Q4 2020 Tandem Diabetes Care Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to tandem fourth quarter and year end 2020 earnings call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your Touchstone telephone. Please be advised that today's conference may be recorded should you require any further assistance. Please press star zero and I would now like to hand, the conference over to your host EVP and Chief administrative officer.
Susan Morrison Madam you may begin.
Good afternoon, everyone and thanks for joining tandem's fourth quarter and year end 2000, and 'twenty earnings call. Today's discussion will include forward looking statements. These statements reflect management's expectations about future events product development timelines and financial performance and operating plans and speak only as of today's date there.
<unk> and uncertainties that could cause actual results to differ materially from those anticipated or projected and our forward looking statements.
The factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is highlighted in our press release issued earlier today and under the risk factors portion and elsewhere and our most recent annual report on form 10-K, and and our other SEC filings, we assume no obligation to publicly.
Any forward looking statements, whether as a result of new information future events or other factors.
In addition, today's discussion will include references to adjusted EBITDA, which is a non-GAAP financial measure adjusted EBITDA is a key measure used by us to evaluate operating performance generate operating plans and make strategic decisions for the allocation of capital. Please refer to our press release issued earlier today for further information.
John Sheridan, President and CEO, and Lee Vossler, EVP, and Chief Financial Officer, who will be participating on today's call.
Following our prepared remarks, we will open up the call for questions.
Thanks for limiting yourself to asking one question before getting back into the queue with that I'll now turn the call over to John.
Thanks, Susan and welcome everyone to today's call.
Before we jump into our fantastic 2020 results I'd be remiss not to take time upfront to acknowledge the incredible team of employees at tandem.
Its a group with a demonstrated history of pulling together during difficult times and and the pace of 2000 Twenty's challenges, we persevered and stayed focus on our mission to improve the lives of people living with diabetes a heartfelt. Thank you to all our employees for your efforts passion and dedication that made the year of success, even under challenging circumstances.
Looking back over the past year, we achieved approximately $500 million and sales surpassed the milestone of having more than 200000 customers and our worldwide installed base launch.
Our best in class control IQ technology, and made meaningful internal product development and operational progress all under the constraints of the global pandemic.
The catalyst that drove our performance in 2020 were largely the same as those that fueled our growth and the past several years and innovative product offerings and scaling international efforts and increasing number of customers eligible for their four year warranty renewal and underlying it all is a large underpenetrated worldwide market.
As we look to 2021 of you on each of these opportunities remain which further strengthens our confidence and achieving our near and longer term goals.
We are gaining penetration and individual practices and in fact, our number of prescribers has increased over 8% and the last three years and our average number of prescriptions is also increasing.
It's been and exciting shift over time, and we continue to earn the trust and confidence of health care providers.
Demonstrating the clinical benefits and exemplary customer experience, we provide with both our insulin therapy management systems and our top ranked customer services.
This feedback was echoed and our own customer surveys in 2022, which we received more than 100000 responses.
Our T Slim next to satisfaction score and the survey exceeded 90%, which we could and we continue to have high net promoter scores that's more typical up leading consumer brands and med Tech.
The support of health care providers and the overall positive experience from our customers.
And our key to driving our growth and the U S. And fact, we continued to see equal growth and the U S for people converting from multiple daily injections and from our competitors pump each representing about half of our new customers.
Awareness of the benefits of control IQ is also a key driver of our technology adoption and the vast majority of eligible customers have taken advantage of our free control IQ software update and the kitchen.
<unk> continues to surpass our expectations.
And the personal testimonials are so powerful that we recently launched a marketing campaign, how control IQ changed my life.
Our customers and as video was explaining their control IQ experiences and their own words and to date. These videos have been viewed nearly half a million times on social media.
We began the rollout of our control IQ technology outside the United States and July and it is now available and more than half of the countries we serve.
And the international customer response, we are receiving mirrors that domestic enthusiasm and we anticipate completing this rollout and mid year.
Our control IQ technology set a new high bar worldwide for automated insulin delivery technology as it allows users more time to spend thinking about their lives and less about their diabetes.
And our investing and enhancements to our control IQ technology to increase the clinical efficacy.
And even further improve the customer experience through expanded personalization and ease of use.
Last year, we submitted a regulatory filing to the FDA for the first enhancements to control IQ to allow for greater personalization and certain rates and ranges and to add and indication for <unk>.
This improvement strategy combined with the Fda's interoperability initiative and our tandem device updater and allows us to put new features and the hands of users faster than ever before ultimately we are working to provide the diabetes community a fully closed loop system and each feature updates and enhancements brings us one step closer.
Innovation will continue to be an important growth driver for us and it is true to our mission at tandem as we take a positively different approach to diabetes care with.
We've catapulted to becoming a leader and diabetes technology and a short period of time and are committed to sustaining this position by continuing to bring new products to market and reduce the daily burden of diabetes care for both pump users and health care providers.
And support of this commitment we are preparing to launch our App based mobile bolus feature for the T cell next two and the first half of 2021, and we're particularly excited to add this to our list of first accomplishments as it will be the first FDA cleared views of a personal mobile device and the delivery of insulin.
We'll be operating this feature on iOS, and Android, which is important as the majority of our customers use our app on iOS and both platforms hold considerable consumer market share.
