Okay, good, good morning. We got a poll right in the middle. This is like my first apartment in Manhattan. Great. Thanks for joining us for this fireside chat session. I'm Matthew Taylor, the Medical Supplies and Devices Analyst here at Jefferies, and pleased to be joined by the management team from Insulet. And to my right here, we have Jim Hollingshead, who's the CEO of Insulet, and also the new CFO, Ana Chadwick, so we'll try to give her the softball questions today. And Deb Gordon's here in the audience as well, who runs the investor relations function. So about 25 minutes for Q&A. That's all on me, so let's get it going. Wanted to start a little bit high level.
I know there's sometimes people in the audience who don't know the story with the quarterly granular detail that we like to press into. So Jim, maybe you can start with just talking a little bit about the evolution of Insulet. You've got a lot of new product launches coming out, a lot of exciting things happening. But maybe give us a brief history lesson in terms of how the company's gotten here and what you're excited about today.
Yeah. Thanks, Matt, and good morning, everybody, and thanks for joining us. It's great to have the opportunity to be here with you today. Insulet is a company that started because a dad with a kid who was diagnosed with Type 1 decided there was a better way for his child to manage his therapy. And we've grown consistently, and we're. Our claim to fame is the Omnipod platform. I'm gonna hold it up for those of you who can see. There it is. That's the Omnipod. This is an Omnipod 5. We have three products on market in the Omnipod platform. You can see it's a very small, wearable, disposable, waterproof insulin pump that you can wear on your arm, your abdomen. Obviously, very unobtrusive, very convenient.
When we launched the company, it took us a while to get this product to market. That's all predating both me and Ana. We then went through several generations. Our Gen 4 product was winning substantial market share because of the convenience of wearing this pod. Very, very convenient, easy to use. Fill it with insulin, put it on your body. It automatically deploys the cannula. Typically, you don't feel the needle go in. It deploys the cannula, and it's a flexible nylon cannula. It delivers insulin. And our Gen 4 product, Omnipod DASH, which has an indication for use for both Type 1 and Type 2 diabetes, that's managed through a controller, a locked-down cell phone. You manage your basal rate, which is the consistent amount you get, and you manage your boluses at mealtime. Our Omnipod 5 we launched in August of 2022.
It's our flagship product. It's truly a revolutionary product. What it did was it brought this form factor, which was already winning substantial share in the market, into the world of automated insulin delivery, or AID. Omnipod 5 connects to CGMs, a continuous glucose monitor. Right now, it's on market with the Dexcom G6, so that creates an almost artificial pancreas system. You're wearing the Omnipod 5. Your Dexcom G6 is reading your blood glucose. The Omnipod 5 algorithm, which is AI-based, is automatically dosing your insulin to keep your blood sugar in the desired range, 7 by 24. Fantastic, innovative product. We launched it in August of 2022, and we leapfrogged the market, all of our competitors.
Our competitors also have automated insulin delivery systems, but they all have tubes or cannulas, and so the big choice driver with this product is you don't have a tube. It doesn't get stuck on a doorknob. You don't have to bleed air bubbles out of it when you set it up, and so on. This is discreet. Many people choose it because they can wear whatever fashion they want. It's got a lot of consumer benefits that go beyond the high-end technology, but the high-end technology in this product is world-class as well, so it's a very disruptive product. When we launched in August of 2022 in the U.S., demand really significantly exceeded our expectations. It's continued to be very, very strong. We're on market now with Omnipod 5 in the U.S. We recently launched in the U.K. and Germany.
In both of those markets, Omnipod 5 is once again exceeding our expectations. And then we have a whole cascade of innovation coming this year in 2024 and into 2025 that I'm sure Matt will wanna talk about. It's a really important market for a couple of reasons. One, people living with diabetes, whether Type 1 or Type 2, who need insulin, have a huge burden of managing their care. So what Omnipod 5 does and what Omnipod DASH does is dramatically simplify your life if you're living with diabetes and you need insulin therapy. It's also important because it's large. Both markets, Type 1 and Type 2, are large and unpenetrated, relatively unpenetrated. In the U.S., to give you some scale, there are about 1.6 million people living with Type 1 Diabetes. Those people need insulin every day to stay alive.
