Q2 2023 DexCom Inc Earnings Call
Ladies and gentlemen, welcome to the decks Com second quarter 2023 earnings release conference call.
My name is Abby and I will be your operator for today's call.
At this time all participants are in a listen only mode and later, we will conduct a question and answer session.
During the question and answer session. If you have a question. Please press star one on your Touchtone phone.
As a reminder, the conference is being recorded and I will now turn the call over to Sean Christiansen, Vice President of Finance and Investor Relations. Mr. Christian you may begin. Thank you Abbie and welcome to <unk> second quarter 2023 earnings call. Our agenda begins with Kevin Sayer, <unk>, Chairman, President and CEO , who will summarize.
Our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jeremy Sylvain, Our Chief Financial Officer. Following our prepared remarks, we will open the call up for your questions at that time, we ask analysts to limit themselves to one question. So we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our second quarter performance.
On the desk Com Investor Relations website on the events and presentations page with that let's review our safe Harbor statement. Some of the statements. We will make in today's call may constitute forward looking statements. These statements reflect management's intentions beliefs and expectations about future events strategies competition products operating plans and performance all forward looking.
<unk> included in this presentation are made as of the date hereof based on information currently available to <unk> com are subject to various risks and uncertainties and actual results could differ materially from those anticipated in the forward looking statements. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward looking statements are detailed in <unk> <unk>.
I'll report on Form 10-K, most recent quarterly report on Form 10-Q, and other filings with the Securities and Exchange Commission, except as required by law, we assume no obligation to update any such forward looking statements. After the date of this presentation or to conform. These forward looking statements to actual results. Additionally, during the call we will discuss certain financial measures that have not been prepared in accordance with.
GAAP with respect to our non-GAAP and cash based results unless otherwise noted all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our second quarter.
The earnings presentation for a reconciliation of these measures to their most directly comparable GAAP financial measure now I will turn it over to Kevin. Thank you, Sean and thank you everyone for joining US today, we reported another great quarter for decks com with second quarter organic revenue growth of 26% compared to the second quarter of 2022.
Demand for decks Com CGM continues to grow as access to our products is expanding faster than at any time in our company's history and the first half of 'twenty twenty-three alone, we broadened our product portfolio strategy extended our geographic reach and meaningfully expanded reimburse coverage for decks Com C. G M. As we sit at the midpoint of this pivotal.
Year for our company, we have a lot to be excited about in the U S. Our launch of G. Seven continues to gain momentum customers and clinicians alike are sharing consistently great feedback around G. Seven to ease of use discrete form factor faster warm up time and redesign software platform with this product we have extended our leadership position in <unk>.
Curious he and product performance, while taking a significant step forward in terms of simplicity. It has never been easier to use or prescribe IDEXX com C. G M and we're attracting new customers and prescribers to our ecosystem as a result, similar to last quarter, we have seen a continuation of the trend that the majority of our G. Seven users have been new to decks. Com addition.
Ali There are now 8000 physicians, writing scripts for G. Seven in the U S that were previously not prescribing decks com, we design G. Seven to hold broad market appeal and these early prescribing trends are validating those efforts behind the scenes. We continued to drive reimbursement for G. Seven as a reminder, we established Medicare and broad commercial DMA.
Average during the first quarter, while rapidly progressing our commercial pharmacy contracts. We've further advanced this process in the second quarter as expected and we are excited to share that all major pbms now cover decks Com G. Seven this occurred much faster than we originally anticipated and brings our total number of G. Seven covered lives nearly in line with our industry leading.
G. Six levels. This further strengthens our position as the most cover CGM brand as we prioritize keeping out of pocket costs low for our customers. As a reminder, the majority of our customers are paying less than $20 a month out of pocket in the pharmacy channel, which is significantly less than our nearest competitor where the majority of customers are paying greater.
Then $70 per month were also saying G. Seven play a very important role for us as we move more broadly beyond intensive insulin management, we've taken a big step in that direction. This year. Following the recent CMS decision to significantly expand coverage beyond intensive insulin use as of mid April Medicare coverage officially kicked in for people with type two.
Diabetes, using basal insulin only as well as certain non insulin using individuals' that experience hyperglycemia. This resulted in a true step change in coverage for the industry. As we estimate these two populations represent around six to 7 million people in the U S with roughly half being of Medicare age Theres also been encouraging to see.
She'll payers quickly follow suit, we have already established greater than 60% commercial coverage for the basal population, which we view as a validation of the ex comms value proposition by payers. We're thrilled to have this level of coverage established as quickly as it provides us much greater commercial flexibility to promote this opportunity while still early the initial response.
From the clinical community has been very encouraging physicians have wasted no time in prescribing decks com to their basal patients as they recognize the clear potential for better outcomes. Among this population. We have also seen excitement coming directly from members of the basal community who are interested in engaging with their glucose data to make more informed lifestyle decisions as a.
Result, we've seen a notable uptick in demand in our Medicare business. In fact, Q2 was our highest new patient quarter within the Medicare channel in the history of our company. Considering this was only a partial quarter of expanded coverage. We view this as a very positive sign of things to come and our international business our share gains accelerated in the second quarter as our ongoing.
