Larry, are we live? Okay. All right, welcome back, everyone. I'm Larry Biegelsen, the med tech analyst at Wells Fargo, and it's my pleasure to host this session with the management team from Dexcom. With us, we have Kevin Sayer, the CEO, Jereme Sylvain, the CFO. The format will be a fireside chat. If anybody has a question they wanna ask, just raise your hand. We'll come around with the mic. Kevin and Jereme, thanks so much for being here.
Thanks for having us.
Thanks for having us.
All right. So, Kevin, obviously, there's been a lot of volatility over the past month or so, and investors are still wrestling with the issues raised on the Q2 call, which we'll dig into in a moment. But first, let's take a step back and look at the big picture. I wanted to start with actually category, you know, growth and demand for CGM. You know, by our math, the worldwide CGM market grew about 22% constant currency in the first half. Is the CGM market, you know, still a 20% growth market going forward, in your view?
Yeah, we believe the CGM market still is a very high growth market going forward. If you break it down by segment, even in the U.S., we believe Type 1 penetration is in the 60 to 65% range, Type 2 intensive insulin users, 50% to 55%, and basal, we're just getting started, approaching that 20% to 25% range. And now we have this entire market of people with Type 2 diabetes non-intensive, which our Stelo product will apply to. We're of the belief very much that CGM can continue to grow. Again, around the world, as you look at other geographies, some of them are very penetrated from a Type 1 perspective, but not at all penetrated on the Type 2 side. So we have opportunistic plans in all these geographies to get more access and more coverage to our products there.
So we believe this continues to be a high growth industry, and we have a tremendous opportunity going forward.
All right, and let's talk about, you know, share. So a lot of the issues, Kevin, you raised on the Q2 call pertained to competition. What's your strategy to kind of catch up to Abbott in the areas you highlighted on the call, and Kevin, what are you personally doing to lead the organization during this time?
Well, personal leadership in the organization, and Jereme and the team can attest to that. I'm making everybody gather at 8:30 A.M. every morning, and we're sitting down and making sure we're executing the way that we need to. If anything, and we said this on the call, this is an execution story on our part, not a story of a market that, any category that's slowing down. We think the category is still very robust. As you look at the issues that, that we talked about, we've talked about a sales force expansion that was disruptive. I know I've been and met with all the salespeople at their midyear meeting and talked with them and got some better color that way.
With respect to our DME distributor relationships, we're scheduling top-to-top meetings throughout the organization, and I'm personally having phone calls with the CEOs of our top distributors as well, and those phone calls will continue on a regular basis, to make sure we're doing what we need to in that channel to get back on solid ground and then eventually get back to the place where we're on equal foot or where we're supposed to be. So we've certainly turned up the intensity. We've learned a lot through this, and we're putting literally the measures in place to get us back to where we need to be. But it's a process. Larry, this is not something we're gonna fix in, wave a wand and fix in two weeks.
It's gonna take us a while to get back to where we need to get.
That's helpful. Well, we're gonna definitely dig in on the specific issues. I wanted to just ask one other, just one, product-related issue. On the 15-1 gap, I think, you know, investors are looking for you to close is the 15-day wear for G7. How are you feeling about a 2025 launch? And can you be more precise on first half versus second half?
I won't be precise, but I'll tell you we feel very confident about a 15-day launch. The Stelo product that we've just launched is a 15-day product, and we've made, you know, simple engineering improvements with Stelo, for example, and in our G7 line, we have a much stronger adhesive than we had at the initial launch of G7. So that is. That, that's gonna help as far as wear with fifteen days. We have a submission that's got to go to the FDA to get that product in position to launch. We have not provided details on that submission. We are very comfortable with the data that we have, that it will certainly meet ICGM standards and will be the reliable and excellent product experience that we've always offered at Dexcom.
Once we get that FDA approval, then we go into launch mode, and that entails contracts, that entails, for example, you know, with the various PBMs, we've got to go recontract because it's a new SKU number. We've got to go run that through the tender process. It takes a while to get the product out into the market. We're very comfortable we'll get it approved, and then the rollout and the replacement, all of the, the 10-day sensors is gonna take a bit of time. We've got to get the 15-day product integrated with our pump partners as well. So all these steps are things we're lining up and working on, but the first step is to get the data filed, and to get the product approved.