That market is about 40% penetrated with technology, so with some sort of pump. The Type 2 market is about 2.6 million people, so a larger market in the US and very large worldwide. That market is, in the U.S., less than 5% penetrated with technology, and so we see that as a huge unmet medical need in both Type 1 and Type 2, and Type 2 really open field running, and we lead both markets. We lead the Type 1 market and the Type 2 market. So we've catapulted into a position of leadership, and we're very excited about the cascade of innovation we're bringing this year.
Super. Thanks, Jim. So maybe with that, with that preamble, you could talk a little about the outlook for the pump market and the growth there. It's not just you innovating, but a lot of the competitors also have new products, and that's been stimulating a lot more people to come to pump therapy over the past few years. So maybe give us your, your high-level thoughts on the market.
Yeah, the market continues to grow in a very healthy way. You know, the breakthroughs in the market, the first breakthrough many years ago was just having a pump instead of having to do multiple daily injections, where you're using a syringe or a smart pen to inject yourself with insulin. And that grew the market and you know, the technology side of the market started to penetrate. We launched the Omnipod Gen 3, Gen 4 products in that period, so Omnipod DASH in that period. Omnipod 5, our entire strategy is to make delivering your insulin so easy that you come off of, we're bringing people out of what we call the MDI, or the multiple daily injection, part of the market, onto Omnipod therapy.
Our goal is to grow that part. In the U.S. market, as I said, that's about 60% of the Type 1 market is unpenetrated. It's really clear since we launched, in particular, Omnipod 5, that we lead that part of the market. So we're growing the market, and we've proven the case now. One of the things that we've done with Omnipod is we've proven the case that people want something that's wearable, smaller, discreet, disposable. What you see is our main competitors who are commercialized, and then some startup companies who are coming around, they're all trying to chase the smaller form factor. But we have...
We're the first and only patch pump therapy with AID in the U.S. market, and all the other competitors who are chasing us, even with smaller form factors, they're all still tube pumps, and so we have a rather substantial lead. We believe that, you know, previously, we said last year on one of our calls, in our market model, historically, people have talked about the insulin delivery market getting to something like 50%-60% penetration in the U.S. We think we can get it into the 70s and beyond. We think it will closely follow CGM penetration. The reason is, people don't go on pumps if they're obtrusive, they have tubes, they have inconvenience.
People don't see those barriers with the Omnipod, and so our fantastic, revolutionary, discreet product is driving a lot more market penetration. So the market is now about competing for bringing people off of MDI, and we're focused on that part. That's what we designed for, those are the patients we're looking for. In the installed base, there is, there's competition, where we actually win, in general, the switching game. But really, the play is to penetrate that 60% in Type 1 and then the 95% of people in Type 2 who are not yet using technology.
And as you're talking about following CGM, it's a good time to bring up integration. So maybe we could talk about your timeline for integration with Dexcom's new G7 and also Abbott, and how those could catalyze your growth?
We're really excited to be integrating with new sensors. So we've been on the market now with Omnipod 5 for almost two years with the G6. Dexcom has launched their next-generation sensor, the G7. That sensor is getting very widespread adoption, and so it creates a tailwind for us because more and more people on MDI will be using G7 because it's the product that Dexcom is promoting aggressively and so on. We're just wrapping up our limited market release of the G7, and we've announced that we expect to be launching the full release of G7 over the summer. It's the limited market release is going really, really well. We expect that to... That's a near-term event with moving to full market release.
Dexcom's main competitor is Abbott, and Abbott has a family of continuous glucose monitors called the FreeStyle Libre family. They have the FreeStyle Libre 2 and the FreeStyle Libre 3, both of which have been granted FDA clearance for use with dosing insulin in an automated insulin delivery system. We're really excited because we're in our limited market release with the FreeStyle Libre 2 Plus. That's the—they're putting the Plus moniker on the sensors that will be used in AID systems. It's essentially the same sensor, has a couple of small differences, and it's cleared by the FDA. So the FreeStyle Libre 2 Plus in the U.K. and in the Netherlands, that limited market release is also going extremely well. And what's nice about that, from a patient point of view, is that there are many millions of people...
Both companies have, you know, 1 million plus. I think they're both 4-plus, 5-plus million patients in their installed base. Many, many more patients will have access to Omnipod therapy, and so we're committed to giving our patients, our customers, a sensor of choice. They can... And we don't want their sensor choice to limit their ability to access Omnipod. So by getting on the G7 and getting on Libre 2, that opens up hundreds of thousands, if not millions of patients, to Omnipod therapy. And again, with... We're doing the LMR and then the FMR first in Europe with Libre 2 because Libre 2 is the most widely adopted sensor in the European theater. G7, I think now has crossed over to be the most widely adopted sensor in the U.S.
