Q4 2024 Insulet Corp Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation fourth quarter and full year 2024 earnings call.
Speaker Change: At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should acquire assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the conference over to your host June Lazaroff, Senior Director, Investor Relations. Please go ahead.
June Lazaroff: Good afternoon and thank you for joining us for Insulet's fourth quarter and full year 2024 earnings call. With me today are Jim Hollingshead, President and Chief Executive Officer, and Ana Maria Chadwick, Chief Financial Officer and Treasurer.
June Lazaroff: Both the replay of this call and the press release discussing our fourth quarter and full year results, as well as our 2025 guidance, are available on the investor relations section of our website. Also on our website is our supplemental earnings presentation.
June Lazaroff: Before we begin, we remind you that certain statements made during the course of this call may be forward-looking and could materially differ from current expectations.
June Lazaroff: Please refer to the cautionary statements in our SEC filings for a detailed explanation of the inherent limitations of such statements.
June Lazaroff: We will also discuss non-gap financial measures with respect to our performance, including constant currency revenue, which is revenue growth excluding the effect of foreign exchange, adjusted EBITDA, non-gap effective tax rate, and free cash flow.
June Lazaroff: These measures align with the supplemental measures that management uses in assessing our operating performance from period to period, and we believe they are helpful for others as well.
June Lazaroff: Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year reported basis with the exception of revenue growth rates, which will be on a year-over-year constant currency basis.
With that, I will turn the call over to Jim.
Jim Hollingshead: Thank you, June. Good afternoon, and thank you for joining us. We concluded an incredible year with a very strong fourth quarter, achieving several milestones across the business, as well as every one of our growth and margin objectives.
Jim Hollingshead: We continue to see robust demand and momentum for Omnipot5, now available to both Type I and Type II patients in the U.S., and continue to expand rapidly in international markets.
Jim Hollingshead: 2024 marked our ninth consecutive year of 20% or more constant currency revenue growth, and we generated over $2 billion in revenue for the first time in Insulet's history.
Jim Hollingshead: For context, we first achieved $1 billion in full-year revenue in 2021. In just three years, we have doubled our top line.
Jim Hollingshead: We also delivered on our plan to grow both U.S. and international new customer starts sequentially and year over year in the fourth quarter. This resulted in year over year new customer start growth for the second half of the year in both U.S. and international markets.
Jim Hollingshead: We also grew new customer starts in both Type 1 and Type 2 populations in the U.S.
Jim Hollingshead: And I am pleased to share that we have an estimated 500,000 global customers using Omnipod. And of these, 365,000 are active global Omnipod 5 users.
Jim Hollingshead: Reaching a half a million customers is a tremendous milestone that our entire team is proud to have achieved and elevates us to a stronger position for future growth and value creation given our recurring revenue model which is supported by high customer retention and continuing new customer growth.
Jim Hollingshead: Our ongoing achievements are proof of the overwhelming acceptance and widespread adoption of Omnipod 5 and have positioned us with strong momentum as we enter 2025 and look out over the longer-term horizon.
Jim Hollingshead: We have great confidence in our objectives to continue growing and executing our strategic plans across our U.S. and international markets.
Jim Hollingshead: Ana will take you through what this means in terms of our financial outlook. But first, I will highlight our initiatives and progress made across our three strategic focus areas.
Jim Hollingshead: First, our work to advance the Omnipod 5 platform through our cascade of innovation fueled by data. Second, our strategy to lead ongoing growth for both Type 1 and Type 2 in the U.S. And third, our commitment to drive access to Omnipod 5 internationally.
Jim Hollingshead: Starting with our cascade of innovation, which includes our broad compatibility with smartphones and sensors.
Jim Hollingshead: The work to develop and establish these compatibilities from our platform has allowed us to strengthen and expand our market leading position with Omnipod 5 and will continue to be a driver looking forward.
Jim Hollingshead: In October, we launched the Omnipod 5 iOS app in the U.S. integrated with G6, and we have heard from many new users that iOS was one of the key factors in choosing Omnipod 5.
Jim Hollingshead: Our iOS app offers enhanced capabilities that are unique and time savers for potters, including our custom foods feature, which makes mealtime simpler.
Jim Hollingshead: Feedback has remained extremely positive, including phrases like life-changing, freedom, and normalcy.
Jim Hollingshead: Since launching iOS, over 25% of U.S. Omnipod 5 users have switched to using their iPhone.
Jim Hollingshead: And we remain on track to launch iOS with G7 in the first half of this year.
Jim Hollingshead: In November, we are proud to have launched OmniPOD 5 integrated with Abbott's Freestyle Libre 2 Plus sensor in the U.S.
Jim Hollingshead: We also continue to ramp Omnipod 5 with Dexcom's G7 and Retail Pharmacy.
Jim Hollingshead: In the fourth quarter, over 90% of US customers and over 30% of our international customers were using Omnipod 5. These are significant achievements given that we fully launched Omnipod 5 in the US in mid-2022 and had only launched in four international markets as of the end of 2024.
Jim Hollingshead: We are proud to have delivered terrific customer-centric innovation which has helped us meet customers where they are and bring them on to our technology.
Jim Hollingshead: In 2024, we saw more Omnipod 5 technology integrations and launches than in the prior three years combined. It is no coincidence that our revenue essentially doubled in that same period.
Jim Hollingshead: Omnipod 5 is the most connected tubeless automated insulin delivery, or AID, system on the market.
Jim Hollingshead: Today, I am also excited to announce our next leap forward in diabetes management with the U.S. limited market release of Omnipod Discover, a new value-added service for HCPs and patients to track data, identify utilization and health trends, and discuss these dynamics together.
Jim Hollingshead: Omnipod Discover is a digital platform connecting clinicians and their patients for personalized data management, insulin usage insights, and learning materials to optimize patient engagement and outcomes.
Jim Hollingshead: The Omnipod Discover platform will be integrated and accessible across devices from a clinician's workstation or a patient's smart phone.
