Q1 2020 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the into a corporation first quarter, all 2020 earnings call.
This time all participants on in listen only mode. Later, we'll conduct a question and that's a session and instructions will follow at that time, if anyone she was quite assisting done a conference. Please press Star then Joe on you touched on telephone.
I am I know this conference call is being recorded.
When I like to turn the conference or what's your house now regarding Vice President Investor Relations.
Thank you and good afternoon, everyone and thank you for joining us for Insulates first quarter 2020 earnings call.
Joining me are Shacey, Petrovic, President and Chief Executive Officer in ways that knowing executive Vice President and Chief Financial Officer.
A replay of this call will be archived on her website in the press release discussing our first quarter 2020 results in second quarter in full year 2020 guidance is also available in the IR section of our web site [laughter] before we begin I'd like to inform you that certain statements made by Insulet during the course.
This call maybe forward looking in could materially differ from current expectations. We ask that you. Please refer to the cautionary statements contained in our SEC filings for a detailed explanation of the inherent limitations of such forward looking statements.
We will also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA in constant currency revenue, which is revenue growth. Excluding the effect of foreign exchange. We had transitioned to these measures is they align with what management uses as supplemental measures in assessing our operating performance and we believe that they are.
Helpful to investors analysts and other interested parties as a measure of our comparative operating performance from period to period.
Also unless otherwise stated all financial commentary regarding dollar in percentage changes will be on a year over year basis in all revenue growth rate will be on a constant currency basis and with that I'll turn the call over the shacey.
Thanks, Dan Good afternoon, everyone and thank you for joining us today.
The last few months have posed extraordinary challenges for countries and communities around the world as Weve grappled with the impact of Cobot 19.
Our Hearts go out to those who health has been affected in our gratitude goes out to the many medical professionals and first responders on the front line.
We also hope that all of you joining us on todays call are staying safe and healthy.
As a company committed to improving the lives of people with diabetes, the safety and well being of our Insulet employees and the communities and potters, we serve have been our top priorities as we navigate these difficult circumstances.
In March we transition to remote work range rents for the vast majority of employees in line with guidance issued by the W.H. show CBC local governments and health authorities.
But those employees performing critical onsite functions, we significantly enhanced safety procedures to include social distancing P. P. E protocol frequent deep cleaning up our facilities and temperature monitoring.
I'm pleased to report that this transition has been essentially seamless and on behalf of our leadership team I'd like to express our sincere gratitude to the employees who are continuing to work on site to ensure we can provide on interrupted supply omnipod to our customers.
I'm incredibly proud of our global teams resilience and compassion interface of this challenge well balancing many other demands like working from home caring for children and keeping their families and friends healthy our dedicated employees have never lost focus on our mission. Our Insulet team is what makes us such.
Great Company and I want to thank each and every one of our employees across the globe.
I'd also like to think our many supply chain partners for supporting our ability to build excess capacity and redundancy to ensure we can serve our customers without interruption and without delay.
Notwithstanding the difficult external environment that began to in fact, our international business in February and U.S. market in March we achieved first quarter revenue of almost $200 million, representing a 25% increase driven by 34% revenue growth in our total diabetes.
Product line.
This performance is a testament to both our execution and the strength of our recurring revenue business model.
We were well positioned to coming into the crisis, having ended 2019 in a position of strength with healthy inventory levels, a strong balance sheet robust global manufacturing operations and plans to capitalize on our growth prospects.
We started 2020 with global Omnipod revenue near all time highs and in the first quarter. We made continued progress on our strategic imperative.
In the face of new obstacles, we responded quickly and effectively maintaining our focus on execution and we delivered financial results exceeding our expectations.
While the impacts of co that are difficult to predict after careful consideration and scenario planning, we have decided to maintain our annual guidance. Although we expect to come in at the low end of the range. We previously provided.
Our unique business model is a key differentiator since we generate the vast majority of our revenue from our large existing customer base.
Therefore, while the current environment is unusually challenging we believe our 2019 and Q1 2020 momentum will provide inflation.
This gives us confidence that even in the face of this pandemic, we will grow revenue at the mid teens rate in 2020.
We will provide more detail, but assuming market dynamics normalized early next year. We also believe we can maintain our 1 billion dollar revenue goal for 2021.
Importantly, our relative strength in the near term allows us to continue to invest in our strategic imperatives that will drive growth over the longer term.
These investments will ensure that over the coming years Insulet make significant strides to improve the lives of people with diabetes. We will bring the simple is most consumer friendly technology to market.
Our business model innovation will ensure cost effective access to the broadest population of users across the globe and our investment in operational excellence will ensure supply chain resiliency world class manufacturing capabilities and industry, leading gross margins.
There is much work to be done to realize our vision and in 2020, we will continue to make significant progress.
This year, we're focused on driving for key initiatives for work.
One deliver consumer focused innovation.
To ensure the best global customer experience.
Three expand our global footprint and for drive operational excellence across the organization.
Our team has done a remarkable job quickly adjusting in the face of cobot 19, and despite the challenges of working remotely we do not expect an impact of more than a couple of quarters on our execution timelines engineers are finding creative ways to innovate in their newly virtual teams sales calls or how.
Happening via Webex, and our manufacturing and supply teams are ensuring we meet our growing customer demand without missing a beat.
I'll now walk through our Q1 progress on each of these key initiatives, starting with delivering consumer focused innovation.
During the first quarter, we continued to grow the number of Omnipod dash users driven by both the intuitive simplicity of its platform and our unique pay as you go business model through the pharmacy channel.
By eliminating complexity and restrictions, we're making omnipod more accessible to a broader range of customers.
The pot is differentiated particularly in a down economy, because it has no upfront cost.
This is also helpful to inflect, creating a high degree of installation through our recurring revenue durable annuity model.
In this first quarter, we continue to increase coverage for Omnipod dash, which helped grow the number of customers accessing omnipod dash through the pharmacy.
