Q4 2021 Tandem Diabetes Care Inc Earnings Call
Thank you for standing by and welcome to Tandem's fourth quarter and year end 2021 earnings call. At this time, all participants are in a listen only.
Mode. After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today's conference maybe recorded.
Would you require any further assistance please press star zero.
I'd now like to hand, the conference over to your host EVP and Chief administrative officer, Susan Morrison you may begin.
Thanks, Latif good afternoon, everyone and thank you for joining tandem's fourth quarter and yearend 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 , and our other SEC filings.
We assume no obligation to publicly update any forward looking statements, whether as a result of new information future events or other factors in.
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 , Bryan Hanson Executive Vice President and Chief Commercial Officer, and Leigh Bossler, Our executive Vice President and Chief Financial Officer.
Following the prepared remarks, we'll open up the call for questions. Thank you in advance for limiting yourself to one question and one follow up before getting back into the queue I'll now turn the call over to John .
Thank you Susan and welcome everyone to today's call.
As you can see in today's results the fourth quarter was a strong finish to an impressive year for tandem.
And looking back at the highlights of the year, we set record sales for both the quarter and the year.
We also furthered our leadership position in markets outside the United States with expanded international launch of our control IQ technology.
Operationally, we are focused on continuous improvement throughout our business and we reached an impressive milestone of achieving our first year of positive operating margin.
Finally, as we highlighted at our R&D day late last year, we furthered our product development efforts to support our near and longer term portfolio.
In addition to these accomplishments just last week, we achieved the exciting milestone of FDA clearance of our mobile app that enables our T. Slim <unk> pump users to bolus insulin insulin from their smartphone.
With this clearance we are adding to the list of tandem firsts. As this is the first ever FDA cleared smartphone app capable of initiating insulin delivery on both iOS and Android operating systems.
Organizationally, we've also been enhancing our structure over the past few quarters with the creation of new senior leadership positions. We've welcome talented and experienced individuals who complement and strengthen our management team as we scale the business and prepare for continued growth near term product launches and the execution of our longer term strategy. It's in it.
Important step as tandem has a great opportunity to further our market leading position in diabetes care. Our installed base has nearly quadrupled in the past three years.
As evidenced that our innovations drive adoption.
I am proud that nearly 330000 people worldwide use a T Slim X two for their therapeutic management.
Credit for these achievements goes to our talented employees, who have a demonstrated great flexibility and an outstanding commitment to improving the lives of people living with diabetes.
As we look ahead 2022 is positioned to be another exciting year for tandem. We're also being mindful of and prepared to continue navigating the challenges associated with the pandemic. It is encouraging to see headlines showing a decline in COVID-19 cases, but as we've seen historically thinks can oscillate quickly.
In addition, the broader effects of the pandemic such as staffing challenges in the clinics, we serve and the global supply chain headwinds will take time to recover and we will trail case rate improvements.
That being said, while pandemic related uncertainties still remain our focus and commitment to achieving our goal is unwavering.
Importantly, our growth drivers from recent years are still in place today.
These include an underlying worldwide market that remains large and underpenetrated.
But competitive conversion opportunity strong.
Strong demand for our automated insulin dosing technology.
Our innovative product pipeline the positively different experience, we provide our customers and the growing renewal opportunity from our current customers who are eligible to purchase a new tandem pump again.
Bryan Hanson, our EVP and Chief commercial officer has seen each of these firsthand.
I would now like to turn the call over to him for him to share his perspective on the quarter and the year ahead.
Thanks, John .
What stands out for me is that our T. Slim X two platform continues to be the leading insulin therapy solution for the durable pump community, which is the largest segment of the insulin pump market.
In fact recent U S data suggests that more people chose the T. Slim X two last year compared to any other pump offering and that the market is continuing to accelerate.
We estimate that more than 70000 people in the United States adopted insulin pump therapy for multiple daily injections in 2021, which is double the number of people who adopted pump therapy, just three years ago.
Outside the United States, we see a similar trend that suggests the pump therapy penetration is also accelerating.
With this market growth I am proud to tandem continues to make meaningful progress in our long standing goal to bring the benefits of pump therapy to more people with diabetes.
In the fourth quarter, we once again saw a balance source of new customer growth of United States with approximately half of our customers reporting that they've converted from another pump manufacturer and half from multiple daily injections.
We're also gaining increased visibility into our growth sources outside the United States, where we see both the high number of competitive conversions and people new to pump therapy.
It's a testament to the ease of use and form factor of our platform.
It's software update ability from a home computer.
The proven performance of our control IQ technology and the customer experience we provide.
In January we held a virtual national sales meeting, which was great timing as the sales force expansion from 95 territories to 110 territories is now complete.
At the meeting we heard high enthusiasm for our T. Slim X two pump and strong conviction in our control IQ technology.
<unk> was coming off a seasonally demanding fourth quarter, where they put in the extra time and effort to ensure that our customers who wanted to get a new pump before year end, we're able to do so before the typical reset of deductibles.
This year was particularly interesting as many obviously shifted back into remote interactions in the fourth quarter during the resurgence of COVID-19 cases.
Health care provider offices were often pressured with staffing shortages and there was a wide range in how they were operating.
We're very proud that our team remained flexible shifting and adjusting to support the prescribers in whatever way works best for their practices.
