All right. Thanks, everybody, for joining us this afternoon. We're very pleased to have with us again the management team from Tandem Diabetes : John Sheridan, President and Chief Executive Officer, as well as.
Katie Nicoletti.
Katie, thank you very much.
Katie is our VP of IR.
You know, my name's Matt Miksic, I cover Med tech here at Barclays. I wanted to maybe start with one of the things that came out of the first quarter call, or the fourth quarter call, was just around the way you've described growth and guidance for the year, competence, and obviously the top-line guide that you gave, which was, you know, 10-11, but then, you know, accounting for maybe some of the adjustments that you're expecting around the realignment. Right. So that's maybe 11-13 adjusting for that.
Right.
Maybe talk about how you arrived at that number, and maybe to put it in context, how your guidance generally has kind of changed in the last couple of years, the way your philosophy behind guiding.
Yeah. I mean, first of all, I would say it really hasn't changed. We still tend to be conservative. If there are things we can't predict or have good sense on how they're going to influence our guide, we typically don't include them. Therefore, we include things we feel confident we can speak about. The confidence in our guide for 2025 is several factors. I'd say the first one is largely the introduction of Mobi has been very successful for us. Smaller infusion pump, it's controlled by a mobile app. It's been very well—I mean, the people who are using it love it, and the uptake has been great.
If you look at 2024, we really didn't introduce it until the mid-year when we got G7 integration. 2025 now represents a full year of Mobi. In addition to Mobi, we have a number of other great pipeline additions. In just a few weeks, we're going to roll out Control-IQ+, which is a new version of our algorithm. Our algorithm remains the best on the market, and this is just an enhancement to it. We also have, with Mobi, we're going to add Android capability. Today it's just iOS. We're introducing the FreeStyle Libre 3, which is a very successful sensor that's been introduced by Abbott, our partner.
We have also filed for CE mark for Mobi, which will enable us to get into the European markets. European markets are larger. We think Mobi's going to do quite well there. You know, a lot of things on pipeline as well that we're excited about. We have expanded our U.S. sales force. We've also given them additional data-driven tools to help the decision-making process. I think that's a driver for us. You know, we have successfully navigated the introduction of the pharmacy channel. I know we'll talk about this in a moment.
Yeah.
I think certainly the access improvement that comes with that, the out-of-pocket reduction for the patient's really a big deal. Finally, we just had our Type 2 indication approved, and we think that represents an opportunity for us in 2025 also.
Great.
There are a lot of things going on.
There are a lot of things, and that was my kind of reaction as well. Yet, you know, I'll answer part of this next question for you, which was the reaction of the stock was quite severe. My answer to the question is, this is a market environment where any wrinkle or anything that makes folks nervous results in kind of an outsize.
Yes.
I'd kind of compare it to last summer, there were a few names that, you know, Dexcom, for example, was one, where there was a lot—I’d say there was a lot more new and adjustments to guidance and so on. Still, I think a lot of people looked at that move and said, "Wow, that is a big move." There were a few others that were down a big number. I think market volatility has a lot to do with it.
I have to ask the question, like, you know, in the conversations you've had after the quarter, you know, which one of these or what part of the story of rolling these things out, Type 2, which has been a big driver for enthusiasm around insulin, for example, somehow just didn't land or resonate with folks in the same way when you made your announcement, which was ahead of schedule and obviously quite positive.
Certainly we've thought about it.
Yeah.
I would say that, you know, we had a great year, first of all. 2024 was a fantastic year for us. At the beginning of the year, we guided to 10%. We grew at 18%. We saw double-digit growth in MDI conversions, which is really the first time we've seen growth in MDIs. We saw Mobi have sequential growth in demand throughout the year. You know, we thought it was a fantastic year. We have mapped out the seasonality of the year very carefully over the last 10 years or so, and we know pretty much what's going to happen every week of every quarter. If you look at the fourth quarter, we see consecutive growth in opportunities every week. That goes from the very beginning of October to the end of December.