<unk> access initiatives and product portfolio strategy have helped us reach many more people with diabetes across the globe, we expanded our international G. Seven launch in the second quarter into six new markets G. Seven is being met with a lot of enthusiasm in our initial launch countries and we're excited to bring it to additional geographies in the coming months. This will include our launch of G. SEC.
Even into Canada, where we recently received regulatory clearance, we have plenty of inventory on hand to support this broader rollout, particularly with our Malaysia for Sony now producing commercial product in other key international lever for US has been our broader rollout of decks com one decks com one is proven to accelerate our entrance into new markets broaden access within exists.
In geographies and even serve as a catalyst for reimbursement in certain regions. Perhaps most noteworthy this past quarter is that we officially launched <unk> come on in Argentina, which marks our initial entrance into Latin America. We expect this to only be a starting point for us in that region. As we continue to extend our global reach in coming years. Finally, we came away.
From the American diabetes Association's Eighty-third scientific sessions as excited as ever about our future. This year's event added to the growing body of evidence demonstrating decks com C. G M <unk> ability to drive greater health and economic outcomes across the diabetes care continuum, particularly we are seeing more data, suggesting a clear use beyond the intensive insulin.
On population and even outside of insulin use all together for example, our team presented a real world study of more than 7000 adults with type two diabetes, who are not using insulin. After only three months. This cohort saw a 40% increase in time and range and a clinically meaningful improvement in a N C levels, perhaps just as important.
Was the high level of engagement demonstrated as study participants wore decks com CGM more than 80% of the time. This was consistent with what we have seen in other broader type two studies, including the mobile trial, where we saw high levels of utilization and a clear desire to continue to our decks com CGM fulltime during 80, a weekend, we hosted an investor day.
<unk>, where we shared our latest vision around the future of decks com as part of the day, we increased our L. R. P provided new detail on the size of our recent access wins and shared our plan to launch a product specifically for people not on insulin with this product we will leverage our G. Seven hardware, but provide a custom software experience tailored to this broader population.
We expect to launch early next year with a 15 day wear time and cash pay option. This will simplify access out of the gate per users as we build the case with payers for broader coverage importantly, this new product also provides a glimpse into our future where we expect to utilize software to build tailored experiences and serve much larger populations.
As we said at Investor Day, we're just getting started with that I will turn it over to Jeremy for a review of the second quarter financials. Jeremy. Thank you Kevin as a reminder, unless otherwise noted the financial metrics presented today will be discussed on a non-GAAP basis reconciliations to GAAP can be found in today's earnings release as well as on our IR website for the <unk>.
Second quarter of 'twenty twenty-three, we reported worldwide revenue of $871 million compared to 696 million for the second quarter of 2022 representing growth of 26% on an organic basis. As a reminder, our definition of organic revenue excludes currency. In addition to non C. G. M revenue acquired in the trailing 12 months.
U S revenue totaled 617 million for the second quarter compared to 511 million in the second quarter of 2022 representing growth of 21%.
We delivered another record new customer start quarter in Q2 with continued momentum in the U S. As our G. Seven launch gained additional traction and the recently finalized CMS coverage provided a new tailwind to our Medicare business as Kevin mentioned, we continued to progress our commercial pharmacy coverage and G. Seven for the second quarter, which further re.
Do start need to utilize the bridge program the.
The impact from this program was negligible in Q2, and we expect this number to remain small going forward with broad coverage for G. Seven now available across all channels there'll be fewer customers that need to leverage this program to access their products International revenue grew 38% totaling 255 million in the second quarter International.
Organic revenue growth was 40% for the second quarter, we have been executing very well in international markets as our ongoing access work in product portfolio strategy continues to broaden our reach we have seen a robust customer response to this expanded access and have consistently taken share across our footprint in recent quarters in fact.
This marks the ninth straight quarter that we have gained international market share. The U K continues to be a great case study for us in the past year, we have significantly broadened our reimbursement in that market seen new clinical recommendations around real time, CGM use and launched our newest generation product. Following these events, we have experienced an acceleration in this market.
And in Q2, we posted one of our highest U K growth rates in recent years. We also recently expanded our connectivity leadership in this market as Insulet extended their launch of Omnipod, five which is powered by our G. Six system T. United Kingdom, given our long track record in the pump market with over 1 million patient years of cumulative experience in the forthcoming.
Connectivity with G. Seven we expect to remain the clear C. G M leader for the connected insulin delivery market. Our second quarter gross profit was $553 5 million or 63.5% of revenue compared to 64.6% of revenue in the second quarter of 2022 the year over year decline in gross margin was expected as we take.
Temporary step back to scale G. Seven production. It is worth noting that some of our expected ramp up cost extended into the third quarter, which increased Q2 gross margin relative to our expectations. It takes some time for our new manufacturing lines to fully scale, but the cost profile of G. Seven will gradually improve as we increased production volumes.