More than 80000 people have downloaded our current App and we expect this new feature to drive even greater awareness and adoption.
Similar to both basal IQ and control IQ. We also plan to offer this highly anticipated feature to our in warranty customers and the United States for no cost. This technology is vital for us to be able to make and an immediate difference and improving the lives of our customers.
The software update with our new mobile bolus feature will be the shift to update that we've offered to our customers since first launching the tandem device updater and 2016.
Software update process is built on the same requirements. We have set for all of our products ease of use ease of training and strong security.
We set a high bar for each of these which is why even five years later, we remain the only insulin pump company to offer this capability anywhere in the world.
And this experience is clearly a competitive advantage for tandem.
Customer segmentation and something you'll hear us talk about Boston since there is not a one size fits all solution for people living with diabetes.
And clinical needs and personal preferences create many segments and diabetes market.
And it's a dynamic that drives our longer term strategy as we work to provide solutions to people throughout the diabetes community.
And many ways tandem as both a medical device manufacturer and a provider of consumer technology, It's wireless support and digital touch points that we provide our customers and health care providers and <unk>.
Crucial as they are experienced with our pumps.
One of the most value digital tools that we offer domestically as T connect our web based data management applications.
T connect improves health care provider and efficiency by providing streamlined information from our pumps integrated CGM and supported blood glucose meters that can be used per therapy management, particularly now that pump data can be wirelessly uploaded to T connect from our mobile App and.
In addition to T connect our expanding digital health platform now includes our T connect web application, our mobile app, the tandem device updater and our customer portal. These.
And these offerings stood out as a valued resource amongst prescribers and the remote care environment of 2020, which underscores the importance of our internal development initiatives over the past year and in 2021.
As we look to the year ahead, we are excited to bring new capabilities to market with our second generation data management application tandem source source features dashboards that are customizable user caregiver or health care provider can access to data and insights needed to optimize diabetes management via our mobile app or the web.
It's also designed for future integration with third party partners, establishing pathways to unlock new insights that make it easier for users to manage their diabetes.
And importantly.
We will make tandem source available as a global offering.
Giving us and end to end solutions for the first time and all the markets that we serve.
We intend to launch tandem Stuart's and select countries outside the United States later this year with a domestic launch to follow.
And and source is one element of our vision for better insulin therapy management, leveraging next generation digital assets with a focus on delivering simplified and personalized experiences to our customers and is a powerful complement to our algorithmic capabilities on the pump.
It's also a precursor to further enhancements to our commerce infrastructure, including our purchasing onboarding and support interfaces.
Over time, the investments, we're making and our digital infrastructure will and.
Enable us to further enhance our solutions for users and support outcomes driven discussions with payers and.
Our positive experience with our ecosystem attracts more people to our products and keep people motivated to use our pumps.
The global nature of our digital strategy is a good reflection of the expanding international focus internally and the growing importance and international markets to our business.
Since launching outside the United States and just two years ago. We now have approximately 45000 people using a tandem pump and nearly 20 different countries by comparison it took us more than four years to reach this level of installed base domestically.
<unk> growth reflects the quality of our product offerings and the meaningful worldwide opportunity that exists, particularly since pump penetration and the geographies we are.
The United States is 10% to 20%.
And 2021.
Plan to continue bringing our T slim <unk> pump to new geographies and.
And our goal is to be and approximately 25 countries by the year and.
This will bring our total addressable type one market outside the United States to approximately 4 million people of which more than 400000 use a pump today.
We also continued development of our T sport insulin delivery system, you may recall that we're designing T sport to be fully controlled by a mobile app that's available on both iOS and Android operating systems throughout the latter part of 2020, we conduct a human factors testing, both live and virtual as part of our iterative design process.
After being delayed and the COVID-19 delays.
And ladies and human factors testing had been one of the unfortunate consequences of Covid and recruiting has slowed and face to face testing is impacted as we prioritize the safety of our employees and study participants.
Our T sport and human factors testing results were mostly positive with a few opportunities for improvement identified during each of the various rounds of testing that were primarily related to make and the user interface more intuitive and efficient.
And in late December we completed our collective analysis of these studies and it was our opinion that the some of the opportunities identified during the testing did not meet the high user experience standards that we've committed to providing the diabetes community and have built our reputation on.
Internally one of our core values is no shortcuts and.
And this is a fitting opportunity to live by those standards and refine the design until it's right to ensure a safe and intuitive to use.
And the changes we plan to make a particularly challenging it will just take extra time to update and test the software and confirm our new designs to additional human factors testing as a result, our final and GUL has shifted from the third quarter to the fourth quarter and we'll provide further updates as we have more clarity on the timeline.
We remain excited for the opportunity T sport presents as our research shows that its form factor and the discretion afforded by mobile control appeal to a broader segment of the insulin using diabetes population.
<unk> would not consider pump therapy.
And as importantly, we remain confident that T sport like the original T Slim.
We will set a new standard for innovation and ease of use for our industry.
In addition to T sport being a 2022 growth catalyst. We also anticipate that next year will benefit from new sensor offerings by both of our CGM partners <unk> and Abbott.
We have a long successful history of partnering with Dex com and look forward to the benefits that their <unk> sensor will bring to people living with diabetes.
