Q3 2021 Tandem Diabetes Care Inc Earnings Call
Thank you for standing by and welcome to Tandem's third quarter earnings call at.
At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference maybe recorded should you require any further assistance. Please press star zero I would now like to hand the conference.
Over to your host EVP and Chief administrative Officer, Susan Morrison. Please go ahead.
Thank you good afternoon, everyone and thanks for joining tandem's third quarter 2021 earnings call. Today's discussion will include forward looking statements. These statements reflect management's expectations about future events product development timelines and financial performance and operating plans and speak only as of today's date.
There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward looking statements.
A list of factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is highlighted in our press release issued earlier today and under the risk factors portion and elsewhere in our most recent annual report on Form 10-K quarterly report on Form 10-Q and in 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.
In addition, today's discussion will include references to adjusted EBITDA, which is a non-GAAP financial measure adjusted EBITDA is a key measure used by us to evaluate operating performance generate future operating plans and make strategic decisions for the allocation of capital. Please refer to our press release issued earlier today for further information.
Hosting todays call are John Sheridan, our president and CEO, and Lee Vossler, our EVP and Chief Financial Officer.
Following the prepared remarks, we'll be opening up the call for questions. Thanks for limiting yourself to one question before getting back in the queue I'll now turn the call over to John.
Thank you Susan and welcome everyone to today's call.
21 has been remarkable we delivered a record setting third quarter in terms of robust sales improving gross margin and generation of cash we continue to add new customers at an industry leading rate and since the third quarter of last year, we have welcomed more than 100000 people to our worldwide installed base.
These achievements would be impressive in any environment, but are especially so as we continue to navigate the challenges of COVID-19.
From sales and clinical quality supply chain and manufacturing the efforts of our team members are contributing to the further to further our mission to improve the lives of people with diabetes and thank you to everyone.
Looking back at the quarter strong worldwide demand for control IQ seasonality and COVID-19, all created puts and takes and influencing our sales patterns.
These vary slightly between the domestic internet and international portions of our business. So I'll spend some time upfront discussing both in more detail.
Starting with our domestic business in October I had the opportunity to meet with members of our sales and clinical teams in various regions of the country Theyre seek their feedback was.
Very consistent and I was proud that allowed us sentiment shared was on the positive impact that we are making with our market leading control IQ technology.
Demand and interest from the diabetes community remains high which supports our belief that we are still in the early innings of control IQ adoption.
The challenges our field team described are largely a byproduct of this high demand coupled with the continued navigation of COVID-19.
As a reminder, we have approximately 95 territories during the third quarter and our territories are typically comprised of both the sales rep in a diabetes nurse educators.
Over the past 18 months, there are productivity rate of our sales territories has grown very high which was manageable when we are operating in a remote environment.
Then as Covid restrictions begin to lift and in person sales calls and clinical training began increasing.
The teams available capacity became stretched thin as we work to keep up with demand.
With this in mind and antenna and anticipation of continuing growth in 2022 and beyond we are in the process of expanding to approximately 110 territories.
We are also investing in our internal teams that support the sales and customer training processes.
Another interesting dynamic discussed by our field teams is that the broader labor shortages being experienced across the country are also impacting health care prescriber offices.
As a result, there is fewer staff to see patients and handle back office workload and some health care providers are having fewer in office days to accommodate the continued prominent use of telemedicine.
This is why the initiatives that we have in place to build out our provider and patient facing data platforms are so important to us.
<unk> platform represents the new generation of our T. Connect data management application and is designed to enhance provider patient engagement with therapy data when weather remotely or in the office.
We are also continuing to invest in cloud based tools for prescribing order management software update and patient support to streamline office efficiency in order to deliver added value to pump users and healthcare providers alike.
Overall, the impact of COVID-19 on our different territories varies greatly by geography, and even by Prescriber office, we saw a summer seasonality in the U S that was more similar to what we typically see in Europe.
As people took some well deserved time off during the concentrated period at the beginning of the quarter.
Then his diagnosis rates for COVID-19 variance began to increase later in the quarter. We once again saw sales activities begin to shift to fewer live interactions.
Even with these fluctuations beginning beginning in October we saw a notable increase in referrals, which is the first step in the pump ordering process.
Internationally, we also experienced seasonality in the third quarter, which was left COVID-19 related and more anticipated to the traditional European holiday season.
While most people with diabetes are being seen through the hospital systems outside the United States, which continues to be pressured by Covid. Our outperformance can really be attributed to the large underpenetrated nature of the markets that we're in and the overwhelmingly positive response to a T Slim X two and more recently our control IQ technology.
