Hey, everybody. Thanks for joining us. Matt O'Brien, I cover MedTech here at Piper. Very excited to have the Tandem Diabetes Management team here with us. From the company, we've got John, who's the CEO, and then Susan, who's the head of IR and Corporate Communications. Leigh can't be here because of a family issue, unfortunately, which is much more important than talking to Matt O'Brien. I can assure you of that. But thanks so much for coming out.
Absolutely.
We do appreciate it.
Thanks for having us. Always happy to come.
Yeah, I guess, I'm so sick of talking about these GLPs, but, let's start with that, you know, first of all. Type 1 penetration, about 40% today?
Yeah, 35, 40. Uh-huh.
In our model.
Yep.
A few years ago, you know, penetration was growing about 100 basis points per year. You know, that's accelerated. Is there any indication that that growth should slow down, as far as penetration within the Type 1 patient population? And then we can get into GLPs and the Type 2 side here in a second.
Yeah. I'd say that longer term, we anticipate that getting up to about 65%. So we would see over the next 4-5 years, continued growth to the point where I think you'd have to have well over 100,000 people coming from MDIs to Type 1 to pump use annually. I would say that this year, in particular, though, has been a little bit bumpy, because when new products come into market, there's pausing that comes along with that. And so not only did Medtronic, but we have our own coming. So we won't be able to tell what the actual number looks like until everybody has reported, you know, for the fourth quarter calls.
But we would expect it to be kind of flat to what we saw last year, and last year was about 75,000-80,000 would come from MDI.
Okay. So 75,000-80,000 again this year is what-
Probably.
You expect.
I'd say in that, in that range.
All right. Got it. And then, on the OUS side, you know, is there any deviation in terms of growth within the market on the pump side?
No. I think we—it's less penetrated, and it's a much larger market. The people that are there really appreciate the technology that we're bringing to the market. So we expect to see higher growth OUS than we do in the US, and I think that, you know, it's a huge opportunity for us, right? Right now, the US market has about 1,800,000 people with Type 1, 40% penetrated. OUS, it's about 4 ,000,000 people, 4 ,000,000 plus, and it's only about 10 or 15% penetrated. So huge opportunity for us, and I think that, you know, I think as health, as the state health or the country health plans see the benefits of the technology, they're beginning to be proactive in terms of actually encouraging people to use it.
Okay. Okay. And then starting to you know turn a little bit on the GLP-1 side of things, but for starters, what percentage of your user installed base is Type 2?
It's a small number. We have in the U.S., we have about 300,000 people using our technology. About 20,000 are Type 2, who are using the system off-label. When you look at the market in the U.S., it's about. There's about 2,300,000 people who have insulin-intensive Type 2, which means they need basal and bolus insulin. Therefore, that's similar to Type 1, and that they need a pump that will improve their therapy. In the U.S., there's about 100,000 people that use pump therapy out of that 2,300,000 . When you look at Tandem and Medtronic and Insulet, we all have devices on the market today that use AID algorithms.
None of them are approved for Type 2, so all three companies are working on clinical studies today to get the approval with the FDA, and we're all roughly, you know, same timing.
Okay. What are you seeing? I know it's early days with these GLPs, but for second-generation GLPs, are you seeing some of your patients roll off of the pump because of the GLPs out of that 20,000 patients?
You know, I don't think so. I mean, it's hard to say. It's a small number, you know, but I don't think there is, and this is why I'll say: We are currently running studies for Type 2. We've got a feasibility study that we just completed a few months ago, and we've reported the data. And roughly half of the people in the study were using GLP-1s before they got into the study. These people are using MDI, they're using pens and needles, and they're using over 100 units of insulin a day. So it's a large amount of insulin with GLP use, and they still were not achieving their glycemic targets. They had A1Cs well over 6.5%.
It wasn't until they got into the study and began using Control-IQ with the GLP-1s, that they actually met their glycemic targets. So I think that when you're in that category of people, where you're using a lot of insulin and you have Type 2, it's insulin intensive, it's actually complementary. I think the use of GLP-1s and the Control-IQ algorithm really do provide better therapy and better results overall.
