Q4 2024 Tandem Diabetes Care Inc Earnings Call
Thank you.
Warren.
Speaker Change: Good day and welcome to the Tandem Diabetes 4th Quarter and Year-End 2024 Earnings Conference Call. At this time all participants are in a listen-only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Susan Morrison, Executive Vice President and Chief Administrative Officer.
please go ahead.
Susan Morrison: Hello, everyone, and thanks for joining Tandem's fourth quarter and year-end 2024 earnings call. Today's discussion will include forward-looking statements.
Susan Morrison: These statements reflect management's expectations about future events, our product pipeline, development timelines, and financial performance and operating plans, and speak only as of today's date.
Susan Morrison: There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements.
Susan Morrison: A list of factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is highlighted in our press release issued earlier today and under the risk factors portion and elsewhere in our most recent annual report on Form 10-K.
Susan Morrison: We assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or other factors.
Susan Morrison: Today's discussion will also include references to a number of GAAP and non-GAAP financial measures.
Susan Morrison: Non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operation.
Susan Morrison: We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods.
Thank you very much.
Susan Morrison: Any non-GAAP information presented should not be considered as a substitution, independently or superior, to results prepared in accordance with GAAP.
Susan Morrison: Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.
Susan Morrison: Participating on today's call are John Sheridan, Tandem's President and CEO, Mark Novara, Executive Vice President and Chief Commercial Officer, and Leigh Vosseller, Executive Vice President and Chief Financial Officer.
Speaker Change: Following their prepared remarks, the operator will open the call for questions.
Speaker Change: Thank you in advance for limiting yourself to one question before getting back in the queue. I'll now turn the call over to John.
John: Thanks, Susan, and thank you, everyone, for joining us on today's call.
Speaker Change: 2024 was a pivotal year for Tandem, marked by an impressive 18% increase in worldwide sales. I am proud that we set new sales records, both in the U.S. and internationally, while delivering industry-leading customer satisfaction and expanding our portfolio of technology solutions.
Speaker Change: The highlight of the year was the introduction of our category-defining platform, Tandem Mobi, which experienced continued growth throughout 2024 as awareness of our newest offering increased.
Speaker Change: Additionally, we implemented operational efficiencies that set the stage for sustained profitability in 2025 and beyond.
Speaker Change: These achievements were made possible thanks to the resilience, perseverance, and hard work of our employees.
Speaker Change: Thank you, everyone, including our distributors, suppliers, clinical partners, for your continued dedication and efforts that contribute to furthering our mission.
Speaker Change: Tandem now offers the most robust ecosystem in insulin therapy management in the world. With our flagship T-SLIM and Tandem Mobi, we provide the greatest choice in pump platforms.
Speaker Change: We offer customers a seamless cloud-based experience with our apps and operating system support, and enable HCPs with our web-based data management platform, TandemSource.
Speaker Change: We also integrate with multiple leading CGM sensors, and next month, we will launch our third automated insulin delivery algorithm with Control IQ+.
Speaker Change: Control-IQ has long been considered the best automated insulin delivery algorithm with more than 240 million patient days of data logged in our system and 70 plus peer-reviewed manuscripts and published abstracts.
Speaker Change: Over the past five years, it has provided immediate and sustained results across all patient populations. Now we're raising our own bar with the launch of CTRL-IQ+.
Speaker Change: Control IQ Plus offers superior glucose control and best-in-class outcomes by predicting, calculating, and adjusting insulin doses, including delivering automated correction boluses.
Speaker Change: Driven by customer feedback, we have added new clinical features, such as an extended bolus lasting up to 8 hours, and the option to set a temporary basal rate.
Speaker Change: Activating Control IQ Plus is easy. We have introduced a simple setup wizard that allows users to set it in accordance to AACE guidelines, switch it on, and witness immediate results.
Speaker Change: This is particularly beneficial to people coming from MDI. In the U.S., customers also are now able to choose between English and Spanish.
Speaker Change: Control-I-Q-Plus was originally approved for individuals with type 1 diabetes age 2 and older.
Speaker Change: As highlighted in yesterday's press release, we're excited that it is now FDA cleared for people living with type 2 diabetes 18 years and up.
Speaker Change: This more than doubles our addressable market in the United States, positioning us for significant long-term growth. This expanded label indication encompasses all insulin-requiring people with type 2 diabetes and is based on a recently completed pivotal trial.
Speaker Change: This trial represents the first large-scale, randomized, controlled study of an automated insulin delivery system in more than 300 people with type 2 diabetes.
Speaker Change: Full study results will be presented at the International Conference of Advanced Technologies and Treatments for Diabetes in Amsterdam next month.
Speaker Change: With Tandem's robust expanded portfolio, we also began executing a multi-channel pair strategy with the addition of the pharmacy channel.
Speaker Change: which we expect will ensure our best-of-class products are matched with ease of access and improved affordability. We also began investing in important commercial initiatives to fortify our business fundamentals and advance our short and longer term sales and profitability goals.
Speaker Change: For instance, in the fourth quarter, we initiated recruitment efforts to support a strategic sales expansion and territory realignment, which took effect at the beginning of this year.
Speaker Change: We identified opportunities to modernize the tools and systems used by our commercial teams, enhance their efficiency and effectiveness,
Speaker Change: Additionally, leveraging the robust performance of our OUS business and recognizing the vast potential within the markets we serve, we have begun a multi-year transition to direct commercial operations in select European countries.
Speaker Change: Overall, 2024 was a successful year for Tandem with a return to growth. Importantly, we also initiated fundamental changes to key business processes, broadened market access options, and expanded organizational capabilities to accelerate revenue growth and profitability in 2025 and beyond.
Speaker Change: And taking a deeper look at the fourth quarter, there are many wins to celebrate. Outside the U.S., we delivered strong, double-digit growth driven by demand for the T-Slim pump platform.
Speaker Change: In the U.S., we saw strength from both T-SLIM and Mobipump platforms, and in key performance indicators, such as year-over-year growth in the customers coming from multiple daily injections and customers renewing from tandem once again.
Speaker Change: Our winds in the quarter also came with some challenges. The fourth quarter in the U.S. did not come together as anticipated. We experienced more muted seasonality in the last few weeks of the year, where historically we have seen acceleration throughout December.
Speaker Change: Additionally, shipping delays by carriers who did not deliver to customers before the end of the year as planned impacted the timing of revenue reporting. Despite these factors, the underlying trends of our business remain strong and favorable.
Mark: I will now ask Mark to provide more additional detail on the Commercial Insights. Mark.
Thank you, John.
Speaker Change: When I joined Tandem just over a year ago, we put a commercial strategy in place to maximize our portfolio of innovations.
Speaker Change: galvanize the customer experience and fortify our international efforts to become truly global.
Speaker Change: Our strategy remains fully intact and we achieved meaningful progress delivering on it in 2024, and most importantly, set ourselves up well for the longer term.
Speaker Change: Starting with maximizing our portfolio, in 2024, we demonstrated our commitment to bringing new innovation to market with the launch of a new pump platform and multiple new CGM integrations.
Speaker Change: We also scaled TandemSource, which is now used by more than 90% of our U.S. prescribers, and began offering it outside the United States.
