Please note that this conference is being recorded. I will now turn the call over to Kevin Sayer. Mr. Sayer, you may begin.
Thank you, Danielle, and welcome everyone to Dexcom's First Quarter 2017 Earnings Call. We'll start with our safe harbor statement from Steve Pacelli.
Thanks, Kevin. Some of the statements that we will make in today's call may constitute forward-looking statements. These statements reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. All forward-looking statements included in this presentation are made as of the date hereof based on information currently available to Dexcom and are subject to various risks and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statement. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in Dexcom's annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission.
Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this presentation or to confirm these forward-looking statements to actual results. Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP with respect to our cash-based operating results. The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Kevin?
Thank you, Steve. Joining me today are Steve Pacelli, our Executive Vice President of Strategy and Corporate Development, and Kevin Sun, our Vice President of Finance and Interim CFO. Before Steve dives into a more detailed financial update, let me highlight a number of recent positive developments here at Dexcom since our last call only two months ago. First, in terms of our sales performance, the quarter came in consistent with our expectations, with revenue growing 22% over the first quarter in 2016. Our CGM first message continues to resonate. Again, in Q1 of this year, new multiple daily injection, or MDI patients, drove our growth and represented the majority of our new U.S. patient additions, estimated at just above two-thirds of our new patients for the quarter.
Second, as we discussed on our last call, we received a non-adjunctive indication from the Food and Drug Administration near the end of 2016, making Dexcom G5 Mobile the only CGM system approved for therapeutic decision-making. Shortly after FDA's decision, Medicare issued a positive ruling for therapeutic CGM. Late in Q1, we received additional coverage details from the regional MACs, confirming that all people with diabetes on intensive insulin therapy will be covered under this ruling. This includes people with Type 1 and Type 2 diabetes. We have always believed that all intensively managed patients should have access to CGM regardless of age, and we hope to leverage the Medicare coverage criteria to our commercial relationships. So far, patient interest has been outstanding.
We currently have over 10,000 prospective new Medicare patient opportunities in our pipeline, and this is before we have even started promoting Medicare availability. We commend CMS on this decision. While we are still early in establishing the framework to serve these patients in a streamlined manner, we are excited to begin rolling this out to seniors who we believe will benefit tremendously from this technology. I will provide more on timing later. Finally, we are beginning to see good initial uptake in Germany following our positive reimbursement decision there last year. Although we are still early in the adoption curve, Germany helped fuel 37% of U.S. growth in Q1. With that, I will now turn the call over to Steve for a review of our financials, after which I will expand on these accomplishments and provide a general business update. Steve.
Thanks, Kevin. Dexcom reported revenue of $142 million for the first quarter of 2017 compared to $116 million for the same quarter in 2016, a $26 million or 22% increase. Sequentially, revenue for Q1 was down approximately 17%. This reflects the seasonality we have experienced in the past several years as our U.S. patients face resetting insurance deductibles at the beginning of the calendar year. In addition, because of the January CMS ruling, we are prohibited by law from balance billing our existing cash pay Medicare-eligible patients, which we estimate accounted for approximately $2 million to $3 million in lost sales during the quarter. As Kevin mentioned, there's a lot of excitement around the CMS ruling, and our sales channel is experiencing a significant amount of noise in the field, which has not yet translated into revenue.
During Q1, we also saw a good uptick in our international business. This led to a slightly lower global sensor ASP due to a greater mix of distributor revenue outside of the U.S. Finally, we saw fewer new patient additions from our pump partners, which Kevin will touch on later. Our first quarter gross profit was $94 million, generating a gross margin of 66% compared to a gross profit of $75 million and a gross margin of 65% for the same quarter in the prior year. Our gross margin came in slightly below our anticipated range for the quarter due to a few factors. Obviously, gross margin was impacted by seasonally lower first quarter sales and slightly lower sensor ASPs.
Our hardware sales mix continues to shift toward our G5 Mobile transmitter, which has a shorter useful life and a lower ASP. Our warranty expense rate has stabilized but continues to run above historical levels, exceeding 3% in Q1. Some final thoughts on our revenues and our gross profit. Our mix between durable and consumable products was within our normal historical range in Q1 at approximately 30% durable and 70% consumable. The ASP for our hardware has remained stable, and average sensor pricing came in slightly below $70, again, due to geographic and distribution channel mix. Finally, our international business showed continued year-over-year growth, generating $26 million in revenue during the quarter, up 37% from last year and 24% sequentially. This represents 18% of our total revenue.
Research and development expense totaled $48 million for Q1 of 2017, compared to $32 million in Q1 of 2016, and up approximately 10% sequentially. Our key R&D investments continue to make good progress. These include the G6 pivotal study and related submissions with the FDA, as well as our advanced product pipeline, investments in our Verily partnership, and the build-out of our data platform. Selling, general and administrative expense totaled $86 million in Q1 of 2017, compared to $62 million during the same quarter in 2016, with the increase primarily due to year-over-year increases in headcount in our field sales and customer support organizations, including support for the initial phase of the Medicare launch, as well as a ramp in our patient-focused marketing expenses, higher IT costs, and our OUS expansion.
Our GAAP net loss was $42 million in the first quarter of 2017, which included $35 million in non-cash expenses consisting primarily of non-cash share-based compensation expense across all functional areas of our business. Consistent with our prior comments, the sequential increase in our first quarter operating expenses included approximately $9 million in annual share vesting payroll tax expenses and one-time charges associated with retirements, severance, and restructuring. However, total operating expenses came in slightly below our recent commentary, primarily due to the timing associated with new hires as well as our direct-to-consumer marketing campaign. Our GAAP loss per share for the quarter was $0.49. Absent non-cash charges, non-GAAP cash-based net loss was $7 million for the quarter.
We ended the first quarter with $181 million in cash and marketable securities on our balance sheet versus $124 million at the end of 2016. During the quarter, we drew $75 million from our credit facility to support our cash needs, primarily to fund expenditures associated with the build-out of our manufacturing facility in Mesa, Arizona. With respect to 2017 guidance, we continue to expect global revenue of $710 million-$740 million, reflecting growth of approximately 25%-30%. We remain encouraged by our early progress with Medicare and are beginning to work through the practical implementation of the CMS ruling in the field. We are very confident that Medicare will be an important component of our future business, and Kevin will provide more on our outlook in a moment.
For the full year, we now anticipate gross margin to be at the low end of our guidance range of 67%-70% due to continued ongoing warranty expenses as we transition to our new receiver. We continue to anticipate OpEx will increase 20%-25% versus 2016 on a GAAP basis. With that, I'll turn the call back to Kevin for a business update.