Jim Hollingshead: We look forward to sharing user experience updates as we roll this out over the coming months and quarters.
Jim Hollingshead: In clinical trials, last week our secured T2D manuscript was published. These findings support our indication for Omnipod 5 use in adults with type 2 diabetes and will be leveraged to transform the lives of millions of people.
Jim Hollingshead: Additionally, results from our RADIAN study will be shared at the Advanced Technology and Treatments for Diabetes Conference in Amsterdam next month. Our STRIVE study, which will test further enhancements to our world-class SmartAdjust algorithm, will also commence enrollment next month.
Jim Hollingshead: and our investment in fully closed loop algorithm research continues with our evolution studies with the next phase commencing later this year.
Jim Hollingshead: These trials are further evidence of our commitment to continue to advance our technology platforms which we validate through clinical evidence.
Jim Hollingshead: Turning to our second strategic focus area, leading ongoing growth in the U.S. for Type I and Type II.
Jim Hollingshead: We have long offered the best technology on the market for Type I and are incredibly excited to continue expanding into Type II.
Jim Hollingshead: In the fourth quarter, consistent with the prior quarters, over 85% of our U.S. new customer starts were from people previously on MDI. This is a tremendous testament to the value and simplicity we bring to people living with diabetes.
Jim Hollingshead: Since we received FDA clearance for type 2 label expansion for Omnipod 5 in August, we have been working relentlessly to build our market leadership position in the type 2 diabetes market.
Jim Hollingshead: As a reminder, we are the first to market an AID for the type 2 indication. It's a very important opportunity for us and for millions of patients living with type 2 diabetes who need insulin.
Jim Hollingshead: For the fourth quarter, Type 2 users represented over 30% of our U.S. new customer starts as we ramped adoption in this patient population.
Jim Hollingshead: In the U.S., our Type 2 indication has significantly expanded the total addressable market for insulin by making Omnipot 5 commercially available to over 5.5 million people who live with insulin-requiring Type 2 diabetes.
Jim Hollingshead: This market includes 2.5 million people who are insulin-intensive and on MDI. We estimate that this market is less than 5% penetrated, with the majority of current pump users using Omnipod.
Jim Hollingshead: The other portion of the market includes approximately 3 million people that use insulin on a basal-only therapy every day, and that market is barely penetrated.
Jim Hollingshead: This creates a tremendous long runway of opportunity, and we are leveraging our proven commercialization playbook to drive reach and awareness.
Jim Hollingshead: To expand our reach, we are growing our US sales force to engage more patients and prescribers. As we discussed last quarter, this expansion involves adding more feet on the street and is not a wholesale change to our sales organization.
Jim Hollingshead: We expect this expansion to increase the reach of our direct sales to over 40% of the 2.5 million type 2 insulin-intensive population in 2025.
Jim Hollingshead: To date, we have filled over three quarters of our expanded sales roles, and we expect the majority of those roles to be trained by the end of the first quarter. Our team is hard at work to increase the number of USHCPs engaging with type 2 patients and prescribing omnipotent therapy.
Jim Hollingshead: We saw an increase of over 20% in HCPs prescribing for type 2 sequentially in the fourth quarter.
Jim Hollingshead: As we invested in our sales and marketing efforts through the fourth quarter, we also saw an increase in new DTC leads from individuals with type 2 diabetes. And we are having great success getting those customers quickly onto Omnipod 5.
Jim Hollingshead: We are proud and motivated by the progress we made in the fourth quarter, and we remain committed to advancing both Type I and Type II commercial efforts in the U.S.
Jim Hollingshead: Turning to our third strategic focus area of international expansion, our international business is also making great progress. We continue to reach more patients in the UK and Germany and we're seeing strong early adoption in France and the Netherlands. This is a testament to the power of Omnipod 5. It wins everywhere it goes.
Jim Hollingshead: We are accelerating international launches. In January, Omnipod 5 with G6 and Libre 2 Plus became commercially available in five new European countries, Italy, Denmark, Finland, Norway, and Sweden.
Jim Hollingshead: and we plan to launch in five additional countries over the course of this year.
Jim Hollingshead: In closing, we had a terrific year and our achievements are proof that we are continuing to build on our lead. As we advance through 2025, we will remain relentlessly focused on driving the diabetes industry forward with Omnipod 5.
Jim Hollingshead: We have brought more patients from MDI to AID technology than all of our competitors combined over the last several years, including in 2024.
Jim Hollingshead: Our time and investments have paid off, with the number of HCPs writing scripts for Omnipod 5 growing to nearly 24,000. We have over two decades of experience and distinct competitive moats.
Jim Hollingshead: Our form factor is unique and has proven very difficult to replicate. It took us years to build a patch pump product at scale with quality, high yields, safety, and very well-protected IP.
Jim Hollingshead: Our form factor has allowed us to deliver widespread affordable access with pay-as-you-go economics through the pharmacy channel.
Jim Hollingshead: The majority of our U.S. customers now have a co-pay of $30 or less a month, which is essentially a dollar a day or less, and given we are the only insulin pump in the diabetes space with Medicare Part D reimbursement, many of our customers pay $0 co-pay.
Jim Hollingshead: And with the limited market release of Omnipod Discover, data will continue to be an emerging mode for us. Every Omnipod 5 customer is connected to the cloud, and we're able to use data to improve our algorithms, to improve customer experience, and optimize outcomes.
Jim Hollingshead: Given these deep moats, which we continue to strengthen, we see ourselves as a category of one.
as we celebrate 25 years of Insulet.
Jim Hollingshead: I want to acknowledge our global team from operations for getting our new Malaysia site up and running ahead of schedule, to our field and customer service teams serving and supporting our 500,000 customers, our clinical team for their amazing work that supported our type 2 FDA clearance, and all of team Insulet for bringing their best selves to work every day and living our mission to improve the lives of people with diabetes.
Thank you all for an incredible year.
We are more excited than ever about the path ahead.