Speaker Change: The expansion of our AID portfolio with the U.S. launch of Tandem Mobi was a particular highlight. Mobi is an expansion to our portfolio, largely attracting customers who otherwise may not have selected Tandem.
Speaker Change: At half the size of T-Slim, the same weight as two AA batteries, and the size of an AirPod case, Mobi is defining a new category in AID technology.
Speaker Change: Its tiny form factor, coupled with mobile app operation, and the flexibility to be worn as many as 20 different ways, including the ability to detach.
Speaker Change: provides patients with an entirely new value proposition in wearability backed by the best-in-class Control IQ.
Speaker Change: This new value proposition is attracting a younger population to AID therapy and earning Movi excellent feedback from both healthcare providers and Movi customers.
Speaker Change: This was reflected in DQ&A's recent survey where Moby was rated number one in size, comfort, and wear during physical activity.
Speaker Change: I am proud of the Start2Mobi launch, which we plan to continue building by amplifying awareness and trialing of this exciting technology, offering greater access and expected affordability through the Pharmacy Channel and by expanding its feature set.
Speaker Change: We also continue to have high expectations for our flagship T-Slim pump.
Speaker Change: which has a strong fan base with both new and renewing customers. Its 300-unit cartridge, broad CGM and phone compatibility, and all-in-one touchscreen use provide high satisfaction and allow for Tandem to meet different needs in the diabetes community.
Speaker Change: We now have more than 320,000 in-warranty customers in the United States. And the way we serve them is a differentiating factor per tandem.
Speaker Change: As a result, we delivered double-digit growth in renewal customers, both sequentially and year-over-year, while delivering an industry-leading customer satisfaction score.
Speaker Change: For the first time, Tandem won Seagrove's People's Choice Award, leading in four out of the eight categories surveyed, including Favorite Punk.
Speaker Change: In DQ&A, Tandem had the highest Net Promoter score, outperforming all other competitors. This reflects our deep dedication and commitment to delivering a best-in-class customer experience.
Speaker Change: Turning to our business outside the U.S., where we now have more than 160,000 in-warranty customers.
Speaker Change: Our consistent outperformance this year was driven by high demand for our T-Slim X2 pump. And under new international leadership, we advanced how we work with our distributor partners and strengthened our commercial capabilities.
Speaker Change: It's also a reflection of the large and underpenetrated nature of the countries we serve and the future opportunity in these regions.
Speaker Change: As we look to 2025 and beyond, we are well positioned to drive and scale our commercial strategy.
Speaker Change: The worldwide AID market has more competitors, larger sales forces, and more insulin pump offerings than ever before.
Speaker Change: 2024 highlighted this as an opportunity to invest in foundational capabilities that we are capitalizing on for the year ahead to increase our share of voice, continue driving sales force and overall commercial effectiveness, and improve how we service those markets.
Speaker Change: In the U.S., we have successfully executed a strategic realignment and expansion of our sales and clinical teams.
Speaker Change: This optimization enhanced efficiency while increasing our share of voice in high-priority growth accounts.
Tandem's technology is incredibly exciting and innovative.
Speaker Change: and we recognize this is a promotionally sensitive market. So, now is the time to invest selectively and responsibly to amplify our market presence
and enhance both the customer and employee experience.
Speaker Change: We have enhanced our structure, targeting strategy, modernized our practices, and equipped our teams with new capabilities and tools to drive commercial excellence.
Speaker Change: These initiatives were piloted with our field team in 2024, are now being rolled out, and we expect to see increasing benefits starting in the latter half of this year.
Speaker Change: Another exciting opportunity for Tandem is our scaling pharmacy channel initiatives. 2025 marks the first year that Tandem is able to offer multi-channel durable medical equipment and pharmacy benefit plan coverage.
Speaker Change: Our team exceeded our market access goals for 2024 by signing multiple meaningful contracts with leading PBMs, and we now have approximately 20% of U.S. lives covered under pharmacy agreements for a mix of commercial and government lives.
Speaker Change: We believe this is a win for Tandem, and most importantly, a win for patients who previously stayed on multiple daily injections due to cost barriers.
Speaker Change: Driving scalable growth in pharmacy is a top priority for our business this year as we work to drive broader access and sustainable growth.
Speaker Change: Pharmacy is also strategically important as we increase our focus on supporting people living with type 2 diabetes.
Speaker Change: where cost is also a barrier. To help drive change so that cost does not prevent people from getting the therapy they want and need, we are active in a coalition as well as industry efforts to establish a sustainable Medicare pathway to broaden coverage for people living with type 2.
Speaker Change: Addressing the needs of the Type 2 insulin-dependent population is a strategic imperative for Tandem, and one that provides long-term growth opportunities.
Speaker Change: With Control-IQ+, Type 2 Indication, now FDA cleared, the size of our addressable market has doubled. As a reminder, more than 30,000 people with Type 2 use Tandem's technology today, and we've seen this success without any dedicated marketing or sales efforts.
Speaker Change: Our recently completed randomized clinical trial will serve as a powerful foundation for promotion post-clearance, highlighting key differentiators that set us apart in this market.
Speaker Change: We also recognize the needs of this population can be different than people living with type 1, and we are committed to serving them with tailored solutions.
Speaker Change: We will soon begin Type 2 pilot launch activities that will scale based on our key performance indicators.
Speaker Change: Turning to our business outside the United States, we are continuing to scale our presence in the countries we serve.
Historically, our sales have been exclusively through distributors.
Speaker Change: In 2024, we began laying the groundwork to expand our international presence by onboarding new talent to our regional and in-country commercial teams while continuing partnerships with our in-region distributors.
Speaker Change: To build upon this model and drive further growth, we are preparing to initiate direct sales, training, and customer support in select European countries starting in 2026.
Speaker Change: Acknowledging that such transitions can cause some disruption, we are working closely with the distributors to minimize impact for all parties involved, particularly prescribers and tandem pump users.
Speaker Change: This is a natural step in our maturation as a medtech company and one that is intended to strengthen our financial position by accelerating sales growth and driving margin expansion.
Speaker Change: It's also an opportunity to gain greater direct insights and deepen relationships within the European diabetes community, which is a priority for us as we build out our teams to support local efforts and establish global leadership.
and John Sheridan. Thank you. Thank you.
Speaker Change: As you can see, we have entered a transformational phase for our commercial organization and for Tandem.
Speaker Change: These steps are critical as we continue to maximize our portfolio, expand our addressable market, increase our competitiveness both near and long term, and improve the lives of people with diabetes worldwide.
Speaker Change: I'd now like to turn the call over to Leigh to share some more information on our Q4 results and expectations for 2025. Leigh?
Leigh: Thanks, Mark. As a reminder, unless otherwise noted, the financial metrics I'll be discussing today are on a non-GAAP basis.
Leigh: Reconciliations from GAAP to non-GAAP results can be found in today's earnings release as well as on the Investor Center portion of our website.
Leigh: This sales performance was driven largely by a strong double-digit increase in pump shipments.
Leigh: Starting with color on the U.S. market, in the fourth quarter we shipped more than 24,000 pumps and generated sales of 184 million, representing 13% year-over-year growth.