With <unk> and will be it will be the fourth generation of <unk> com sensors that we integrate with our technology based on the Fda's interoperability initiative and the timing of <unk> Coms clearance. Our goal is to commercially launch our control IQ technology with the G seven and sensor within one quarter following their receipt of FDA clearance.
Our development efforts with Abbott Libre technology are also off to a strong start and.
It's been a collaborative effort and we share a common goal to bring the integrated product with Abbott Libre technology to the diabetes community.
As soon as possible and 2022.
And we intend to begin our commercial efforts with a U S launch and which Libre technology. We initially launched with will ultimately depend on the timing of Cabot's FDA clearance and supporting AIB and use.
As CGM can be a driver of pump therapy adoption and is fundamental to the broader adoption of automated insulin delivery and we're excited for these new CGM to come to market and look forward to collaborating to bring the benefits of our insulin therapy management platform to even more people living with diabetes beyond.
Beyond 2022 in addition to continuing to expand our hardware platform offerings.
And automated insulin delivery and connect and health initiatives. We're also beginning to spend more time on opportunities to improve and enhance other components of the insulin therapy management systems.
<unk> additional infusion set technologies and the use of alternative insulins.
While these efforts and our longer term goals that we have set for ourselves are largely based on helping people with type. One diabetes. We are also beginning to expand our internal efforts and helping people with type two diabetes.
People with type two diabetes represent less than 10% of our total domestic customers yet the worldwide prevalence of people with type two diabetes using intensive insulin therapy similar to people with type one.
The property and bereavement challenges with private payers and the U S that once existed for people with type two and has been reduced.
And this historical test requirements are increasingly recognized as antiquated and further we continue to support advocacy partners to affect CMS policy change that will increase ease of access.
With a breakdown of this barrier, we are focusing our research on the clinical needs and behaviors and preferences that segment. The type two market to better understand why pumped option is only about 7% domestically and even less outside the United States at.
At the highest level. Our research has highlighted the importance of discretion simplicity of therapy management and the need for demonstrated clinical outcomes and support when a person with type two is considering and insulin pump.
We are using these requirements to guide our multipart strategy, we're accelerating pump adoption and the type two community.
We will provide more color on our specific initiatives and the upcoming months, but are planning to kick off our efforts to pursue and expanded labeling indication for our control IQ technology to include people with type two.
And the longer term, we are working to provide the type two community with a dedicated solution that uses a discreet form factor and features our latest automated insulin delivery technology. We're also exploring the role of simplified functionality and a modified user interface and addition to concentrated insulins and tailored support solutions.
As you can see our drive to improve the lives of people living with diabetes are stronger than ever. In addition, our scalability initiatives are progressing well to support our continued growth and we are focused on execution.
We remain dedicated to our mission and our confidence and our ability to achieve our near and longer term goals and.
Look forward to sharing our progress and achievements and the year ahead, as we work to become a worldwide leader and insulin therapy management and.
And with that I'll now turn the call over to Lee.
Thank you John and good afternoon, everyone, Mike and the entire organization executed remarkably well with control IQ, culminating to drive strong demand and outstanding sales results, we were able to accomplish.
During the fourth quarter with the heightened concern regarding COVID-19, and its potential impact on the markets and which we operating particularly does geography outside the U S.
We closed 2020, achieving record worldwide sales of approximately 500 net.
38% year on year sales growth.
And our national was particularly impressive with <unk> 2019, and largely benefited from the worldwide and in the package.
And just to have a pandemic related headwinds.
We shipped more than 90000 pumps worldwide for the full year.
Our 2020 average Jordan.
And we shipped and the fourth quarter.
First quarter sales per $168 million net growth rate and 55% Inc.
Momentum gives us high confidence that the inkjet and new year.
Jack and additional color on our domestic business 2024 to 116 net and we now have more than 170000 domestic customers and our installed base.
We shipped 25000 pounds collectively in the fourth quarter, resulting in sales and $139 million or 42% growth over 2019.
And as John mentioned, we continue to be successful across multiple growth drivers, including our own and you all while we saw an increase and the fourth quarter.
Our internal data shows that we are renewing customer and get a higher rate and are shortening our average timesharing law.
As a result, we have increased our Cmos and for you all range of 55 per second which is up five percentage points and the end of 2019, reinforcing the ability to reach and a longer term goal of a 70% renewal range.
And 2021 cumulative renewal opportunity for scale and 50000 and more than 65.
And we expect to see continued positive trends.
Now that we have access to all United Health care.
<unk>.
Even more exciting and looking ahead to 2022 and beyond where the number of opportunities sales dramatically and in line with our 2018.
And 2020 channel during which period and demonstrated a pump shipments CAGR at greater than 60%.
Thank you and our full year sales grew to 83 million net was $29 million during the fourth quarter Atlanta aware and.
And as of our technology and demand are building outside the U S. Even and the challenges of COVID-19.
Is this reflective and greater than anticipated shipments late in the fourth quarter to fulfill that demand and right size inventory levels, particularly in Germany, which represented approximately half of our 8000 international pump shipments.
We are proud of our international progress and net nearly 49 and people with diabetes.
Are you seeing tandem insulin therapy management techniques.
Globally, we estimate that our and warranty.
And central more than 250000 people driving and 61 per cent increase in supply sales for the full year and 2020.
