Q1 2021 Insulet Corp Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation's first quarter 2021 earnings conference call. At this time, all participants on a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call is being recorded and I'd like to turn the conference over to your host Deborah Gordon Vice President Investor Relations.
Thank you and good afternoon, and thank you for joining us for Insulet as first quarter 2021 earnings call with me today are shaky, Patrick <unk>, President and Chief Executive Officer, and weighted Mcmillan Executive Vice President and Chief Financial Officer, both the replay of this call and the press release discussing our first quarter 2021.
Our results in 2020, one guidance will be available on the Investor Relations section of our website.
Before we begin I would like to inform you that certain statements made by Insulet. During the course of this call may be forward looking and could materially differ from current expectations. Please refer to the cautionary statements and our SEC filings for a detailed explanation of the inherent limitations of such statements will also discuss non-GAAP fine.
And she'll measures with respect to our performance, namely adjusted EBITDA and constant currency revenue, which is revenue growth. Excluding the effect of foreign exchange. These measures aligned with what management uses as supplemental measures and assessing our operating performance and we believe they're helpful to investors analysts and other.
Interested parties as measures of our operating performance from period to period. Additionally, unless otherwise stated all financial commentary regarding dollar and percentage changes will be on a year over year reported basis with the exception of revenue growth rates, which will be on a year over year constant currency basis.
With that I'll turn the call over to Stacy.
Thanks, Deb and good afternoon, everyone and thank you for joining US we are off to a strong start to the year with first quarter revenue growth of 24%, both our U S and international diabetes product lines achieved solid results with total omnipod growth of 19%.
We are on track to deliver another year of double digit revenue growth, we have sustained momentum across our business and we are preparing for the highly anticipated launch of Omnipod five.
We continued to execute at a high level, which speaks to the strength of our team and our deep commitment to Insulet mission to improve the lives of people with diabetes.
During the first quarter, we advanced each of our strategic imperatives, including expanding access and awareness delivering consumer focused innovation.
Growing our global addressable market and driving operational excellence.
To begin with access and awareness and how omnipod remains well positioned to further eliminate access barriers and displace legacy therapies the.
And the progress we've made to date is largely due to the differentiated customer experience Omnipod provides our <unk> form factor simple user interface unique business model and expanding presence and the U S pharmacy channel.
There are millions of people around the globe living with diabetes and yet. This population is critically underserved there are far too many people that either don't have access to omnipod are unaware of our product or in some cases, both this must change as omnipod can simplify.
Lives and deliver improved outcomes.
The value Omnipod provides is clearly demonstrated by our ability to drive new customer growth from multiple daily injection users and the type one and type two segments.
Approximately 80% of our new customers switch from MDI to Omnipod.
Additionally, in the first quarter between 35, and 40% of our new U S customers were type two.
Much of this growth has been driven by Omnipod dash, which offers tremendous benefits compared to existing therapies.
As a result, we continued to transition a growing percentage of our U S pod volume through our pay as you go model in the pharmacy channel.
This provides increased access for customers low co pays and no upfront costs or multi year lock and periods. It simplifies access, making omnipod easier to prescribe for physicians and provides a number of benefits to payors and drives our recurring revenue.
Today, our technology and form factors stand at the forefront of innovation, while our U S pharmacy channel and pay as you go business model are eliminating longstanding access barriers.
This combination uniquely positions insulet to further penetrate both the type one and type two insulin intensive markets.
By the end of Q1, we had secured coverage for over 75% of U S covered lives for Omnipod dash and the majority of our new customers across the globe start on Omnipod dash.
At the same time, and we are focused and expanding omnipod awareness given the diabetes market is large yet critically underserved last year, we launched our direct to consumer advertising campaign in the United States. The reaction to date has been positive and we have already started to see incremental new customer starts.
We have also begun to pilot DTC and the United Kingdom. It is early days for both our domestic and international campaigns, but we know there is tremendous opportunity to help more people across the globe learn about the life changing benefits of Omnipod.
Driving access and awareness are core components of our growth strategy and complement our commitment to delivering market leading innovation.
We believe the combination of enhanced access and superior innovation improves outcomes and makes living with diabetes or caring for loved ones less burdensome.
All of this has resulted and consistently strong omnipod adoption and customer retention and a global customer base that surpassed a quarter of a million people and Q1.
We accomplished this despite not having and AIG product in the market and this will soon change with our Omnipod five automated insulin delivery system, which we believe is the future of insulin delivery.
We've had five unlocks a new level of freedom and simplicity through easier insulin management and significantly improved glucose control.
The number of first Omnipod five brings to market is compelling. It is the first two bliss entirely wearable AI system with a personalized adaptive on target algorithm embedded in every pod.
This means there is no need to disconnect or interrupt therapy other than a few minutes. It takes to change a pod every three days.
This is critical as interruptions and and continuous insulin delivery lead to suboptimal outcomes.
Managing diabetes will be easier and more discrete as omnipod five customers will have complete smart phone control for all system functions at.
At launch we will offer full control from personal Android smartphones and every customer will also receive a controller that includes a sim card.
This marks another important distinction between omnipod, five and other options available and the market.