Our distribution partners are doing a great job in their sales efforts to identify the prescribers that are less impacted by COVID-19. The enthusiasm we are hearing about people's experiences with control IQ outside the United States.
For the positive experience that we hear about domestically.
This is very encouraging as we are still in the early stages of launch with our control IQ technology, particularly in France, and Germany, which provides significant additional market opportunity.
As there are a number of steps that take place in bringing a product to market. We expect the launch in these countries to build over the next 12 months and provide benefit throughout 2022 and beyond.
As we've seen domestically or international launch of control IQ is demonstrating that when technology reduces the burden of diabetes. It drives customer adoption in 2022, we plan to focus our international efforts on supporting our U S distribution partners to drive deeper penetration in their markets.
In addition to our sales and clinical activities, our internal quality supply chain and manufacturing teams are also doing an outstanding job navigating the pressures related to COVID-19.
While no one is isolated from the more global issues like increasing shipping costs and semiconductor supply constraints, we take great pride in the success of our overall supply chain management throughout the pandemic and as we look ahead to 2022 and beyond we will continue to carefully manage sourcing activities and keeping close contact with our suppliers.
From a manufacturing perspective, we are regularly evaluating our needs and adding lines and expanding capacity accordingly.
Moving a majority of our cartridge manufacturing to a third party manufacturer in 2020 was beneficial from a capacity and a cost perspective, but it was also provided it proved to be fortuitous as we are able to rely on different labor markets.
Overall I am very proud of how we continue to perform during these more challenging times and the team's solution oriented approach to overcoming the various headwinds from the pandemic as you can see even though we have experienced some unusual domestic seasonality associated with the changes to the COVID-19 environment, we are demonstrating that our market leading.
T cell next to with control IQ combined with our expanding global footprint.
It has us well positioned to deliver both near and longer term growth.
Incredibly more than two thirds of our 300000 customers worldwide are now using control IQ technology and the real world experiences shared by our customers continues to be overwhelmingly positive.
This also reflects in the ongoing clinical data being reported on control IQ, including the data presented most recently at the ASD and <unk> meetings.
The data presented at these conferences highlights how all individuals with type one diabetes can benefit from control IQ technology not just the traditional pumps candidates has thought of historically for example, individuals with higher hemoglobin <unk> and those who have not had access to technology in the past did very well on control IQ.
There was also a data presented that highlighted a significant reduction in adverse events in pediatrics control IQ users.
Which is particularly encouraging as we prepared to pursue lowering its agent occasion from users as young as six down to ages two and above.
As Youll recall, we are supporting a multi site study to evaluate the use of control IQ in this pediatric age population and we intend to use the data to support a regulatory submission by the end of 2022.
We will also be pursuing expanded labeling indication for people living with type two diabetes.
Our type two feasibility study is on scheduled to start this month and will inform our pivotal trial that we plan to conduct next year we.
We've also begun enrollment in our first clinical trial for control IQ with an expanded feature set that we will plan to provide additional color. On later this year as you can see we've been very active with our clinical efforts and the FDA has been responsive to our request.
Moving for Ice's for upcoming studies this quarter.
A different team at the FDA is also continuing to review our 500 10-K for the Teasel next to mobile bolus feature that we submitted about a year ago.
We responded all the questions by the FDA in late August and continued to prepare for launch.
Three of our other key R&D initiatives for 2022, Rt's per pump as well as the integration with <unk> <unk> sensor and Abbott's Libre technology are also continuing to progress each of these have dependencies, either our own with T sport as we look to obtain the mobile bolus clearance in advance of providing a regulatory.
Timeline for submission.
Or that of our CGM partners as they work to secure FDA clearances. However, our own development work is able to continue unimpeded at this time.
And looking beyond 2022, our product pipeline is something we haven't given investors much visibility into but internally, we have been putting increasing attention on our longer term strategy for driving our growth through innovation over the next five years.
We'd like to take the time to share our vision with you which is more expansive than we can cover on a call like today's.
So we invite you to join US for an R&D day event, which will take place virtually on Monday December 6th participation.
Details and registration can be found on the Investor Center portion of our website and we look forward to sharing more on our strategy and vision with you at that point in time.
In the meantime, we are focused on a strong finish to 2021 and setting up 2022 to be another successful year.
With that I'll now turn the call over to Lee.
Thanks, John Good afternoon, everyone.
Our streak of records continues with our highest sales quarter ever increased profit and strong cash flow generation, even with the backdrop of a global pandemic.
While the pandemic has made it difficult to predict near term variations and market conditions. The strong demand for the chief IMAX to when control IQ has been hesitant around the world and we are particularly excited for scaling launch outside the U S.
Worldwide, we shipped 32000 pumps in the third quarter and generated 180 <unk> sale.