Jim Hollingshead: With that in mind, today we are announcing that we will host an investor day at our Acton, Massachusetts headquarters on June 5th.
Jim Hollingshead: We will provide further details in the upcoming weeks and months, and we hope many of you can join us.
Ana: With that, I will turn the call over to Ana to walk you through our results and guidance.
Ana: Thank you, Jim, and good afternoon, everyone. We are pleased to conclude a very strong year financially, clinically, and operationally.
Ana: Looking ahead to 2025, we are optimistic for another exciting year.
Ana: For the full year of 2024, we delivered revenue of $2.1 billion.
Ana: The revenue growth was comprised of U.S. Omnipod growth of 21% and international Omnipod constant currency growth of 27%.
Ana: Gross margin was an impressive 69.8% and operating margin was 14.9%.
Ana: For the full year, our estimated global utilization and retention trends remain stable versus prior year.
Ana: Our results demonstrate the ongoing strength of our platform and the dedication of our teams.
Ana: who executed our vision of getting more patients on Omnipod in every geography we serve, culminating in tremendous recent milestone of 500,000 active global customers.
Ana: We delivered on our plan to grow both U.S. and international new customers starts sequentially and over prior year, resulting in year-over-year growth in new customer starts for the second half of the year.
Ana: We also grew new customer starts sequentially and year-over-year in both type 1 and type 2 markets in the U.S.
Ana: Let me now provide more details on the fourth quarter results.
Ana: U.S. Omnipod revenue grew 12.4%, just above the high end of our guidance range, driven by ongoing strong demand for Omnipod 5.
Ana: As a reminder, the fourth quarter of 2023 included two stocking dynamics, which totaled an estimated $30 to $40 million and impacted our fourth quarter of 2024 growth rate by approximately 1,100 basis points.
Ana: U.S. revenue growth was driven primarily by increasing volume as we continued expanding our customer base.
Ana: As Jim discussed, we are extending the Omnipod 5 platform through our Cascade of Innovations, which will support continued customer growth.
Ana: Additionally, the ramp in Type 2 new customer starts that we experienced after the FDA clearance in August continued throughout the fourth quarter.
<unk> was driven by continued strong demand and adoption of Omnipod five.
Ana: On a reported basis foreign currency was a 40 basis point tailwind over the prior year, which was approximately 60 basis point unfavorable versus our guide.
Ana: We continued to drive strong omnipod five growth in the U K and Germany. We're also pleased with the early momentum we're seeing in Omnipod five adoption across France, and the Netherlands, along with positive feedback from our recent Libre two plus integrations.
Ana: With our recent launches of Omnipod, five in Italy, and the Nordics and future market launches planned international will play an increasingly pivotal role in our growth strategy.
Ana: Turning to drug delivery revenue grew 34, 1%.
Ana: It was above our guidance range due to an increase in orders from our partner.
Ana: In addition to our strong revenue growth for the fourth quarter. We are pleased to deliver exceptional gross margin expansion.
Ana: Fourth quarter gross margin was 72, 1% up 120 basis points over prior year, primarily driven by U S volume through the pharmacy channel.
Ana: Newport, five pricing in international markets and improved manufacturing efficiencies.
Ana: We continue to drive margin expansion as we scale and execute our initiatives to drive operational excellence across our global business.
Ana: Operating expenses increased in line with our expectations as we invested in our business to support our strong growth trajectory.
Ana: <unk> gearing up for near term launches globally.
Ana: We once again grew R&D dollars as we continued to fund our pipeline of innovation.
Ana: Operating margin was 18, 3% and adjusted EBITDA margin was 25, 3%.
Ana: While down from prior year due to the benefit of the stocking dynamics last year. We are very pleased with this strong margin results.
Ana: From a tax perspective in the fourth quarter, we released approximately $17 million of our valuation allowance, resulting in a noncash tax benefit.
Ana: Which has been adjusted out for non-GAAP purposes, our non-GAAP effective tax rate for the fourth quarter was 25% and the full year was 24%.
Ana: Turning to cash and liquidity, we ended the year with over $950 million in cash and cash equivalents.
Ana: And the full $300 million available under our credit facility.
Ana: Our free cash flow for the year was $305 million.
Ana: Milestone that represents our commitment to and execution on delivering a premium financial profile as we continue generating cash and investing in the business for long term profitable growth.
Ana: Now turning to our 2025 outlook for the full year, we expect total omnipod revenue growth of 17% to 21% and total company revenue growth of 16% to 20%.
Ana: As a reminder, our revenue growth guidance is on a constant currency basis.
Ana: For U S. Omnipod, we expect revenue growth of 16% to 20% driven by strong Omnipod five adoption as we continued to build our recurring revenue model by growing type one and ramping type two.
Ana: We also expect benefits from G. Seven Libre, two plus and iOS as customers continue to move from MDI to our AI technology.
Ana: We anticipate U S. New customer starts will grow on a year over year basis, our guidance for U S revenue assumes similar trends and pricing utilization and retention for 2025 relative to 2024.
Ana: For International Omnipod, we expect revenue growth of 22% to 26%.
Ana: On a reported basis, we are assuming an unfavorable foreign currency impact of approximately 300 basis points.
Ana: We expect continued growth in the UK and Germany as those markets benefit from new integrations and customers continuing to upgrade from Omnipod dash to Omnipod five.
Ana: We also expect France, and the Netherlands continued to ramp and contribute more meaningfully to our growth in 2025.
Ana: And we expect the recent country launches in Italy, and the Nordics to also ramp throughout the year.
Ana: We anticipate international new customer starts will also grow year over year.
Ana: <unk> is expected to be the primary driver of our international revenue growth.
Ana: Listed with trends we saw in 2024, we expect international revenue to also benefit from pricing as new customers adopt our technology and existing customers upgrade from Omnipod dash to Omnipod.
Ana: Our international guidance assumes a modest benefit from pricing and stable utilization and retention trends from 2025 relative to 2024.