Thank you, Steve. Life at Dexcom continues to be very exciting. The company achieved multiple historical milestones in the past several months, and now it's time for us to execute on them. Following our non-adjunctive claim late last year and the CMS ruling in Q1, our pipeline is at an all-time high. We are proud that the Dexcom G5 Mobile is the first and currently the only CGM system to be classified as therapeutic CGM. We continue to believe these accomplishments are a direct result of the strength of our CGM platform, both in clinical trials and in the real world. In the U.S., our recently expanded sales force is ramping up and will be critical in supporting our preliminary launch into the Medicare market later this year. Our worldwide new patient additions met our internal projections.
As I mentioned earlier, the estimated mix of our new MDI patients in the U.S. is now consistent with the underlying type one market. However, we have experienced softness in the growth of our new pump patient additions. As you are most likely aware, our two commercial pump partners have encountered difficulties in recent quarters driven by a variety of factors. However, we see several highly competitive Dexcom-enabled insulin delivery systems, both on the near and long-term horizons, that will provide attractive options for the diabetes community. Outside the U.S., our year-over-year growth accelerated from fourth quarter levels, buoyed by broader reimbursement in Germany, efforts in our two other direct markets, the U.K. and Canada, and increased volumes throughout the European distribution channel. Turning to Medicare, nothing in this process has gone according to the standard plan.
A CMS administrator's ruling is incredibly rare, and the timing of that ruling was completely unanticipated by us. Medicare certainly got this right for patients, as its ruling should ultimately accelerate access to the eligible population. However, the joint article recently issued by the DME MACs is something that is typically issued simultaneously with or after a coverage decision has been published. While the joint article provided guidance enabling patients to access this technology, the formal absence of a coverage decision makes it very challenging to process claims in an efficient manner and not to take significant regulatory and financial risk by shipping to these patients, hence the confusion and the delays. At this point, we are pulling every lever we have at our disposal and are speaking to Medicare regularly.
It is also important to note that a change of administration and a stricter stance on new regulation can cause challenges. We hope to resolve this as soon as possible. Longer term, Medicare represents one of Dexcom's biggest opportunities in the intensive market. We estimate that Medicare-age type 1 population represents 20% of the overall Type 1 market, or as many as 300,000 patients in the U.S. We also estimate that type 2 Medicare-aged patients on intensive insulin therapy represent approximately 1/3 of the intensive type 2 population or approximately 500,000 patients in the U.S. Again, we have over 10,000 Medicare-eligible patients in our pipeline, and we really haven't done any promotions yet. In the past year, we have certainly made dramatic progress on the reimbursement and access front.
To put things in perspective, with positive coverage decisions from both Medicare and Germany's G-BA, we estimate that we now have an incremental of 1.3 million covered lives to target with our technology. This roughly doubles the number of covered lives we had entering 2016. Globally, our goal remains to continue to drive CGM towards the standard of care for diabetes management, and we maintain our goal of achieving or exceeding an installed base of approximately 270,000 patients worldwide by the end of 2017. Now I'll provide you with an update on our product pipeline. With respect to our product pipeline, we continue to have regular interactions with the FDA. We have received approval for our new, more reliable touchscreen receiver, and we will begin transitioning new patients later this year.
Our discussions on the submission surrounding our new insertion system and corresponding transmitter are ongoing. As we mentioned on our last call, we are evaluating the implications of this filing on our commercial timelines. Considering the magnitude of launching a new applicator, coupled with our G5 platform making very good progress, we will assess the timing of a potential launch of the new insertion with that of G6 as we move through the year. On the app front, we hope to launch our Android platform in the U.S. by mid-year. The majority of our G6 pivotal trial has concluded, and our goal remains to file the G6 PMA by the end of Q3 2017, which would allow us to launch this product in 2018, assuming a positive review by the FDA.
We have very high expectations for G6 based on its impressive early data. Assuming this performance continues, we expect patients will quickly appreciate what G6 means for standards in CGM performance, even with a reduction in the number of daily calibrations. In addition, G6 represents the basis of our future no-calibration technology. Turning to our Verily partnership, our collaboration continues to march towards a continuous real-time, low-cost, no-calibration disposable sensor system, allowing us to target the non-intensive type two market. In addition to the progress we are making in product development, we are beginning to explore a variety of commercial channels to support our non-intensive strategy. As we have said in the past, the business models we consider in the non-intensive market will likely differ from what we have pursued in our intensive business to date.
These include a shift to value-based programs and working in collaboration with payers, providers, and employers to develop diabetes management solutions that leverage CGM and our data platform to facilitate both therapeutic and behavioral change. Considering the importance and cost associated with the broader type two patient population and healthcare management today, these efforts are driving significant interest in solutions for this important category. The noise in the Type 2 diabetes market is only getting louder. New drugs, new programs, all with different outcomes. It seems like we have a new answer every week. It is our belief that none of these offer the diabetes community as much value as CGM. More specifically, there is a tremendous void in the information provided to these patients to manage their condition. The system's answer today is to take a pill, eat less, and exercise more.
Patients have heard this for years, and yet those ineffective treatments cost the system a fortune. The opportunity lies with an approach that can not only provide better outcomes but alleviate expenses. For the first time, accurate, reliable, and intuitive CGM data will provide payers, providers, and patients with real-time feedback about timing and efficacy of medications and how eating, sleeping, and exercise can impact their diabetes. One of our early learnings is that CGM accuracy matters in the non-intensive market every bit as much as it matters in our intensive markets. Many of these patients are truly interacting with their diabetes for the first time, and they must have confidence in the data and information they receive.
Our early pilot studies in the non-intensive type two space have demonstrated this with reductions in average glucose as well as improvements in A1C, time in range, and glycemic variability over a relatively short period of time. Once patients begin using CGM, they quickly understand the repercussions of their decisions around both medication and behavior. These benefits will ultimately drive significant cost reductions in the care of these patients. From a product development perspective for these initiatives, we believe our first Verily device should be commercialized by the end of 2018 and anticipate that the second-generation device will be available in the 2020-2021 time frame. Turning to our partnerships, we are making continued progress in our integrations of both G5 and G6 with advanced insulin delivery systems, including pumps, smart pens, and other interconnected diabetes management platforms.
We will highlight more specific progress as these integrated systems approach clinical trials and commercial launch. To sum things up, Dexcom continues to raise the bar in the CGM category. In the near term, we remain focused on driving awareness around therapeutic CGM and our recent positive reimbursement developments, both with Medicare and in Germany. In parallel, we continue to develop our non-intensive strategy and are excited by the early signs of significant potential, both in terms of product development and revolutionary new business models. Execution on our strategic pipeline will position us to maintain our position as the leader in CGM. The Dexcom team continues to perform at a very high level. I wanna take a moment to thank our employees for their continued efforts.
With all of the major milestones the company's achieved in the past few years, we now have the ability and the mission to bring this life-changing technology to a much greater number of patients. I'd now like to open the call up for Q&A.