Keep in mind, our Malaysia facility recently initiated commercial production. So you shouldn't expect to see similar dynamic occurring in the near term as we scale. Those lives operating expenses were 395.1 million for Q2 of 'twenty twenty-three compared to 347.6 million in Q2 of 2022 at our recent Investor day, we highlighted some of our.
Key cost initiatives, which we refer to as cost to execute this represents our ongoing framework of how we think about operational efficiency and how we ultimately see cost as a growth driver for our business.
Our second quarter operating expense management was yet another demonstration of our commitment to this program as we generated over 450 basis points of Opex leverage. We're very proud of this result, as we have continued to support our ongoing investments in our global commercial efforts. We know this will ebb and flow over time based on the needs of the business, but it should.
As a reminder of this organization's ability to scale operating income was $158 4 million or 18.2% of revenue in the second quarter of 'twenty twenty-three compared to 101.9 million or 14.6% of revenue in the same quarter of 2022, adjusted EBITDA was 232.6 million or 20.
6.7% of revenue for the second quarter compared to $175 5 million or 25.2% of revenue for the second quarter of 2022 net income for the second quarter was $139 4 million or 34 cents per share we closed the quarter with greater than 3.6 billion of cash and cash equivalents, leaving us in a very <unk>.
Strong financial position this significant step up relative to our Q1 cash levels, primarily reflects the convertible bond offering we completed early in the second quarter with our 'twenty twenty-three converts coming due later this year, we saw an opportunity to refinance at very compelling terms, which provides us significant financial flexibility. This supports are on.
Boeing capital deployment goals with a primary focus on extending our organic growth opportunities as we mentioned we reached a key milestone during this quarter as our Malaysia facility began producing commercial product. This plant will quickly scale to become our largest operation and help support our long term cost target of $10 per sensor turning to guidance.
We are raising our full year 'twenty 'twenty through revenue guidance to a range of 3.50 to 3.55 billion representing growth of 20% to 22% for the year. Our updated revenue guidance reflects an increase of over 65 million at the midpoint compared to our previous guidance. This reflects our strong start to the year as well as our XP.
Taishan to carry this momentum into the second half of 'twenty twenty-three.
From a margin perspective, we are updating our full year non-GAAP gross margin guidance to 63%, which represents the high end of our previous guidance range. Our operating expense management has also left us well positioned to raise operating and EBITDA margin guidance for the year. We now expect non-GAAP operating margin of approximately 17% and adjusted EBITDA margin.
26, 5% for fiscal year, 'twenty twenty-three with that I will pass it back to Kevin. Thanks, Jeremy our results. This quarter, we like our highlight reel Q2 was our highest revenue quarter ever and represented the largest year over year dollar growth in our company's history, we again delivered record new customer starts worldwide.
And gained market share in nearly every major reimburse geography, our G. Seven launch continued to be marked by excellent execution across the board. We've now introduced this product in that 13 international markets and quickly built broad reimbursement in the U S through our commercial efforts, we're bringing new physicians into our ecosystem and our manufacturing.
Factoring initiatives are driving process improvements ahead of expectations. Additionally, our R&D team is already enabled five flawless upgrades to our completely redesigned G. Seven App. In addition, we are growing in a disciplined and sustainable manner. We have delivered over 450 basis points of operating expense leverage doubled our earnings per share.
Year over year and posted one of the largest free cash flow quarters in our company's history I'm incredibly proud of our team for delivering this level of progress when you experience results like these it makes our stated vision much more tangible we are truly out of mission to help people control their held through continued innovation and execution with that I would now like to open the call.
For Q&A, we will also have Jake leads our chief operating officer join US for our question and answer session. Sean. Thank you Kevin as a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary Abby please provide the Q&A instructions.
Thank you.
We'll now begin the question and answer session. If you have a question. Please press star one on your touch Jonestown.
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If you are using a speakerphone you may need to pick up the handset first before pressing the numbers.
Once again, if you have a question. Please press star one on your Touchtone phone and we will pause for just a moment to compile the Q&A roster.
Yeah.
And we will take our first question from Robbie Marcus I apologize Danielle empathy with UBS. Your line is open.
Hey, good afternoon, sorry about that I didn't realize.
Apologies.
Good afternoon, everyone and thanks, so much for taking the question.
Hey, guys.
This revenue acceleration across the bank.
Oh, you asked one but it really does stand out it looks like one of your stronger growth quarters internationally in a while.
A little bit more color on the sources of that.
International as you think about the key regions that you've entered.
Okay.
And one landfill across these different geography, thanks, so much.
You bet Danielle this is Kevin I'll take that and it was a great international quarter Yeah.
There are three things that have driven that international business for US you know the first the plan we have.
Launched a several quarters ago to increase access across the board and make a profit product more accessible in all these markets and we've seen results of that.
And all of the geographies, particularly in Germany.
Second of all you can't underestimate the effect of G. Seven in many of these markets. We've launched in 13 countries as I said.
In our prepared remarks G seven is going very well.
The third piece is the portfolio strategy, where we have decks com when supporting.