No. Other AI system offers real time connectivity, even when not near Wifi, and real time remote monitoring through Sim and personal phone control.
Omnipod five users will always be able to view their data on their smartphones and loved ones will always be able to know how theyre powders are doing in real time on the Omnipod five view app.
And <unk> five is the only system with customizable glucose targets for different times of day and also a hypo protect feature that can be used in times of greater hypoglycemia risk.
Additionally, our system is the only one to provide a smart bolus calculator that recommends more or less insulin based on users' CGM trend not just the CGM value alone.
All of this while maintaining the same form factor our customers love we.
We are confident that Omnipod, five will mark a major improvement and quality of life and diabetes management.
And the U S. Omnipod five will be available only through the pharmacy channel will utilize our unique pay as you go model and will be priced at parity with Omnipod dash and.
As a result, the low monthly out of pocket costs for Omnipod five should be comparable to both omnipod dash and MDI like.
Like Omnipod Dash, we expect the majority of Omnipod five customers in the U S to have a monthly pharmacy co pay of under $50.
In addition through our 30 days of Freedom trial anyone can try omnipod five free for 30 days. Our goal is to quickly secure broad affordable coverage and expanded access we believe the broad coverage. We have established for Omnipod Dash will continue to serve as a major competitive advantage.
And a strong foundation for our efforts to drive access to Omnipod five.
Although omnipod five has breakthrough device designation and the FDA has been incredibly supportive and collaborative throughout its review process. The clearance timeline is taking longer than we had anticipated.
The feedback we have received to date has been in line with our expectations and we remain optimistic that we will receive omnipod five clearance by the end of June or shortly thereafter.
But given the current environment and the associated lengthened review time clearance could shift into the second half of the year. As a result, we now expect to begin our limited commercial release and the second half of 2021, we.
We do not expect this will have a material impact on revenue guidance and our internal teams are certainly not standing still we are building omnipod five inventory, we are developing commercial launch materials and testing our systems and processes and we are securing coverage for omnipod five.
Our teams are geared up for what we fully expect will be the best technology and customer experience on the market and a wildly successful launch.
The value Omnipod five offers to people with diabetes was clearly demonstrated.
Via the impressive pivotal data we shared in March at Endo 2021.
Our pivotal study included children and adults ages six to 70 compared to standard therapy, Omnipod five achieved significantly higher time and range and improved <unk> C, while maintaining or lowering hyperglycemia.
After three months on Omnipod, 553% of children and 66 per cent of adults achieved and <unk> of less than 7%.
Time and range for children increased 16 points to 68%, while timing range for adults and adolescence increased nine points to 74%. Additionally, time and hypoglycemia was reduced for adults and remained very low and children.
And we've had five will offer meaningful value for individuals living with diabetes as well as per their families physicians and payers. It's a clear Testament to our innovation team that we were able to achieve this very competitive time and range. While also delivering the strongest published hypoglycemia outperformance.
We have additional omnipod five abstracts accepted for presentation at upcoming diabetes conferences in June.
These address a number of important areas, including performance and preschool aged children. The transition from multiple daily injections directly onto Omnipod, five and quality of life outcomes.
Also on the clinical front, we had impactful domestic and international data recently published and several leading peer reviewed diabetes journals.
Collectively the results shared and these publications demonstrate that Omnipod can drive improved outcomes across a broad range of people living with either type one or type two diabetes. These.
These improved outcomes spanned multiple age groups and disease states as well as people coming from different forms of therapy.
We continue to invest clinically and have a compelling roadmap, including our work to expand our omnipod five indications to preschoolers down to age two and to secure a type two indication.
The first phase of our preschool study is complete and we are progressing well through our planned 12 month extension phase, which allows us to collect longer durable outcomes and allows our trial participants to continue on omnipod, five which they all elected to do.
Additionally, our type two feasibility study is now fully enrolled and the results are illuminating.
During Endo 2021, and Dr. Bruce Bodie presented early data from our type two study that showed encouraging results for omnipod five with time and range that more than doubled and the first eight weeks. The type two diabetes market offers tremendous opportunity for Insulet and we will continue to innovate to further penetrate this.
Largely underserved population.
The depth and breadth of the clinical data published and presented in just this last quarter demonstrates our commitment to building strong clinical evidence that supports how omnipod will continue to improve outcomes for people living with insulin dependent diabetes.
We continue to advance our pipeline and we look forward to sharing additional clinical data in the future.
Omnipod five is our top innovation priority. However, we are diligently working to advance a robust pipeline that extends well beyond.
We know that our success over the long term requires leadership in critical areas such as software development data science and other core competencies and this includes the integration of Omnipod five and our future products with next generations of products by Dex Com and Abbott.
Beyond Omnipod five we have begun and product development on innovations that we believe will offer significant value to people living with both type one and type two diabetes.
Moving to global expansion, we are expanding access and awareness of Omnipod and a number of attractive markets last year, we entered five new countries within Europe, and the Middle East This quarter, we expanded into Turkey, and we continue to gear up for an expected launch and Australia later this year.
Our international expansion efforts will drive access to a huge global addressable market.
Across our current footprint, we estimate there are 11 to 12 million people living with insulin dependent diabetes we.