Thank you. We will now begin the question-and-answer session. If you have a question, please press star then one on your touchtone phone. If you wish to remove from the queue, please press the pound sign or the hash key. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you do have a question, please press star then one on your touchtone phone. We have our first question. Our first question comes from Mike Weinstein of JP Morgan. Go ahead, Mike. Your line is now open.
Good afternoon, guys. Thanks for taking the questions. Let me just start with the U.S. sales performance. It sounds like the inability to deal with some of your cash pay customers cost you $2 to $3 million. Even if I adjust for that would say the U.S. business was down 21% sequentially. The last two years, your U.S. business was down 15% sequentially. Can you give us some additional commentary on just the U.S. revenue performance? Then from there, I'd like to follow up with the commentary you made just about that backlog of 10,000 Medicare patients. Can you just explain what that backlog is and how you're coming up with that number? Thanks.
Why don't I start with the backlog because that's very concrete. Once the coverage decision was announced, we certainly have criteria when a patient phones in or goes to our website for creating what we believe is a patient opportunity or a patient lead. These are patients who have met criteria, who've shown enough interest and have enough of the criteria within our system to be qualified as patient leads. Again, there are more than 10,000 Medicare patients in our system outside of the traditional patients that we have as well coming in through the field or coming in through our website and through the digital market space. These are, again, patients who have reached out to us and expressed interest and have enough information to qualify as someone who's truly interested in CGM.
With respect to the U.S. business and our growth year-over-year, I think one thing that's very important to remember is we were in the middle of the G5 Mobile launch last year. We launched it late in the first quarter, could not meet everybody's need in the fourth quarter, didn't meet all the needs in the fourth quarter, and a lot of that carried over into the first. It is a tough U.S. comparison quarter-over-quarter. With respect to our patient adds, again, you know, pretty much like we had discussed before, Mike, the majority of our growth came from MDI patients, and we see the MDI patient base growing very quickly.
Where we were down a bit, where we've been in previous years on the new patient side was on insulin pumpers, and we had fewer of those than we've had in the past. With respect to reorders and patient behavior, the other thing Steve talked about, and I can elaborate a bit on as well, gets back to seasonality in the first quarter and possibly a changing nature in our patient base. We had good reorders. Our, you know, patients called in. That wasn't a problem. But the bigger issue is deductibles and co-pays, and particularly as we get into the MDI markets, you know, our insulin pump patients spend a lot more money on insulin supply, insulin pump supplies and their pumps, meeting deductibles faster than this new market and this group of patients that we're seeing.
We know that there's some financial pressure on these people. We have not seen anything that would indicate increased attrition. We have not seen anything that would indicate decreased utilization on the sensor. It's first quarter is a tough seasonal one, and those are really pretty much everything around the revenue numbers in the U.S.
Okay. You just go over a few things. You reiterated your projections for the year on new patient starts and where your installed base would end up, which was just going back to the fourth quarter call, was basically your patient adds are gonna exceed your revenue growth in 2017. You said your pipeline is at an all-time high, and you're reiterating your sales guidance for the year. Two questions. One, can you give us some sense on the second quarter, how you know, what your visibility is today and how you're thinking about the second quarter versus the balance of the year? Because obviously, there's some disconnect between how the Street's modeling you guys and how you're thinking about it.
Second, can you just talk about how your expectations may have shifted to the positive on Germany and that may be offsetting a little bit of incremental U.S. weakness from your pump partners? Thanks.
Well, Germany has been very successful for us. While we've grown quite a bit in Germany, it's still only about 20% of our total international revenue, so it's not as big as it can be. We have contracts in place with less than 20% of the payers. We're sitting in front of two of the largest ones with contracts that should be executed shortly that would get us up to 50% of contracted reimbursement. With the payers we haven't contracted with, we can process those claims and get paid, but it's very much one-off and requires a lot of documentation. Germany will provide us some significant growth opportunities going forward.
With respect to our estimates for the year and our pump patients, there are a number of factors that we look at as we weigh this. Again, we have our Medicare situation. We have a robust pipeline of potential new patients to serve without promoting it. Once we got this, we have, you know, we're excited. We think we can add a number of new patients there. We think on the patient number front, that would offset some softness on the pump side and possibly more than offset any softness on the pump side. Where the Medicare model is a little bit different is the revenue we derive from a new patient when we add them.
If I could give you an illustration, you all know if we go back in time or if you look at a new patient, the initial transmitters and a receiver and three sensors, the hardware is between $800 and $900 and three boxes of sensors, just for the sake of being simple, let's say they're $300 a piece or $75. You've got somewhere between $1,500 and $2,000 to start up a new patient. On the Medicare side, as you've all read the CMS rulings, we're not gonna get that big of an upfront payment. us or our distributors will be getting rental payments on the receiver over a 13-month period, and the average payment per month on the disposable components is somewhere between $250 and $300.
A new patient in that first quarter of use will bring us somewhere between $750 and $900. Even if we grow the patient base significantly past the 270, if a number of them are Medicare patients, it won't have the immediate pop that we've experienced in our commercial business in the past.
As we look at the opportunities and the number of patients who continue to request CGM, the number of new non-Medicare patients in our pipeline, we're comfortable with our guidance for the year in spite of all the other diabetes news that is out there, and we plan on achieving those goals. Second quarter, typically for us, has been up over first. We certainly expect that it will be much better than the first quarter, and we'll see how it goes from there.
Yeah. I mean, Mike, one of the other.
Yes, go ahead.
Just a, just a...
Let's see.
Yeah, just a quick addition. You asked about Q2 specifically and the sell-side models. I mean, we certainly don't control the sell-side models, but what we said in our Q4 call, if you recall, is we expected to do somewhere between, you know, 18 to 20% of our annual revenues in the first quarter, and I think where we landed was right square in the middle of that. We've also typically historically said we expect to do 40% to 45% of our annual revenue in the first half of the year. You know, I think we would be comfortable sticking with that as a historical guide.
Understood. Last one, I'll jump and let others in. Do you just wanna comment on kind of what you think the feedback has been so far on 670G, in terms of how that's faring with, you know, early clinicians and patients?
Well, they've put it on 500 people, and my guess is that they probably picked those 500 people specifically. We've heard some relatively good feedback. We've also heard mixed reviews with respect to the complexity of the system and, you know, going out of auto mode and everything. I don't think the book can be written on 670G till this is commercialized to a broad number of patients. I would tell you on the pump front, we do see, as is evidenced by, I think, what we heard on Tandem's call, that some doctors are waiting to see, before they put a patient on a pump to see how 670G goes, then this will be more applicable to a patient. In all reality, pumps, again, are a four-year warranty cycle.
We believe that we can do very well with the pump patients that we have now. As I said earlier, our new patient adds on the pump side were slow, and that was really the most negative thing that we saw in the first quarter. We'll just keep going from there. There's a lot of MDI patients who really can use CGM, and we will focus on those guys and our other pump partners patients as well.
