All right. Morning, everybody. Thanks for joining us. My name is Matt O'Brien. I'm one of the Med Tech Analysts here at Piper Sandler. Very fortunate to have, to have the Tandem team here with us, especially one of us, one of them that got in at 1:00 A.M. this morning. I'm gonna direct all questions to her, and hopefully she's LOOPY enough to give us more information than she should. From the company, we have Leigh, who's the CFO, and then we have Susan, who is the Chief Administrative Officer as well. Thank you so much for coming out. Really do appreciate it. We have 24 minutes left. I'm gonna spend 23 of them talking about pricing because I think this is a giant opportunity for you guys.
I don't know what you're actually gonna say, but, again, I think this is a huge opportunity for you guys. Maybe start off a little bit with the supply side of things. I think you said during the call you delivered, you said pricing was 5% revenue growth in Q3. Was that a global or domestic comment?
That was a domestic comment, and it was a combination. You mentioned supplies. It was not just supplies. It was DME benefit.
Yep.
It was pharmacy benefit, and it was Mobi Pump and supplies as well as t:slim supplies being launched into the pharmacy channel for the first time.
Got it. Okay. I think you said a majority of the pricing benefit in Q3 came from the ASP uplifts you got on the supply side in the pharmacy. Is that right?
The way it breaks down really is that about two-thirds came from pharmacy in totality, and about one-third came from DME still.
Okay.
I think people are surprised DME was still, had a great deal of impact. There was great benefit that did come from the t:slim supplies being launched into the pharmacy. I should have added, I thank you for starting with this topic and wanting to spend so much time on it because it is one of our biggest growth drivers, and we're super excited about it as an organization, what it can do for the business as an overlay to all of our other good growth drivers that we have.
Right. Right. Got it. Okay. Again, I, I'm just careful what you wish for because I have a lot of questions here on this. So as I calculate things out then, and I was using, you know, all of it being in pharmacy, but if, even if I adjust that, I'm getting like a $5 million benefit to Q3 from the, the supply side alone, alone. Is that about the right number? 'Cause I think you said that was just for one month, for September.
Yeah. I'll just reiterate, it's with Mobi Pump and supplies as well as t:slim supplies.
Okay.
It's everything through the pharmacy. It's a great point because our pharmacy sales were about 5% of our US sales, which had a great dollar impact. It was still on small volumes, so the volumes were less than that because the price benefit is so good on the pharmacy.
Okay. Okay. I mean, again, I'm just like triangulating on the math here. I don't know if it was $4 million or $3 million of benefit there, but again, for one month, it would seem like, okay, let's just use four for easy math. That's $50 million a year, of a benefit. Like, that's 5% of growth next year very quickly. I mean, is that, is that a fair way of thinking about how, how big of an impact this could be to your business?
I think it's a good starting point. We talked about how we saw revenue growth across each quarter of this year that was escalating with pharmacy really becoming a bigger driver in the third quarter. As we look ahead, next year it's going to be dictated by the amount of coverage that we have, how much we can push through the pharmacy channel, how much benefit we can actually get. What we said as a starting point with that, you know, 5%-ish growth in the third quarter, that's a good baseline to think about as we continue to gather more information in the fourth quarter about the blend between pharmacy and DME and the impact for next year.
Okay. And how many, what's your coverage right now in pharmacy? Is it 30%?
We have 40% of U.S. lives.
Okay.
For Mobi Pump and supplies covered, and we have t:slim that's rapidly getting there with the supply. Since we just started doing that in the third quarter, we're still building that up, but it's moving very quickly towards the 40.
Got it. Okay. As I think about pricing then, again, I'm not sure how much you wanna, wanna discuss here, but, you know, I look at, at like a Beta Bionics, they're charging $450 a month. You know, insulin's around $400, maybe a little less than that. You guys have been $100. And so again, as I'm, per month on the supply side, as I do the math on it, I'm getting like you're at least doubling your price and maybe even a little bit more than that. Is that kind of in the right range?
I think it's fair to think of it that way. We're obviously not gonna give our actual pricing for a number of different reasons, but you can clearly see what some of the market comps are, and we would aspire to be at those same levels. We will continue to, as we build out our contract portfolio, continue to drive towards that.
Got it. How quickly can you move existing patients from the DME to the pharmacy? I know the coverage is important, but how quickly can you move that group over?