We demonstrated recently with Stelo that we can get a regulatory filing approved very quickly, and we're confident in the data that we have for G7 15 days, that it should go very fast, but we've got to get it in.
Yeah, and I think us getting out and saying it's 2025 gives you, takes care of the if conversation. I know it was always a matter of when.
I think we're highly confident in saying 2025. I would just say, let us get through the FDA process, because obviously that's something we cannot control. Once we do that, I think we'll be able to give you some very firm dates, but we are highly confident in a launch in 2025.
It sounds like, Kevin, the submission has not happened, but based on the way you just talked about it, or I guess, would you disclose if and when the submission happens?
We typically don't disclose filings. We like to disclose approvals.
Okay, so your language today was not, it may or may not have been filed?
No.
It sounded.
We're not in a position where we can say there's gonna be approval imminently. So when we have an approval, we'll let you all know.
Okay. And one other big picture question before we dive into some other topics. You know, historically, I think Dexcom's guided to 15% to 20% annual growth, and you've often exceeded that. I know you pointed people to the low end of the LRP for twenty, which implies about 14% growth next year. Do you still see Dexcom as a high teens grower long term, or is something structurally changed?
You know what? Jereme comes with the estimates. I will just give you my perspective. We have some amazing opportunities going forward into 2025 , particularly as we right the ship with the efforts that we have going on now. We have the Stelo product that'll be out next year. Certainly, there is more market to go grab and more patients to go serve. So the opportunities are in the categories there. It's about us executing. Jereme can talk to you about how we got to those numbers.
Yeah, and you know, obviously, we run through all of you know the things we saw in the second quarter into where we really were able to reiterate the low end of the guide. We took all those into account. You asked the question at the start, is this still a market that can grow significantly? It still is, and I think we expect to take our fair share in that market. While we're not committing to 2025 guidance at this point, our expectation is there's nothing structurally wrong in the business. Ultimately, it's about execution. And when we get through some of the blips we had here in the second quarter, I think we'll get back to executing.
That's helpful. Before we dive into the issues that came up on the Q2 call, particularly around DME, I wanted to ask about your reaction to the Abbott Medtronic deal and the implications for Dexcom, because that's new, I think, since the Q2 call.
That is certainly new since the Q2 call. I think the one thing that it demonstrates is the importance of a good sensor within these automated insulin delivery systems. Medtronic made a commitment to work with Abbott to add another sensor to their system that, by all external literature, is a higher quality sensor than what they're manufacturing. And it certainly would have some cost advantages. What it means to us, again, it validates who we are. The sensors are very important, and they're the thing that drive these systems. We believe it's also an opportunity for us to grow closer to our existing partners in the automated insulin delivery space and offer them a better experience that can put us ahead.
And so we'll work with them, and we'll help them, and we'll see how it goes in the world and in the field.
All right. So let's move on to the Q2 update. You know, I wanted to talk more about the DME issues. It's interesting, the sales force issue and the DME issues. It seems like the sales force issue, correct me if I'm wrong, was a DME issue, in that you didn't capture as many higher revenue DME patients as you expected. And in fact, actually, I think new starts actually grew year over year, correct me if I'm wrong, Jereme, in the U.S. in Q2. But my question is, what are you doing exactly to fix you know, the sales force and the DME issues and how long might that take?
Why don't I start with the sales force, Jereme, and then I'll pass the
Sure.
DMEs over to you. We decided back in 2023 we needed a broader sales force for a number of reasons. The first reason is we've looked at prescribing patterns, and the places where we were not getting any traction are those offices where we had no salespeople, where we weren't calling on physicians. We're getting very few prescriptions. We needed to broaden our reach. On top of that, we knew we had a Stelo product coming, and we knew that would be an opportunity to get in front of more primary care physicians as well. So we laid out the plans for a sales expansion.
As we laid out those plans and we looked at the opportunity, we decided to take the approach of having a specialized sales force to call on high prescribers who have long been endocrinologists or diabetologists, diabetes clinics, and then a primary care sales organization that would really call on more people and have a different sales target. So we broke the team up, and we did that. We implemented that April first, at the start of the second quarter. What did we learn? Well, one of the things, we caused a bit of confusion across the board because we changed literally territories for everybody. In the past, our expansions were, we'd have, let's say, eight sales reps around the Boston area. We'd go to 10, and we just split zip codes up, and most people would call them the same people. In this case, we re-divided everything.