Okay, got it. So let's just talk a little bit about Q3 then and get off this GLP discussion for a bit. You know, you guys were surprised by what happened as far as the pause with Mobi. You know, what was it that was surprising? Because we all knew this was coming out. Was it the time of year that surprised you? Because, you know, Insulet introduced O5 early in the year, and so they didn't have to deal with some of the seasonality in Q3, and then obviously, Q4 being a big quarter. Historically, they didn't have to deal with that. You do have to deal with that because people are pausing now this quarter.
Yes.
So what really got you in terms of surprises versus kind of... You knew this was coming, you know, heading into the year with Mobi timing.
I think the Q3 number, we actually hit the Q, the Q3 number. It was really close. I think that the thing that we didn't anticipate was, we expected to get approval for Mobi in the first half. We got approval in the third quarter. And so typically, it takes a couple of months to get the product ready to actually get on people, which for us is now the case. We have people using the technology today. And then it's a brand-new pump, so it just takes time to get through the process to be sure the pump works properly, and our internal systems are supporting it properly.
Yeah.
So, I think it's just a matter of timing, that, you know, it just, it took longer to get through the FDA than we anticipated. And when it came out, you know, the availability of the product was in the fourth quarter, and we weren't able to just sort of provide the demand. If it had happened when we anticipated, we would have been in a much different position. We'd have been able to sell the product and sell it in volume. And, you know, unfortunately, that's not really going to happen now until the first quarter.
Okay. Okay, but just to push a little bit on this, and forgive me, but, you know, you kind of, everybody thought you kitchen sink guidance, right? For the year coming out of Q2, and then coming out in Q3, it's like, oh, no, it's actually another step lower. But you knew the timing of Mobi had gotten pushed a little bit. So what was it that changed to where you had to lower Q4 even more? Do you see what I'm saying?
Yeah. I think that the Q4 guidance, the issue in the Q4 guidance was largely because of OUS issues.
Okay.
It was the rebates that were in, you know, that we experienced with the additional reimbursement. There was a charge we had to take to deal with the rebates. And then there was also a distributor that had an order in, and the order was pushed into the first quarter because of the availability of the G7 integration.
Okay.
They wanted G7 product, and that was not gonna be available really until the very end of this quarter. Therefore, they decided, "Well, we don't wanna upgrade the G6 pump that we would purchase," and they just moved it to the first quarter.
Okay. All right.
So it was these factors here that don't really relate to specific market conditions. It's kind of one-offs because of, you know, these factors, these other factors.
That makes total sense. Okay, so let's flip into Mobi then for a second. Would love to hear, and I know it's early, but just where are we at as far as the ramp of that product goes? I know it's friends and family for a little while. I mean, where are we at in terms of rolling that product out?
So we have it on well over 100 people right now, and there are people who are Tandem employees, and there's also two clinics, two clinics that are large, well-known clinics in the U.S. that are. They have a substantial number of people that are MDI pod users, 780 users. You know, the response is... I mean, we knew the response was gonna be positive, but the response has been overwhelmingly positive. You know, people refer to it as, you know, the pump and the patch. And it's a. It's. I think that there's this belief that it's a product extension. Well, it's really not. It's a whole different form factor that we think is going to to drive demand next year.
It's a, you know, it's really, with a tube, tubeless argument up until this point, and I think with Mobi, it becomes a choice and wearability argument. 'Cause with Mobi, it's small. You can use an adhesive sleeve with a very small infusion site, and with that, it's very much like a patch, and you can put it practically anywhere in your body. We had a woman who ran in the New York Marathon, and she did a personal best with Mobi on. We had another woman who ran in a marathon a few days before that, and she actually wore it on her thigh. You know, so the wearability options are incredible.
Mm-hmm.
And again, people forget they've got it on 'cause it's so small. And it comes with the... It's controlled fully by a mobile app, so there's a great deal of convenience and discretion that comes along with using the mobile app, and, and, and people love it. We think it's going to be a significant growth opportunity for us in 2024.