This represents 45% growth over the prior year, driven almost equally by new pumps sales and recurring revenue streams kind of a high retention rate of our customers.
To that point, we now have nearly 300000 customers in our worldwide installed base contributed meaningfully to our supply sales growth and providing significant opportunity for future sales and renewals.
The dynamics continued to vary greatly in the U S compared to the markets in which we operate outside the U S.
Starting with our domestic sales performance. This quarter, we generated 133, nine sales were 24% growth compared to the prior year and over 20000 pumps.
Looks like we discussed on our last earnings call and as John spoke to it was an unusual quarter in terms of the Covid undercurrents and its effect on our sales.
But putting the impact of Covid. Aside we are pleased that we continue to expand at some tough market with approximately half of our new customers converting from multiple daily injections.
We are also pleased with our continued progress on renewals, particularly as we prepare for a step up in conversion opportunities next quarter stemming primarily from the 7000 pumps, we shipped in the fourth quarter of 2017.
Also of note the third quarter of last year was the first time, we had full access to the United Healthcare subscriber base.
Other words, we saw incremental benefit in both the first and second quarter of this year in terms of the United Health care opportunity, but the third quarter was largely comparable to last year.
From an international perspective, we are really beginning to hit our stride with all geographies continuing to demonstrate strong ordering patterns.
As a reminder, our T. Some extra technology is now available in more than 20 countries worldwide.
Outside the U S. We more than tripled pump shipments compared to the third quarter of last year to over 11000 pumps.
And generated $47 million in pump and consumable sales.
Going into the third quarter, we fully anticipated a decline in shipments from the second quarter associated with the typical European summer holiday season.
Although our pump sales were more than offset by greater supply sales due in part to some inventory rebalancing estimated two benefited our third quarter sales by approximately $3 million and our distributors continue to manage high patient demand global logistics challenges and of course, the ever changing COVID-19 dynamics affecting their selling activity.
We are now supporting an installed base of approximately 77000 in markets outside the U S of which more than 40% joined the tandem family this year alone.
We are once again, increasing guidance and now expect to end the year with 2021 worldwide sales in the range of 685 million to 695 million.
Which reflects year over year growth of 37% to 39%.
International sales expectations are increased to a range of 168 million to $173 million, which is more than double our 2020 sales.
The escalating awareness and acceptance of our technologies around the world have made us incredibly successful in this challenging environment and we anticipate this momentum will continue in the long term and the near term. However, we will maintain a heightened level of caution due to COVID-19 volatility, we have seen from quarter to quarter.
The overall growth in our sales also contributed to gross margin expansion, we improved to 54% gross margin in the third quarter from 53% in the prior year.
This is a reflection of improvements in the cost per unit of each of our products as we continue to leverage our fixed infrastructure on higher sales volumes.
And drive efficiencies in our manufacturing process through various lean initiatives.
We also continue to benefit from higher average selling prices of our supply thanks to the growth of international installed base.
I applaud our operations team for their ability to manage the many challenges they have faced in the COVID-19 environment, while still scaling effectively to meet customer demand.
For the full year of 2021, we are adjusting our gross margin expectations to approximately 54% based on higher expectations for pump sales outside the U S where average selling prices are lower than in the U S. Due to the nature of our distributor model as well as the potential for higher supply chain and labor costs.
Longer term, we remain confident in achieving our goal to exceed 60% through continued leverage from growth.
Further manufacturing efficiencies, new product launches and enhanced reimbursement.
Our margin expansion this quarter extended to both our operating and adjusted EBITDA margin, we maintained a high level of focus on advancing our R&D pipeline initiatives for what you're spending in the third quarter increased 50% over the prior year, even though we still stepped up our operating margin by five percentage points to 4% of sales and our adjusted EBITDA margin.
Expanded to 15% of sales versus 12% in the prior year.
We are maintaining our adjusted EBITDA expectations at approximately 15% of sales for the full year of 2021.
This expansion of our margins again contributed to significant growth in our total cash and investments along with benefit from our employee stock plans.
We closed the quarter with $595 million in total cash and investments, which is an increase of $50 million in the third quarter and $110 million for the year to date.
The strength in our balance sheet continues to afford us the flexibility we need to invest strategically in key program and appropriately scale the business to meet the growing demand for our products.
In summary, we began the year with worldwide sales guidance in the range of $600 million to $615 million and today. Our expectations are now in the range of 685 million to $695 million, which includes international sales of $168 million or $173 million.
Gross margin for the full year is updated to be approximately 54%, while our adjusted EBITDA expectations remain unchanged at approximately 15% of sales.
Our noncash charges for stock compensation depreciation and amortization are now expected to be slightly lower at approximately $75 million included as components of both cost of sales and operating expense.