Ana: Lastly for drug delivery, we expect a 45% to 55% decline.
Ana: Turning to 2025 gross margin as we previously communicated we expect modest improvement going forward as compared to prior years, which reflected the benefit of pricing as we shifted to the pharmacy channel.
For the full year, we expect gross margin of approximately 75%. This guidance reflects the continued build in scale and manufacturing efficiencies, including our Malaysia facility, becoming slightly accretive in the back half of the year. We expect these benefits to gross margin to be.
Ana: Partially offset by the ramp of our lower margin international business.
Ana: Additionally, our gross margin guidance assumes that our business will not be materially impacted by tariffs.
Ana: We are very pleased to have a robust manufacturing position here in the U S complemented by manufacturing sites in China and Malaysia.
Ana: Our supply chain strategy includes developing regionally located dual source for materials, which provides us with resiliency.
Ana: This strategy has demonstrated success over prior challenging supply chain environment and offers us great Optionality and adaptability in the current environment.
Ana: Naturally this is something that we are continuously monitoring.
Ana: For the year, we're guiding operating margin of approximately 16, 5%, which reflects a 160 basis points of expansion over 2024.
Ana: We expect to continue to expand margins, while further investing in R&D, which we will continue to fund with more dollars on a year over year basis, given our exciting pipeline of innovation.
Ana: Our operating margin guidance also includes investments in sales and marketing, particularly as we develop the type two market and continue to grow our type one customer base.
Ana: We have many catalysts for growth in 2025 and considerable opportunities to drive further margin expansion over the near and long term coming from scaling the business efficiently.
Ana: Even with continued investment in our robust innovation pipeline and commercial efforts.
Ana: Consistent with historical patterns, we expect gross margin and operating margin to be lower in the first half of the year and improve in the second half.
For 2025, we expect our effective tax rate to be 20% to 25%.
We expect capital expenditures to be slightly higher in 2025, compared with 2024, as we continued to expand and optimize our manufacturing and supply chain operations as well as support our global expansion.
Ana: Additionally, we expect to continue generating positive free cash flow annually and strengthening the cash position on our balance sheet through organic growth and profitability.
Ana: Turning to our first quarter 2025 guidance, we expect total company revenue growth of 22% to 25%.
Ana: For U S. Omnipod, we expect growth of 21% to 24% as a reminder, the first quarter of prior year included $20 million to $25 million of unfavorable stocking dynamics adjusting for these our first quarter U S. Omnipod growth is in the mid to high teens.
Ana: For International Omnipod, we expect growth of 28% to 31%.
Ana: On a reported basis, we estimate an unfavorable foreign exchange impact of approximately 400 basis points.
Ana: And we expect drug delivery revenue to decline 5% to 10%.
Ana: In conclusion, we are very pleased with our recent progress and immensely excited for the year ahead underpinned by our innovative technology significant investments in growth and product differentiation wide competitive moat and unparalleled feedback from providers and <unk>.
Ana: <unk>, we are positioned to continue leading the insulin delivery field and changing the lives of people with diabetes for the better.
Ana: Furthermore, we will do all of this while generating strong growth executing on our plans for gross margin and operating margin expansion and improving our profitability and free cash flow profile to enable continued investment in key growth catalyst.
Ana: To summarize we are optimistic about the future and the long term value we are creating.
Ana: Look forward to sharing even more of these topics during our investor day in June with that operator, we will open the line for questions.
Speaker Change: Thank you if you have a question at this time. Please press. The Star then one on your Touchtone telephone look your question has been answered or you wish to remove yourself from the queue. Please press the star one again, we are limiting each participants question to one however, please feel free to go back into queue and if time permits we will be more than happy.
Ana: To take your follow up questions at that time.
Robbie Marcus: And our first question comes from Robbie Marcus with JP Morgan.
Robbie Marcus: Oh, great. Thanks for taking the questions congrats on a good quarter.
Robbie Marcus: I wanted to ask about type two my rough math points to about 50% growth year over year at 30% growth quarter over quarter and type two patients in the U S.
Robbie Marcus: Just wanted to see if that's ballpark right and how to think about what its contributing in the trajectory throughout 2025, given the great exit point in 'twenty four.
Robbie Marcus: Thanks, Ravi Thanks for the question and thanks for your congrats.
As you know.
Robbie Marcus: Not breaking out specific numbers on NCS and growth rates by the two categories I will say that ever since we had the launch ever since we got the label in August we've had a really nice really nice response from the market. As you know we've always had type two is an important part of our business, especially with Omnipod Dash, we had a lot of off label use with Omnipod fiber.
Robbie Marcus: Before we got the label and we've seen a really nice ramp and Thats how type two that the 30% of new customer starts even with both type one and type two growing in the quarter, so, but we're not going to break out the actual splits on the growth rates.
Robbie Marcus: And comments on 25, and how you think it'll progress maybe just qualitatively.
Robbie Marcus: Yes, we're very bullish on 25 overall and we're really happy with the near term results. We're seeing in type two obviously to have it grow to that percentage of mix.
Robbie Marcus: Even in the balance of continuing to grow our new customer starts in type one.
Robbie Marcus: Really good early response.
Robbie Marcus: We're seeing growth in prescribers were targeting prescribers for type two in it. So as we said we saw we saw a clear lift in Q4 for doctors writing for type two so our growth in that and we're just we're just finishing the expansion of the sales force getting us into more call points. So we'd be reaching significantly more type two patients in those call points. So we think.
Robbie Marcus: Type two is a big growth driver for us in 'twenty five and in the years beyond given the size of the market and given of course that were first to market with a label, which gives us a clear advantage.
Jeff Johnson: We'll go next to Jeff Johnson Baird.
Jeff Johnson: Thank you good afternoon, guys congrats on the quarter as well so Jim I wanted to ask another question on to clear more of maybe a qualitative question.
