Q1 2021 Tandem Diabetes Care Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Q1 tandem diabetes care of 2020 one earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
A question during the session and need to press star one on your telephone if you require any further assistance. Please press Star then zero I would now like to do sales through his conference call Susan Morrison.
Thank you good afternoon, everyone and thanks for joining tandem's first quarter earnings call for 2021. 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 are risks and uncertainties that could cause actual results to differ materially lower than anticipated or projected and our forward looking statements. A list of factors that could cause actual results to be.
[noise] 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 quarterly report on form 10-Q, and and our other SEC filings, we assume no obligation to publicly update any forward looking.
Statements, whether as a result of new information future events or other factors and.
In addition, today's discussion will include references to adjusted EBITDA, which is a non-GAAP financial measure adjust.
Adjusted EBITDA is a key measure used by us to evaluate operating performance generate future operating plans and make strategic decisions for the allocation of capital.
Please refer to our press release issued earlier today for further information.
Our call today will be hosted by John Sheridan, Our President and Chief Executive Officer, and leave off where our executive Vice President and Chief Financial Officer.
Following their prepared remarks, we'll open up the call for questions.
And you in advance for only asking one question and one follow up before getting back into the queue I'll now turn the call over to John.
Thanks.
Welcome everyone to today's call.
2021 is off to an incredible start with record first quarter sales and meaningful operational progress throughout our business.
I am proud of our performance and tandem <unk> ability to continue delivering record breaking results, while improving the lives of people with diabetes.
Credit for these accomplishments goes to a more than 500 employees.
As well as our valued partners and suppliers. Thank you everyone for continuing to provide our customers with a possibly different experience with tandem even while operating under constraints on the COVID-19 pandemic.
Looking back we are and the strongest position and our company's history with World class products and services operational excellence, a differentiated product pipeline and robust balance sheet.
The number of people using the T. Slim ex too has nearly quadrupled over the past three years and we are now more than 20 countries around the world.
Tandem has moved from being a comeback story to being a leader and diabetes technology.
We have a line of sight to achieving our longer term goals and as we demonstrated once again and the first quarter.
We are still on executing.
And today's prepared remarks were going to concentrate on the highlights and updates from the quarter. So there is ample Q&A time to expand on the topics that are most important to you.
Starting with our top drivers of pump adoption and Q1, we were particularly happy to see the increasing international demand for our <unk> ex to pump and continued high interest and our control IQ technology.
The strength of our performance outside the United States is a reflection of our offering a best in class products and a large and underpenetrated market.
As a reminder, there are approximately 4 million people living with type one diabetes and the countries that were and internationally and yet pump penetration on average is less and 20%.
It's a huge opportunity and even so with our commercial efforts still scaling and meaningful COVID-19 restrictions in place, we outperformed our internal expectations for Q1.
It was particularly encouraging that this international demand was not the result of any one country's activities, but rather positive adoption trends across essentially all geographies.
Outside the United States people are choosing the <unk> ex too for the same reasons, we here domestically with center around its ease of use and flexibility.
Interestingly. These were two primary areas of focus and our flagship T. Slim strategy as it's designed to appeal to large segments of both current pump users as well as people using multiple daily injections.
Ease of use and a decrease of persons confidence and managing their therapy, while reducing the burden of diabetes and our daily lives.
Flexibility is important since the needs and preferences of people living with diabetes can vary greatly day to day and.
Fusion's debt provides flexibility and as a result durable pumps remain the dominant industry form factor, both domestically and internationally.
Our Q1 international sales also reflect the early benefits of our expanding control IQ launch.
Which began on the second half of last year and will continue to scale across additional geographies throughout 2021.
And the larger countries. We serve we are at various stages of control IQ availability.
We launched in Canada, and the first quarter and plan to launch in Germany, and France later this year.
There are two statistics and our control IQ use which really highlight the scale of the impact that we are making with our technology.
First following its initial launch and the first quarter of last year more than 150000 people have our control IQ technology worldwide.
Second is that we now have more than 20 million days of real World control IQ use already logged and our cloud infrastructure.
Experience matters with automated insulin delivery and the real world use of control IQ sets a high bar.
And when analyzed through our T. Connect system, we are able to use this data to further study the algorithms clinical benefits offer valuable insights to health care providers enhance.
And enhance our future product offerings and demonstrate the health economic outcomes to payers.
Most importantly feedback from our customers and health care providers continues to be awesome.
And in fact real World data was published and the diabetes technology and Therapeutics Journal and March demonstrating that users of control IQ technology achieved and to some extent exceeded the results obtained and the randomized controlled trials after one year views.
In addition, the <unk>.
Data showed glycogenic improvements and a broad range of people nearly 8000 and for whom we had type one diabetes and 400 of whom have type two diabetes.
Type two diabetes continues to be a strong area of interest for us as we analyze people's needs and preferences and make up the different segments of this market.