Outside the United States, Our international distribution partners also continue to navigate the challenges of COVID-19, which varies greatly by country and by region.
Despite these challenges we achieved record sales and only our third full year of commercial activities outside the United States.
Our success was driven by multiple factors such as the scaling launch of our control IQ technology, which is now offered nearly everywhere we operate outside the United States. In addition, our T. Slim <unk> was available for a full year in both Germany, and France, which represent two of our larger markets and where our control IQ was launched in the fourth.
<unk>.
As a reminder, outside of North America, we work with experienced distributors, who are responsible for all the selling reimbursement and customer care activities.
Fantastic to hear their feedback on product adoption and similar to what we hear in the United States the customer experience with control IQ is overwhelmingly positive.
It helps to fuel demand for our products as more people experience the benefits of control IQ and health care providers through the clinical outcome improvements. This innovation provides.
It's been a tough environment for distributor forecasting and inventory management and in addition to the high growth dynamics of our product launch and the pandemic are also navigating the associated supply chain complexities.
For example, the timing and availability of deep rate has been a variable that they've had to contend with that has been difficult to predict as a result, we have seen and anticipate we'll continue to see the variability of distributor ordering patterns throughout 2022.
Turning to the competitive environment. It was largely consistent worldwide throughout 2021 as well as in the more recent weeks.
In the United States, our sales team was thrilled to receive last week's news of FDA clearance for our T. Slim <unk> pump users the bolus using the T connect mobile app.
As significant as this clearance provides people the freedom and discretion of having their most frequently used pump feature available on their personal smartphone.
The updated mobile App also continues to offer the benefits our customers have already been enjoying.
<unk>, a convenient way to view their pump alerts on their phone, which serves as a discrete secondary display for their pump and automatic wireless uploads of pump therapy data to our cloud based <unk> web application.
We're kicking off trading on the new mobile bolus feature for our internal teams now followed by healthcare provider training and then we will be progressing the launch as a tiered rollout throughout the spring with availability for everybody. This summer.
This launch is a prime example of the power of our tandem device updater and how it provides the T Slim X to what's a competitive advantage.
In the upcoming months, we'll be able to offer nearly 240000 of our in warranty U S customers access to the mobile delivery feature free of charge.
And it's easy to get through just the software update to their pump and thereafter, they could perform in the comfort convenience of their own home.
That's the type of innovation that truly makes our offerings positively difference.
It is also an opportunity for us to connect with existing customers, who may be waiting on the sidelines for a reason to buy their next T Slim X to <unk>.
As a reminder, customers typically become eligible for new pump purchase once every four years.
Our experienced slow is that many customers will not pursue that renewal pump purchase until well after their warranty has expired averaging roughly a year later.
We continue to enhance our internal infrastructure and processes to drive customer renewals and are seeing great results.
For example in 2021, we hit a milestone where more than 70% of customers, whose warranties expired in 2016 have now purchased their second or even third pump.
Which speaks to the high retention for our customers over a lengthy time frame.
Our speed is improving.
The percentage of customers purchasing a pump within six months of their warranty expiration has improved for the third year in a row and nearly half of our customers newly eligible in 2021 have already renewed.
That is fantastic progress as many people who are eligible did not become so until the fourth quarter.
As you can see 2021 was a busy and accomplished year and our commercial initiatives are well positioned to continue being a driving contributor to our longer term growth objectives with that I will turn the call back over to John .
Thank you Brian .
At our R&D day event in December we shared our longer term vision and strategy for driving continued growth through innovation is rooted in our foundation of extensive market research, which is a practice that we began at the company's inception.
A consistent outcome from these results has been that there is no one size fits all solution in diabetes management.
How a person chooses to wear their pump is a big driver in their purchasing decision and its based on personal needs and preferences.
As a result this creates segments in both the type one and type two markets and our portfolio approach is designed to bring new solutions to more people living with diabetes.
We are continuing to invest in advancing our T slim platform, along with bringing our miniaturized durable pump to market as well as to Bliss options.
From a timing perspective, the next new pump, we intend to launch is that tandem mobi, which we historically referred to under its development named T sport.
Moby gives us an opportunity to serve a new market segment with an even smaller more discrete pump using leading edge hardware technology.
We chose the name mobi to represent the pumps mobility and the way, it's worn and as a nod to its mobile app based interface.
The multi pump is designed to be fully controlled through a mobile app on a user's personal smartphone.
The T connect mobile App that was cleared last week for bolus insulin delivery is also the foundation of movies mobile control functionality.
Last year during the regulatory review for our mobile bolus feature for the T cell next to platform, we were able to get clarity on the fda's expectation for pump mobile control functionality.
And all of that learning has been applied to the mobi full control mobile App development effort.
<unk> has been extensively tested including more than 15 rounds of formative human factors testing. This.
This gave us high confidence as we entered our human factors validation study, which is now underway. This is the largest human factor study in the company's history and will be used to support the 500 10-K filing to the FDA later this summer.
As a reminder, <unk> will be submitted to the FDA through the Ace pump 500, 10-K pathway, which allows for it to be integrated with interoperable algorithms and cgm's without additional regulatory review.
This is particularly relevant for the commercialization of <unk> as we will be evaluating timelines to determine which ICM will be integrated when we first launched.