As of the end of Q1, we had secured omnipod coverage in the United States for over 50% of Medicare and approximately 70% of Medicaid beneficiaries.
And we've seen a notable tick up in commercial coverage for dash with dash now covered for over 60% of commercially insured lives.
In the first quarter approximately one third of our U.S. New Omnipod starts were type two primarily omnipod dash through the pharmacy channel.
As a result of this strong growth and expanding market access our U.S. new Omnipod starts represented another record Q1.
With last year's launch of Omnipod Dash, we created our online training program for dash customers transitioning from Omnipod.
This enables users to get started via online training without the need to leave home or meet with a clinician for support.
Thanks to dashes simplicity. This web based training has been a success and today. It is being used extensively to support thousands of users and in fact, many users transitioning from Omnipod to dash just rely on the intuitive user interface, which provides step by step instructions to get started.
These tools were created to support effective scaling of our business and have proven to be exceptionally helpful. In our current environment.
In addition in response to the pandemic our team worked quickly to expand and enhance our program to include virtual training for new users that's still wants support from a clinician.
The virtual training and support capabilities, we have built across our global business have allowed us to successfully service existing customers and to onboard new customers, even those that are brand new to pump therapy.
In fact over the last several weeks in our direct markets, which represent about half of our business. We've onboarded approximately 2000, new users be a virtual training with insulet clinical trainers and about 80% of east where N D. I users new to pump and pod therapy.
We have also seen our distributors and intermediaries implement great virtual training programs.
Last week I personally observed one of these trainings via Webex and it was a remarkable experience our clinical training manager walked a new Potter seven year old Colton and his parents through the set up and pod activation of Omnipod dash they were transitioning from multiple daily injections.
The training was thorough effective and the family was clearly at ease receiving it and the comfort of their own home and it was absolutely wonderful to see the delight on coal tons and his mom spaces. When they learned about dashes food library, and tempt basal capabilities and when they experienced putting on their very first.
Todd.
It was a clear reminder of just how simple and accessible omnipod is.
[noise], we've made great strides in delivering a best in class customer experience, we are constantly making it easier for users to try omnipod and access it from a convenient pharmacy.
We had much of this work underway in order to support our rapid growth and our goal to deliver the best global customer experience.
Tele medicine virtual training tools and the convenience of pharmacy access will continue to deliver appealing scalable customer experiences.
Well, we remain encouraged by the momentum of Omnipod Dash, we have seen a slowdown of new omnipod starts globally.
This intensified in March as many people delayed non emergency doctor visits due to cobot 19, and we expect to face the strongest new start headwinds in the second quarter.
It is obviously difficult to predict the timing and extent to which co bid will impact our business.
We don't know how long are customers will be challenged meeting with their physicians.
Or precisely how much are tele health capabilities will offset this impact.
Our guidance assumes the Pandemics recessionary headwinds will persist throughout 2020, followed by a gradual recovery starting in the third corner as economies begin to reopen and physician and patient interactions begin to normalize.
We are presently assuming market dynamics returned to normal starting in 2021.
In addition to ensuring the safety of our employees and continuity of supply to our potters. Our team has found ways to give back to our communities. We have participated in P.P. donation programs to local health care facilities and gifted computer equipment to support remote schooling needs in our communities.
And I'm, particularly proud of that in response to the significant economic impact of Cobot 19, we have broadened our financial assistance program to ensure those who rely on omnipod can remain on product if they lose insurance coverage.
This is a robust <unk> program designed to help address the unique health care affordability challenges for U.S. Omnipod users, who lose coverage due to cobot 19 and are not covered by Medicare or Medicaid.
For these users we will provide up to six months of pods at zero cost through the end of 2020.
Throughout the first quarter, we continued our work to develop our next generation product Omnipod powered by Horizon, we remain highly confident that omnipod horizon. The first two bliss personal smartphone controlled automated insulin delivery system will be a game changer for people living with diabetes.
As you know we paused the horizon trial at the beginning of March in order to address the software anomaly I'm pleased to report that we have successfully completed the software update and has been sent to the FDA for review.
Given anticipated agency review times and newly required logistics at our trial sites, we're now tracking to bring Omnipod horizon to the U.S. market in the first half of 2021.
We are fortunate to benefit from the enthusiastic support of our trial sites and participants and expect that all sites and virtually all patients will continue in the trial.
That said cobot 19 present, some challenges to how we support and monitor the trial and this likely will add a few months to our timeline.
The team has reacted quickly proposing updated protocols to the FDA to ensure virtual follow up and support in our interactions with the agency continued to be collaborative and helpful. We look forward to resuming the trial and we know our study participants are eagerly awaiting the benefits of simple automated insulin delivery.
Divided by Omnipod horizon.
In addition to our progress with Omnipod horizon. The team has continued to advance our collaborations with Dexcom Abbott and type pool over the coming years. These partnerships will bring exciting new products to market that will deliver reduce burden and improved outcomes for people living with insulin dependent diabetes.
We also continued to advance our existing platforms to bring even more value to our customers. This year, we will build out omnipod dashed with various new languages to further expand globally.
And we will deliver dashed with remote upgrade capabilities, including secure cloud to cloud integration through Glu go enabling additional ease of use and tele medicine capabilities.
And development work is underway on mobile phone platform extensions for Omnipod horizon, such as iOS.
Now turning to our global expansion as a result of the progress we made capitalizing on our direct operations in Europe, we've strengthened our presence in many of our large underserved existing markets.
We entered into a limited commercial release of Omnipod Dash in three European markets at the end of 2019 and had planned to further rollout dash in Europe in Canada and to to enter five new international markets.
We are eager to expand into new geographies and dash has been well received in the markets in which we've launched it.
Cobot 19, however present, some uncertainty in terms of market readiness training and preparedness of our teams and partners as well as regulatory and market clearances. We believe these dynamics delay our dash and market expansion efforts into early 2021, as we work to it.
