Q2 2025 Tandem Diabetes Care Inc Earnings Call
Good day and thank you for standing by. Welcome to the Tandem Diabetes Care, second quarter 2025 earnings conference call.
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Executive Vice President and chief administrative officer, please go ahead.
Hello everyone and welcome to Tandem second quarter 20125 earnings call.
Today's discussion will include forward-looking statements, 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.
There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements, which are described in our press release issued earlier today. And under the risk factors portion of our most recent quarterly report on form 1010 Q.
Today's discussion will also include references to a number of gaap and non-gaap financial measures. 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 and other information regarding our use of non-gaap financial measures
Today's call will be led by John Sheridan tandem's, president, and CEO, who will be joined by leave Osler Executive Vice, President and Chief Financial Officer.
Following their prepared, remarks, the operator will open up the call for questions. Thank you, in advance for limiting yourself to 1. Question before getting back in the queue, John, you may begin.
Thank you, Susan. And thanks everyone for joining our call today.
Looking back at the first half of 2025 and the second quarter in particular, I'm proud of the progress. Our team has demonstrated
We achieved records second quarter sales, both in the US and internationally we've strengthened our business model by progressing or multi-channel Market access strategy including accelerating our Pharmacy Channel initiative. In addition we made meaningful progress and transforming key Business Systems to improve our commercial teams Effectiveness and increase profit margins.
Lastly, we achieved significant product development, milestones. In Q2 that, keep Innovation at the heart of our business and lay the foundation for future growth.
We'll speak be speaking to each of these accomplishments on today's call. And we'll also provide caller on how we're thinking about the back half of the year.
Starting with the commercial update in the US, we saw year-over-year increase in pump shipments. This includes continued double-digit growth and renewals
Renewals were just over half of our pump shipments and it's a trend. We anticipate will continue through the end of the year, which demonstrates our strong retention.
our growth and pump shipments, also reflects the adoption of our technology, by people using multiple daily injections,
People converting from MDI once again made up about two-thirds of our new pump starts this quarter, which is a reflection of our continued focus on attracting people who are new to pump therapy.
We continue to be an industry leader in new durable, pump starts. This is a testament to our technology and the transformation. We've been making in tandem's commercial organization.
We've broadened our operations and refined processes while investing in systems and talent.
our technology also continues to Stand Out Among customers and Healthcare Providers with number 1, ratings and categories, such as reducing the burning of living with diabetes performance of an aide algorithm,
Clinical outcomes and favorite pump.
I recently heard a customer comment that control IQ remembers when I forget.
it was a succinct and Powerful statement that captures what we strive for
Improving the lives of people with diabetes.
Our high customer satisfaction scores reflect that we are furthering this mission.
Tandem Mobi our newest pump platform continues to receive positive feedback for its versatility and wear comfort and flexibility to detach.
It was a key contributor to new user demands of Q2 as evidenced by year-over-year increases in its adoption.
This comparison is important because Q2 of last year was the first full quarter that Moi was available and it likely benefited from some pent up demand.
Moi also represented a greater percentage of our new pump starts in Q2 compared to a year ago, on track for achieving our near- and longer-term financial goals.
We are pleased with Mo's performance and our goal remains to expand. Its addressable Market through additional features and Integrations. Starting with the addition of Android control before the end of the year.
Our Flagship pump Tesla X 2 continues to receive high customer satisfaction scores for its larger volume insulin, Reservoir, multiple sensor Integrations and the convenience of having touchscreen control on the pump.
In the second quarter, we announced Tesla's compatibility with Abbott's freestyle delivery, 3 plus sensor.
Integration is now underway and we plan to expand to full us availability this fall followed by launching internationally and integrating with tandem Mobi.
Another exciting Market expansion opportunity is our ability to bring tandemous technology to people with type 2 diabetes.
Following FDA clearance earlier. This year, we began to Pilot type 2 commercial activities.
This provided valuable insight for our portfolio: positioning sales force planning, patient training, and reimbursement strategy.
In the pilot territories, we saw greater type 2 adoption compared to the non-pilot areas.
The strength of our New England Journal data and the value proposition provided compelling evidence that control IQ, plus is easy to start easy to use and easy to personalize.
This lends itself to a new and exciting development, and our active efforts to drive improved access for the type 2 Medicare patient population which includes approximately 1.3 million people with diabetes, use insulin intensive therapy.
The Senate appropriation committee recently approved a bill that would require CMS to address coverage for insulin pumps to ensure that all requirements including measurement of C peptide levels are consistent with clinical standards of care.
If enacted, CMS will be required to provide a briefing within 180 days.
In the third quarter, we are expanding our type 2 efforts which will continue throughout the remainder of the year.
1 of our top priorities is improving Channel access by reducing the barriers that discourage people from adopting pump therapy.