Our endocrinologists, for example, more than a third of them, had a new sales rep, and those relationships, particularly in high-prescribing offices, are incredibly important. On the PCP side, we're calling out offices where we've never been, and the reaction, if we've never been there, isn't the open arms of an endocrinologist who's seen a bunch of Dexcom patients forever. It's somebody who doesn't know very much about us, and we didn't necessarily have the proper tools or positioning with DTC to create that demand before that rep got there. On top of that, as those new reps hit the PCP offices, where they do a lot of Medicare prescribing, which goes through the DME channel and Medicare Advantage in particular, these new reps did not have relationships with their corresponding DME reps, so they immediately sent stuff over to the pharmacy.
You saw literally a big reduction in referrals from us to the DME providers in the second quarter. That didn't sit very well and didn't sit very well with our DME partners. That's kind of how the sales force worked. What we've done, we've retrained the new reps. We've talked to them about the importance of channel neutrality. Let's make sure that a patient gets the product. That's what's most important, and they get it through a channel that's reasonable for them. You know, and I'll let Jereme go into our DME efforts, so why don't you take that one on?
Sure. Yeah, and you know, Larry, your, your question on new patient starts, yeah, they grew year over year. Sequentially, it was down from Q1. It wasn't a record, and that's some of the disruption we talked about. But year over year, the underlying, CGM market still remains strong. You know, Kevin alluded to some of the, the conversations we were having, sales rep to sales rep, but also in those same marketing materials as we were pushing folks to Medicare Advantage, which was benign intent. The intent was to add more people to the funnel. At the end of the day, I think what it did is it, the way it was executed came across as we thought that the DME channel was not an important long-term customer, and it is. And so in doing so, we've changed a lot of that.
We've made sure we've changed the materials. We're focused on, to Kevin's comment, the top to top meetings, to better understand. We understand this is a long-term relationship, and it's important we both see it as such, and it was never intended not to be. Those are the things that are working there, and ultimately worked against us. Because what you have is, if you're gonna start someone on a product, and they're gonna switch from your channel to a different channel where you lose that customer, that creates a long-term economic incentive or disincentive in the case of the DME providers. And so we needed to get through that. We're working through that today as we speak. What it means, though, is that the underlying economics in the channel, as you look at our patient starts year over year, our competitor patients start.
The CGM market as a whole continues to be really, really strong. I think it's a misstep, specifically in that channel, that caused some of the impact in Q2 and the change in the year on the guide.
You also talked about losing share in the DME channel. It sounds like it's also Abbott winning more share at the physician level with Type 2 basal patients who tend to be Medicare. So they're. And then Abbott showed data on this at, actually on, at ADA, at their analyst meeting, that they had, like, 70% share in that channel, in that population. Is that a fair characterization, and how do you fix that?
A lot of these patients do come through that channel, and a lot of these patients come through physicians we've never called on, hence the sales expansion, so we can have a better presence there. And so we're working on that. We do need to pick up more of these individuals, Larry, and we'll push harder. I can't comment to the accuracy of their 30/70 number, but suffice it to say, we're behind.
Got it. And anything. And then the other headwind was the channel mix. Three Medicare Advantage plans opened up the pharmacy channel for CGM. You know, the question is, was this something you hadn't seen before, and why won't it happen again?
Yeah, so when you think about that, it's really dual channel was available, so it's not, it's both. It was always DME, and they opened it up to both pharmacy and DME. That's okay. Patient preference is a good thing. We support that. In fact, most of our contracts are dual channel. I think where this got a little bit of a stub of the toe moment is about demonstrating neutrality in the channel in which we operate. We wanna be neutral. We want you to go where it makes sense for you to go. That might be the DME in cases. It might be in the pharmacy. As Kevin alluded to it earlier, we pushed, leaned into that pharmacy. Again, benign intent, opening up the funnel, and that, as a result, frustrated some of the adjudication via the DME.
It wasn't the fact that Medicare Advantage opened it up that caused it. It was the fact that we lost share because of the relationship strain we put on it by pushing folks.
Okay, and I'm gonna ask the UnitedHealthcare prior authorization for Medicare Advantage
Sure.
that starts September first. There is some concern that it will move more patients into the pharmacy from DME. Do you share that concern?