We are working towards a type two indication for control IQ and we are encouraged to see the GTT publication that the average time and range for type two users with CGM integrated pump experience increased from just under 70% to 78 per cent.
The data from the <unk> publication, along with other real World Glycemic trend and quality of life data will.
It will be presented next month at the H T T D and the Ada conferences.
I think the poster at the 80 day on the qualitative study of experiences with control IQ title I feel human actual normal best.
Best captures our customers experience.
Tandem has been catapulted the forefront of diabetes research in recent years and is a position that we are committed to retaining.
This is why we were particularly thrilled to announce that during the quarter. Dr. Jordan Pinsker has joined us as medical director.
Dr. Pinsker is amongst the most prominent artificial pancreas researchers worldwide and.
And is highly regarded tandem and respected throughout the diabetes industry.
He joins us from Samsung Diabetes Research Institute, and Santa Barbara, where he was the lead investigator and numerous clinical trials on automated insulin delivery systems for tandem as well as other leading manufacturers.
He was also the lead author on a number of recent publications, including those highlighting patient reported outcomes and the success of our virtual training programs for individuals starting control IQ technology.
In addition, Dr. Pinsker brings extensive knowledge and patient care diabetes, epidemiology and physician practice efficiencies to tandem as executive team and as importantly shares our passion for improving the lives of people with diabetes.
Dr <unk>, who will lead our clinical strategy as we look to advance our automated insulin delivery offerings expand our product portfolio to support different segments of the diabetes market, including people who are living with type two.
Turning to our other product development efforts, we are continuing to make good progress across all of our R&D pillars that focus on the expansion of our hardware offerings.
Automation insulin delivery and digital health and systems, and integrations and and other advancements.
We provided an overview of our R&D activities on the last call and so today, we will just be a highlight a couple of updates of note.
First is that a new study using control IQ technology and kids as young as two years old recently commenced enrollment.
Results from another pilot study and this younger age group were published in December.
The initial period for this new study will likely run throughout the year and will include a large number of participants to help.
Further support a lower age indication.
And while health care providers can and do sometimes prescribed our control IQ technology to younger kids today, youre not able to market to them about the benefits of our technology.
The lower age indication could increase adoption of our products and this segment of the market.
Next update is that in March we received an FDA response to our mobile bolus submission that we filed and the fourth quarter of last year.
It is a meaningful milestone as we have understood that the agency has needed to prioritize COVID-19 related filings and were encouraged to begin the normal questions and response process of this review.
For competitive reasons, we don't comment to any level of detail on our interactions with the FDA, but I will say that I was very pleased to see the agency's response towards cyber security work beats.
Between COVID-19, and the fact that there is not a credit commercial app available that controls the delivery of insulin is.
Tough to predict clearance timing.
Based on where we are and the process, we're no longer planning for a Q2 clearance, but we will be working to bring this highly sought after feature to market as quickly as possible.
Strategically we've always recognize the importance and filing our mobile bolus feature first.
And so any learnings could be transferred to our entire product pipeline.
We are seeing the direct benefit of this approach now as we've gained some additional perspective that will be useful for the T sport filing.
It's directly relevant because our T sport pump is designed for use with the same foundational iOS and Android apps that our customers will use to access the mobile bolus feature for T Slim ex too.
We're making great progress on advancing the development of T sport and the user interface refinements that we elected to make at the end of last year are resulting in a more robust customer experience.
Our development timeline for T sport is on track however.
However, the filing date will push out a few weeks as we incorporate additional information from these insights gained from our mobile bolus response.
By addressing these items upfront, we believe our T sport regulatory filings will be more complete and ultimately results and a faster path to clearance and commercial availability.
Internally our operations team is preparing manufacturing for T sports commercial launch next year.
We are particularly excited to launch on new pumps and form factor option.
As it expands our family of offerings, while addressing a different segment of the diabetes market than we serve today.
Many of whom use multiple daily injection and otherwise we would not consider pump therapy.
Also slated between now and the end of 2022, our enhanced features for our control IQ technology expanded digital health offerings like tandem source and the launch of our new sensor integrations with Dex Com and Abbott.
Commercially operationally and strategically we are working to enhance our business, while providing new solutions and a revolutionary customer experience to people living with diabetes worldwide.
Overall, we're coming out of the first quarter performance with great confidence about our ability to achieve our key goals, we set for 2021 and beyond.
And with that I'll now turn the call over to Lee.
Thank you John and good afternoon, everyone.
Overall, our financial performance and the first quarter were strong with progress made across the key fundamental areas of our business.
Highlights include our sales growth, both domestically and internationally He inc.
Kris and contribution and reoccurring pump renewal purchases and Dubai.
Paul.
This margin improvement, even with continued investment and trial.
I'll point improvement and operating that and.