Legal discuss more on our Pharmacy Channel progress. But there is 1 update that I would like to highlight
Beginning in Q4, we plan to start selling T, Sim supplies through the pharmacy channel to our eligible customer base.
It's exciting evidence of our business transformation and important for our current Tesla customers as a can make pump therapy more affordable.
Turning to our International markets, the team delivered, strong overall performance.
Driven by demand for t:slim, increasing pump renewals, and growing Supply sales.
Commercial efforts are also underway prepare for the launch of Tandem Mobi as we recently received CE mark.
We are now pursuing additional Regulatory and pre-commercial activities.
Such as securing. In-country registrations and reimbursement.
We are also continuing to roll out the mobile app and Tandem Source, which are prerequisites for Mobile's launch.
Operationally, we plan to begin. Direct sales in select countries next year, and our preparations are progressing. Well,
We continue to attract and hire in-country talent, and our team is executing well against our transition plans.
This shift is a pivotal step for Tandem to globalize our leadership deepen relationships within the European diabetes community. And strengthen our financial position by accelerating sales growth and driving margin expansion.
I am very pleased with the progress we've made so far this year in preparing for the transition. And the concurrent sales trends that we've delivered
As you can see, there have been many strengths in our performance for the first half of 2025. Where we delivered, Topline growth whilst demonstrating margin Improvement
We also gained a number of insights that inform our thinking about the remainder of the year.
Overall we expect to achieve 1 billion in worldwide sales, which is a significant Milestone and goal for our company.
Sales from International will be a bigger contributor than originally anticipated with more moderate growth in the us as we progress our commercial transformation.
The team remains laser focused on bringing the benefits of our technology to people living with diabetes worldwide, and expanding the large and underpenetrated markets. We serve
Oh, now the turn the call over to lie for more on our second quarter results and updated Financial assumptions for the year.
Thanks John.
As a reminder, unless otherwise noted the financial metrics I'll be discussing today are on a non-gaap basis.
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.
Please note that 2025 sales emergence in the US are no longer impacted by the tandem Choice program which ended in 2024
We started the year, strong delivering, year-to-date worldwide sales of 475 million or growth of 15%.
The majority of this growth was driven by Pump and Supply volumes with 4% pricing Improvement year-over-year, which also contributed to gross margin expansion.
For more than a year, we have been setting new quarterly records each and every quarter, both in the U.S. and internationally.
Us sales in the second quarter were 170 million representing a 9% increase over the prior year which was the first full quarter of Moby. Availability.
The demand for our portfolio of products remains high from new customers, and loyalty from our existing customers is evident, both in growing renewal and pump supply sales.
Our focus on channel management and expansion also drove a meaningful year-over-year increase in average. Selling price, primarily through our DME Channel efforts.
Pharmacy volumes remain small relative to our overall pump sales, but we continue to enhance our operational capabilities and validate our assumptions for this opportunity.
our entry into the pharmacy channel was predicated on 2 objectives to lower, out-of-pocket costs for our patients and to drive sales and margins more in line with industry comps
we are still in the early stages but are already seeing examples of patients paying zero upfront out of pocket under our current agreements
the pharmacy contracts we have signed are similar in reimbursement, structure and revenue, recognition to our DME contracts, but we also continue to discuss pay as you go models, which we are confident in our ability to support
Our experience to date, underscores our confidence in meeting our business schools for pharmacy expansion.
We are working aggressively to build on this opportunity in multiple ways. Our team is making great progress in our conversations with pbms and payers to expand insurance coverage under the pharmacy benefit
We currently have approximately 30% of us lives under coverage and anticipate signing additional meaningful contracts in the upcoming weeks that will be available immediately.
We are also expanding our pharmacy distribution network to maximize patient access. We currently have which provided incremental benefit this quarter through initial stocking orders.
Last, we are advancing our strategy by beginning, the Contracting process to offer patient access for Tesla's supplies in the pharmacy Channel.
Considering we have an installed base of several hundred thousand Tesla users in the US. This could provide meaningful benefits as we build on our Pharmacy coverage for Tesla beginning in the fourth quarter of this year.
Recently, CMS issued a proposed rule that updates, medicare payment policies, and rates for DME providers, including 2 changes for insulin pumps.
The first is a proposal to alter the reimbursement structure for pumps from a 13-month rental to a pay as you go model.
Similar to my Pharmacy. Comment, we are confident in our ability to support pay as you go.
the second proposal is to include pumps and competitive bidding which is a Medicare initiative designed to reduce costs and improve access
Overall, traditional Medicare represents a small portion of our business at less than 10% of our U.S. sales.
Should CMS move forward with the proposals as written. It's an opportunity to bring can of technology to more people living with diabetes. And the structural changes May ultimately provide benefits to our business.
We plan to participate in the current comment period in anticipate final rulings in November.