Okay. When you say overwhelmingly positive, what have you heard specifically? Is it just the size of the thing being so much smaller or something else in terms of the feature set of the product?
It's very light.
Okay.
Because it's smaller, you can put it anywhere in your body, and people forget they've got it on.
Okay.
So it's not invasive at all. It's not like you have something that's sticking off your body, it gets bumped off or... I mean, the t:slim is a great product, but it's heavier. And so it's so light that people just forget they have it on. I think that therefore, you know, you're controlling it from your mobile app. It's just like a patch, and so that's why people are calling it a, you know, it's a pump and a patch, and I think it's gonna do quite well in the marketplace.
Got it. Is there any thought in December of rolling it out to a bunch more people?
Mm.
Or is it more in Q1, but more so Q2 because it's seasonally a stronger quarter generally in terms of pump placement?
Yeah, it's, you know, the process we follow is we want a limited number of people to be on the system for a while. Since it's a brand-new pump platform, we wanna be sure it's working properly, and so that's the phase we're in today. We're evaluating it. We've got hundreds of people who are wearing it 24/7, so we have call centers that are set up. We've got teams that are looking at every call that comes in. We're also testing our internal systems. We wanna make sure that the training we provide to patients is effective, it's not generating its own set of problems. And then we wanna make sure that our customer service organizations are prepped and trained. And then we're also working on training to optimize the healthcare providers' access to the system.
We're getting those things all ready right now. I think as we move into the first quarter, we'll start to ramp up the volume. We'll have thousands of people on the product-
Okay.
in the first quarter.
Okay.
And then as we exit the first quarter, we'll go into a first, a full commercial launch, and what that'll entail is it'll have the G7 integration as well as G6, and then it'll be available to anybody who wants it.
Okay. And the G7 integration is on time for the end of this year?
Not on, on, not on Mobi.
Okay.
It will be on t:slim.
Oh, I'm sorry, on t:slim.
Yeah.
So-
t:slim, the G7 integration, we have thousands of people on it right now, and in the next, in a very short period of time, we will go to a full, full commercial launch in the US.
Okay. Any updates on Libre?
Yeah, Libre is in the early phases. We've got, again, hundreds of people using it today. It's a few months behind, I'd say, where G7 is, but very positive response as well. I mean, people are using it to control insulin. It's working quite well on the system. We expect it to be a great opportunity and a great product for us going forward. So every single new product that we've talked about now is, it's in one of the phases of commercial launch.
Right.
The results we're seeing for all of them is very positive. So I think that we're excited. The organization's very pumped up about this. There's a lot of momentum and excitement with the team. You know, so we're ready to get this in the market.
Okay.
'Cause we think it's gonna... When you think of 2024, we'll have all four on the market for the entire year, and I think that it's gonna, it's gonna be a transformational year for us as a result of these new products.
Okay. Okay, I'm excited. Fingers crossed there. On the Libre side of things-
Yeah
... were those new to pumping folks, or were they using something else already? Because that's the other thing, you know, talking-
Yeah
... to all these Libre users out there, how many are gonna start on pump therapy with any-
Initially, the people that are initially using it are Tandem employees-
Okay
... who have diabetes. That's how, that's how we start, and we wanna make sure that we have very close observation of what's going on there. We talk to them quite, quite frequently. Next step will be to add some Abbott employees that have Type 1, and then we kind of just add more and more. And there's. We've got lists of people that we've actually asked people if they're interested in signing up for. So we've got a list of people we'll go to and start to get, you know, more and more people on it.
Okay. And just back to the infrastructure side of things, is there anything you're seeing so far from a manufacturing, a call center, et cetera, perspective, that you're worried about with, in terms of Mobi?
I mean, nothing that's significant. From Mobi's point of view, it's going very well. You know, it's going, it's going incredibly well.
