I think we can get started. Green lights, please. Good morning. Welcome. My name is Mike Polark, Medical Device Analyst at Wolfe Research. Day two of the Wolfe Research Healthcare Conference. Thank you for being here. I'm pleased to be joined in the session by Tandem Diabetes. From the company, we have Chief Financial Officer Leigh Vosseller and Chief Administrative Officer Susan Morrison. Leigh and Susan, thanks for being here.
Thanks for having us.
I look forward to the chat. Look, I want to start on your market. I think we all build our models as we do, and we see what we see, but it seems pretty clear that the pump market is having a good year. Growth, I think, in users, especially in the U.S., the rate is higher than it was last year, and there seems to be kind of a rising tide element to category performance, and I'm wondering, and you have your numbers, which are undoubtedly better than mine, do you see it similarly from a growth perspective? And if so, thematically, what are the drivers of kind of this resurgence in performance?
Yeah. So I mean, I can mostly speak to our performance, but we are pleased to see the market is growing. And I think an important element that there's room for all of us to grow. So with multiple players in the market, we were particularly pleased this quarter to share that our new pump starts grew year over year more than 20%, which is something that has been a struggle for the last few quarters. And we had said we would turn the corner this year in the back half of the year, and we did in a big way, I would say. And so the market is big. And I think that's one of the most underappreciated elements of this.
When you think just of the Type 1 community in the U.S., with multiple players in the market, there are still 60% of people who are using multiple daily injections today. So that means there's room for everyone to continue to grow. And we think we have an advantage there because our products are squarely focused on meeting the needs of people whose needs have not yet been met. And so we're focused with Mobi on driving penetration in that space. We have a number of catalysts in 2025 that also will be moving into that space more and more. And so we think we're positioned well to take advantage of this growing market.
You brought up three Qs, so let's hit on it. I think it's you beat and raised unequivocally. Numbers went up, stock has gone down. And we all attempt to model new starts up year on year for sure, maybe sequentially flat to a touch lower. You've neither confirmed nor denied it, but I think perhaps that's what some folks see. Do you agree with it? And if so, kind of the message was seasonality. And I think perhaps the frustration is, well, Mobi's launching, Mobi is kind of game changing for the platform, and it's just second full quarter on the market. Wouldn't this be a year where you would kind of power through that seasonality and starts would be up sequentially as well?
Yeah. Yeah, it's a great question. So a couple of points there. So I'll start with Mobi itself. So Mobi did grow from Q1 to Q2, and Mobi grew again in Q3. So we're seeing Mobi do its job.
Sequentially.
Sequentially. Absolutely saw a lift there. From Q2 to Q3, our pump shipments in the U.S. grew modestly, but again, it's a seasonal impact. And so when you think about what happened with new starts, renewals, everything was kind of in line, I would say, just slightly up from Q2 to Q3. But our pump shipments grew just under 1,000 a quarter over quarter. That's important because seasonally, what we've seen, at least in the last three years, is that pump shipments have been flat to down from Q2 to Q3 because of the seasonal aspect. And I would say that regardless of how exciting a new product is, if people just, if they haven't met their deductible yet, they're just not going to buy it. They know they have time in the fourth quarter.
Q2 to Q3, we did grow through that kind of flat or what's usually down seasonal trend, and we were up slightly. It was a move in a positive direction. Again, we attribute that to Mobi and the strength that is driving for the business.
Can I ask the competition question? And look, we're observers. We listen to everyone. And everyone's taking share from everyone right now. It's an interesting bit of a narrative. And it's part of your message. Your disposable patch pump competitor says we disagree with that message, and we see it differently. And yesterday, your large tube pump competitor kind of said we're seeing good switch activity. So what's an analyst to make of all this? What are we missing? Or is the best response that, hey, look, the major message here is rising tide penetration is 40%-45% in T1. There's been a lot of new technology. It's a good thing for everyone, and we're all squinting about these switch variances.
It's the latter. It really is. I mean, there's always been some level of share exchange between the manufacturers. For us, our comment about Mobi was very specific to trying to give some color to how we're viewing the launch and who is the Mobi customer. Mobi was designed to expand the market. And that's why we're seeing the growth in multiple daily injection. And that's what our focus is. So as we look to where the opportunity is, it's been interesting to observe an increased number coming over from the patch competitor, but that's not our focus. Our focus is multiple daily injection.