Leigh: On a full-year basis, sales were $642 million. Pump shipments of nearly $81,000 for the year increased 10% due largely to the Mobi launch and strong retention of our customers through renewal purchases, while pump sales increased 13%.
Leigh: This differential is due to improvements in average selling prices, benefiting from continued price increases, and favorable mix within the DME channel across the year.
Leigh: We are now consistently seeing nearly 40% of our U.S. pump and supply business through direct contracts versus 36% a year ago.
Leigh: When looking at our sources of business during the year, we continue to see positive trends into the fourth quarter. Renewals and new starts from MDI conversions are two key metrics that are foundational to meeting our long-term growth objectives, and we delivered on both fronts.
Leigh: Renewals continue to meet historically high retention rates on pace for consistent achievement of 70% capture within 18 months of warranty expiration.
Leigh: Renewals were the greatest driver of pump growth, but we are exiting 2024 encouraged by our trajectory with Mobi, driving more MDI users to pump therapy.
Leigh: MDI conversions in 2024 grew double digits and made up greater than 60% of our new starts overall.
Leigh: Q4 also marked the conclusion of our Tandem Choice Program, which as previously discussed, was an opportunity for eligible TESOLmx2 customers to switch to MOBI upon its availability earlier this year.
Leigh: As a reminder, reported pump shipments and non-GAP financials do not include any impact from the program.
Leigh: There were essentially three stages of this program. On a gap basis, we deferred a portion of the sale for each eligible X2 customer over the course of approximately 18 months prior to selling Moby.
Leigh: Upon launching MOBI this year, we ceased deferring any portion of X2 sales and began recognizing sales and cost of goods sold with each individual election to switch to MOBI.
Leigh: Now that the program is complete, we captured all remaining X2 sales deferrals in the fourth quarter totaling $30 million.
Leigh: For further details on the GAAP accounting for this program, please refer to the accounting policy discussion in our 10-K.
Leigh: Turning to our results outside the United States, we shipped approximately 40,000 pumps for the full year and grew sales to 268 million, which is a 39% increase year over year.
Leigh: In the fourth quarter, we shipped approximately 10,000 pumps and grew sales 48% to $68 million.
Leigh: Similar to the U.S., our OUS pump and supply sales benefited both from volume and price increases.
Leigh: The majority of our pump sales continue to be driven by customers new to Tandem with strong demand for T-SUM X2. Renewals will begin to offer more meaningful contribution in 2025.
Leigh: Moving on to margin performance, our 2024 gross margin was 51%, consistent with 2023, while absorbing headwinds associated with the Moby launch.
Leigh: As expected with scaling volumes, Moby Pump manufacturing costs per unit continue to improve across the year and will begin to benefit gross margin as we enter 2025.
Leigh: This positive contribution from Moby will build in the coming years and become more meaningful as we increase the mix of Moby pumps we are selling.
Leigh: Additional leverage will come from MOBI cartridge scaling in 2026 and beyond as the size of the ordering install base is expected to grow.
Gross margins also benefited from favorable ASPs across all products.
Leigh: For the full year of 2024, our adjusted EBITDA margin was consistent with 2023 at negative 1% of sales, which included increased spending year-over-year to support the MOBI launch and clinical trials for new products and indications.
Leigh: The adjusted EBITDA margin also reflects initial investments to commence the expansion of our footprint in the U.S., as well as build infrastructure to support direct operations outside the U.S.
Leigh: Even with these investments, 2024 marked a return to positive free cash flow, which is early evidence of our dedication to improved financial strength in the coming year.
Leigh: We ended the year with $438 million in total cash and investments and are confident in our ability to support key operating and non-operating commitments in 2025, including debt repayment of convertible notes due and final AMF purchase obligations.
Leigh: Turning to guidance, with Tandem Choice behind us, we are returning to GAP guidance for 2025, which will be most directly comparable to the non-GAP results we provided in 2024.
Leigh: Worldwide sales are expected to be in the range of 997 million to just over 1 billion or 10 to 11 percent growth year-over-year. This contemplates the impact of certain factors that are critical to meeting our long-term sales ambitions that may create some level of disruption in the near term.
Leigh: In the U.S., our sales for 2025 are expected to be in the range of $725 million to $730 million, or growth of 13 to 14 percent.
Leigh: This growth and new pump starts will be driven by continued traction with MOBI and other new product innovations.
Leigh: We will continue to vigorously pursue improved market access for our expanded Type 2 label in the Medicare population, expecting only modest contribution in the meantime.
Leigh: Our move into the Pharmacy Channel is important for addressing affordability concerns, and we have a strong start with approximately 20% of covered lives under contract.
Leigh: We have not included material benefit from pricing or volume at this time.
Leigh: We will continue to gather and assess data related to new product adoption and channel utilization to inform updates to our guidance in upcoming quarters.
Leigh: As a reminder, both pump and supply shipments typically reflect seasonal patterns across the quarters, which is associated with insurance dynamics in the U.S.
Leigh: For example, first quarter pump shipments typically decline from the fourth quarter by 25 to 30 percent. Accordingly, sales for the first quarter are expected to be in the range of $144 million to $147 million, representing 10 to 12 percent growth year-over-year.
Leigh: The remainder of 2025 is expected to follow historical seasonal patterns where both pump and supply sales scale up across the year.
Leigh: Sales outside the U.S. for 2025 are expected to grow 2-4% to a range of $272 million to $277 million.
Leigh: This reflects the tremendous market expansion opportunity ahead, balanced with the potential for disruption as we prepare to go direct and select European countries.
Leigh: Our sales assumptions factor in $15 to $20 million of potential headwinds later in the year as we navigate this transition ahead of our planned 2026 launch.
Leigh: In the first quarter, we anticipate minimal disruption and therefore expect sales of $75 million to $77 million from strength in these markets.
Thank you for watching. See you next time.
Leigh: We expect to demonstrate our greatest progress in recent years in both growth and adjusted EBITDA margins. While I have outlined today certain investments we are making for growth, we have meaningful efficiency initiatives underway through greater automation, process improvement, and increased use of technology to support our customers.
Leigh: The savings expected to be generated will allow us to fund the commercial investments while expanding margins.
Leigh: We expect gross margin to be approximately 54% for the full year and 51% in the first quarter, including minimal anticipated impact of tariffs, driving towards our long-term target of 65% where Moby will be the greatest contributor.
Leigh: Adjusted EBITDA margins are expected to improve to approximately 3% of sales for the year or an improvement of four percentage points from 2024 with the low in the first quarter at approximately negative 6% of sales.
John: I'll now hand the call back to John for closing remarks.
John: Thanks Leigh. Alongside our operational and commercial strategies to propel business growth, we are unwavering in our dedication to innovation and focus on new technologies that will bring the greatest benefits to our people with diabetes.
John: In 2025, we will further expand our portfolio by launching new technology solutions.
John: First is our integration with Freestyle Libre 3+, with T-Slim, followed by Mobi, and then next is the introduction of Android app for control for Mobi.
