So, John.
And this is Katie Nicoletti. Katie is our VP of IR, and we're glad to be here today. So thanks for coming and attending. I just want to start off by a little bit of background. Tandem is a, it's a mission-driven company. We are really focused on improving the lives of people who live with diabetes. If you come to the company, roughly 15% of our employees have Type 1, and it's a great opportunity for us to understand the disease better and work closely with them in terms of developing products that help the community. I would say that we're, you know, it's a large under-penetrated market in the U.S., and it's even larger and less penetrated in the OUS markets. We're in 25 OUS markets today. In addition to the Type 1 opportunity, we are now ready to enter into Type 2.
We have a clinical trial that's completed. We expect to get it into the FDA here in a matter of days, and we anticipate an indication and approval in the first half of next year, which even expands the market even significantly better than we are in today. We have a strategy that believes that it's a very segmented business. It's a very segmented market for both Type 1 and Type 2. People want to wear pumps differently. They want to control them differently. They want to interact with them differently. And as a result of that, we believe that a solution to this problem is with a multiple portfolio approach, multiple pumps in a portfolio, and that a single device is not going to meet the varying needs of the entire community. And so we're well on our way to developing the portfolio.
We have plans to develop t:slim, which has been on the market now for probably 10 years. Mobi is our second device, which is now on the market. It's about half the size of t:slim. It doesn't have a touchscreen, and it's controlled entirely by a mobile app. Mobi has been doing very well on the market. It's been on the market for essentially two quarters. And then we have another device that we call Sigi, which is a full patch device. So t:slim has a larger reservoir. It's got a touchscreen on the device. Mobi defines wearability in that it's going to be tubed and tubeless, and then the Sigi device will be a tubeless pump. We have choice in sensor integration. Right now, we're integrated with both Dexcom G6 and G7 and FreeStyle Libre 2 from Abbott.
We're working on the integration with FreeStyle Libre 3 for all of our products, and we'll have that in the near future, and we have a data-driven data platform that we call Tandem Source that we wrap around it. It provides data-driven products and services that enable the physicians to manage their patient population more effectively, and it also gives data to the person living with diabetes so they can help manage themselves, and it's a one-stop shop for people in terms of just purchasing supplies, updating the software on their products, and getting just service and help from the company. We just finished the third quarter. We had a record quarter. It was our highest revenue quarter ever. We have seen great results from our Tandem Mobi device.
It's really driving in people who are using pens and needles to pump therapy, which is really where all the growth is, and we're very happy with the performance. We've got the most exciting pipeline in diabetes, and the team is really executing very well. In this past year, we basically hit all of our milestones, and in the first three quarters of the year, we beat and raised, and we continue to do that. We expect to see a strong finish to the year.
Great. You touched on a lot of my questions, but I want to dig a little bit.
I didn't want to answer them, but I wanted to tee them up.
Great. Great. Maybe we'll start kind of high level. Let's talk about the market a little bit.
Yeah.
Your results have been good. So have pods, even Medtronic's doing a little bit better. And that's a preface to ask you, do you think that the market is already starting to accelerate? And how do you see the outlook for the market in the next couple of years with all these product catalysts, the Type 2 catalysts, the integration catalysts?
First of all, if you don't know, the Type 1 market in the U.S. is about. There's 1.9 million people who have Type 1, and about 35%-40% of them use a pump. So it's, you know, there's roughly 800,000 or 900,000 people who use a pump. There's a million people that's an opportunity. In the U.S., the Type 2 market is about 2.3 million people and about 5%. Around 100,000 people use a pump. OUS, in the 25 markets we're in, it's about the Type 1 opportunity is greater than twice the size of the U.S. market, and it's about 5%-10% penetrated, and the Type 2 market's even larger than that, so big opportunities, as I said, as I mentioned, that we believe that simplicity, ease of use, and excellent therapy really do drive adoption.