Maybe you shouldn't quote me on that. You can ask our Dexcom colleagues if that's right. But it just opens up market for us, and then we'll be following with Libre 3 in short order. Those are the four main sensors that are approved by the FDA in what's called iCGM. So we will. This year, we've got launches. Very excited to have those two sensor integrations coming in the near term. We'll cross over, so G7 gets to Europe, Libre 2 gets to the U.S. Libre 3 is coming behind in the near term, and then we'll have all four sensors as options for our patients.
Great, and you talked about this on the call, that qualitatively, you thought that the integrations would drive the acceleration in new patient starts, in the U.S., where a lot of people are focused. Can you talk about how that could roll into your results over the next couple quarters, and, when could you get back to new start growth and-
Yeah
... record new starts again and-
Yeah
... and kind of share that info?
Our new starts are continuing to be very strong, as we said, Matt, and I know you know. You know, we had very strong demand in Q1, had a you know Q1 hit right on our expectations. And we expect to have sequential growth all year long, but when we complete the G7 integration in the U.S. and release it to the full market, that will accelerate our new patient starts. Because it's... I use this metaphor all the time. It's like, you know, what fish are being stocked in the pond? My dad and I used to go trout fishing. We would always go to the lake that had just been stocked. And so, you know, for the last couple of years, Dexcom's been stocking the pond with G6.
Right now, Dexcom has been heavily stocking the pond with G7, so we need to be out there fishing with the right bait for people on G7. By being able to integrate with G7, it'll create a tailwind for us because it's so much easier for a patient who's already on a G7 to transition to an Omnipod 5. For the last quarter and a half, if you've wanted to get on Omnipod 5, sometimes you've actually been written a script for a G7, and you have to go back and get a script for a G6, so it's created an extra step.
So by getting full market release of G7, we see that as a tailwind, and it's a very large number of patients who are now on G7 in the U.S., who are also in Type 1, you know, living with Type 1 diabetes. So we expect our growth to be heavier in the second. It would normally seasonally be stronger in the second half in our industry, but G7 will create a tailwind, and so we expect the full market release of G7 to create an upswing for our new customer starts.
You touched on international as well in your comments about integration and moving into some new countries, and that was a real bright spot in Q1. You basically crushed your,
Yeah
... your guidance and raised it by a lot. So maybe just talk about the trends in the international markets, and give us a preview on some of the new market entries that we could see over the next year or two.
Yeah. So we've been really pleased. You know, it's funny, as I said, when we launched Omnipod 5 in the U.S., we had pretty bold expectations, and we blew through our expectations. The demand for Omnipod 5 was off the charts. So as we launched in the U.K. and Germany, which was last June and August, we said to ourselves, "Let's make sure we're ready for that." And now those are massively exceeding our expectations. We did plan for more customer support, which was important, so we've been able to manage that. And then we're very excited that we're launching in France this summer also. We've said we have clearance, we have reimbursement, we have everything we need in France.
We're down to the final throes of negotiations with distributors, so that's also a very near-term event. With those three markets, we are now in the three largest markets in Europe, and you can sort of figure out what would come next. We've talked publicly about the Nordics and Italy that we're working on. We haven't put timing on those, but those, we're working on those as we speak to get those launches going. And that's why, you know, the success of U.K. and Germany, coupled with our coming launch in France, which is ahead of our internal schedule, which is great, that's why we raised our guidance in international by 500 basis points in Q1. It's very unusual for us to raise guidance on a Q1 call, but we saw the results in U.K., Germany.
We saw where we were in the France process, and we said, "We, we have to raise guidance internationally." And that's great. The international teams, you know, they are raring to go, and it's so exciting. We just got back, Ana and I, from London, where we were having a board meeting, and we had a key opinion leader, who I won't name because I didn't get permission to name her in investor conference. A very well-known key opinion leader, who came in and was just raving about Omnipod 5 for her patients. Most of her patients are on Libre 2 Plus. Most of them, the vast majority of them, who are interested in automated insulin delivery will not do tubes.