John: Additionally, I am thrilled to announce that we have already submitted MOBI for CEMark and are on track to launch it outside the U.S. by the end of the year. The international launch of TandemSource, currently underway, will enable the scaling of MOBI's global expansion.
John: Another key regulatory filing to highlight is our initial FDA submission for our steady set infusion set.
John: We are pursuing a three-day indication as a first step in our regulatory strategy for longer wear times, with additional filings to support our product targets.
Our commitment to innovation and growth also extends beyond 2025.
John: We are enhancing the features of both T-SLIM and MOBI platforms.
John: For T-Slim, it's continuing to keep our flagship platform modern and competitive. For Mobi, we are prioritizing the development of a tubeless infusion site that offers even more wearability options, which will be the next significant pump enhancement available within our portfolio.
John: Beyond that, we plan to further expand our portfolio with a third pump platform, SIGGY. SIGGY is an ergonomic and rechargeable patch pump. We are beginning to accelerate its development in San Diego, leveraging the expertise of our advanced pump development team, and we are excited to bring this differentiated technology to the market.
John: We remain steadfast in our commitment to offer the best performing fully closed-loop algorithm with industry-leading outcomes and minimal user burden.
John: To further this goal, we recently signed a multi-year collaboration agreement with the University of Virginia Center for Diabetes Technology to advance research and development efforts on fully closed-loop insulin delivery systems.
John: This exciting collaboration will build on ongoing research as we continue our successful partnership to deliver new innovations.
John: As you can see, 2025 is positioned to be full of tremendous opportunity for tandem. The strengths that have driven meaningful growth for us in the past are once again in place today. These include having a differentiated portfolio of technology solutions,
John: our industry leading customer service and our best in class automated insulin delivery algorithm.
John: These drivers, coupled with our actions underway to fortify, strengthen, and grow our business, include our expanded sales force with modernized tools and systems, increased pharmacy channel access,
John: scaling growth into type 2, preparation for direct sales in Europe, and the most exciting pipeline in diabetes.
John: Each of these is an exciting opportunity independently. Together they position us for near and longer-term profitable growth as we create new possibilities for people living with diabetes.
Thank you for supporting Tandem through this exciting transformation.
Operator, will you please open the call up for questions?
Thank you for joining us.
John: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To withdraw your question, press star 11 again. Due to time restraints, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster.
Leigh Vosseller, John Sheridan, Susan Morrison
John: And our first question will come from the line of Matthew Blackman with Stiefel. Your line is open.
Matthew Blackman: Good afternoon, everybody. Thanks for taking my question. Leigh, I was going to give you a multi-part question. Apologies that we're starting off like that. I was hoping to get you to, if you could quantify, I think you called out 4Q shipping delays. Could you quantify that for us and whether that was on both the pumps?
Matthew Blackman: and the supply side and and then also the December trends being softer just any thoughts there on why and to the extent you want to give us some commentary beyond obviously the one cue guidance how things are looking
Matthew Blackman: in early 25 on that front. And then on the guidance, I just want to confirm, I think I heard it, but is type two baked in there? Is Libre baked in there? It didn't sound like it. And just any clarification on what's in there and what would be potentially upside. I'll leave it at that. Thank you.
Thanks Matt, certainly a lot packed into that question.
Matthew Blackman: So I think I will start with a few comments on the fourth order.
Matthew Blackman: And so, to your point, asking about where the shortfall came from, the majority of it really came from the fact that we saw a muted seasonal curve in December. So, if you think about the last few weeks, and as we normally look at seasonal trends, it not only grows across the quarters, but even across the weeks within the fourth quarter.
Matthew Blackman: December was still by far the largest shipment month we had for the year. It was really just those last few weeks that fell short. And it showed growth year over year.
Matthew Blackman: And so the comment about the shipping delays, it was a contributor. It was not the most meaningful, but it was important just to call out compounding, you know, what we were seeing at the end of the year.
Matthew Blackman: And we did take those considerations or take those into consideration as we thought about how to set the guidance for 2025. None of it took away from our enthusiasm, our confidence in continuing to grow the market. We still saw great strength in MDI. We still saw great traction with our renewal opportunities. And those are the fundamental key performance indicators that we expect to drive the business going forward.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Steve Lichtman with Oppenheimer. Your line is open.
Steve Lichtman: Thank you. Evening, guys. I guess for my one question, I wanted to touch on pharmacy. A lot of progress.
Speaker Change: that you noted there. Can you talk about the next steps for that initiative? Any 2025 goals on coverage you can share and how you see, now that you're at that 20% mark, how you see that playing out here in the coming quarters? Thanks.
Speaker Change: Thanks for the question, Steve. I'll take that one. So, yeah, I think, you know, we're really focused on pharmacy. We recognize that out-of-pocket cost matters and, you know, we're really pleased with the strong progress we're making, you know, in the pharmacy.
Speaker Change: You know this year is the first year that we can offer multi-channel DME and pharmacy benefit plan coverage and you know the good news is we now have patients receiving product through the pharmacy.
Speaker Change: It's a really important step. It's a win for Tandem, certainly because we believe that it allows us to offer better access and experience, and we do think it'll help us with our win rate with both healthcare professionals and patients, but it's obviously a huge win for Tandem.
Speaker Change: patients, right, because those that have, you know, been on MDI and haven't been able
Speaker Change: to go on to cost barriers, you know, it's been something we've been focused on. So, yes, we've signed multiple contracts with leading PBMs, that translates to roughly 20% of covered lives across various lines of business, both commercial and government.
Speaker Change: And, you know, we're activating our co-pay assistance capability as well to serve that market. So, you know, we have those plans, obviously, pulled through that with our field teams. And, you know, for this year, drugging scale and efficiency in the pharmacy remains a top priority.
And just one moment for our next question.
Speaker Change: And that will come from the line of Brooks O'Neill with Lake Street Capital Markets. Your line is open.
Speaker Change: Hey, good afternoon, guys. This is Aaron on the line for Brooks. Thanks for taking my question. You've mentioned in the past that the Moby Pump compared to Teeslin in the long term will be roughly 10% to 15% lower manufacturing costs, and the cartridge being about roughly 20%. Can we expect to see some meaningful margin improvement from those conversions this year? Recognizing the guide does call for margin improvement, but just looking to digest that a little bit. Thanks, guys.
Sure, thanks for the question, Erin.
Speaker Change: So you do have it correct in terms of the ultimate at scale, lower manufacturing costs for Mobi compared to T-Slim. As we built up this year, we were facing headwinds with Mobi having that higher per unit cost, mostly because of the overhead that we were absorbing. But I can say as we exited 2024 and going into 2025, the pump itself will start to become accretive, and that's part of the contribution to the margin improvement in 2025.
Speaker Change: The cartridges, on the other hand, still have a way to go before they scale up enough to start showing that benefit, which will begin in 2026. And so this is a multi-year margin expander for us, but everything that we're seeing, we're absolutely on the right track to achieving those targets for the MobiBump.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Met Mixic with Barclays. Your line is open.
Met Mixic: Thanks so much for taking the question and congrats on a really great finish despite the ebbs and flows that you mentioned in December. So I wanted to ask a question about you mentioned some of the additional the new product innovations that kind of baked into your into your into your guidance for this year.