Expansion into geographies, where we haven't been before and broadening access and the countries, where we already exist. Those three strategic efforts have helped us tremendously in our Jeremy if you've got anything you want to add to that no I agree I think the only thing I'd say is you know really across the board all the major countries, we're in where there's reimbursement we're taking share.
And it's a common theme you're really seeing in our portfolio approach really allows us to do that so a wonderful quarter and thank you for the question.
Okay.
We'll take our next question from Robbie Marcus with Jpmorgan. Your line is open.
Oh, great. Thanks for the question and congrats on a really nice quarter.
It looks like you guys raised guidance for basically two times the size of the beat in the quarter. So I'd love to just hear where the confidence is coming from how to think about U S and O U S growth in third and fourth quarters, we progressed and where that upside in guidance is coming from.
And any color as it relates to type two basal within that guidance range. Thanks a lot.
Sure Ravi. Thanks. This is Jeremy I can take that.
Youre right, we did raise guidance and it really comes off of you know the strength, you're seeing outside the U S as well as some of the coverage and access wins, we've had in the U S of course all of it buoyed in the background by the launch of <unk>, seven which as you know most accurate sensor and one that we're really happy about it.
If you think about kind of geography wise, you know think about it the first half of the year to a little bit reflect the second half of the year and that's how the split would work, which I think you'll see that and as you kind of think about what that means you know we have a little bit of a a bit of a more challenging comp in the U S. In the back half of the year at least related to the second quarter. So we've contemplated that in we've also contemplated.
Outside the U S continuing to do well, but just being mindful of the fact that you know growing at.
At a faster clip than we have in recent quarters, but being mindful about growing into market does we're expanding if you think about where it's coming from what the driver is in the U S. Around basal certainly some of it is there well, we're not giving a number around basal Basil has really now started to with the coverage we have been able to obtain its really starting to fall.
Into the core business, but you can assume Basil is there and then you may ask the question well Gee Theres is there opportunity look we provided the guidance is what is the base case, we've increased our confidence in that base case, I think you can see that and then of course, we'll look to outperform as time moves on.
Great. Thanks, a lot.
And we'll take our next question from Jeff Johnson with Baird. Your line is open.
Yes. Thank you good afternoon, guys, Hi, Jeremy maybe I'll follow up on your U S commentary on basal only if I look back the last four or five years you guys typically increase your U S revenue sequentially from <unk> to <unk>, maybe 70 to 80 or $60 million to $70 million I'm sorry. This quarter. It was a 90 million sequential improvement so anyway, that's a half of that was basal.
A third of that was Basil I know it was only a not quite a full quarter contribution, but just help us maybe qualitatively how much of that sequential bigger than usual.
The improvement.
Might've been basal and then just on top of that just in France any movement, yet on basal only I know obviously your competitor has gotten that I think you guys were working towards that just any updates on on basal only coverage for you in Europe . Thanks.
Sure Jeff.
What I would say is is in the U S. In the quarter a relatively nominal contribution from basal in Q2, while we did have quite a few quite a robust patient add quarter.
And you know this all too well with with coverage really kicking in in April starting with the <unk> channel. It takes three to four weeks to get access to product and so ultimately the contribution start to build over the course of the year. So yes. There was contribution in the quarter, yes. It did help with a lot of it was driven just by taking share in existing markets and so we're really proud of that.
In terms of in terms of France, you know our expectation is we have G. Seven out in France, we're launching <unk> com one in France here in the near future. We expect to have a very robust coverage model I wont speak expect Lee there because we are going through that process, but we do expect broad coverage to compete with that of our competitor and I.
What we're proving is in markets, where we have coverage and you've seen.
In our international growth over the past nine quarters, taking share we expect to do quite well and take our fair share in that country. Once we go live.
Fair enough. Thanks.
We will take our next question from Larry <unk> with Wells Fargo. Your line is open.
Good afternoon, thanks for taking the question.
Jeremy Let me ask on the guidance I mean, it looks like you're guiding to about similar growth.
In the second half as the first half.
One would think you know and the comps are two different when you look at it you know first half versus second half last year, but one would think that you.
You know you have tailwind pricing coming down you know the ramp of basal and she's having is there anything you're seeing that that's concerning or is this conservatism and just if you could comment on just cadence should we expect typical seasonality. Thanks for taking the question.
Yes, sure Larry Theres, nothing that gives us pause about the back half of the year I'll start with that I think if we come into this quarter record quarter of new patients. We have no no lack of confidence in saying that and so we do expect a good back half of the year, we raised the guidance at the midpoint.
By you know a little over 65 million. So I know you're kind of inferring you know at the top end and doing the work there.
Look there's nothing that gets in the way what we've done is we've derisked. The base case, you see we've done that we're now the base case is 20% to 22% growth a record patient growth quarter in and in Q Q2, obviously bullish in the back half of the year, but again basal new so we're just being prudent in how we go about that and making sure. We provide that base case of course, if we can do better we.