CGM integration work has been progressing well with both our CGM partners <unk> common Abbott. These are strategic priorities for us in 2022, so that our customers can benefit from new sensor technologies, along with the features of our AI algorithms and insulin delivery systems.
We're also making great progress on our clinical initiatives for advancing control excuse labeling and feature set with a few milestones of note. We currently are enrolling our first type to feasibility study.
Our pediatric trial is progressing well and as discussed in the past we intend to use the data to pursue an age indication for children younger than six years old.
And we also have several other studies in progress and in the planning phases to further support our AI programs.
As we look to the year ahead.
Once again primed with opportunities to bring the benefits of our technologies to more people living with diabetes I am confident in our team's ability to continue meeting and exceeding our near and longer term goals as well as delivering relentless innovation and revolutionary customer experiences to the diabetes community.
With that I'll now turn the call over to Lee.
Thank you John and good afternoon, everyone.
2021 was another record breaking sales performing for us at.
As we scale from just under 509 sales in 2020 and more than $700 million in 2021.
Representing 41% growth over 2020, which we successfully delivered despite the unique and unpredictable challenges of the pandemic.
We shipped nearly 130000 pumps worldwide of which approximately 30% were shipped in the fourth quarter alone. This brings us to our worldwide installed base of nearly 330000 customers.
Fourth quarter worldwide sales were a record $210 million, which is a point of comparison is meaningfully more than our full year sales in 2018. This is a significant achievement.
Three year timeframe.
Specific to the U S market in 2021 sales grew 26% to 525 level more.
More than half of our sales were driven by shipment of approximately 83000 pumps in the year.
Our U S install base of nearly 240000 customers also drove meaningful growth in our supply channels and built the foundation for pump renewal sales in the future.
Following on Brian's remarks regarding our renewal progress we reached our goal of three new approximately 60% of the more than 65000 pump warranty that cumulatively expires at the end of 2021.
While the majority of the renewals. This year were generated from 2021 warranty expirations. There was still a meaningful contribution from warranty expirations as far back as 2016.
That continued renewables sales in the future from warranty that expired in years past.
As we look at our 2022 renewal opportunity approximately 30000 additional customers will become eligible for renewal based on our 2018 shipments.
Importantly, more than 40% of these customers will not be eligible for renewal until their warranties expire in the fourth quarter of 2022, which will influence the timing of those renewals sales across the year.
Fourth quarter sales in the U S for $161 million on 26000 pumps kidney benefiting from the traditional seasonal uptick we experienced at the timing of insurance deductible resets and the highest volume of renewals we have shipped in a single quarter.
Outside the U S. Our presence continues to strengthen across the more than 20 countries in which we operate we ended 2021 with 178 million in sales, which was 114% growth over 2020.
Just over half of the sales were derived from 45000 pump shipments essentially doubling our installed base outside the U S to nearly 90000 customers.
We ended the year with strong fourth quarter sales outside the U S of $49 million on 12000 pumps.
Reflective of the continued strong demand for our products, but impacted by the variability in ordering patterns that we saw throughout the year due to the challenging COVID-19 environment as Brian discussed.
We anticipate that these fluctuations will continue into 2022 for example, certain distributors exited 2021 with sufficient inventory to meet first quarter demand and are anticipated to place later follow on orders in the first quarter of 2022.
Therefore, we anticipate Q1 orders for both pumps and supplies will be lower than the fourth quarter of 2021 as distributors continue to focus on achieving optimal inventory levels.
Looking to 2022 worldwide, we have significant growth opportunity from our market leading control IQ technology.
And in markets outside the U S where it is still in the early phases of commercialization.
Our recurring surprise sale also represent a meaningful and predictable revenue stream that will increase proportionately in 2022 with the growth in our sizable installed base.
We are maintaining a cautious approach in 2020 for impacts that Covid may have on the business, particularly as we reflect on the continuous surprises in 2021, even at times when markets begin to reopen.
For these reasons, we expect our 2022 worldwide sales to be in the range of 845 million to $860 million a growth rate between 20% and 22%.
Peter use seasonality in international ordering patterns, we anticipate Q1 will be the smallest sales quarter of the year at approximately 19% to 20% of sales similar to years past.
Our U S sales guidance includes annual expectations in the U S or 630 million to 649 or growth of 20% to 22% with comp sales scaling up across the year in line with historical seasonal patterns.
Overall in the U S sales in the first quarter tend to fall in the high teens as a percentage of our full year sales due to the impacted insurance deductible resets impacting both pump shipments and to bypass.
Sales expectations outside the U S are estimated to be in the range of $215 million to 220 million or growth of 21% to 24%.
While market demand remains strong in the markets, where we operate we expect the COVID-19 impact on the timing of distributor orders are likely to continue to create a high degree of variability in sales across the quarters.
Therefore, we are being conservative with our guidance as we monitor the dynamics with each of our distributor partners.
Sales are expected to be lowest in Q1 with growth across the year as we continued to penetrate the various markets and increase our installed base keeping in mind that some fee pressure tends to occur in the third quarter due to the European summer holiday season.
Moving on to margins, we continue to demonstrate improvement in our gross margin in 2021, increasing to 54% from 52% in 2020.
This reflects an approximate 10% improvement in the per unit production cost for both our pump and cartridge.
Well overhead reductions are a contributing factor as our volumes increase we are also seeing notable benefit from cost initiatives.