And we see attractive future expansion opportunities that will further grow our total addressable market and bring our technology to people living with diabetes around the world.
The international launch of Omnipod Dash has been highly successful and work is underway to bring omnipod five to our international markets.
Lastly, we continue to invest significantly and our global manufacturing operations, we are well positioned to meet growing consumer demand for omnipod dash as well as the commercial launch of Omnipod five our broader innovation pipeline and our future international expansion plans.
Operational excellence is one of our key strategic imperatives that is enabling growth today and will do so well into the future.
As part of this strategy Insulet is committed to responsible and sustainable growth. We have developed a comprehensive sustainability strategy that builds upon our existing capabilities provides value to our stakeholders and considers the most important ESG issues that affect our business.
Society and planet.
We recently published our 2020 sustainability report, which outlines our commitment to addressing important ESG issues and highlights our key priorities.
All of us at Insulet are dedicated to a business resiliency and responsible business practices that help our customers our employees and our communities thrive.
In closing we are off to a strong start in 2021, we expect to deliver another year of double digit revenue growth launch Omnipod five and advanced our innovation pipeline to continue to bring life changing innovations to people with diabetes and order to simplify and improve their lives.
Now I will turn the call over to Wade. Thank.
Thank you Susie.
We continue to execute at a high level and look forward to the limited market release of Omnipod five our.
Our strategic imperatives are supported by continued investments across our business to drive long term revenue growth and margin expansion.
We delivered 24% revenue growth and the first quarter, achieving the high end of our guidance range driven by strong total omnipod growth of 19%.
As we previously discussed dependent impact on global new customer starts in 2020 will have a compounding impact in 2021, primarily in the first half.
While the pandemic has persistent globally with ongoing challenges mainly throughout Europe, and Canada, we are navigating them well and driving continued growth.
And the U S. Our new customer starts were a record for any Q1, and our history and second only to the very strong Q4, we achieved last year. We accomplished this while also driving strong international performance.
And Q1, we delivered U S omnipod revenue growth of 23%.
Benefiting from our growing customer base, Omnipod dash adoption and ongoing mix benefit as we ship volume into the pharmacy channel.
Omnipod Dash continues to ramp and drove over 70% of our U S new customer starts and.
<unk>, we grew pharmacy channel volume to approximately 45% of our total U S volume.
This is up significantly compared to last year, representing a meaningful increase and contributing to our topline growth.
Expanding our presence and the U S pharmacy channel remains a key strategic imperative as we plan to drive increased access for Omnipod Dash and Omnipod five once launched.
International Omnipod revenue grew 13% ahead of our expectations performance was driven primarily from our expanding customer base and ability to navigate through COVID-19 related challenges.
The full launch of Omnipod dash throughout our international markets last year is helping to drive growth. This year as the majority of our international new customers start on Omnipod dash.
Omnipod Dash continues to generate physician interest and drive hospital access to.
To a smaller degree international Omnipod revenue in Q1 also benefited from timing of PJM orders, which can vary from quarter to quarter, given our distributor channels.
We're also pleased that our global attrition and utilization once again were stable this past quarter.
Drug delivery revenue more than doubled in line with our expectations growth was unusually high due to increased product demand this year versus the low production levels last year, which resulted from a slower than typical manufacturing startup.
Of these drivers were due to the COVID-19 pandemic.
Gross margin was 66, 4% and the first quarter, representing a 230 basis point increase or 120 basis point increase on a constant currency basis.
Our gross margin expansion was driven primarily by improved manufacturing operations and supply chain efficiencies.
The ongoing benefit as we transition more volume into the pharmacy channel and the U S and a decrease and COVID-19 related litigation costs.
Partially offsetting these increases were the expected higher mix of costs as we continued to ramp U S manufacturing.
Operating expenses and the first quarter were $151 million, primarily due to our investments to support our innovation pipeline development efforts and the upcoming launch of Omnipod five as well as our broader direct to consumer advertising.
Operating margin was six 5% up from three 8% and adjusted EBITDA margin was 14% up from 12, 3% all were in line with our expectations.
Overall, we're off to a great start in 2021 as both our diabetes product lines generated record performance and we continue to invest across our organization to support our growth strategies and drive future expansion.
This includes increasing advertising to drive brand awareness and strengthening our commercial and R&D resources to support Omnipod, five and our innovation pipeline as well as geographic expansion.
Turning to cash and liquidity, we remain and a strong position with our earliest debt maturing in 2024 and low cash interest expense.
We ended the first quarter was $850 million and cash and short term investments.
We recently completed a $500 million term loan b financing as well as a separate $60 million revolving line of credit.
Our goal over the long term is to strengthen our access to traditional capital market financing diversify our capital structure and overtime drive our gross leverage ratio down to five times Bank EBITDA.
This marked our first step and an important one and that direction.
We plan to use the term loan b financing to pay down a portion of our outstanding convertible notes due 2024.
This will lower our cost of capital, while also maintaining flexibility to pursue future strategic investments.
Now turning to our outlook for the remainder of this year.
We are raising the low end of our full year revenue guidance to 16% to 20% up from prior 15% to 20%. This includes raising the low end of total omnipod revenue guidance to 18% to 21%.
