Q3 2022 Insulet Corp Earnings Call
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Okay.
Good day, and thank you for standing by and welcome to intuitive.
Third quarter 2020 earnings conference call at this time, all pick up in China in listen only mode.
After the speaker presentation there'll be a question and answer session.
Good question during the staffing, giving me congrats Scott one one.
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Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your first speaker today, Deborah Gordon Vice President Investor Relations. Please go ahead.
Thank you Joanna good afternoon, and thank you for joining us for third quarter 2022 earnings call with me today are Jim Hollingshead, President and Chief Executive Officer, and waves at Millen Executive Vice President and Chief Financial Officer, Brett Christiansen, Our executive Vice President and Chief Commercial Officer.
<unk> is also with us for the Q&A portion of our call. Both the replay of this call and the press release discussing our 2022 third quarter results and 2022 guidance will be available on the Investor Relations section of our website.
Before we begin we would like to inform you that certain statements made by Insulet. During the course of this call may be forward looking and could materially differ from current expectations. Please refer to the cautionary statements in our SEC filings for a detailed explanation of the inherent limitations of such statements.
Well also discuss non-GAAP financial measures with respect to our performance, namely adjusted gross margin adjusted operating margin adjusted EBITDA and constant currency revenue, which is revenue growth. Excluding the effect of foreign exchange. These measures aligned with what management uses as supplemental measures and assessing.
The third quarter marked a continuation of our strong revenue performance, new customer growth and strategic progress.
We increased our full year revenue outlook and the entire insolent team continues to execute at a high level and advance our mission.
We're focused on finishing the year strong and carrying sustained momentum into 2023.
In Q3, we achieved several notable milestones.
We once again delivered record U S and global new customer starts, which helped us achieve a remarkable 42% year over year growth in the U S are highest U S revenue growth rate in at least a decade.
This was driven in large part by an incredible start for our use full market release for a revolutionary Omnipod five automated insulin delivery system.
Feedback on Omnipod five from our potters and their caregivers continues to be fantastic.
And of course, we are far from finished.
We continue to work to expand access to Omnipod five as well as increase the total addressable market for our Omnipod platform.
During the quarter, we expanded omnipod fives indication down to age too and secured CE Mark.
We also continue to drive growth with Omnipod dash, both in our international markets and in the U S, especially in the type two diabetes market.
Building on that we are incredibly excited to announce that we have developed and will soon submit a five 10-K for a new Basil only pod to accelerate our future growth and type too it's.
It's a clear indication of our commitment to further innovate for people with diabetes and expand our addressable market and I'll share more about this in a few moments.
We could not be more excited about what's yet to come for insulin and our customers the.
The market enthusiasm for Omnipod five is greater than even we anticipated.
Demand is coming from all across the market.
Our core target market of MDI users is growing ahead of our own forecast and continues to be the greatest source of new customers for us.
But we are also seeing significant increases in customer conversions.
Omnipod users are converting to omnipod five at a much higher rate than we saw with previous product launches demonstrating that even current <unk> omnipod five is a breakthrough offering.
In addition to those coming from MDI, we are seeing significant volumes of customers converting from tube pumpkin technologies and in many cases, we are winning back customers who had once been potters.
Thousands of people returning to us and adopting omnipod five.
And this strong demand also comes from all age groups, we achieved record new customer starts with both adult and pediatric users.
In Q3 after only two months of its full market release Omnipod five represented over 80% of U S. New customer starts compared to over 25% in Q2.
This validates the power of Omnipod, five and the competitive advantages it offers.
It is the only tumulus AI system within adaptive algorithm that works as designed right out of the box delivering high time in range the.
The algorithm then learns from each patient specific usage and automatically personalizes care over the first two or three parts.
Because of that personalization, we're seeing consistent reports of increased timing range reduction and even see and markedly low hypoglycemia.
It is a combination of clinical effectiveness and our unique omnipod platform that is fueling our success.
As a result, our historical 80 20 mix of those coming from MDI in traditional tube pumps is changing in.
In Q3, we saw an estimated 60 40 split due to significantly more competitive takeaways.
We are excited by our early progress and are gratified to see how omnipod five is transforming diabetes management.
We have long believed that superior innovation offering simplicity discretion and improved outcomes will drive adoption in our large underpenetrated markets.
<unk> five is demonstrating this to be true.
Omnipod five offers more than any other AI system on the market, including a number of market first.
The first pod based AI system, the first fully compatible phone controlled AI system.
The first system that no one has to plug in to access data and the first AI system with the predictive algorithms are smart bullets calculator. The directly incorporates not just blood glucose levels, but also blood glucose trends.
And the stories are inspiring we recently heard from a healthcare practitioner, who has patients on omnipod five several of whom called her related about the dramatic improvements in their diabetes management.
This HCP said, she and her patients are amazed with our system and for the first time they had been in range, 100% of the time.
They called their experience quote life changing.
It's clear Omnipod five is making it easier for our customers and their caregivers to manage diabetes and it's simplifying the interaction between patients and their hcp's.
We expect Omnipod <unk> contribution to further accelerate growth as we gain additional market traction and increased commercial coverage.
To that end, we've made significant strides with access and by the end of Q3, we secured coverage for over 80% of US covered lives for Omnipod five well ahead of our initial expectations. We have also experienced a few challenges that we are hitting head on the incredible market response is placed pressure on our onboarding capabilities Po.
Ocularly incoming call volumes.
Additionally, the voluntary medical device correction, we initiated last month for our Omnipod dash personal diabetes managers in response to the battery issue. We identified also slightly elevated call volumes.
Given this where you are in the process of carefully reviewing the early field data on the Omnipod five controller to ensure it means our high expectations for safety and user satisfaction.