These benefits more than offset the impact of lower average selling prices from increased comp sales in our U S market as well as broken our supply sales from our large installed base.
As a reminder, U S pumps are our highest gross margin products, followed by a U S patent and then overall container bulks.
Comp sales were 59% of worldwide sales in 2021 compared to 63% in 2020.
Our fourth quarter gross margin of 54% was essentially flat compared to the same period in 2020, we continued to drive product cost savings through the end of the year, but these benefits were partially offset with increased cost associated with global supply chain challenges that we began to incur within the period. Additionally, both international sales and supply sales.
And at a higher percent of our overall sales in the fourth quarter of 2021 as compared to 2020.
Looking ahead to 2022, we expect to achieve an annual gross margin of 54%. This is in line with 2021 due to increased material and freight cost expectations, which we anticipate will continue to be a burden in 2022.
We are continuing to drive our cost saving programs to offset these cost increases to the extent possible.
We view this as a more temporary impact to the business and remain confident in achieving our long term goals, while managing these near term cost pressures.
We expect to achieve gross margins of 65% by 2027 with incremental progress across the year, some scale and cost saving initiatives, but more significantly in the future from new product introductions and reimbursement initiatives.
Our 2021 operating margin of 3% marked another milestone achievement for Tinder, which was the first time that we reported a positive operating margin on a full year basis by comparison, our operating margin was negative 2% in 2020.
This is meaningful as we continued to demonstrate progress on the path to achieving our long term profitability objectives.
We continue to view, our adjusted EBITDA margin, which excludes noncash stock based compensation as the appropriate metrics to measure our near term profitability progress that.
<unk> margin improved two percentage points to 14% in 2021, reflecting expansion in line with our gross margin improvement year over year.
We took a more significant step up in our R&D investments in the second half of 2021 to drive our pipeline programs, including hiring of key personnel and conducting a number of clinical trials.
Our top financial priority is to invest in product and business model innovation to deliver sustained high revenue growth.
Investments will continue into 2022 as we also build the foundation for leverage in the long term.
We anticipate our full year adjusted EBITDA margin will be in the range of 14% to 15% and that we are well on track to achieving our long term operating margin goal of 25%.
Our cash and investments substantially increased by $139 million in 2021, and maybe youre at a balance of $624 million. We believe we are well positioned to make the necessary investments to execute on our strategic plan.
To summarize our 2022 outlook worldwide sales are estimated to be in the range of 845 million to $860 million, including sales outside the U S of $215 million to $220 million.
We estimate gross margin for the year to average, 54% and adjusted EBITDA to be in the range of 14% to 15% of sales.
Our noncash charges for stock compensation depreciation and amortization are expected to be approximately $90 million included as components of both cost of sales and operating expense.
In conclusion, I am proud of our financial achievements and overall execution in 2021 that were made possible by the efforts of our amazing in tandem.
Tandem is positioned to break records again once again in 2022 as we continue to carry out our mission by bringing the benefits of our solutions to more people living with diabetes.
With that I will turn it over to the operator for questions.
As a reminder to ask a question you will need to press star one on your Touchtone 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 Chris Pasquale Guggenheim. Your line is open.
Thanks, and congrats on a nice finish to a strong year.
Wanted to just drill in on the renewal opportunity something that should be a big driver for you guys over the next couple of years would be great to just get an absolute number for what you think the renewals were in 2021, you gave a lot of details around the rates, but it'd be great to have a baseline there.
Sure. Thanks for the compliment Chris I'm happy to talk to you today.
So with regards to renewals first of all I will say that yes, it's becoming a growing opportunity which will be much more meaningful in the coming years.
For 2021, and even again for 2022, the vast majority of our pump sales will still come from pump versus new to tandem.
We have made great progress, though and it's not that we arent renewing people. It's just that the opportunity volume hasn't grown as much. So in 2022, it's going to increase by about 30000, new opportunities, which is where we really start to see more contribution, but it's pretty back half loaded. So you can think about it as more of a 2022 and into 2023 opportunity.
And just to give you maybe a little more perspective on that breakdown you can think of the new pumper thats still being more than 80% of what we shipped in 2021.
Okay. That's helpful. Thanks, and then on margins.
Flat gross margin 22 versus 21.
Maybe not too surprising given some of the cost pressures the industry is dealing with broadly.
But it was good to hear you reiterate the long term goal just curious on the drivers there how much of it is dependent on new products. How much is dependent on reimbursement, which is a little bit out of your control.
As you think about getting to 65 long term.
Sure. So when you think about it I usually put it in three buckets, what you've been seeing is demonstrating its really the incremental benefits each year as we grow our volumes.
<unk>, our overhead and just keep identifying cost saving initiatives and efficiencies within the processes themselves. The real step changes will come when we launch new products. So for example, with Moby coming once we get to a level of scale, we've estimated that that product costs should be about 20% better than the T. Slim itself. So you can see that's when you'll start to see step.
Just going towards that 65% long term goal.
The reimbursement initiatives are more similar to incremental progress we're seeing on the volume side. It's really about continued conversations with the insurance payers getting more direct contracts and looking for price increases as we move along especially as we're using our clinical data to share the benefits that their patients are saying so.
So you can think about it is within those three ways.
Thanks.