It shouldn't. So in theory, what Medicare Advantage has. I mean, sorry, what United has said in its Medicare Advantage plan is follow the CMS guidelines, and they just put it in their plans, which should have been being done all along. It was just the DME provider had to do it. By putting it formally into the guidelines, essentially, it just puts a policy out there that you have to follow what has always been done. Whether folks have or have not been doing it, I can't comment on that. Maybe there's a reason in United audit, they said that. From our point of view, in the CMS channel, the guidelines are very clear. The fee-for-service guidelines, Medicare Advantage generally follows the fee-for-service guidelines, and this is just a formal, essentially, ratification that UNH expects folks to follow those guidelines.
The prior authorization step being put in place for the DME channel, you don't see that as a reason doctors or patients may choose to go into the pharmacy?
It was the same thing that they had to do to get access to the product before. The DME just had to do it, as opposed to UNH. So it shouldn't. It should be effectively the same thing. Around the fringes, could it create some noise? Potentially, but we don't necessarily see it as a big, big driver one way or the other.
All right, and I guess there's also concern that maybe Abbott has some pricing advantage or some economic advantage. in the DME channel. Is there any merit to that?
When all is said and done, our pricing and our largest competitors are quite similar in the DME channel, particularly with respect to DME government. We have a slight premium price there, but it's not a large premium. It's very much reflective of the same pricing range we have in the pharmacy channel as well. So that's not the biggest issue, as I've talked to the heads of these companies, and Jereme's talked to them as well. They want volume from us. Now, look, if you call a distributor and ask them, they're always gonna say, "Give me more price." But what they really want from us is to drive more business their way, and again, to be neutral in the channel, not to be pushing people towards the pharmacy versus the DME channel when they can go there.
You know, Kevin, I heard you comment upfront about, you know, this is gonna take time to fix, something along those lines, not to paraphrase you. Are things moving as you expected, you know, when you on the Q2 call, anything? I mean, there's a lot of moving parts here. Are you pleased with the progress so far?
What we are doing is what we said we were gonna do. We've heightened the visibility of our DME relationships. I'm having, as I said earlier, phone calls with the leaders of the higher-ups of these organizations. Our commercial leadership team is having face-to-face meetings, head-to-head meetings, locally at all of them at their headquarters, hearing their concerns. As I said, we've retrained our people at our mid-year sales meeting to send product and how to use that channel effectively. We've also, again, encouraged our reps, go get those relationships that you need with the local DME rep at your physician's office. So we are doing the steps that we planned on. There's always a lag to DME data versus the pharmacy data.
You know, you're very well aware of how we can get the data from scripts through IQVIA or whatever source, quite quickly. DME data is much tougher. It takes longer. We can only get our data from our suppliers. They're not gonna give us other companies; they're not gonna give ours to other companies either. So we'll need to see the data. We know the reorders, but we don't see the new patient data for a while. We'll start seeing that, but remember, we announced this at our earnings call in late July. Started talking about it, we really started putting action plans together over the last five weeks. So we're hopeful that these things work, but, as I said earlier, it's gonna take us some time, and we need to show a commitment to these guys, that we're committed to helping them.
That's helpful. The other headwind that you talked about was international, 10% organic growth, in Q2. It's actually a really tough comp, so it wasn't
Yeah
quite as, the, you know, what it appeared from a nominal growth rate. But. And you also said a good chunk of the 70,000 patient shortfall was OUS. How are you thinking about international growth going forward?
Yeah. So, you know, that market, at least we saw the overall market growing in kind of the mid to upper teens as a total market. And we think that that's a pretty steady state for it, and then as essentially, you know, categories of reimbursement open up, there can be spurts where it can grow a little bit quicker. When you look at our performance on the quarter, tough comp, you're right. Also, I think Japan, and we talked a little bit about this, going direct in Japan, it was a tough kind of get out of the gates for us there. Mostly related to distributor transition challenges, and they didn't set us up to succeed. We're feeling much better about Japan right now.
When you exclude that, you start to get a little bit more normalized. I think this is a market that can continue to grow. We see the market continuing to grow in the mid to upper teens in the established markets, and that's prior to all the basal coverage and incremental coverage that we expect to open up in the coming months and years. So it's a good market, good opportunity, a lot of reimbursement coming on tap. I think what you see and reflective in the quarter is, again, tough comps, certainly Japan, and then we did see some timing of tenders that we did expect to take place in the quarter, that didn't take place in the timeline we expected, that we do expect those to come over the coming months and quarters.
