All righty, let's get this show on the road. Obviously, Patrick from the US MedTech team. Disclaimers, none of you are gonna read them. You're never gonna go there, but they're there if you desperately want them. And what is a lot more exciting, the disclaimers, low bar, to be fair, is to be joined by Dr. Trang and Ana from Insulet, as Chief Medical Officer and Chief Financial Officer respectively, for what is a highly topical company and a highly topical area. So massive thank you for agreeing to do this and joining us today. I guess maybe if we start with big picture, maybe Ana, because it's kind of interesting, four months now, I think?
Four months.
I'd love to hear your perceptions on what you assumed you were gonna be walking into, versus now that you're in the business, how you're feeling about it in the industry.
Thank you, Patrick, and thank you, everybody, for being here and for the interest in learning more about Insulet. When I joined, it was actually a pretty easy decision. You look at the company from the outside, and you see eight years of 20+% growth, margin expansion, and then I go and meet this fantastic team that shares the same values, and most important, it's a company with a fantastic purpose. I'm like, "I'm in," and then you get there, and you kind of start looking under the covers, and you see that innovation pipeline, and you see the amount of free cash flow we're producing, so we're self-sustaining, and everything that I have seen since I've been here has been to the positive of everything that I saw from an outside in, so I'm super excited to be here.
I think these are one of the most exciting times for the company. Maybe two years ago, when Omnipod 5 was launched, was probably another big milestone. But what we have going on here is this cascade of innovation, and that's really gonna fuel the growth, not only today, but into the future. And I'll just name a few because, I can't keep them all in my short-term memory, but you guys all know, you know, we've been working hard, and this is the work of getting a lot more sensors connected. We just put out the G7. We're in that process. We also have the iOS limited market release for G6 in the U.S., coming into full market release very shortly. We have Libre 2 Plus coming in a little bit later in the year.
Before I talk about Type 2, because I'm gonna pass it over to Trang for that, we also have an incredible performance taking Omnipod 5, that's winning in every market we're taking it internationally. So we feel we're in a very unique spot, and in addition, getting the good news from the hard work and the quality of the data that we produced in our SECURE-T2D to get the FDA label expansion earlier than we were even anticipating. But I know that's gonna be the topic. It's the label expansion. I'll pass it over to Trang to maybe share a few words on that.
Yeah, go for it.
Type 2's a big, big area.
Yeah. Just last Monday, we announced the expansion of Type 2 indication for automated insulin delivery, and so we are the first company to have that indication, and it's gonna completely change every conversation that we have with doctors. Super excited about that, and as Ana mentioned, that all comes hot off the heels of our SECURE-T2D data that we presented at ADA this year. This is gonna really expand our total addressable market. We mentioned that it's grown by 6 million . Really, there are really two components of that, people who are on intensive insulin, so that's the two and a half million people living with Type 2 diabetes today, requiring multiple daily injections.
They are the ones who are at an advanced stage in their disease, who need insulin therapy and are not getting it effectively today, and Omnipod 5 works very well in this population, and they already are seen by endocrinologists and endo-like PCPs in our current core points commercially, so we're gonna be leveraging our current core points and commercial strategy to call upon these doctors who see these patients.
That's in play today, and so last Monday was our release, and I was in Mississippi at the time, and we walked straight into our first HCP education program, where we were talking about Type 2 to both endos and PCPs locally, so that was super exciting for us.
In some quarters, historically, Type 2 had actually been a reasonable chunk of new patient starts. Obviously, some of that was a little bit basal, but the Omnipod 5 off-label usage that we know had happened a bit. To you guys, what does that tell you about the underlying demand, I guess, for this patient pool, given it was willing to be used a little bit off label before?
Yeah, I think there's incredible demand for this product. So on our last call, we said that 25% of new customers to Omnipod were actually Type 2 diabetes. The majority of those patients were written off label for Omnipod 5. We also know that through our direct-to-consumer leads, about 50% of those have Type 2 diabetes. And as you mentioned before, Omnipod 5, when we only had Omnipod DASH, which was our standalone insulin pump, 35%-40% of our new patient starts at that time were Type 2. So we're already the leader in Type 2 diabetes. This is a massively under-penetrated market. So of that 2.5 million, less than 5% are using pumps. And the issue is that with multiple daily injections, it is people don't take that insulin.