Total worldwide sales represented 63% of IMTT and sets at 26% and cartridges at 11%.
For all of these rigs and five Bcf and for 2021 as high as we continued to build on the flow and drivers.
And successful.
We expect our 2021 worldwide for kidney and the range of 600 million to 600 question.
Growth rate of 20% to <unk> 23 per site.
We continue to go with average price payments to price our from our large installed base and pump renewal sales.
And the combination we expect beef and contributed nearly half of our 2021 sales.
As a reminder, Q1 is typically the third quarter of the year due to seasonality for example, and feedback from <unk>.
<unk> represented approximately 20 per cent of our worldwide sales.
Our sales guidance includes a range of 495 million to 505 million number one.
Our historic seasonal trends.
Thank you could see us increasingly across the year based on the tiny and insurance deductible resets and the resulting impact on customer ordering patterns.
Our international sales are expected to be in the range of 105 range 110 million growing 26 per cent for 32 first of all Paul.
And we continued to penetrate our visibility market drives further volume from those countries, where COVID-19 impacted our 2020 commercial launches and answered.
And the market.
We anticipate continued during the day already on a quarterly ordering patterns of our distributors and one near term where the rubber COVID-19 restrictions continue to fluctuate and I think <unk> already with the ordering dynamics on the individual market.
For example for fourth quarter of 2020 benefited from outsized demand and Germany, which is not anticipated to record growth develop and the near term.
And the megawatt <unk> and 'twenty, one, we anticipate and control it it will be available and all of the country's zone, which we operate for bulk and we will begin to drive increased momentum.
Let me explain some of you and.
Overall, the outlook remains in line with our FERC filing.
We base our projections on the stock price, where we have a better line of sight for control and a quick question for online such as the impact of Covid, 19, and new product launches and whether our own or the box and commentary.
Turning to margin question.
First of all from our fourth quarter and the full year with a gross margin of 52 per se.
Gareth and a number of factors all contributing to profit pressure on 2020 compared to 2019 and Thats notable is our royalty obligation.
And with our control IQ technology, and just over one percentage of sales. This year, so let's start with no comparable expense and <unk> alone.
Excluding the cost of the royalty and all of our pumps and supplies gross margins improved versus 2019.
We also made and vessel for 2020 per sample our cartridge manufacturing capacity and incorporate and experienced third party manufacturer and <unk>, both of which are necessary steps to support our growing stockholder and to reach our 2024 and gross margin and access.
And 60%.
Other factors that have and we're continuing to hold price our gross margin results and current average selling prices and changes and both geographical and product Inc.
And 2021 with an increase in volume as anticipated production and pressure from Covid and continued cost improvement initiatives, we expect to achieve annual gross margins of approximately 55 per se.
For the third year in a row, we achieved a positive operating margin and the fourth quarter and recognized and operating margin loss of only two percentage sales for all of 2020.
We also sustained our trend of reported positive adjusted EBITDA margins for the ninth quarter and umbrella, reaching 21% net fourth quarter sales and 12% on a full year 90 day.
As anticipated and our adjusted EBITDA was relatively flat to 2019 and based on planned investments and manufacturing R&D and simple organizational scale setting the foundation for achievement of our long term operating margin growth of 25%.
And 2021 do you expect to pass the breakeven point for operating margin on a per year basis, and achieve an adjusted EBIT and module and the range of 14% to 15% gross margin improvement and continued execution on our operating initiatives, while we continue to make prudent investments to meet our long term adjusted.
Our total cash and investments were 485 nine and at December 2020, we generated 25 million and cash from operations this year and $314 million and final for activity and cleaning our convertible debt transaction and model.
We also reinvested 32 million and the business through capital purchases for manufacturing and general facilities expansion as well as executed against our mobile strategy through the sugar net acquisition.
Our balance sheet is strong and continues to price provider security and flexibility and pursuit of our strategic plan.
To summarize our 2021 outlook worldwide sales are estimated to be in the range of 600 million book heightened 15, Maryland and international sales were 105 non answer 110 momentum.
We estimate gross margin for the year to average, 55% and adjusted EBIT and a range of 14% to 15% of sales.
Our non cash charges for stock compensation depreciation and amortization are expected to be approximately 80 million and create that both components of cost of <unk> and operating expense.
With that I will turn it over to the operator for questions.
Thank you.
Thank you as a reminder to ask a question you will need to press star one and your telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Steven Lichtman of Oppenheimer. Your question. Please.
Thank you Hi, guys I guess, it's true one question John you mentioned.
And you guys have submitted four I believe you mentioned and submitting for and algorithm enhancement.
And when is this the one <unk> been targeting for 2021 overall win when should we expect to see that and can you talk a little bit more about what it's going to do for customers.
Sure Yeah. Thanks for the question, Larry I would say that.
The.
This enhancement to the.
And the algorithm really is about improving access to the technology.
Expanding body weight and correction factors just to enable a broader range of.
The pediatric population to use the system and also people that have.
Larger insulin needs.
Mobile bolus or those gives me there some bullets and experience improved and the improvements and I've mentioned analogue.
I think that this is these are changes that we don't believe require clinical studies.
And as I said, we submitted them. This past this past year so.