Met Mixic: to maybe highlight what some of those are. And then, you know, also one of the questions we get often is.
Met Mixic: but maybe what other, what are hoops and hurdles that it has to get through in order to get to market? Does that involve a large clinical trial? Maybe just some high level background on what the pathway is to bring CIGIE eventually to the US. Thanks so much.
Speaker Change: Sure thing, Matt. Well, first of all, we're really excited about the launch of Control-IQ, and that's going to be happening here in a matter of weeks. And it has enhancements to the algorithm, the usability of the product personalization, and also it will enable children two years and older to start to use Control-IQ as well as people who have type 2. So very excited about that.
Speaker Change: I'd say following Control-IQ+, we intend to implement Freestyle Libre 3 on TSLIM, and that then will be followed on to Mobi. And then we also are working on the Android version for Mobi, which will be available in this year as well.
So all
Speaker Change: We feel very good about these. We think that they're going to be meaningful improvements to the sort of the appeal of the products and drive significant revenue growth opportunities in the market. In addition to that, we're also rolling out tandem source and mobile OUS.
Speaker Change: which we're excited about and I think that you know that's that's been happening now and I think that we're going to be going country by country you know as as we get into the year.
Speaker Change: We did also, as I mentioned, file for CE Mark for MOBI. And so certainly there's uncertainty that comes along with the MDR certifications in Europe. They've gotten more complex over time. But, you know, we would expect to hopefully have that on the market, OUS, before the end of the year.
Speaker Change: So that's a lot going on here for 2025, and we think it's really meaningful progress, and I think it's our commitment to innovation.
Speaker Change: The question is about SIGGY. SIGGY is going to be an ace pump, so it's going to be interoperable. And so just like T-SLIM and MOBI, once it's approved as an interoperable pump, we can use any of our approved algorithms on it, and we would intend to do that.
Speaker Change: and so it's, you know, it's still a little ways away. So any enhancements that happen to Control IQ or any additional improvements we make to algorithms in the meantime will be available on CIGI as soon as it does come to market. I hope that answers your question.
Thank you very much.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of David Roman with Goldman Sachs. Your line is open.
Speaker Change: Good afternoon, this is Phil Onford. David, thank you for taking the question. I thought I'd go to the OUS business. Some solid outperformance in 4Q versus your guidance.
Speaker Change: But if I do the math, even if adjusting for the direct to the distributor to direct transition that's contemplated, it still represents
Speaker Change: some slowing year over year, trying to adjust out some of the 2023 one-time distributor and France.
Speaker Change: You know, I guess the question is, is what's contemplated in the underlying there with renewal becoming a more meaningful part of the opportunity? Is there maybe some expectation for slowing ahead of the MOBI rollout and launch OUS? Thanks for taking the question.
Speaker Change: Thanks Phil. I'll acknowledge first there have been a lot of moving parts in our business outside the US over the past couple of years and and in 2025 as well but I'll say from the perspective of the market it's still vastly under-penetrated and we've been demonstrating great strength and traction. If you think about where our business has been coming from in the past few years it's it's really almost all new customers to tandem and so renewals only begin to be a contribution in 2025.
Speaker Change: And so we do anticipate there will be disruption this year as we execute on this transition to going direct in preparation for 2026. But outside of that, we feel very strongly about our opportunity in those markets, and we'll continue to push forward there. And so, you know, as we start the year, we're always thoughtful when we put our guidance into place about what the risks and opportunities are for the business and putting more weight to the risks. And this is true for the whole worldwide business.
Speaker Change: And that's reflected in how we built the guide for 2025 for OUS, but we do believe there's a great opportunity for us to grow.
Thank you. Thank you.
Thank you. One moment for our next question.
Operator: And that will come from the line of Chris Pascal with Nefron Research. Your line is open.
Speaker Change: Thanks. I wanted to ask about the U.S. Salesforce expansion and clarify how far along you are in that process today and how we should think about the timing of any potential disruption associated with that. And then given the news about type 2
Speaker Change: Does this give you the coverage that you need to really capitalize on that opportunity and call on the primary care physicians who manage a lot of those patients, or are you going to need to do more to really get it at that opportunity?
Mark, why don't you take that?
Mark: Yeah Chris, thanks a lot for the question. There's a couple questions in there.
Mark: Yeah, I mean, when we stepped back, we felt like it was the appropriate time to selectively invest in the field force expansion, you know, just based on the potential of the portfolio. Also, just looking at what competition is doing with their sales forces. We know this market is a promotionally sensitive market, and frankly, we hadn't, you know, realigned in several years.
Mark: You know the realignment will do a couple things. I think first off it does create optimization and efficiency.
So you get through a realignment process.
Mark: And then the expansion, you know, is clearly going to give us some boost in increasing our share of voice. And what's important here is, you know, this is going to allow us to really call on the right.
Mark: high growth HCPs, the ones where we believe have the greatest potential.
Mark: and growth opportunity as we've, you know, missed some of those or haven't called on them in the prior years.
Mark: So, and the realignment and expansions allows us to really go deeper in each of those more high-potential accounts.
Mark: Now, in terms of disruption, I mean, this was very front and center, and we did this expansion in quarter four. So we start this year right now with higher share voice. We are completing the expansion about 95 plus percent there, and so it's live.
Mark: And, you know, we were very intentional in how we went about this to ensure that we minimize disruption. In quarter four, the field teams were focused on selling, and so there was no impact to Q4. And, you know, we've got a really good, experienced team on board that, you know, knows how to manage realignments and expansions. And so, you know, that continues to serve us well now into the second month of the year.
Mark: I'll try to comment on the future. Salesforce expansion, you know, I think we continuously evaluate share voice needs.
Mark: you know, what competition is doing in line with our growth and profitability goals.
Mark: For now, in type 2, you know, we're really primarily focused on those high insulin prescribers. Think of this more as endos and endo-like PCPs.
Mark: But what's very important is we designed this Salesforce restructure and alignment. It's designed with the Type 2 expansion in mind, as well as, you know, as we expand in pharmacy.
Mark: So down the road, we can easily scale up, you know, over time if we want to put more sheer voice into primary care, but for the time being we're focused on on the immediate core market.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Larry Beagleson with Wells Fargo. Your line is open.
Larry Beagleson: Good afternoon. Thanks for taking the question. John, I wanted to focus on the Type 2 launch and opportunity in the U.S.
Speaker Change: So, the mid-single-digit growth and new starts, how much is contemplated from Type 2? How long is the pilot going to last, John?
Speaker Change: Type 2, I think about 5 to 10 percent of new starts today. For you guys, for POD, it's, you know, 30 percent now. Is there any reason your percent of new starts from Type 2 can't increase to 30 percent in the next few quarters? Thanks.
John: Yeah, let me go ahead and just kick it off, and I'm going to hand it over to Leigh and Mark to add some...
John: some insights from their perspective. First thing I want to do about type 2 is...
You know, I want to thank the FDA because...
John: This was a stressful time for them, as you might imagine.
John: and I think they did a great job of getting this through their system.