With that I will turn it over to the operator for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Matt O'brien of Piper Sandler Your line is open.
Hey, Good afternoon, guys. This is drew on for Matt and thank you for taking the questions.
I just wanted a place a little bit more on the comments related to Covid, maybe I'm over reading your comments, a little bit, but it kind of sounds like youre, saying that the virtual training environment was a bit of a tailwind to your U S business and now you kind of have to play a little bit of catch up from a salesforce perspective as things resume in person.
Is that the right interpretation of those comments and I guess, if so does that suggest that that pressure might linger a little bit over the next couple of quarters or can you backfill that with.
The territory adds relatively quickly.
Thanks, that's a great question.
Wanted to start off by saying that we had a great quarter. It was really strong performance and we're confident that the fundamentals of the business remain intact.
We clearly experienced some unusual COVID-19 related effects.
This quarter, particularly when you consider that the seasonality in the U S was more resemble the typical seasonality, we see in Europe, where.
People take an entire month off that was that was very evident to us as the core began this is well deserved time off but clearly it was it was very different than we've seen in the past and I'd also say that the <unk>.
Delta variant it seemed like the offices were opening up and then they closed back up pretty quickly in different locations and geographies, but there was an inefficiency I think that comes along with that and finally, the endo practices themselves. They were impacted by these broader staffing challenges and I think with lower staff online they were basically pushing out endo visits.
So it wasn't necessarily that the there was inefficiency in the in the virtual environment. It was more of that the access to the actual end dose has changed in this particular quarter and I think I just want to say it was a challenging environment, but we did a great job and I'm proud of the team and it was a strong performance.
Okay. That's super helpful. And then just briefly on international control IQ in Germany, and France, maybe you could just speak to it a little bit more detail.
Despite the seasonality did you see an acceleration compared to how those regions are growing with basal IQ and how does that compare to what you've rolled out control IQ in other regions. Thank you.
Our international team is frequently in touch with our distributors and and they've been very upbeat about control Iq.
Just getting started in France, and Germany as you said, but the initial the initial demand has been very strong and we think we've got a long runway. There for success and then if you look into the other and other smaller markets, we're capturing significant market share with control IQ in those markets and we're also.
We're seeing very significant success in capturing new tenders. So I would say that the excitement that we've seen here in the U S is being replicated O U S. It's underpenetrated market and we think we've got a long runway there. So we're quite excited about it.
Very helpful. Thank you.
Yes.
Thank you and as a reminder, please limit yourself to one question. Our next question comes from the line of Danielle and coffee.
SBB Leerink your line is open.
Hey, good afternoon, guys. Thanks, so much for taking the question.
Just a quick question on the type two opportunity and good to hear you guys are starting the <unk> study I guess I'm just curious about how to think about.
What is going to take to get after the type two.
Type two market from an access perspective, one of the things. We're hearing out there is that it's really about access in the pharmacy going through the pharmacy versus even data and the label I'd be curious to hear what you guys say about that thanks. So much sure. It's good to hear from Daniel.
I would say that.
Our plans as we've described in the past are really too.
To get our current product to get control IQ approved for type for the type two community <unk>, but right now we have just this less than 10% of the people in our installed base are type two and Theyre seeing incredible results using control IQ and just in terms of managing their therapy. So we have a lot of confidence that this is going to be it's going to be.
<unk> for the type two community.
And as I said, we're really focused on getting through these clinical studies, we're going to start.
Smaller study this month and we think that's going to inform us on the design of a pivotal study that would be done next year and so we would expect that sometime late 2022 or 2023, we'd be in a position to submit the.
The application for the approval to the FDA, probably a 2023 approval. So we think that we've got a good plan were also spending quite a bit of internal resources just understanding the the opportunities to develop additional products for type two.
We have people looking at the clinical benefits, we have people looking at features and the products and access and so access is something that we do need to research.
Specifically to the pharmacy channel I'll, just let Lee comment on that sure.
So what I'll say when people refer to the pharmacy channel I think they are usually referring to the simplification of the ordering process and then proceed simplification of the ordering process and so to John's point, there's a lot of research to be done about what it might take for the type two space. If it's different but what we believe is that we can optimize that upfront ordering process can still leverage the structure, we've built around <unk>.
So that we can make it just as simple and streamlined and that wouldn't be necessarily be a barrier or change that we would have to making long term.
Okay.
That makes sense I guess I just have one follow up on that so one of the things that.
I thought I heard from at least one or two primary care physicians is that for whatever reason the reimbursement hurdles for type two pharmacy are lower than the dnb is that is that true or is it really just about the prior off and maybe whatever they have to do in their office to get that reimbursement those hurdles might be lower than that.