We'll do so and we will certainly pass it along to you in terms of cadence and seasonality I think our expectation is at least Q3 looks.
It looks to operate in a similar seasonality as to last year.
At least that's how we're looking at it now globally.
So think about it that way on a global basis.
And I would expect that to play out and really expect that to play out for the balance of the a relatively similar seasonality to the past two years.
Thank you.
We will take our next question from Joanne Wuensch with Citi. Your line is open.
Thank you.
Quantified.
Come on.
In the quarter outside of the United States I'm trying to get my head around.
The international growth how much of that is coming from that's come on how much from Jason If you can share and then maybe.
Some of it is from.
Opportunity to partner with insulin pumps.
Me through that please thank you.
Joanne This is Kevin we don't break those numbers out, but our growth comes from all of all of the above certainly index comes one's been a factor in those countries, where we've launched it but we haven't watched it and all of our international geographies, yet our lunch as Jeremy said earlier were about to launch in France, We just now.
And as we're kicking off in Latin America here in Q3.
And we've launched in a few other geographies those geographies its doing well G. Seven has been a strong contributor, particularly in the U K and Germany, where those launches her are more mature.
Our pump partners, particularly as automated insulin delivery reimbursement has broadened and some of the geographies.
That has helped us tremendously our direct efforts in Australia, where we acquired our distributor that distributors performed extremely well and they've taken.
Good share in the Australia, and New Zealand markets.
In addition to that so I mean, it's a blend of of all the factors we talked about on the call and just to help you with the just kind.
Kind of.
Triangulate some of our prior comments, we talked about a third of our new patient starts coming from decks com one.
That's a building business over the course of the year. So if that's a third of the new starts and its a building business over the course of the year join you can probably then presume where most of the new patient starts come from they come from the G series, and we don't necessarily distinguish between the two we'd obviously know what the numbers are the point is is it's a series in our platform and so.
A majority of the growth does come from that G series, just based on what we've historically said nothing's changed since then.
Thank you.
And we will take our next question from Matt <unk> with Barclays. Your line is open.
Hey, thanks, Thanks, very much for taking the question so just.
One follow up on O U S growth.
Just a quick question on <unk>.
Let's see.
Sure.
More of your promotional efforts.
Market development.
Brand awareness.
Ads that you're putting out and television and elsewhere I'm just wondering.
How youre thinking about the success of those you know what the.
<unk> of those of those campaigns run.
Yeah.
S or internationally and I'll just conclude the quick follow up on some of the international growth questions that youre getting to try to parse out the strength areas.
If you could remind us also if theres any stocking of new geographies that happen or as you're really stepping into a new area. There is some element of that but we should also think about that may not repeat.
Next quarter the quarter after.
<unk>.
Hey, Thanks, Matt Thanks for the question and I'll start with the second one first and then we can circle back.
No no significant stocking anything along those lines. This is really driven by a robust patient growth.
And so I think it's just taking share driving access and ultimately entering into these markets.
In terms of your first question around promotional activities.
We always look at what works we use various versions of mixed marketing mixed sales models to ultimately determine the effectiveness and the return on investment of those and then how the response curves work in.
Terry and the commercial leadership team they do a wonderful job assessing that spend looking at what makes sense and then and then pivoting as needed and so what you can expect to see is there will always be mixes over time, but they will change and so we will have campaigns they'll change, but it will change based on what works best and we'll continue to learn from those and.
So I would expect to see continued promotional materials will continue to see.
Demonstrating why we think decks com is the right product for folks in and making sure that they know that we are the right product for them.
And so I think you are seeing good feedback we are seeing great returns I mean at the end of the day, what you see as record new patient quarters, and you see that in our acceleration of growth in the quarter. So.
That's what we'll continue to do that's what we will invest I don't know Kevin any other thoughts on on promotional materials. So I just think our promotional materials continue to evolve.
And you'll see those evolve over the course of the year.
As we have more to offer and we direct that message more towards the different markets.
I think our commercial efforts have been very successful, but in all fairness, we're looking at everything really.
With a very close eye right now as we plan for next year and year after that.
Not just a not just a one quarter shot for us.
That's great. Thank you so much.
And we will take our next question from Travis Steed with Bank of America. Your line is open.
Hey, Jeremy Thanks for taking the question I guess just wanted to clarify on the basal guidance before it was like one 5% of total total revenue for the year is that changing at all or are moving and what's a fair way to think about a full year of basal should we think about that exit rate and multiplying. It by four is thinking about kind of a full run rate for basal thank you.
Yeah, So Charles industries.
So.
Well, we're not going to give a specific number on basal anymore. Just because it's now really folded into our business. There was a time when we said hey look we have CMS coverage and we don't expect Medicare advantage to come that faster, we think commercial is going to take a little bit longer.
And it's happened much much faster. So now it's just really part of our core business to your question, though is it greater than one 5% absolutely. It's part of the reason we raised the guidance. It's part of the performance in the quarter and so you would expect it to be higher than that the way I would think about it is is just now about any other patient really population.