Jeff Johnson: We've talked a lot of thought leaders over the past six to 12 months on Pfizer It seems like especially with the KOL level. There's a lot of excitement I think what we've heard coming out of the securities <unk> data, Here's why would I not asking everybody on all of my I conclude on.
Jeff Johnson: I'd just like I think I have two on May 21.
Jeff Johnson: Love to hear your kind of how you are hearing the next layer down of Docs talk about consumer first point, maybe those and those who are the thought leaders in the space on the PCP is that excitement to using AI assistant and tied to also grow in Alaska user population or I'm, sorry, the prescriber population. Thank you.
Jeff Johnson: Thanks, Jeff Yeah, where we're getting great feedback on Omnipod five inside <unk> first thing I'll say is patients love Omnipod five and.
Jeff Johnson: You know we saw that in our clinical trial.
Jeff Johnson: Even our investigators were surprised at how easy Omnipod five proved to be to use for the participants in the trial most of those patients wanted to stay on Omnipod five and we're seeing that as we got in the market and as we talked about over 2024, as we got close to getting the label.
Jeff Johnson: Some and those were already writing Omnipod five off label, but some some and those in our in our call point, where we're waiting for the indication. So we saw a clear lift as we got the indication for use and more and more as.
Jeff Johnson: Physician practices as the HCP see omnipod five in the real world see it in their hands put it on a patient we're very bullish on the adoption that we're seeing already and obviously those MDI patients who.
Jeff Johnson: We're using frequent injections of insulin it has a real it really removes the burden for them to go on Omnipod five, but we know physicians who are also already putting it on basal only patients because the algorithm is just so adaptive to the patient's needs. So there.
Jeff Johnson: There is an education process here, we do have to go develop this market. It is not until now really been expected to use pump therapy insulin pump therapy in the type two patient population and so we have to go out and drive awareness drive drive education show, how easy it is to us but the early reception is really really strong and I will note that the Ada.
Jeff Johnson: <unk> updated their guidelines to suggest patients should use type two patients on intensive insulin therapy should be offered aig's therapy and of course, we're the only one on the market with a label so that that should drive growth for us and we're getting great early reception.
Travis Steed: Well move next to Travis Steed at Bank of America.
Travis Steed: Hey, Thanks for taking my question I wanted to ask on the.
Speaker Change: For Q1 U S guidance I think you said, excluding all the stocking that was kind of mid to high teens in Q1.
Speaker Change: Just kind of little lower than I was thinking of just want to make sure. If that's just conservatism or are there kind of how you're building up the Q1.
Speaker Change: For U S.
Speaker Change: Yes, great Travis this is Anna.
Speaker Change: Are.
Speaker Change: Youre absolutely correct, the normalized guidance for the Destocking events back in <unk>.
2024 bring us to the mid to high teens and.
Speaker Change: That is.
Speaker Change: Also to consider that we do have that seasonality between the fourth quarter in the U S. In the first quarter, but more importantly.
Speaker Change: Our guidance philosophy has not changed and that is in line with the 60% to 20% that we're guiding for for the full year.
Speaker Change: We'll go next to Michael Polak at Wolfe Research.
Michael Polak: Hey, good afternoon. Thank you for taking the question.
Speaker Change: The guidance construction question. This sales force expansion that you're three quarters of the way through.
Speaker Change: How impactful is this for the guide meaning kind of what.
Speaker Change: What can you just go get today.
Speaker Change: And the guide versus what do you need from these incremental hubs to contribute to the U S growth this year.
Mike: Thanks for the question Mike.
Mike: The guide includes our planned rollout and the hiring is done really really well and our sales force expansion and as a reminder, it's not a separate for us for tier two versus tier one it's the same as selling model into more call point. So we're just expanding territories expanding rep head count.
Mike: Barry.
Mike: Very well established commercial model and so the fact that we've already through the quarter already hired 75% of those heads.
Mike: We're training them and we're filling those at pace. The guide encompasses an assumption that those reps are in place in a timely fashion.
Mike: Okay.
Speaker Change: We'll go next to Etsy Kirby at Redburn Atlantic.
Etsy Kirby: Hi, guys. Thanks for taking my question I, just wanted to ask about type payback on some of the early adopters that you're seeing both from a patient and physician perspective is there anything standing out in tons of container, sometimes therapy and the tight T cohort.
Speaker Change: And then just.
Speaker Change: Touch upon your marketing strategy and putting these direct to consumer needs scaling would love to get some more color on that.
Speaker Change: Yes.
Speaker Change: Sure. Thanks. This is great great to hear from you.
Jim Hollingshead: I'm not sure there's a clear pattern emerging yet about different segments of type two patients. What we're seeing is really strong reception across the board obviously as I said before in our in our kind of existing call points of endocrinology. Some of those physician practices, we're waiting for the label and so so we're seeing really clear tied to Omnipod five adar.
Jim Hollingshead: And those type two practices and then as we reached down into that layer of Pcp's, who are writing rapid acting insulin in a lot of CGM. We're also seeing really strong reception. There. So I don't think theres, yet the distinction about which patients are adopting I think it probably does tilt to the intensive insulin using MDI type two patients.
Jim Hollingshead: But as we get more experience, we'll be able to give more color or color on that point then on the DTC I think it's really powerful as we've said before a couple of times.
Jim Hollingshead: <unk> hundred five lends itself, so well to direct to consumer promotion, because it's so easy to use and it's so easy to adopt and train four and so on so it's much easier for us we have a clear advantage over our competitors to go out and talk about omnipod five because patients can see it and visualize how easy it is to us but in the past.
Speaker Change: Without having the indication for use for Omnipod five for type two we were generating a lot of leads from type two patients when they saw our DTC, but we couldnt actually offer them omnipod fiber route them to a physician who would offer them omnipod five because we only had the label for Omnipod Dash and so now what we're seeing is already an improved yield.
Speaker Change: We want to think about it that way where patients see our DTC they happen to be a type two patient and they come on and we can actually we can actually help them get onto Omnipod five and so we've we've been saying for a while that we think we get better yields out of our DTC and it's clearly paying dividends for us to be able to promote in that way. So we're reaching more physicians.