Yeah. I mean, we're actively working to do that right now. The three big levers that are the things you have to think about are, first of all, as you just said, is coverage. So how much coverage do you have? I think, and a reminder to people, we just launched in the pharmacy at the first quarter of this year, we said we had 20% of covered lives. We already grew to 40% by the third quarter. That's already a big shift from that perspective. From the supplies in particular, you have to get a new prescription from the physician. So you have to get the physician engaged, and it's a really busy time in the fourth quarter when they're prescribing a lot of pumps as well. The third piece is it is dictated by the patient's out-of-pocket responsibility.
If the pharmacy is better for them, many times we'll be able to get them to switch over. Some people, human nature, they like where they are. We're working through that right now. That is why the fourth quarter will be so telling to all these questions about how this could look in 2026 as we're going through all these pieces, and we're understanding the benefit that we can get and the trends that will underline what next year could look like.
What can you do to make it easier for patients to go through the pharmacy versus their DME channel?
Yeah. I mean, at the end of the day, it's mostly what the out-of-pocket looks like. In the fourth quarter, fortunately, unfortunately, a lot of patients have met their deductible, so many will have no out-of-pocket for DME as well. That's okay. We're getting a lot of information right now, and we're gathering it. At the end of the day, we want it to be best for the patient. We can continue to work on this as we go into 2026.
Got it. Okay. Just to finish up on this, this, you know, ASP uplift side of things, you had a 300 and, well, I'm calculating, sorry, last year you had $340 million of supplies in the U.S. That's what you did. You know, just on the sup, just on the ASP uplift alone, why couldn't this be like, if you just got the same pricing benefit on that 314, couldn't it be a $500 million business on top of the growth that you're gonna get from new patients? I guess, I mean, I'm, what I'm really trying to get at, like, isn't this a multi-year massive tailwind, from pricing, you know, through the pharmacy channel?
I would agree. I think one thing that makes the move we just made with t:slim supplies so important and so valuable to us as a business is because we already have hundreds of thousands of customers. Just focusing on, to your point, not even adding volume yet.
Right.
Just the price benefit that we can get, this is very helpful to the business model, and not only drives top-line growth, it also improves gross margins and bottom-line margins.
That dovetails exactly into my next question. I mean, isn't this all pure profit just taking the price up? It's the same volume. So couldn't this be a meaningful tailwind on the gross margin side over the next several years?
Absolutely. When we look at the gross margin, already in the third quarter, we showed more gross margin improvement than we've shown in quite some time. This year, coming in between 53%-54% for the year, where we've been hovering around that 51% level for a couple of years. Price is the major driver this year. When we look to next year, all the indication we've given so far is you can think about us exiting 2026 at a 60% rate. We have never delivered a number that starts with a 6.
Right. Okay. You know, speaking of which, I can't remember. I should have looked this up earlier. I'm sorry I didn't, but I'm trying to remember back. I think the pumps for a while were higher gross margins, right, than the supply side. Where are we at in terms of the equilibrium of those two?
Today, on the business overall, pumps are still higher than supplies. Pharmacy lets us, I would say, remedy that. That is one of the big reasons for this business model change. People have often looked at us and said, "Why aren't you more of a razor, razor blade model?" This allows us to move in that direction. The real benefit to the business is on the supplies, the pricing that comes from that, and the lift we can get there. You will start to see those come closer to parity.
Okay. One of your competitors is in the 70s from a gross margin perspective overall, it's, it's Insulet. I mean, can you get the supplies business into the 70s in terms of gross margin eventually?
I think it's possible.
Okay. I mean, yeah, there's just massive tailwind there. Okay. All right. Let's talk about the pump side though. I think that's one area that still needs, you know, a little bit more of a boost. I calculate 6,500 MDI patients in Q3 that you got in the U.S. You don't have to opine on that number, but that's what I'm coming up with, MDI alone, not competitive conversions, not renewals. That's only slightly higher than a newer entrant that you've had into this space. So what I'm really trying to get at is what can you do to start to get that new pump growth going again? How big a deal is type 2? And then you do have another competitor in SQL coming.
I think their launch has kind of failed a little bit, but like, how impactful could that be too in terms of getting your growth going again?