We have received a few inbound calls highlighting a potential issue related to charging the controller.
Our work is ongoing and if we ultimately decided to take a particular action you can expect it to be swift and transparent.
Every single aspect of the Omnipod five experience is important to US we are investing to increase our onboarding and call Center resources and are already seen significantly improved response times.
We're driving customer growth through our access and awareness efforts, we have a differentiated business model and a unique leadership position in the U S pharmacy channel.
Both make access to our technology extremely simple efficient and affordable, which further differentiates omnipod during challenging economic times.
We have long focused on improving functional access for our customers as a result, the vast majority of our use customers continue to pay less than $50 a month through the pharmacy channel for both Omnipod Dash and Omnipod five and the average copay is less than $50.
Consistent with our commitment to drive expanded access.
We are proud to offer our technology at a similar cost in multiple daily injections, while also delivering improved outcomes and quality of life. We also remained focused on the benefits are model provides to physicians and payers are pay as you go model makes access easier and more affordable for customers, while also eliminating lengthy locking pier.
<unk> at.
At the same time and provide the superior value proposition and is less expensive for payers we.
We eliminate the large upfront costs that are common in the durable medical equipment channel with traditional tube pumps, which make those offerings are far more expensive, especially since individuals in the U S change insurance plans every couple of years on average.
In addition to growing our strong position in the type one market. Our initiatives are also key drivers of our leadership in the fight to space.
People with type two diabetes are becoming increasingly comfortable with and on body tumulus device and we offer an unmatched user experience with Omnipod dash and classic Omnipod.
We were pleased with the recent local coverage determination proposal that would provide CGM coverage for Basil insulin patients. This proposal if approved increases access to cgm's at.
At the same time CGM awareness is rising and we are well positioned to capitalize on this market expansion opportunity today, we're leader in the type to space and now we are taking this a step further with another novel innovation.
We have developed a version of Omnipod, specifically designed to treat type two patients on Basil only therapy, which we plan to submit to the FDA in a few days.
It should greatly improve both the user experience and adherence by completely removing the use of needles. It is the perfect product for people with needle phobia and others, who may struggle with adherence to daily or weekly injections.
The total addressable market for our basal only pod is estimated to be approximately 3 million people in the us alone.
It Leverages are unique omnipod platform, including auto insertion comfortable where an affordable access through the U S pharmacy channel, creating a winning first of its kind product for this population.
The basal only part is incredibly simple to use and requires no controller or phone application to deliver a fixed rate of rapid acting insulin for 72 continuous hours.
This new innovation allows early entry into the type to treatment pathway gets patients comfortable with pawn therapy and creates a clear pathway for them to adopt other omnipod product offerings as their insulin needs evolve.
Pending regulatory clearance, we plan to begin use commercialization in 2024 are.
Basil only pod is expected to drive Tam expansion in revenue growth for years to come while further improving the lives of people with diabetes. This innovation builds upon our leadership position in the type to market.
During the third quarter individuals with type two represented an estimated 15% to 20% of our U S new customer starts as.
As expected this percentage is declining given our success driving omnipod five adoption in the type one market.
However, we remain confident that the simplicity of our Omnipod five platform represents a significant competitive advantage that will allow us to expand our customer base and both the type one and type two populations.
As a reminder, like all AI systems Omnipod five is currently indicated for use only for people with type one diabetes. However, the number of individuals with type two adopting omnipod dash remains very strong <unk>.
Serving the type to population is a priority for us and we are confident the combination of our form factor access model and innovative product portfolio will continue to drive customer adoption.
Another area of focus is advancing are clinical efforts.
Our omnipod five randomized controlled trial is progressing well.
We're on track to complete enrollment of 120 participants in the U S and expect as soon begin enrollment of up to 80 participants in France.
We believe the results will demonstrate omnipod five benefits compared to non AI pump use with CGM.
We are confident this will strengthen our position to secure broad reimbursement in pricing for Omnipod, five and our international markets.
As I mentioned, we were excited to receive our expanded indication down to <unk> to for Omnipod. Five we are a leader in the pediatric segment and are confident omnipod five will truly change the lives of these young children and their families.
Based on our positive Omnipod five type two feasibility study results.
Happy to share that we expect to begin a type two pivotal trial for Omnipod five and 2023.
We continued to advance are robust innovation pipeline with a focus on future AIG offerings as well as building our digital and data capabilities are iOS integration work is ongoing as as our development work to integrate omnipod five with Dexcom G seven and Abbott's Cgm's.
We remain committed to building on our product offering and also providing CGM of choice to our customers are investments and R&D and innovation or a strategic priority that we fully expect will drive sustainable long term growth and continued value creation.
Our priorities in this area are clear complete integration with our CGM partners grow our global addressable markets and create digital and data driven products to simplify diabetes management for both customers and caregivers one, especially important feature Omnipod. Five offers is real time usage data feeds.
This simplifies diabetes management for patients and their physicians looking ahead, we will be in a strong position to use that data to further enhance the patient experience improve workflows for physicians and build on our competitive advantages.
Moving to our international operations, we were pleased to receive CE Mark for Omnipod five in September this.
This represents a major step on our path to deliver omnipod, 5% people globally.
We remain focused on building the necessary cloud based infrastructure needed to deliver the omnipod five experience, while ensuring compliance with local data protection regulations at.
At the same time, we're developing country specific launch plans and continuing our work to drive premium reimbursement.
We expect to enter our first international market in mid 2023, given our plan stage approach, we will rollout omnipod five more broadly throughout 2024.