And ending the quarter with the strongest balance sheet and our company history.
To add some color on each of these areas starting with sales the first quarter with record setting for us once again, we achieved $141 million and worldwide sales, which is a 44% increase compared to last year and.
As a reminder, we provide details of our sales results by both geography and product and the investors section of our website under events and presentations.
Overall, our worldwide shipments exceeded 25000, and a quarter with a record number of pumps to international market.
This is our second highest sales quarter ever only second to our most recent fourth quarter, which benefited from the traditional ended year seasonality.
And we continue to feel pressure on our sales from the pandemic largely offset by high demand for the Keystone ex tier momentum, which is just beginning on the international market.
The breakdown of where our sales come from its beginning to look very different compared to historical years and the first quarter nearly half of our worldwide sales were from recurring sources of revenue, which increase our scaling renewal pump sales to repeat customers and the ongoing sales if the price of our installed base of nearly 240000 customers and <unk>.
And international sales now contributing meaningfully to the debt and we anticipate that international will represent approximately 20% of our total sales this year.
Turning to our domestic results, we now have more than 185000 customers and our U S installed base.
Yes for the quarter were $103 million representing growth of 30% over the prior year. As a reminder, the first quarter last year benefited from an incremental $3 million and supplies sales from customer stocking at the onset of the pandemic.
Our sales growth was primarily driven by 16006 hundred.
Consistent with historical strength approximately half of our new domestic customers were new to pump therapy from multiple daily injections, which is evidenced that we continue to expand the market. In addition to capture and competitive share.
Contributing to our growth as the full access to United Health care members that we did not have and the first half of last year as well as an increase in renewal sales both in terms of pump shipments and and the cumulative rate.
The direct connection we have with our customers through the <unk> channel provides valuable benefit and furthering our progress that renewal, particularly as we prepare for 2022 when the opportunities will increase significantly.
And the international markets shipments well exceeded our expectations, reaching 8700 for the quarter.
This brings us to more than 50000 customers and our internationally.
Sales were $38 million for the quarter, which is a record for our international operations and more than double the prior year.
Unlike the fourth quarter, which was heavily weighted to one distributor retail sales orders from essentially every distributor and the first quarter.
We expect ordering patterns to continue to fluctuate in the coming quarters, though and our distributors navigate the constantly changing COVID-19 dynamics and closely manage their inventory level. While also scaling the launch of control IQ.
In addition, many countries outside the United States, and Europe in particular and meaningful seasonality and the summer months and people take time to go on holiday.
Factoring in these sales dynamics and based on our strong Q1 results. We have increased our 2021 sales expectation both domestically and internationally to a total range of 625 million to 640 net loan or a growth rate of 25% to 28 per se.
International sales and the range of 125 million to 139, representing year over year growth of 50% each day.
Perfect.
From a gross margin perspective, we improved to 52% this quarter compared to 51% and the prior year.
This reflects the beginning of expected leverage from the cartridge capacity investments, we made in 2020 to support our rapidly growing installed base.
And non cash charge for stock based compensation included in cost of sales also declined as a percentage of sales two 1% compared to 2% and the prior year.
As a reminder, a higher percentage of sales to markets outside the U S put price pressure on gross margin from lower average selling prices. However, we greatly benefited and operating and adjusted EBITDA margin due to the nature of our distribution model outside the U S.
We also made great progress and are adjusted EBITDA and operating margin and the first quarter, our adjusted EBITDA margin increased to nine percentage of sales from 4% and the prior year.
We experienced and even greater improvement and our operating loss and the only negative two percentage of sales from negative 14% last year due in part to a reduction in total noncash stock based compensation as a percentage of sales and.
I'm, particularly proud that we were able to gain this let rich while heavily investing in R&D to support both our near and long term strategic initiatives related to pump hardware software and digital health.
And our progress and Q1 is on track for achieving our 2021 expectations of a 55% gross margin and adjusted EBITDA and the range of 14% to 15% of sales.
There was also one accounting update this quarter from non operating expenses since the second quarter of 2020, we reported total cash and noncash interest expense of 4 million to $5 million each period associated with our convertible debt and.
And the first quarter of 2021, we early adopted new accounting guidance related to the treatment of convertible debt, which resulted in only $2 million and interest expense. This quarter. This is expected to be the new quarterly trend going forward.
Our total cash and investments increased $29 million and the first quarter ending at $513 million, primarily due to strong cash flow generated from operations.
This is a milestone and that we achieved positive cash from operations for the first time and the lowest seasonal quarter of the year.
We have also generated free cash flow for quarters, and a row, despite higher capital investments and 2020 to expand manufacturing capacity.
To summarize our 2021 outlook, we have increased our worldwide sales expectations to a range of 625 million to $640 million, including international sales of $125 million from 130 million.
We estimate gross margin for the year to average, 55% and adjusted EBITDA could be and the range of 14% to 15% of sales.