Can I ask on the sensor integrations? Abbott is kind of finally coming into a rhythm on being able to enable AID. You announced t:slim had Libre 2+ in January. I feel like I haven't heard a ton about that, whether it's helpful, kind of neutral, too soon to tell. And I think Mobi Libre integration is on the come. And so I just want to peel the layers back here because round numbers, two million Type 1s, 400,000 Libre Type 1 users is Abbott's number. If these folks had the sensor loyalty historically, they didn't have access to AID, and now they do. That's a big unlock. If you force rank the things that are mattering in the market right now, where does the Libre integrations sit? And as it relates to Tandem's business, have you seen an impact yet?
Is it still in front in 2025 because that's when Mobi gets tied in? What's the cadence of Libre Catalyst for you?
Sure. Libre 2 launch on t:slim, think of it as a stepping stone towards offering Libre 3 more broadly. It is an important step, though, because it allows us to start the market development activities. To your point, going out and meeting with healthcare providers who are prescribing Libre today to explain that it is now available as part of an AID system. That is foundational work that is important and that is happening this year in preparation for broader FreeStyle Libre 3 availability, both in the United States, outside the United States on t:slim, on Mobi. Those are 2025 activities. This is an important kind of building year in preparation for that.
What will be the Mobi timing for integration?
We said all 25. We haven't explained really within the year when those are going to be coming, but we'll be giving greater detail in our next call.
This is an interesting topic to me. I mean, on the surface, totally positive development. The question is how positive numerically. And the bull case is these folks love the sensor. They've maybe been MDI. They've never had the ability to integrate with a pump. Now they do. They consider it. AID is obviously a big leap forward in terms of quality of life and performance. The flip side is, and I've learned the Type 1s are kind of technologists. They like to dabble. They like to experiment. The presumption would be they were aware that they had AID offerings with Dexcom before. And in your product, if that had appealed to them, they would have tried it by now. So that's this interesting bull bear on the Libre as a catalyst for T1. I guess, what would you say to the bear tilt here?
If they would have switched to a pump, they would have done it by now. Now they're going to? How do you see that?
I think there's different needs and preferences that drive why someone chooses a specific sensor. Insurance coverage also is a big piece of this. And so there may be other reasons why someone chooses to use the Libre versus Dexcom sensor. And that's an independent decision from us. For whatever reason that drove them to choose Libre, we want to support them. To assume that somebody can just switch or they should use a different sensor, it's not always that easy. And that may not align with their preference. There's a lot of people who chose Libre. And so we want to support them by offering AID.
I want to shift gears and ask about the pharmacy stuff. The first pharmacy contract is in. It's announced, but I'm going to probe, see if we can pull the layers back. I know this has happened already, and you haven't said a ton. But let me lead with a dumb first question on pricing because this is also an interesting dynamic between the two channels. On a per patient, per year basis, your patch pump competitor who's in the pharmacy can earn roughly, according to my math, two and a half times what y'all earn kind of on a fully amortized basis per year in the DME channel. This sounds great, right? If the business shifts over, you could two to two and a half X your revenue per patient. Do you see it this way? Is this the math? Have I done bad math, and talk me down.
Why isn't this financially very exciting as the company initiates the transition?
Sure. So maybe I'll go through the reasons for moving into pharmacy of which one is an opportunity to expand margins, if you will. So it starts with, as I mentioned earlier, affordability is a big question for a lot of people. And so one of the things we want to do is to find an avenue to help patients afford to get on pump therapy. The pharmacy channel offers that kind of avenue with copay assistance and buy-down programs that you can offer. We also see that competition is enjoying a premium pricing as they sit in that channel. And so we set out, we're using Mobi, I would say, more as a pilot into pharmacy for Tandem. We're keeping t:slim in the DME channel, which actually works very well. It's well established. We've been seeing generous price increases. We're very pleased with the performance there.
We have some really great contracts there, some with even no out-of-pocket. We want to take Sigi directly into the pharmacy channel. With Mobi, we're learning. We're learning how pharmacy channel works, how these pricing negotiation works, what resonates. What we do know the difference between the two channels, you think about durable pumps. They were originally positioned in the DME channel. This was before they were smart pumps, if you will. This was a device without integrations, without software, without these technologies that made them more advanced. The pharmacy channel tends to put more value on the kind of data that you can provide now with an AID system. As we go in and talk with the players on the pharmacy side, we're most certainly putting Control-IQ front and center.