Lastly, our global manufacturing capabilities support our long term growth trajectory and serve as another competitive mode global supply chain and macro related headwinds remain but we are addressing the needs of our expanding global customer base and supporting the adoption ramp up omnipod five.
Our team has secured components and built product ahead of our forecasted capacity needs.
While this results in increased costs that impact margins they are necessary to deliver uninterrupted products for our customers.
Although R. U S manufacturing will continue to be a headwind to gross margin given the higher production costs.
Over the long term, we are confident all of our sites combined will continue to deliver the highest quality product and gross margin expansion.
R U S manufacturing and has allowed us to build redundancy capabilities and gained key learnings that are driving efficiency quality and productivity improvements across all our facilities.
In closing, we once again achieved notable financial commercial and operational milestones and are focused on finishing your strong.
With our customers at the center of everything we do our entire insolent team is executing our global mission and strengthening our foundation for sustainable long term growth.
I will now turn the call over to Wade.
Thanks, Jim <unk>.
Q3 marked another record breaking quarter or global team continues to execute at a high level and.
<unk> five is proving to be a life changing new option for people with diabetes.
We're focused on finishing that you are strong and entering <unk> 2023 with momentum.
We generated 29% revenue growth in the third quarter, finishing above the high end of our guidance range driven by total omnipod growth of 30% on.
On a reported basis for total revenue foreign currency was a 480 basis points headwind compared to Q3 of last year.
U S Omnipod revenue growth was 42% exceeding our guidance range.
Revenue growth continues to be driven by the compounding benefit from a record new customer starts and increasing volume through the U S pharmacy channel.
This includes a growing contribution from Omnipod five and a premium for the pod given we provide the PVM at no charge in the pharmacy channel.
Growth in the quarter included an estimated 16 million dollar benefit associated with the initial quarter of Omnipod five volume ramp.
This was primarily driven by conversions from Omnipod Dash and classic Omnipod, where we benefited from some customers getting both their starter kits and first refills in the quarter as.
As well as some initial stocking and retail pharmacies.
Omnipod five and Omnipod dash, new customer starts combined we're over 95% of our total U S new customer starts.
Comprised of Omnipod five at over 80% and 94 dash at almost 15%.
In addition, pharmacy channel volume increase to almost 75% of our total U S volume.
International Omnipod revenue increased 9% within our guidance range, driven by Omnipod dash adoption, partially offset by ongoing competition.
On a reported basis foreign currency was a 1400 40 basis points headwind over the prior year, which was approximately 140 basis points unfavorable versus our prior guide.
During Q3 are estimated global attrition remain consistent and utilization was higher driven by the Omnipod five ramp benefit mentioned.
Drug delivery revenue declined 4% at the high end of our guidance range.
Gross margin was 55.3% representing an approximate 1300 basis point decrease including a favorable foreign currency impact of approximately 70 basis points.
Cost of revenue included a 37 million dollar charge or approximately 1100 basis points related to the voluntary medical device correction.
The aggregate 37 million dollar charge in Q3, primarily reflects the estimated replacement units shipping and reclaim costs of the Pbms for global Omnipod Dash users.
This charge is within the estimated $35 million to 45 billion dollar. We included in our October 8-K filings.
We no longer expect any material additional operating expenses to be recorded in Q4 of this year or in 2023 as we previously had estimated.
Excluding the Q3 medical device correction charge adjusted gross margin was 66.1% representing a 240 basis points decrease.
The primary drivers were the expected higher mix of costs as we ramp R. U S manufacturing operations.
Higher manufacturing costs associated with drug delivery and higher mix of course, given omnipod five ramping.
These costs were partially offset by growing volume in the U S pharmacy channel, including the associated premium.
Operating expenses were slightly higher than our expectations to support higher demand for Omnipod five.
And were higher than Q3 of last year due to continued investments and sales and marketing such as our Omnipod five launch efforts development work to advance our innovation pipeline and cost to scale, our business to support our growth.
Adjusted operating margin and adjusted EBITDA in Q3, which exclude the voluntary medical device correction, where 11, 6% and $18 4% respectively.
Both metrics were impacted year over year by gross margin pressures and an increase in operating expenses.
Turning to cash and liquidity, we ended the quarter with over $720 million in cash and the full $70 million available under a credit facility.
Our financial position remains strong and.
And offers us the flexibility to strategically invest in our business.
Further strengthen our innovation pipeline and delivered growth for years to come.
Now turning to 2022 guidance, we are raising our total company full year revenue growth to a range of 18% to 19%, including total omnipod growth of 23% to 24%.
For U S. Omnipod, we're increasing our revenue range, 230% to 31%.
We expect revenue growth to be driven primarily by strong omnipod five new customer starts and conversions to omnipod five from both Omnipod Dash and classic Omnipod.
As well as increasing Omnipod dash volume and the benefits over pay as you go business model.
For International Omnipod, we're raising the low end of our full year guidance and now expect a range of 11% to 12%.
On a reported basis, we estimate an unfavorable foreign exchange impact of approximately 1200 basis points.
Growth is mainly driven by ongoing omnipod dash adoption, partially offset by AIG competitive headwinds.
Lastly for drug delivery, we're raising the low end of our full year guidance range and now expect a decline of 37% to 35%.
A reminder, 2021 levels were elevated as a result of the pandemic.
Turning to 2022 gross margin excluding the impact of the voluntary medical device correction. We continue to expect a gross margin range of 65% to 66%.
On a year over year basis, we expect our gross margin will be impacted by higher costs associated with R. U S manufacturing ramp.
Product line mix through to ramping Omnipod, five and lowered drug delivery revenue.
These headwinds will be partially offset by the benefit of increasing volume in the U S pharmacy channel.