As we were halfway through December, you know, we had continued to see the growth in the opportunities, but strangely, you know, there was softening the last two weeks of the quarter, which impacted us. I think the other thing that happened is we had made shipments the last week of the quarter, and historically they would have arrived before the quarter was over. For some reason, you know, a number of them did not. We had these two issues that ended up causing us to miss U.S. guidance, which I think was the number one thing I think that drove the disappointment. I think the other thing that happened is that we did set a conservative guide for 2025, and again, that is our philosophy.
As we just went through, there's a lot of really exciting things that are happening, and we absolutely intend to beat that. You know, that's the intent, really, is we expect to exceed what we've put in there, but that's what we commit to because that's what we feel comfortable with at this point in time. I think that that's another factor that contributed. I think that just based on what you mentioned, we are expanding the U.S. sales force, which is essentially done now, but I believe there's a fear that there might be disruption that comes along with that that others have experienced, which I have to say we intentionally designed the expansion to minimize the disruption. We know how disruption occurs, and again, it's been very intentional, and we think that's overblown.
I think when there's sales force expansion, when we're going direct OUS in certain countries, when those things happen, I think that there's a wait and see. Let's just wait and see how this goes, and we'll get back in after this has been done. As I said, it's been managed carefully. We feel that the impacts are going to be de minimis this year, but I think those are probably the main issues contributing to that response.
Yeah. Yeah. I think after, you know, I mentioned last year, not to call out Dexcom, because it's been widely discussed, but they realigned their sales force, and I'd say it sounds like a much different way than what you're doing.
Yeah. There were new call points.
You're expanding and you're going direct, you know, expansion in the U.S. and going direct to geographies in Europe.
We're not going direct in select countries, you know, in a stepwise manner, so it's not going to be dramatic. It's just going to be managed carefully.
Right. Okay. Instead of moving a bunch of sales reps around, which might be one definition of realignment or changing your sales force, is this, I mean, I do not want to put words in your mouth, but like more traditional, like splitting territories, adding territories, adding reps, you know, like investing in places where you see opportunities for penetration, like that kind of expansion? Is that.
Yeah. I would say we want to increase share of voice, reach and frequency. When you consider what's going on in the market, there's increased competition. There's new sales forces out there. You know, when you look at our big competitors, they have larger sales forces. It's a logical thing for us to do, is to expand the sales force to maintain our competitive footprint. When you look at the, you know, we did realign several territories, and we added territories as well, but when we did that, we minimized the effect by controlling the number of new physicians, the new call points that people in those territories have. I think that's really the source of disruption, is when you have to establish a new relationship, you've got to get in there and sell the product. We minimized that, and so we think that it's definitely manageable.
Okay. Maybe a couple of things about the sales force is, you know, increasing share of voice. You have new competitors, and Beta Bionics kind of investing in their sales force and making a push now. Also you're communicating, I guess, with clinicians in a different way in certain geographies as you kind of ramp up your access to pharmacy. Maybe talk a little bit about, you know, how you expect growth in 2025, performance of the sales force in 2025 to maybe be different than it was in 2024.
Yeah. We have new sales leadership, and they have brought in new analytics and tools to help the sales organization become more effective. In 2024, we piloted these tools, and we found out, you know, it's basically external data on how our competitors are doing in each individual practice, our own data, and then characteristics of the physicians. What are the selling points that the physician appreciates? We armed our sales organization with this data today so they actually can go and hunt and go to the locations that have the biggest opportunities for us to grow. These tools, I think, are really important. That combined, I think, with the size of the sales force, I think we're going to be a lot more effective this year.
Okay. Anything, you know, again, kind of comparing 2024 to 2025, because I mean, there's some things that are new and different in 2025. The sales force for you were being one of them, but, you know, guiding to sort of call it low double digits, delivering high double digits last year. You know, what were some of the difference makers that surprised you to get to that level of performance, and how should we think about the opportunity to outperform this year?