You know, either they forget, it's not convenient, they don't know exactly how much to give, they're worried about the side effects of too much insulin delivery, and so it becomes a very ineffective therapy. That's multiple daily injections. So for us, this is an enormous opportunity where we've shown that we can take these patients, put them straight onto Omnipod 5, fill a pod with insulin, put it on, put a sensor on, off you go, bolus from a phone. Simple, easy, something that people can do discreetly, and on top of that, it's affordable as well. So we've already shown success in Type 2 diabetes, we're the leaders in both Type 1 and Type 2 diabetes, enormous market, very accessible as well.
One of the questions I get a fair bit, and we were chatting about it last night, I feel sometimes gets missed in the clinical data, is the proportion of patients that are heavy, like heavily insulin resistant and like big-
Yes.
-unit users.
Yes.
And the T2D data that you guys put out, the insulin reduction that pulls a bigger proportion of those type two patients into being able to use a 200-unit reservoir. Maybe, maybe like expand on that for people a little bit.
Yeah. So for those new to our company, our Omnipod product lasts for three days and holds 200 units of insulin, and people replace it every three days. And the product is essentially has a cannula that is inserted under the skin and delivers small increments of insulin, and it requires only short-acting insulin. So when people come onto the product, they don't need long-acting insulin any longer. Just back to SECURE-T2D, 305 patients, very diverse population, and not just racially diverse. We had 22% Black, 24% Hispanic population, but very real-world representation. About 50% had less than $50,000 annual income, and about a third had the highest education level of high school.
So very representative of a general population, which is important because, you know, for us, it was important to show that Omnipod 5 could be used by a general population. We had no restriction on, in terms of the upper end of insulin requirements, so our maximum, the highest insulin, total daily dose for one patient was 357 units a day. And overall, for all of our patients, we saw a 29% reduction in insulin when they used Omnipod 5. So we went from an average of 80 units a day down to 57 units a day on insulin. And for those insulin resistant patients who were generally more than 100 units a day, we saw a 64% reduction in insulin.
So, you know, people who are needing about 150 units a day, they were dropped by more than approximately 100 units down to about 50. And I think there are two reasons for that. One is, as I mentioned, multiple daily injections. You know, people aren't getting all that insulin that they're being prescribed, so, you know, that's why that's problematic. But also, when you're delivering insulin via a pump, it's much more physiological, and they're getting the insulin that they need exactly when they need it. So on top of the efficacy improvements that we saw, a 2.1% improvement in A1C for those who had an A1C baseline greater than 9%. On top of that, we saw no increase in hypoglycemia, as well as the reduction in total insulin.
So overall, highly effective and safe, and I think this gives doctors a lot of confidence in using automated insulin delivery in patients with Type 2 diabetes.
Ana, you've got the unenviable task as we later approach next year of having to think about integrating the Type 2 label and ramp into numbers. I don't know from... I guess you'd have a few months to sort of start to see how that curve is looking. Have you guys sort of holistically and philosophically had any thoughts about how to begin doing that? Because the curve could be many different things, right?
Yes. So, absolutely, you know, we're paving new grounds here. We're the first ones with this label, and we have been out there with a smaller commercial pilot on Omnipod GO, which taught us a lot around a lot of PCP offices that really act like endo offices based on the number of patients with Type 1 and type two diabetes that are in the population. When you take a step back, we have our existing sales force, and the way we're thinking about this launch is very programmatic, right? So we're gonna take our existing call points, which today cover a significant amount of that type two population, in those call points that we have today.
And we're gonna take that, and we've already started training all of our sales force with new materials, especially coming out of all that great data that Trang just mentioned. And we're just gonna be able to not have our arm tied around our back when we're selling, and that's just gonna give us a new first phase population. As you might recall, during our earnings prepared remarks, we talked about sales force expansion. We were thinking this was coming anyway, so as a natural progression, we've been doing it all the time, we've been expanding our sales force. So we've already hired some of those people, and we're in the process of training them and making them productive salespeople as fast as we can. So that's on the sales force.
Then we have the direct-to-consumer type of marketing that we do. We do a lot of that through social media, and that's just gonna have more eyeballs, and we're gonna target that to not just the Type 1, but also broaden that to the Type 2. And third is then we get there somewhere where, I don't know, somewhere in twenty twenty-five, we have all these learnings, and then from there we go on and we say: "You know, there's the both the basal market. For Type 2, that's another 3.5 million that can have some specialized targeting." But we're really gonna be very programmatic, and it's. What's hard is to predict that ramp. And that's really where we're gonna spend here a little bit of time before we wrap up twenty twenty-four.