Thank you. Our next question comes from Brooks O'neil of Lake Street Capital. Your line is open.
Thank you and good afternoon, and congratulations on the terrific finish to 2021.
I'm just curious Lee if you could talk a little bit about the assumptions you include in the 'twenty to 'twenty two guidance John mentioned I think two to CGM partners, both Dicks com.
But I'm curious how you think about the impact of G. Seven Libre three.
Then whether you've included an assumption about contribution from <unk> in the 2022 guys. Thanks a lot.
Okay. Thank you Brook.
In terms of guidance just our overall philosophy as we typically do not include products not yet approved any of our guidance level. So to answer your questions on CGM as well as lobby those would not be factored into our 2022 guidance at this point what has been included there was the continued enthusiasm for control IQ It still has not yet.
Its full market potential and even here in the U S where it's been around now for two years, but especially outside the U S. But we're just starting to roll it out in France, and Germany, and just the recent months and so we still think we have a great runway with control IQ and now with the addition of mobile bolus at that gives US a lot to talk about with our customers.
Great. Thank you very much.
Thank you. Our next question comes from Larry <unk> of.
Wells Fargo. Your line is open.
Hi, This is Nathan on for Larry.
Just a question sticking to 2020 two guidance what are you assuming for competition, we just saw Omnipod five approval.
Also have Medtronic warning letter and potential impact to their pump so what's assumed in your guidance.
Sure and thanks for the question. So when we think about what's included I already mentioned controlling key but in particular, we still think we're going to continue penetrating the MDI population and see growth and competitive conversions year over year as we think about competition. This year, we really factored in I would say more of the noise level. If you think about it we're still the leading.
Layer and the durable pump segment, which is the largest of the segment.
Don't see a lot of switching back and forth between two and two bus Thompson. So at this point.
We're considering it noise level like we have seen in the past where new products are launched and sometimes it causes a little bit of near term disruption.
Okay. That's helpful and then.
You previously indicated that you plan on beginning to type two control IQ pivotal study in 22 can you provide an update on timing what do you think you would need to show in the study to achieve traction in type two and also when would you expect to take to label and how important is this to you.
Thanks, David well right now we're enrolling our type two feasibility study and this is something that we've worked with the FDA on to just understand the various segments of the type two community and just to test them out in a smaller study it turns out that.
Some time.
I would say that probably late next year or early 2023, we would initiate our.
Our type two feet our pivotal study.
It's going to be a large study and I think that's roughly what we would expect for timing. So I think we're looking at it indication probably in the 2023 time frame.
Great. Thank you.
Thank you. Our next question comes from Alex Nowak of Craig Hallum Capital. Your line is open.
Great Good afternoon, everyone.
Several diabetes approvals, making their way through the FDA in the last couple of weeks are you starting to see the backlog that agencies start to ease a bit here and then when you take the learnings from mobile ball as you document those and then you fold them into <unk>. How are you thinking about what you need to change the mobi additional studies that might be it.
It might be needed on the defense side and then how are you thinking about timing for approval there.
Yes, good questions Alex.
I'd say, it's difficult to say still as to whether or not the FDA has got additional resources that I'll come back from <unk>.
Supporting the Covid work that they are involved in so I think as we have to wait and see still I would say that they've been very supportive they've been with the limited staff and we're very happy as appreciative to get the approval but.
It's still it's still early in my mind, and I think we need another quarter or two to see if in fact things do change there.
When it comes to mobile I would say that.
We have we learned a great deal there was not a lot of new.
Information that came as they did approve the device which was good.
And so I would say that right now were.
Essentially we've incorporated the learnings from the.
The questions that we received last year into <unk> at this point in time, and we've really transitioned from a development mode into more of a testing mode. As I indicated were involved right now in the largest.
Summative study that we've done for human factors testing, we did at least 15 or at least maybe 15 or 17 formative studies, leading up to it. So there's a great deal of experience that we're comfortable with the results, but it is a very complex study, it's going to take several months, it's going to be involved multiple cities will be involved multiple types of.
Segments within the diabetes community will be involved so it's a long and extensive study and so thats really we have to finish. The app is also additional verification validation studies and testing that we have to do inside the company. So I think that puts us too.
Summertime submissions and we feel good about that.
Okay. That's helpful and then with outside the U S. Just becoming much more important to the company here can you just give us an update on where you stand today as far as your pump versus the installed base of pumps out there to share.
New pumps being placed outside the U S market and then just how is Medtronic 700, <unk> launched their change the sales process for you.
So I'll start with a little bit on just color of where we stand today, if I understand your question correctly and please correct me if I'm wrong here when you think about where our business is coming from it's much like the U S, where theres a high level of competitor conversions coming our way as well as people new to MDI. So we continue to penetrate those markets and we're especially excited about control IQ.
And the great demand that we're seeing an interest in that product as we look forward and then if I have to talk about a bit about the selling environment as it relates to <unk> I.
I think as we see here in the U S. We see the power of control IQ in our international markets as well and we really haven't seen a dramatic.
Influencer shifts from that product in the market. So we compete against today. So we feel pretty good about it we certainly have a lot of visibility with our partners. We have great relationships with our partners, we have balanced growth across all the regions. We're in right now so.
The early indications are a control IQ is doing very very well.
That's great I appreciate the update thank you.
Thank you Alex.