Jereme, you guided specifically, I think, to 1% to 3% for Q3.
Yep.
I'm gonna assume that was pretty de-risked, but the guidance implies Q4 growth of 5% to 10%. Please correct me if I'm wrong. What's giving you the confidence that you're gonna accelerate from Q3 to Q4?
Yeah, so there's a couple things, as you kind of walk through that guidance. First off, we assume in Q3, we lose share, a little bit of share in the DME channel before it stabilizes into Q4. So clearly, that plays through in the third quarter, and obviously, the stabilization in the fourth quarter is helpful. As you look at then the pharmacy channel and the new reps, we do expect reps to get more productive. We didn't add all these reps to our sales force in the second quarter with the intent that we're not going to be setting records in new patients. Obviously, second quarter, a negative surprise to us.
But as those folks go through the training, Kevin alluded to the mid-year sales meeting, as we kinda educate them on, I'll say, fishing in the entire pond versus just 60% of the pond and not partnering with the DME partners, I think that will help the effectiveness. And we're already seeing that happen. We talked about on the call, June, we started to see more and more effectiveness coming out of that sales force. So we do expect them to be more effective as we move into the fourth quarter, and then clearly, we'll have a full quarter of Stelo into the fourth quarter. So that's also something you'd consider as well in that guidance.
I think Kevin's alluding to, I don't know that we're gonna be completely out of it and taking share back by the fourth quarter, certainly in the DME channel, but we've laid out the kinda components and how we thought about it, and then, of course, if we can out execute, excellent. We'll certainly pass that along to investors.
All right, well, twelve and a half minutes left. We'll transition to Stelo. Kevin, I wish we had thirty-five minutes to talk about Stelo, but
You know what I wish? I wish I had a booth outside for you guys to go to. We were concerned when we came here that after we've had a few meetings, that every Stelo we'd sold had been sold to people in this room. But you're not our only customers. I can, I can assure you, I've got a heat map on my computer that shows they've gone everywhere, all over the United States.
So Kevin, I know it's early days, but maybe, you know, can you speak to what you're seeing qualitatively, any, you know, on demand? We've been publishing on the app downloads, which look pretty strong. What are you seeing?
App downloads are strong. Demand has been very good. We are getting incredibly good feedback on this product so far. The first thing that really delighted us in particular was how delighted our customers were. We went live on Amazon at 11:00 P.M. on Sunday night, and one of our people ordered at 11:02, and she had it at 7:00 A.M. the next morning, which if you bought medical devices or product like that, that kind of turnaround has not been typical. So our customers have been delighted in the robustness of our distribution channel and what we've built. The website appears to be working well. There's been a glitch or two, but nothing insurmountable. The feedback we're getting from users and it's been, for me, it's been users across the board.
So I met, for example, with our Type 2 ambassadors, the week before launch and got their feedback on what they've learned just about simple meals, you know? And again, these are people with Type 2 diabetes for years. One's about my age, you know, he's approaching 65, and he said, "I had no idea what was going on with my body in the morning. I was eating oatmeal every day, and my sugar just goes off the charts. So I went to steel-cut oats because that's supposed to be better. Wasn't. So we're not eating oatmeal for breakfast anymore. I've talked to people who've talked about learning to space foods after they've seen a spike if they eat something before they eat the other stuff. But really good feedback so far.
I've talked to another person who said, "I've done this for a week, I've lost two pounds, and all I'm doing is trying to stay in between these lines." So the feedback has been very good. So far, the experience has been seamless. We are asking in the app when you sign up, do you have Type 2 diabetes? Are you pre-diabetic? Are you just doing this for health? So we'll have a good indication, and we'll give some color on that on our earnings call as to who's buying that. Obviously, it's gonna be early when we get to the September earnings call to say how many people who subscribed have purchased again, because we're only one month into launch, but we're very anxious to see how that goes. I've had conversations with people about the fitness side.
Somebody had said they'd been to their trainer. Their trainer is making everybody in his gym put on a Stelo. Because he'd said, "I've learned more from my Stelo about my nutrition and what's going on in my body than anything I've ever done." So it has been a great experience so far.
Okay. You talked about some glitches or a couple of glitches, anything noteworthy?