Now I will turn to our performance outside the United States. As a reminder last quarter, we noted a $5 million shift in timing of sales from the second quarter into the first quarter.
In the second quarter, we also experienced flight headwinds from distributor inventory adjustments and preparation for our transition to direct operations in 2026.
Yeah, we were still able to deliver record second quarter sales of 70 million.
We saw benefit in the quarter from early traction and renewals as well as favorable currency Dynamics.
Moving to our company's margin performance at Key objective for our businesses demonstrating improvement in profit margins. Our plans for driving gross margin expansion. And operating leverage this year are on track as evidenced. By our second quarter results, our second quarter, gross margin was 52%, reflecting an increase both year-over-year and compared to the
First quarter pricing was the primary driver offset partially by product mix and non-manufacturing costs.
Importantly, the moai platform is a key driver to our long-term gross margin expansion. And its benefits are beginning to materialize. As we gain more manufacturing experience, and scale volumes.
The moai cost per pump has already improved meaningfully year-over-year. And the platform margins are expected to continue improving over the course of the year as pump and cartridge volumes grow.
From an operating expense perspective, I'm particularly impressed by the execution of our teams to deliver on our profitability targets, while making meaningful progress to prepare our people process and technology for our next wave of growth.
We are taking action to both modernize how we go to market through a combination of efforts within the sales, force Channel, technology, and process redesign, with the goals of offering an elevated customer experience. While scaling headcount more efficiently.
Domestic compete in a highly competitive market, while also delivering profitable growth.
As a result, operating expenses grew 10% year-over-year, driven by SG&A investments.
Going forward. We expect these Investments to be offset by savings, which will begin to provide benefits in the second half of the year.
R&D expenses were essentially flat year-over-year. A result of our continued focus on efficient delivery of new Innovations.
We ended the quarter with 315 million in total cash and Investments. The quarter had 2 noteworthy uses of cash. First, our 2025, convertible notes, matured in May and we settled the balance of 41 million using existing cash.
Second, we paid $8 million as the first of five annual installments towards a $36 million settlement that includes a 10-year worldwide non-exclusive patent license and a covenant not to sue.
we view this as a positive development that will allow us to focus on innovation in our business and for our customers
Looking at 2025 overall, we are on a path to achieving double-digit growth of $1 billion in 2025 worldwide sales and have updated our guidance accordingly.
In the US, we anticipate more moderate growth in the back half of the year, which reflects the US Dynamics between our commercial Evolution and the competitive environment partially offset by benefit from the pharmacy Channel opportunity.
Outside the United States, our sales performance confidence has increased, as we continue to drive our International strategy. In particular, we had assumed a 15 to 20 million headwind associated with going direct. We now believe the headwind will be reduced to approximately 10 million and we expect continued strength and growing. The market overall.
With these updated assumptions, the expected, Geographic mix will be sales of approximately 700 million in the US and 300 million outside the US.
Turning to margin expectations. We are executing to both our manufacturing and operational goals.
We anticipate achievement of gross margin in the range of 53 to 54% as a reflection of the change in Geographic, mix of sales and expect to see margins expand across the quarters as pumps sales increase and additional Moby. Efficiencies are gained
Impact from tariffs has been negligible and we expect that to continue.
Importantly, we remain on track to reach the quarterly. Milestone of 60% gross margin as we exit 2026.
From an adjusted EBA perspective, we are no longer excluding expenses for in-process research and development in our non-gaap results in order to align with used recently expressed by the SEC. Therefore, our adjusted Eva guidance for 2025 is now being recast from positive 3% to negative 5%
This change is solely driven by negative, 8 points of margin for the 75 million. IP R&D, charge, associated with AMF, medical that occurred in the first quarter.
In support of our operational, Eva margin goals, even with our growth Investments initiative to deliver, efficiencies are expected to begin. Materializing in the back half of 2025, with increasing benefits in future years.
We also anticipate returning to positive free cash flow in the second half of 2025.
I’ll now turn the call back to John.
Thanks Lee.
I'd like to express my thanks to our employees for their outstanding hard work so far this year. In addition to the progress, they are driving across our business. I am also proud of how the organization quickly addresses issues when they arise.
Last month we initiated a field correction, notice to inform t-slim users that we identified certain speaker versions that have higher than normal failure rates.
We are taking necessary steps to address this issue and there are no changes to our financial expectations. As a result of this notification, we wanted you to be aware as we will be taking measures to Aid. Customer awareness, such as issuing a press release.
The final topic, I'd like to discuss today is our new product initiatives and our pipeline continues to be the most exciting and Insulin therapy management.
Our distinctive technology ecosystem includes insulin pump systems Advanced algorithms and a digital Health Solution. And I'll have a few updates to highlight today.
Steady Set is our proprietary infusion set technology.