Speaker Change: And, you know, those guys are just as committed to helping people with diabetes as we are. So, just a hats off to them. That being said, as you know, as you said, Larry, it's a large underpenetrated market. It's about 5% penetrated in the U.S. Essentially doubles our addressable market. And the great thing about Control IQ is it brings the same benefits.
Speaker Change: that people with type 1 have experience to the type 2 community and I think that as we've seen it over the last couple of about over the last year or so that we as we've done marketing research we're finding that people who have type 2 are more willing to consider pump therapy.
Speaker Change: And so in the past, we might have said that we can get from 5% maybe to 15%. I think that with the new, smaller, easier-to-use technology in the market, we think we can get to over 25% in the next three and a half years.
Speaker Change: So, you know, I think that with that, I think I'll let Mark talk a little bit more about our go-to-market strategy, and we'll go from there.
Thanks everyone for coming in.
Mark, I think you're on mute.
Speaker Change: Thank you. I just will echo the gratitude and, you know, the excitement we have about, you know, being able to scale our impact in type 2 diabetes. And so, you know, we'll soon, you know, in this quarter in March, begin our type 2 pilot launch activities. And, you know, we'll scale that based on how things go and based on various performance KPIs. As I mentioned earlier, we're going to target, you know, high insulin prescribers.
Speaker Change: A big focus is gonna be around activating and expanding the pharmacy channel, recognizing how important that is for type 1 and type 2.
Speaker Change: and work to establishing a sustainable Medicare pathway to broaden coverage.
Speaker Change: There is, you know, naturally a lot of market development work in this particular category of Pipe 2, so we recognize that with our other industry partners, we have our work cut out for us. It's going to take some time to develop the market.
Speaker Change: and you know to ensure that we've got really good long-term growth potential, but we're excited to
Speaker Change: roll out, you know, the results we'll be presenting next month in Amsterdam ATTD.
Speaker Change: We're really excited about unveiling, you know, those results and then, of course, all the following on medical communication, clinical training and so forth that comes along with it. So, you know, we have a big year ahead of us, you know, and the last thing thing I think we'll say is that we do recognize that the population needs here.
and Type 2 are different from Type 1.
Speaker Change: We're approaching it and we're committed to serving this population with tailored solutions.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Shagun Singh with RBC. Your line is open.
Speaker Change: really put those opportunities into perspective for 25 would be helpful. Thank you.
Speaker Change: Sure, happy to take the question. So, from a guidance perspective, to your point,
Speaker Change: We looked very closely at what are the predictable recurring revenue streams to start, and obviously renewals have been something that we have a consistent track record with that will already, just because of the new opportunities in 2025, create a step up in growth, consistency in our supply sales from our very large install base of over 480,000 people.
Speaker Change: And then when we thought about the new factors, if you want to call it that, or the new product and feature introductions that we have in 2025, we're super excited about all of these opportunities tied to the new products.
Speaker Change: the Pharmacy Initiative, but some of these are really multi-year contributors, and we're just getting started. Mark just talked about the pilot for Type 2 Pharmacy. We're at the very beginning phase, you know, really building out the infrastructure and just testing the waters there, if nothing else, here in the first quarter at least. And so from a guidance perspective, we factored in modest contribution from those in 2025. And so what's important, I think, is it really is the impact it could have on new starts for Tandem, and we factored in about a mid-single.
Speaker Change: Digital Gross End Use Starts year over year, in the U.S., I should say in particular. And, Sagan, this is not unusual. We we've done this in the past where we were we're pressing hard to get these systems into the market and to benefit from them. But until we have evidence and understand exactly how they're going to affect us, we're going to take a more conservative position.
Thank you.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Matthew Taylor with Jeffreys. Your line is open.
Speaker Change: Hi, good afternoon guys. This is also Matt on for Matt Taylor.
Speaker Change: We wanted to ask a little bit about the integration with Libre users.
Speaker Change: especially those not on the pump. So maybe if you can help us understand how that launch has progressed thus far and maybe the kind of momentum you're seeing about it and maybe how you think about this from a guidance perspective in terms of it being a driver of your new starts next year.
Speaker Change: Yeah, we have Libre 2 integrated today with T-Slim and we're working on bringing Libre 3 to market here in the relatively new future.
Speaker Change: I think that the availability of the product is going to be, it will be shipped on new pumps and it will also be made available to people who currently own pumps through a software upgrade. Right now, though, if you look at the install base in the U.S. for Freestyle Library 3,
Speaker Change: There's roughly 300,000 or 400,000 people who use the system, use the sensor, that have Type 1 who don't use pumps.
Speaker Change: And so I would say that there is a large market development opportunity to collaborate with Abbott as we bring this technology to market.
Speaker Change: and we see the benefits. So, you know, if you look at over time, you know, we've said we can get, you know, upwards of close to a million people using our technology and these 400,000 people in the US represent a big part of that. And so we will be working closely with Abbott and our own sales team to make sure that we take advantage of that.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Mike Kratke with Learing Partners. Your line is open.
Speaker Change: Hi everyone, thanks for taking our questions. Maybe just to go back to an earlier one on understanding the dynamics of the fourth quarter, I think you mentioned the unexpected timing of revenue reporting in the fourth quarter, but you know looks like the guidance for 1Q is still down.
Speaker Change: about over 20% at the midpoint in the U.S. So was there anything specific that fundamentally contributed to that December weakness that you saw? And I think you mentioned that there was no impact to your 4Q sales from the Salesforce realignment. So just wanted to...
clarify what's giving you the confidence that that's the case.
Speaker Change: Mark, would you like to talk about the commercial environment a bit in the fourth quarter going into first?
Mark: Yeah, of course. Happy to, Leigh. And thanks for the question, Mike. So, yeah, I mean, as John and Leigh both pointed to some of the things that happened in Q4, I mean, there was, you know, a little bit of a muting on the seasonality.
You know I think
Mark: I step back and I reflect on the full year and, you know, there's some macro factors that I think we continue to observe that continue to be a challenge. I mentioned, you know, out-of-pocket costs for patients and, you know, how important it is to make these accessible and so, you know, that's really underscored the importance for us.
Mark: to strengthen our position in pharmacy. And so I think that played into some parts of it. I think, you know, overall, from a competitive standpoint, I think, you know, we recognize that, first off, this is like a super large.
Mark: you know, underpenetrated growth market. There's going to be some entrants here and there. And we continue to see kind of two large competitors, you know, a new one that's been scaling. But, you know, we feel good. We feel like we're holding our own. And, you know,
Mark: As Leigh mentioned, you know, despite December, I mean, it was still a really good, I think, month. In fact, it was like the largest shipment month we had all year and with really sizable growth versus
Mark: last year's December in 23. So you know the underlying fundamentals we feel good about it was a record quarter you know healthy year-over-year and quarter-over- quarter growth. We really like what we're seeing on the MDI side and and of course from a renewal perspective.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Danielle Antalfi with UBS. Your line is open.
Danielle Antalfi: Hey, good afternoon, guys. Thanks so much for taking the question. Just to follow up on the Type 2 opportunity, just curious, so I appreciate there's still a lot of market development to happen and you guys are gonna pilot this and all that, but just curious about, and by the way, congrats on getting that approval, how to think about
Danielle Antalfi: What's important to a type 2 patient based on, you know, the small percentage of patients that you have?