As we previously stated we expect many of these factors to impact our results for the next couple of years and as a result, we expect 2023 gross margin to be similar to this year.
Excluding certain legal and CEO transition costs, we continue to expect operating expenses to rise year over year due to the investments in our sales and marketing efforts, including the launch of Omnipod five as well as expanding our innovation pipeline and clinical efforts and scaling our support functions.
We continue to expect adjusted operating margin to be in the high single digits and for 2023.
Given the expectation for gross margin and the continued investments to launch Omnipod five in the U S and international markets as well as ongoing innovation clinical commercial and support functions to scale the business and costs associated with are implementing a new enterprise reporting system.
We expect operating margins to be similar to 2022.
Our commitment to margin expansion continues and we expect to begin to leverage this bullis of investments in 2024 and beyond.
Lastly, we now expect capital expenditures to be relatively level with prior year versus our previous expectation of a slight increase.
Turning to our fourth quarter 2022 revenue guidance.
We expect total company growth of 11% to 14%.
Including total omnipod growth of 23% to 26%.
On a reported basis, we estimate an unfavorable foreign exchange impact of approximately 500 basis points.
For U S. Omnipod, we expect growth of 27% to 30% for international Omnipod, We expect growth of 15% to 18% on a reported basis, we estimate an unfavorable foreign exchange impact of approximately 1600 basis points.
Finally, we expect Q for drug delivery revenue to be nominal as the majority of our orders for the year have already been fulfilled.
In conclusion, we are delivering solid financial performance, achieving critical milestones and further positioning insulet for long term sustainable growth.
These are exciting times, given the full market release of Omnipod five the recent milestones we've achieved and the progress we've made advancing our innovation pipeline.
We're focused on continuing to execute at a high level and delivering on our mission.
With us dilemma. Please open the call for questions.
Thank you Sir.
As a reminder to ask a question you would need to press star one one on your telephone.
We ask that you keep your questions to no more than one but please feel free to go back into the queue and as time permits will be more than happy to take your follow up questions at that time.
Please stand by while we compile the Kunai rosner.
And I saw our first question comes from the line of Jeff Johnson from Barron. Please go ahead.
Thanks. Good afternoon, guys can you hear me okay.
We can hear Latin cleared yet.
Great Jam.
Congratulations on the quarter I guess, you know a lot of big numbers and a lot of good numbers. Then we can focus on but let me let me ask.
A question that maybe it doesn't focus on those things and that's the charging issue you brought up maybe on on on the part that you might be and seen some early signs on.
Obviously I would think.
Technologically you can fix that you can figure that out maybe it doesn't even grow up to be any any kind of real issue, but is there any risk at all especially in your stocks gonna be up tomorrow expectations are high given how good Oh five seems to be going here any expectations. We should have a concerns we should have that maybe oh, five or X noire accidents have to pause for a little bit because of the.
Charging issue you have to come back and say Hey, maybe three months from now we will have an extra two months from now and then we can start up this oh five momentum again, just help us understand kind of the the level of risk endless charging you too. Thanks.
Sure. Thanks, Jeff.
Really early days. So let me, let me start first and foremost with for US patient safety is absolutely the top priority.
And in terms of the complaints were seen on on the charging of the Omnipod five.
It's a small number of complaints at this point, we're looking at like a couple of dozen complaints, but we're looking at it really closely and we don't yet have enough data to be able to understand exactly what's going on with the risk levels are so.
We're looking at it we're going to fully investigated and if if we have to take any kind of action. We are going to be as I said in prepared comments, we're going to be really fast we are going to be completely transparent with our customers completely transparent with investors and obviously with the FDA right. So it's I think it's too early to say and we're looking at them really closely.
Thank you.
And I saw our next question comes from the line of Travis speed from Bank of America Securities. Please go ahead.
Congrats on a really great quarter, I guess just to focus on a lot of things off but the focus on the dynamic of you were talking about more to pump patients coming your way. Thank you Amy said the word thousand well I'm a little more color. There do you think this is like a one time bullets, where where you think people were just waiting for Omnipod five or do you think this is a more sustainable trend.
More than 60 40 can hold.
And then how how the carrier and carries over to the 2023 I think the street modeling 20 per cent growth I would think that you have to do a little better than that and <unk> maybe below that.
Travis I'll start on that and then I'll ask the team to maybe add some color I'll just say that.
Omnipod five is such an appealing offer.
And I think the <unk> the general market has been waiting for Omnipod five it's revolutionary.
All know the value profit.
<unk> disposable toothless patch pump. We competed on that form factor for a long time very successfully now we've added automated insulin delivery.
So patients no longer have to make the choice between a patch pump pump.
And that and you couple that with all of our the access to the channel the reimbursement access and the economics.
I don't think that value property is going to be any less appealing in queue for her in 2023 than it is today, but I'll ask the team if they want to add color Hey, Travis Brett.
So as you know.
For years, we've talked about this 80, 20 split where 80% of all of our new starts come from MDI that has been our focus it will continue to be in focus but as Jim said, we don't have to our patients don't have to make that choice now between the superior form factor of Omnipod and an AI system. So they can get it all and so it's not surprising to.
The the split changed from 820, we will see what where it settled in we don't know yet if that was if there was a bullish of to pump users that wanted to try omnipod or if it's going to settle in there it's likely to settle in somewhere.
Different than 80, 20, but we're excited to finally be offering a choice to those that chose an AI system, but really preferred the form factor of Omnipod. So global C. A r's settled in in the in the coming quarters, but again, it's really an exciting development that weren't getting these to pump conversions.
[noise] that could just pick up on the question around 2023 revenue growth and it is really.