Yeah. I think last year, at the beginning of the year, we had just introduced several new products: G7 integration, FreeStyle Libre 3, our Tandem Source, and then in the first quarter, early in the first quarter, we introduced Mobi. Really, we did not give ourselves any credit for any of those introductions. Certainly, we saw significant benefit from the G7 integration, from Mobi's integration, or Mobi's availability. I think that the processes do not commit until we understand, and we saw continued growth through the entire year. I think it was largely a result of the new products that we brought to market earlier in the year.
Even though they kind of scaled in, I mean, like Mobi was sort of quarter speed, first quarter, half speed.
Yeah. That's why I'm saying this year, if we have a full year of Mobi on the market with new features and capabilities, you know, we expect to see the continued benefit of that on our new product starts.
Okay. Not dialing in any benefit really from these new products and same philosophy.
Yeah. The new products that are not on the market yet. I mean, we have some single-digit growth in new products, largely driven by Mobi.
Okay.
New starts, largely driven by Mobi.
Okay.
I think when it comes to the features that we're adding, there's no credit for those. There's minimal to no credit for pharmacy or Type 2 in the guidance either. We all know that those are going to have a favorable effect on our business this year. It's just that we don't want to commit not knowing what it would likely be.
Sure. Overcommit and hit a soft spot or something. You know, coming back to the things that did surprise you in the fourth quarter, anything—I'm sure you've thought a ton about this—but anything that you can do now that that's happened to kind of mitigate the risk of those kinds of mid-late quarter surprises going forward?
Yeah. I think when we look back and try to ask what really happened, you know, certainly economics is part of it. Inflation, I think, concern for potential recession, those sorts of things are impacting people's purchasing habits. You see it across the board in other industries as well, and markets and things like that. That's a factor. I think the other factor is that there's more people today who are purchasing high-deductible insurance plans. Last year, and over the last couple of years, the CGM manufacturers have gravitated towards pharmacy, and the majority of their business now goes through pharmacy. You know, the impact on the deductibles is minimized. Therefore, in certain cases, we think people's deductibles just haven't reached that, and they decided to wait as opposed to purchasing a system.
Right.
I think a combination of those two things. When you look at next year, I think that, you know, we have continued to emphasize the—we have a payment plan that's also available for people who want to just distribute the upfront across a couple of years if necessary. Pharmacy channel also is going to reduce the out-of-pocket for the patient, which is really one of the main reasons we're doing that. I also think that pharmacy channel provides us access.
I mean, it's easier for the physician to prescribe it. It's easier on their practice. I think the benefits of that, you know, can have a favorable impact. We intend to—I mean, we have 20% of covered lives today, which is a huge step for the first year of really focusing on it the way we have. We definitely plan to improve that number, increase it, and really take advantage of it and push as much product as possible through the pharmacy channel.
Okay. That's helpful. Maybe just on margins, and I'd also say if anyone has a question in the audience, feel free to put up a hand. On margins, you're obviously investing in the field in the middle of the P&L for sales in the U.S., but you're converting some of your geographies to direct. Maybe talk about those offsets, the benefits, where we should see them. Obviously, not so much of a benefit in maybe not in 2025 for the investments in the field force, but how those things maybe offset each other as you get through the end of 2025 and into 2026?
Yeah. I'll say that we're intently focused on profitability. It's very important to the business. We understand that we're a billion-dollar company. You know, we really need to do a better job there. If you look at, you know, in 2024, our EBITDA, we were negative 1% EBITDA. In 2025, it's 3%. I think that the company and the team have really focused on looking for costs, taking costs out to enable us to grow the sales force and go direct, and at the same time, improve the profitability position. I mean, we really have spent a lot of time over the last couple of quarters looking for cost reductions and savings so we can grow. That's certainly one of the things that has happened.
When it comes to the OUS, it's a 2026 actual event. This year is prep. I mean, we'll be adding the team, building out the capabilities of the team, but nothing's going to start until 2026. You know, there's going to be—it'll probably be a 2026, 2027 timing to get, you know, several of the countries from distributor to direct. The benefit for us, I think, really when you consider that, is we have control over the sales force. We have control over the message. You know, we think we do a really good job here in the States, and I think we will there as well.