So already in her clinic, even in the limited market release, you know, she's got people lining up to get on Omnipod 5 therapy, and that's what we see. So Omnipod 5 wins wherever it goes, and so as we can continue to expand it, to expand it across European theaters and other markets that we're in, we expect to have really, really strong growth.
Great. And since you brought the guidance raise, maybe I'll ask you to comment on that a bit. It is kind of rare for you to raise in Q1. You were forced to because you performed so well. So I guess I wanna understand better because your qualitative comments are really positive. You're talking about accelerating growth through the year. Now, the guidance calls for basically similar growth in the first half versus the second half. Why wouldn't we see more acceleration in the second half of the year?
I think that we're very prudent in how we guide. You know, and so there are a number of moving parts for us. I'm gonna turn to Ana-
Yeah, sure
... since I'm doing all the talking anyway. Ana, why don't you take that one?
No, thanks. So, I mean, first of all, the growth is fantastic. It's stellar growth, and vis-à-vis expectations, as you said, we're even raising that. There's a few dynamics. 2023 was a fantastic year, and we saw very significant growth in the second half as well of last year. So when you look at the comparison, it's still massive growth. When you look at it on a dollar basis, it's much higher growth. When you look at it on a rate basis, it's still raising the guidance to the full year. So, I just wanna concentrate on the fact that it's growth. It will have some lumpiness as it goes through a particular quarter, but look at it in the full year.
You know, for the entire company, raising guidance both on the low end and the high end up to 18% overall is fantastic. And in addition to that, we did that while also increasing margins. So we gave a raise of operating margin of 50 basis points up to 13.5%. So we feel we're in a very, very strong position, both on the growth and the margin.
Yeah, I'm glad you brought up the margins. I wanted to ask about that as well, and you've essentially raised the margins twice in the last year or so, and making a lot of progress in operating margin. I guess I was just hoping you could talk at a high level about the cadence of operating margin expansion going forward, and how you think about balancing that with driving growth with a lot of investment opportunities.
You hit it on the nail, absolutely. I keep thinking about this as kind of what's the rate and pace.
Mm-hmm.
As we grow, we of course have margin expansion from our scale and all of those things, in addition to the strong discipline we have around productivity, Lean Six Sigma, all the natural things you expect in a manufacturing site. We're also expanding into Malaysia with our new site coming later in the year here, and we expect all the benefits of all the learnings that we have from our Acton, Massachusetts site to be translated into our new site. So all of those things are gonna yield further productivity and we continue to stay incredibly focused. Prior to my arrival, and I love this, the company had stated about 100 basis points of margin improvement, op margin improvement per year. And that's where the rate and pace kind of comes in.
So we wanna continue to set aside those funds for all those innovations, and as a company, manage so that we keep our competitive edge on our product development, on our cascade of innovations, and at the same time, return to the bottom line. So that's the fine balance we're working through.
Great. And maybe I'll pivot back to Jim. And you talked about Type 1 and how that market could evolve, and I was hoping you could talk a little bit about Type 2. Because you will have some data coming out there soon, too, and could get an indication to finally market to Type 2 who already are clamoring to get your, your product, seemingly from your, your new study disclosure. So talk about the progress in Type 2, please, and then what we can see from the data when you can get an indication, and what that could do for you.
Yeah, sure. Type 2, as Type 2 progresses, people go onto oral meds, and then they go onto other drugs, typically injectables. There's been a lot of talk about GLP-1s, which we can get into if you want to, and they've been progressing through GLP-1s in our market for 7, 8, 10 years, depending on which class of GLP-1 you're talking about, and then they end up needing insulin therapy. And so that's where the Omnipod would come in. We're already the leader in insulin delivery in the Type 2 market with our Omnipod DASH product because it's so simple to use, and it's so much easier than doing multiple daily injections. And so for several years now, we've been the leader in " pump therapy," although we think of it as pod therapy, in Type 2 with Omnipod DASH.
With Omnipod 5, Omnipod 5 has all the same benefits for somebody who's doing multiple daily injections for Type 2 as it does for Type 1, but we don't have the label for it. Omnipod 5 is right now indicated for use only for people living with Type 1 diabetes. So we've done, as you know, a series of clinical studies, and right now we are just about ready to file with the FDA with our pivotal trial to get the label extension for Omnipod 5 for use in people with Type 2 diabetes. Matt's alluding to the study. This is at ADA. We're at ADA in three weeks, two weeks down in Florida. We'll be sharing data from that study. So it's a large pivotal trial of about 350 patients. They come from. They're Type 2.