Thank you. Our next question comes from Steve Lichtman of Oppenheimer <unk> Company. Your line is open.
Thank you hi, everyone.
You saw solid for Qs, So obviously, you're able to overcome COVID-19 headwinds.
I was wondering what kind of impact you did see.
From Covid in the quarter and what Youre seeing is the year turned in as you mentioned got John Covid cases are just starting to come down.
I'll take that one this is Brian it was an interesting year for sure and I think the best thing, we probably stated we remain cautious because we've kind of been here before.
Said in my earlier statements very proud of the team and the work they've done over the last two years and in Q3, we saw things kind of open up but it was characterized by almost an extended holiday or vacation period, and then as we moved into Q4 and we have a lot of optimism. The new variant came and it began to change access for us to our patients and our health care providers.
First on Europe , and then we saw it here in North America. So we kind of migrated back towards our remote model in many regions and think we were pretty good at that.
The difference in Q4 was we saw a lot of COVID-19 positives at that point, we saw it with their health care providers, we saw it with some of our patients that we saw internally here with our staff internal and external and our partners. So it was just an odd quarter to kind of navigate through we did so successfully we certainly hope that it moderates now when we head into some.
Peter moderate in 2022, but again, we are cautious I think there is still uncertainty as we move into this year and most of that to keep our eye on it.
Hi.
And then also on the commercial organization.
What kind of tailwind.
Could the expanded sales force provide in 'twenty, two with a nice growth in the commercial team.
Is it getting you into new regions, we werent in before or more about going deeper and will we see a material benefit from the expansion 22 or is that more meaningful in 'twenty three.
Well I'll start with the purpose behind it one was to reduce some of the workload on our existing staff because they were simply getting a lot of patients to handle in their it.
Current territories, so going from 95 to 110 was to ease a little bit of that burden, but then that allows us to do exactly what you said go a little deeper in our existing accounts and also get out and see some additional accounts that we may not spend as much time with so we opportunistically look for those areas, where we were just getting a little bit too large we may not be doing all that we can be doing in that.
So this allowed us to right size the sales side on the clinical side, a little bit and.
I do think it's certainly going to provide some benefit for us this year and our folks were very happy to get that relief leaves do you want to talk any further to that Mike that's great.
Thanks, Larry and thanks, everyone.
Yes.
Thank you. Our next question comes from Matthew O'brien of Piper Sandler. Please go ahead.
Good afternoon, and thanks for taking the question so.
Just to put a little finer point on the <unk>.
Potential tailwind on the Medtronic side of things I think they said $2 million to $300 million is the impact I expect this year, just using the midpoint of that.
$2 50, I think around half of that is insulin pumps and supplies.
And I'm, assuming the majority of those folks are into durable pumps. So as I look to Lee at the domestics.
Guidance it looks like you're only factoring in I don't know if somewhere in that $10 million to $20 million range for net tailwind or those numbers kind of ballpark and then.
I guess why why be so conservative with the potential tailwind on the Medtronic side.
Sure. Thanks for the question Matt.
We haven't actually quantified obviously, how much we're thinking about it but I guess one point to make is we were coming into this year I think many people thought that our competitive conversion opportunity was going to go down where in fact, we still expect that it will increase this year and maintain that same healthy balance of new pumper is coming from MDI and competitive conversions. So we still think the opportunity is.
Drawn but as is our nature and as we're continuing to navigate the COVID-19 environment, we're going to be cautious initially until we see continued trends that might suggest otherwise.
Okay. So there is some conservatism built in.
On what you've seen from Medtronic so far.
That's correct.
Okay. Thank you and then on the competitive side is.
The control IQ.
The momentum that you have is a form factor enough to really dislodge a bunch of existing.
Patients are even new to do to pumping patients heading heading into the full launch of the low five or do you need to see real world data for a year kind of post full approval or is that momentum so strong with the IQ that it's really going to be difficult.
Slow things down from a momentum perspective.
In terms of what you've got going.
Thanks.
I would just say briefly we're really comfortable with our position and certainly where we sit right now.
The competitive messaging Thats out there is it's early to tell we certainly haven't seen a reduction in our pipeline.
Phase rollout.
We certainly learn more over the coming periods here.
But Boeing control IQ and the outcomes that we've seen for control IQ continue to be a real positive for us launching mobile bolus is an exciting opportunity for us to get into visit our accounts the product pipeline.
Leads to great things at the end of the year and in next year than the services. We provide our infrastructure. We have in place I think puts us in a really good spot.
Matt I'd, just add to that that when you look at the algorithms themselves and you look at the results. There's really there's not a whole lot of significant differentiation I would say that it's some convergence of anything and if there is more to it we really do believe form factors important.
And when you look at our pipeline, we've got control IQ on T Slim doing very well today, we've got <unk> filing here shortly.
Got additional sensor partnership integrations, which I think are really going to.
It gives us a sales boost as well with this new technology and then we've got we've got X three we've got moved to listen we've got patch here in the next three to five years, So I think that.
We feel very well positioned to compete and as Brian said, there's not a lot of information out there right now we're going to have to wait and see what happens, but we feel very very strong position to compete.
With the other element of other players in this market.
Got it thanks, so much.
Take care.
Thank you. Our next question comes from Matt Taylor of UBS. Your line is open.