Thats, what youre, referring to.
Sure I think it's hard to put a broad generalization on reimbursement do pharmacy is all being one way depending on where you are structured and the tiers of their formulary. It Mike Barry you might have a basic copay you might have a co insurance is still it looks like it doesn't EMEA channel. So that's part of what we'll continue to evaluate as well to see if we can make a difference there but for now we'll continue.
To focus on optimizing the gaming experience.
I said before evaluate whether or not we need to make a change.
Okay. Thanks, so much guys.
Take care.
Thank you. Our next question comes from Matt Taylor of UBS. Your question. Please.
Hi, excuse me. Thank you for taking my question.
I wanted to start with just a follow up on the two comments that you made about the near term performance I mean, firstly would you be able to quantify or help us understand how much the July seasonality negatively impacted the quarter versus your expectations and then I think we made a comment that.
You saw a pick up.
In October could you help us.
Frame that in terms of what you've seen in the past.
Sure. Thanks for the question Matt.
It was a highly unusual quarter in terms of the market dynamics that we were experiencing John walk through me. The part about it started with an intent to vacation season. It turned into a delta variance surge and we were confident that we would still see a strong Q4, because it's routine and customary price people to hit their deductible that they move forward.
Purchases I think the difference this year was that we saw that come a bit later than what we're accustomed to seeing so in the past usually really picks up right. After labor day when people are going back to school and getting settled back into what I would call a more normal routine and what we found was that it came about more selling October. So we're still very excited about where we're headed for Q4 I think it just changed that.
It's usually a modest step up from Q2 to Q3 this time to make it a little more flattish.
Right right Okay.
<unk> members to the sales organization in the field. We also have a relatively large organization internally that supports the field in the clinical teams and we're obviously, adding to them as well and that that definitely helps the overall productivity of the of the system, but both of those are happening as we speak right now we hope to have these people in place by the beginning of the year. So we can start off strong.
Alright, thanks for the contact something.
I care about.
Thank you. Our next question comes from Travesties Barclays. Please go ahead.
Questions Uhm, I guess took a little further out if you think about some of the puts and takes over the next 12 months, maybe some potential for competition, but also big ourselves for some other tailwinds like new product launches just kind of curious how you see the puts and takes over over the next year. If you will in the streets kind of at the low end of what you typically do it modeling.
80%, so just kind of thinking about.
The the next 12 months, if you will.
Yeah, I mean, I think that the factors that have made a successful travis in the past really exist now and probably even more so because our pipeline is next year has been a great year for a pipeline, where we have mobile bullis, we're going to have 10.
10 of source, we're going to have the integration of the CGM companies and we're also hoping that we have T sport next year as well. So I think that the pipeline is obviously the most important thing and we think that the technology that we're developing right now is driving adoption ease of use drives adoption and we're seeing a significant growth in the MDI conversions and as Lee said, we're <unk>.
Seeing about 50% from competitive conversions. So I think we think next year is going to be an exciting year clearly there's going to be a different competitive environment, but right. Now we are in Germany, and the UK and and so it's 780, and we're doing quite well right there and I think that when you look at the the patch.
The patch companies introduction next year, it's going to be basically slow and it's going to be it's going to take them a while to really ramp up. So I think that's that's another factor that we've got in mind and as I said, two sports going to compete quite effectively against the.
The past product. So I think we are very confident with our competitive position and we think that control at Q. As it is today is going to continue to do very well next year, but as I said, we have a great pipeline and I think that we're well positioned to see pretty good growth next year, you want to add to that.
I guess I would just add on top of all of it positive.
One other element is that the renewal opportunity continues with stuff, that's not pretty significantly once they're still really looking forward to that as well.
Great and on the virtual R&D day, I don't know if there's any additional color you can add at this point are you planning on updating that 500000 patient LRT that you've got out there for 2024.
The virtual R&D day, or will you wait and do that at a later point and is it going to be more like product focused or is it going to be discussed highlighting some of the software investments that you've you've made over the past year.
Yeah, I think that's going to be it's going to be really focused on R&D and I think that there'll be time I think in the future talk more about the sort of a financial objectives that we've got.
So I think that it's going to be the broad spectrum of of our vision for the next five years and so it will include it will include software and hardware and we're really excited to share. This with you guys. We've been we've been keeping again to internal for a while now and I think that you're going to be equally as excited when you have a chance to look at it because it is a it's.
It's it's it's definitely going to be driving growth for us for the next five years and beyond that I think it's going to be a great day for everybody.
Great looking forward to thanks, a lot you too take care Travis.
Thank you next question comes from Brooks O'neill of Lake Street Capital Your question. Please.