And the U S. We're raising the low and a full year omnipod revenue growth to 22% to 25%. This will be driven primarily by Omnipod dash volume growth the benefits of our efforts to drive expanded access and awareness are differentiated pay as you go model and the mixed benefit we realized and the pharmacy.
Channel.
Also driving growth is our expectation for further omnipod customer adoption and both the type one and type two markets. We also expect growth will benefit to a lesser degree from the limited market release of Omnipod five.
For International Omnipod, we are raising the low and a full year 2021 guidance to 11% to 15%.
And the near term, we continue to expect our international business to be impacted by the pandemic and related challenges combined with the compounding impact on new customer starts from 2020.
With that said, we are encouraged by the adoption rates of Omnipod dash and our plan for driving expanded market penetration internationally.
Lastly, we are reaffirming our revenue expectations for drug delivery and the range of and 11% decrease to a 4% increase.
Turning to gross margin, we continue to expect full year gross margin and the range of 67% to 70%. Our gross margin expansion drivers remain the same increased scale and efficiencies provided by our global manufacturing operations and positive mix from the continued volume shift and.
And to the U S pharmacy channel.
We also benefit from a planned reduction and COVID-19 related mitigation and safety related costs.
We continue to expect operating expenses will largely rights in line with revenue growth. This year, as we invest and consumer focused innovation and best position ourselves for increased market penetration.
This includes investments and our sales and marketing teams ahead of the launch of Omnipod, five and to support our international market initiatives.
As a result of our strong revenue growth combined with gross margin expansion and the investments, we're making across our business. We are reaffirming operating margin for full year 2021, and the low double digit range up significantly from five 7% in 2020.
We expect operating margin will improve sequentially throughout the year.
Lastly, we continue to expect capital expenditures to increase and 2021 as we further invest and our global manufacturing operations and strategic imperatives to support our strong growth expectations.
Turning to our second quarter 2021 guidance, we expect total company revenue growth of 10% to 14%.
This includes total omnipod revenue growth of 14% to 17%.
We expect Q2 U S omnipod revenue growth of 17% to 20% driven primarily by our growing customer base fueled by Omnipod dash volume growth and the mixed benefit we realized and the pharmacy channel.
As a reminder, Q2 growth is impacted by the tough prior year comparison, where we experienced a net impact of estimated distributor channel and and customer inventory levels at the start of the pandemic.
We expect international Omnipod revenue growth of 10% to 13%. This reflects the ongoing growth and our customer base from increased Omnipod dash adoption, partially offset by the headwind of lower new customer starts in 2020 stemming from the pandemic as well as the continued <unk>.
Nick impacts throughout many of our international markets.
Also the benefit in Q1 from the timing of Omnipod Dash Tdm orders is not expected to occur again in Q2.
We also expect drug delivery revenue to decline, 16% to 24% due to the normalization of order volumes and the current year as compared to elevated levels and the prior year due to the pandemic.
In conclusion, we're off to a strong start in 2021, we remain on track for robust revenue growth and operating margin expansion continued to advance our strategic imperatives and are in a solid financial position to continue to invest for growth.
We are building a foundation for long term sustainable revenue growth margin expansion and increased value creation for our stakeholders with that we'll turn the call over to the operator for Q&A.
Thank you.
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Our first question comes from the line of Jeff Johnson from Baird. Please go ahead.
Sorry, guys I was on mute good afternoon chassis I just wanted to start with a question on the timing around Omnipod five.
It sounds like I don't want to put words in your mouth, but a.
A couple of few weeks of potential.
So you know my my remarks aren't really prompted by the fact that we're getting through that buffer and so the review process is taking a bit longer than we expected, but we're in the final stages and Phil feel good about where we are.
Thank you.
I'll start and next question comes from the line of Robbie Marcus from Jpmorgan. Please go ahead.
Great. Thanks for taking my question two from me.
One weighted I'd I'd love to get a sense of after you gave guidance at the end of February on the fourth quarter earnings call. How how the rest of the third quarter trended I know diabetes can sometimes have different trends and what we see across the rest of med tech in terms of procedure volumes.
And then how it played out versus your expectations throughout the rest of the quarter.
Hey, Robby Yeah sounds good and.
It's actually a really good question because there's quite a few dynamics ruling out and I think diabetes does have some.
Uniqueness to it so what do we think about it first and the U S and what we've seen in the U S is really at the end of 2020, we saw.
The access to customers and the market really start to turn.
And we're still dealing with some pandemic issues and the U S, but we really saw and.
Start to level out and and the end of Q4, 'twenty and obviously with a 23% growth rate here and the quarter start to pick up one thing we've talked about and the path that was unexpected was we thought we would see seasonality change a little bit more in Q1 and the move into the pharmacy, we have 45% of our volume and the pharmacy now and we really.
Didn't see that so that was kind of a unique.
Impact and we think it's really due to the fact that.
And customers still have <unk>.
Patterns that are related to the legacy market paradigm here and diabetes and the traditional order patterns of buying more and Q4 as well as people throughout the value chain distributors wholesalers, even physicians thinking about prescribing pumps at the end of the year versus the start of the year. So I think it's going to take.