In the second quarter, our team submitted a steady set 510 K in pursuit of extended wear time.
I am proud of how swiftly the team executed our regulatory strategy to file the submission.
It serves as a great example of the urgency our teams are demonstrating across the business.
Yes and Innovative solution for people who are interested in versatile wear options and gives the users, the opportunity to change their insulin cartridge and infusion site independently of each other which helps minimize insulin waste.
This feature is of strategic importance, as we believe extended wear time will be a benefit to people living with type 2 diabetes, who often have greater insulin needs.
Last, I'd like to thank everyone who was involved in the fully closed loop trial. We completed in the second quarter.
Our internal and external research efforts today have been foundational in shaping our longer term objectives for our fully closed loop system and remain. We remain committed to advancing our R&D efforts looking ahead. We continue to make meaningful progress in our collaboration with the University of Virginia Center for diabetes technology.
In addition to these updates, we are working closely with both Dexcom and Abbott on new technology, integration and continuing to advance our Siggy patch pump platform.
in conclusion, we are doing the right things to position tandem 4 success with our product portfolio, commercial Evolution and by strengthening our core business model,
Each of these initiatives supports tandem's commitment to sustainable, long-term growth and improved profitability, while reaffirming our dedication to enhancing the lives of people with diabetes.
Thank you again for joining us today. We look forward to keeping you updated on the company's progress.
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In the interest of time, we ask that you please limit yourselves to one question. You may rejoin the queue. If you have any additional questions, please stand by while we compile the Q&A roster.
Our first question comes from Matt. Mix it with Barkley's. Your line is open.
Hey, thanks for taking the questions. Um, so I had a question on uh, the uh, CMS proposal uh, since that seems to be um, kind of in the front of everyone's mind about uh, uh, on that like yours that have been sold through that channel.
Um, can you give us a sense of of how you think, you know, it it's that word to go ahead to, and maybe that's, maybe that's the, the Crux of the question is, if that were to go ahead but maybe if it were to go to head, uh, as as sort of sketched out or something similar, um, how you would anticipate that uh, affecting your business, both kind of top and bottom line. Um,
Everyone follow up.
Sure, thanks Matt. Um, I guess I'll just start by saying, we do not believe it will have a material impact on our business. And in fact, we anticipate it could help drive more people to pump, pump therapy. Um, so when we think about it, traditional Medicare is less than 10% of our sales. So, it's not a very big impact overall and transitioning to a pay. As you go model is something that we've contemplated anyway from a commercial perspective as we've pursued the pharmacy Channel. And so, when we think about it transitioning for Medicare, we see that as a positive as well. So overall, you know, we will continue to monitor this closely. Um, we'll be participating in the comment period and we look forward to hearing a final ruling later, this year.
Thank you. Our next question comes from, Matt Taylor with Jeffrey's. Your line is open.
Hi, thanks for taking the question. I was hoping you could talk a little bit more.
About the pharmacy progress, and Johnny said on the, on the prepared remarks, there's this access that's going to open up in Q4 for supplies.
Um I guess on that specifically, is there a benefit for Tandem, in terms of of pricing and maybe just help us understand how much progress you've been making, and how material Pharmacy overall could be in 2026.
Increased that coverage already this year and then by moving um, t-slim supplies into the pharmacy Channel, that's another way to really Elevate, or I would say accelerate what percent of our business. Um, Pharmacy can represent for us that benefit will begin in the fourth quarter. And so, as we look ahead to 2026, we're not giving any um numbers yet or color on how to think about it. But just know that it is 1 of the key levers, um, for driving our business. Um, going forward,
Our next question comes from Chris Pasquale with nephron research, your line is open.
Hi. This is Carol on for Chris. Um, I thought it was a nice raise and the guide for OS, it seems like it's less about the sales transition and that bump its kind of curious. If you can share a bit more commentary on why that change and the Outlook, thanks.
Sure. Um so our owe us business has been performing very well and we're really excited about it. Another area that I think is vastly underappreciated for how we're driving the business there. Um what we've seen is great strength and performance in the first half of this year and as we're preparing to go direct, we had anticipated that, we might see some headwinds this year as as Distributors, reduce their inventory levels or dto in advance of that transition. Um, what we've seen so far is some limited um, decking activity. Um, and it's also we've changed our expectations on how much that headwind could be for the year. So we originally estimated 15 to 20 million
And now we think it'd be closer to something like a million dollar headwind. Um 1 exciting Point too, is that in the markets we're beginning to see the signs of early Traction in our renewal opportunities. So far that business has been growing almost solely based on New Market development as we expand the MDI market. And we also get competitive conversions. But now renewals which have been such a reliable? Um, recurring Revenue stream in the US will become a better opportunity for us outside the US. And so that is what gave us the confidence to raise the guide for those markets. Um, for the remainder of the year,
thank you. Our
William plovanic with
Mechanical cord. Annuity. Your line is open.