As Jimmy breakfast at the ideas the difference maker and that shows up in the different growth rates between the regions.
Yo for U S. We've got a lot of momentum obviously.
Is June breakfast said and we had the prepared remarks, we're seeing increased demand with MDI as well as conversions from our existing customers a legacy product and then the competitive switches here. So a lot of momentum in the U S. I think the way to think about 2023, yeah. We'll just give some color here, we're not going to provide guidance will do that and.
In our queue for call in February , but some color to think about at this point is.
U S carrying a lot of momentum we should see larger dollar growth in 2023 need to normalise that for a couple of the volume benefits. We've seen here in Q2 and Q3.
And that should settle a so to start right now on that low 20% growth range for the U S. And then as you said Oh U S. Without AIG, we're thinking about really consistent we think will continue to grow really well with dash and the markets that were in we are bringing omnipod five mid year.
To start to bring it to our international markets that.
Rollout will continue through 2024.
That puts us for international is.
High single digits low double digits range I think would be a good place to start for now and of course, both of those regions will be monitoring here throughout Q4, and and getting getting more confident in some of these really dynamic metrics as breakfast highlighted.
Get a lot of things changing pretty dynamically with almond Buckfast will monitor those so you are they should go and put our guidance in place for 2023, and then drug delivery just to hit that as well.
At this point, we would expect drug delivery to do are both the same decline next year as it did this year. So that will put us in kind of that mid $20 million range about 25% to $30 million reduction year over year is we're experiencing this year and we would think about the same next year.
So let's sets us up for some color on 2023, but as I said, we will provide the official guide will get to February next year.
Thank you.
And I saw our next question comes from the line of Robbie Marcus from J P. Morgan. Please go ahead.
Yeah, Thanks for taking my questions and congrats on a great quarter.
<unk>. Thanks for the very non specific guide for next year, I think that will help get models and a good good place.
You know as we think about some of your competitors they talked about lots of macro headwinds and upfront cost to the patient and you clearly have a very different business model. If I was hoping you could just.
Give us the latest on what you think the actual out of pocket is on average for patience for Omnipod in the U S vs MDI and Basil.
You know I don't know if it's a different price point, yet and what you've disclosed their our willing to disclose and the average monthly costs for a basil patient.
And is it materially different outside the U S. Just as we think about some of the macro headwinds and head when some of your competitors are facing thanks.
Yeah, Hi, Robbie I can take that one this is Brett so you know as far as the the macro trends in the fields were not feeling it we were in the midst of an occupied five launch demand is incredibly high.
The teams excited and patients are wanting to start a omnipod five can't say that we're feeling.
Any of the effects of a lingering COVID-19 or or any sort of macro inflationary recession type.
Concerns, but you know as you mentioned our business model is different and we've spent years planning a scalable affordable business model that would allow for patients to upgrade from existing omnipod products and start and so we've got very low co pays that remained below $50 on average.
With a vast majority of all co pays and the pharmacy channel being less than $50.
That we send that would dash and really the Omnipod five co pays almost mirror dash exactly where we priced omnipod find that parody got added got added to the contracts with payers in pricing is very similar as far as al out of pocket goes for our users as far as Basil only part I don't know if that's.
The question you were asking about out of pocket and co pays we're not there yet we'll be building reimbursement and having discussions with payers now that we've mentioned.
Basil only part, but we do have some basil usage with our existing products, primarily dash is tied to access it's very good four dash and they'll take dash they'll customize it and use it as a basal only pump and that that reimbursement in the exact same for type one and type choose for Basil and for insulin intention.
More to come on the commercialization plans of our basal only pod, but will be building reimbursement next year with with that planet.
Thank you.
And I said our next question comes from the line of Margaret <unk> William Blair. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking the question.
I wanted that to follow up I get some more detail even on that specific pumps and what are the features that we're going to look for there is this mechanical pump business smart pump now is it can I have the <unk> feature what's gonna be maybe and that'll that'll apply to trial or not add an order is that.
Type of travel.
Yeah.
Alright, it's brat. So we're excited to start to share more about today is only part Jim mentioned at the beginning of the call. Some of what we're excited about it and that is although we've got access today and some Basil only users will use a product like dash. It was not built for Basil only usage.
And there's a lot of complexity in pumps, and we want to take that complexity away for anybody that wants to start on a basal only part so as Jim mentioned it won't have a controller, that's very key because a lot of the complexity with pumps is around settings. There are no settings with Basil only part.
So it's going to be designed and for the the basal only user when they're that's in endocrinology primary care.
It's focused on simplicity and so we'll start to share more about what it's form factor and looks like as Jim mentioned will be submitting.
This product to the FDA in the in the coming days and we're just excited to start educating you on what it's all about and we'll do that in the future but do.
You wanted to highlight how excited we are to capture a patient at the moment they need insulin the moment they need an injection. So they can avoid ejections altogether throughout their lives on omnipod like products as they progress in their type two diabetes, yes in fact I just.
Tag on breast comments.
That's a key thing for us in terms of growing the Tan. We obviously, we have the leading offer right now for patients with type two diabetes with Omnipod dash as much as referred to.
The basal only pod will be getting much earlier and much much further upstream into the journey locations.
And because it will be the same core omnipod platform is a product patients will get used to using our omnipod product and then as they are insulin needs change it creates a pathway for them onto our other offerings. So it's a great experience for patients were gonna dramatically simplify the use of basal insulin for those type two patients.
Then those customers as they progress in their therapy will have a natural pathway or other offerings.
Thank you.
And I show him next question comes from the line of Larry Biggio Swing from Wells Fargo. Please go ahead.