And we have seen that over the last years, last couple of years, where we have seen an acceleration in the adoption rate. If you were to look back five years, there was about 25,000 people who came to market annually from pens and needles to pump therapy. I think this past year, it was probably more like 90,000. So a substantial jump. Last year was a tumultuous year because a number of companies, including Tandem and Medtronic and Beta Bionics, all introduced new technology. And typically, when a new product comes to market, there's a pausing effect. People wait to see how it behaves, what's the general opinion of the product from their friends and their physicians. And so there's a pausing effect. And so it was difficult to actually see that growth last year.
But I think now that all of these products are in the market, we are absolutely seeing growth this year. It's hard to assess exactly what it will be because many of the companies don't want to give you their, they don't give you specifics on how many pumps that they are selling. But I think that as we triangulate, we think it's growing, and we think it's going to be a good year. Now, we believe that the market in the U.S. can go from 35% or 40% penetration today up to 60 %- 65%. And in order for that to happen over the next four or five years, we have to eclipse 100,000 new starts per year, which we think is going to happen.
I think that if you look at the cycles of innovation that are planned, there's a significant number of new products that are going to come to market. And, you know, Tandem will certainly be part of that. The same thing is going to happen with Type 2. We've done quite a bit of research recently into the Type 2 community. And in the past, we would probably have said we expect that 5% to get maybe 10%-15% over the next three or four years. But as these AID systems have come to market, they substantially improve the therapeutic benefits. And people who have insulin-intensive Type 2, they live the same life as people who have Type 1.
And so the products that, you know, we expect that the AID systems, the simplicity of using them, the size and discretion, and the innovation that's going on there is going to cause more growth in the Type 2 community. We expect it to get from 5% to an excess of 25% in that same time frame. We're excited about the opportunity. We think, as I said, for both Type 1 and Type 2, it's big. I think it's a situation where the market's growing in that, you know, the three or four pump competitors on the market can all do well. It's not a zero-sum game. You know, I think we can all succeed. I think that's what's happening right now.
Right. And just to talk a little bit more about the Type 2 opportunity, it was a few months ago that you first started talking about this new market research.
Yeah.
Suggesting that maybe you could get to 25% penetration in three to five years. If you just do the math on that, if you take the low end, five years, adding 20 points of penetration, that's four points a year in a 2.5 million patient market.
Yeah, it's a big number.
I mean, it's approximately equal to what we're seeing each year in the market today, just from Type 2.
Exactly. And I think right now, Insulet, they received the indication just recently, I guess a quarter ago. They're working on getting that activated into commercial use. We expect to have the indication in the first half. We're quickly preparing, I think, for getting the organization ready for that to happen. And, you know, commercially, from a medical and clinical point of view, as well as from market access, we're putting the things in place that we need to do so that when we do get the indication, we can move rapidly to take advantage of it. And I think that Medtronic also has a clinical study in the works. And when you look at the market, there's definitely a market development need right here. These are people that need to understand the benefits of the technology.
The clinical data needs to be shared widely with physicians so that they understand it. You know, it's really, we need to involve the PCPs. Today, most of our interactions with physicians are with endocrinologists, and PCPs really are where people with Type 1, excuse me, Type 2 start, and so all of this work needs to happen. I think that the more companies that are out there selling to the Type 2 community will help the market development initiative, and so we think we all benefit from it.
Right. I mean, that makes a lot of sense. One thing I wanted to ask is kind of a sidebar question, but pod's been a little bit ahead on just the approval. So they've been talking a lot more about their sales force buildout and the channel buildout that you just were discussing. What will you need to do, and when will you do it as far as expanding the sales force and doing things differently to reach PCPs and Type 2s?
Yeah, I mean, we're evaluating it right now. Probably more information on the fourth quarter call. I don't think we're going to talk specifically about what, I mean, in general, we're thinking about those areas. We definitely need to do something there, and I think we'll speak more about it in February.
Fair. Okay. Another big product catalyst I wanted to talk about was sensor integration.
Yeah.
So getting on board with the newest, latest, and greatest sensors from both Dexcom and soon to be Abbott could be another big catalyst.
Absolutely. Yeah.
Can you talk about what you think that could do as far as acceleration and what it would mean to have sensor of choice?