Speaker Change: Practices through the sales force expansion and we're reaching more type two patients who might be seen a position that we're not calling on and both arms of that promotional strategy I think are paying off.
Speaker Change: We'll take our next question from Patrick Wood at Morgan Stanley.
Patrick Wood: Perfect. Thank you so much I'll keep it to one I would love to unpack that a U S side and you guys gave some really good details there, but we try to back in December yes, mass training going very well so as to drive its option and clearly having a proper AI solutions.
Speaker Change: About five of the market's really helpful. Bob I'd love to sort of get a sense for midterm view of sustainability, there and how much is a function of omnipod five relative to like the speeding up of training just unpack a little bit.
Patrick Wood: Thanks, Patrick.
Patrick Wood: Pie five and we say this.
Speaker Change: Frequently omnipod five wins everywhere, we've taken and I think it's all of the benefits of Omnipod five. It's it's it's so discreet wearable waterproof disposable easy to learn to use provides great glycemic control, it's very unobtrusive and.
Speaker Change: And it has in most of the markets that we've launched in Europe, we have sensor choices. So theres a wide range of sensor choice for patients and will continue to drive that as we said in our prepared remarks, we'll be bringing the G. Seven.
Speaker Change: Sensor integration into the UK and Netherlands here in the first quarter and then continue to roll out <unk> seven is a very wide choice of sensor for patients.
Speaker Change: I think it opens up the market, we do see some conversions from Omnipod dash onto Omnipod, five, but mostly if you're already on a pump you're locked into a contract even if its on dash and so what we're seeing is it's omnipod five is reaching those MDI patients who have not wanted to try a pump because pumps are seen as difficult and when they see how easy it is to use on me.
Speaker Change: <unk> hundred five and maybe they are already on a CGM and they can just adopted it opens up a big portion of the market that previously would not have tried and that's what we're seeing and I think it is very sustainable.
Speaker Change: UK is going well, Germany continues to go well both past their anniversary still growing France, and Netherlands really great early adoption and already patients on product in our early launch markets and those are all going really well and as we continue to roll out we will continue to see Omnipod five winning every market. We take two is our expectation.
Speaker Change: Our next question comes from Margaret Kaczor with William Blair.
Speaker Change: Hi, everyone. This is <unk> on for Margaret Tonight, Thanks for taking our question.
Speaker Change: Wanted to go a different direction and ask on the discovery platform.
Speaker Change: It seems like the limited market release has already started as as you mentioned so wondering what the feedback has been thus far what those utilization trends have been like in the early days and ultimately.
Speaker Change: How we should think about that integration and rollout moving forward throughout the year.
Speaker Change: Yes, thanks for calling we're really excited about omnipod discover it is early days, we're just in limited market release.
Speaker Change: But we have really terrific response from both the physician practices, who are using it and from the patients who are using it so and we measure all of that.
Speaker Change: Does it is a cloud based platform, we test and measure of our responses and we have been running surveys on the users and so on and so very high net promoter scores.
Speaker Change: From both the practices and the patients.
Speaker Change: We're really excited to get this out out of the world and into the hands of more and more providers and patients. The point behind on me. If I discover is it allows us to it's a cloud based portal it's accessible through a browser. So you can see it in your workstation or on your computer if youre in a physician practice patients will typically access it through their smartphones.
Speaker Change: One, but through any smartphone as long as it has a browser they can they can access the portal and what it allows you to see if you're a patient you can see how using your insulin. It gives you tips and tricks. It tells you about patterns of usage and time and range in.
Speaker Change: So on so it really improves the experience gives patients more visibility into their own usage or therapy.
Speaker Change: And then for physicians you can see all your patients in the cloud really streamline straightforward reporting for physicians to see how their patients are doing and then of course it facilitates conversation. So the patient sees a data the physician sees the patient data and when they get together say in a physician visit they can talk about what do we hazard therapy going what are we seeing so we're really excited about it.
Speaker Change: <unk> workflows for docs.
Speaker Change: Really improves the patient experience on care for patients and we think it will drive retention and drive further market share for us.
Speaker Change: We'll go next to Larry Robinson at Wells Fargo.
Good afternoon, and thanks for taking the question.
Speaker Change: Jim you've seen the type two is it part of it as a percent of new starts to creep up.
Speaker Change: Sequentially now for almost two years each quarter over 30% now is the 35 to 40 can do you think you can go above that 35% to 40%, where you were with dash and at.
Speaker Change: It seems like I heard your comment that type one new starts grew also in Q4 in the U S is the type two launch having a halo effect on on on type. One is there any risk that the focus on type two.
Speaker Change: As you take your eye off the ball on type one thank you.
Speaker Change: Thanks, Larry Let me do those in reverse order.
Speaker Change: It's a huge strategic focus for us to continue to lead growth in both type one and type two and so.
Speaker Change: Our commercial teams our field force refurbished cycle laser on growing both sides of the business and the beautiful thing about Omnipod five platform products. So it's the same it's the same product for.
Speaker Change: For insulin users who are type one or type two patients right. So so that is a huge emphasis for us this year to continue to be the leader in type one and grow the type one market and be the first to market in type two and grow that as well in terms of the mix.
Speaker Change: I think over time, we will see type to continue to grow as a part of our mix and obviously you know this very well but.
Speaker Change: The total addressable market in type two is about three five times the size of the total addressable market in type one.
Speaker Change: How much runway left in type one still only about 40% penetrated.
Speaker Change: And people in type one are all MDI users and so there is 60% of that market ready for their burden to be reduced by Omnipod five therapy. The type two is a really big market. So we do think it will grow beyond 30% as a part of our mix, we haven't yet called kind of the ceiling on the mix, but we do we do expect it to grow welding.
Speaker Change: 30% and we expect to continue to grow both sides of the business in type one and type two with Omnipod five.