People living with Type 2 who need insulin, in some cases, they only need basal, so it's basal and basal bolus patients. We'll be showing the whole data set at ADA. We're very excited about it. We anticipate that that large data set will prove the case for our feasibility trial we published earlier. So in our feasibility trial, what it showed was a dramatic increase in Time in Range, which is the term of art for keeping your blood glucose in that tight range. A dramatic increase in Time in Range for those patients, and also a reduced insulin dose on a daily basis, which is important clinically and also important from a cost point of view. Those are really important results.
That feasibility trial also showed that people who were on GLP-1s actually did better on Omnipod 5 than people who were not on GLP-1s, which is another interesting finding. So we'll be exploring that as well with showing some subset data. In our pivotal trial, about half of those patients are on GLP-1s, and so that will be a, that'll be a scientifically meaningful sample that we can share data on. So as we committed to publicly, we will file for that label extension by the end of 2024. We think that, you know, we're well ahead of schedule on that right now, but by the end of 2024 is what we're committed to. Once we have that label extension, we'll be able to promote Omnipod 5 to people living, you know, to doctors and people living with Type 2 Diabetes.
We already get a lot of off-label prescriptions because doctors see the power of Omnipod 5. We don't promote it. We're very careful of saying we don't promote it. But when we can untie that one arm that's our reps have behind their back and actually actively promote Omnipod 5 for Type 2, we expect that to also be a tailwind for us and drive a lot of new patients.
Great. And before you mentioned that, Type 1 market could go from 40% penetration to maybe 70 or a higher number in the future. Can you talk about that, framework for Type 2 as well?
Yeah, we haven't quantified that, you know, publicly in a kind of rigorous way, but it's sitting there at 5%. We know those patients face so much burden. People living with Type 2 have so many things going on. We anticipate, you know, really open field running in terms of penetrating that market. We haven't yet publicly stated where we think it can get to, but thing to remember about both of these markets is that CGM has always paved the road for Omnipod. And so, you know, CGM penetration of Type 1 is high and climbing. Omnipod therapy is not far behind that. And both, Abbott and Dexcom, our two partners, our two key partners, have received broadened labels and broadened indications for use in the Type 2 population.
More and more people living with Type 2 are gonna be wearing on-body technology. That on-body technology is required for Omnipod 5, and so we expect to be able to penetrate that market. I think we have a very clear right to win. We expect to be first to market with that indication for use, and we are the simplest technology on the market by a lot, and so we have a clear right to win in that space.
Great. I think we're almost out of time. I can't tell 'cause of the poll, but.
We are.
Um-
37 seconds.
37 seconds. So let me ask you one on GLP. So it seems almost-
Yeah
... like a bad dream from last year, that all these stocks were negatively impacted by GLP-1 fears. I'd love to ask you, A, do you still feel like there's some fear in the stock from GLP-1s, and have you seen any impact to date on your business from GLP-1s?
I, my sense is, and Matt, you would know, and people in the room would know, my sense is there is still an overhang on the stock from GLP-1s. We continue to think it's unfounded. All of the data show that GLP-1s have a temporary effect. They're beneficial drugs. We think they're good drugs. We like pharma innovation. We're trying to you know, serve the same patients. They have a temporary effect. Patients almost always progress on insulin, and we, there's some things, if you haven't seen on our website, there's some slides we put up showing that dynamic.
GLP-1s have been on our market for many years, and we will be showing new data in the next two or three weeks that show that if you're on a GLP-1, you actually have a higher likelihood of going on insulin therapy in that first 12 months than if you were not on a GLP-1. And if you go on a GLP-1, and you drop off of GLP-1, which more than half of patients do, you're more likely still to go on insulin therapy that year, both of those at a higher rate than the underlying rate. And so that's a counterintuitive finding for us, and we'll put out some more data so that you can all, you know, inspect it and understand it. But GLP-1s do not create a headwind for our business, and the overhang out there is...
We're gonna surprise on the upside when we drive growth in Type 2 because the overhang is there, and it shouldn't be.
Great. Well, I think that's a good place to end. Thank you so much for your time, Jim and Ana, and thanks for your interest in Insulet.
Matt, thank you very much.
Thank you.
Thank you, all.