And more time than we expected to see some of those seasonal trends take place and as we think about the rest of the year for the U S. I mean really strong we think we've got a strong guide for the second half and we start to build momentum just a reminder, that we do have an annuity model here at Insulet and so we start to build momentum we had a record Q1 start new.
<unk> starts here, we had a record Q4 and.
2020, so you put those two together and we're starting to build momentum up again, and you see that start to build and our growth rate here and the second half that's implied in our guide and then internationally is a different story, we are seeing the pandemic persists it was longer and more difficult through the end of 2020 and we can.
See that as it rolls into our annuity model here in the first half of 2021, and so we will see that.
Persist longer internationally, having said that we still feel we had a pretty strong growth rate and 13% in the face of the challenges that the team has seen internationally and.
And just to highlight a couple of the things we're dealing with.
Our business is.
And as concentrated in a few of the larger regions like the UK and France and those are the regions, where we've seen more lockdowns and more persistence of the pandemic and so when some of those regions are more challenged it's harder for our teams to get in and get customers started on new product, but I mentioned in the prepared remarks, where we are seeing.
Good traction as a lot of interest and our new dash product and so that is giving our teams reasons too.
And with physicians and with customers and so.
We are starting to see signs of improvement internationally as well, we do think it will persist a little longer into the second half and Thats reflected in our growth rates at the high end of our growth rates, we get up to that 17% range and as you know our expectations for the region are high teens low 20, so optimistically, if we see the pandemic start to.
<unk> come down and internationally as well, we will start to get back into that high teens growth rate.
Thank you.
I show. Our next question comes from the line of Larry <unk> from Wells Fargo. Please go ahead.
Good afternoon, and thanks for taking the question.
Casey one on.
Type two patients.
This is the second quarter and a row. It was 35% to 40% do you see it stabilizing there or do you see it growing further and secondly, how often are type two patients changing and their pods and they tend to use more and insulin. So are they doing it more frequently.
Frequently than every three days on average thanks guys yeah.
And Larry Great questions and I'll start with the first one we actually Havent really seen a change in utilization that is noticeable at the population level between type two and type one and I think that comes down to a reduction and total daily dose and insulin and in fact and.
We mentioned this and the press release, but we had some incredible data published this last quarter and most recently.
And type two rather the data was published in diabetes research and clinical practice and this looked at.
Almost 3600 patients and demonstrated.
Statistically significant reduction and even C, but maybe even more surprisingly a 32% reduction and total daily dose of insulin and that was regardless of which therapy. They were coming from multiple daily injections or previous pump therapy. So I think that points to the value of Omnipod and site rotation among <unk>.
Other things and.
Really playing out in the patient experience out there, which is why we don't see broadly utilization, increasing and the population and with steady this quarter and then the other question that you had on type two.
With 35% to 40% it actually has kicked up every quarter. Its just a broad range. So it is growing and it is probably growing faster than our total new customers, which are growing quickly and as well.
Thank you.
I show. Our next question comes from the line of members of this from Morgan Stanley. Please go ahead.
Hi, This is Mario <unk> from Morgan Stanley I, just wanted to go back later and I. Appreciate your commentary on the second quarter guidance and the ex U S. COVID-19 impact is very understandable and.
And the U S. It seems like the sequential.
<unk> growth that we're expecting for the second quarter versus the first quarter is a little bit lower than history.
And based on pharmacy seasonality and that really the entirety of the story and the answer is there anything else that we're missing in terms as COVID-19 research and says.
Or really anything else.
And.
Yes, So I think you've got most of it I would just highlight one of the things I called out in the.
Prepared remarks was the tough comp we have and that's because of the inventory build we saw last year and Q2 at the start of the pandemic, that's about a 5% impact to the growth rate. So if you add if you just add that tough comp for the inventory last year that puts us into the mid twenties even above.
Q1 growth rate and so.
And that's in there, but as you mentioned.
There is.
Also some dynamics between Q1 and Q2.
The pharmacy channel, we're still learning, it's still new to us and we're still monitoring it and to see how that plays out but another way to think about Q2 for US is we have at the high end of our guide.
A similar sequential dollar growth rate $12 million growth rate same as we experienced last year. So that's another thing to ground on and we'll see how it goes.
We're also closely watching the pandemic and the U S and we're not free and clear of that yet and the teams are doing a great job selling through at our virtual training capabilities are really helping us here and we'll see how that continues to play out and the U S. We're very optimistic with vaccine rollout across the U S and things continue to improve and.
Again, if you normalize for the growth rate that puts us into that mid twenties, and then our apply our implied growth rate and the U S. For the second half is mid to high <unk> and so.
And an annuity model just a reminder for everybody. It takes several quarters to build up the new customer starts.
Last year Q2 for US was a low new customers third quarter, but we still had 30% growth because of the momentum coming into the quarter. So we're excited here to be building momentum again, setting record new customer start quarters, and if we can continue to do that youll see the growth rates climb into that guidance implied guidance of 20% growth rates and the second half.
Thank you.
Our next question comes from the line of Margaret Chasm from William Blair. Please go ahead.
Hi, This is actually Brandon from Margaret Thanks for taking the question I wanted to follow up on the type two omnipod data sounds really encouraging.