Speaker Change: Our next question comes from Murray Typo at PPI excuse me D. P. I G.
Murray Typo: Good afternoon, and thanks for taking the questions I wanted to ask here a little bit on the margin guidance certainly heard that you are looking to invest in R&D at that this year, but when I look at all the drivers that got you to this really strong gross margin and operating margin here in Q4, a lot of it looks like sustainable dynamics, and so I'm just kind of cures.
Speaker Change: Yes, nothing to sneeze at this 160 bps of expansion in 2025, but just kind of curious.
Murray Typo: Why not a little bit higher thanks for taking my questions.
Speaker Change: Yes, great.
Speaker Change: Absolutely listen we're very excited to grow op margin to 160 basis points.
Speaker Change: Some amount will come from gross margin as I've mentioned before as.
Speaker Change: As we have guided here to gross margin over 70% at 75%, which has been a longstanding goal of the company here, but.
But we're looking to invest in R&D.
Speaker Change: We're going to be proudly.
Speaker Change: In different parts of the cycle, 10% to 12% of our revenue will be in R&D, we are absolutely looking to.
Speaker Change: Sales and marketing, especially capitalizing here in the type two.
Speaker Change: And in the international launches. So so that will be areas that we invest our general and administrative expenses, we will see leverage and that gives us the confidence to guide here at 65% in the process of doing all of that of course, we will continue to expand our profitability and <unk>.
Speaker Change: Generate the free free cash flow as well too to self invest so where we're looking forward to strong margin expansion as we move here in 2025.
Speaker Change: Well go next to Mike Kratky at Leerink partners.
Mike Kratky: Hi, everyone. Thanks for taking our question one follow up on type two how are you thinking about how the competitive landscape could evolve in type two and 2025 and specifically is your expectation that youll have a dominant competitive advantage in that segment of the market even as other competitors get FDA approval.
Speaker Change: Specific factors to call out there.
Speaker Change: Yeah, Mike Thanks for the thanks for the question.
Speaker Change: As we've said before Omnipod five obviously, we're first to market and so our competitors do need to demonstrate and follow with their own clinical data in their own clearances, but.
Speaker Change: But we think Omnipod five just has inherent advantages overall, so omnipod five is the product that came third to market as AIB in type one and yet overtook all of the incumbent competitors.
Speaker Change: Ever since we launched on May five we brought more people off of MDI than all of our competitors combined and Thats been a very consistent trend that was true in Q4. It was true through all of 2024 and so so obviously, it's the winning offer in the market and then take that into type two where your typical type two patient has a lot going on and they tend to have a lot of comorbidities.
Speaker Change: <unk>.
Speaker Change: That's been a barrier for pump adoption already has that type two patients tend to lead pretty complicated lives just with their with the burden of conditions that they live with Omnipod five proved in security today to be so simple to use it really surprised both of participants and the investigators. So so as we go into into the type two mark.
Speaker Change: We're first to market with the product that overtook all of our existing competitors. So we are very confident in our position and we think we have a clear right to win in the type two market, even if our competitors are able to follow and get their own indications.
Speaker Change: Okay.
Speaker Change: We'll take Jason Bedford from Raymond James for our next question.
Jason Bedford: Good afternoon, and congrats on the progress here. So maybe just a quick one on the 25 guidance I appreciate the comment that new customer starts in the U S will grow year over year and 25, but I'm just wondering embedded in this forecast are you assuming that new type one users also grew.
Jason Bedford: Grow year over year or is all the growth coming from from the type two.
Jason Bedford: Thanks for the question Jason.
Jason Bedford: It's a strategic imperative for us to continue to lead and grow in type one and type two there's so much runway in type one in the U S. We're the clear market leader.
Jason Bedford: Overall and clear a clear leader in NCS and were first to market in type two so that's a strategic imperative for us we have not broken out in guidance with the splits look like but we're focused on growing both markets.
Next we'll move to Matt Taylor at Jefferies.
Matt Taylor: Hi, Thanks for taking the question.
Matt Taylor: I wanted to kind of check the box on this one I think some investors are concerned about.
Matt Taylor: And the pharmacy channel and pricing and so I wanted to see if you could give us an update there and maybe okay.
Matt Taylor: Answer the question for an investor who might be worried about that in the future talk about how you see that playing out and why those arent major risks for you. How can you how you can defend against that with your modem.
Matt Taylor: Yes.
Speaker Change: Yeah. Thanks, Matt we have inherent advantages in the pharmacy channel that kind of there are multiple sides to that the first thing is we have a lot of experience now in the pharmacy channel and.
Speaker Change: We first we first started our work to enter the pharmacy channel and the 20 teens, we signed our first contract.
Speaker Change: Seven years ago, I think $2017 77, five years ago 2017.
Speaker Change: Then ramped coverage and it took us a few years to get coverage, we were doing that first with Omnipod Dash and then with Omnipod five. So we're now 95% covered lives with the pharmacy benefit. We're also the only <unk>.
Speaker Change: Insulin delivery third the only AI E therapy on the market that has part D reimbursement, which is really really important so we get reimbursed through the pharmacy benefit as opposed through the Dnb Hicks fixed benefit and so that's a clear advantage and then on top of that so we have a lot of experience. We built a lot of muscle and organizational capabilities, we actually have the right way.
Speaker Change: <unk> category, our product fits the pharmacy channel because you go and pick up your pods in a box.
Speaker Change: Where you get your insulin and so it's a very straightforward kind of pharmacy style experience for our customers.
Speaker Change: And we have relationships with all the Pbms and then <unk>.
Speaker Change: Pbms make money on volume and rebate and we do significant volume through the pharmacy channel. So.
Speaker Change: We have very good relationships and we also have.
Speaker Change: Beneficial contracts in both directions for us so.
Speaker Change: We feel very confident in our position we think pharmacy is a very clear moat. We're very conscious that we have a number of competitors talking about how they can do it they have to do all those things they have to build the muscle they have to get the contracts. They have to get the coverage. They also have an inherent disadvantage in that a durable pump does not fit the pharmacy channel very well it doesn't fit it in terms of stocking and delivery.