Excuse me hi, Thank you for taking the question.
So I did want to ask one follow up on you mentioned that you are baking in some conservatism to the international guidance, maybe just talk about what youre seeing how conservative you're being in whats the FX number that we should be using for international.
Sure. He match, so IMAX, even let Brian talk about the environment, a little bit because I think that helps explain better the caution that we're putting into the guidance, but I will take the simplest one first which is we have very little FX FX exposure.
Nothing to speak to in terms of out in front of a materiality perspective.
Okay.
We have great relationships with our partners, we have great visibility to the work that they're doing.
And again, we talked about the balance of growth across all of our regions. It was an interesting end to the year as we prepared to launch control IQ in Q3 and into Q4, especially in our newest geographies. We encountered several factors that made it quite complex. One was the unknown demand. These are large markets that we were going into specifics.
The France and Germany. They are newer partners for us theres different distribution models in those countries, which makes it even more complex and one of the reasons. They were a little bit later in our launch.
And there was some really unique supply chain issues that hit us in Q4, whether it was <unk>. It was hard to get things out the door and on schedule over there.
So theres plenty to learn from Q4. The good news is the demand for control IQ continues and the variability that we're experiencing should take care of itself as we move into the middle part of the year.
And as we've talked about the competitive environment remains fairly strong in our position right now so.
I remain pretty bullish on what we're doing.
Okay, great. Thank you for the color.
I appreciate it.
Thank you. Our next question comes from Danielle <unk> of SBB Leerink. Please go ahead.
Hey, good afternoon, everyone. Thanks, so much.
Can you hear me.
Thank you Ken Thanks Danielle.
Alright.
Congrats on the strong into the year.
Question on where we are with penetration today.
Lee I think you mentioned that.
Something like double the number of new patients started on therapy this year versus three years ago.
How are you feeling about your long term sort of target out there for some penetration in pipelines based on where we exited the year and then one follow up on international.
Danielle will go ahead take that I mean, I think we feel very positive about continued pump penetration and it's not just being driven by tandon, but when you look at the diabetes Med Tech community in general there's been a tremendous amount of innovation that has occurred over the last couple of years and there is there's more innovation coming and I think that is.
It's all intended to just reduce the burden of diabetes and we believe that.
That ease of use drives adoption.
We've stated specifically that we think.
We can get to 60% to 65% penetration and when you look at our pipeline. We think we've got innovation, that's going to continue to drive that as well as our partners and competitors. So we think it's a number that's going to continue to expand.
As you said, we've seen aggressive growth in MDI penetration in the last couple of years, we expect to see it to continue to happen and not only in the U S markets, but also O U S. As we bring this technology to the.
Europe and other countries that we're in today, we think it's going to happen there as well.
Where are you.
My question was going to be.
Some of these major.
Marcia.
Incremental maybe that's a better way to think about the incremental runway.
Thank you.
In places, where we are today.
Hi.
Im wondering if you can beat the market.
The next few years I mean, I think the factors are the same the same factors that are affecting pump penetration improvements in the U S are going to occur or U S and I would say right now our numbers would suggest that the pump penetration in the markets. We're in today is approximately 5% to 10% and we think that can probably double maybe more than double in the next.
Three to five years and Thats also with a much larger market as you know in the states. It's approximately one seven or $1 8 million people with diabetes in the markets. We're in today, it's $4 million and so.
As we make improvements in the pump penetration there it's a much bigger number for all of us to participate in.
Yes.
Yes.
Take care.
Thank you. Our next question comes from Jayson Bedford of Raymond James Your line is open.
Yes.
Good afternoon.
A few questions here, so maybe for Bryan you mentioned over 70000 folks adopting pump therapy in 'twenty, one just embedded in the guidance, what's the expectation for that number in 'twenty two.
And I think we haven't given a specific number other than we think that our ability to penetrate the MDI population will continue to increase in 2022. So the drivers that have made us successful so far are still there.
<unk> patients coming our way, it's more competitor conversions and an increase in the number of renewables that will ship this year.
Okay.
Okay, I guess just on the renewals you mentioned, an incremental 30000 coming due I think in <unk>.
<unk> two can you just update us on the actual number of renewals either exiting 'twenty, one or 'twenty two we can back into it.
One of the years, but what's the actual number of renewals out there.
Sure what we actually achieved by the end of 2021, there is more than 65000 people, whose warranties have expired over the years since the beginning and we have renewed.
A significant portion of those and so what we're looking at as we go forward I think one of the things that to think about it is the information we gave today on where we exited 2021, which is that nearly half of the people whose warranties expired in 2021 have already renewed. So you can think about that as you look forward into 2022, and what that additional 30000 opportune.
These might provide for us and 2021 is not done in 2000 Twenty's knocked down there's still people coming from way back that will continue to be renewable opportunities as we look forward.
Okay. So.
Okay.
I had a number about 60000 exiting 'twenty two is that in the ballpark for accumulators.
Yes, I don't think I gave you that specific metric.
65000 customers 60000 have renewed by the end of 2021.
Alright, Thank you for your percent of them sorry.
Let's say Wow.
Thank you.
Okay.
Okay.
That's helpful.
And then just in terms of mobile bolus in Europe .
Can you just.
Talk about where you are your thoughts there and then maybe some of the challenges of introducing such technology in Europe , where I think they have stricter stu.