Sure. Well, I think choice is very important to people with diabetes. You want to provide choice. As I said, it's segmented. Some people like sensors, one sensor or the other. And I think having both is the best solution, you know, for the community. So we have currently implemented the Dexcom G6 and G7 on t:slim and Mobi. Both of them are commercially available, and we definitely see good uptake. We have roughly 480,000 people in the world who use our technology, and the majority of them today are using Dexcom sensors because that's who we started with. We implemented the FreeStyle Libre 2 at the beginning of this year. It's a good sensor. It's doing good in the marketplace.
But really, I think that the focus of Abbott right now is to really get the FreeStyle Libre 3 to market, that, and to increase the uptake there into the pump community. We expect to have that available, integrated with our both Tandem t:slim and Mobi, next year. And it'll also be available in the US and OUS markets. So if you look at the FreeStyle Libre 3 and its use in the US today, there's approximately 300,000 or 400,000 people who have Type 1 that use the FreeStyle Libre 3 and don't use a pump. So that really represents a big portion of that million people who aren't using, who are using pens and needles. You know, I think that, again, that's a big opportunity. It's a market development initiative as well. You know, I think we have to work with the physicians.
We have to work with the people who have, who use the Abbott sensors and work with Abbott to help that community understand the benefits of the therapy, but in my mind, there's no reason why we can't achieve the same levels of penetration with Abbott as we are, you know, in general in the marketplace, and again, the same conditions exist OUS. They're even larger, so a big opportunity OUS as well with FreeStyle Libre, so, you know, we're excited to work with both Abbott and Dexcom. They're great partners, and they've both developed great technology that really does provide a meaningful benefit to people living with diabetes.
Great. You talked about Mobi a little bit and how it's reunifying wearability. It's been kind of a game changer for your value proposition.
Yeah.
What are the biggest proof points that you would point investors to in some of the early results to say, "We know Mobi's really working. It's really starting to change the way we're going to market or the attractiveness for certain types of patients"?
Yeah. So we first introduced Mobi, I would say, in a limited scale in February of this year. We sort of expanded it to our distribution network a couple of months later. And then in the June time frame, we integrated G7 with it. And many of the people in the Dexcom community had already converted from G6 to G7. So G7, people weren't going to go back. And therefore, having G7 on the product really did sort of open up a significant portion of the U.S. for us to get Mobi on there. I would say because of competitive reasons, primarily from Insulet over the last couple of years, what we have seen happen is we've seen the number of MDI starts, people who are using pens and needles drop. We were getting less percentage of people coming to market because of the competitive situation.
Mobi has changed that and turned it around. We saw in the second quarter, this is after the second quarter was over, we saw the highest number of MDI conversions that we had seen in probably six quarters. And it was largely driven by Mobi's availability. And then we also saw growth in MDI conversions, largely driven by Mobi again in the third quarter. So, you know, Mobi is a, again, it's half the size of the t:slim. It's about the same size as the pod. And it really has redefined wearability. People, I think, in the past would have said it's a tubeless argument. We'd say it's not. It's really the size of the device and it's the sort of ability to wear it in a very versatile manner. And I mean, we had a clinical study done. People wear it in roughly 18 different ways.
I think that flexibility is very appealing to people. You know, so I think that, you know, Mobi is just getting started. We have roughly 10,000 physicians prescribing our products today, endos today in the U.S. You know, we've been on the market for a couple of quarters now. You know, we've got 115 salespeople. You know, we haven't even gotten close to addressing that number of physicians in the marketplace. It's a tactile field. They have to see it, feel it, get it in their hands in order for us to get them to begin to prescribe it. And so it's just a slower process. The good news is that, again, everybody who's using it, everybody who's prescribing it loves it. You can get on Reddit or YouTube and see the reviews on it. They're very, very positive. And so we're very pleased with the performance so far.
The other thing that's important about Mobi is, you know, G7 integration is really, it was a big step for us, but it's iOS G7 only today. Next year, as I said, we plan to get to FreeStyle Libre integration on it, which opens up another large segment of the market. We also have, excuse me, Android mobile development in works. And then, and more importantly, we have a tubeless version. It's basically, it's a new tubeless option for Mobi that will be available in the not too distant future. And then I think you have kind of the maximum, sort of the maximum wearability features, if you will, because you can wear it as a tubed pump or a tubeless pump. And you basically, it's the exact same pump. It's more a matter of buying a different set of supplies.