Sure the markets are prepared for successful dash launches and market expansions.
These impacts are temporary and we continue to view global expansion as an exciting multiyear growth driver for inside.
Lastly, I will address our manufacturing innovation and ongoing efforts to drive global operational excellence.
Several years ago, we began taking steps to strengthen our global supply chain, we focused on building redundancy with our U.S. manufacturing capabilities to supplement our capacity in China as well as create redundancy throughout our entire global supply chain.
The importance of this effort was highlighted as we work to maintain production continuity in the face of Cobot 19 first in China, and then in the United States.
I'm very proud of the incredible work our team has done to ensure we are producing above planned product levels.
While ensuring the safety and well being of our global employees. We are laser focused on making sure. Our customers received continued on interrupted access to omnipod.
This pandemic is the challenge of our lifetime, but we will emerge stronger and better for it already at Insulet. It is driving us to improve systems enhanced tele medicine capabilities and further strengthen our manufacturing operations and supply chain inside.
What is rising to this incredible challenge and there is no other team I would rather work with and rely on to see us through to the other side.
We remain focused on executing our strategy to continue creating value for shareholders.
And we remain focused on our mission to improve the lives of people living with diabetes, even in the most difficult of times.
I'll now turn the call over to wait.
Thank you Shacey. These are challenging times as we deal with the ongoing global health prices and I'd like to also say thank you to the incident team has shown incredible adaptability as we have all adjusted to a new modem operating.
And well wishes to all of those impacted by 219.
We are certainly not immune to the headwinds created by the pandemic. However, as Shacey stated we are fortunate to have a durable annuity model with the vast majority of revenue generated in any given quarter coming from our existing customer base.
The current global environment is disrupted but it does not change the significant market opportunity, we have and we remain well positioned for sustainable growth over the long term.
We're confident in our ability to continue creating significant value for shareholders, while advancing our mission to improve the wise what people with diabetes.
We achieved another strong quarter financial and operating performance in Q1.
The execution of or strategic imperatives is paying off and we continue to invest for growth.
A reminder, the revenue growth rates old discussion on this call organic constant currency basis.
The first quarter. It 2020, we delivered revenue growth of 25.3% approximately 7 million over quarterly guidance range.
The strong growth was driven by our global diabetes business, which grew 34%.
10.5 million above our guidance range.
We were able to achieve these results and your global operations and commercial teams did a tremendous job could be adjusting to the constraints calls but to get 19.
The operations teams that measures in place early in the quarter engine, you won't have challenges ramping back up or China manufacturing facility in January and a commercial team acted quickly later in March as regional walked into into me to switch to more telehealth activity.
So we've been able to deliver product to customers without interruption and we're producing above historic levels with volume contribution from our new U.S. manufacturing.
All while keeping a keen focus on ensuring the safety and well being of our employees and delivering product to our customers.
[noise] by product line.
Also on the broad revenue grew 35.4% 5.6 million above our guidance range and represented the highest growth rate. We have achieved in our first quarter in over five years or increasing customer base and growing adoption of omnipod.
Primarily through the pharmacy channel continued to be the main drivers Oh performance, along with the mix benefit for the premium on Omnipod.
In the quarter, we experienced an easing of the seasonal impact of Q1 deductible, Lisa given our shift to the pharmacy and we also benefited from an estimated $4 million and customer stocking due to cool bid 19.
As a reminder, we began generating revenue for dash at the start of the second quarter of last year sore 2021st half growth rate will benefit from Annualizing. The first full year of Omnipod dash and our move into the pharmacy.
In the first quarter volume rules <unk> Omnipod dash drew over 60% over U.S., new Omnipod starts.
And we grew U.S. volume through the pharmacy channel to almost 30% of our tool.
International Omnipod revenue grew 31.9% 5 million above our guidance range.
International also benefited from an estimated $2 million channel stocking orders due to bid 19 late in the quarter.
Delivery revenue declined 50% and was below our guidance range. This was due to a shift in timing of production, which you will see is reflected in the greater the normal revenue growth. We expect from this product line in the second quarter.
Overall, we're pleased with our strong revenue growth in the first quarter and start to the year displace beginning to see a slowdown in new omnipod customers in March.
Turning to gross margin, we delivered 64.1% in the quarter down 280 basis points year over year and flat sequentially.
Including a 160 basis point unfavorable impact from poor bid 19 related costs as well as a 40 basis point unfavorable impact from FX.
Also impacting gross margin was the continued impact of ramping production at our new U.S. manufacturing facility with our second manufacturing lines starting production in early March.
Partially offsetting the gross margin headwinds really continued improvements throughout our global manufacturing and supply chain operations, we were well prepared for this difficult situation given our complete supply chain redundancy strategy implemented over the last several years.
The incremental 2020 cost we're incurring to maintain the safety of employees and the quality of our products and to ensure we produce ahead of demand is critically important during this time.
Okay.
Now turning to the rest of the P. you know on a full year basis.
For gross margin, we now expect the full year to be approximately 63%.
Compared to our prior expectation of approximately 65%.
This factors in our forecasted reduction in volumes and related lower revenue forecasts due to cope with 19.
As well as an estimated 5 million 210 million of additional one time costs related to cope with 19 safety in mitigation efforts.
Also factored into our gross margin estimate is a slower ramp in our new U.S. manufacturing lines as timing has been impacted by the shift in focus for the operations team to mitigate the risks related to pandemic safety.
Well a supply chain continuity.
And to a lesser extent you assumed cost of our enhanced financial assistance programs.
Are 2020 in long term financial strategy in capital deployment plan remain unchanged and we continue to expect capital expenditures to be consistent with prior year. We will continue to invest in our innovation pipeline expand our global commercial initiatives and invest in U.S. manufacturing.