Yeah, great thanks. Uh, thanks for taking the question. So I just wanted to kind of dig into the new patient numbers, a little you know just by our math and looking at where the street was, it seems like for the US maybe, you know, you outperformed on the new mdis competitive about in line, but in terms of renewal, maybe a little lower, I don't think there's anything in the prepared, remarks any color on the US renewal rate and then same on the OU. You just commented on it a little but kind of what percentage of the mix was it? Thanks for taking my question.
Sure. Excuse me, um, I'll start with the US piece of it. Um, when we look at the mix of shipments in the US, our renewals, um, grew double digits, and they represent a little more than half of the shipments this quarter. Um, and so we do expect that Trend to continue through the remainder of the year. It is 1 of our most um, reliable revenue streams, highly consistent capture rates, and we're seeing great traction, and, and continued progress there from a renewal perspective. Um, when we looked at new starts, um, they, they did grow from the first quarter into the second quarter. What we're seeing this year, when you break down, new starts between MDI conversions and competitive. Conversions is that MDI is outpacing from a growth perspective. We still, we are still seeing a bit of headwind from a competitive conversion perspective. Well, in line with our, uh, with what we had anticipated, as 1 of our large competitors has has evolved in their business to some extent and and the opportunity itself is just lower this year than it has been in years past. And so we're very focused on how to drive the MDI.
Opportunity. Because that's where we think we can win as we go forward in future years.
Thank you. Our next question comes from
with mizuho Americas, your line is open.
Anthony, please check your mute button.
Our next question comes from.
Shotgun Singh with RBC. Your line is open.
Uh great, thank you so much. Um, I wanted to touch on the US guidance reduction. It it seems like it's been lowered to about 700 million. Now you did talk about the commercial organization, can you? Elaborate and maybe touch on? Um uh you know what's going on there? And how we should think about Trends into the back half of the Year. Thank you.
2025, we indicated that we were making some fundamental business Transformations that we felt were really essential to bring us to the next level and help us deliver predictable double digit growth and profitability, you know, we have a couple of key elements to that. First of all, you know, Lee talked about our multi-channel Market access Pro program with improved Pharmacy channel coverage. You know, we have, uh, we're modernizing the business systems that we used, um, in our commercial organization to improve efficiency and Effectiveness. We've got a great portfolio. We've also expanded the sales force. We're going to direct us, we have the type 2 Opportunity. We are making great progress on each of these initiatives and we've accomplished a lot in the short term.
I would say that some of the adjustments to the US numbers really acknowledges that a number of these initiatives are still in process and that has uh, delayed some of the benefit. So internally, I think we feel good about where we're at but we're still implementing some of the work that's required to see the benefit of these of these. As, you know, transformational changes. I'd also say externally we have, um, you know, the competition remains intense, but there is a new market entrance, this, this quarter. And while we have very limited experience with their product, they have built a larger than expected sales organization. And so we know it's going to generate a great deal of noise. And it's likely to cause some pausing in the second half. And so, as I said, we're focused on building a strong organization, we're excited about
Where we are, but we're taking a realistic approach to the second half based on these factors.
I think I'll add a point here too, as we think about the back half of the year on a worldwide basis. Often get the question how to think about the Cadence of sales as we adjusted these expectations and the way to think about the third quarter is that we expect to do about 235 million in Revenue worldwide. It's a slight step down from what we saw in the second quarter. Some of that has to do with some of the Dynamics. We saw in Q2, we had some modest docking benefits in the US. We also had some foreign currency benefits outside the US. Um and so there's a side step down going into the third quarter. And obviously then we still expect to see a strong fourth quarter as we tend to do with the seasonal curve.
Thank you. Our next question. Comes from Lawrence biegelsen with Wells, Fargo. Your line is open.
Uh, good afternoon. Thanks for taking the question. Um, the press release talks about, uh, sustained. Double digit growth is that referring to 2026. And if so, how, how do you get there with, uh, the US renewal opportunity? You know, being flat on a year-over-year basis in 26, for the first time in, in many years? Uh, thanks for taking the question.
Yes. So when we talk about that, that's our long-term goal that we, we plan to drive in the coming years. Not just 1 year, in particular. Um, renewals as I mentioned earlier, it's been such a strong piece of our business. In fact, our recurring business, uh, between renewals and supplies is now about 75% of our Us sales. Um, and you're correct when we look ahead to next year, the number of New Opportunities coming to Market from a renewals perspective, will be flat to what we saw this year. There's still a sizable growth opportunity for us with renewals all, all by themselves because of the way the waterfall works. And so when we have people renew, it's not right after their warranties expire, over the course of about 18 months, we capture about 70% of our customers who want, whose warranties expire. So there's still a pretty sizable tail if you want to call us. Back from people who came to market last year and this year. And so then that will help Drive the growth in 2026.