There is just, in terms of just relationships with the KOLs, clinical relationships, marketing relationships, you know, there's a benefit for us doing that. There is also the margin benefit as well. I think the combination of those two things just, it's back to, we think we're at a point in the company's size and history. There's a level of maturation that comes along, and this is a natural step that business has taken, and we're just doing that now.
Got it. Okay. So, yeah, the EBITDA was one of the things that obviously needed to come down. Street estimates were a little higher when you printed and guided. I guess, you know, maybe a hard question to answer, but it seems like some.
What about Katie a nswer it then?
Okay. Maybe this is for Katie. But there's some amount of that, of that, like I don't want to call it a reduction, but, you know, coming in lower than consensus that was aligned with coming in a little more conservatively on the sales side as well.
Yeah, that's true.
That's the adjustment. Anything else that you'd attribute to, you know, a more tempered initial look at EBITDA for 2025 anyway?
We certainly want to hit the number, and, you know, we want to beat it. I think when you look at the things we just spoke about, we, you know, we have 10-12% or 10-11% in the guide. You know, with the things I just outlined for you, we expect it to be numbers. That will just, it'll drop to the bottom line, obviously. The pharmacy channel, in addition to lower out-of-pocket, improved access, the ASP is also beneficial. In 2025, we'll also see the benefit of Mobi being on the market and the margin benefits of that. You know, those things are, again, a lot of the things we're talking about that aren't planned will absolutely have a favorable effect on the top and bottom lines.
Okay. With upside to sales, and not that we're like predicting or our estimates are in line with your guidance, but should you outperform in any way like you did last year, then some of that should result in slight improvement.
I think the other thing too is, we've made a lot of investments in R&D over the last several years. We've acquired a few businesses. We've taken on their staff. And so, you know, this year, I don't think there's any reason to grow it as aggressively as we have in the past. I think we definitely would, we would leverage, I mean, we expect to grow the top line a lot, like at a higher rate than we would the R&D team. That's another big expense that's been part of it.
Okay. One on this, like, I guess, you know, a little bit of a surprise. You know, you mentioned pharmacy and pricing benefit leading into this contract during last year and a lot of the discussion, even after the quarter was, well, pharmacy is good, but pharmacy will be bad, you know, for cash flows. It sounds like it's sort of one of the surprises was it's like a little better for cash flows. Maybe no difference in that.
Yeah. It's interesting.
Talk about that a little.
I think there was a perception that the only way this would work in pharmacy if we were to have an economic situation where we gave away the pump and it was all of the revenue came from increased ASP for the supplies.
Right.
That did not happen. We actually spent quite a bit of time with these large organizations and helped them understand the model. There was this educational process. In the contracts that we have signed, the economics are very much like they are for the DME model, meaning that we get a large upfront for the pump, and then the supplies we pay on a quarterly basis over a four-year period of time. In both cases, though, the ASP for the two of those supplies and the pump are higher than what we are seeing through DME, but it is the same economics.
You know, I think if we were a startup, that would be what we would want. I think that the annuity model doesn't really make sense, but I think that as we continue to develop contracts, we would anticipate we will potentially have agreements that do that, where you have to give away the pump. I think we feel comfortable that we can tolerate that.
Right. Yeah. I think the mantra all along has been, you know, obviously better to be in pharmacy than not to be in pharmacy, but access has been a big thing.
That's right. I mean, I think the way we look at it, it's really multi-channeled. We want to have access to both, and we want to be able to, I mean, depending on what happens in one or the other, you know, move business and volume to the most optimum financial situation.
Right. Given what you said about some sensitivity, deductibles, you know, consumer kind of behavior, if you will, of these folks not wanting to plunk down, you know, just yet and out of pocket, this kind of takes some of the edge off of that going forward.
Absolutely. Yeah.
You're at, maybe talk about where you are in terms of covered lives and coverage, because I think you've also made a bit more progress on the pharmacy side than at least we were expecting. What are you saying now about by the end of the year, by the end of next year in terms of, you know, covered lives access by a pharmacy?