Our non cash charges for stock compensation, depreciation and amortization are expected to be approximately $80 million, including debt components of both cost of sales and operating expenses.
As you can see by today's results, we have substantially involved and the organization since the launch of our first comp in 2012, particularly in the last three years with our explosive growth and consistent execution against our financial objectives.
Innovation and customer care and our commitment to growth are at the forefront of our strategic decision, making and we are positioned well to achieve the longer term goals, we have set for our business and supported the diabetes community.
With that I will turn it over to the operator for questions.
Ladies and gentlemen, and if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered Houston with yourself from the queue. Please press the pound key.
Our first question comes from Steven Lichtman with Oppenheimer.
Thank you hi, guys.
Just a first question on international Great to hear the progress there and I was wondering if you could provide any color on how trends have changed and I assumed accelerated as you've launched control IQ and various countries, particularly with a couple of other countries you mentioned expecting to come on line with control IQ.
Later this year.
I see thanks for question and it's real.
And we interesting as you think about it we're just at the beginning of the control IQ rollout in fact, we haven't even launched it yet and France, and Germany, which are two largest market and we're seeing great strength already without it I think what we're seeing and the U S with control IQ and the momentum that's driving as an indicator of what we can expect to see and the O U S markets for now I don't think.
We have a great trend in terms of what's happening there and spent a lot of variability and the ordering patterns from the distributors just based on the dynamics that they're fighting with the changing COVID-19 environment, but it does encourage you to think about how this might translate into the long term growth for us.
Great. Thanks, Thanks, Lee and then go on you you talked about type two and are increasingly talking about type. Two I was wondering if you could frame per as sort of where you guys are at overall.
You talked about seeking an approval for control IQ and you made the investment during the quarter and secure and can you sort of just update us.
Your thoughts overall on where tandem is on on approaching the type two market.
Absolutely well first of all we're very excited about the data that was and GTT T.
400 users that saw substantial improvement in time and range over the last year. So that was great data and great to see but we are we are still working on sort of a longer term plan and strategy that involves clinical and clinical studies design the user interface on channel access.
And those sorts of deals.
And things that we've been working on but as we said before our first step is to take advantage of our existing products.
On the on control IQ is currently not indicated for type two and so we really want to work with the FDA to get approval for that it may require a clinical study, but we're still and we.
And we need to begin the conversation is actually.
And to get approval for that and then obviously, we believe that.
You know that T sport with the smaller form factor and discretion is also going to be very appealing to the type two community. So.
Those two products almost in the bag, we plan to move forward with those aggressively here and the near future and then we'll be we'll be working on longer term issues that we'd be looking at a discreet form factor specifically for this this community and just.
And just take advantage of the.
Newer products.
And potentially simplifying the user interface and and also in the meantime, studying just the channel and market access dynamics, so that when we actually get to that point, where we have these these newer products we can be successful.
Great. Thanks, John.
Sure Thanks, and good talking to you Steve.
Our next question comes from Larry <unk> with Wells Fargo.
Hey, guys. Thanks for taking the question.
Congrats on the strong quarter and just one question on international and just and one on C Corps.
And how do we think about the cadence this quarter for international sales.
If we look at seasonality last year.
Using Q1, you would come and well above the guidance and I'll ask the <unk> quick question here as well Jon that your quote and the relief. They put out you know obviously caught people's attention what attracted you to that how do you think it compares to.
The incumbent and any color on the timeline, thanks for taking the questions guys.
So and I'll start with the international question. So when you think about the cadence and is a little bit difficult to predict just based on that Gary.
Gary Bobby and the ordering patterns that we've seen starting with Q4 looked a little bit unique because so much of that opportunity and pull from one particular distributor at least half of the business and the fourth quarter. This quarter, we saw everyone's ordering but I can't say, yet that I see a particular trend and that can help us to develop that confidence and exactly how it will play out I think the thing to think.
About the most is generally speaking, we expect pressure and the third quarter just due to typical seasonality outside the U S. Because of European holiday season, and otherwise we expect continued growth as we gain traction across the new markets and control and keep continue to roll out there.
Alright, and then we'll start with regards to CCAR.
And we're excited about the investment as you know diabetes is not a one size fits all condition. There are many market segments and there is different user preferences and each of these segments and so this investment and just aligns with our strategy to support solutions that meet the needs of these different segments, particularly in type two when you look at the sneaker simplicity is a simple.
Low profile on alternative to injections and it's it's a valuable tool and it will appeal to customers, who really are and a very different segment that we're operating in today and so the intent here really is to learn about this particular segment as we formulate our type two strategy.
And specifically about the segment working closely with secret understand that but then theres broader type two issues I think we can learn from from working on seeker about asked as I've mentioned market access about working with TCP versus and dose. So I think there's a great deal of education that tandem Ken Ken gained from this relationship and I think that we can help seeker as well.