Hi. This is Brian here for Josh, thanks for taking the question. Um, on the updated gross margin Guidance, the 53 to 54%, it's pretty comparable to the prior guidance. Is there something? That's offsetting what I assumed would be margin pressure from the change in mix. Uh, is that an impact from Moby outside the US? Thanks.
Opportunity to to expand the margins this year and increase the profit. Um, and so, the reason that the of is now 53 to 54% is purely based on the change in, um, the geographic mix, um, which affects how margins play out. And so, with the, the, the US and US Dynamics, we now expect to be in the range of 53 to 54%
Thank you. Our next question.
Danielle and tely with UBS. Your line is open.
Hey, good afternoon guys, thanks so much for taking the question. Um just a just a quick question on um the the new patient starts in the quarter and pump shipments and just curious. If if you could comment on, you know, where you think the market where market growth might be, and I know, I appreciate, we have some of your competitors, you have to report, but obviously, um, there's some Cher Dynamics versus market growth Dynamics here. Curious, if you could parse that out, have you seen competitive pressures? Actually increase another Market entrance. Anything you can say about that in the US and I'll just, I'll just leave it at that. Thanks so much.
Sure. Um,
We typically don't commit to broadly on how we think. The others are performing in the market. We do know that we have been a leader in durable, pump starts and expect to continue to take have that position as we look ahead. Um, we do leave, the market is still growing overall, it's large and under penetrated. There's room for us to grow as well as the other, uh, companies that participate in it. And so overall,
You know, we look forward; we believe we have ways to drive that opportunity as well within our own, um, business between our product portfolio and our Pharmacy Channel expansion, where we can lower the out-of-pocket costs for patients. This can help us attract more and more patients to durable pump therapy. So, um, we feel like we like, as I said, maintain that leadership position.
Thank you. Our next question.
Uh, thank you, good afternoon. Um, I I want just to touch strategically on the business. As you look forward, you've been consistently committed to the model of a multi-pump platform to serve different channels within the market. But as you reflect kind of on the evolution of the business where you are today and the profitability is that a strategy? You think you can reasonably continue to execute given the resources you have and a competitive landscape where each of your competitors are uniquely focused on single platforms?
You know, I I think we we continue to believe that the portfolio approach is the right approach. I think that when you look at the marketplace, it's very segmented. There's different people want to wear control and interact with their devices in a unique Manner. And I think that if we were to focus on any 1 of those particular devices, you don't cover the entire Spectrum. Um, I think that, you know, with, with a product that has a touchscreen and the 300 unit, um, you know, uh, uh, Reservoir we're seeing continued interest in growth in that.
Product. Um, we do believe that, uh, having the versatility of Moi, that will be, uh, first of all, um, it'll be tubed and tubeless. Giving people a great deal of Versatility is an important product, and then we think that there's absolutely a market for, um, a 2 was only pumped. I, I think over time we'll continue to evaluate it but as as we as we feel, as we stand right now, um, you know, we feel that we still need to have these products. I will say that the organization is making a great deal of efforts internally to, uh, to drive efficiencies and how we design. Um, I would say, mobile apps and sensor Integrations, so that these things are actually easier to implement than might meet the eye. And so I think that, you know, as you as you just saw from Lee's report, we've actually maintained our R&D spending flat uh over the last quarter. And we had continued to expect to see the efficiencies in in our R&D spending while while continuing to drive.
A very Innovative pipeline.
Thank you as a reminder to ask a question. Please press star, 1 1 1 on your telephone again, that is star 1, 1 1 to ask a question in the interest of time, we ask that you please limit yourself to 1 question and you may rejoin the queue if you have any additional questions,
Our next question comes from Richard newer with truist Securities, your line is open.
Yeah I mean you're right. We think that the type 2 indication obviously doubles the size of the addressable Market. We're very excited about that, you know, I think that the uh the pilot was a was something that we thought was important to really understand the market before we stepped on the gas. We did not want to make uh any kind of footballs we wanted to get it right from the beginning and I will say that if you look at the pilot territories over the last quarter they have performed better in type 2, adoption work sides about that. I'd also say that right now. We are expanding the type 2 efforts to a significant number of new territories based on the experiences that we've had in this past quarter. And we also we intend to continue the expansion through the range of the year.
So, you know, I think we're happy with the experiences that we've got. We, we've learned a great deal in that, uh, in that quarter. And we're now applying that to the, you know, abroad much broader percentage of our our sales territories in the US. So, um, you know, we think it's, uh, we think it was a wise thing to do and we're we're benefiting accordingly as as we do this expansion right now.
Thank you. Our next question comes from Jeff Johnson with beard. Your line is open.