Data is coming out nicely I.
I was wondering if you could give us a little bit more details on what the next steps are there.
And the algorithms needs to be tweaked for the type two patients or can we kind of move forward with what you have now and run additional data and if that's what's needed. So just trying to understand what next steps are for type two and on.
And the pod five thanks.
Sure Brandon and thank you for the question and yes as I mentioned this has been and area of focus for US. We're really excited about the early data that Dr. <unk> presented at Endo and <unk> and.
And to develop it just may take a few years to change behavior, not just for customers, but all through the value chain, but other than that.
And as you know, Jason we've got a lot of new things going on in both regions, but in particular and the U S. The pay as you go model is still relatively new are moving to type two is new the DTC campaigns, our new even dash uptake is still accelerating for us so.
As we think about guidance, we've got a lot of puts and takes and were very happy.
Dealing with the pandemic to print the 23% growth rate on a dollar basis I think the strongest of all the companies out there and we're continuing to expand our leadership position and.
So I think as we're approaching $1 billion our growth rates don't look as impressive as some others, but we're happy to be growing stronger on a dollar basis.
Thank you.
I show. Our next question comes from the line of Danielle and coffee from SVP Leerink. Please go ahead.
Good afternoon, everyone. Thanks, so much.
And for taking the question.
Okay.
Around that.
You.
And so successful sorry, gentlemen, it sounds from greedy, but is it feels like the scale.
Untapped opportunity.
Even with all the work done and all the success you've had at the primary care physician level, we've been doing a lot of work here and talking to primary care physicians and it feels like they managed so many of these patients there's still a lot of opportunity. So just curious if you could talk a little bit more about whether there's any special efforts toward.
The primary care physician or you're expanding your touch with the primary care physicians or just how you are going after that market from the physician level I guess versus patients. Thanks, so much.
Sure Daniel and it's a great question and something we think a lot about I think.
Youre right.
Our success and the type two population does not rest on Omnipod five.
For the insulin dependent type two user we have and outstanding value proposition with Omnipod Dash and you can see it and the adoption trajectory, we are uniquely differentiated and this space because of the simplicity of dash because of our market access position with dash and because of our business model and it's showing and the in the growth of that segment.
And then I referenced the clinical data earlier, you add to that clinical outcomes and the data that was published this quarter and looking at those 3600 patients and showing of a 32% reduction and total daily dose of insulin and such and improvement in <unk>, That's just really really powerful and so.
I think we I guess the other thing that we do is really address a.
Our recognized and frustrating compliance challenge that exists for the clinician and for the patient and that's because of pods form factor and simplicity. So I think at a high level. We believe that Omnipod has the potential to change how clinicians are thinking about therapy insulin dependent type two.
Two patients and and that's because of all the things that we know already our simplicity, our user interface, but also the simplicity and access and prescribing.
No upfront costs, no lock ins and for a physician is just a very easy E script.
And then clinicians and patients can try omnipod for free and that those are tactics all designed to change fee.
Physician behavior and patient behavior and and.
We're having a lot of success with that in the Endo office today, but youre right. We also have begun to pilot new approaches in our messaging and our education and in our physician targeting and.
Because we know there is there is such a huge opportunity and because we are so well positioned and it. So we're looking at our calls to action and DTC and how we target patients and clinicians were looking at piloting <unk>.
Physician targeting of PCP.
And looking at our training and support model, so all sorts of things and I think ultimately.
And youre right to that awareness, both among people living with insulin dependent type two and their clinicians.
Awareness is really critical to continuing to unlock this opportunity. So I think the good news is we're having a lot of success today and the Endo office with Omnipod Dash I think as you look to the future. There is even more exciting things on the horizon, both with Omnipod, five and with our ability to move potentially into new.
And <unk> segments.
Thank you.
I show. Our next question comes from the line of Joanne Wuensch from Citibank. Please go ahead.
Good afternoon, everybody and thank you I'm trying to get some timing on a couple of things.
And sort of out there is the pediatric label for Omnipod five tied to label for Omnipod five and then the integration with Abbott Libre can you just.
If you want to get in quarters, or even first half versus second half sort of get us an idea of when you think we might be seeing those approvals.
Well the one thing that we have given a timeline publicly on his and.
The pediatric label and so all of our internal efforts on that front are on track we have collected the data fee.
Finished the study everything looks good and we're getting ready to submit shortly to the FDA on that front and so that would put us on track and a normal world and put us on track for a label expansion by the end of this year.
Obviously, we do recognize though that we do have challenges today in terms of the workload and what the FDA is contending with so I just caution everybody. We're on track on our end.
And and working certainly hard to make that happen and we haven't given timelines yet on the type two label indication or on Libre label indication just to indicate that that work is underway, but to give you. Some sense of things just remember that we are right now and a feasibility study for type two so the next step.
Would be to move into a pivotal study. So there still is some clinical work to do before we're ready to submit to the FDA for the label expansion and then Libre. What we've said is that work is underway that will also include a submission to the FDA, but not not any clinical work. So that just kind of gives you a sense of what is.
Ahead of us and we'll get more granular with our timelines once we have omnipod five into full commercial release, which is 100000% where most of the team is focused today.