I think it's back to our, this won't surprise you, but rather than commit, we'll just go ahead and we've got 20% today, which is, I mean, we started off the year last year in 2024 saying, let's get a million covered lives. Well, we got a lot more than that. There's no reason to believe that we can't continue to accelerate and achieve more than what was achieved in 2024. We have a great team. They've got a lot of experience. They've done this before in other companies. You know, so it's, you know, I think it's just a matter of, you know, executing and getting these things done. We definitely will continue to grow, you know, access the number of covered lives and take advantage of it.
Yep. Just to put a number on that, 20%, it's like 30 million or something?
That's probably twice that.
Okay. Really? Wow. I thought covered lives were, okay. So that's great. Terrific. All right. Maybe in the two minutes that we have, let's just cover Type 2.
Okay.
No, but I think just the question I would have is, I think you were distinguishing, you made sort of some differentiated comments around Type 2, around the lift required. Like, this is going to be a market development lift. This is going to be, you know, this is not going to switch it on. We are just like penetration and pumps in Type 2 is just going to start to take off. I mean, you sort of recognized the investment that you were going to have to make and the market development that is required.
Maybe talk about like, you know, I want to ask you what percentage that gets to. You have talked about that or other companies have. You know, when do we start to notice that, do you think, in your results? Is it, you know, six months away? Is it nine months away? Is it 2026 in terms of adoption and penetration in Type 2?
Yeah. I think that the introduction of AID systems in Type 1 has been noticed by people with Type 2. Type 2, it's very similar to Type 1. You have to have basal-bolus insulin, and you have the longer-term co-morbidities if you're not managing it properly. We've done quite a bit of research with the Type 2 community. What we've learned is that they're more willing to consider pumps at this point. We would call these people near-term pumpers. They're well-educated. They've got good jobs. They've got good insurance, and they care about their health. Why wouldn't they use an AID system if it's going to help improve their health? The therapy benefits are substantial. You know, I think that a couple of years ago, there's about 100,000 people using pumps today.
That could get up to, which is about 5% penetrated. We thought that could be potentially 10% or 15%. I think now with the new technologies, they're simpler, they're smaller, they're more discreet, mobile control, all these benefits have come along with them. These people are now willing to consider it. You know, our numbers would say we can get north of 25% or 30%, which is, that's a big change right there. I think that there's, you know, from a technology point of view, I think we need to simplify the system. That's something that we're obviously focused on. When you see the Type 2 data, you'll see that there's things that we've done to even simplify the interaction with the system on the existing products.
This Control-IQ+ that's coming out has some features on it that simplify the starting process for somebody with MDI substantially. We are doing these things already, so we think that is going to be a benefit. It is an ongoing thing that we are going to have to do over time to really optimize the product. I think that when you look at access, the commercial plans all cover Type 2 as if it is Type 1. It is really the government plans. There are activities we have underway to reduce some hurdles that the government plans require to get people on a pump. I think that is an important thing that we are working on. I think that obviously Type 2s are prescribed by endos and PCPs, more PCPs.
I think there is just getting into that area and getting the PCPs trained, understanding the technologies, the benefits of the technologies, and getting them comfortable prescribing them. I think that, you know, we're going to start with a pilot, and pilot in multiple territories. We're going to understand how the training, how the data, how the physicians respond to the data, how the marketing materials work, how the access works. We're going to optimize that. I think as soon as we feel comfortable that we're making headway, expand it to the remainder of the country.
You know, I think that there will be immediate benefit from that once it's there and once we start. I think that it's not going to be a step function change in demand. I think it's going to be a gradual increase in demand over time. I think it has the opportunity to accelerate, you know, as more salespeople are selling it, more PCPs are aware of it, and the data is out there. I think that having more than one company in the market is beneficial because we're all doing the same thing.
Sure.
We're doing it to the same people. You know, it's going to take a little time. Like I say, it won't be step function, but it'll definitely be meaningful. I think we're doubling the TAM, and so that's a big deal for us.
Sure. Thanks so much. We're at time, so I appreciate you coming.
Good talking to you.
Yeah, always. Thank you.