Got it. Okay. And, forgive this question, why could Beta Bionics get to the pharmacy so quickly and you guys can't, especially now with Mobi? Why can't you get through the pharmacy quicker? Is there something structural with the business where it's like, "Well, hey, look, you know, we're really good with DMEs, and we'd have to, you know, take a hit in the near term," or, you know, there's something else that's preventing-
No, nothing at all. I think that, the first thing we did with Mobi is we wanted to get it approved in the DME because we wanted to be reimbursed immediately.
Yeah.
We have a team of people that have been working on this for quite a while. I would say that maybe 6-12 months ago, there was a question as whether it's even possible. I think we're definitely past that now. It's not if, it's when. We are working with the PBMs, we're working with payers. I think that if I was a small startup, I wouldn't want people to know anything exciting about what was going on in the organization. Having a PBM agreement doesn't necessarily mean you have agreements with payers, which is the next step. I think we're doing this in a very measured manner. We wanna make sure that, you know, that we have...
With all of the variables that are, you know, part of getting pharmacy reimbursement are locked up, and we've got solid commitments from the various organizations. It's a complex model to deal with. I will say we will definitely have contracts in place with the pharmacy this year for Mobi.
Oh, in 2024?
Yeah, twenty-four.
Okay. Okay, excellent. I'm sorry, just, just working through this a little bit. Oh, I know what it was. On the competition side of things, I've been hearing some stuff out of Medtronic, which hasn't footed yet with their numbers, and I'm still trying to get my head around. Beta seems like they're doing pretty well, and Insulet's still doing pretty well. How, how is the competitive dynamic right now, especially with two newer players on the market, one that may be able to go through the pharmacy with a traditional pump?
Mm-hmm. Yeah.
How do we think about that impact on the business as we head into 2024?
I'd say that of all three, Insulet is still having the most effect on our business. But it's stabilized, as I said. You know, we're still out there, we're in the trenches, we're battling, but it's stabilized. I would say that, you know, the Medtronic device, it's-- we're seeing that Medtronic is doing better job with their own renewals, and it's what we expected. There's no surprises there. It's not like this overwhelming, all of a sudden jump in their demand. I can't foot their numbers, honestly. I'm not gonna try to, 'cause what we're seeing in the field is, you know, that it's what we expected. They're doing better. I don't think they're getting any, if they are, but very few MDI conversions. It's really...
There's no attrition from Tandem to Medtronic. I would say that with Beta, it's really early. They're still trying to get a sales force in place. You know, we do hear about the product in the clinics that actually supported their clinical studies, but beyond that, you know, we haven't heard much.
Okay. And that's the one thing I was curious about on the renewal side, because they've been saying, like, "Hey, we're getting some people to switch over, and actually a fair number." You're not seeing that? Okay.
No.
All right,
I mean, we see very little attrition.
Even to Insulet?
Yeah, very little, even to Insulet. We have some people who try it. I mean, when it first came to market, most of our employees tried it. I'd say... I mean, they came back to Tandem. So, you know, we look very carefully at attrition.
Okay.
Leigh spends a great deal of time just looking at various signals that we have in the organization. We have a lot of data, and we have data scientists that are looking at this for us. You know, there's always been a small number, but it really hasn't changed from the small number that we've seen.
Okay.
I think that we're competing directly with Insulet for the MDI conversions, and they're doing a better job than they have in the past. I think that these new products that we bring to market here in the near future will kind of get us back to where we have been.
Okay. So 75,000-80,000 patients, you know, coming off of shots into pumping next year. I mean, can you start getting back closer to some of the numbers you were doing historically?
Yeah, I think we will.
... next year, or is it more of a 25 event as you get-
I mean,
- everything out, you know?
I think that, I think we'll start to see the impact next year. It may not be as visible until the second half of the year when we actually have meaningful volume for these devices.
Yeah.
But I think we'll start to see Tandem... It may, we may not get back to 50/50 where we were, but I think, I mean, right now, we probably estimate we're like maybe at 65/35. I think it's gonna move in our favor.
Okay. And on the renewal side of things, do you see people still pausing and waiting for Mobi, or are they just converting and they're like: "I'll just pay the $200 bucks down the line, down the line?