Lastly, we are reaffirming our expectation of adjusted EBITDA as a percentage of revenue in the mid teens now closer to the low end of the range.
[noise] for 2021 as Shacey stated earlier, if our base assumptions hold for 2020, and we see market conditions stabilize in 2021, we will remain ontrack to deliver our revenue target of 1 billion.
For our 2021 gross margin target as a result of the pandemic impact the volume and U.S. manufacturing ramp we now expect a range of 67% to 70%.
We still see a pathway to our original 70% target. However, there are many scenarios that <unk>. So we feel it's prudent to provide a wider range at this time.
No way does it change or confidence that we will achieve 70% gross margin overtime.
Finally, we are reaffirming our expectation of 2021 operating income as a percentage of revenue in the mid teens.
Now closer to the low end of the range.
In summary, we started the year with higher than expected performance and Q1 and with our resilient business fundamentals and base assumptions, we believe install it as well position to sustain growth in 2020 and over the long term.
Remain focused on our strategic imperatives and delivering on our mission to improve the lives of people with diabetes around the globe.
In closing our thoughts and prayers go out to everyone impacted at this time.
We're proud of her insulin employees have responded to this challenging situation and how they remain focused on our mission.
With that will turn the call over to the operator for Q. and I.
Thank you know how many channel question that there's times faster spike undermining touched on Palestine.
The across them happen then started on your wrist, Yes, 500 Q. Please press the pound key.
We asked you. Please keep your questions to no more than one quite some place to follow up myself.
Yeah, It Tom Cardinals there'll be more than happy to take you pop questions.
Hi, mom and pop the question.
Yeah.
Mm.
And first question is from Robbie market J.P. Morgan.
[noise] great. Thanks for taking the question and congrats on a really nice corridor.
I mean.
Yeah, you know we've in our checks with endocrinologist, we consistently here that you know.
Pumps are a little harder to train remotely than C.G.M. by Omnipod stands out as being easier. I then there are competitive pumps to train and.
Remotely plus the cost to access and the costs to use it significantly lower which bodes well during what should be a pretty tough economic time, the next few months or longer here. So.
How are you thinking in terms I know most of your new patients starts come from M.D.I., but how are you thinking about your a competitive positioning here going forward both to patients to basically pay up before but also versus your competitors, where you might have a a lot of.
Benefits versus that thanks.
Thanks, Robby Yeah, I think I think you're write your data supports what we see which is bad and you know where there are all sorts of things that make omnipod really appealing insulin delivery therapy for patients and some of those things are even more powerful in in an environment like the one.
Where in when you think about the move towards a more at cost conscious consumer and this really a challenging economic environment. Obviously, the fact that you don't have to pay up front <unk> and you're not locked into four years of therapy. Those things are very appealing, but I think probably even more powerful than that is the simplicity.
Yeah, the platform and in some ways tally health displays really perfectly into our strategy. Because you know our whole goal is to bring the simplest most consumer friendly technology to market and if you think about what you need to be able to transition people in tell a health environment from multiple daily injections.
To a new technology, it's gotta be simple and you know we've developed a technology that a simple enough for kids simple enough or multiple daily injection users and one that really if you think about it has two components no needles to handle no infusions type. So it's just a very simple technology to train on.
And I think that that differentiate or is going to become more powerful in the environment that we're in today. So we feel good about this trend and I personally I'm really excited by the capabilities that we built and expanded on and it really short period of time to be able to you lenient.
Really bring our technology to to more people who need it.
Great that'd be just as a quick follow up inputs stands out as having a lot of China manufacturing exposure you touch on the spin the prepared marks and you have done a great job are ramping up at the new manufacturing facility I believe no line. One is blind to is on its way in line three is being bell.
But how should we think about when you'll have much more dependent on the U.S. manufacturing versus outside the U.S. and case this last for much longer.
Oh wait I can I can take that one.
And you know the the the team saw those risk several years ago when they laid out the the multi your strategy and obviously made a significant investment I I know you've seen it here as well and to your point the the the that's giving a lot of tailwinds to the team here. During this current challenge that we've got two lines.
And running now and producing and that's allowing us to actually build inventory through this time and so being able to stay ahead of demand and you know demand that's over achieving or o. performing or based scenarios regarding a risk in China. I mean, we've got a really strong partner in China.
I think we're very impressed by how quickly they took on the challenge and we're able to staff recruit onboard train and safely move people into the facility and get our production. It was clearly delayed from a typical you're in start but given the.
<unk>, we were impressed by how quickly both the third party team in our operations teams work together highlighted here some of the cost we put some incentives in place to help a fun some of the work that our third party manufacture was doing in some of the extent they were going to get employees into the facility.
To get producing for US again after the new year. So you know I I think we're going to see a multi a facility strategy from us going forward and one of the main drivers for U.S. manufacturing facility was to get redundancy and we'll have redundancy. Once we have three and four lines running here in the U.S.N.
Keeping are trying to manufacturing facilities. So <unk>, we'll achieve that objective once we get our third wind up and then eventually onto her fourth line.
Next question please.
[noise], yes.
Next question Incomings problem deadline, <unk>, Oh Morgan Stanley.
<unk>.
Ah good afternoon, a couple of Crooklyn's for me Oh wait I appreciate in great detail on new patients started impact across the quarter I Wonder just given that you know certain geography is are beginning to open up certain regions of the U.S. are beginning to open up an unforeseen this growing impact of Tele medicine hair April as it bleeds into may that qualification that you gave us across the quarter.
<unk> is that thinking up a sort of a qualitative recovering you're seeing April into may or is it sort of slightly ahead are slightly behind.
Hey, good afternoon to yeah, so and the thanks for bringing this one up because we were hoping that we'd get an opportunity to give a little bit more context on it starting with a matching of our assumptions with the global economy in in what we're starting to see in the Macroenvironment with.