Right. Right. So it is, I would say, from an organizational perspective, our primary attention is focused on that MDI patient, right? There's still 60% of people with type 1 diabetes who are not using pumps and 95% of type 2 patients. To your point, we just got the type 2 indication, which I think of that as a multi-year market development build. That is not the thing that's probably gonna Turn the Crank in the next three to six months. We're making good progress, but there's a lot of work to be done to develop that part of the market. We have pharmacy as an overlay. It's not just a price play. If we can reduce that out-of-pocket cost for patients upfront, that can actually bring more volumes in the future. We still talk about our product innovation, so we're not done there.
That is where we used to put all of our attention before, was we needed new product and new product cycles in order to drive more patients. Now when you put all of those together, we are very well positioned to make a big difference in the market and in our P&L in the coming year too.
Got it. Okay. Maybe, Leigh, I do not know if this is for you or for Susan, but just the type 2 patient population, and just hear me out on this. Sorry, it is a longer question, but, you know, everybody knows you have the best algo. That is understood. t:slim holds 300 units. That is great for type 2 patients. You do not have a Patch. You do not have a system where you just throw your weight in and go. It is super easy to use. Are those going to hamstring you in terms of being able to compete effectively in the T2 market, i.e., you really need tubeless before you can be more effective on the type 2 side of things?
I think we've got a great competitive position for both of those. On the algorithm side, earlier this year in the New England Journal of Medicine, we had our new algorithm published, and it was called Control-IQ Plus. What that allows you to do is just enter someone's body weight and total daily insulin. That ease of onboarding is important. It also has an easier bolus process. Someone's able to use fixed unit dosing. This is for the first time. You don't have to carb count using the Control-IQ system. It's already, to your point, highly regarded as the best algorithm out there, and now we're making it even easier. There is an educational process with healthcare providers to make sure they know that you can use Control-IQ in a different way.
This is very important, especially for people who are living with type 2. On the patch side, we will launch our first patch pump next year. Mobi is able to be worn in a tubeless manner. The part that's so exciting about that is the base that it sits on can be worn for up to seven days. You can take the pump apart from the base and refill your insulin. You're not having to do a new injection every time you need more insulin, which is particularly important for people who have higher volume insulin needs.
Okay. Okay. Yeah. The longer wear is the biggest pushback I hear on the patch, products that are out there today. You're gonna be a 7 versus 3. That'll be a, a much bigger deal. Okay.
Absolutely.
What about, I guess, sorry, go ahead.
No.
Okay. Maybe just talk a little bit about, I know the Android thing you just got, Android integration . You know, I know when it was going the other way for insulin, it was like, "Oh, they finally got Apple," you know, "They're finally integrated there." How big a deal is Android for you guys?
It's a big deal. If you look at, you know, overall mobile users in the United States, they probably represent about 40% of the population. This is expanding our total addressable market for the Mobi pump. It is very exciting.
Okay. Is thinking about you just got integrated with Libre, and they just had a field action. How big a deal is that? Is that gonna potentially impact you guys?
It's a temporary issue. I mean, we have high trust in Abbott and their ability to resolve this quickly. We are just launching integration with FreeStyle Libre 3. That being said, there are hundreds of thousands of active Libre Users who are very happy with the product, the majority of whom aren't using a pump today. It is a great market for us to be targeting. We do look at this as an unfortunate but short-term issue for them.
Okay. Got it. Obviously, hot off the presses this morning, you know, Medtronic just integrated with, with Abbott as well. How, how big a headwind could that be for you guys, with those guys now integrated with Abbott?
I'd say this is as anticipated. We knew the announcement was coming. We knew that integration was kind of in their pipeline. You look at the total system, and we think we have a superior product when you look at it as pump platform versus pump platform and the strength of our algorithm. Even if you have the same CGM that's maybe powering the algorithm, we look at our overall systems, both for t:slim as well as Mobi, as superior offering.
Understood. Okay. Maybe talk, Susan, a little bit more about tubeless. You know, I think we're expecting the clearance for that second half of next year. Is that right?
We just said 2026.
Okay.
Yep.
First half? I'm just kidding.
2026.
Okay. Yeah, I was hoping you were more loopy than that. Okay. Can you just be more specific on what you're hearing from your clinician base in terms of the benefits of tubeless? 'Cause it is bulkier than what you're gonna get with Omnipod. You know, what outside of the longer wear, what else are they excited about?