Well, in order to get that, it's the Tandem Choice Program, and that's if you, if you buy a pump today, a t:slim pump between June and December, you are eligible to get a Mobi pump in 2024 when it's available for $200.
Yeah.
So that's encouraging people to actually renew today and not wait. It's. I think it's more economic, it's more favorable economically for them to do it this year than wait and start it in the first half of next year. So, you know, so we think that choice is a good program, and we think it's definitely helping.
Okay. Everybody's focused on you guys getting MDI patients, getting some of the competitive conversions on the top line. What does Mobi do for you guys on the bottom line, and how quickly? 'Cause I know it's an area that you've talked about historically, but how big of a influence-
Sure
... can that product be?
Susan, you wanna get that?
Sure. So Mobi will scale throughout the year. Of course, there's gonna be gross margin pressure initially, but to your point, the pump is gonna cost 10%-15% less than t:slim, and on the cartridge, it's at least 20% better. So we've got meaningful opportunity. It'll scale across the year, but really, when you look at it at scale, Mobi gets you halfway to our 65% gross margin target, so it's a meaningful opportunity for the company.
Okay. And then the rest of the business, Susan, how do we think about some leverage in the rest of the business as you're making all these investments in medical education, all these new products? And even other stuff that's still in development. We haven't even talked about tubeless or Sigi yet. How do we think about leverage there?
Absolutely. So we started expense management activities well over a year ago, and so what you're starting to see now is some of the benefit also from investments that we've made, things like automating ability for customers to renew purchases. So for their supply reordering, we don't actually have to scale the headcount associated with supporting that portion of the business as the way that we did in the past. So you're gonna see operating margin leverage just from that portion alone. And so we've got a number of initiatives throughout the business, as well as, of course, volume and things like that, that will contribute. But obviously, the benefit from product, you're gonna see as it, as it scales across the year.
Okay.
The infusion sets will help.
Yeah.
I think that ultimately pharmacy channel will as well, where we would expect to get additional reimbursement over what we receive today for DME.
Okay, why do you think you're gonna get extra reimbursement?
I think that if you look at the competitors that are already in that marketplace, they're getting a significant benefit from that. We may not get the same, but we think it's gonna be more than DME.
Okay, there could be a pricing tailwind that we see in 2025, 2026?
Yeah, I think so.
Okay. The other question, and I don't know if this is for Susan or not, but just the, you know, the concern that investors have, obviously, with the burn rate you have right now, with additional investments that are coming, you're gonna need—are you gonna need to raise additional capital? And then you've got a convert that's coming up, I think it's 2025.
It's current in 2025.
Um, yeah.
Yeah.
So those things are starting to make people nervous as well. Like, do you need to raise more capital, and then what are you gonna do with the convert in 2025?
Yeah, we feel very comfortable with our balance sheet right now. I mean, if you look at it, we have over $500 ,000,000 , and so part of it with the convert is deciding what makes sense and what is the right timing. But to your point, yes, it comes current May 2024, but it doesn't mature until May 2025, and so we've got some time to make some decisions on what's right for the business.
Well, like that... Sorry, go ahead, John.
I was just gonna say, I mean, the real issue that happened this year was the transition to the European distribution center.
Yeah.
That slowed us down in the very beginning of the year, and we did burn more cash than we typically. In the second half of the year, though, we don't, we tend to be adjusted EBITDA positive. And I think as we get the growth we anticipate in, you know, in 2024, we expect to return to, you know, cash flow positive.
Okay. Okay, appreciate that. What about on the seven-day infusion set side of things? Where are we at with that? I think there was a study that had to be run and-
Yeah, we're just about... I mean, we're working on the final details of starting the study.
Okay.
The study will take, you know, 6-9 months. So latter half of next year, we'll have the data for the FDA. In 2025, we'll have a product in the market. And as, as Susan mentioned, you know, the, the products, and so Mobi and this extended wear infusion set really do have an impact on, you know, on the, on the gross margin.
Okay. What about tubeless and Sigi? Where are we at in terms of the development on those two products?