Understood. I'll let somebody jump in. Go ahead.
Thank you. We have our next question from Jayson Bedford of Raymond James. Go ahead, Jayson. Your line is now open.
Good afternoon. Can you hear me, guys?
Yep, perfectly.
Okay, just a couple of quick ones. Kevin, I appreciate the explanation around Medicare, but what really needs to happen from here for Medicare patients to access the technology?
The most important thing that can happen next is a coverage decision. What a coverage decision does is it provides an explanation around the benefit criteria that have already been established. For example, you know, in the documents that have been issued already, it says a patient needs to be taking four finger sticks a day, but we don't have any guidances how to document that. What the local coverage determination will provide is documentation requirements to document four finger sticks a day. This is what you have to do. Same thing with the other criteria of Type 1 diabetes and the other things that are on that list. Also, with the local coverage determination, Jayson, while under the current pronouncements of Medicare, you can bill on a one-by-one basis on claims.
We processed a few Medicare claims, and our distributor has, and they've all been pretty much denied awaiting a coverage decision. We really need this coverage decision, and then we can really open this up and get this process running smoothly. That is the next obstacle. Again, I wanna be very clear, CMS has been very progressive in helping us try and get this out. The things that they've done, you know, the last guidance they gave towards the end of the first quarter, that was very much a positive step. We viewed it as a positive step by us to outline the criteria to specifically identify Type 1 and Type 2 diabetes patients using intensive therapy, and that did keep the ball rolling.
We need to get this local coverage determination, and we are going for local coverage determinations as soon as possible, and then we can really get this thing going. That's the big holdup right now more than anything else.
Kevin, are we gonna see a series of local coverage decisions, or is it one national that can be overlaid on the local?
There's again, it's more consolidated in that it may be more than one, but it probably would be two up to a maximum of four. Still a little bit unclear.
Okay. When do you anticipate this to be put in place? Is midyear still a fair estimate?
You know, there was a CMS webcast actually that happened earlier today, and they basically said it's in process. They wouldn't give specific timing, but it, you know, seemed like it would be sooner rather than later. We're hopeful, you know, before the summer.
Certainly before the end of this quarter is what we're hoping for.
Last one on this topic. Is when the local coverage decision is in place, is that when you kick in a more aggressive marketing effort?
That is correct.
Yeah.
The last thing we wanna do is go add another 10,000 patients to the 10,000 patients we're not currently shipping and have them all frustrated. Yeah, we will, we'll aggressively go after that as soon as we get that local coverage decision.
Okay.
We're teed up. We're ready to go. This isn't something that will require a bunch of time. We'll get after it very quickly.
Okay. I'll jump back in queue and let some others ask. Thanks.
We have our next question from Doug Schenkel of Cowen and Company. Go ahead, Doug. Your line is now open.
Hi, this is Ryan on for Doug. Thanks for taking my questions. You've talked historically about international ASPs being about 20% lower than the U.S. on average. Is this still the case in direct markets, or should we assume it's closer to the U.S. indirect markets? What are your expectations for sensor ASPs over the remainder of 2017?
Yeah. What we've said is the pricing in Germany is more reflective of our pricing, our direct pricing in the U.S. Remember, Germany doesn't represent, you know, it represents an okay chunk, but it doesn't represent a huge chunk of our OUS business yet. The vast majority of our OUS business is still through third-party distribution, which is at a lower ASP. As we look to go direct in other markets, I think you'll see some, you know, pricing improvement versus through distribution. I will tell you, give you an example, one of our reimbursed markets, we actually elected to lower the price slightly to drive sales, to drive volume, and it's had a wonderful response, particularly against some of the competition that is priced lower.
You know, we're still evaluating how we proceed OUS. Yeah, I mean, what you've seen today, certainly Germany being the only big direct market is still more reflective of our U.S. pricing.
Okay. Should we expect the, you know, where ASPs were this quarter or around that? We should expect it to be towards the lower end of your historical range for the remainder of 2017?
Yeah. This is Kevin. I think we get back up into the 70 range, probably not towards 75 as the U.S. volumes become a larger percentage of our business. You know, the U.S. international mix in Q1 of last year was also similar to this. In fact, the international business doesn't really suffer the seasonality that we suffer in the U.S., and many times Q1 has been our biggest quarter of the year internationally. Now we certainly wouldn't want that to be the way this year. If as U.S. business goes up and becomes a bigger percentage of the business, again, you'll see prices naturally move up because of again, just distribution channel shift and geographic shift.
Okay. That's helpful. Moving back to Medicare, you said on the Q4 call that you believe within Medicare, penetration of the type 1 patients could exceed the broader market rate over the next few years. What do you believe will happen within the intensively managed type 2 population? Thank you.
Specifically to Medicare or more broadly speaking?
Specifically to Medicare, but both would be helpful.
Yeah. I mean, I'd tell you it's still a bit of an unknown. As Kevin said in his prepared remarks, we hope to leverage the coverage, you know, the coverage criteria, the coverage language from Medicare into the commercial side of the business. You know, I think it's still a little bit of an unknown because our core commercial business is not, you know, it's not dominated by intensively managed type 2s due to a lack of coverage. So we're probably, I'd tell you, taking a little bit of a wait and see approach, but the numbers of patients are much larger than the type 1. So I think it could be, you know, extremely additive over the next several years.
Yeah. With respect to the type 1 market, again, these are from a patient profile. These are patients many of whom who suffer from hypoglycemia unawareness, and this is a wonderful tool to help them and help give their families peace of mind. We see a tremendous opportunity here. If we didn't see a tremendous opportunity here, I can tell you it's emphasized because it would appear to me that most of the Medicare cash patients who we didn't ship have all sent me emails regarding the fact that they don't have their product and they want it soon. This is a group who's been very committed to the technology and done extremely well. I think we have a wonderful opportunity here.
The key for us will be executing, streamlining the reimbursement and shipment process as we have to bundle this with the strips and meters up front, and making sure the patients are properly trained and qualified. We've staffed up for that. We've added more people on our tech support group and on our patient care team and in our order processing team in anticipation of this. We've done some things much better than we did a year ago. We put good plans in place to anticipate this, and we're just really excited to get started, but getting started is the key word we really need to go.
We have our next question from Jeff Johnson of Robert W. Baird. Go ahead, Jeff. Your line is now open.
Thank you, guys. Good afternoon. Let me ask, I guess one other Medicare question. If I'm looking at the Noridian coverage decision from late March, the wording's pretty clear in there that you'll only get coverage if you're using the Dexcom receiver to display data. And in fact, I think in that document, the word only is capitalized. And then it goes on to say that if a beneficiary uses a smartphone as the display device, the supply allowance will be non-covered by Medicare. I guess my question is, you know, Liberty recently decided they're no longer gonna process G5 orders, at least I'm not sure if that's temporary or not. Is there any connection between that and the display wording? Is there any risk that the payers take if it's found out that the patients are using their phone?