Speaker Change: Patient experience it doesn't fit in terms of revenue recognition and co pay and pay as you go economics and so.
Speaker Change: We are conscious that competitors are trying to follow almost everything we do for that matter. We're very we're very mindful and respectful of our competitors, but we think we have very distinct modes that we built around the pharmacy channel.
Speaker Change: Well move next to Matthew O'brien with Piper Sandler.
Speaker Change: Hey, this is Phil on for Matt Thanks for taking our questions and congrats on a really nice Q4, I just wanted to dig in on the domestic guidance for the full year, maybe a little bit more.
Speaker Change: Guiding U S omnipod to call it, 18%, which is lower than last year and a year that we'll see full contribution from type two iOS Libre integration I guess would be a tailwind as why is high teens. The number the right place to set expectations, especially as it relates to be in the <unk>.
Speaker Change: First mover in that quite honestly massive type two opportunity.
Speaker Change: Great. Thanks for the question, we do not feel like we're slowing down we will for sure be.
Speaker Change: Accelerating, especially after year progresses I wanted to take a step back in the U S for a second and comment a little bit on some dynamics, we anticipate our growth to come from volume.
Speaker Change: In 2024, we were not 100% in the pharmacy channel. So at the beginning of the year as we progress through the year. So in the earlier quarters.
Speaker Change: We had some benefit back in 2024 from price and that is not that's a headwind as we look at various of growth.
Speaker Change: That normalizes as we go through the year as as of the third quarter pretty much almost 100% of our volume was going through pharmacy. So that's one consideration there is a little bit of a price headwind, but not that there's a headwind. It's just as you do it as a comparison.
Speaker Change: We are extremely excited by our guidance.
Speaker Change: Internally here is completely.
Speaker Change: Striving for the high end of our guidance.
Speaker Change: And we will continue to update.
Speaker Change: The year progresses, and and we're very excited by the.
Speaker Change: The 16 to 20 and of course, Amy as always for the high end of our guidance.
Speaker Change: Yeah, and I'll, just add Phil we have a pretty strong track record of achieving our goals and so we're focused like a laser on continuing to deliver growth. We were really happy to deliver our ninth straight year of 20% plus growth on the top line and we have strong ambitions for continuing to grow the business.
Speaker Change: Okay.
Speaker Change: We will take our next question from Chris Pasquale with Nephron research.
Chris Pasquale: Thanks, I wanted to push a little bit on the margin guidance. So if my math is right. Your 24 gross margin would have been just slightly below 75, if not for that one time charge back into queue. So guidance is effectively calling it for to be flat, despite malaysia ramping despite improved pricing or U S. So can you talk a little bit.
Chris Pasquale: About the offsets there and then maybe more importantly, now that you've reached 70% milestone how much higher do you think you can get gross margin longer term should we expect it to flatten out in this area or is it an opportunity to go meaningfully higher.
Chris Pasquale: Yes, no great.
Chris Pasquale: We're very proud of that achievement of the fourth quarter being at 72%.
Chris Pasquale: Gross margin in guiding to the 75 and the team has done a fantastic job as I've mentioned before we benefited from tailwind to have pricing that has helped our gross margin expansion and now we're achieving.
Chris Pasquale: <unk>, leading level here and we're going to continue to push growth at a more moderate level.
Chris Pasquale: Youre absolutely correct with the Omnipod go charge it gets us close I do want to point headwind.
Chris Pasquale: That that it's out there as everybody knows our international.
Chris Pasquale: Pricing is lower than our U S and as I as we.
Chris Pasquale: Materialized in 2024, we grew faster than international and U S. At the mix and as we look at the full year guidance here for 25 that the teams so that presents a little bit of a headwind in terms of.
Gross margin, but we're looking to more than offset that by improvements in our manufacturing by our Malaysia facility.
Chris Pasquale: Becoming accretive here into the second half of 2025, and we're really positioned well to continue to drive our growth margin into the future, but I would go back and I indicated it's going to be at a much more moderate pace now that we're at industry leading levels.
Speaker Change: We'll take our next question from Joanne words at Citi.
Joanne: Good evening and thank you for taking the question.
Joanne: I'm fascinated by the questions that have been answered or asked so far because it follows our conversations with investors and so I'm going to pose to you what I'm frequently asked witches, which is more important over the next 12 to 18 months for revenue growth is it tied to any adoption here in the United States.
Joanne: Or is it the international opportunity and would that answer would be different if we go past the 18 month timeframe.
Joanne: Thank you.
Joanne: Joining us.
Joanne: It's a great question and what I'll say is the reason we've laid them.
Joanne: Fact, we lay that all out of strategic imperatives, right, we're going to our three imperatives are to extend lead with the platform you know drive drive the platform lead growth in type one and type two in the U S. Both of those are big markets that have lots of growth available and then international rollout is big and so we haven't we've very deliberately not tried to put it.
Joanne: Premium on geography in terms of growth because theres, so much growth opportunity and what I would say is we're really excited about being able to provide more color on all of that in June at our Investor day. So I hope you'll be able to come on June 5th active and join us for Investor Day.
Joanne: This concludes our Q&A session I would like to turn the conference back to Jim Hollingshead.
Jim Hollingshead: Thank you all for joining US today, we're really excited about the path for Insulet ahead, and we look forward to updating you as we make progress against all of these strategic objectives I just want to again reiterate migrate gratitude to the entire global Insulet team for your dedication and hard work.
Jim Hollingshead: <unk> delivered a ton to our patients in 2024, and I look forward to continuing to reach more patients and grow the business in 'twenty five and beyond thank you everybody.
Jim Hollingshead: Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful call you may all disconnect.
Jim Hollingshead: Okay.
Jim Hollingshead: [music].
Jim Hollingshead: Sure.
Jim Hollingshead: [music].
Jim Hollingshead: Okay.