Yeah, well, we're, we're moving ahead in both cases aggressively. The Mobi tubeless, it's a tubeless implementation for the exact same pump. So with Mobi, you can have a small tube or you can have a tubeless implementation. It gives people choice, which we think is very important. That's what we're working on that aggressively right now. We would say that that's probably, you know, 18-24 months out in time. And I think that, you know, we've just closed a deal with Sigi. It's a Swiss patch pump that uses. It's rechargeable and uses a prefilled insulin cartridge. We think that's gonna be a very favorable competitor against the current patch options that are on the market today. That's more like a 26, 27 product.
In both cases, we're, you know, we've got great teams in place, we've got activity, we've got plans to get these products done, and we have confidence that they're gonna come to market. So we have, you know, we've got these four products we're bringing to market right now. In the not-too-distant future, you know, we've already teed up these other two, which we think are gonna have another meaningful impact on growth, and it's gonna help us get this MDI conversion, you know, to get the penetration rate up to 65%, as we've talked about.
Do you think you need Sigi with tubeless? Because I know tubeless is gonna be a little bigger, but it's not gonna have tubes. You can move it all over.
I think that, I mean, when you look at Sigi, again, it's a rechargeable device, and you have a device that you throw away every three days. We think that that environmental differentiation is going to be important. It's also very convenient. You can change the cartridge on Sigi in a matter of seconds. You can just get a prefilled cartridge out of your refrigerator, pop it back in, and you're going. So the combination of those two is highly differentiated, and I think that when you look at the two products right now, it's not tubeless, obviously, but there's a big benefit, I think, to choosing one. If you go to Europe today, they're highly concerned about the environment.
I think young people in the States are, and I think increasingly, you know, I think we'll see more of the older population in the U.S. become more concerned about it as well. So we think that the environmental, the rechargeability factor is important.
Okay. And you guys know I was skeptical with Sigi,
Mm-hmm. Yeah
... because I've seen a lot of other companies develop products.
You've told us that before.
Yes. Yeah. Sorry, doing it again.
It's okay.
What have you learned since you've had the asset now, and how do you feel about your ability to develop it and get it to market? Because Medtronic's tried, Cellnovo's tried, I mean, there's Medingo. I mean, you can go on and on with all these guys that have tried on the patch side and failed. What have you learned and just the confidence you have?
Well, first of all, it's a very different product than a three-day use device.
Yeah.
So a three-day use device, the equipment that's required to build that, and automation-wise, is about $100 ,000,000 . It's very different for a device that's gonna be used, a durable device that's gonna be used over time.
Right.
So we have a lot more flexibility in terms of the manufacturing design process. I would say we just implemented Sigi—excuse me, Mobi. Mobi is roughly the same size in terms of complexity. We've miniaturized the device already. We know how to do that.
Yeah.
It's a durable pump as well. It's really the fact that they have that this device is disposable. That's where the challenges come from, and that's why others have failed at it. Because the manufacturing process is probably more complicated than the product design, and they are definitely integrated when you do that. With a durable device, you've got more degrees of freedom. The automation equipment costs $1 ,000,000 or $2 ,000,000 .
Yeah.
It's a completely different problem. We feel very confident we can do that, and we've demonstrated that we can already.
Okay, and last one, just last few seconds. I'm sitting here listening to all these, these, you know, new products and new opportunities and, and everything else, and I'm just, I'm thinking back to Leigh and 10% growth next year. Why, why is 10% the right number, you know, with, you know, OUS should be much better. You're not gonna have all the headwinds there, all these new products coming in.
It doesn't have any-
Renewal new product activity.
It's all that the number... It's a baseline, first of all. It was really just to manage expectations when we changed our guides in the middle of 2023.
Okay.
I think that we expect that these new products are gonna drive increased demand, as will the other programs that we've got going on. But it's really just a baseline to sort of set it. And it's, we can achieve that 10% when you look with just the renewal growth as well as supplies.
Yeah.
And we feel very confident we can achieve that, but again, it's just a baseline.
Okay. Got it. Well, I've kept this over, so we'll, we'll cut it off there. Thank you so much, John.