The supplies are things that you use, you know, over, you know, a period of a couple of quarters. You would purchase supplies. So you can purchase supplies where both either a tubeless or a tube option. And I guess it gives people this maximum ability, you know, for wearability. So we're very excited about that. We think that's going to be a very competitive device. It'll have the best algorithms that we've got on it, as well as choice. And, you know, I think that's going to really drive an inflection point in demand for Mobi, you know, in the near future.
And speaking of modes of competition, one advantage that your competitors had is the pharmacy and easy access through that. But now you're starting to make your first inroads into the pharmacy. Maybe talk about how that's going to the extent that you can share anything about that.
You want to cover that? [crosstalk]
Yeah. So we announced our goal to bring Mobi into the pharmacy channel and to announce a contract in 2024. So in Q3, we were really thrilled to be able to announce that milestone. It is going to be a multi-year effort. And we are still focused on our DME, on pharmacy channel. And with pharmacy channel, we think that we're going to be able to, one, increase access, two, reduce the out-of-pocket cost to our customers. And we also think that there's opportunity for ASP expansion. So a really exciting milestone for us this quarter. And we look forward to reporting more as we continue to work through that and have additional contracts signed.
I'll just add that a couple of years ago, we were not sure we could get a durable pump into the pharmacy channel. This past year, as we started to have discussions and negotiations with the pharmacy entities, you know, that's changed significantly, and I would say that it's now not a matter of if, it's a matter of when. We have negotiations going on right now with all of the major players in the pharmacy channel, and we anticipate that we'll have multiple agreements in place in the not too distant future. We have to develop the internal processes to provide the product to people through the pharmacy channel to take orders and, you know, just to get reimbursed. We're going to take it, you know, cautiously for the first quarter or so, just to make sure that those systems are working properly.
But there's no reason after that happens and we're comfortable with it. We can't step on the gas and see the benefits. I think that in Type 2, we believe pharmacy is an important feature to have because the Type 2 community today is used to getting their supplies through pharmacy. And so it's a win-win. And I think that, you know, the pharmacy entities are looking for competition. And I think we provide an organization that has significant volume that they're interested in. And they're, like I said, they're definitely willing and want to negotiate with us to get these things in place. And I think that, you know, it's going to help the top line, you know, because we'll see higher ASPs. It's also going to help the gross margin line as well. And so we're very excited about it.
I think it's a really big and positive thing for the company.
Now, you've talked about this as sort of a multi-year process in the past, but said maybe you could step on the gas a little bit.
Yeah. I think that just based on the speed at which we're interacting with these various entities would lead us to believe that it can happen faster. And all we really need to do is assure that our internal processes are working effectively before we really go aggressively. But it's not going to take us long to do that.
Do you think we could actually see material volume through the pharmacy next year, or is it more of a 2026 event?
I think it's, I think it's going to gradually start. I think it's probably more meaningful. You probably see it in the results more meaningfully in 2026 than next year. But, you know, when you look at it, we've got these things that are, we've established the Type 2, we've established pharmacy. These are all things that have the opportunity to sort of like start building on, you know, the benefits of these additional markets or access, you know, opportunities, you know, just to see revenue growth as well as margin growth.
Gotcha. Since we're sitting in international, your international reports have been very good this year. Maybe talk about some of the drivers this year and the outlook for next year as far as new countries and new product introductions for OUS markets.
We're in 25 countries, OUS. I'd say 70% of them are here in Europe. There's three or four large markets, Germany, France, and the U.K. that really do represent the biggest opportunities, and they're very underpenetrated. When you look across the spectrum of countries that we're in, you know, each country is its own different entity. I mean, there's some of them we have 50% share, some of them there's a more competitive environment, and we may not have that much. And so, you know, but when you put the whole thing together, we've seen substantial growth this year. I think that we had over 30% year-over-year growth this quarter in our shipments OUS. So that was substantial.