Weighted for the FDA right now to get onto this and to begin to actually look at the review process. There is a little bit of uncertainty is when we expect to see this happening I would say that we have a lot more meaningful improvements planned that do require clinical studies and we will be conducting those this year.
Thanks, Sean.
Okay.
Thank you. Our next question comes from the line.
And Larry Dickerson of Wells Fargo. Your line is open.
Good afternoon, and thanks for taking my question and congratulations on a nice quarter, John maybe a little bit more color on what led to the delay and T sport, what still needs to be done and you're confident you can address you can address this and it was just one quarter delay if I heard correctly pushing out from third quarter to fourth quarter file.
Thanks for taking the question Yeah, sure well I think that we didn't anticipate or we did experienced the delays due to COVID-19 when COVID-19 first hit and we probably lost and the entire quarter and I would say that it was just difficult to actually do the human factors testing.
When the market did open back up we had virtual human factors and we had face to face, but we had a hard time getting the correct number of patients and various groups to do the appropriate types of testing, but as I said what happened is that we began to look at the data early in the December timeframe and as we did we just saw issues that we werent satisfied.
And with and I think the most important takeaway here is that we wanted to get this product right and we're willing to sacrifice a few months to do that because we understand the long term benefits of this technology and we know what's going to drive demand from the MDI segment. So we're we think that we have a reputation that's built upon ease of use intuitive and simple.
And to use devices and we've got to continue to do that I would say that none of the changes that we're making are significant and it just requires us to go back and and are correct. The issues test them again, and then just move forward. So as we mentioned we're going to be doing this now our submissions planned for the fourth quarter.
And there's still some uncertainty because we are entering into additional human factors testing now and it's still the COVID-19 environment and as I mentioned and the FDA is theyre pretty backed up right now and it is uncertain as to when theyre going to get back to their their normal cadence of review, but we are this is still our number one priority as an organization we have a lot of stock.
And the the device and how it's going to impact the market and so we're moving forward aggressively to get it to market.
Thanks, John.
Yes.
Thank you. Our next question comes from Alex Nowak of Craig Hallum Capital. Your line is open.
Hey, good afternoon, everyone. This is true Mccarthy on for Alex.
One question for Eric can you speak to the competitive environment and how that will morph over 2021.
<unk> is being more vocal with their pump. This year, there are new patch pumps coming as well as some new players. So how do you expect growth to modulate this year and next with.
Competition and what actions are you taking to defend that.
Well I guess I'll start off by saying that we have a great deal of confidence and control IQ, even without <unk> and the market this year.
I think that we've demonstrated a history of innovation and we intend to continue to keep that trend. When you. When you look at competition I think it's really important as a couple of factors I think that are important.
Impact adoption and first it's basically due to achieve a therapeutic outcomes.
You said, you would and and then have you improve the patient experience and if we look at it and those and that light.
If you look back and.
And the competitors that are coming to market this year.
Data from.
And from a clinical study because I would say it's measured in hundreds of patients by contrast, we have real world data today and 100000 pay.
Patients and I think that control IQ, it's been on the market for full year, we actually got we updated people and the marketplace and about four or five months, we had about 50000 people using our system and the marketplace. So health care providers got to see and immediate.
Bump and immediate experience and interacting with control IQ and the outcomes have been tremendous I mean people have had actually experienced great results and the health care providers have a great deal of confidence now and trust and systems and so.
That's a really important.
It's really important to understand that a tremendous number of health care providers have confidence and the system and and many many people's hands more and more people are prescribing our pump and of the people who are prescribing yet, they're prescribing more and more systems.
Think that when it comes to the clinical efficacy, we've clearly demonstrated that and we've demonstrated and the big way and a very short period of time.
When you consider the patient experience I think it's important to point out that.
And the patient experience is not all about the algorithm as far as I'm concerned today. The algorithm is table Stakes and the patient experience is really about the interaction with the entire system, the entire product and for that matter and the entire company.
And so I think when you look at control IQ system and absolutely provides a very positive experience today and the people can basically people who are using control IQ think more about their lives and their diabetes.
And it works and the background people trust they can sleep.
No finger sticks, there's no need to carry a second device to manage your diabetes.
I think the mobile bolus feature is going to be a tipping point and it's going to increase the demand for the system by providing additional discretion and it's going to improve the convenience we have world class.
Customer service desk and pulled down the background and we also have this digital ecosystem and we're going to wrap around all of these products that provide support simplicity and efficiency for our patients and our health care providers. So I think with the competition coming up I think tandem as and a very strong position, both clinically and and reducing the burden and so as I said.
I feel very confident that we're going to continue to do extremely well this year with with control IQ and and we'll have we'll have T sport and the market in 2022, and I think that will also continue to drive demand for our products.
Got it thanks.
Thank you. Our next question comes from Chris Pasquale.
Of Guggenheim Partners. Your question please.
Thanks, and congrats on a great quarter guys. I was curious do you have an estimate for the percentages U S. New patient starts that came from United This quarter.
Yes, so the way you and I have settled and forest.
And again, starting July one and ended up being about 10% of our domestic shipments net.
Look forward and to 2021, and that's a good baseline for a starting point and the longer term, we anticipate that that will grow.
And to be closer to their overall market share with the switch is estimated about 15%, but that will take time as we continue to gain access to people who are coming up further and why tailing off.