Thank you. Good afternoon guys, lie. I was hoping I could ask again on the uh, International pump. Starts number in the quarter. I think, the last 3 quarters, I have you, and I know it's tough, uh, with a lot of moving pieces. You don't give uh, a a ton of, uh, exact detail there. But I've got your new starts internationally up anywhere from 15 to 2530 the last 3 quarters this quarter,
In my model they're looking like they might have been down 10 or 15% to get to your updated, even your higher second, half guidance. I've got you down. Even if I adjust for some inventory, drawdowns, 20, 25% in the back, half of this year on new starts internationally just, you know, can you confirm maybe my ballpark math there and maybe what's going on with the fundamental Trend at some of those moving parts? Thanks.
Sure, um, maybe I'll start with 1 Thing. Uh, to remind you about the first quarter in the second quarter was that, um, we did have a timing shift of borders in the first quarter. We recognized about 5 million dollars at Borders, Pump and Supply that we had originally anticipated in the second quarter. And so there's a bit of that that's going on between the 2. Um, and and then that means that what you see externally isn't necessarily indicative of the demand and the placements in the market. What I can confirm is that our placement on patients did grow year-over-year and so we are still performing very well. We just have those tiny variables that are a piece of it and and I'll add the other element to this quarter. We did start to see the beginning of cynthy stocking within um 1 of the key markets, where we plan to go direct next next year. And so shipments did reflect a a lower number where again placement still showed uh growth so I think maybe that will help.
Thank you. Our next question comes from Mike kratki with Lee ring Partners. Your line is open
Hey guys, thanks for taking the question. This is Brett on for Mike. I just wanted to go back to the 60% gross margin target by 2026. I mean, obviously you have, you know, pharmacy penetration broadly getting better, with Tesla incoming in Q4, the Mobi pump helping, and the MobiCar cartridge helping next year. What gives you the confidence that you can reach this 60%, maybe with Mobi tubeless coming next year as well?
Yes, so when we refer to that, 60% next year we're we're speaking to the quarterly rate as we exit the year. So if you think about the past um, of gross margin and any calendar year, it scales up from the first quarter into the fourth quarter, just based on the growth in US pump shipments, following the seasonal curve as nothing else. And so from where we are today and how we expect to exit this year um in the in the mid to high 50s it it it's not a stretch to be able to see us achieving that 60% in a year from that. Particularly now that we've shared we've layered on incremental opportunity from our Pharmacy expansion with peace and Supply considering we have hundreds of thousands of pieces of customers today that without even purchasing another pump. We can transition them to the pharmacy channel on the supply basis and increase our profits. And so um you know and as you said Lobby, of course is 1 of the big drivers. I think what's great is we talked about Moby for so long as being a could be a contributor and now we're
Actually seeing it in our results. And so, it's a proof point for our ability to drive, and why we feel so confident for next year
Our next question comes from.
Americas, your line is open.
Uh, for t-slim specifically. Um, and then I'll have a quick follow-up.
Yeah, I'd say that. Uh, if you look at the US market, the last time, I I recall hearing from Abbott. They have 3 to 400,000 people in the US that use the lever 3 sensor. But do not use pump therapy.
And so I think that, you know, we're very excited about it. I mean, we're we're in the midst of our Early Access and as I said in the call, we intend to go to full commercial availability. Here this fall. So we think it's a huge, a huge opportunity. And I think that, you know, there's there's existence proof as well. If you look in the US markets, there is a a company in the US owe us markets who who does have freestyle delivery through integration. And, you know, in a relatively short period of time, they've got about 50,000 people using the device. And so our Market Research in the US indicates that there are people who are absolutely interested in pump therapy and for 1 reason or another. They don't have it today but we think it's a it's a wide open opportunity for us and we're excited to get there.
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Our next question comes from Joanne lunch with City, your line is open.
Uh, thank you so much for taking the question and good evening. Um, International seems to be going a bit better than, um, than previously expected. Um, can you just sort of give us an idea of how you look or think about that, rolling out into 2026 and how you think about adding, um, maybe more direct salespeople and or more regions
I appreciate it.
Yes, thanks, Joanne. Um, so we've already started, um, this year in the first half of the year with investments that we're making in those markets outside the U.S., building up the systems, hiring the talent, um, doing more in-depth market research for how we're going to approach those markets to make that transition. And so we look forward to the ability to start taking some of these operations direct. We feel like we can drive them in a different way with an intimacy that we have with our own products that maybe our distributors don't have today. Um, it also just structurally provides an opportunity because we will release some of that pressure that we have on revenue where we give up um, price in order for our distributors to fund their operations. And so we should see some revenue and some margin benefits as we begin these transitions outside the U.S.
Thank you. Our next question comes from Travis Steed with Bank of America Securities. Your line is open.