Where you ultimately want to annualize it youll think about attrition so far theres been no differences in terms of attrition from the basal population that started today to our core population.
And I think you start to annualize that exit rate and that's that's the way I'd apply it and going forward and then of course, new ads. So.
I think youre thinking about it the right way Travis and then you know in terms of is it greater than one 5%, yes. It is.
Thank you.
And we will take our next question from Matt Taylor with Jefferies. Your line is open.
Hi, Thank you for taking the question.
I just wanted to ask you on about the competitive environment.
Basically ask if youre seeing anything change in terms of share or pricing or anything else. Notable there that we should be aware of.
Okay.
We've been pretty clear about our share position and if we haven't been let me reiterate it again in all major geographies that are reimbursed, we've been gaining share and we gained share across most all of them. This quarter. So we're doing very well G. Seven.
Has been accepted the way we wanted it to the majority of our G. Seven users are new users at <unk> Com, we've seen greater increased awareness in the physician community now that they have this product with its simplicity combined with it being the best performing product on the market.
So we're very clear there are pricing trends you know you can see our margins.
It remains strong and our pricing is where we want it to be across channels.
Sure.
We've been pretty clear on all of those things and there's really no other changes to report.
Great. Thank you Kevin.
We will take our next question from Margaret Kaczor with William Blair. Your line is open.
Hey, good afternoon, everyone. Thanks for taking the question.
I wanted to maybe focus a little bit longer term and.
Talk about basal adoption trends historically.
Okay.
That's the same as coverage has expanded for intensive insulin users. We've seen like this 1000 basis points plus of kind of incremental marketed option at least by our math.
I know it's early at this point. So you guys are being a little bit hesitant to get ahead of yourselves, but how do you compare I guess the early weeks or months in Batesville right now versus what you saw one commercial coverage had opened up for them.
And then longer term why shouldn't we see that same level or pace of acceleration and Basil.
Market, but especially as commercial coverage has maybe come on faster than it did in those markets at that time.
Margaret This is Kevin I'll I'll take it to start and ask the other guys have more to add they can.
I think yeah.
As I've traveled about and spoke with physicians and stuff. We've learned a lot about basal just launching just the journey of a basal patients they've been on other meds for quite some time and that step to call on insulin is big step and it's a step that they in many cases been afraid out for a long time, so providing this group with.
Information necessary to truly manage their condition and to see that they're getting the right dose to see that what behaviors they need to.
To use to.
To try not to advance their type two diabetes as fast we think there is a tremendous market here and I think the reception.
In all fairness, probably been even warmer than I thought it was going to be just as I've gone and spoken with people.
We are also at a different point in time as far as CGM adoption in CGM awareness in general as CGM is much more accepted than it was when we launched in other markets even from a distribution perspective, when we got Medicare approval. The first time I don't want to take you all back but.
A medicare patient couldn't use the phone app.
When we got Medicare approval back in 2017, if they did we had to give all the money back to CMS, we couldn't even get distributors to take our business. So that environment is all much much more positive than it's been before the flip side of this as its new there are a lot of them and they're still education to do and quite candidly, we're with a different.
Physician group because these people are usually primary care, while we've done everything we can or we think we've done a good job of expanding to get into that market. We know there's more work to do there as well. So we're cautiously optimistic we've seen great results. So far we've heard great things from the patients who use it.
But it's just going to have to build over time, we considered all of these things as we've looked at that market.
We will take our next question from Matthew O'brien with Piper Sandler Your line is open.
Afternoon, Thanks for taking my question.
Would just love to hear a little bit more about G. Seven specifically you know those 8000, new prescribing clinicians here in the states.
Can you talk about the composition of those between <unk> and then existing.
And does that or higher volume folks and then internationally I know Jeremy you said historically that <unk> seven is a.
Product, where you're actually getting paid.
Patients away from your competitor is that trajectory changing as far as the that dynamic as far as getting patients away from your competitor just looking at that international number in the quarter. Thank you.
Yeah, So and thank you for the question in terms of those 8000 prescribing physicians those are really predominantly primary care physicians and many of them were already writing CGM in the past and so you can probably surmise that change is obviously, what we think is taking share and that's quite frankly, what we're seeing.
And so those are folks that are seeing G. Seven theyre seeing the ease of use they.
We're seeing the expanded coverage that we've worked on for years and years and years and that really we've led and so and so that's really driven a lot of that change outside the U S and Jacob alluded to or Kevin alluded to it in and Jake tracks. This all the time.
Over half of new patient starts still remain new to CGM and a good chunk of those are switchers theyre not new to see it and I say, new decks com not necessarily new to CGM.
So as you see that and you see a good chunk of folks, saying well. While this is a product we've been waiting for we do believe we're doing incredibly well in those international markets. Both in patients that are new to CGM in all candor, but also those that have decided to make the switch and so we're really excited about the growth I mean, I think you can see we've been really excited about <unk>, 7% per year.
And I think the market feedback is following that same excitement.
Yeah.
And we will take our next question from Mathew Blackman with Stifel. Your line is open.