Thank you.
I show. Our next question comes from the line of Kyle Rose from Canaccord. Please go ahead.
Great. Thank you for taking the questions.
Just two on my side and I'll ask them upfront and just.
You know from from a big picture perspective, you know it kind of feels like.
The company and for that matter and the broader diabetes industry and is kind of shifting more towards a.
Software focus rather than just purely.
And on the hardware side I mean, you've obviously got big investments there and you've done a lot of work already when we think about.
Dash and the apps and and the Omnipod five side, but just what other investments do you need to make from a software perspective for future projects I'm just trying to understand how much of the investment has already been made versus some of the investments that need to be made in the future and then.
With respect to the launch of <unk>, just any commentary around expectations for covered lives. When you do move into the controlled launch and how we should think about maybe the first.
And to 18 months from a from a reimbursement perspective.
Great and Kyle both good questions and so first on software and this has been a significant focus and it's funny because we say software other people say digital there's actually a lot included in that when we think about software. We're thinking obviously about software developers, but we think about cyber security.
We think about.
Interfacing with consumer devices, and obviously, our sensor partners and potentially other diabetes technologies and we obviously think about mobile technology cloud computing and data science. So theres just a lot wrapped into that and we mentioned last year, we doubled our product development head count and most are.
<unk> and most of that doubling took place and fact virtually all of it took place in some sort of software function. So we have been building rapidly and I think you know I look back and think about where we are in our.
And in these final stages of the clearance for Omnipod, five and I think it's.
So great. We made these investments and we built such dramatic capabilities here because it is a moat for others behind us to get really good at remote insulin delivery from either a P M and or mobile phones and those are not easy to do and then obviously all of the integrations with our partners and I wouldn't say, we're done and this is an area.
That will be continued investment for us for quite some time to come.
We have no shortage of really exciting disruptive.
Innovation programs ahead of us and we will continue to invest here and we've always said, we'll get a little bit more maybe public about what those programs might look like as we think about once we've got omnipod five into full market release, but areas and investment for us or for example, and continuing to advance.
Our algorithms because that will provide ease of use more automation and better outcomes.
And continuing to interface with obviously additional sensors, but also additional phone platforms at <unk>.
Renewing to build them.
<unk> and digital so things like our data insights and decision support and serving up generating insights per patients payers and clinicians just as some examples. So we've got work going on and all of those areas and I don't think that's going to slow down anytime soon and we'll continue to build capabilities there and then.
Second question around Omnipod, five and covered lives as I mentioned in my prepared remarks. The teams are doing a great job here and we're really encouraged by the discussions that have been being had by payers.
And we're definitely educating the pharmacy channel for the first time, an automated insulin delivery and the value of Omnipod five those conversations are going well, we already have some coverage established and as we've always said.
As the clinical data gets published we expect more coverage and then of course on clearance, we expect more coverage and so we're building we're right where we expect to be at this point I really.
Really delighted with the team's work and really optimistic that we're going to launch with a decent coverage position and also build very rapidly from there so that and all of our tactics are really designed to make that happen are the ones that I mentioned in my script around.
The leveraging the data.
Pricing at parity and all of that is designed to make sure that we establish rapid access.
Thank you.
I show. Our next question comes from the line of Ravi Misra from burn Berg and capital. Please go ahead.
Alright, thanks for taking the question so I guess.
But to the broader diabetes landscape and if I may 1st.
And second backed and announced that its spinning off its business.
And this morning, and the diabetes World and just.
Looking at very low revenue numbers and they're kind of focus can you maybe think about or maybe help us think about how you think about kind of where we are progressing as an industry I mean to me.
I would think perhaps since the signal of the pumps or the way.
Given that this is a business flattish revenue and focus on needles, but just curious how you guys are thinking about it up there. Thanks.
Sure Yeah, Robbie and good question I mean, I think Youre right, we certainly believe and we've been very public about our belief that this market will double and that we're going to take a take a very exciting position in this fast growing market and that is being driven by so many things.
You've talked about what's been happening with CGM adoption, it's actually almost breathtaking. When you look back five years and think about what's happened to the blood glucose monitoring business and what's happened with CGM, it's been pretty remarkable transformation in the market and the value of our real time CGM data and what.
That has meant in terms of technology integration and technology adoption among pump therapy and that that is I would say still maturing and type one and at the very very early stages and type two and so I do think.
Potentially you could look at that move as just an endorsement of where the market is heading from.
Pump utilization and technology utilization perspective, both CGM and pumps really when you look at their business and.
And I think.
We feel very well positioned in terms of specifically patch pumps, you know theres been a lot of activity out there are players trying to get into Patrick BD is one of them and so I think it also points to how hard what we do is and how well positioned we are and when you think about the and the <unk>.
<unk> It takes to do something like we do with Omnipod.
And just the incredible investment that it takes to serve this market. It is about our IP position and it is about the incredible manufacturing capability, but it's also about what it takes to serve the commercial market and build the brand and create awareness et cetera, and that's an area where a player for example, like BD just didn't have a strong.
<unk> commercial presence either so I think it's and from.