Hi. This is Stephanie pza on for Travis, thanks for taking the question on the lowered us guidance. Could you talk a little bit more about maybe what changed versus last quarter on the commercial Evolution side? And is there any way to think about how much of the lower guide is related to that versus the newer competitive entrance headwind? Um, that
You called out, thanks.
Well, I I think the commercial transfer transformation is it's made up of uh its sales force expansion coupled with um upgrades that systems tools and processes that we use to, to manage the interactions between a sales team and, uh, customers in hcps. And, you know, if you look at the key metrics during that, during the first half of the year, we saw, you know, rep productivity improved quarter over quarter, but these new systems and sales tools are just not completely implemented yet. And so, um, you know, I think it's just, we're as I said, you know, we, we're just trying to be a realistic about the second half, we're not where we want to be in terms of implementation. But we certainly understand that these are key key steps to take to make ourselves more competitive in the future. And I think it's also just, uh, you know, just just be cautious. I'd say when you consider there is a new player with a large sales force. And anytime we see a new product on the market, we see pausing. So it's difficult to say which of the
The 2, but I would say that they're both there and we're just trying to take that into account being realistic as we forecast the second half.
You, our next question comes from William plain with caner, cord's annuity. Your line is open.
Yeah, great thanks for taking my follow-up. I'm just curious. You know, you you you talked about Pharmacy, contributed some in Q2 as, maybe some of those new partners started to build some inventory. I'm wondering how much of a contribution was that and you know, cuz I mean, you're you're Us. Number was basically in line, so that was obviously a boost. And how much did you expect coming into the quarter? Thanks.
We expect to see a similar type of step down going into the third quarter. Um, based on some of those stocking Dynamics, we do think this is a really important step, this will really help us, um, capitalize on that Pharmacy opportunity that we have is we even with the coverage in hand today, we can have a broader reach by extending these distributor Networks.
Thank you. Our next question. Comes from Jason Bedford with Raymond James and
Is open.
Uh, good afternoon, thanks. Um, just on the the US pump guidance. I think you hinted at it earlier, but historically you had talked about a 50/50 split between new users and renewals. Uh, with with the latest guide, what is the expected mix between new users and renewals in in 25?
Um, yes, great question, Jason, so we do. Um, now expect that renewals will be a little more than half as we go throughout the year as we made our, um, updates to our guidance. It was really more a factor of our expectation for, for new pump starts. Um, we had originally had an assumption that those would grow mid single digits year-over-year. Now, it's more likely, those will be flat to slightly down. Um, and so that's the primary change in the guidance update.
Thank you. Our next question comes from Anthony, Petrone with mizuho Americas. Your line is open.
Uh just quick follow up again on. Um, the difference in renewals you have more type twos coming in relative to type 1, is there anything notable there? But it it, I guess the math is suggesting that your retention rate and type twos is, is somewhat better. I don't know if that's a fair statement. Thanks for taking a follow-up.
Sure, um, we don't usually speak to type 1 and type 2 in the renewal versus new population. Um, but what I can share there is that our type 2 have generally been in the, uh, by plus, you know, Nick or high single digits that I guess I would say it's a percent of our overall shipments.
And we don't typically see a difference in terms of retention of those types of customers. We are excited going forward with our type 2 initiatives. Um, and hopefully some positive movement on the reimbursement side that we can really maximize and start to see type 2 is grow as a percent of the business and help Drive incremental growth in future years.
Thank you. I'm gonna I'm just gonna insert myself here from a moment. There's of of surprised we didn't get more pipeline questions and I just want to go ahead and and talk about some of the exciting things that we do have going on. As I mentioned, in the prepared remarks, we did get, um, we did submit steady set, um, for the extended where infusion, um, capability, which was really excited about. And um, you know,
But right now we're we're working on, you know, just as soon as we get approval, we'll be working on seeking, you know, reimbursement and we're also building out, uh, the manufacturing capabilities, but, you know, I'm excited. Uh, indicate that we plan to Launch
Steady set in the US markets in 2026.
Along the same lines as we made this decision to incorporate the extended wear technology into the tubas version of moi.
You know, Moby, the tubas Moby, obviously will allow people to wear it as a tubeless pump which provides great versatility in wear but it also enables people to change the cartridge in an infusion site independently, which we believe will save on in insulin usage. And it's also going to be benefit beneficial to type 2 users, who just obviously use more insulin on a, on a daily weekly basis. So, as I mentioned in the past, we are in dnv testing and Manufacturing buildup for for 2 This movie. But I do want to let you know that we also plan to launch 2 list Moby in the US markets in 2026. And we think that these are 2, really exciting, um developments for Tandem. And I think it's really going to do a go a long way to improving the competitiveness and of our products uh in 2026 and Beyond. And I'm just sorry. I just wanted to take the opportunity to share that with all you guys.
Thank you. This concludes our question and answer session and today's conference call,
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