Good afternoon, Thanks for taking the question and Alec on my congratulations on a really strong quarter here.
Wait I wanted to focus on the U S to $60 million I think at one time items at Q3 do you expect more in Q4 and I'm trying to reconcile my back that outweighed.
You know I get to about 33 per cent growth in Q3.
X one time items.
Why are you guiding two 2070% to 30%.
Q for a little bit slower and how do we put that into the context of the two.
2023 color you gave if I heard you correctly low 20% range.
For for U S Omnipod growth next.
Next year.
Given the queue for guidance that you've given thanks, so much.
Yeah, you bet, Larry So just starting with this <unk>.
Volume that we got additional volume got around Omnipod five.
As I mentioned in the prepared remarks as some of its timing because we're only had omnipod five in full market release for two months out of the quarter.
And when people some people start on Omnipod five as it turns out a good percentage of them.
Ended up getting their starter kits as well as their first refill order in the court.
So it gave us some additional volume and then we also had some retail pharmacy stocks.
That is going to happen over time as more and more retail channels start to stock the product. So let those the two drivers of additional volume in the quarter. Your question of whether we think that will continue in queue for we're going to monitor it very closely if you have a lot of scenarios here of how this could play out.
What we're anticipating in the guide could push us either to the high end of the low end is how many of these people either wait a month to get their next script. Some people may order in the middle of the month or some people may immediately just get their next script and so we're going to have to watch some of these dynamics and see if this this volume can continue.
Into into Q4.
And so just a lot to monitor a lot of changing dynamics with Omnipod five and we're very happy to get the volume here at the end of the day, we are a volume business in the pharmacy channel, we're doing a lot to drive volume, both increasing access as well as all the things we're doing around innovation.
An awareness as well as the clinical work, we're doing you soar announced this quarter down to age to doing a lot of things to drive volume here and and so we're really excited at the front end to be in the first just just the first two months and we're going to monitor. This we do think will get the benefit in queue for as well, but it should be somewhere.
Offset by those people in Q3 that either take a little bit longer or take a whole month to place their next order.
And then Larry.
Talk a little bit more about the queue for guide if you normalize for these volume benefits than you are right. We are in both low thirties growth right here on a normalized basis for Q2, and then as you look forward to queue for.
We certainly have a much tougher cup, we had a significantly.
Very strong quarter in queue for last year. So we have to keep that in mind and then of course throughout the front end of Omnipod five and so we don't want to get out in front of that we're going to continue to monitor it but but really excited to see what can happen in Q4, and then as I mentioned the key for 2023 is.
Law of large numbers were planning for growing the dollar growth of the business in 2023, and subtle sore throat and that low <unk>. So I think that's a good place to start again, we're not guiding we're just trying to give some color and we'll give our official guidance in February next year, which will give us another whole quarter here in Q4 and the <unk>.
Q1 to really understand some of these changing dynamics.
Thank you.
And I saw our next question comes from the line of Caitlin Conan from Canaccord Genuity. Please go ahead.
Hi, this is actually Kyle on here.
The one question I wanted to talk about with specifically moving into more of a type to focus I mean, obviously you have type two business now we've seen some of your other diabetes technology partners when they have gone more meaningfully into the.
The basal market they've they've made some commercial changes or a commercial shift in focus adding salespeople things of that sort of just breath and wondered how we should think about the state of the sales force now with respect to the type to market and maybe the investments you'll need to make over the course of the next 12 to 24 months when you bring the basal only and then eventually.
I'd for type two.
Hi, Thanks for the question. So we've got a really strong tend to offering today as you know with with access that mirrors type one and the pharmacy channel. So start there we got a really good product the dash, it's kind of indication for all insulin requiring patients great coverage.
We're going to add to that offering with.
Getting an indication from the fund five as we've started that trial that clinical.
And we're going to add the basal only hard in 2024, and we think you know what that does for us as it does allow us to capture patients the moment they need insulin.
It's too early to say what the commercial model will look like for that product, but we know we can capture some of it today with just the existing salesforce and team that we have as many of those patients do reside in endocrinology and we do call on a small number of primary care physicians with the existing sales team. So more to come there I think it does just depend on how quickly we can build <unk>.
<unk> how quickly that launch goes and then how we start to think about primary care and capturing patients where they reside but we'll talk more about that probably later in 2023, there's there's a lot to consider there it's really exciting.
More than doubles are can more than 3 million patients in the U S that are Basil only so we're excited about it and there's a lot to consider as far as how we commercialize it in 2024.
Thank you.
And I saw our next question comes from the line of Jason Best friend from Raymond James. Please go ahead.
Good afternoon just.
Two questions that require quick answers.
Almost twenty-three guidance, just kidding way I know, it's not guidance, but just what's the the expected FX impact on revenue and then second on the basal only pod you mentioned submitting in the next few days, but I think you commercialization that until 24 so.
I just want to know is it a five 10-K and second why the big gap between selling and commercialization.
You bet happy to talk about the twenty-three color that we're providing to help everyone here before we get the guidance Jason.
On a constant currency basis.
So obviously.
Not going to be factoring in where we think FX is going to go at this point. So just think about the the color there on a constant currency basis, and then I don't know if you want to talk to Basil too.
So on Basil yes. It is a five 10-K, we are submitting it immediately.
Just a couple of things, we don't want to get out in front of timelines on approvals.
So we we don't want we don't want to do that publicly will let you guys know as we get approval. What we're gonna do and then is Brett was saying there's work to be done on the commercialization plan and I think the reason for that is it's a new world offer it's not it's not a new pod. It's a new home is in Omnipod platform.