From our perspective, we feel very well positioned and a market that is growing very rapidly and that's going to happen I think explosively and type one and we're just at the beginning stages and type two so it's a long tail from here.
And and we feel very well positioned in that space.
Yeah.
Thank you.
And show our next question comes from the line of Anthony patrolling from Jefferies. Please go ahead.
Alright. Thank you quick two part question on <unk>.
On Omnipod five.
I guess is there a way to.
And maybe sort of look at the existing omnipod user base and how it segmented between BGN and CGM.
And how do you see those individual patient populations overtime and gravitating to all five just one trend.
Faster than the other or does everyone sort of converge on and integrated basis and.
And then if you have any early opinion on retention specifically.
How do you see retention on <unk> five.
Versus a standalone omnipod user trending once the cycle begins thanks.
Great Thanks, Anthony and itself.
I'll take the retention one first and just to say that our retention has been very stable. So I think that's a great thing just especially when you think about.
How dynamic and the market is with new.
Innovation is coming it's great to see that our retention has been stable and.
And I would expect that to likely be the same with omnipod five primarily because we have done so much work on the access front and because we're focused on establishing broad affordable access for Omnipod five we know that that is one of the major reason.
Reasons for people.
Trading off the product is tied to access and cost and so we have prioritized that with dash and frankly and then.
Now with Omnipod, five and I believe that's one of the drivers behind the.
Stability in our retention for patients and.
As it relates to our user base and who is going to convert more quickly be GM or CGM users and we certainly see CGM users is a very logical target for this and we've said in the past that's about half of our population and so.
That's great, but I honestly I think this product is going to be a winner with our patient base period and.
There's a lot of exciting benefits around phone control et cetera, and when I think about what's been happening with our user base CGM adoption has grown very rapidly. So every day that number ticks up a little bit and then that target population becomes even bigger for omnipod five so and that's certainly the trend across.
And the United States, and so and we've got a really big exciting target for Omnipod, five and a really exciting product to bring to those people.
Thank you.
Our next question comes from the line of Matt O'brien from Piper Sandler. Please go ahead.
Hi, This is <unk> on for Matt Thanks for taking the question and so.
So just on the 30 day trial that Youre doing how quickly do you think that will shift over to Omnipod five will not be immediately once you launch. It are you still going to be using dash for a little bit and then just on that topic as well how many patients are you seeing actually stay on Omnipod. After doing this trial is there a way to quantify.
And five out yet.
And yeah current great question, So and we won't stop doing 30 days of freedom for Dash. This as part of our.
Great position that we have with our business model to be able to essentially sample the product where others can't and so its a tactic to help drive more people who are sitting on multiple daily injections injecting themselves four to five times a day.
And really be able to get over the hurdle of trying and new technology. It's been wildly successful for us the vast majority of people who use the 30 days of freedom trials stay on the product and.
So it's been a successful tactic for us and one we will continue and we will likely offer that once we move into full market release. So once we have broader access established for Omnipod. Five is when we will start to offer that with Omnipod five, but we will operate with both a remember that omnipod five is indicated for type one we still anticipate.
Great utilization and growth among certain type one segments as well as obviously the type two user and so we'll we'll offer them both free trials.
Thank you.
And I show. Our next question comes from the line of Matt Taylor from UBS. Please go ahead.
Hi, Thank you for taking my question.
And I just had one on phasing.
We know that the pandemic depression of new starts and still having an impact here in Q2, but now you've had a couple of quarters of record new starts.
Could you just help us think about how that will start to roll in and does that help you start to inflect more.
And the second half and any other nuances to help understand that and gaining over the quarters.
Yeah, Hey, Matt and it is a unique dynamic with our annuity model and and so.
Definitely makes sense to spend a little more time on that and you're referencing the U S. First of all I would say just at the high level. We do think that we're through the majority of the pandemic impact and the U S. We turned the corner at the end of 2020 and were now as you said and then more of an acceleration mode. We had record new customer starts in Q4.
And again here a record for Q1 and the U S and so that positions us for is the strong 23% growth and Q1.
And with a very tough comp in Q2 still and the high teens, 20% range, but what those specific to your question, Matt as it positions us for that 24% to 28% growth rate and the second half and starts to get us into the high 20% growth rates and we haven't been and the 30% growth rate since before the pandemic.
And are a couple of quarters before the pandemic we were 30%.
The annuity continues to build here and we're confident that we'll get into the mid to high <unk> and then just to touch on international because it is a different dynamic I mentioned earlier pandemic persisting longer and.
So we will we will take a little longer to build the momentum back up again internationally, but we've got confidence that we will do that and we expect international to be high teens low <unk> nearing the end of this year and after we get on the other side of the pandemic mixture.
Thank you.
I'm showing no further questions at this time and the queue I would like to turn the call back over to Stacy Petkovic for closing remarks. Please go ahead.
Thank you and thank you everyone for joining us today and.
There's just so much to be excited about at Insulet and there is so much more we can and will accomplish from our customers. We have passionate employees transformative innovations and a differentiated business model to continue to displace legacy therapies and to simplify and improve the lives of people with diabetes. Thank you.
You all and have a great evening.
Thank you for attending today's conference calls and this concludes the program you may all disconnect good day.
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