Sure. I'd say actually from a size perspective, it is relatively comparable. It operates differently. I think the part that's important is this maintains it's a durable pump. It is not a disposable pump. That durable pump though provides a lot of flexibility. We were already talking about the ability for the base to be extended wear and the ability to take that pump off and change the insulin cartridge separate. That's a very important feature. It also provides a lot of optionality in the way that people wear their pump. They may choose sometimes to use an infusion set and other times to wear it as a patch. Being able to have that flexibility is so important because it allows for people to say, "I'm not picking for what I need today.
I'm allowing myself that flexibility for whatever my lifestyle demands or what I want over the next year, year plus. That's an important piece from a flexibility that I think healthcare providers really value.
Do they expect it to displace existing Patch Users, or do you think it's gonna be more incremental new patients you're gonna get as a result of having tubeless?
I think this places us very competitively in the Patch pump segment of the market. That being said, it is a highly underpenetrated market. I do believe there are lots of people who are using multiple daily injection today who maybe have hesitated to adopt a Patch technology because they want some of these features that I have discussed. We look at this as a market expanding opportunity for Tandem.
Okay. I wanna get into that in a second. Why do you need Sigi then?
The Sigi now, the acquisition that we did for Sigi was through AMF Medical. It allows us to further miniaturize Mobi. What we look at is that technology. It makes Mobi an even stronger next-generation offering. Originally, we had talked about it as an independent pump, but as we looked across the portfolio, we saw where there's opportunities to leverage our R&D resources, manufacturing resources by incorporating more of that Sigi technology into Mobi. Think about it as an enabler for our next-generation Mobi, the key feature being further miniaturization and more of an ergonomic profile.
Okay. What do you think's really gonna resonate with patients or clinicians as far as tubeless goes? Is it the extended wear? Are there other things to really think about there that will resonate with those stakeholders?
I'd say extended wear is rising to the top. The ability to offer that is differentiating and extremely important as we enter this market. Also, the ability to disconnect your pump. There's lots of reasons why in someone's life they may wanna have the, the choice or the option to take that off, even if it's just for a short period of time. That's what this is enabling: choice and options and wearability.
Okay. Okay. Understood. Speaking of Sigi, when you, you think a l you know, I think you've said, I think John has said it'll be available shortly after tubeless sees good market adoption.
Mm-hmm.
Is that, that's the right commentary?
That's fair.
Would we think about kind of a 2028 timeframe then for Sigi? Is that probably the, the right timeframe for us?
We've stopped providing the timelines because we're so excited about the tubeless offering for Mobi. That's our focus. This is our Patch Pump that we are launching next year. The enhancements to Mobi will be beyond that. We're not providing exact timelines yet because our focus and enthusiasm is focused on Mobi right now.
Will that entirely or primarily be through the pharmacy then?
Stay tuned. We haven't announced what our commercial plans are for it yet.
Okay. You do not have the tubing on that one. How do you, I guess I am not familiar. How do you, how do we think about pricing for that product or the potential impact of the P&L from it?
Yeah. You'll think about it still as you'll have the pump, and then you'll have two consumable pieces. I don't think it's a heavy lift for us to go talk to the payers, whether on the DME or on the pharmacy side about how to think about that as part of the package.
Okay. Is that a gating factor to adoption then? I just don't want people to get too ahead of themselves for 2026 in terms of Patch. So we more impact on 2027 side of things?
Right. I would say from a reimbursement perspective, there's always work to do, but I would put it in the category of more administrative in nature, not necessarily strategic or novel when you think about having to introduce this new product in particular within the same, the form that it's in. No matter what, when you launch a new product in the first year, you're still gonna have to market it. You're gonna have to develop the market, you know, educate the market, I would say, maybe not develop the market. It's gonna have more of an impact in 2027 when it's in the market for a full year.
Yeah.
We do expect to have some benefit in 2026.
Okay. Interesting. I think you talked about you just started a pivotal on a closed-loop system. Could we see that one in 2027?
We'll start that in 2026.
Okay.
Typically from the time you start your pivotal and doing all of the recruitment and the trial and the analysis and submission, think about it as like 18 months typically from the time you start that to when you could have a commercially available device. That will start in 2026, and we're excited about that fully closed-loop offering. Our fully closed-loop is really designed to allow a person to interact with the device as much or as little as they want. Do you wanna set it and forget it? That's gonna be one profile of person who may adopt the technology. Someone else may wanna provide additional information like about what they're eating, for example, at meal times. Ours is a fully closed-loop system that allows for both options.