Different countries and regions opening up that's why we tied or base assumptions to this gradual improvement through the end of the year and you know clearly we're expecting headwinds through the rest of the year, if it happens that regions open quicker and our customers and patients.
You can get to meet with their positions and get the therapies that they need to treat the disease sooner will be ahead of those assumptions, but at this point, we're assuming that will continue to C.D.'s headwinds through the end of the year.
And to the second part of your question you know how does that compare contrast, what we've seen in April.
You know the Oh to use this as an opportunity just to help explain to people the impact of our model and and it's really shows the durability of our model because.
The impact to Q2 is not really impacted that much by new patients starts as I mentioned in the prepared remarks, approximately 10% of any quarter is is due to new patients starts and so we're really benefiting from the strong second half of 2019 and strong performance into Q1.
And what we've seen so far in April is revenue continuing to perform well because we're benefitting from that momentum coming into cute too, but behind that we're we're seeing a slowdown in our new patients starts and we really see that in two stages, we tracker cell cycle in two main stages.
Leads and then actual new patients starts so even in front of new patients stars for tracking or sales leads and that's where we saw a pretty acute drop off in March and so is that funnel coming into Q2 starts to get smaller that's what we're seeing the impact and so that's going to impact may and June for the most parts were into.
<unk> or new patients starts although strong through April will start to slow down here through May and June and then you know, it's our expectation that both given the ability for people to return to their endocrinologist's and work on different strategies to improve their therapy.
Including five therapy, we're assuming will gradually improve through the end of the year and then <unk> highlighted tell a health you know, we we feel very well positioned our teams were already working until the health initiatives and we were training people virtually but we've readable those efforts down in the face of this pandemic and we're doing she she said you know thousands more.
And that's growing every day.
Okay wait thinks that Super helpful. Then maybe she should just one cooking for you kind of also tied to recovery, but he X.U.S. impact your forecast things a little heavier than U.S., which you know makes sense given the different sides of service or how this or how care is delivered in those two geography, but how would you characterize visibility into the U.S. recovery relative to the X.U.S. recovery. Thanks.
Great job.
Thanks Dad, Yeah, you're right on <unk>, just a way that carries delivered they're obviously and many more people living a diabetes get trained on new technologies like Ami pot in the hospital setting as opposed to the clinic setting. It should we do you anticipate it'll take a little bit longer for some of those markets to return towards normal.
And they had when they're a little bit more significant that said, we do have <unk> activities going on in virtual trains going on in every international market just like we do in every U.S. territory.
And so I think that's just at nature of of what we're dealing with and the U.S. in terms of visibility we have we benefit in the U.S. from visibility to our direct our customers and that helped give us a sense of what we can extrapolate across the markets. The same thing is true in Europe, Although I think the insight.
<unk> patients aren't as extract aren't at easily extract extrapolated into additional market. So that's the challenge we have is just how fragmented.
European market is that we work everyday obviously with our partners and with our team to get those insights and as as Wade said to be tracking those leading indicator. So that we can manage the business as effectively as we can during this time.
[noise] next question.
And our next question coming from the line shall adaptation, which city, yeah, a lot or something.
Ah good afternoon, everybody I'm. Thanks for taking the question one of the things that I'm trying to get my head around is the patient or the new patient ads that aren't happening right now when did it come back and how do they come back.
Yeah, I think it's it's a good question Joanne it's difficult obviously to predict the future what our data shows that I'll speak mainly to the U.S., because that's where we have really the best insight, but what our data demonstrates is that in the United States Endocrinologist visits are down to 60 per cent since then.
Getting of March.
And that remaining 40% that are still happening 15% of those are being I delivered via tele medicine, so pretty pretty significant drop off what we see is just you know more and more adoption a tele medicine across the United States I think that'll help offset it and I think.
One of our questions is how adorable is tele medicine, because it's obviously dependent in some some ways on reimbursement.
But we do a track you know state by state New patients starts and as Wade said R.I. leads in those markets to see instead of these areas that were hit harder than others are they starting to recuperate and so we see you know indications of that across various markets and that's what we'll continue to track. So that we can continue to fork.
Fast.
Thank you and then my second question has to do with the international market, recognizing maybe it'll be a slower to open up me geography is how do you think about approaching them and double up happening globally changed your view on what markets may be Max or not thank you very much for taking questions.
<unk> I I don't think this impact today I makes us feel differently about the new markets that we had planned to enter out really what's you know what we're planning for it just to make sure that we have all of these markets prepared for successful launches and so you know in in.
Various markets, we might use for example, partnering with a strong distributor partner there we may be seeking market I clearances, or even regulatory approvals and we want to make sure that all of that stuff is in place before we launch into the market and so that's that's really where where you know when we're thinking about different timelines and potentially early.
2021, instead of 2020, it's really tied to making sure that we have everything prepared so that we can have successful launches not that we're thinking about different territories. At this point, there's a tremendous amount of opportunity as I always say you know we are really in a handful of countries relative to the rest of the world and that's true even in Europe, where we start.
Thing to build a really strong presence there there's still a tremendous amount of unmet needs. So we're going to attack that unmet need she's going to be a little bit later than we expected because of because of these dynamics.
In our next question coming from the line.
Margaret tax sorry.
<unk> <unk> <unk>.
Okay. Good afternoon, good thanks for taking the question.
This one for me I guess on the virtual training I wanted to pull up on that I understand 15 of the 40% of a patient remaining were trained virtually but as you look at that going poor or you can you give us the advantages and disadvantages that for example that easier to get patient online or they're cheaper costs associated with that.
Sure Yeah, I think we're seeing a lot of advantages frankly, and not not any disadvantages in terms of virtual training me I think there are always going to be some subset of patients you would be you know who would prefer inappropriate world to be trained with a clinician or you know in a clinic.
But the feedback from patients on virtual training has been incredibly positive you know people are a describing it as simple and I can tell you from the one that I witness just on a Friday that the patients were incredibly comfortable the family was incredibly comfortable that we were able to get more insight into kind of how they operate by just.