Danielle Antalfi: on Pump Today, and some of the market research you've already done, you know, from a feature perspective, time and range versus pharmacy versus footprint of the pump.
Danielle Antalfi: for flexibility, et cetera. And also how a patient utilizes that pump. Is it pretty in line with what you see from type ones like 24, seven, 365? Is there, or is there some different adoption patterns we should be, or utilization, excuse me, patterns we should be considering? Thank you so much.
Speaker Change: Mark, I'll just kick that off and hand it over to you, but I would just say that a couple of things are important to people with type 1, type 2, excuse me. First of all, I think it's the simplicity of the system. It really does have to be easy to use.
Speaker Change: Discretion is another very important factor. So, therefore, it needs to be small and convenient. And I think the financial elements are something that, you know, we need to deal with. So, I think that when you look at this, we've got MOBI. It is small. It's convenient. We're moving into the pharmacy channel. It is addressing some of the out-of-pocket expenses that the type 2 community will have to deal with.
Speaker Change: and I think that we feel pretty well positioned to take advantage of this marketplace and I think we're gonna kick off this pilot and learn a lot more. But I think it's one of those opportunities that we think is giant for us and we're excited to be in it.
Speaker Change: Mark, do you want to add anything to that? Yes, thanks John. I think, you know, the only thing I would add is that
Mark: to two points is that, you know, from a portfolio perspective, what we feel good about is that we can offer choice and that, you know, it is one similarity between type one and type two is that not.
Mark: Not One Size Fits All, and that, you know, we've, through our work and research, recognized that there are unique segments in Type I, but also in Type II, and in some cases,
Mark: type 2 really favor, you know, a larger reservoir with 300 units of insulin and they like the on-screen compatibility and use of T-Slim.
Mark: Others we know are going to really like Moby because of its small form factor and its versatile wear. So I think we feel good about being able to offer that choice. And as we load up more CGM integration on Moby, we believe that's going to be key.
you know, equally important.
The other point I'd say is that
Mark: You know, we have a lot of experience working with Type 2. I think we've shared before, we've got about 30,000 people living with Type 2 using our technology today. And so we've got great experience training them, working with them. We understand, you know, some of the important nuances to deliver compelling and effective training. And, you know, we're naturally looking at how to scale that, digitize it, modernize it, and make it, you know, the best experience possible.
Thank you.
Thank you. One moment for our next question.
Mark: And that will come from the line of Jason Bedford with Raymond James. Your line is open.
Speaker Change: Good afternoon. Just maybe on the pharmacy, the 20% of lives.
Speaker Change: is bigger than I thought. So I guess my question is, how does this impact the P&L and your guidance in 25? Meaning, is it a driver of revenue growth? Does it impact margins? Or is it just a little early right now?
Speaker Change: Thanks for the question, Jason. So I'll start by saying we're very pleased with the progress we've already made acquiring these contracts coming into the year. And we're still in the very early stages. And so from a guidance perspective, we have only factored in very modest contribution from a volume and an ASP perspective. But I think that's the point as we look forward, this compliments our channel strategy and will help us drive towards meeting our future profitability goals.
Speaker Change: Susan Morrison, Leigh Vosseller, John Sheridan, Susan Morrison, Leigh Vosseller, John Sheridan,
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of William Plovanek with Canaccord. Your line is open.
Thank you. Thank you. Thank you.
William Plovanek: Great. Thanks. Good evening. Thanks for taking my question. I want to go back to the pharmacy. You know, you've been signing these contracts. I think one of the questions I get is how does this impact cash flow? You know, typically, if with the pay we go product, you'll get, you know, you have a capital piece. Do you get paid that capital piece up front or is that smoothed over the length of the contract?
William Plovanek: And then, you know, so how is this going to impact your free cash flow?
and how are you thinking about...
Speaker Change: Longer term, just the business in general, I mean, I see, you know, it seems like as you're crossing that chasm into a positive free cash flow, you're taking the opportunity to transition the international business, realign the US sales force, kind of like turning 25 into a transition year. Is this just taking the incremental free cash available and investing in the business now for leverage in the future?
Thanks for taking my questions.
Speaker Change: important things that we need to do to set up the business appropriately to drive that long-term growth to meet our ambitions for growing top line and we are always looking for ways to make those investments but fund them in other ways with cost-saving initiatives and so as we turn the corner to being free cash flow positive again this year we look forward to the opportunity to be able to make these investments that will have multi-year benefit for the organization we also have initiatives in place so that we can show a bit of
Speaker Change: Thank you all for joining us and we look forward to seeing you all in 2025, even in this investment year.
Thank you. One moment for our next question.
Speaker Change: That will come from the line of Mike Polark with Wolf Research. Your line is open.
Mike Polark: Good afternoon. Just one model question. I appreciate the 2025 guidance comment, mid-single digit growth expectation for new U.S. pumpers.
Mike Polark: We all stab at this number, but Leigh, I'm interested if you're willing to comment on 2024 U.S. new pumpers. What was the growth rate either for the full year or in the fourth quarter? Thank you for taking the questions.
Mike Polark: Sure, great question Mike. And so what I can share about new pumpers, so we've often talked about our sources of growth being renewal and new pumpers and within new pumpers we have to break it down into NDI and competitive conversions.
Our focus is purely on MDI conversions.
Mike Polark: 2024 was a year where we knew, we anticipated, and we saw that competitive conversions would start to decline.
Mike Polark: purely because the opportunity was declining, and so our focus is driving the growth of the business through the NDI conversions. NDI did return to growth in the second quarter, grew each of the quarters Q2, Q3, and Q4, and it was double-digit growth year over year, and so that's one of the key underpinnings as we thought about the 2025 guide in that build-up.
Thank you. One moment for our next question.
Speaker Change: That will come from the line of Matthew O'Brien with Piper Sandler. Your line is open.
Matthew O'brien: Afternoon, thanks for taking the question. It's a two-parter as well. I just want to be clear about a couple of things that you've said on the call. The Q4 end-of-year impact that you saw, I'm just wondering if that wasn't competitive, specifically with another durable pump company in the market.
Matthew O'brien: with a good product there, the halo effect that's probably happening on the patch pump side of things. Is that something you saw in Q4 that's lingering here somewhat into Q1 and could impact the full year?
Matthew O'brien: And then secondly, the guide, Leigh, if I look at the number of additional pump sales you need to make this year, I know there'll be a little bit more bump.
Matthew O'brien: from the renewal cycle, but it's also at a time where you've got a restructured sales force where that didn't go well for one of your CGM partners recently. And it's just assuming a big, big ramp.
Matthew O'brien: in the back half of the year, especially, that I think a lot of folks are going to be concerned about you being able to hit without getting a massive tailwind from type twos and a massive tailwind on the pharmacy side. So, how do we get comfortable you can do all that again with a restructured sales force? Thanks.