Last year, we did some sort of, I guess, structural work to establish a distribution center in Europe that allows us to put product in that center and ship directly to the distribution partners we've got. And before that, we saw a substantial headwind from the shipping. And because of COVID, you know, overseas shipping, and it was just unpredictable. And so what happened is our distributors had to carry more inventory to deal with that. Now that we've got this European distribution center in place, we're seeing that the shipments that we're reporting better represent actual placements. And so I think that, you know, there's a lot more predictability. It's better placements. And so our shipments do represent better what's happening in the market. There certainly is competition in the OUS markets.
I think that the company is really focused on bringing the technology that we have today in the U.S. into the OUS. I mean, we're really working to get FreeStyle Libre 3. We're looking to get Mobi in these markets. In order to do that, Mobi needs to have Android. These are all things that we have prioritized in the business. And I think that when we do have Mobi with, you know, the sensor integration as well as the Android, I think we become a lot more competitive in the markets than maybe we are in some of those markets where we are seeing more competition today.
Talking about competition, could we address that a bit more? Should investors be concerned about new competition from new entrants and/or Medtronic getting a little bit tougher?
You know, I think that the way I look at it, that there are still three entities in the U.S. We're competing against Medtronic and Insulet, for sure. And they, you know, I think that that's been going on for quite a while now. I think that it's stabilized. When Insulet first brought their product to market, there was definitely an impact, but I think it's stabilized. And with Mobi, we now are seeing we're taking some of that back. With Medtronic in the U.S., they have a new product in the market with a better algorithm, and they're doing a better job of retaining their own renewals. And so we anticipated that the renewal volume would affect our competitive conversions, which is, again, what's happening. But as I said, we're seeing growth in the MDI conversions.
I think that when you look at Beta Bionics, they're young, they're getting started. They do have small volumes at this point in time, but the volumes that they get are volumes we could have had. And so, you know, we definitely are focused on the competition. We're not taking it for granted. We think that the innovation that we're bringing to market is going to meaningfully address that. And I think that when you look OUS, it's again, it's back to Medtronic and Insulet. Beta is not yet there, but there's a company called Ypsomed, which is a, that's also a relatively young company that's only available in Europe and predominantly in Germany, who are pretty competitive.
And so I think, as I said, as we bring our technology to these markets, we think we'll be in a much better position to compete more effectively against all of the current players in the OUS markets.
Great. Last couple of minutes, I wanted to address two things. One is your guidance philosophy or approach the last couple of years. So it's been conservative. I mean, this year starting at 10, you may end at 17 or 18. It's a pretty good beat.
Yeah, it is. It's great.
And it seems like you're still taking that tack for next year with the street kind of modeling low double digits. But maybe talk about how you're approaching guidance now. How could that change going to be?
Yeah, absolutely, so you're right. We started off the year at 10%, and that was really based off of our predictable revenue streams. We have healthy growth if you just look at our renewals and if you just look at the growth in the install base and the supplies associated with that, and at the beginning of the year, we wanted to make sure that we then had data-driven trends related to Mobi, so as we move forward, we want to continue with that philosophy. We want to see the data. We want to see the trends before we start to add that on to upside, but we're coming off of a record Q3 for revenue. We're on track for a record Q4, and we'll continue that practice as we move into 2025. Tons of really exciting opportunities as we move into 2025.
We just want to make sure that we've got certainty on timing and magnitude. We'll continue to provide updates as we go through the year and as we finish out Q4.
I would say that if you look at 2025, we have six new covering analysts, some of whom are not as familiar with the story, and if you look at what their expectations in terms of growth were for the year, it was in the 20%, and I think all we were trying to do is tamp that down to something that's a lot more reasonable and just manage that. I think that's the right thing to do, and I think that our philosophy makes sense. I think if you were to talk to our top investors, they appreciate that and think it's the right thing to do, and, you know, our plan is to beat and raise every quarter, and, you know, that's what we're looking to make happen again in 2025.
Great. I think we have to end there, but that's a good spot to end. Thanks so much for your time.
Thanks everybody. Nice talking to you.
Yes.