Them at home and you know is a very efficient very effective training so and the feedback it's been very positive. So I I think this is a trend that will continue regardless of what happens with Tele medicine. You know, we're seeing a lot of positive feedback out of this are clinicians can be more efficient patience I don't have too you know get into the clinic.
And the feedback has been very positive and it's just so simple you know you don't have a needle you don't have you have two components and it's <unk> really straightforward technology to walk a user through so it it is ideally suited to virtual training.
Okay, Great. That's very helpful. And then in terms of patient lead in sales and marketing strategy is in the inner I I spend most of your patient going or coming from taste faces. It's the thumb doesn't strategic discussions within those and so on but are you going to change any of that strategy over the summer.
Kind of through your and add to maybe get patient two different channel with like an on line channel.
Yeah. Thanks, Margaret I first I'll say that it's pretty remarkable to me that actually virtual sales calls are still happening with I know chronology offices and in many cases and those are really looking for information from us in terms of how we can support <unk> activities I think earlier in February we had a web.
<unk> focused on Tele medicine, with Ami pot and like 800 positions. You know attended that so there there's a tremendous demand out there for just information insight to how do you do this well and we've got great resources to be able to support those discussions with and so that isn't going away Abbott to your point obviously.
That's where the had ones are coming from we have reallocated resources out from a sales and marketing perspective from things like conferences, and travel and entertainment too I'm more digital outreach direct to patients to be able to engage them on one the benefits of Ami pod and to the fact that you can try it.
You know risk free and you can train all at home without needing to go into the clinic and so you know it's early days, but we believe that message will resonate with patients.
<unk>.
And our next question coming from the line <unk> like like off calling yeah <unk>.
I think for taking my questions can you talk a little bit more about what the ceiling within your revised horizon guidelines winter U.S. During the trial restarts and then you still expect to conduct a limited market will be prior to a full launch in the U.S. or do you believe you could probably watch rise in the U.S. a product yet.
[noise] thinks Ryan said, we are anticipating just a little bit of time, a few weeks of F.D.A. review for.
The submission to restart the trial and then we've got to retrain sites et cetera on on just the virtual protocols for follow up and monitoring of patients and so I. We think that's going to take a little bit of time, probably some time into June I would guess before we restart the trial.
And in terms of a limited market release, we will do a limited micro release, you know, it's best practice with any new technology to do a limited marker release, we will do what we can to bring this technology as rapidly and through access and other methods to patients as quickly as possible because we know there's a significant demand out.
There, but it is going to take us a little bit of time to get through the limited market release.
Got it very helpful. And then I apologize if I Miss this but what proportion new patients starts in the U.S., where did the pharmacy in the quarter and.
Proportion of your overall U.S. installed base is is now going through the pharmacy and do you believe the transition to the pharmacy could be accelerated at all and the U.S. do the cooking eggs. Thank you.
I'll take maybe the pharmacy issues and then we can talk about what percentage of our new starts I'm not sure. If we gave that detail, but I in terms of the overall base. We now have almost 30 per cent of our U.S. customer's going through the pharmacy and actually you know when I think about how do we have really scale. This business, we've always been thinking about how do we help our.
Customers get the best customer experience through self service through easier training et cetera, and we've talked a lot about that our virtual training tools and our web based training tools, but the pharmacy as a big piece of this to you know this this work was underway for us because diabetes is an epidemic and endocrinology is in short supply and so.
We need to we need to innovate the business model to be able to ensure that we can meet this rapidly growing demand in this unmet need and so of course, all the telemedicine stuff that we talked about it as a piece of that but the other piece of that you know if patients need care and potentially aren't in there physician's office is frequently the pharmacy.
Play, a really exciting and really important role because you know unlike your endocrinology office. There is a pharmacy on every corner and if we could leverage that channel to educate and form and support patients that could be a much better customer experience and of course, it's a channel that we right now from an.
Insulin delivery standpoint, or insulin pump standpoint own and so very we see it as a worthy investment in in a way to provide the best possible experience and the most cost effective scaling a commercially of our business.
Hey, Ryan, it's way and and just to add on there too round off your question.
He said or install base in the pharmacy is 30% we didn't give exact pharmacy, new patients starts, but dash, we did and dashes, 60% over new patients third almost all those are through the pharmacy as well as type two has grown to be a third of our new patients 13. The majority of those are through the pharmacy.
As well, so dash and type two or a big part of what's driving the volume growth now to 30 per cent going through the pharmacy.
Great to see to just the progress made on establishing market access through the pharmacy, it's a big piece of why we've been able to expand so much and in fact, just in the last month, we've even secured a cigna coverage in the pharmacy channel, which is you know that's part of why we saw that take up and commercial coverage and part of what continues to draw.
<unk> adoption through the pharmacy channel.
No next question coming from the line up just <unk>, Yeah, let us open.
Thank you good afternoon.
I wanted to follow up maybe on the questions around new patients starts and and the 50% to 75% decline in the second quarter and then negating thereafter trying to triangulate that with your comments about the ease of use of prescribing through tell a health and that you think that 50 to 75 per cent and then the third and fourth quarter numbers that you're giving how do you feel like that compares maybe.
To the broader insulin pump market at this point are you guys doing better than about the same as worse than a just given your comments on the ease of prescribing I would think better than but just a would love any kind of competitive intelligence you're hearing outlet you open your docks on what those numbers represent relative to market.
Yeah sure just I think you know I don't I don't want to comment on it kind of competitive pump businesses, but what we do know just from a I.Q.V. a data and market read primary market research is that in the United States and no visits are down 60 per cent since the beginning of March. So I think that gives you a sense that this 50 to 75 per cent number is.
Probably right in line with what others are seeing and while we are I would say bullish on what kind of fit Omnipod is for Tele medicine, and we believe in that world, we can lean in and do better than others. At the same time, we are relying on endos to build tele medicine capabilities. So while we.