Do patients take any risks? Do you guys have to change the share functionality on Medicare, for Medicare patients? It just seems like a big issue tied to this word only, and I'm just trying to figure out if there's anything there to be thinking about.
Excuse me. This is Kevin. I'll take that. What is lost on many of us is we're about a year ahead of where we thought we'd be with respect to this Medicare stuff. In order to get DME approval, we had to have a durable component of the system that would last a specific period of time that we would cover. In working with Medicare, again, they worked very hard, and they determined that durable component is the receiver. We'll start with the rules that we have. As far as Liberty concluding this, it has absolutely nothing to do with their decision and with this. That is by far and away the least important gating factor in doing this, Liberty's decision.
As we've looked at this and quite frankly spoke with other distribution channels, not knowing exactly what the coverage decision looks like and not knowing what you're gonna have to have in your file to get paid when you have a Medicare license at risk and your business is very much Medicare oriented, is something of a risk that Liberty Medical just wasn't ready to take at this point in time, even though they could get paid on individual claims and go through the process and do a lot of work. They stepped back and they're waiting. They wanna wait for this local coverage decision, as much as we do. Once this becomes clear, we will, you know, we'll determine how to best proceed. I think it's important for everybody to understand this hasn't been a one-time thing.
This has been a process over several years. While we may sit here today with that position on the receiver being the durable part and being kind of like the centerpiece and the most important component of the system, we have a number of options here. We can certainly work with CMS over time to see if we can move it to another category. We can also go back to what we did in the past with Share and have the receiver talk to the phone. Certainly, we don't have that product in our portfolio right now, but since we were the first to make it way back when, we know how to do that. We have a number of options here. We just need to let this play out. We need to get this technology on patients.
We need them to explain how it has changed their lives and how beneficial it is. We need to be pleased with where we are and not get too crazy. I don't think that's over time gonna be a factor.
That's helpful. Can I ask one clarifying question, Kevin? Earlier you mentioned a supplies reimbursement monthly limit of $250-$300. Just as I'm thinking about my Medicare model for you guys, I thought the number had come out at $238. Am I wrong on that? Just wondering where your $250-$300.
The receiver rental-
Got it. Yep
-is added to that payment for the first 13 months. That's why I have that. Then
Yeah
Again, what we end up getting will depend upon the distribution channel and our terms with distributors, and we'll have more color on that once we start going in future quarters.
Yep. Very helpful. Thank you.
Our next question comes from Kyle Rose of Canaccord Genuity. Go ahead, Kyle. Your line is now open.
Great. Thank you very much for taking the question. Can you hear me all right?
Yep.
Yep.
Yeah. Just wanted to ask you just, you know, more on the pump partnership side. It's just, you know, has the disruption in that side of the market, you know, changed how you guys think about, you know, the long-term opportunity of, you know, where partnerships should look, whether it be, you know, pump partnerships versus smart pens versus connected health? Just, you know, obviously, when you think about, you know, the type 2 opportunities, just trying to understand how you guys view some of the value of those longer term partnerships.
I'll take that one, Kyle. You know, no, I don't think it changes our thinking on that at all. I think there is an extremely important segment of the market that will look to have, you know, to utilize these semi-automated or hybrid closed loop systems. We remain active with, you know, folks who you know with Insulet and some others that you don't know. I think those are critically important to some subset of the market. We also think, as you mentioned, smart pens.
A smart pen paired with a CGM, we think is an extraordinarily compelling product offering, particularly when you think about the power and computing power that we have on the phone and being able to really mimic using the algorithms that would be the similar algorithms that you'd have on the pump on the phone, and actually really provide, you know, detailed dosing assistance and otherwise to the patient. If you really look out at the market, you know, thinking about type 2s more broadly speaking, Kevin gave some color on our initial thoughts there. You know, there's a much broader opportunity even in the non-insulin taking patient population in type 2s.
I think we're starting to see some really, you know, compelling preliminary data that will marry up with the appropriate products as we continue forward with our Verily relationship. So, you know, I don't think our partnership strategy has changed. In fact, I think, you know, our partners are becoming, frankly, more important, perhaps more diverse. It, you know, we're not just gonna focus on, you know, c losed loop or hybrid closed loop systems, I think there's a broad spectrum of partnership product opportunities for us, but they're all gonna be critically important over time.
Great. I appreciate that. Just a two-part question, and then I'll hop back in the queue. Just wanted to say, or just wanted to see, is it fair to think of, you know, the product cadence, and I appreciate the color, but just the product cadence coming as, you know, G6, and then, you know, the Verily G1 and then the Verily G2. I don't mean to imply that, you know, that's not a very robust pipeline, but I'm just trying to understand, you know, if we may see some incremental launches, whether that be, you know, different labeling, different types of use cases for those products along the way as we think about, you know, 2017 to the 2020 to 2021 time period.
Just second question, is anything you guys wanna highlight when we think about, you know, heading to ADA in June?
Let me start with the product pipeline. On the product pipeline front, it's a real good question and a very good observation. We have been very successful over time once we get a technology platform established on the sensor side to turning that into enhanced performance and other different opportunities. I think in today's software world and with the expertise we're developing and the expertise, quite frankly, that some of these important partners that Steve has talked about is I think you will see derivations of our core technologies. We tend to speak to our core technologies on these calls, but I can give you a simple example.
We've certainly run feasibility studies on the G6 sensor for 14 days, not only for purposes of the Verily first product that we're gonna launch because it will be a G6 sensor, but also for possibly a 14-day version of G6, but all this is in feasibility phases. We're giving all these things thoughts, and you will see iterations that will be different. I think the other place that we can iterate that'll be very meaningful will be software.
We believe once we have that accurate, stable, you know, industry standard sensor platform and algorithms that generate extremely accurate, and well-performing numbers, that we can then in future worlds, come up with possibly different apps that might be approved for different labeling and might have different use cases for patients and back to what Steve talked about with our Type 2 business models and our Type 2 relationships. No, there is a lot going on, and there's a lot more going on here than just. When we talk about really the core basic things on these calls, there are many other projects and many other things we're considering along with those. With respect to ADA, certainly, there will be talk about the second phase of the DIaMonD study, the Type 2 DIaMonD data.
We have several technology papers that'll be posters. We have a couple oral presentations. We don't have a new product coming this year. We would love to be able, you know, knock on wood, if we can launch Android at ADA, that would be a wonderful event, but we're not there yet. It'll certainly be a good show for us. It always is, and we'll have a great time here in San Diego.
Thank you very much for taking the question.
Our next question comes from Margaret Kaczor of William Blair. Go ahead, Margaret. The line is now open. Margaret, this is the conference operator. If you're on a speakerphone, could you please pick up the handset or unmute?