We're using Mobi as the entry point, but we're showing them the power of Control-IQ and the data that it brings, and that's what we're using as our negotiating point for, I would say, the right price. I wouldn't assume anyone new coming into a channel will get to rise immediately to the level of pricing that someone else is enjoying. In fact, pharmacy channel can be very competitive from a pricing perspective, so there's potentially an opportunity for us to go up, could put pressure on existing pumps within that category over time. So we'll see how this plays out, but we're in the early stages, and I should have said we really were celebrating internally that we got this first contract. It's something we said we would do this year.
It's been a long time coming as the world has transitioned to, I'll say, being accepting of durable pumps in the pharmacy channel, and here we are, and we're excited what this could offer to us for 2025. We think it can bring not only potential margin accretion as we think about multiple contracts coming into play, but also this volume advantage or access advantage.
Can you remind us on the kind of why now? I mean, what made your product as it's designed, what made it difficult to fit into the pharmacy channel from a logistics, billing, coding, payment perspective? And kind of why is that now more feasible? Or what solutions have you figured out to make it work?
Yeah. I would say it's as much that's just where pumps were before. And so the payers were comfortable with it. It's the way it was designed. And there was no reason for anyone to make a change, if you will. With a pump being put into that category in recent years, kind of opened eyes to maybe there's opportunities or to think about where it should fit better. And with the advancement in the technology, the data can be used for population health management, which is more, I would say, normal to be done on the pharmacy side of things. And so it's, I think, a number of things coming together. But it's also a little bit about educating the payers and the awareness of what we can bring.
Can I ask one? And I know you're going to do this thoughtfully and slowly, and it's not going to happen all at once. I hear that loud and clear. But Dexcom had a challenging quarter a couple of quarters ago. And one of the things was, well, too much business going into pharmacy. Some of our DME partners were frustrated with us. How do you see that tension as this happens? And kind of what mitigating steps can you take to ensure that as you seek to expand horizons into pharmacy, which is probably long-term very good for all stakeholders here, you ensure that that DME base is still solid?
Yep, yep. So I would say that ties to our strategy a bit of with X2 staying in the DME channel. We've got these solid, great partners that have a good business growing that they can grow alongside with. Mobi kind of in between. A lot of the players on the DME side are actually dabbling in and looking into pharmacy as well as an opportunity for them to expand their businesses. So it's something that we're working on together. We're absolutely going to be very thoughtful about the intricacies as you switch channels. It's clearly very complex. It's not an easy process, but as you said, we think of this for Tandem like we do our product launches. It's almost going to be like a scaling launch.
And so as we step into the channel, as we start to drive the business, what are the learnings we have and how do we mitigate the risks that are out there doing this kind of transition?
The one contract, I mean, it's a small number, but we talked about this on the follow-up call post-earnings. It's a PBM contract, correct? And there's only a few of these folks that, so it covers a lot of folks potentially, kind of a hunting license for, I'm going to put numbers out there, you don't have to confirm, like 20%-30% of the population, there's three, four PBMs that matter. Is that the kind of contract that this is?
You can think of it along those lines. It is a first major step in getting that rebate agreement into place. And then to your point, it's attaching the payers alongside. So the PBMs and GPOs work to attach the payers. Our market access team works to attach the payers. And our commercial team will work in the field making sure we're identifying the eligible patients and driving that volume through the contract. And so there's still work to be done. But I think the most important part was done as we got through the pricing negotiation. And so now it's really about the pull-through piece of it. And kind of to your point too, the magnitude of it, it was material enough where it was worth announcing. But also, we have other conversations underway. So it doesn't mean it's the end either.
There's still other opportunities for 2025 as well that could come along between now and when we talk to you at our next earnings call.
Understood. I hate to ask for comment on your competitor's view, but I just find this very interesting. You've been clear. We just talked about your view of evolving access. Medtronic, I asked this question not long ago, and they said pharmacy never, and I thought it was very surprising to me. What do you make of that?
Yeah, I guess I could only speculate. And I probably shouldn't speculate. I'd be curious what your speculation is on that. But we see benefit and value for the reasons I just described. We think this affordability question is one of the major reasons why penetration, why it will never get to 100%. And so we want to try to solve for that. And we think this is an effective way to do it.