And in many ways and so we're we're excited about the opportunity and.
And I think this is just kind of one element and our strategy to get into the type two market effectively.
Thanks, John.
Yes.
Our next question comes from Matthew O'brien with Piper Sandler.
Afternoon, Thanks for taking the questions.
Just looking at the guidance and you know theres not a lot to pick on here, but I just wanted to make sure our math.
Asking this question just so we're clear on it all but looking at the guidance you beat by 23 million Bucks versus what we were modeling youre pushing the midpoint of the guidance range up about $25 million almost all of that is international so.
Is there anything you know given.
The competitive dynamic or anything else to really call out domestically as to why maybe it didn't bump up things a little bit more.
And that piece of the business, which is still 80% of the overall the overall business.
Sure.
I'll just start by saying you know our philosophy and approach Hasnt changed at all Jeff and a few months ago. When we talked about guidance for the year, we talked about the you know the positives and also a few of the things that we were more cautious about and.
And when I think about the topic, it's really the momentum we've seen from control IQ and the U S. It's been building now for quite some time and we're just starting to see it build outside the U S.
And then when we think about some of the I should add debt, we have United Health care to tailwind also at the beginning half of this year since we didn't have access and held July of last year and.
Items that we're cautious about will still be that COVID-19 dynamic I would say more so outside the U S and the U S. It's not that we're not seeing it here, but we think that the control IQ momentum and largely offsetting net and then the other area is the potential for some noise on the market and the back half of the year as it relates to the competitive dynamics and so I still think all those factors.
And are in play we have to your point and we're still very pleased with our domestic results still on outpaced our own internal plan and on and we look forward to seeing further growth across the year.
Okay and leave it just to be clear youre not incrementally more nervous about the competitive.
And the marketplace and the back half is that fair or not at all.
Confidence on our position and I think Thats why we raise guidance both U S and domestically.
Got it and then as a follow up that's really helpful. I appreciate that Lee I didn't hear any and any comments as far as what the contribution was from United or on the replacement side in terms of quantitative figures would you mind, providing those.
And sure I'll talk to you a little bit about the and how those turned out so from a renewals perspective first and we did see and just like we've been seeing across the recent quarters by four and eight quarters. We saw an increase in net volume compared to last year, as well as and improving and our chemo and some break and I think those are key factors you know right now and the renewals are really about strong and steady.
No just that solid progress and and what you've been seeing and the day finally, EV can't predict off of what's really exciting about renewals more so with what is going to come next year. When you think about the comparison of 2017, which are new opportunities. This year end of 2018 shipments, which are new opportunities for next year does and doubled in terms of size and so this year.
You're about a continuation of what we've been seeing and think about next year as being the Wow I guess, if you will.
And then from a United perspective, it's just tracking along in line with our expectations. It's clearly up year over year, because we didn't have access and Q1 of last year.
Started and the baseline and Q3 and were just trending as we would expect and we likely won't comment to the particular size of that going forward, because we don't typically comment it quarter to quarter variations on that.
Payers and now it isn't a big part of the baseline and so we are happy with where it's tracking.
Great. Thank you.
Yes. Thank you.
Our next question comes from Brooks O'neil with Lake Street capital.
Yes.
Thank you good afternoon, congratulations on the great start to the year I'm curious.
Obviously, there's been and what I would call widespread expectations about the new pumps from the competitors do you guys think you lost business and the first quarter as people waited to see what those new products look like or how do you think the market is responding.
And to you in light of the expectation that these new pumps or catch it up to where you've been for a long time.
Yes, and it Brooks I don't think so and I'm pretty certain we have it and I mean, we obviously had a great quarter right now the one of our competitors pumps is available.
And it's particularly available and in the German market and you saw that and the last few quarters, we've done extremely well and Germany, and we did that with basal IQ control and he was not even there yet. So we're excited that we're going to compete effectively against that product and you can't market. These products and the U S until they've been approved by the FDA and neither has and the U S. Yet so I think that's unlikely.
At this point that we've seen any impact.
We'll just have to see what happens as they do gain approval there'll probably be more noise and will probably won't see that until the second half of the year.
Okay, and then I'm curious and I understand the competitive edge.
But I'm curious about your comment on the mobile bolus and then subsequently T sport.
Is your sense that the FDA believes that your your mobile capability works and is safe.
But they just want a little bit more information that they want more data help us to understand kind of how you read the Fda's response and.
Feelings about that product sure.
Sure I mean, I think that this is just part of the normal interaction with the FDA. When you have a submission like this.
And I think that day.
And I want to comment specifically about things and our interaction with the FDA, but I will say, we're very pleased with their response to us on cyber security and I think that might have been one of the areas of greatest risk and I think we've alleviated any concerns that they've got their with our response and our design. So we feel very positive about that I'll also say that the.