And, as we wrap up 2024, we'll be able to give everybody a little bit more of our thinking of what that means for guidance into 2025.
How are you guys thinking about the interplay between, you touched on it, like investment relative to the opportunity? Because you also have that head start, as well as like differentiated form factor. But there's obviously... Presumably, there's a temptation to keep investing really quite heavily to drive the share of new patients within that pool. Is that fair?
Yes. So, it's gonna be a prioritization. And I think we have a really good problem in the sense that just by taking our existing base, we're just gonna get the highest returning. And then, as we go forward, we will continue to analyze each one of those investments in either additional resources or additional direct to consumer or sampling programs. There's just so many other things that we do. And we're gonna continue to have the same discipline we've been having for many years in progressing to expand our new customer starts in the most productive manner.
For Type 2, how should we think about the impact of Libre integration on the speed of adoption within that pool? You know, it's been used off label already before, so clearly it's not super critical necessarily. But is there? Do you expect, like, an inflection with Libre integration, or how you think about that?
Yeah, we expect Libre integration, which is coming at the end of this year, to be another tailwind to our growth. You know, it's really fantastic to be in the market with two sensor partners, two leading sensors in the market. We have G6 and G7 today in the U.S., and in the U.K. and Netherlands, we have the both G6 and the Libre 2 Plus integration. And there are enormous markets for us, and what that will do is enable less friction for people who want to choose AID, whether that's a Dexcom sensor or a Libre sensor, to be able to access AID.
What we found is that the people choose their AID first, and the differentiated form factor that Insulet has, being the only tubeless insulin pump, will be a key differentiator for us, and we're gonna continue to grow next few quarters, and we see incredible momentum behind this expanded indication.
Last one for now, specifically on Type 2. I thought it was a very interesting discussion last night, actually, around the arbitrariness of the definition between basal and intensive treated as discrete buckets. But actually, there's a large subset who are basal, but only 'cause the doc doesn't really trust that they'll be able to do MDI, and the HbA1c is actually eight or nine in some instances. Might be what, for those who are less familiar, expanding on, because I think people do segment those two markets completely-
Yes.
as a divided line.
Yes. It's a continuum, and so with Type 2 diabetes, as the disease progresses with beta cell death that occurs over time, people are generally started on a basal insulin first. And that originated out of convenience, really. But what people really need as the disease progresses is postprandial or mealtime insulin. And often, doctors are reluctant to prescribe it because it does add more complexity to people's lives. You can imagine, you know, if you have diabetes, you've got to remember to inject for breakfast, lunch, dinner, and snacks. And that's a lot of things to remember, and so doctors are reluctant to add that additional complexity for their patients.
And so what generally happens is that people just coast along, you know, A1C that's elevated, and that's problematic in terms of complications for their diabetes and, you know, increased in terms of morbidity and life-threatening complications. And so we've, in our press release, actually, we talked about the fact that only 25% of people living with Type 2 diabetes on insulin are actually at a target glucose of less than 7%. The other remaining 75% are above 7%, and that is a marker of disease progression. And so, you know, for us, the first opportunity is to go after that 2.5 million people on multiple daily injections today, intensive insulin therapy, who behave very much like an insulin-deficient Type 1 diabetes patient.
You know, they're already in the core points that we call on today, and that's a very familiar patient for the doctor to think about AID therapy for that patient. So that lift is relatively small in terms of it making sense for that Type 2 patient. In terms of basal insulin only, so these are people who are taking you know, once a day injection. They're not taking mealtime insulin, they're coasting along. What generally happens is, as their A1C creeps up, people tend to just crank up their basal insulin. You know, in our SECURE-T2D study, we actually recruited 21% basal patients, and we put them straight onto Omnipod 5. These were patients who were not at their target glucose.
What we found was that they could go straight on to Omnipod 5. They did not need to go to multiple daily injections and then onto Omnipod 5. We see that as an enormous opportunity for us in the future. What's really exciting about all of this is that, you know, this is not something that, you know, we're going to see massive growth in just the next couple of quarters. It's going to be multi-year growth for us. There are just so many patients out there who have life-limiting disease, and we have the opportunity, unique opportunity here with simple products, to be able to help these people get their insulin in more effectively. And that's been borne out in our clinical trial results.