Yeah. Transition out of pharmacy to Type 2 with a pharmacy and Type 2 question. And this came up on the last call, and I thought it was interesting to fully tap into the Type 2 opportunity that we think will be unlocked in the years to come. How critical is pharmacy?
I would say it's important, but probably just as important for Type 1 as we talk about the affordability question. I don't know that it has any more importance for Type 1 versus Type 2. Overall, we think it can be very helpful and healthy for our business to be in that channel.
So, Type 2 submission going to FDA by end of year. That's what I've heard on timing. And then we can choose our own adventure on what that means for a label. And it sounds like 2Q, 3Q, mid-year kind of thing if I just count six months-ish.
That's a fair assumption.
John made the point that FDA will have seen Control-IQ for the fourth time now.
It is. They recently reviewed the algorithm when we lowered the age indication down to age two. So it's the exact same algorithm with a new clinical data set to support based on people living with Type 2. So we're hopeful that that helps to expedite the review. But that being said, FDA is always a variable, and it's an unknown. So to say six months, that's what a normal 510(k) approach could look like, is a fair way to think about it.
Have you commented on when the world might see the data from the pivotal trial?
We always look to the major conferences. So ATTD is after the first of the year. That would be an opportunity. And so we'll look at the conferences and see what makes sense.
Yep. This is a little history for me. I don't know the answer. I've never asked this question. But why has Tandem not pursued a Type 2 label yet? I mean, now we have AID, obviously. But I guess why is the company getting to it now and not years ago?
Sure. So the pump is indicated for all people living with diabetes, both Type 1 and Type 2. It's the algorithm piece. And that's dependent on who was in the original clinical study. And so our original clinical study was actually an NIH-funded study that we did in partnership. And so it was focused on people living with Type 1. And then as we spoke with the FDA, even though we had tens of thousands of people using our device with the algorithm who live with Type 2 diabetes, they really wanted to look at kind of different subsegments of people living with Type 2, for example, people who are taking a GLP-1. And so there's a meaningful number of people in our study using a GLP-1 so that you can see the combination of different therapies that people may use.
We needed to do another study that really was sizable enough to be able to provide a breakdown of these different demographics.
What do you have to do on the commercial side to prepare for this? I mean, again, not historically been a marketable claim, I guess, per se, but you seem to be setting the stage for this. So is it, yeah, new folks or just ensuring the existing field force has the type two message down? Kind of what does that look like? Is there investment required? Is it happening now? Will it happen next year?
Sure. So we are looking at territory optimization based on high prescribers of insulin. That's really where our focus is and refining what does that go-to-market strategy look like. And so we'll give more information on the upcoming calls and how that is. Leigh Vosseller, do you want to comment to the investment piece?
Sure, so as we think about 2025, this is probably investment in general, so when we think about investments that we need to make in the business, whether it's R&D, whether it's field, or whatever it is, we're also looking for cost-saving opportunities to fund investments as much as possible because we're looking ahead, and while revenue growth is a top priority, margin expansion is as well, and so this quarter, we turned the corner on EBITDA profitability, and we want to continue to demonstrate that in the future.
Covering med tech, I've learned there's often no shortage of TAM. But there is a supply side to this equation. And that's provider throughput, office capacity. Type 2, 4% penetrated on pumping in absolute terms bigger than Type 1. It's a very large opportunity. And the product, the technologies are now seemingly better positioned to meet this market opportunity. So we've been upbeat on Type 2 for the pump category. My question is this. As this picks up steam, can the endo or high insulin prescribing PCP community will Type 2 be incremental in terms of kind of potential patient starts? Or do these offices, these practices only have so much capacity and kind of Type 1 maybe needs to still grow but come down a little bit to make room for Type 2? How do you guys see the capacity constraint or if there is one?
We view it as incremental opportunity because if you have someone on an AID successfully, it improves their outcomes, and that's a benefit for the practice as well as the person living with diabetes, and so I think that the hesitancy before in part has been a perception of what is the motivation and what is the capacity for people living with type two to be able to use these systems when they haven't grown up with the diabetes language the same way that someone typically living with type one does, but these systems have become so easy to use, and they're less intimidating, and I think also there's just more awareness within the type two community about using technology, and I think that CGM has been a great example of that.