Built on our core offerings, but the patient said his new the channel might be new the call points might include new call points. There's just a lot to consider in the commercial offerings that we need to work through and so we don't want we don't want to jump the gun on talking about those things until we have more certainty.
Thank you.
And I show next question comes from the line of <unk>.
Steve Linkman some Oppenheimer. Please go ahead.
Thank you Hi, guys just a couple of quick.
Quick quick follow up one can you give any more color on timing of Iowa.
<unk> two relative to.
Basil only I apologize if you mentioned, what do you anticipate that being a lower cognitive bites given maybe it would get.
Price point as you go into a into that channel. Thanks a lot.
[noise], so we start with I O S V I O S.
That work is proceeding as we said last quarter.
Really confident in what we're building there are teams have tested it we've had it out of testing on samples customers and we'll give you more update as we get closer that's another one I don't want to jump the gun on it is our practice to not talk about those dates until they are right in our hands and so but we're very confident that are offering is going to be very strong and we want it to get it to market.
As quickly as we can.
On the on the basal part I'll just say that.
Maybe you can maybe the guys going on my crush surge, except grown the pricing and pricing which were not.
We're not we're not ready to talk about pricing and I will say about the basal part is that you know because it's it's.
It's based on our core Omnipod platform.
Has all the same IP wrapped into it all the same IP protections what's different about it is that is basil only and so it doesn't take a controller.
Has a basal rate built into it makes it really simple for you know just give you some color what were picturing here.
Cause it's the omnipod with the auto an assertion.
It's really easy to put on if anybody has a needle phobia look I'm needle phobic right and I'm wondering omnipod I can't feel I cannot fill a cannula go in and that's what we're going for here is anybody that is on Basil only therapy and has to do daily or weekly injections.
Had a needle phobia doesn't really want to do that and the beauty of this this basil only part is it's going to make that an assertion real easy and then allow the customer to get their basal rate on a continuous basis over 72 hours.
Disruptive.
And as.
We think it's going to be an extremely simple experience and really change.
Potentially lifted.
You should have a huge benefit to their care and a huge potential benefit to tears, but there is a lot to be worked through so we're not going to talk about pricing and we're not going to talk about Cogs in those things will give you guys more detail as we get closer.
Thank you.
And I saw our next question comes from the line of Chris <unk> from me from Research. Please go ahead.
<unk> a couple more questions about the basal pause it sounds like a very exciting opportunity.
First what percentage of Basil patients have reimbursement coverage for omnipod today, and you'll be able to piggyback on that and we have to start from scratch with a new product and then secondly is obviously focus on C. G. M adoption. This population.
Is there any potential benefits of having the pot and the C. G M censor talk to each other in this population of these patients need to titrate insulin rates as the disease progresses or anything like that cause it sounds like what you're talking about here is more of a D features offering thanks.
Yes, Hi, Chris Great question, the reimbursement today for Basil only patients.
The answer to that is there really is no difference between insulin intensive type two patients and Basil paces patients as foreigners reimbursement goes however.
<unk> was not built with Basil only in mind and so while there are some patients using it for Basil only just wasn't really built that way and again, there's complexity with pgm's complexities with settings, and so if you're going to use a product like dash today, although reimburse you effectively have to kind of program Dash, Hey, look we're going to get rid of all the <unk>.
<unk> features a lot of the features and just use it as a basal only product so not ideal for Basil only wasn't built that way. It does seem complex to something like a primary care physician there simply wants to write a prescription which is what they would do with Basil only part and so while the reimbursements there we plan on changing it because it will be a different <unk>.
Code and so it will be a different reimbursed right in a different price. We just haven't which is not ready to talk about that we've got work to do before we get confident in talking about what that will be level contract for as far as the CGM go goes that's a lift for us because as you know cgm's provide the user with tremendous information that requires them to act.
It shows physicians timing range, and that's going to be really valuable for driving demand for products like Basil only part, but our initial thinking as we really don't want those two products to speak to each other because it does add complexity as you mentioned in so.
Thought on Basil only paused to keep it as simple as possible as D featured as possible, we want a physician to run a prescription and that really is it and so that means no communication with a C. G. M. No reports no settings, that's what we're thinking about today and we think that's the best way to go abroad and capture that market place.
Thank you.
And I see our next question comes from the line of Matthew O'brien from Piper Sandblast to kind of have.
Mister O'brien your line is open.
I'm sorry, I should our next question comes from the.
The line of Marie Tebow from Bgg. Please go ahead.
Hi, yes, thank you for taking the question.
And your comments you mentioned that current Omnipod users are converting to omnipod find that a much higher rate than previous launches I'm. Just curious what portion of that installed base. This conversion at this point and what portion you think eventually converted over time, thanks for taking the questions and congrats on a great corner.
February it's wait I can start that one and then I'm sure Brett our gym might want to jump in [noise]. So given that we're just in the first couple of months of our full market release, we are just getting started here so.
We have seen just just like in all the channels, we mentioned the competitive switches as well as MDI conversions of existing Omnipod US has also been incredibly strong.
Even just in the first few months and and tracking them through their journey coming to Omnipod. Five. So we were thinking about this right. Now is if we continue to see accelerated rates of conversion converting customers that will probably last throughout 2023, and the majority of them should be through in 2000.
23, but again the first couple of months here, we're going to be watching this as we are with many of these different dynamics to these really strong converting trends continue after the first couple of months or to the ebb and flow over the next few years, but if we continue with these trends we should have most customers converted by the end of 2023.
Thank you.
And our next question comes from the line of Matthew O'brien from Piper Sandler. Please go ahead.
How 'bout. This time can you guys hear me.
Hear you loud and clear no.
Okay, great. Thank you.