Yeah. Sorry about that. Can you guys hear me?
Yep, we can.
Perfect. Thanks. The first question for me, in terms of the final pieces for Medicare, once they're in place, how should we think about the ramp of these patients? Are you continuing to see that pipeline of patients grow even now as we go couple months beyond the initial, announcement? I guess more specifically, over what timeframe should we look at those 10,000 patients to come online?
Well, certainly we wanna get the 10,000 patients up and going as quickly as possible. I think the Medicare ramp, once this final coverage decision is in place, can go relatively quickly as we qualify these patients and make sure they meet all the criteria and understand what documentation that we have to have. The impact of the patients, though, as I described earlier, is a little different than our regular new patient just based on the reimbursement model and the fact that we get a monthly rental rather than the big, upfront payment. Our relationships with distributors are gonna be a little bit different. Where the Medicare revenue really becomes material and significant is when we get, like, a 30,000 or 40,000 patient base, and we're billing them all that monthly charge.
You've got a regular monthly revenue stream combined with monthly shipments that we think can be highly predictable. You know, like I said, a new Medicare patient upfront is probably about half of what a commercial patient is in our upfront revenues. As that bolus goes out over time, those patients become extremely valuable to us. It's gonna be a little bit different model, but it will be highly. We're very excited about it. We think it'll be very additive to our business.
Are those pipeline of patients still growing beyond the 10,000 kind of the blend over the period?
Well, we are still getting people coming in and wanting to join the pipeline. We get several, you know, many opportunities per day. When they hear we can't ship them yet, it's been a little bit difficult. I would say that we really need to turn on the faucet once we get the coverage decision, Margaret, and then we'll have a very good idea as to how robust these patients who have inquired is and how many will convert and how they use it. We really need to get going.
Got it. In terms of the second question, you know, on the U.S. patient adds, is there anything that you guys can do in the near term to help, maybe your existing pump partners improve those patient adds? And Steve, I don't know if you have the numbers or are willing to share, but what percentage of your patient adds in the past have been through those pump partners last year versus what you guys saw this quarter?
Well, you know, it's not. I wouldn't say it's just pump partners. I mean, you know, what we've said is historically, you know, two to three years ago, we were a typical quarter. We would add roughly 60% pumpers, which included, you know, Animas, Tandem, not just integrated Dexcom integrated systems, but pumpers broadly speaking, so Animas, Tandem, Insulet, and even
Medtronic.
Even Medtronic. You know, with a couple of pump partners that we're seeing not adding, you know, just not adding new patients, generally speaking, we've seen a slowdown. The point, though, is that while that did have an impact, we've shifted the mix pretty dramatically over the last 12 months or so. Now in a typical quarter, we're adding, you know, two-thirds of our new patients are actually MDI patients. While it's had an impact, it's not, you know, it's not crippling the business. We just drew attention to it because it was a factor in the quarter.
It's a factor. Yeah.
Got it. You know, last one for me, maybe as we think about the G6 label, Kevin, you know, what could Dexcom offer patients in exchange for that hard shutoff on the sensor, whether it's 10 days, I think you mentioned 14 days, that you're thinking about, what would make them excited about that prospect and effectively pay more per day, per sensor than they do today?
Well, the 10-day life for G6, the way G6 is configured, there is not a hard shutoff on G6, as we are filing it at this point in time, and we will evaluate that hard shutoff feature going forward. You know, we all read the blogs on our system, and every time I get on the Dexcom G5 user group, pretty much every night, somebody says, "Hey, I just got my Dexcom, and I've worn my sensor for two weeks. How much longer is it gonna last, and what do I do to make it last longer?" Then you read. A couple weeks ago, I read somebody who said, "Yeah, I get 48 days for each of my sensors or seven weeks per sensor, and here's all the things that I do." This is a feature we have built into our products.
I mean, our product has been very reliable for more than seven days. I think over time, the way our model works, particularly as you get out to 10 or 14 days, if we were to shut it off, it would be, I'll be honest with you, for quality purposes and to make sure that it's accurate, in particular, with our non-adjunctive claim. The way we would look at that, Margaret, in all reality, while we're billing somewhere between $10 and $12 a day in the U.S. to the reimbursement entities, if we did shut the thing off hard, we would make sure we were fair with the patients because we always do. We would have a program whereby patients we would hope patients would not be hurt economically.
It's something we will study and explore over time and give it lots of thought and consideration. It will be an interesting evolution on our technology curve, and we have a lot of things to think about and consider.
Great. Thank you.
We have our next question. Our next question comes from Danielle Antalffy from Leerink Partners.
Thanks so much, guys. Thanks for taking the question. Just a question on the competitive landscape. Don't wanna belabor this, but Kevin, I'd love to hear your thoughts on another competitor expected to come to market at some point later this year, the Abbott Libre. They've added a significant number of patients internationally. What I'm really looking for is maybe your view on how the U.S. market, the dynamics there are different than the international markets, where you compete head to head with them, and therefore, why the competitive landscape when they do come to the U.S. might be different than what we see internationally.
Well, one of the first things to note, international, U.S. versus Libre, is when Libre started, our entire international team consisted of three people. We really hadn't built much infrastructure over there, and we didn't have any reimbursement. The decision for a patient was very simple, pay cash for Libre, which is much less expensive than a Dexcom system. Adding cash patients with that low price point up front led to some significant growth. As Steve alluded to earlier, and I can validate again, as we have received reimbursement in some of these European geographies, a reasonable number of our patient adds are Libre users who aren't getting what they want from Libre. In the U.S. markets, again, one of our biggest assets is our non-adjunctive claim that a patient can dose insulin off of this system.
We believe intensive people who intensively manage their diabetes, that is gonna be an important feature. We believe in the intensive market, we can do well. The fact is, again, even in Europe, where we don't have near the resources they've had, you just heard us talk about a 37% first quarter growth factor in Europe, and I mean, in the OUS markets for this quarter and in our reimbursed markets, we're doing very well. In the U.S., you know, I think there's a niche for this. I think there will be people who want it.
I think in the intense world where we are now, we can maintain our share with our connectivity, our share features, the Android app, the new technology we have coming, and really more important than anything else, our accuracy and the performance of our system that has been documented time and time again. Over time.
Okay.
As we look at that market, I assure you, as you look at the Verily products, we will have products to compete head to head with that in the not too distant future that we think will be far superior. They'll be extremely good.
Okay. That's helpful. I guess another issue for Libre might be what reimbursement looks like for that system. One more question, Kevin, I have on the long-term outlook here from an OpEx perspective, and not asking for guidance, but just trying to think directionally. You know, you've talked about how the look of the business will have to change when you do have a type 2 product. You know, I'm just curious about how the run rate for OpEx might change. Can you drive leverage as you sort of shift the infrastructure and build the infrastructure for the type 2 market? Or should we think about just directionally speaking over the next few years as you get ready for the sort of negative leverage or at best flat? Thanks so much.