What we've seen if we look to kind of Type 1 as the proxy that we draft off of that CGM adoption. So as people living with Type 2 are becoming more and more comfortable with using CGM, now you have the information. But what are you going to do about it? How are you going to manage your therapy and improve the outcomes? And that's where pump therapy comes in. So I think it's actually a benefit both on the patient side, obviously, but also on the healthcare provider side as they're able to support their patients with new tools.
Do you have an estimate as we head into the Type 2 era here? Rough cut, two and a half million patients with intensive insulin needs, two and a half million Type 2 patients with intensive insulin needs, three to four million kind of so-called basal patients. Your commercial footprint, the endos plus the high insulin prescribing PCPs, do you have a sense for how many of those patients you're theoretically positioned to service or pitch to today?
Sure. It's more than 2.3 million who use intensive daily rapid-acting insulin, of which to your point, it's only about 4% or 5% penetrated. But it's been interesting as we do our market research, we survey these folks and understand what is your interest level or your consideration for adopting insulin pump therapy. In the past, it pretty consistently was about 15%. And so we said, OK, that's probably that nearer-term opportunity. In more recent testing, we're hearing those numbers more at 25% plus, which I think shows that there's increasing interest in this technology, which positions us well for growth.
We have five minutes. I want to hit on OUS. And then I'll fish for pipeline timing, which you guys don't say anymore, but I'll try anyway. So I feel like I'm the OUS renewal guy. I feel like this is if you look at what's happened in the U.S. the last couple of years, for revenue, the renewal opportunity has been very significant for performance. And we're coming up on maybe 2025, 2026, 2027 in an era similar for OUS. So is it reasonable to think it goes the way it went in the U.S.? I know maybe the kind of commercial models are different over there and more reliance on distributors. But how excited or financially compelling is the OUS renewal opportunity?
Yeah, no, it is exciting. So what we've relied on for growth, and we've been demonstrating great growth outside the U.S., has been attraction of new patients to Tandem. So it's the MDI population and competitive conversions. And it'll be nice to have this, I'm going to call it, new layer of predictable revenue. So in the U.S., to your point, the renewals have become a very predictable and sizable revenue stream for us. The real opportunity for the OUS markets begins in 2025. So we launched early in 2018, 2019, but it was a very small population at that time. Our biggest markets where we have the largest presence was really 2020, 2021 dynamics.
And so I would say you can think about long-term that those markets will evolve to the same metrics that we see in the U.S., which is assume that we capture about 70% of those patients through renewals within about an 18-month time frame from when their warranties expire. I would not expect us to be hitting those targets right away. There is a bit of a learning curve. You make a good point. Every market's different. Their structures are a little bit different. They typically all follow the four-year warranty cycle. But there's learnings for our distributors to go through just like we did in years past. But I would say the first couple of years, it might be a little bit slower progression. But we do anticipate that they will get there as well, just like we are here in the U.S.
We look forward to having that underpinning revenue growth in the future.
Is there any country that's kind of bigger to start than others?
It's just the large markets. Like you think about Germany, France, UK, our largest markets.
Yep. Let's do the pipeline. It's been a couple of years since the timing was described. But I tried to count it out again. Or maybe this was the old framework, and it's no good. But so X3 was once upon a time next after Mobi in 2025. Mobi Tubeless, we affectionately call Tobi. I think it's a great name. 2026, and then Sigi in 2027. Is that directionally still OK?
We just stopped providing the timelines, and even when we made the conscious decision, we said at that time, there's been no change to it. It was more of a we decided to just focus on giving updates on the most nearest-term products, which for us is FreeStyle Libre 3 integration in and outside the United States, Mobi Android, and then the Type 2 indication, so that's what we're focused on. We've also said the extended wear infusion set, we're wrapping up that clinical study by year-end, and then it's the compilation of data, and that'll be submitted for a 510(k) also, so no new updates on Tobi, which is the tubeless feature for the same Mobi pump that's commercially available today or for Sigi.
Can I ask on Sigi? Is there what's called a pivotal trial underway? Or what is the regulatory or clinical evidence pathway required for Sigi?
It's a 510(k).
Yeah.
And so for each of the different pumps in our portfolio, t:slim X2, Mobi, and Sigi, all of them require 510(k)s. And then there's a separate 510(k) that's done for the algorithm. But they're all being designed to be used with our latest available algorithm at the time.
Good. I think we can leave it there. I appreciate the conversation. Thanks for being here.
Thanks for having us.
All right.