So I I would love to kind of follow up a little bit on I think what we're talking about as well, but but more on the competitive pump side of things because that was really new information and the and the shift so quickly is kind of startling. So.
Is it is it a function of the more legacy provider in the space that you're really being successful is that both of the big players. There and then can you talk about how that momentum built are built throughout the quarter and and your thoughts on.
Continuing to drive into competitive pump.
Share over the next several several quarter than yours.
Thanks Man.
Look I think as we said earlier in the call.
Customers no longer need to choose so a number of customers have forever been drawn to the great simplicity and elegance and ease of use of of the pod form factor and with only five five we're offering.
Fantastic AIG algorithm and so they get AIG therapy, and the preferred form factor they get into the channel. They wanted to get it with economics, they wound and so it's actually not surprising to us to see a number of people switch from tubes pump offerings are offering is.
Just so easy to use and it delivers great clinical outcomes incredibly ease of use and great economics and so we've had we were we were pleased to see the raiders switching in the quarter in terms of a forward look I think we're going to have to wait and see how it plays out but as I said earlier I don't I don't think that this that the omnipod five offering will become.
Any less appealing either to customers coming from MDI or to customers who might be using the two punks, who went there because they wanted any idea offer so we're very confident and the robustness of the offer.
Thank you.
And I assure our next question comes from the line of Matt Taylor from Jeffries. Please go ahead.
Mhm.
Hello, Thanks for taking the question.
Yes, there's been a lot of questions on the U S and looking great I wanted to have an international one you mentioned a few catalysts.
Alistair obviously with CE, mark, but some evidence development.
What's going on there as well to extend coverage I was just hoping you could kind of frame.
How you expect those kinds of things to help your international growth.
Next year, you're going forward.
So an international data and if there's a number of things going on we're very pleased to get to see mark.
So that's that's no longer a hurdle we have to get over we have CE, Mark and and that's good to go for Omnipod five as we as we said before what we're working on now in terms of Omnipod five launch is making sure that we have the right cloud infrastructure.
Delivers the right you.
Think about the Omnipod five offering it's a very holistic offering for the customers. So we want to make sure that we are delivering the full only five five experienced in the markets, where we launch and we also obviously have to be <unk>, both with European and with any local market data privacy and security regulations and so that's that's worth as being billed we don't need the <unk>.
With that we talked about to do that so.
So.
Will be if I could just go back for a second Omnipod five X U S. As we've said we'll be launching.
In Europe , and the middle of twenty-three and then we'll stage those launches to make sure that we have the right launch plan for each market as we cascade the second half of twenty-three into 2000 foreign lunches markets.
The randomized controlled trial is designed to make sure that we have the right kind of clinical evidence to position omnipod fiber appropriately and X U S markets and so we're confident that we are going to be able to demonstrate benefit of already Ivy algorithm and the pod form factor against non AIG pumps, and CGM alone and that's what we're building evidence which is a huge.
Jeff or for us or a huge it's a huge emphasis for us to continue to build evidence for all new butterfly.
Thank you.
And I assume.
Ah last question in the queue comes from the line of Matt mixed Vic from Barclays. Please go ahead.
Hey, Thanks, so much for fit me and congrats on a really strong quarter.
Maybe a couple of comments questions around color on on two Bliss and and T. As if you could maybe.
Elaborate on your expectations for what what percentage of people with diabetes and U S. Historically had been.
Selecting tubas pump so your your pump essentially.
Past and if you think that's changing and why and then maybe just some color as to if the mix of your patience is changing in terms of age or folks coming in at speeds and staying a returning after leaving that kind of color would be super helpful and congrats again.
Hi, Thanks for the question so.
It's sort of highlighted.
We are the leader in driving penetration from MDI and that has always been our focus so.
Bulk of our new starts entrusted new start is the first time you start on an omnipod product and we don't we don't count renewals, we don't count.
Other shipments it you start an army by year New start once in your in your lifetime and our focus has always been MDI and that's where with the 80 20 number has come from where 80% of those new startup come from MDI. This quarter, we just see that shift where only 60% came from MDI, because we had a ah bullis of people coming from two pumps that we hope continues.
And.
The.
We also been a leader pediatrics I think you just kind of asked about where our customers come from <unk>.
Pediatrics has always been our strength you think about the form factor of omni by five very attractive to parents and two children, we lost a little bit with the lack of at AIG system, where parents were actually forced again to make that decision between the form factor that's perfect for pediatrics and AI.
System now they don't have to make that so we did see a lift significant lift in pediatrics as a percentage of our new starts this past quarter. We're excited about that those patients that are newly diagnosed that we want to start on omnipod and want them to use our products for life. So excited about that trend excited to be beginning to get competitive to pump users and I think you asked.
Sort of about.
People coming back Jim highlighted at the beginning of the call. When you see thousands of people this past quarter comeback to omnipod. So they they left us for reason.
Likely that was an AIG reason, it and the lack of and so with Omnipod five they're coming back to that product. We've seen attrition be very stable and we're excited about what I mean by five does to strengthen retention with our existing users.
Thank you.
I'm sorry, no further questions in the queue. This concludes our Q&A session. At this time I'd like to turn the conference back over to Jim how intense president and Chief Executive Officer for closing remarks.
Thanks.
Thanks, everyone for joining us today. These are incredibly exciting times essential. It is only five is out in the market transforming diabetes management for thousands of people and that number keeps growing and we could not be more excited to further expand our addressable market with our new innovation and type two for the types of community with our basal only pod we've got an incredible.
Team and we have a significant.
Difficult momentum and to continue to execute on our mission. Thank.
Thank you and have a great evening.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly.
<unk> you can dial 911.
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