And the FDA remains very supportive of using mobile technology and medical devices, particularly on it and insulin pumps and so I think that that's also.
A positive and I think that we still remain very confident that we're going to get approval for this product.
It's just this is just a normal back and forth interaction and I think that clearly is going to happen and now respond and there is inherent uncertainty and dealing with the FDA and the review process, but this is more of this products coming to market and we will keep you informed as we know more about it from our interactions with the FDA.
Thank you John.
Thank you.
Our next question comes from Matt Taylor with UBS.
Okay.
Hey, Thanks for taking the question.
So I just wanted to.
Follow up on a question there about.
The cadence and the environment I know theres still some uncertainty could you offer any color on recent trends.
And it's improved through the quarter or is there any trend to extrapolate through April and anything that you can provide on that would be really helpful.
And I'll, just say that there's been strong demand into the second quarter as well so we were.
We're excited about 2021, and we have confidence that we're going to achieve the goals. This year that we set out for ourselves as well as the next couple of years based on what we're seeing now and the positive reaction to.
Control IQ from the physicians, who are prescribing and as well as the people who are using it it's just outstanding and.
And as we talked about we have 150000 people who are now using it and we havent. We have momentum we have incredible momentum that physicians are prescribing more and more systems, we have their confidence and trust and the people who are using it I mean I can't tell you how many positive anecdotes I get daily from people using it that are so motivational to our whole organization, but.
I think we're on a great spot.
Got you got you and then just a follow up on.
International There was definitely some outperformance there sounds like relative to what you expected that was broad based.
Is that what you think is going to continue I guess broad based ordering or just wanted some more specificity on if there were any kind of pockets of strength that you would call out.
It was really strength across the board from all of that region back order and we were happy to see everyone with ordering including Germany, who just play such a substantial order and the fourth quarter already reordering and the first quarter and it's hard to say if their orders today are a new trend with volume.
Each country. They are still wrestling a lot with the COVID-19 dynamic so how is it impacting their local markets how do they get their inventory write back and say.
You think about the demand that's in front of them.
And so it's just it's been a bit of a challenge for the distributors to ask this to try to figure it out but what I think is we're hearing loud and clear is there's enthusiasm and theres a lot of awareness about what were bringing and I think again it will be something that we will continue to see and the long term.
Great well, thanks for the color and congrats on a good quarter. Thanks, Matt Thanks, Matt.
Our next question comes from Ravi Misra with burden per capital markets.
Hi, good evening, everyone. So just on that.
Question.
On the 20 million days control IQ.
Rather large number and can you just help us think about kind of longer term. Some of the innovation that you think you can extract from that data whether it comes to algorithm refinements or kind of any value add capabilities. You can add to the patients and then maybe my second one and I'll, just ask and upfront for Lee.
On the guidance and the leverage metrics you're getting on.
It looks like and international Leverages, a lot better than you thought it was given the sales outperformance this quarter and you've brought that number up but it seems like you are kind of holding fast to the to the profitability metrics that you had laid out and the prior call. So just kind of wondering whats the offset there given kind of the revenue outperformance. Thank you.
Yeah, that's a great question Ravi about how we use the data.
As you can see we have a tremendous amount of data and we have invested greatly and our data science team and our algorithm teams and they are looking carefully at this data to do just what you are saying we're mining the data we're looking for exactly how the system performs and looking for opportunities to make improvement and the overall performance of the system and its interaction.
<unk>.
And as the algorithm works and I think this is really the data is what's driving the next the next day formulation of the next steps for <unk>.
Our control IQ advancements and time and so I think that there is there is the there was the algorithm itself. That's on the pump. There's also data that we collect I think we can probably help physicians optimize settings over time.
For the people who are using the pumps. So there's there's algorithms that can potentially exists and the cloud debt that could support and.
The physicians, who we consider a customer as well more efficient as they interact and provide better therapy.
And more effectively fourth for their patients and then there's also just the product itself. We see how the product performs that helps us understand where the opportunities are for improvement and clearly we've taken a lot of that information and we've applied it to T sport and we're going to continue to apply it to the next generation process of yellow over and time. So it's a treasure trove, it's hugely important to us we're fully taking.
Advantage of it and we're building teams out to know how to who know how to do just that and I would finally say that when we work with payers payers really value of this data as well and we see ourselves and establishing dashboards with this type of information that we can make available to payers and to help them see the benefits of our technology and potentially go back to them and look for additional reimbursement.
For our products on time.
And Robin to your question on the margins I think I would just start by saying that and this just gives us even more confidence in achieving those margin targets. We set for this year and and one way to think about it is because when we set our operating profit based on net revenue assumption and there are many things that people and the organization I'd like to spend money on that we cant necessarily afford within the construct.