I appreciate that. You're talking really more about the commercial and the SG&A aspect of those expenses. It's become very clear to us that this will be a different type of business model for us. We can't have the one-on-one ordering that we have now and walk patients through their DME benefits and the way that we do things. It's going to have to be different. We are exploring new business models that can do that. As Steve talked about earlier, outcome-based, excuse me, type programs that we can sell with employers, payers, communities and things of that nature. There's gonna have to be leverage, and it's gonna have to be done differently than what we do today. We think we can leverage that and be successful.
We are taking as much time with the business model in this area as we are taking with the technology. The development of the business model is every bit as high tech and challenging and different as developing the technology is. It's really been a wonderful effort so far. You'll hear more, probably more towards late this year and early next year as to what that's gonna look like for us.
All right. Thanks so much.
We have our next question. Our next question comes from David Lewis in Morgan Stanley. Go ahead, David. Your line is now open.
Thanks. A couple of follow-ups and some clarification. Kevin, just on this topic, and maybe Steve, actually, I think you answered this question, but on the two-thirds MDI mix, if that mix holds at two-thirds where it sort of has been the next several quarters, you're still comfortable with your guidance, I'm assuming, because that's where it's been the last several quarters. You seem to have popped up a little bit, but is two-thirds MDI throughout the remainder of the year an issue or something you're comfortable with?
No, that's actually been a goal, right? I mean, you know, historically, we were even with the endocrinology community. People always, you know, this is the old days, but people used to characterize CGM as just an adjunct to a pump. We set out a number of years ago with our CGM first campaigns to show the world that, you know, CGM is the most important tool in diabetes management. If you're on MDI, you can effectively manage your diabetes without going to a pump with MDI and CGM. No, I think it's actually, that's a huge positive for us.
I totally understand, Steve. I guess what I'm getting at is if that number were to go to 80% in the back half of the year, do you have enough MDI momentum to offset the pump degradation?
Sure. There's lots more patients on MDI. I mean, remember, pumps are only about 30% penetrated in the US and less than 10% penetrated outside the US. There's tons more patients in the MDI group.
Okay. Kevin, just, or for Steve, you know, guidance this year, I mean, no one's really specifically asking, but how should we think about the impact Medicare is having on guidance? Do we still assume a very limited impact, in your expectations for Medicare? Was there any channel load at all here in the second or first quarter into your DME partners to speak of?
No, there's no channel load for us. We monitor our distributors very carefully, and no, there's no channel load there. With respect to the impact of Medicare, again, and even the impact of new patients and patient growth, and that's a very good question. In all reality, as you're looking at a $700+ million-dollar business, the number of new patients you can add in a quarter dwarfs what new patients could contribute three years ago to a quarter. The new patients are very important and Medicare will have an impact. I don't think it can move the needle like 10% or 20%, certainly over the back half of the year. It can move it at a lower amount of that depending upon how many patients that we add.
We will give you more guidance and color on that as we add them, and we're probably gonna have to be very clear with Medicare patient numbers on margins and breaking some of this out so everybody understands the story. Where it really moves the needle is in the periods going forward as you get a large established base with recurring revenues, and we continue to shift it to that business. It's gonna evolve more over time than the upfront payments we get from new patients now.
Okay. Kevin, just, we get this question a lot from shareholders the last couple of, you know, weeks and months. In light of this year with Medicare, Libre, 670G, is it likely we get a guidance update earlier in the year this year based on those parameters? Or do those parameters actually make it a lot less likely you provide an update for the year, until your more traditional period? Thanks so much.
Go ahead, Steve.
Yeah. No, I mean, we evaluate our guidance on a quarterly basis, and at this point, we're not comfortable because we're not shipping to Medicare. We're not comfortable upping it. We do think Medicare is a huge opportunity, and we'll evaluate it at the end of Q2, which will, you know, that call will probably happen a month after the end of the quarter.
Yeah.
Just where we sit today, we didn't feel comfortable changing. Yeah.
Our next question comes from Tao Levy of Wedbush. Go ahead, Tao. Your line is now open.
Great. Thanks. Good afternoon. Maybe some clarification questions. Ed, in terms of the percent of patients who are on G5 versus G4, is that a number that you guys can provide?
No, we've not broken it out. Remember, the disposable sensor is the same. With respect to 70% of our revenue, it's. It doesn't matter whether they're on G4 or G5. The only difference it makes to us financially, as we noted in our prepared remarks, is that the COGS on the G5 transmitter, yeah, are a little higher.
Right. And so that's, I mean, has a decent sized impact on sort of your hardware sales. If you you know if you separate the two, I mean, you know, hardware sales growth was reasonable, you know, this quarter up over 30%. Then kind of where you fell a little bit short at least versus my model was on the sensor side. What you had said on the call was you've got more international, so that lowered the ASP a bit. My question is that $2 to $3 million related to Medicare was that all sensor related, or was any of that hardware? Also what happens to that in the second quarter?
I mean, it's much more sensor related. These would be existing patients, so not new patients. I suppose there could be in that mix some anticipated transmitters. The transmitter died during the quarter. No, that it would be predominantly sensor revenue.
Got you. What happens in the second quarter with that $2 to $3 million? Can you start charging for?
We haven't been able to ship for cash. These were ex cash pay patients, and now that we have Medicare coverage, we cannot ship to them and charge them cash. Once we have coverage, again, it's back to once we have the formal coverage in place, we can absolutely continue to service these patients. There won't be a makeup per se.
Right.
Because it's revenue that they would have, you know, we'll start charging them, you know, we'll start charging Medicare for sensors and shipping sensors to them, but there won't be a, you know, a catch up.
Got you. Just lastly, from a sort of like a strategic perspective, you know, I think, you know, when the question around, you know, would you guys ever buy a pump company, you know, had come up in the past. You know, I think the response was, you know, no, not really. You know, if it did potentially have an impact on our sensor business, you know, not having a competitive artificial pancreas or similar device, then you know, you guys might consider it. Is this kind of what we're talking about here, where, you know, your pump partners aren't, you know, as quick to launch artificial pancreas technology as Medtronic?
Yeah. I mean, I can cut you short. No, we're not looking to buy a pump company. I think we continue to evaluate our partnership relationships. You know, you could see us become a little more involved with one or more of the partners if some of them seem to fall off. At this point in time, we're gonna continue with our partnership strategy again, both on the pump side and on interconnected pens and other software platforms. Not interested in buying a pump.
Great. Thanks.
Our next question comes from Joanne Wuensch of BMO Capital Markets. Go ahead, Joanne, your line is now open.
Thank you for taking my question. Can you hear me okay?
Absolutely.
Yep.