Good afternoon, and I have one question, it's got two elements to it I'm trying to keep your format. So first.
Recognizing as Lee said that domestically most of the insurance plans reset at the end of December.
Do you feel the late start to the fourth quarter bump is going to in any way limit your ability to fulfill her cell pumps.
Pumps in the strong seasonal fourth quarter and then.
I think related do you have you seen any fan.
<unk> or impact from the delayed competitive launches and if so how do you think that's affected thanks a lot.
Alright, Thanks, I'll take that first part of the question when it comes to make it active us resetting it's such a powerful force people through that purchasing cycle. We don't anticipate there is going to be any problem with managing everyone that needs to come through with that capacity that we've had that we have in place at.
Frankly, you know prepare for this all year long and we none of us.
Mclean to come so we feel confident in being able to push through heavy lines, you kind of stick a table and breaks I'll also point out that we raise guidance in the fourth quarter as well, which I think shows coincidence that we've got.
And then what relative.
As I mentioned on the call. We were I was in the Salesforce with Brian excuse me I was in the field with Brian and a sales force. This past month and had great conversations with the team and really got to understand the things that they were hearing and seeing and if you recall on the on the second quarter call. We we basically indicated that we thought that the <unk>.
Second half of this year is going to be primarily impacted by COVID-19 and very little competitive activity and I would say that that's exactly what's happening I mean, some people are talking about it but the real issue. This quarter is was this past quarter was COVID-19 and not much not much chatter about.
About the new products I would say that there's still some uncertainty because of the FDA on their availability and we'll just have to wait and see when they do get through that process.
Absolutely Thanks, a lot.
Take care of Brooklyn.
Thank you. Our next question comes from Alex Smack of Craig Harlem capital.
Your line is open.
Great. Good afternoon, everyone gone back to the mobile Bullis you responded to questions in August the FDA. So is the SDA review clock still checking here and aren't you pretty close to hitting that 98 review window with a five 10-K and then just curious if the delay relates to a couple of the Cypress security notices we've seen issued by the FDA recently just ended.
Scenarios.
Hi, how are you doing.
As you're right, we basically we got the questions in the spring and we we did a very thorough job and we should have that submitted them back in the August time frame.
We have <unk>, we have some initial conversations within just let us know that they received them, but really since then there hasn't been anything that's been meaningful in terms of communication.
And I would say that the issues that we're dealing with here really don't have to do with cyber security that was the very first thing we hit with the FDA and I think there are quite pleased with the with the approach that we've taken in the design parameters that we've implemented what really happened and this and this.
Most recent response has to do with how the patients interact with the system, how how they interact with a cell phone and a lot to do a training and so we we had to go back and revise our training approach. So that it was more in the app as opposed to and Emmanuel and that was really most of the work that.
That we did so I think that they're very busy right now I think any of those metrics that they established and we're probably they were adhering to 18 months ago are no longer valid and I think they are still very busy supporting COVID-19 and a lot of the people that have been part of the groups that we have worked with are still not back yet and so I imagine.
That everybody's experiencing the same thing, but hopefully it will return to normal next year, but right now it appears that we are.
We're we're hoping and planning for approval here, but you know as.
As we get further and further into November it seems like practically it probably won't happen will just have to wait and see what does happen.
Okay understood that makes sense and once you do get the mobile bowls approve of how quickly can you pay the debt so that submission for T sport.
Well I think that's I think we'd have to do we have to see the what actually is are the lessons learned from the mobile bolus feed.
Feedback, we get from the F D. A in and how much work that's going to be as we're gonna be required to apply that to tease sports. So we will as soon as we get the response and when as soon as we get approval on that will come forward and discuss.
We'll discuss more about the timing for T sport.
Okay I appreciate it thank you take.
Take care of it.
Thank you our next question comes from.
Chris prescribing of Guggenheim. Please go ahead.
Thanks for taking my questions.
He talks about the renewal opportunity, which becomes a much bigger deal for you guys over the next couple of years as you sort of laughed the significant your new customer gains that you had a few years ago. I'm curious if you could just give us some updated metrics on how you think you're doing in terms of converting those patients that are ready.
For a new pumps today, and how you're approaching.
It really maximizing the opportunity over the next couple of years to try and get as many of those patients to come on with a second pumps. Thanks.
Sure.
Think about three new opportunity accident has been very focused time, obviously for many years and hoping to of course it easier since we began I'm going after those opportunities. We've learned a lot of lessons we've implemented Verizon changes on our process efficiencies lately approached patience and most importantly, our retention activities along the way you feel like it's not like a patient here, it's from US again for the first.