That we put together and so by having an over achievement and sales. It allows us the opportunity to navy advancement of those and initiatives or investments or go ahead, and and put them on the table for something that we could do this year as opposed to maybe putting on optical amongst yourselves.
And if it's still feel very confident and putting those margin targets and will allow us to keep on moving forward towards meeting our long term and something that as well.
Thank you. Our next question comes from Jason Bedford with Raymond James.
Good afternoon, just a couple quick ones I guess.
On the pipeline, John and I, just wanted to clarify paraphrase your commentary a bit here to make sure I understand the message on T. Sport I think you said pushed out a few weeks so is that still fourth quarter or could it slip into early 'twenty. Two and then just to follow up on that you believe you've solved kind of ease.
<unk> interface and human factors dynamics that you talked about last call.
Yeah. Good question, so I think that the.
We're still on track with this program, we're very excited about it we believe that the interface refinement that we elected to make last year.
Definitely resulting on a much more positive experience and so we're pleased with those results.
I would say that when we develop a strategy to submit the mobile bolus at first we did that intentionally because we knew there'd be lessons learned that we can apply to two T force and other products that use our mobile app and so.
There is now there is these new requirements that we I guess, we should have anticipated and did anticipate they are going to work.
We're going on we're gonna have to go back and do additional work on it it's going to be measured in weeks as we said I think it's the way we look at it is that by by incorporating these improvements now we're likely to gain during the review process itself. So that the the commercialization should hopefully end up at the same.
And time that we expected it to and 'twenty two anyway, it's possible we might slip into 2021 excuse me 2022 with the filing but we anticipate that the commercial availability and the device will be roughly the same as it was to start.
And John maybe you could just remind us.
If you have disclosed it before what is the expected commercial availability time on.
And then we haven't said, specifically, but I would say, it's probably sometime in the summer of 2022.
Okay.
And then if I can sneak in another one just on the international plan and annualize.
First quarter sales the guidance implies that the average over the next few quarters. It is lower than in the first quarter.
And you're launching control IQ and a few key countries. So I'm just wondering if there is.
Patient about that go on hire on international I'll, just largely a function of the uncertainty tied to COVID-19 and the distributing distributor ordering patterns.
And yes, and and just a reminder, too that third quarter pressure, we tend to see because of the European holiday season, and I would add back to it but yes. It's just a question around the fact that we really haven't been able to discern a specific cadence or trend with the distributors. They are all really getting back on their feet and I hope. It's the beginning of the new trend, but just wanted to be thoughtful about some of the variability we've been.
And so on the last few quarters.
Fair enough. Thanks.
Our next question comes from Joanne Wuensch with Citibank.
Yes.
And good afternoon, and thank you for taking the question.
Excuse me the other diabetes companies are starting to sell their products and.
And to the pharmacy channel and.
And I recognize that traditional pumps are into the Dnb channel, but is there is no way that control IQ and those that come after it can move into the pharmacy.
I would not put in no way on that Julien I think you are right. What we're seeing with a lot of moving into the pharmacy channel across the state that those products aren't necessarily like our product our product being a little bit more specialized and nature of those means being more I'll call it commodity like and.
So today, we're really focused on well what are the benefits we have in the D and E channel that maybe aren't in the pharmacy channel and we really like the fact that we have a clear line of visibility to our customers in terms of who's ordering where they're coming from helps us build that customer.
From a relationship right upfront, which is key and important as we think about the long term renewable prospects. So that piece number one and the other element that is that we like about the D and E channel and it's just the pricing stability that we've seen there one of our initiatives really is dependent upon you to enhance reimbursement bye bye.
Bye.
Demonstrating the clinical value of the product to the insurance payers and we think we have a good path for that through the day any channel. So those are the things that we're focused on today, what you care about the pharmacy channel many kinds of it and it sounds like its more streamlined upfront and so we're focused on debt and how can we streamline the ordering process.
And that people don't have that perceived.
And negativity around it and so we're focused on digital solutions automating.
And improving our processes in order to make that flow better. So that's what we're focused on today and on the D&A side really and and what we can continue to evaluate the pharmacy channel for them on term.
I appreciate that and my second question has to do with the replacement cycle. It sounds like it's significant and 2022 is there any way to quantify that thanks.
Sure from a renewals perspective, and if you think about it that people who purchased pumps in 2018 are going to be coming up for their first opportunity in 2022, and when you compare that to 2017 I share that we shipped 34000 pumps in 2018 that and double what we shipped in 2017 and it really was just the beginning of the.
And of our business through this year. So were renewals have been strong and steady just very solid path and trajectory I think it's going to get a lot more exciting in the coming years as those become a more meaningful part of the business opportunity for us.
And renewals when you compare it to attracting new patients and those are the people. We've built a relationship with and so our goal is to continue to offer innovation is to enhance that customer experience. So that they want and stay with us when their warranties expire.
Thank you.
Thanks Joanne.