Speaker Change: Sure. Great, great question, Matt. I'll kick this off. Mark may want to chime into it. So, first of all, from the Salesforce expansion perspective and the impact on 2025, we did anticipate there could be disruption no matter how well you plan or execute. There can be a little bit of turbulence initially as people are going out and meeting their docs and getting acquainted with their new territories and realignments. Mark can speak to how diligent we were and how we are executing on this. But we factored in in the beginning of the year that it could be a bit more
Speaker Change: and Susan Morrison. And so to that point, on the ramp across the year, it's partially seasonality, taking into consideration the impact we saw at the end of 2024 with a little bit muted seasonality really in just the last few weeks of the year, but also assuming that these, with the territory realignments and the expansion, we'll start to see more productivity as they get to the back half of the year. And so to that Q4 softness, I would say there's a myriad of factors that contributed. It's hard to pinpoint a single one.
Speaker Change: they all work in an increasingly competitive environment. Mark mentioned the macro factors we've seen across recent years more and more people becoming sensitive to cost, use of high deductible plans and such. There are so many things but I can't say if there's any one thing that turned on a dime in those last few weeks, it just was a little bit more mooted than what we've seen in the past.
Speaker Change: Yeah, I would just say that nothing changed competitively throughout the year. I mean, it was basically, it was static. And I think that we held our own. Certainly there was a lot of competition, but I think we held our own.
Thank you.
Speaker Change: Thank you. As a reminder, due to time restraints, we ask that you please limit yourself to one question. One moment for our next question.
Speaker Change: And that will come from the line of Josh Jennings with TD Cowan. Your line is open.
Hi, good evening.
Josh Jennings: to ask on the type 2 indication. I guess first just to ask you your views on the basal opportunity. Is that in play with the current label or do you need to show more data for control IQ to be approved there and for you to take advantage of that opportunity and maybe just touch on type 2 coverage for tandem pumps.
Speaker Change: where it stands and when it will be full. Thanks a lot.
Speaker Change: Yeah, Josh, the approval we got was for type 2 diabetes in general, for insulin use with type 2, using our algorithm. And so it involves, it's all insulin, and it's all manners in which insulin can be delivered, either through basal, no, basal bolus.
Speaker Change: So it's all there. And so, you know, I think basal only is something that's not necessarily an area we're focused on, but if we decide to, then we can do that with this algorithm. Leigh, do you want to just comment on...
Leigh: Sure, the type 2 coverage. And so I'll say first and foremost, from a commercial perspective, it's pretty much the same coverage as it would be for a type 1. So there aren't any real limitations from a type 2 perspective.
Leigh: From the Medicare perspective, there are still some onerous requirements, and we are engaged and working actively with other industry players in order to get changes made with that national coverage determination, which has been received by CMS and is on the docket for review. We just don't yet have any color today on when they will actually get to it, so we are working hard to pursue that improved coverage overall.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Jeff Johnson with Baird. Your line is open.
Jeff Johnson: Hey, thank you. Good afternoon guys. Congrats on the type 2 coverage. I wanted to focus another question there, which I apologize I know a lot of the questions have been on type 2
Jeff Johnson: But I've really been trying to game this out and, you know, John, I'd love to hear your thoughts or anyone else's thoughts.
Speaker Change: If I look over the last two and a half years, up until six months ago, both you and your biggest AID competitor, essentially were off-label for Type 2. And I think during that time, as best I can break out numbers, you guys were winning about 25% share of the Type 2 new starts that were coming in, the other company winning maybe 75%. Now, when you're both gonna be on-label,
Speaker Change: Do you think those shares shift? I think a rising tide is going to help everybody, but do you think that 25-75 split, or maybe my math is off a little bit, but somewhere in there, does that share shift, or does the share shift at all now that you are both going to be competing on-label? And how is it different if you are both on-label versus maybe 6-9 months ago when you were both off-label? Thank you.
Speaker Change: Yeah, the first thing I'll say is what I mentioned a moment ago, and that is that, you know, certainly as new technology comes to market, it's smaller, it's more convenient to use, and the therapy benefits are substantial. You know, we believe more and more people are coming to market. So, you know, the opportunity is big, and I think the penetration is bigger than we had thought it was in the past.
Speaker Change: I would say when it comes to Type 2 and the competition in the marketplace, it really comes back to the pipeline, market access, and the things that we're working on.
Speaker Change: And so I would anticipate that, you know, we're very confident in our pipeline and we think it's going to be more competitive as more of these features and systems comes to market. So I think that, you know, I think we're going to begin to take more share on Type 2 and in Type 1.
Thank you. Thank you.
Thank you. One moment for our next question.
Speaker Change: And that will come from the line of Travis Steed with Bank of America. Your line is open.
Travis Steed: Hey, thanks for taking the question. I did want to ask on the gross margin wrap over in the course of
Speaker Change: 2025, I think it was 51 in Kewan, and 54 for the full year, just if there's any other additional color on that.
and then.
Speaker Change: The impetus for why doing the cell source extension now, I don't know if there was a specific reason why now is the time to do it, if it was related to type 2, or if it's what you're seeing in the competitive environment, and if it's, if you're calling on more primary care doctors, or if it's all kind of just focused on deeper with the end dose.
Speaker Change: Thanks for the question, Travis. I'll start with the gross margin and turn it over to Mark from the commercial expansion perspective. For gross margin,
Speaker Change: What you typically see in, again, I'll say the normal year, is that gross margin improves across the quarters as pump sales ramp in the U.S., with pumps being the highest gross margin contributor. In 2025 in particular, we have, I'm going to call it the added benefit of Mobi scaling up across the year. So as we sell more and more Mobi pumps,
Speaker Change: That will also provide even greater contribution to the margin. So we're starting the year at 51%, and I think I'd like to point out that that's flat to what we just demonstrated in the fourth quarter, when usually we take a bit of a step back in Q1 for gross margin. So we're at a new starting point for the year and confident in our ability to deliver on that. So, Mark?
Mark: Yeah, thanks Travis for the question. I think you know the timing was right for us to do this the end of last year
Mark: and set up ourselves for 2025. I think, you know, it's a combination of factors of timing. I mean, number one is that, you know, we do think the portfolio has got a lot of potential. We're really excited about what we can offer with our technology. And the market is promotionally sensitive. We know that. We've done our research. We understand it.
Mark: You know there is an efficiency play here too. We haven't realigned in
Mark: in several years. And what that sort of means is that, the marketplace has grown and changed tremendously over the last few years. And for us to recut territories and alignment creates greater efficiency for our sales teams.
Mark: get them better workload balance, they have better reach and frequency, and can just really concentrate on those high potential accounts, but it's really important.
Mark: And then secondly, we believe we needed some extra share of voice in order to compete and continue, you know, in this current market within the U.S. And, you know, alongside that, there's also new tools and capabilities. It's not just about Salesforce expansion. You know, as John mentioned, we've been piloting a number of different tools.
Mark: to better understand and segment HCPs and help enrich our messaging, new selling tools. And so, you know, again, we feel good starting this year where we have stronger share of voice.
Mark: We know exactly where to go, what to say, how to say it with a bunch of high-impact tools that really can support the field.
Speaker Change: Thank you. I'm showing no further questions in the queue at this time. Thank you all for participating. This concludes today's program. You may now disconnect.