Four years after they bought their first pumps and so that's proving to really improve our renewal metric and where we are right now as for a tracking to being at about 60% cumulative renewal rate by the end of this year, which is a pretty big step up compared to where we were at the end of last year and it's great because of our position as well as a number of new.
<unk> increased pretty dramatically.
By that I mean, if you look back to 2017 versus 2018, the number of pumps reshaped practically doubled and we're looking at the number of opportunities for next year practically gambling, what we're seeing this year. So we think we're in a good spot.
Hopefully with the progress and we're very pleased with where we're headed.
Thank you. Our next question comes from Steve Lichtman of Oppenheimer and company. Your line is open.
Thank you John you you talked about it the momentum you guys are seeing internationally uhm, but also talk about the fact that you're relatively early on in <unk> to control I Q expansion can you put some some more color on that red whether qualitative or quantitative.
Now where you guys on the rule out in France, and Germany. What other countries are you targeting here near term just you know to your outlook for continuing that international momentum would be great. Yeah, absolutely I mean, I'll start off by saying that right now we have 300000 pay.
Patients worldwide, and and two thirds 200000 or using control I Q, which is really really exciting in terms of momentum we have 30 million patient days of data in our in our database is that that really help them understand the performance of the system and benefit our product development initiatives. So great momentum there I would say that you know it is.
Early and.
And France, and Germany, and it being so early it's really exciting to see the interest and that's in the initial strong demand I mean, clearly they're big markets. We're just getting started but it's only been a month or so maybe two months at best since we've we've started to push the products in that area. So you know we think that this is a long.
There was a long runway here and I would expect that just like we saw it in the states we saw it <unk>.
Strong demand and it continues to be strong we expect to see that Oh U S and I think as you know the the countries. We're in now that 20 or 20, plus countries were and now represent almost two and a half times. The number of people that are here in the states. So underpenetrated large market and great technology, We think it's a winning formula.
Great. Thanks channel jump back in queue.
Take care.
Thank you. Our next question comes from Joanne <unk> of City. Your line is open.
Hi, This is Anthony on for Joanne Thanks for taking our questions.
I understand it might be a bit currently but to the extent that he can what initially when should we expect for two sport just in terms of type one vs type two and then what manufacturing steps do you need to take out of that lunch. Thanks.
Yeah sure I think that will right now if you look just at the pump.
The T slim pump as it as pump and it is it is indicated for both type one and type two the component that is not as the algorithm and so the control like your algorithm has to be approved for type two and you know I would say that shortly after we introduced.
T Sport My guess is that we'll have a type two indications so it'll probably be introduced initially and then.
Type one indications only and then followed by.
Type two as soon as that approval comes through when it comes to manufacturing we're building the product right now we've established manufacturing capability, we're building products.
We're evaluating and testing those products were letting the R&D teams have access to them. The organization is wearing them and walking around with them and we're building up the manufacturing capability as we as we speak and.
We're we're making a lot of progress we're doing.
That the devices awesome it looks great and we're excited about it we just need to get out there in the marketplace. So you guys could hear about it as well.
Great. Thanks.
Yep.
My next question comes from Robbie Misra, Bahrenburg capital management to your line is open.
Hi, good evening. Thanks, John Thanks, lifting the questions just I guess my one I'll use my blood on the international sales and kind of the can you talk a little bit more about the stocking that 3 million number that you mentioned the and as we kind of go forward you know you're having this tech day are you going to lay out some of the more international strategy.
Around how you plan to attack other markets beyond Europe, how should we think about kind of the rest of the world. There's a there's a lot of diabetics out there beyond Europe.
What kind of time frame should be thinking about you guys getting into that that world. Thank you.
Sure. Thanks for having further question I'll start with talking about the <unk>.
The fact that we talked about in the third quarter and it's really came through the supplies and the international market them and I think the one piece that's been more difficult as the variability we've seen in the ordering patterns across the year. So what we wanted to highlight it as you looked at the third quarter. In particular, there was about $3 million of incremental benefit that just came from the timing of when supplies for or.
<unk>.
That's in an effort to have just from a modeling perspective, because typically the supplies sales are the easiest to model and give you a level of predictability for the future. So hopefully that helps when you're thinking about how to model out the international standards and can we get out of this type of Covid environment, that's creating the variability that we're seeing today and you asked about where we go next basic.
<unk>. So I'll start with 2022, it's really going to be about a year of building and getting more depth in the markets that we're in so we're not necessarily going to be talking about any major expansion, but we will in the future talk more about where we're going to go. After day. There is still much room to run marriage Johns had so much at Underpenetration, a really large market and we wanted to make sure that we're capitalizing on.
Today before we take too many steps for right.