Our next question comes from Alex Nowak with Craig Hallum.
Great. Good afternoon, everyone. This and sidetrack Mccarthy jumping on for Alex just to dig a little deeper on the competitive question.
What are you hearing from patients and providers and the EU and UK around Medtronic 700, <unk> are you finding it.
More or less competitive than you originally thought and as the feedback, they're allowing you to tweak and plan to defend.
And when Medtronic launches here and states.
I would say that we are just now beginning to hear about it.
And I think that.
We feel like we're doing quite well our U S.
With the products that we've got there today as I was just mentioning a moment ago.
And we're in Germany today with basal IQ.
700, <unk> has been there for two or three quarters, and we did exceptionally well last quarter and we did quite well again this quarter. So I.
And I feel that when you look at the seven atg is incremental improvement to and algorithms on our system and sensor that had been problematic. So I think that while medtronic as a formidable competitor I think we feel comfortable that we can compete effectively against them and.
O U S countries as well as here in the states.
Got it.
And then just a follow up decks com ran a big consumer push and is taking price and Lauren and you to help pick up greater adoption are you seeing any benefit from their efforts translate into an increase and MDI conversions and do you anticipate.
And you push to help your conversion potentially in that geography.
So from net BTC perspective, and the campaigns and.
I don't have any evidence that you can show a direct correlation to and add and what benefit we might get but I think it's natural to assume we've always got and benefit from that relationship that we have a debt coming to market win when net sales reps are and talking with physicians and patients with a natural conversation to talk about the integration of our products. So I think it's fair.
And if they're seeing an uptick based on that that we might have to go back and be having no effect.
Got it thanks for the questions.
Our next question comes from Mathew Blackman with Stifel.
And good afternoon, everybody. Thanks for taking my questions I'll, just put them both out there upfront.
And one can you size or frame the incremental opportunity and expanded age indication would open up for you.
And then the follow up question sort of back to the DTC team.
Obviously, you've got more competition coming in and and those folks are spending more on on developing new patient funnels are you considering any incremental investment and in DTC or even outside the traditional endo channel something and the primary care channel and just how you're thinking about <unk>.
And the investments from here.
To drive more patients to pump therapy. Thanks.
Thanks, Matt.
I think the numbers that we've seen are there is approximately $1 1 million chiller.
Children under the age of 18 with type one worldwide.
So it's.
Not necessarily a large number but it is a very important population that does need control immediately and I know that a number of pediatric endocrinologists are suggesting that we should put children and this age group on pumps and immediately because of the benefits technology has provided.
I don't think its going to be a meaningful.
And the increase and opportunity for us. It's just a very important age group that we want to work with and just provide the benefits of control on Q2.
So we want to be able to market and that group as well. So that people are aware of it and we can't do that today until we get the syndication and so.
We're going to continue to push forward with this and we would anticipate debt.
Our study will be completed probably in the early 2022 timeframe and that during that time of 2022, we can get the indication for that group.
And that's our hope.
And then to your question, Matt on DTC strategy and I'll, just start by saying, we have a very smartly and the marketing folks care constantly evaluating the best ROI and the rates are attractive.
Customer. Thanks, you reached and are focused primarily on today on social media engagement and streaming platforms and ways that we can really connect directly with the pipeline commodity and we.
No and see that they are highly engaged when it comes online and act.
And so that's where our focus is today, but we will continue to define and refine our strategies and determine where the best price pressure, it's been hard dollars.
Thank you.
Take care.
Our next question comes from Danielle until after you with SBB Leerink.
Hi, This is Rebecca Wang from Danielle I have a higher level question.
Patent landscape. So we're saying the income palm market will be more competitive with all of those and just how much do you think the overall pump market growth.
Accelerated from current levels.
And more options for patients and I mean, do you think the market and needs to accelerate for tandem to sustain and you kind of growth trajectory. Thank you.
That's a good question. Thank you.
We have stated publicly that we believe that we can increase the penetration.
And the type one community from probably in the low thirties today to the to the mid fifties other endocrinologists and others who are working.
Manufacturing companies within diabetes believes that could even go higher and so I think.
It does it just there's a lot of opportunity, we think that the new technology, that's coming to market, whether it's CGM or whether it's pump technology with algorithms is definitely going to reduce the threshold that people face when they make a decision to go from pens and needles to pumps and other technology. We think we are drafting behind the CGM companies.
Companies get their products onto people who are MDI.
They see the benefits of the technology. They see the benefits of working with a company that provides service and support and I think that they are more likely to consider a pump at that point in time. So we think that the market is going to continue to expand and.
And I think as it does we will all benefit and.
We think technology and ease of use is driving that adoption.
Thank you.
Ladies and gentlemen, I'm not showing any further questions at this time with since there are no further questions. At this also concludes today's presentation. You may now disconnect and have a wonderful day.
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