No, I think, you know, we have a Stelo bot that Jereme's team, Jereme's IT team, has been putting together that's gonna learn about questions and how to answer them through AI. We've got it. It's got to learn, so right now, the experience has been a little difficult for some folks, but by and large, it's been great. No showstoppers at all.
Kevin, I mean, the other big question people are asking about. I mean, you priced it at $89 to $99 a month subscription versus one time. You know, the Libre cash pay price is approximately $80 a month. We don't know what. As far as I know, we don't know Lingo's price.
No.
Assume it's approximately that $80, so you're at a premium. You know, why do you think you can charge a premium?
We spent a lot of time researching pricing for this product and discretionary pricing and what we could price this at and get user group. The prices that we landed on, the $89 with the subscription and $99, if you did the one-time purchase, is based on a whole bunch of market research. As time goes on, particularly now that we have two sensors with Stelo instead of three in the 15-day wear, we can have some price flexibility if we need to. We're very comfortable with where we started, and we'll see how that evolves over time. Larry, I wanna we wanna get this on as many people as we can.
The subscription versus one time, I know it's super early. You talked about, you know, prediabetes, et cetera. Any initial color on subscription versus one time?
I'm pretty sure most people have signed up for the subscription, haven't they, Jereme?
Yeah, a lot of people signed up for subscription. The question, Larry, is: do they follow up?
Do they
I need to get back to you in 30 days on that
Yeah.
because most folks obviously sign up to save. But we'll have color on that, and the good news is we'll have color by cohort, so we'll know whether it's Type 2, prediabetes.
Right.
So give us 30 days, so we can see that first subscription period lapse. But early on, a lot of people opted for subscription.
couple other learnings, if I could just interject a bit. A lot of the feedback we're getting is: I like this so much, I want more. We've invested very heavily in the software group over the past several years. We have a series of launches and features, including some initial AI work and some other things, that will roll into this over the next twelve months, literally creating new experiences, maybe not monthly, but certainly every two months, the Stelo app is gonna get more robust and address more factors. So that is. We're really looking forward to that. The second is the partnership opportunity. A lot of people want access to Stelo data, particularly now that a patient or a user can buy this over the counter and buy it online.
This opens the door for a lot more access, so people don't have to get a prescription. And it will also open the door for us as far as interfaces with direct-to-software connections, maybe rather than API running our app and running their app in the background. So we think we can enjoy a good expansion on the partnership front with Stelo as well.
What type of partnerships?
For example, if you're seeing data for one app for health and nutrition on your phone, let's put the Stelo data in there and let them compute what's gonna happen with your glucose values based on what you eat and stuff. Those types of companies, activity monitoring, sleep, you pick it. We think the glucose signal can be valuable across the board when it comes to health.
Kevin, there's you probably know some skepticism about the $40 million, the 1% contribution to growth. What's giving you the confidence that, you know, in that $40 million, and maybe what were some of the underlying assumptions?
Demand has been strong so far, but we're about eight or nine days into this. Look, we modeled this out, number of users we had to have, number of users we had to add, how many leads we had to get, what do we do? We modeled that in our traditional models. The most important thing in the next four months is for us to learn. We learn the most if we can get up to $40 million in revenue because we'll have enough users that we'll be able to make the changes that will continue to drive demand. So while we're confident and hopeful in the $40 million, the most important thing is to learn, and that is the primary goal of this launch. If we get to $40 million, that will be great.
Look, we're gonna give color as to how we do. We're not gonna hide it. We threw a $40 million number out there. We have to say how we achieve against it. So we will, and we'll give color on the user base and subscriptions and all those things going forward, because this was new for us. This is a brand-new business, and we're very excited.
Yeah, and Larry, just to give you. You know, you asked the question: How'd you calculate it? You know, one of the things we did have as a result of getting that Stelo website up, there was quite a bit of inbound interest and emails that came in. "Hey, tell us more. Where are we going?" So we already had a head start in terms of a customer base. We also, as a result of years and years of being in the industry and the G-series, there's been a lot of folks that have had interest in our non-insulin users that have had interest in G7. Obviously, our cash pay price at that time wasn't as competitive, but those names we've kept on file over the years.
So not only have we always known that there was interest in Stelo, we had interested folks in a product of some sort at some time that would match it. We used all of that, along with some of the inputs, to come up with it, which gave us some confidence in it. Again, you'll, you'll hear a little bit more on our Q3 call on, on where we're headed, and we won't hide it. We'll tell you what it is.
