affect the company.

Commercialization risks are high. Successful market penetration depends on gaining acceptance from patients, physicians, and payors, overcoming the inertia of existing MDI users, and effectively competing against well-entrenched rivals. Manufacturing and supply chain risks, including reliance on third parties and potential component shortages, could disrupt production and delay product availability.

Reimbursement uncertainty is a major hurdle. Without adequate insurance coverage, the affordability advantage of MODD's products may not translate into sufficient sales volume. Intellectual property risks, including the ability to protect its proprietary technology and avoid infringing on third-party rights, are also important considerations.

Conclusion

Modular Medical presents an intriguing investment opportunity centered on its potential to disrupt the insulin pump market by addressing the unmet needs of the large "Almost Pumper" population. The company's MODD1 and planned Pivot pumps, with their emphasis on simplicity, affordability, increased capacity, and user-friendly design, represent a differentiated approach in a market dominated by complex and costly devices. Key milestones like the upcoming MODD1 launch and Pivot regulatory clearance offer potential catalysts for value creation.

However, the path to success is fraught with significant challenges. As a pre-revenue entity with substantial operating losses, MODD faces an urgent need for additional funding, which introduces financial uncertainty and potential dilution. The company must successfully navigate complex regulatory pathways, scale manufacturing, secure favorable reimbursement, and effectively compete against formidable, well-resourced incumbents. The investment thesis hinges on MODD's ability to execute flawlessly on its commercialization strategy, leverage its technological advantages to gain market traction, and ultimately achieve financial sustainability. Investors should carefully weigh the potential for disruptive growth against the substantial financial and execution risks inherent in this early-stage medical device company.