Good afternoon, everybody. Thanks for taking my question.
I'd ask on the PCP channel are you encountering any friction points in those offices above and beyond what you may have expected with basal and I guess Conversely is there anything that you anticipated would be challenging that that may be playing out less challenging in and also I'm curious is your PCP sales force finding a meaningful number of type ones in that channel.
Thanks.
Yes. This is Kevin the challenges, we're encountering a challenge as we anticipated.
The biggest challenge always is particularly in the Medicare environment is document, giving the documents and getting to the proper distribution channel to serve these patients because they are pretty much all go through those who are not in Medicare advantage I'll go through the <unk> channel.
And so document gathering, particularly in EM and at PCP office, where they don't see all people with diabetes all the time.
Use of these documents is the biggest channel, but we anticipated that and.
We've worked very closely with our distributors to streamline that process as best we can and they've done a very good job, helping us get our product out and help us continue to grow as we talked earlier, our biggest Medicare new patient add quarter ever those folks all went through distributors. So that's.
A good metric for us and show that shows that they are doing very well.
I think it's been pretty much as planned and we don't have a specific PCP sales force our reps have geographic territory and they call on both specialty diabetes clinics and primary care physicians. So they truly have a business to run it in their individual territories and certainly we know who they call on it.
And where they spend the majority of their time, but it's their job to drive that business and bring those offices along they do a really good job of that.
Okay.
We will take care and I think I'll add just one thing.
It was one one you asked the question on type one and we find them in the PCP offices and the answer is yes, we do we do and we find them as we go deeper and deeper into the primary care offices, we do find type ones.
Some of it.
Some of whom are not on CGM and PCP offices, where maybe CGM is a little bit less prescribed and so there are opportunities there in those spaces to continue to drive awareness.
Beyond of course, the typical endocrinologist space.
Thank you.
And we will take our next question from Marie Thibault with <unk>. Your line is open.
Hi, Thanks for taking the questions and congrats on a great quarter wanted to ask my question here.
<unk> learned recently about a competitor's DTC launch I think in the U K of a wearable to monitor glucose for people without diabetes are more of a lifestyle sort of tool with dex comms device for non insulin users coming next year any early thoughts on how your device will be differentiated whether that's features price.
Seeing how you're targeting that market.
Yes. This is Jack I'll take that one yeah, we're re.
Really excited about this new product that we're gonna introduced specifically for non non insulin users and you know what I'd say about it is it is specifically designed for the needs of someone who isn't on insulin, but is trying to manage their glucose and trying to improve their health condition and so the feature set is very.
Unique to the needs of those users. It's not you know you're not managing insulin youre not trying to avoid hypoglycemia, it's all about connecting the dots between them.
Diet exercise and how those things impacts glucose CGM is the only tool that can provide you that real time feedback and so we're really excited about how it's going to play into that space.
Over time, we likely will expand.
The patient segment for that product, but we are initially focused on the type two insulin non insulin users.
And price wise and most of the memory price wise and those things, there's a time and place we'll ultimately.
Talk about that.
To date, probably not the best time, obviously, it's information we want to keep a little bit close to our vest until it gets a little closer to launch date, but very I would say, we're very excited about it. It is an incredibly exciting time around here at <unk> com.
Alright, well understood. Thank you.
We will take our next question from Jason Bedford with Raymond James Your line is open.
Hi, Good afternoon, maybe just a quick follow up on the last line of.
Questioning I think you mentioned that youre going to launch the non insulin device early next year, which I think is kind of newest at least on timing and 24.
Have you run a trial for the device and I assume you'll you'll file late this year or have you file.
Yes, I think thanks for the question.
Yes. So it is important to note that product has a 15 day.
Our product our non insulin.
Product and we have completed a clinical study on the G seven platform.
Showing survivability out to 15 days with great performance.
We met the <unk> criteria in that study. So that study is going to be used for the submission of that product. So thats why we are confident in our ability to to say, we're going to launch that product next year.
Okay. Thank you.
And we will take our next question from Steve Lichtman with Oppenheimer. Your line is open.
Thank you hi, everyone.
I wanted to ask about basal and broader type two opportunity outside of the U S, particularly in the EU certainly another big opportunity.
Are the new pieces that you were putting in place with <unk>, seven and <unk> com one enough to really go after penetration of that patient population or are there additional reimbursement efforts needed there as well.
You know the access strategy is an ever evolving one and Thats why we have our product portfolio.
Our portfolio approach that we've adopted there are some geographies where <unk> come on we'll absolutely be the product that we go after that base of population with other geographies were quite candidly if they reimburse adequately we can use the G series and we break it down market by market in some countries, it's literally state by state and region by region, where we select the right.
Product within our portfolio to offer and gain the access and coverage that we need we believe we have the products that we need to go do that and we've talked a bit about this but the <unk> count one platform.
As soon going to be index hemlines soon going to be on the G. Seven platform into next year and when that happens that is going to be.