Jereme, you talked about how you built the second half 2024 guidance. You have this kind of 14% number out there for 2025, right? The low end of the LRP. Big step up, right, from 1% to 3% growth in Q3. What are some of the puts and takes next year? What gave you the confidence to say, "We can hit the low end of that LRP?" And you kept the margins, by the way.
Yeah. So I think there's a couple things. One, I think let's start with the top line. One, we've expanded the sales force, and we talked a little bit about it earlier and getting comfortable longer term. The expectation is productivity starts to ramp over the course of this year, into the back half of this year and into the following year. We always talk about this. New patients aren't what drives the quarter, but it does drive the rest of the year. You saw Q2, there was a miss on new patients, and then you see the impact on the rest of the year, and that's obviously reflected in guidance. Wasn't as much of an impact on the second quarter.
As we've seen those patients coming in in the third quarter and the fourth quarter and that productivity as it ramps into next year, as well as some assumptions around stability in that DME market, you can very quickly see why it gets back to those figures. You combine that again with Stelo and some of the assumptions around Stelo, I think that gets you enough comfort around where we're going. And we wanted to make sure that we ran through all the assumptions, everything that took place over the course of the second quarter. We really wanted to make sure we incorporated that in the giving that reiteration, if you will, at the low end of the LRP. So those are some of the reasons. Obviously, we're gonna lap.
We're gonna lap kind of what I would say is an easier comp next year based on where we're projecting this year, which is also helpful. Not a reason to be happy about our growth rate, but nevertheless, a reason. So when you do the math on all that, I think you'll find a pretty relatively modest pathway to get there, but we'll give you more color on it as we give a guide for 2025.
Stelo, I mean, if you hit the $40 million, it's. We've talked about this a number of times.
Yeah.
It's almost like a 200, you know, $200 million run rate, you know, 150 color.
Yeah. There's gonna be more attrition, utilization
Yeah
trialing in that group. But you're right, if you hit forty million in a short period, that means there's a lot of interest in the product. And then we'll have to get back to you on the subscription versus one-time buys and give you trends over time. But you're right, there's a lot of interest in this product. There's already hundreds of thousands of people wearing, that are non-insulin users, wearing sensors full-time today, and they have to go through all the challenge of going through a pharmacy, going through a script, getting a physician to write it, then, of course, going and getting. This is easy. Order it online, it's at your house in a day or two. So we know there's demand out there.
I, you know, obviously, as we report on it over the coming couple quarters and giving you some guidance for next year, we'll give some color, but it's a very interesting product and a massive unmet need in our society.
So, Kevin, we're almost out of time. Feel free to go over. I'm gonna give you the last word. What? You know, you can say anything you want. What did we cover? What do you want to leave investors with? Obviously, Dexcom's going through a challenging time, more challenging than we've seen probably, if not, you know, in a long time, if not ever. And I just want to wrap it in here. We've seen a lot of companies announce, you know, ASRs. I don't think we've seen that from Dexcom. So give you the last word here, Kevin. Thanks for being here.
Oh, thank you for having me. Look, we have a robust market, and in all of our discussions, for example, with our DME distributors, where these relations have been difficult, all of them start with, "Well, you guys do have the best product." And we have built a company on the best product, and we built a company based on our relationship with our end users. It's very important as we go forward, that we think more broadly, and we think more broadly about who our customers are, and that we meet the needs of all of those people and all those constituents. This is an execution hiccup. This is not a reflection of our product pipeline. It's not a reflection of the quality of our product. It's not like we've had a recall or anything.
This is a reflection of a hiccup and some execution that could have been done better. We'll do that better. We'll fix it, and over time, this business will continue to grow, and as one investor asked me on a. We took a lot of late-night calls after that earnings call. Somebody asked us about 10 o'clock, "Well, do you still see this being a $6 to $8 billion dollar company in X number of years?" I said, "Well, yeah." He goes, "Then don't worry. Go fix it," and I think that's how we feel about this business. It is a tremendous opportunity. Our product pipeline, Larry, is gonna be fabulous as you see it coming out over the next couple of years, so look, we're very optimistic and bullish about the future.
A little tired of going through the present now, but we'll get through it, and suffice it to say, if you wonder if I'm grinding the people hard, I am. Trust me, we'll get, we'll get there.
All right. Perfect. Thanks for being here.