That's helpful. Thanks.
And then John the comments around type two and the opportunity there was a very interesting when you think about a dedicated platform for those patients and what they really need.
Do you see T sport as fulfilling those needs and really checking all those boxes or do you think that down the road, you're going to need a distinct platform from the true that you're already going to have in your portfolio to really address that population.
Yes, I mean, I think our intent really is to start with T sport and to explore how that interacts with.
And how the diabetes type two diabetes community interacts with it and at the same time continue to collect information from from focus groups and things like that as to what people what their preferences are we definitely see a sort of simplification and the user interface.
And we also believe that there is a.
A way to improve access through tailored support solutions we.
Think that Theres no reason why we can't create customer access points that replicate the experience that people have through the pharmacy channel using our digital assets. So theres a lot of opportunity here, but I would say that T. Sport is clearly where we're going to start.
As we mentioned the first thing we're going to do is get the indication for control IQ and then we're going to just jump right into this with our multi point strategy.
Thanks.
Thanks, Paul.
Thank you and next question comes from Brooks O'neil of Lake Street Capital. Please go ahead.
Yes, good afternoon, and hoping you could just characterize kind of what youre seeing in general from the FDA in terms of responsiveness and just wanted to be sure that the T sport delay and changes you're planning to make are coming from your own initiatives as opposed to getting some direct.
And from the FDA.
Hi, Brooks.
Right now we are talking to the FDA free.
<unk> frequently and I think that there is there's definitely been a significant reduction of their resources and <unk> been reassigned to other COVID-19 related tasks and.
And so the predictability I think right now is a bit uncertain and a few months ago. They indicated that they thought it would be about nine months before the book sort of the ROE Jan with the rug Lockwood with break and it's been about that amount of time right. Now. So I think that as you know we're still in the midst of this pandemic and I'm not exactly sure when the resources are going to come back but we.
We do have confidence that we're going to have approval for our mobile bolus feature and the first half and I think that as we as we move to the latter half of 2021, we're hoping that things free up so that there really is no impact on T sport, but I would say that all of the decisions that have to do with with T sport and nothing to do with the FDA at this point and.
Time.
Great. Thank you very much thank.
Thank you.
Thank you and next question comes from Chris <unk> of Cowen Your question. Please.
Hi, Thanks for taking my question I, just wanted to follow up on a previous question here.
Could you update us on pump share gains trends exiting 2020, and as it relates to 2021, what do you have factored into your guidance and I guess, Steve, but and a bit more conservatism just relative to the past with the pending launch of seven and ADT. Thank you.
Sure. So as we exited 2020 and the source of our new pumps.
And really consistent with what we've seen and our history, which is about half from the MDI population and about half from competitor conversions.
As we move forward into 2021, and that's why I should point out is that MDI population continues to become further penetrated and the public space and where years ago, you would see only about 25% to 30000, New Congress and the market each year, what we've been experiencing and last year. So that is an acceleration and our best estimate it was somewhere close to 60000.
People, who purchased the pump and the market share for the first time. So when we think about 2021, we're anticipating that.
And that will continue to grow and that yet.
And the same triangle.
And with our Conservative guidance philosophy, we're anticipating right now will be at least as good as what we saw in 2020, and we will continue to take a very large share of that.
Okay.
Thank you. Our next question comes from Matthew O'brien of Piper Sandler Your line is open.
Afternoon, and thanks for taking my question.
Yes, I guess.
And we just on the renewal side.
Wasn't quite following the commentary as far as what Youre seeing on the renewal side, what youre seeing in terms of and acceleration there and what we should be expecting for me. It sounds like things are starting to get much better on the renewal side and.
And that could be a meaningful tailwind for the company over the next several years is that what you were trying to say and then John just to kind of.
Finished off a final point that you were making earlier on the type two side and the discrete side is there going to be a renewal component or non renewal excuse me and annuity component with the technologies that you are thinking about there. Thank you.
And thank you for the question starting with renewables.
To frame up how and where things are looking today.
Through the end of December we have had about 50000 people and total sales warranties have expired and as that all have renewed about 55% of them and when you compare that to where we were a year ago at the end of 2019, we have renewed about 50% of all of the opportunities that were available so that 50 and 55 per cent demonstrate.
So really great progress on the renewal shrank and and I agree with you and we're going and coming in at such an important part of our business as we look forward because if you think about the acceleration behind the business. The last three years all of those folks will start coming to the table as well and so it's been a lot of investment and that stream and it's also just building up a better patient experience, which we think is what's.
Driving this increase and the renewal rate.
I would just say that relative to the annuity aspect and we're continuing to invest and our pump technology and we believe that miniaturization is really the direction to go so as I mentioned, we're looking at concentrated insulins as well, so, but but we really haven't spoken about whether or not the next form factor is going to be disposed of or not.
Okay. Thank you.
Yes.
Thank you. Our next question comes from Matthew Blackman of Stifel. Your line is open.
Good afternoon, everyone. Thanks for taking the question and I've got a few international questions I'll, just sort of throw out there and.
In one fell swoop and.
And maybe the first couple for Lee and called out some Germany stocking is there any way you could quantify that for US and then leave for you as well.
Give us a sense.