Just another step forward for us and as we look to the future as we extend the life of our sensors and things like that as we talked about at our Investor day, as well just have more and more opportunities internationally. So we have the portfolio to go attack those things we still have to go through the process of filling out paperwork, making bids meeting with the proper people.
And building that access team out overtime and Thats infrastructure.
Now we built from the ground up and we've been building over the past several years.
The one other thing I'd say to that is remember outside the U S. A lot of.
The products are available.
See you don't really necessarily need to go get a script now you'd might go to a pharmacy to pick it up the script is required for reimbursement and so as you think about some of these products that are coming out that are really targeted at that you can already use them and so there are ways. We can work around that with the right form factor with the right product and as Kevin has alluded to we think we've got the.
Leo the products the software the ways to iterate on that to be very effective in those markets.
Great. Thanks.
And we will take our next question from Josh Jennings with Cowen Your line is open.
Hi, good afternoon.
Openness, just better understand how you've had success kind of dragging the average out of pocket costs for patients prescribed with <unk> 67 down to $20.
Is that something that you can you can marketer had been marketing to patients or physicians and then has that been a driver of share gains in the U S. Thanks for taking the question.
It certainly has been a driver of share gains in the U S. Because we're.
Again, our focus is on on that customer and and as we go for the lowest cost per customer and that's what we do we do everything we can to keep that co pay down and.
In some cases.
It depends on the payer and the insurance company what the arrangement is but we also are able to maintain a premium price due to the strength of our product due to the fact that it provides such great outcomes and such good retention.
Our retention rates are better than they've ever been as far as people staying on our product and using it and we know when people stay on their product. They are healthier there is clinical data coming over the next several months from studies.
This is going to show that.
Extended use of CGM over time leads to just much better extended health. So you combine all those factors. The fact that patients stay on our product. The fact that it produces great outcomes. The fact that those outcomes are documented we can go and command a lower co pay and we can go really position ourselves to do well now because of that you have.
To go through again, the access games are the access infrastructure that various payers play one of our key initiatives right. Now is working on Preauthorizations into if we have to keep those to make sure those are electronic to take that burden off to the heads of the physician's offices, who prescribe our product thats, probably our biggest hurdle as far as ease of <unk>.
Reimbursement right now, but we're working to do that as well and we have very aggressive goals on that front over the next year, but.
The product and reputation and outcomes of decks com or weren't able to do enable us to do that.
One of the things we've talked about over the years is our strategy was to look at ways to get covered products make the easier burden longer term I mean, if you think about people impacted by diabetes. There is already a significant burden on those individuals' and now you add in a large co pay that's a challenging things we've really worked on coverage.
Something we've known is out there and it's something we've worked on and you're seeing it play through.
US working very hard on coverage relative to that of perhaps our competitor has really driven us to be in a position, where we can help patients better longer term. Because this is a long term challenge and we want to be there throughout that.
Okay.
Thank you.
And we will take our next question from Michael Pollack with Wolfe Research. Your line is open.
Hey, good afternoon. Thank you for taking the question. My question is on the <unk>.
<unk>.
The product for.
He is not on insulin that's going to launch next year, the 15 day.
There.
In 2024 is this largely.
Is the base case expectation that this is a cash pay model in 'twenty four and then over a multiyear period there might be.
Im uptake into traditional insurance channels or or or would you expect that next year.
You will have.
Kind of early at risk.
Insurance coverage for.
For this concept.
Yeah sure I'll take that one so yeah, it's primarily an initial launch it's going to be cash pay we do feel though.
We're targeting this segment.
I meant it customer there's 25 million people in the U S who fit in.
This category of with type two diabetes on insulin so we should feel a real opportunity.
To provide them with better outcomes and we do feel.
This product is specifically designed for this group can produce an outcome that a payer will pay for over time, but we got to generate that evidence in that population. We're starting to see evidence of CGM in that population and the benefits. It can provide we feel like this custom tailored product is going to do a great job at delivering the outcomes that we're going to need so.
It's going to take a little time, but we do feel that this is a place that ultimately will be reimbursed.
And this concludes our question and answer session for today I will now turn the call over to Mr. Kevin Sayer for closing remark.
Again, thanks, everybody for participating on our call today, just in wrapping up I want to acknowledge all the great.
Efforts here at our company our commercial team around the World has had an incredibly successful G seven launch.
Not only in getting product out the door, but driving access make it available everything that we've asked them to do we've done faster than we had planned and we're just.
Very appreciative that our operations team has not missed a beat from supply chain and micro chips and <unk> manufacturing. In addition to G. Seven along the way our engineering team. This products performed the way we wanted it to its done very very well they continue to.
Work on making it better I talked earlier about our outperformance software is not just an add on it is difficult and then those five upgrades of the app in this quarter.
Seamless and delivering people better features every time you can go through the entire organization, even the bond offering this quarter.
Most of that team.
It's a great time to be here and as I said earlier.
Paired remarks, we're just getting started and thats, how we feel about things. So thanks, everybody for participating on our call today, and we look forward to talking to you again soon.
Okay.
Thank you, ladies and gentlemen that concludes today's conference and you may now disconnect.
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