Thank you so much. Okay, of the sales force hires, is there a way to sort of qualify or quantify the people that you have coming on board, and how are they spending their time largely? Then the second question, which is somewhat related, you talked about 10,000 Medicare patients coming in before you really, you know, do an outreach program towards them. Can you discuss what that outreach program might look like and the timing of when that might happen? Thank you.
Well, the outreach program will start as soon as we get a coverage decision in earnest, and it'll be much more noisy. It will be a combination of digital platforms. We'll also have some TV ads that will run and then other media programs very similar to what we do with our DTC campaigns today. We have very focused web, you know, all that type of stuff to identify and help these patients. So we're gonna do that one. And that's when that will come. Sorry, what was your other question?
It had to do with the new sales force hires and...
Sales reps. Okay.
Yep.
The new sales adds came on board late last year and early this year. The sales adds in the U.S. were determined by dividing current territories and reassigning people within those territories. I would tell you, like any sales force reorganization, there are some bumps and some speed bumps along the way. We are extremely happy with the quality of the people that we brought on board, and we had absolutely no shortage of people wanting these jobs who are very qualified. It does take a while to get everybody up and running, and we did experience that in the first quarter as well in the U.S. You know, Dr. Jones in some city just lost their rep and a new one's coming in and relationships have to be redeveloped and redeployed.
We believe our team is up and running and doing well, and it does take a little while. I mean, we expanded 20% to 25% on the U.S. side. There's a lot of new people. They have all been trained. They've all been in for training. We've had our national sales meeting and they should be ready to go and certainly very productive in the second quarter. The way we analyze all our salespeople in the U.S. and our key criteria is new patient adds. We evaluate everybody based on their new patient targets and are very thoughtful and deliberate as we set those up and get that done. We watch everybody.
Thank you very much.
We have our next question. Our next question comes from Steven Lichtman of Oppenheimer. Go ahead, Steven. Your line is now open.
Thank you. Hi, guys. Obviously a nice uptake in Germany and that continues to build. Where are we in terms of CGM reimbursement in additional countries in Europe? You talked about France and U.K. in the past.
You wanna go? You go ahead, Steve.
Yeah. I mean, we're, you know, we're still working with the French authorities. I don't wanna be more specific other than we're hopeful within the next 6 to 12 months, we hope to see some reimbursement in France. You know, similarly in the U.K., we've submitted the appropriate paperwork and are having discussions with the National Health Service there. We're starting to see, you know, reimbursement, but in a more limited fashion in some of the other countries in Europe where they're looking to provide, you know, a set fixed amount of money for reimbursement. We're trying to figure out how we would play in some of those markets. Australia is starting to reimburse. You know, we're seeing it.
It's happening, you know, certainly as quickly as we would have hoped.
Okay, great. Excuse me. Beyond the dosing claim, you also had positive data obviously come through over the past few quarters through DIaMonD. How do you think you can leverage the DIaMonD data sets with clinicians and with patients, particularly as they get published?
I'll take that one. Certainly having a published paper to take into clinicians, particularly as I go back to the example Steve gave, and when I first started with Dexcom, I went out in the field. Frequently, when I would go into a physician's office, the first thing they would say to me, "I'm not giving a patient CGM unless they're on a pump. They have to be on a pump first." What the DIaMonD study clearly shows is that is not the case, that you can derive significant benefit being an MDI patient and wearing Dexcom CGM. I would tell you, as we meet with clinicians and conduct symposium and educational programs across the country, that attitude has changed.
The CGM first message is taking hold, and that DIaMonD paper is really the first thing we've ever had to document those outcomes. We think it can also be helpful for us with payers over time as we look for lower cost solutions in managing patients with Type 1 diabetes and intensive insulin-using type two patients, and we will use it for that as we try and expand our markets and our coverage and go deeper. It, you know, it's a very good start, and the other data will be very helpful as well.
Great. Thanks, guys.
Our next question comes from Chris Cooley of Stephens. Go ahead, Chris. Your line is now open.
Good evening, guys, and thanks for working me in here in the queue. Just two from me. One, would you be willing to characterize the Medicare pipeline in terms of which channel they're primarily served in? Are they coming in primarily through the endo channel or are these patients that are being cared for by GPs? Just trying to think a little bit about how frequently they visit their practitioner and then converting them over time once the coverage decision comes into place. Then just as a quick follow-up from a model perspective, when the additional two payers come online in Germany, and you're up over 50% of the covered lives there, should we think about incremental pressure to the global ASP on the sensor side, or is that already kind of factored into your prior comments? Thanks so much.
As Steve said earlier, in Germany, our sensor reimbursement in Germany is very similar to what we get here in the U.S. Again, as these payers come on in Germany, chances are it would have a positive impact if Germany becomes a greater percentage of our international business. As I said earlier, it's probably around 20% of the total OUS business right now, so we'll just have to see how that goes. With respect to referrals and physicians of our Medicare patients, we're getting leads from two sources, certainly online and online referrals of patients coming through our website and enrolling. Those patients can have general practitioners and endocrinologists. With respect to referrals from the field, those are primarily coming from endocrinologists, which is where our field team spends most of their time.
If you go into an endocrinologist office, at least when I go in, as much as I wanna talk about our pipeline and all the stuff that's coming in the future, the first question I get every time is, "When are you gonna be able to take care of my Medicare patients?" I think there is good pent-up demand amongst endocrinologists to help that senior population.
Thank you, Kevin.
I am showing no further questions at this time.
All right, I'm gonna wrap it up. I wanna thank everybody for their participation on our call today and your continued support of Dexcom. In preparation for today's call, we noted that my first earnings call with Dexcom was exactly six years ago today. We proudly reported $13.1 million in product revenue for the quarter. Not one week's revenue for us going forward from now on. It's been a very fast and extremely rewarding six years, driven by a tremendous amount of hard work and commitment from our team here. Think about this short list of industry firsts.
CGM performance that finally met patient expectations, the first FDA-approved apps to allow patients to share data, the first system ever to communicate directly to a phone, the first device ever to be labeled to make therapeutic insulin dosing decisions, and finally, the first product to Medicare, at least in a few weeks or a few months, we hope. While this list is great, and we're very proud of all that we've done, everybody here at Dexcom will tell you that if you look out over the next six years, that list is gonna be much longer and much more meaningful as we drive the message of CGM as a standard of care for glucose measurement across the board. I had an opportunity this past weekend to speak with an individual whose family has been greatly affected by diabetes at a recent JDRF gala here in San Diego.
This person commented to me that while he's very generous and is supporting diabetes research, it's Dexcom that saves his children every night. He told me to be very mindful of that as we go forward in what we do. We'll never forget that. As we launch our new product platforms, incorporate Verily's high technology and truly merge high tech and med tech, build out our new factory, communicate and connect to more and more devices, and expand into new markets over the next several years, our commitment to patients will never change. We truly want to enable people to take control of their diabetes. Thank you.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.