Stricter laws around privacy.
Yes, great question. When you look at the results. So that you can see about a quarter of our revenue came from our U S and I think that.
We've quickly become an international company I think that.
We need to structure, our product pipeline. So that it also represents and provides this technology and innovation to the O US countries. So we are absolutely committed to providing mobile bolus and Bobby and all of our products for U S is something that we have to do.
I think youre right. There is some complexity, but right now as we've talked about in the past we are rolling out tandem source right now it's in the UK and a.
Yes early release state and the intent of tandem source would be to integrate with mobile technology and so it's definitely something that we have in our roadmap. We just have been very clear yet intentionally about what the timing is but I think that will come in time.
So mobile bolus in Europe , and there's more of a 'twenty three dynamics in 'twenty two is that fair.
That's a fair a fair thing to say, yes, we haven't been cleared that clear about it but I would say it's fair.
Okay. Thanks.
Youre welcome good talking to you.
Thank you. Our next question comes from Jeff Johnson of Baird. Your line is open.
Thank you good afternoon, guys, Jon maybe one clarifying question for you and then one pump volume question modeling question for Lee, but.
The clarifying side, you know you talked about ace pump.
Submission for Mobi, maybe middle of the mid summer summer of this year I think you said.
I don't anything within Ace pumps submission that would think that would make us think that it's more than kind of a typical or less than a typical six month <unk> review pathway. I mean, I know Covid has created uncertainty around review timelines, but historically, we think a 510 cases about six months ago is that fair with with Amobi submission. So maybe a late 'twenty two early 'twenty three.
Any kind of potential approval timeline as a way to think about it.
I think thats very fair prior to Covid occurring.
But right now I think that it's still I think the jury's still out as to how much additional resources diabetes group at the FDA get in the next couple of months, we hope that things return to normal by that time, because we would of course like to get the product on the market as quickly as possible, but I think there is inherent uncertainty and their resource and staffing levels. At this point in time, but we're going to have to wait a little bit more time.
Jim just to see how it plays out okay.
Okay. So ex FDA assumptions, an ace pump kind of that typical six month as there is a fair way to access.
Okay.
Yeah, Perfect and then Lee just from a pump volume standpoint, I know you don't guide to pump volumes, but I'm going to ask a question around that anyway. When I look at your U S pump volumes in the first half of this year 21. They grew over 30% in the second half I think they were up upper single digits is your guidance for 'twenty, two kind of implying somewhere in between their comps.
Yes, hopefully COVID-19 falls off a little bit so maybe pump volumes in the U S grow somewhere between the second half than the first half of 'twenty, one is that a reasonable guesstimate for the year.
But I think it's challenging to take the growth rates in 2021, and the plane no sense of normalcy curious if you think about really what was happening in the base year of 2020 Covid had the most significant impact in the first half of that year and in the back half what we were starting to see with <unk>, we were actually starting to feel optimistic at that point and it seems like.
Youre getting back to normal line, maybe a little bit of that pent up demand from the first half of the year was coming through so that's why the growth rate in 2021, probably or maybe a little bit unfair, but thinking somewhere in the middle I think makes sense for this year.
Look at it as more the terms of the seasonality curve and where you come off of that launching point lift pump shipments in the U S usually being in the high teens as a percent of the year and in the fourth quarter, just kind of depending on.
Mike Gary in years, where we had product launches, but anywhere in that 30 plus percent range.
Yeah. That's helpful. All right. Thank you.
Thank you Jeff.
Thank you. Our next question comes from Josh Jennings of Cowen <unk> Company.
Your line is open.
Hi, This is Brian in for Josh. Thank you for taking my questions I have two longer term ones on the two bliss opportunity that's in the pipeline.
Our first competitor today revealed its intention to commercialize a patch pumps. Since this comes after the R&D day does it in any way change your views on tandem's eventual opportunity in the patch market segment.
Not at all in fact, I think we were aware of the investment that they had made and the company in the past.
It's not surprising that they are considering doing this.
So it's not a surprise and it doesn't it doesn't change.
It doesn't change our own decisions.
Our strategy of moving forward with products that support both <unk> <unk>.
Segments.
Okay. Thank you and my follow up is just generally speaking can the U S regulatory success.
<unk> for tube pumps speed leverage to streamline the FDA process.
For the development of a patch pump or those too.
Two very distinct rounds for the agency to pumps and patch pumps.
I'm thinking about.
Yeah, I was going to say I am thinking about factors like the size of a pivotal trial or are we just too far out to.
No the exact scope of work there.
Well I would say that.
When it comes to actually working with the FDA in these filings we have a great deal of experience with it we've been doing it now for many years and we understand the types of data and the depth of the analysis that we need to provide so I think our team is very experienced when it comes to these sorts of filings I'll also say that the entire initiative the interoperability benefits us.
And I don't think that they have distinguished whether or not the tube or two bliss pump when interoperability comes to play because one of our competitors does that does have the ace pump designation for a patch pumps, so I think that.
I think that the regulatory landscape is not going to.
Impact us one way or the other we just have to continue to produce well thought out analysis and justification for the technology and if we do that I think we will continue to be successful.
Understood. Thanks again.
Thank you.
And ladies and gentlemen, this concludes today's conference call.
Thank you for participating you may now disconnect.
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