Maybe to touch on channel dynamics and competition in that side. There's a narrative that's sometimes out there that some of the success for you guys has been a function of an excellent pharmacy business, essentially. Of course, everyone recognizes the form factor and the algo and those sort of things, but the pharmacy is a component of that success. Thus far, apart from sort of one very small player, kind of none of the durable pumps have made their way really meaningfully into the pharmacy. How would you both think that the competitive environment evolves as they begin to make some of that transition? I know it's still a debate for durable pumps on what that model would even look like. Is it that standard $4,000 upfront, or is it, you know, a use over time?
But do you expect any competitive impact from that channel being shared among a few more players? And if so, how are you thinking about that?
I can start. Yeah.
Yeah, you can start.
So with pharmacy, that's been a multi-year investment for us to build that coverage. So today we have over 90% of covered lives in the U.S. That's over 300 million people, and that is both for Type 1 and for Type 2. So we are out of the gate covered for our patients. And that is really incredible and really quite remarkable, and there's a lot of plans out there that we had to negotiate in order to get that coverage. So we have a very unique position, and all of Omnipod 5 goes through the pharmacy channel. So we have incredible volume to leverage as well. And so we see ourselves in a pretty unique position. So you know, we're covered through Medicare, Medicaid, commercial plans, Medicare Part D, where there's no C-peptide requirement.
And that access is just so important when it comes to out-of-pocket costs for patients. You know, again, back in... when I was in Mississippi, you know, people we talk about this product, and the first question the doctor asks is: "Okay, how much is it going to cost my patients?" Well, it's pretty remarkable to be able to say, you know, what we're seeing through in general for Medicare patients is $11 copay for their pods per month, which is remarkable. And overall, I don't think I've said this yet, but we have the majority of our patients pay less than $50 out of pocket for their pods, and actually, a third of our patients pay $0 out of pocket.
So really, in the case where you need to pay a copay for your long-acting insulin becomes cost-neutral in many cases. And, look, you have to, on top of having a great product, it has to be accessible to patients. So pharmacy has been a huge driver of growth for us, because it's made it accessible to so many patients. But also, the volume of prescriptions that we put through puts us in a very unique position compared to other new players coming to the market.
Yeah, I mean, you've said it all. I do think that the point you mentioned at the beginning, we've been in this journey for over four years, establishing ourselves, and the way the pharmacy channel works is a volume, it's a rebate base, and that volume matters. So we're just going to continue helping people, giving them access, pay-as-you-go model, and just continue our lead and just stay there. There will be competitors, there will be different pressures at different times. I believe our product is differentiated enough, that we should continue to have the strength and the lead, and we have more things in our pipeline to keep that going.
This is going to sound like a cheesy question, and I suspect my clients will roll their eyes, but to what degree do you think the brand is also a barrier to entry? And what I mean by that is, you know, the literal design of the product and how it looks, people referencing it to each other, you know, calling people Podders. Building that consumer brand equity of it not really looking like a device, being a little bit more discreet on that side. You know, some of your peers who have hybrid patch-like pumps, but they still sort of look like devices. How do you think about, like, building that consumer level relationship and brand, and do people miss that, or am I just going down the wrong path?
I think it's a huge advantage for our company, is the loyalty that our customers have to the product. And it's, you know, it's actually, you know, very accessible. Nowadays, you know, with the success that our sensor partners have had, people are used to seeing people wear CGM and, you know, wearable diabetes technology is becoming commonplace. You know, when I was in Mississippi, I actually went to the Delta region, which literally nobody goes to. And I spoke to these physicians and I said, "Have you heard about Omnipod?" And they said, "Yeah, I've got patients coming in who have seen your ads and want to use the product." And so, you know, with very little training, they've prescribed Omnipod, and we train the patient.
But, you know, it's the barrier to entry is pretty low, just because of the simplicity of the product. And as a reminder, you know, I think after our first quarter call, we said 20,000 providers have prescribed Omnipod 5, and there's only about 7,000 or 8,000 endocrinologists in the U.S. So that means that, you know, almost two-thirds of the population are PCPs, NPs, PAs. And so it's reaching a very broad population of prescribers as well as patients, and ease of use and simplicity is a key component of that, as well as the advocacy that patients themselves tell their doctors, you know, they have a good experience, and that's what gives doctors the confidence to want to prescribe it for other patients.