And then just relative to the pipeline and international we made this transition pretty quickly over the last several years and I think that right now we're definitely thinking like an international company and when we when we talk about pipeline projects. It's definitely something that's part of the equation I would say that there's a benefit in the U S. Today because of the interoperability initiatives.
The regulatory challenges are not as significant as they are.
I doubt it will talk too much in depth about it really the R&D day is going to be about vision, where we're headed but I think in time, we will definitely speak more about it because it's definitely a huge opportunity I think we see it as you do and and we want to take advantage of it.
Thank you again, ladies and gentlemen to ask a question. Please press star one on your Touchtone telephone again, that's star one on your Touchtone telephone to ask a question.
Our next question comes from the line Matthew Black men have Stifel online is open.
Good afternoon, everybody. Thanks for taking my question, John You mentioned, starting a control I Q enhancement study is that the control like U 2.0 study that's being run that at U V. A I think it started late in the summer and if so what might we see that data is it possible that we'd see it at at a D a or maybe even a T. T D. Just any.
Any more color you can give us on that thanks, yeah.
No you're right that is we have we have control I Q1 0.5.
Which is I would say, it's kind of modest changes to the to the function of the of the product not really algorithmic of nature, and then control I Q2 point, Oh, which is really what we're investigating today and.
And a smaller study that's N U VA and but when you sort of think about what we we had to go off and do a great deal of market research to understand what were the features that we wanted to include in it and then those features had to be designed and implemented modeled and tested and now we're at a point, where we're doing a clinical studies on those and so the way it's going to work really is that we're going to probably.
Did it right through these features generate a significant amount of information share that with the FDA and then decide what might control I Q2 point, Oh look like and then design the pivotal study for it and so this.
We're excited about this I mean, we had I mean.
We're excited about the results, it's really cool to start doing something significantly new and different and I would say that are clinical team definitely wants to present the data they're excited about it as well I don't know if we'll be in a position to do it that early but I mean, I think that everything that we do clinically we will ultimately share with the the broader community commute.
Because I think it's going to be it's going to be great results in further the excitement and the growth opportunities that we have here at tandem.
Thanks, John.
Sure thing take care man.
Thank you. Our next question comes from Jason Bedford of Raymond James Your line is open.
Uh-huh doesn't have enough throbbing for Jason <unk>. One quick question is there any timing update you guys can provide us on the G. Seven that integration is not leaping integration what more has to be.
Done for because those two things can happen.
Sure well as we've talked about in the past we've been working with Abbott now for about a year and we're making great progress tandem is really focused on the integration of the technology into our pump and in parallel avedis focused on addressing the vitamin C issues that they have with the icy Jim designation and AIG systems. So those those are happening in parallel.
No I think at some point, we're we're going to.
I think that there is an F D. A clearance that's going to be required for Abbott and I think that really will be the sort of a long tall at this point in time the when it comes to when it comes to Dexcom. We've integrated three generations of their sensors already we are on the fourth.
We know how to do this and so you know we would anticipate shortly I mean, we've said month.
Months after their.
Their approval their FDA approval, we'd be in a position to introduce the product. So we're moving aggressively here. We think that these are two very exciting initiatives for us that are going to drive a lot of interest in the company and our products. So we we are definitely resourcing these things and taken the very seriously.
Thank you that's all the questions. We have in queue. This does conclude today's conference call. Thank you for participating you may now disconnect. It looks like we have one more.
And we actually do we have a question from Brooke's O'neill Lake Street Capital. Your line is open Okay, Hey, guys sorry, I. Appreciate your squeezing me in here I was just thinking you were talking about the next comment.
But still I was curious obviously.
Over bolus feature works in conjunction with Apple and I got the Android phones as well.
Would it be reasonable to think there might be other ways, you could work with Apple and <unk> Android manufactures down the road.
Yeah, I think that's a I mean I think once we once we integrate the technology onto a phone <unk>, there's a wide range of opportunities that we've got there I mean, there's I mean, we various there is a watch I mean, there's a watch people. If you if you can get onto the Apple pump. The watch is not that far away. So that's about some opportunity I would say and then there's all.
This all of the features that you have on your your phone.
When you consider just how you interact with it today.
I can envision where we have the ability to order supplies.
<unk> ability to text our customer support lines.
The ability to just open up videos that help explain how the system works. If there's questions like that so there's a tremendous amount of opportunity that we we establish once we get into this mobile space and we certainly intend to take advantage of it and I think it's it's going to be very exciting it's going to really reduce the burden on people using it it's going to be.
Convenient and it's it's also going to be very discrete. So all these things are great for the people who are using our systems and.
I'll talk more about this on R&D day, but it's gonna be it's gonna be it's a it's a really cool opportunity for us and people using our systems.
Great. Thank you very much take.
Take care Brooks.
And ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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