And what the mix of patients are that you're onboarding and are coming from existing comfort versus MDI in and some of these and these European countries and then a couple for John sort of thing.
Your line of questioning.
And you sort of alluded to it and your commentary about international but any effort to expand the number of MDI patients and some of these some.
Some of these regions outside the U S. Whether it's you or are your partners and it doesn't look like it sound like it but any changes and the competitive backdrop in Europe with some of these recent launches. Thanks.
Thanks, Matt for the questions and I'll start with Germany and what.
And it's happening with Germany and.
And it's not exactly as we had anticipated when we came into the year, we were paying the commercial launch for the third quarter, but with Covid and everything going on and the world that was somewhat muted and I would say the risk.
Excellent.
Itself that we feel proud forward and what happened Michael Q4, everything started to come and get to fruition and so there was a large uptick in demand, which they need and kept wholesale plastic with and kind of index inventory back on their shelves. So they can move forward. So let me follow and the fourth quarter and really like about half of our international shipments team from Germany, and we were thrilled to have.
That kind of and very late and you're like that because it says a lot about where things are headed and the international market.
We have inc. From a global perspective, yet given the same metrics that we have and the U S and terms at the mix of the source of all pampers, and so whether or not it's MDI or competitive conversions and obviously, we started with let's say a competitor conversions because of that animas opportunity.
And I'll say about the international marketing and.
And it's far less penetrated than we'll see even and so with only 10% to 20% of people are using pumps per day that is our most significant opportunity there.
Yes, I would just underscore the fact that we said we have approximately.
There is 4 million people with type one and 400000 are using and pumps and so I think that the MDA MDI population as it is right to be looked at and I think that when you look at our success here half and car sales are coming from MDI and United States and we're really I mean, when you look at T sport and improvements and reconcile the technology is.
It really does drive MDI adoption by reducing the barriers that they see as reasons not to use the technology. So it's really.
Our main focus for us here and the states as well as our U S.
Thank you as a reminder, please limit yourself to one question.
Our next question comes from the line of Matt Taylor of UBS. Your question. Please.
Hi, Thanks for taking the question.
So I wanted to ask you about your comments on phone book It seems a little different on this call you seem very excited about it in terms of the being calling.
Selling you the tipping point or kind of awareness generator that you saw with basal and control IQ. Those are those are high bars. So maybe talk about why you think and have you done additional market testing or are you getting feedback it really shows and that could be.
Okay.
Yes, I think that mobile bolus is going to be very important, but I wouldn't put it in the same category.
Control Iq or basal IQ.
I would say that we believe that T. Sport will have that same story and effect, but I think when you. When you talk to people right now that are using the system with control IQ. They really have no reason to take it out of their pockets of wherever they have it.
During the day, while they're outside of their home unless they have to bolus to reveal and so theres a great deal of excitement and so number one requested feature really for us today is to be able to bolus from iPhone and.
So we're trying to make this.
And to be a very easy to use and it's going to be accessible to our entire patient population.
Short period of time.
And so I think it is going to be it's going to be a meaningful driver and I think that it's really going to go right. After as we were just talking about the MDI group because I think this provides discretion that they currently don't have and we're always trying to reduce these barriers that MDI and people perceive as objections for using pump technology. So we're excited about it.
It's going to be important and like I said, we're trying to roll this thing out and the first half of the year.
Sure. Thanks, John.
Take care Matt.
Thank you. Our next question comes from Jason Bedford of Raymond James. Please go ahead.
Good afternoon.
So just I guess one for me.
All three of the domestic pump manufacturers reported much better fourth quarter or December quarter results here.
Of course, you guys grew the strongest so I'll give you credit there, but I'm. Just wondering do you think this is a function of COVID-19 related pent up demand or is it something else either from an awareness and access standpoint, I just love your thoughts there and just kind of general market acceleration.
We're seeing some.
Sort of relief I think and the Covid environment, but it's a bit spotty, it's geography by geography. It seems like the south seems to have opened up and office visits are common there, but there are other locations where.
It's still pretty tight so I think it's difficult for us to put up.
To put our finger on Covid and sort of freeing up of Covid is the reason that's driving it.
And that we.
We just believe it's the continued interest and the technology and I said, there we're building momentum with these health care providers and there's so many of them now are so familiar with the results they see them.
Got many many patients on the system. They just have great confidence with it and at least from our point of view, we think thats whats driving it.
Health care providers trust and confidence and it's also the people using the systems. They talk about it is available on social media. We have marketing programs that are just using people's own words to describe their experiences and control IQ and I think all of that really I think there is just making awareness better. So I think it's probably more of a and awareness situations and and as Covid.
Okay. Thank you.
Yes.
Thank you. Our next question comes from Joanne Wuensch of Citibank. Your question. Please.
Thank you very much and good evening I'm curious about your comments of getting into the type two diabetes patients and it sounds like the mobile bolus app might be moving in that direction, but I wanted to make sure that that's the right read and then I'm curious what else you might need or want to have to penetrate it and going along with.
Do you have plans to launch a patch pump.
Alright, well, let me just start with the mobile bolus and the mobile bolus feature is going to develop maybe available to our entire.
U S patient population here as I said, hopefully and the first half and that's something that's going to drive discretion, which we know is important to the type two community.