Maybe if I could just add, you know, for the more finance population here, when you look at our utilization on a monthly basis, the number of pods being used on a monthly basis, and also you look at our retention, we're seeing very stable. So we're seeing that once we get that patient in through the door, the form factor, the attachment that we just talked about, the pay-as-you-go model, the accessibility, all of those things are coming together very nicely in our financial model.
Malaysia is as a manufacturing hub, obviously for you, going to become pretty important. How should we think about what the implications of that could be over a whatever one, two, three-year time horizon, however you want to characterize it?
Yeah, no, this is a great thing. I mean, taking a step back, it's all about our margins as well, right? So not only do we have to have the capacity to have the pods needed over time to be built, but we also want to make them with high quality in the most efficient manner. So, our production facility in Acton, where a lot of, I would say, our R&D development of the technology we use to actually do the mass production happens there. We've leveraged that with China and Sanmina, and now in Malaysia. The good news is, we have the rooftop capacity to supply the needs for three-plus years down the road. So the biggest part of our capital investment has happened. Once we have that rooftop, then we expand lines.
So those are incremental investments that will need to happen. Malaysia is just super special. I was just there during the opening in the month of August. The energy, the quality of the people, the quality of the product we're putting out, in 2024, I mean, it's really a fraction. It's really the ramp. And because of that, advantage that we have in terms of the cost of that production, we see margin expansion, not only from the volume, because this is a fixed cost leverage play, but we also have a lot of the mix of the sites that I just mentioned, and we also have a lot of hardcore quality, lean, Kaizen, Six Sigma engineers out there making it better and better every day.
We continue to feel very confident with our gross margin. Here in the second half, you know, it's gonna be around that 70% gross margin. And we continue to see, you know, that incremental margin expansion as we move into the years.
Maybe also a slightly shorter time question. There's always some noise that's created from that inventory movement for the G6 to G7 pods . G6 could be a good product name, but, the six to seven pod inventory and the stocking situation, maybe for those who aren't aware of that situation, an update there on how things are tracking versus expectations.
Sure, so when we launched G7, we made a very conscious decision that we wanted to make the experience for both the physician prescribing it and the patient to be a very good one, and in this case, what we wanted to avoid was a patient on G7 unfortunately getting a G6-only pod, because that would have just destroyed that experience, so in order to facilitate that, we decided to go through the specialty pharmacy channel, and that will ensure that that pairing and that match happen. Our goal is to be full-blown retail through all the pharmacies, and the key about the pods that we're producing for G7 is that they're G6 backwards compatible, so one SKU will cover both G6 and G7.
But there's G6 inventory in the distributions and in the pharmacy, so we wanted to let that kind of flush through and avoid having a lot of return pods because, you know, produce them and we use them. So we actually took that two-step approach, going through specialty pharmacy to ensure that experience happens really good for the customer, and also allows the depletion of that of those G6 pods. So we anticipate being full retail pharmacy here in towards the end of September, beginning of October. It's kind of hard to call the exact timing. And again, it was a very conscious decision. We feel the demand for G7 is very strong, and it's just the way that we supply to the end customer in a phased approach.
I guess, rounding it out, for each of you, you know, you obviously spend a lot of time internally doing things. Are there things that you spend a lot of time and energy on internally that you feel don't get reflected externally or don't come up in conversations? Or are there things that come up externally where you're a bit perplexed why they keep coming up, relative to, you know, your expectations?
You want to start?
I think we've got incredible growth drivers coming up ahead in terms of all of our sensor integrations and delivering iOS, which is iPhone compatibility. I think there is the main thing is that, you know, we're very innovation driven at our company. It's a very competitive market, as you can see just from the news of this week, and so we're very much driven by continuing to deliver innovation and to stay number one in this market.
Yeah. So, maybe just to wrap the conversation here. We definitely, our number one mission is to simplify the lives of people with diabetes. And again, I've only been in the company for a short time, but all of our meetings have the customer at the center of everything, and that is what drives the innovation. That also drives our financial performance. Our desire to have that free cash flow to reinvest in ourselves is a top priority, and we live it and breathe it every day in the company.
Ana, Trang, thank you so much for agreeing to do this. Thanks, everyone.
Thank you.