Kind of sped ahead, and I think built some really exciting capabilities and support mechanisms for our ando offices, they're still across the globe. You know different clinics are in very different situations in terms of their capabilities to be able to support Tele medicine. So you know we're a little bit ahead of the curve and we'll see.
See how this plays out and how quickly and offices across the globe, frankly, but particularly in the United States can start to implement and support tell health for their patients.
My next question coming from the line of change son, that's part of Lehman James.
Shopping.
Hi, This is not was not the case in a appreciate all the color invisibility you guys about given it's much appreciated. My question is on another type twos. So now that there's been a bit more time with a you know kind of them more substantial amount of tied to using the base have you noticed any change in the utilization or attrition dynamics.
With these types of users and then also can you speak to the broader type two reimbursement environment on the commercial front, especially given how a meal on C.D.M. find some parents about benefit more from me. Thanks.
[noise] great email again, this is where they can.
And so the first part of the question. We the dishes you for the second part so we have not seen a material change as type twos or become a bigger part of our mix of products or utilization as stayed pretty steady through Q1 and also through the first month of April and in fact.
One of the things that was on our radar when we set our annual guidance at the beginning of the year.
In one of the things that we thought could have push us to the lower end of our original guide was attrition because we had done a lot of new things a new channel a new product a new business model with the pays you go model and so we left or sell some room in the original guide that we could see attrition tick up and what we.
Variance in Q1 is actually are attrition took down a little bit we performed very well in the first quarter with slightly better attrition, we had seen historically, so we're very happy about that.
As I mentioned I prepared remarks, or though as we head into this more recessionary driven environments, we are adding a tick up and attrition and it took down and utilization just because we don't know what the recessionary environment holds for us and we're gonna start there and put that stayed common ground and then we'll monitor.
As we go from here.
That's great weight and in terms of your second part of your question around reimbursement for the type to patients you know what are the things we really like about the pharmacy channel is that there are there isn't really distinguishment between reimbursement for type two or type type one if they ever acquire insulin and so there are fewer.
Restrictions, it's a a simple or channel to access to your technology through and it really doesn't distinguish between type one or type two provided the patients insulin dependent and you know needs and insulin delivery mechanism and then of course, we always educate pairs on the fact that omnipod reduces total daily dose of insulin and provides very clear.
Benefits for both patients segments, and so I, we've been fortunate to establish broad reimbursement to the pharmacy channel, but doesn't distinguish between the two segments.
Next question coming from the line of Travesty of Bank of America online or something.
Congratulations on a strong Q1 and everything you're doing for patients <unk>. This one or the make sure I fully understood. The you'll be able reductions you gave in in new patient starts when those reductions versus last year or or versus your original reasonable guide them and then the change in the foyer got it sounds like the majority of the changes coming from.
Those new patient starts being lowered curse, if there's any any more color you could provide on what you're assuming on attrition expansion of the the patient support program.
You know how Travis. Thank you so to the first part of the question on new patients starts it is versus our guide in our previous expectations for 2020 and of course those are estimates right. You know, we we have really good visibility into cue to as I mentioned walking through the two stage cell cycle there.
And really good visibility for two two obviously in this environment, there's gonna be more uncertainty for the second half and what the pools of what we thought it was important to just lay out these key metrics and put a steak underground. So that we can then help you understand you know the key drivers for our business here and then we can mess.
To it as we go throughout the year.
As far as the full your Guy goes no. The the key is new patients starts we think that that will be the most significant metric to watch for you know if we just pull up and think about our business model. You know we'd have this advantage of a durable recurring revenue model and so even when we see new.
<unk> get impacted like we did in March and inability for our customers to get to the into office I mean, it's a really unique dynamic and and with that the momentum of our business carries and so we've got really strong growth rates in Q1, we're putting a strong guide infer q. too.
Well, we have to manage then is this compounding of new patients starts. So if we go through two or three quarters of restrained new patients starts that's going away on our growth rate, especially given the tough comps we had because we perform so well at the end of last year, So we annualized into that tough call.
We're gonna have to managed through some lower growth rates in the second half, but then.
As expected when we see our new patients start start to build momentum through the end of the year again, and then assuming we get back to normal or a new normal which is a shacey talked about earlier may involve more tele health, but we get back to a more new new normal where we're getting a regular cans of new patients starts then the momentum builds up.
Again, and we started to drive our growth rates, even higher so we felt it was important to really layout that new patients third dynamic and then do it the other key metrics that I mentioned utilization and attrition, we have took down utilization a little bit attrition up a little bit but the major driver here is new.
<unk> starts so for that you know we're going to watch it. We're we're gonna certainly benefit from the durability of this model here in the first half of the year, we're going to track. These q. metrics through the second half and then hopefully we'll all moved beyond this pandemic and get back to business here in 2021, and Travis I'll just comment on your I question regarding the.
T.I. patient assistance program you know, we don't look at that as hitting revenue because these are patients who would not be able to afford the product anyways and so you know I'm really really proud of this program I'm proud of the fact that Insulet was out front and that we can help support that patients who otherwise might not be able to access the the potty.
But we didn't do that as a revenue headwind because those patients would've probably a trade it off the product because they can't afford it.
Mm.
Okay, operator were overtime, but why don't we try to get through at least one maybe two more police.
Next question coming home to line up not I'll try and <unk>.
Yeah, and a shopping.
Hi, guys as as a juror on from that thank you for taking the question here.
I wanted to start off a little bit on on your sales channel goal, but I believe you said about 30% of your volume was doing the pharmacy.
That color and and definitely should help you in this type of environment.
But I guess diving in on the other 70% of the business are there any barriers presented by this epidemic outside of patient willingness that kind of thing.
That could then that you know that because then they thought patient access seemed to be any you know be availability people not being into crosses paperwork anything like that.