And we probably believe that the T sport device, however, with its size and combined with a mobile app really have more discretion associated with it and we think thats going to be more appealing to the type two community.
We are as I said, we are focused on a multi point plan. We are looking at using the technology. We have today and are exploring how it how it resonates with the type two community as well as looking at opportunities to add features and capability to the.
To the products so that they appeal more I think simplicity is a big one.
Having the most advanced algorithms important and size and discretionary hugely important.
Those are things that we're focused on and we're also focused on access we need to understand how to penetrate this market from an access point of view and it's something that we think is very important and regarding passport and we haven't said anything about catchments other nine per se that we're constantly looking at advancing the technology that we have and we do believe that that sort of reduction.
And size and miniaturization of the system is important.
Thank you.
Thanks Joanne.
Thank you. Our next question comes from Jeff Johnson of Baird. Your question. Please.
Thank you good afternoon. So hopefully this doesn't count as my question, but I'm not sure if I caught the renewal number and the quarter. If you could just repeat that for me, but for my question John I was thinking.
You made some comments on non freestyle libre and.
And you made a comment and passing about Youre not sure, which sensor you might go with with them.
Is there an opportunity on libre two to work that into our control IQ My understanding was maybe the battery or some other limitations there wouldn't allow for full kind of continuous streaming to a pump to control. It. So I just want to understand if if libre three is delayed for any reason or if it doesn't meet your timeline requirements were you, saying you could go back to Libra.
Or is there something else and that comment thanks.
I'm going to net legal first and I'll answer your question adjusted Okay. Thanks.
And I will just start rates and the way I try and get renewals. It's more about trying to take attending you can measure or compare against our long term goal of achieving a 70% renewal rate. So.
So the way I think of that and that we have now improved to about 55% of all opportunities, which were roughly 50000 at the end of the year I didn't give a specific number this quarter, but it's fair to assume that it was up again compared to last year and even the third quarter in line with seasonal channel.
Moving and it really great direction.
And Jeff and I would just say that we haven't been specific about which technology, we intend to incorporate into the relationship with Abbott and the CGM integration, but I do know that the libre two was capable of operating and AI system.
System, but first.
And obviously has to address the vibrancy issue, which I know that they're working on.
Understood. Thank you.
Yes.
Thank you. Our next question comes from Ravi Misra Bear.
Bear and Barry Capital Management Your line is open.
Hi, Thanks for taking the question and hope everyone is doing okay. So I wanted to probe a little bit more on the.
Type two access commentary that you talked about earlier John.
One of your peers yesterday on their call basically said that they feel that having pharma access is something that kind of sets them up really nicely into type two maybe if you could comment on that and you are kind of potential ability to get there. These days I know thats been something <unk> been trying for a while or is there another kind of channel or venue that we should be think.
And of that we're not that wood.
I would kind of.
And gender that.
Yes.
Yes, I mean, I'll tell you what I'll do I'll start off and I'm Gonna, let Lee kind of wrap up as well because she has.
Thoughts on the pharmacy channel I would say that.
When we interact with physicians today, they do not make decisions on whether or not.
No.
Good day.
And the systems going into a pharmacy channel or whether it's going into the DMA. So.
We believe that.
That we can make the system and the interaction with our products.
Just as it's.
Accessible and easy.
The pharmacy channel using some of our digital health initiatives.
Thank the reason will be when you look at some of our competitors. The reason that's important we sell a pump once a year and so when you consider the touch points that we've got excuse me. Once every four years the touch points. It's very this is reduced and I think that if we can even improve that I think that you'll go a long way to improving access and there's no way, we can't and theirs.
And we can't automate the.
And the supply sales, we can automate that we can make that happen automatically and I think thats something that simplifies that part of the process, but I think when you look at the when you look at the competitive patch pumps I mean, there are selling pumps and theyre using it every three days and they are probably gone and get monthly or quarterly so there's a lot more interaction I think.
And that access and.
Frequency of interaction and make the trip the pharmacy channel and important for them.
And I would say think of it very well I think first and foremost it's about having the right product.
Because that's what physicians want about the model and if the.
Channel and simplify things will continue to look for ways to optimize or create efficiencies within our own channel and then when it comes down to for Ashford, Inc. We are focused on getting stronger relationships with the payers through more direct contracts and in those conversations and we can have.
And the deeper discussion about what's the right channel what makes sense for us, but the type of products that we have with it being much more specialized and a disposable type product.
Okay.
Great. Thanks, and if I could just ask one more is there an FX component to the AWS revenue.
Very immaterial.
Thank you and next question comes from Danielle and as healthy of SBB Leerink. Your line is open.
Thank you and thanks for taking the question.
And one question on net basis.
And I am currently 15% and Europe lately.
Sorry, Andrew.
And from replacement and Dana.
And all of these being Danny and.
Back then and the primary care I have heard those replacement and that replaced and agreement with Medtronic and the airlines and M&A, which might be worth.
And yes, Danielle I think we feel very confident and our competitive positioning next year and we would anticipate that we would continue to see that.
Strong.
Component of our total sales coming from competitive conversions.
Alright, and next week.
And I know, you've got a ring and going on in the background and thank you.
Thank you, ladies and gentlemen, and that does conclude the Q&A portion of our call today.
And our call. Thank you so much for participating you may now disconnect have a great day.
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