Got it. How do you, the flow of new, you know, I can't believe I'm saying this, but it almost seems like you have too much innovation coming. How are your sales, how are you going to position all these different products in the market and then successfully sell them versus like if I was a sales rep, like, "I'm just gonna focus on tubeless. Like, I don't, I don't wanna deal with the other ones.
Yeah.
How do you make sure you're as efficient as possible?
Absolutely. I feel like we've streamlined our portfolio quite a bit, especially over this past year. The focus is really on having the best algorithm available. The question to someone is, "And how do you wanna wear and operate your device?" We're looking at the Tandem portfolio as being what we're selling because we've got the best offering to answer any of the reasons why someone may have, "I can't adopt pump therapy 'cause I'm concerned about how it's operated or how I'm gonna be wearing it." We've got a Patch. We've got a fully incorporated touchscreen on a pump. We want an algorithm. We'll have the best algorithm available. Fully closed-loop. Someone says, "I'm intimidated about what I need to enter the information." You don't need to enter that information.
The whole goal is that we have an ecosystem that's adaptable to the individual needs of people living with diabetes.
Okay. Okay. Are you gonna need to broaden the sales force then to be able to, to sell all these new technologies? Is that another investment you need to make?
We already expanded our sales force at the beginning of the year. The goal with that was to really optimize the territory lines to allow people to focus on the high prescribers of insulin. From here, we'll look where maybe further optimization is needed. At this point, I think we're in a good spot to be able to address the market.
Got it. How do we think about the international markets? You're making a lot of investments there. I mean, are we gonna have a free and clear year in 2026 as far as your international business goes?
We'll start with, first of all, we're going direct in a few markets: U.K., Switzerland, and Austria. We do have a roadmap where we're gonna roll out going direct in other markets across the next couple of years. Next year, what you'll start to see is the price benefit coming from some of these transitions. This year, where our direct operations outside the United States has been less than 5% of our OUS sales, next year it'll grow to about 15%. You'll start to see the benefits that come with that. This year has been mostly about the investments, and next year you'll start to see the return.
Okay. What has gotten into the market? It's clearly accelerated, and I don't think it's type 2 yet. Is it just all these new technologies pushing, right now, and then type 2 is another, another, you know, boost to the overall category for several years?
I think that's a fair, a fair takeaway. Yes. Type 1, there's a lot that can still happen with the new technologies. Back to that 60% of people, there is an element of, "Do we have the right products?" Then there's the element of the cost piece of it. That's what pharmacy's helping to solve for us. It's really to reduce that out-of-pocket cost for patients because many people maybe wanted durable pump therapy but just couldn't bear the idea of that first payment for the pump. We're trying to work to smooth the path for people across the board in terms of everything that we can offer them.
Okay. How fast do you think the overall pump market's growing domestically and globally?
You know, that's hard to put together based on not everyone has public information. What we can say to your point is we have seen that it's growing very rapidly, and we feel good about taking part in that.
Okay. I mean, the only one we can't see is Medtronic, and we'll see them next year. Why can't you guys grow at or above market for several years, especially with the pricing tailwinds?
That's certainly our goal.
Okay. Okay. Is it fair to think that the market's growing double digits? I think at least double digits at this point.
I think that's fair.
Okay. Okay. I think something else that gets missed, Leigh, is that you guys just returned to EBITDA positive in Q3, so congratulations on that. How do we think about you guys, not necessarily in Q4 'cause I know it's, you know, in Q1's different. Is this a metric where you can stay positive annually going forward? Have we hit the bottom now, and you're gonna continue to make money on the EBITDA line going forward?
Yes. Yes. That is absolutely our goal. This year, we have guided to negative 5%, which includes an 8-point impact because of a single charge in the first quarter. Without that, we would be at a positive 3%. Our commitment is to continue to expanding upon that in future years.
Okay.
As we just talked earlier about the gross margin expectation, already that's going to move multiple points again. Even that flowing through to the bottom line is a big help.
Okay. Okay. Last one for me in the last few seconds here. I think people in the room might be surprised, the webcast might be surprised, but you guys generated $50 million in EBITDA in 2022. How quick can you get back to that level?
I would say as early as next year.
Oh, wow. Okay. All right. A lot of compelling stuff there. I think we're just about out of time, so we'll cap it there. Thank you guys so much. Really appreciate it.
Great seeing you. Thanks for having us.