I think you know one of the challenges and the D.N.E. channel is a limitation of access for people living with type two diabetes. So that's one area, where you know, we we likely will not see access or availability.
And then you know I I'm not sure about the others, we haven't really seen trends that would indicate that there's a particular challenge with the D.M.V. environment that isn't.
Being experienced in the pharmacy channel with the exception of type two access.
The next question please.
Next question coming someone off call roles of <unk>.
Great. Thank you very much taking the questions in <unk> on his truck or two questions for me at one is the delays on a new patient stars from Kennedy assumptions, you're you're seeing a guy.
The commentary about the decline in and do business, but maybe just.
Help us understand maybe about what the fall off of like from from leads to starts are you seen a bottle necks more on the on the training inside is it more from a patient resources, an economic sides not want to commit to pump at this time and then just second question was ask it now it's just what did you learn.
Through this tele medicine, and virtual training process that you think cash that you can apply towards the horizon launching and patient onboarding from that perspective, as far as bringing down barriers to adoption disapprove any overall ease of use in the in the palm ecosystem from a longer term perspective. Thank you.
Oh, Great I think way can take the first part of your question and I'll I'll address the second sure sounds good so <unk>.
Typically see a few week two a month.
Lag between our sales leads and then leading into our new patients starts and so as I mentioned, we saw the decline in sales leads really hit in March.
But our teams have done. This this is in direct reference to she sees prepared remark where she talked about.
The ability for the team to transition to working remotely and working through till a health and we've done a great job through the into March and April transitioning what was in the pipeline into new patients starts and so when we'd guide to reduction a new patients 30 to 50% to 75% for Q.
It is a result of looking at that fills lead pipeline what happened to it in March what we've seen happen to it in April and what we're calculating will be the impact in May and June. So that's the way the math works on that one <unk>. So from a training perspective that you mentioned Kyle is are are teams are doing a great job. She she.
<unk> or <unk>, you know we're into the thousands in the first few weeks and ramping every day and that's both U.S. and Oh you. The I.T. teams have worked with the marketing teams too rapidly learn what are the bottlenecks work with the H.C.P. used to find out what are the bottleneck and these teams everyday are clearly hurdles and we're getting more efficient.
Being able to train people virtually.
And I think on your question tied to what did we learned about horizon. I mean, we continue to learn every day, but I'll tell you that the most exciting thing from my perspective about horizon is that you know it really has been design from the outside to be the simplest technology on the market and so that will lend itself very very well to tell a health and.
<unk> and the other great thing about horizon. Besides its simplicity is that there's real time access to a cloud data and so that will be that will that should enable some really.
Easy and effective interactions between patients and positions, whether they're happening in the clinic or up in particular, if they're happening via telling medicine.
The next question please.
Our next question coming from the line up down Yeah, <unk> as D.D. lyrics, yeah, a lot of shopping.
Hey, thanks, Thanks, so much for squeezing the n. congrats on a really strong corridor. It's good to see I had a quick question on attrition and sort of what you're seeing so or why I guess you saw in the last few weeks of the quarter. I know you have this patient assistance program, how you're seeing that.
The utilized and yeah, I guess, maybe let's start there.
Sure. So I can certainly like she see and you know I just mentioned to a previous question. There that you know through two one actually attrition was a little better than we've had historically and so in the face of the pays you go model, where we thought we could see some higher attrition, we actually saw a lower attrition as we get more acute into.
The month of March it's it's becomes harder to know if someone's actually attrited. It takes a bit of time to figure out if they've just skipped an order if they retreated but we actually saw the opposite a cold out in the prepared remarks that we are estimating a $4 million of end customer stocking and to break that down we have.
Really good insight into our direct business, which makes up about still makes up almost half of our business. So we know exactly when a customer asks for an order earlier than it would typically be shipped in so we estimated about $4 million worth of customers pulled orders from two to into two one.
And just to clarify for guidance for Q. too, we're not assuming any impact into two we're assuming too too has the same pull ahead from Q3, and we expect that we'll see the other end of the headwind in the second half a when it normalizes, though so we kinda saw the opposite Danielle where we saw some <unk>.
Drink in March because of Ah customers ordering resuming we're going to see that again here in the in the second quarter as far as attrition goes you know I think it's probably a little too early for recessionary impacts to start pushing on metrics like attrition in you know in the first month year of April so that.
One's still a T.V.D. and we'll monitor that one very closely as far as the financial assistance program. You know we were not quantifying are right now because we don't know exactly how many people are going to take advantage of that program and how utilize it will be she she mentioned, it's just really important for us and right in line with our mission to make sure that if there was.
Someone who in the U.S. has lost their job and lost their insurance and whether they're in the process of getting a coverage through Medicaid or or another means to insurance, we wanted to be there to back stop them and so we can't quantify that one at this time, you know I I prioritize it in our list of gross margin had.
Rooms at the end because I think it'll be one of the smaller head wounds, but will the ones he has to be determined.
Okay, I'll I'll just leave it there thanks.
<unk> and that will just take one last question. Please.
Ah So <unk> questions. Please pass to start end to one key.
Well, we can leave it there then yeah, if there's no one on the thanks, yeah. Thanks, operator, so I think you despite volatiles market conditions, we delivered strong operational and financial performance in the first quarter a team adopted quickly to challenges and executed on behalf of our customers shareholders and others.
Stakeholders. So we'll continue to monitor the situation and keep you all updated to the best that we can during this unprecedented time and I just want to close by thanking our global Insulet team across three continents for their relentless hardwork and dedication it's because of you that our team remain safe and healthy.
That our customers know they can rely on us even the base of this pandemic to get the product and support that they need. So thank you all for joining us today, and our heartfelt thoughts and wishes go out to all of you and your families to stay safe and stay healthy. Thanks.
He's fine gentleman disk space called friends. Thank you for your participation and have a wonderful day email disconnect.
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