Insulet Corporation

Good afternoon, ladies and gentlemen, and welcome to the Insulate Corporation fourth quarter and full year of 2020 earnings conference call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Deborah Gordon, Vice President, Investor Relations.

Thank you, and good afternoon, and thank you for joining us for Insulet's fourth quarter and full year 2020 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer, and Wade McMillan, Executive Vice President and Chief Financial Officer. Both the replay of this call and the press release discussing our 2020 results and 2021 guidance will be available on the Investor Relations section of our website. Before we begin, I would like to inform you that certain statements made by INFLIT during the course of this call may be forward-looking and could materially differ from current expectations. Please refer to the cautionary statements in our FEC filings for a detailed explanation of the inherent limitations of such statements. We will also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA, adjusted operating income, and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance, and we believe that they are helpful to investors, analysts, and other interested parties as measures of our operating performance from period to period. Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year reported basis, with the exception of revenue growth rates, which will be on a year-over-year constant currency basis. With that, I'll turn the call over to Shaci. Thank you.

Thanks, Deb. Good afternoon, and thank you all for joining us. On today's call, I'll discuss our key accomplishments and our strategic priorities. Wade will share our 2020 financial results and introduce our 2021 guidance. And then we will open the call for your questions. The fourth quarter marked a strong finish to another very successful year for Insulet. In the face of extraordinary challenges, we executed our strategy, delivered consistently strong growth, and advanced our key imperatives. This past year, more than any other, clearly demonstrated the loyalty of our customers, the durability of our pay as you go model, and the strong value proposition of our differentiated technology. What we've accomplished in 2020 is a clear indicator of the resiliency and strength of our people and our culture. Together, we embraced a new reality while staying committed to our core mission. We not only supported each other, but also our customers and the communities we serve. One of Inflip's greatest strengths is our mission-driven, customer-centric culture. This was particularly evident this past year as our team rose to the challenges and showed an incredible ability to learn, adapt, and perform in an ambiguous and rapidly changing environment. We executed with an unwavering commitment to our customers and delivered another compelling year of growth. Our mission remains the same, improve the lives of people with diabetes, and every Insulet employee drives towards this goal with unmatched passion. In the face of COVID, we didn't miss a beat, and we consistently advanced our innovation, commercial, and operational initiatives. We entered 2021 with strong momentum, with our Omnipod 5 commercial launch on track, an expanding clinical and innovation pipeline, and a growing global addressable market. In 2020, we delivered over 20% annual revenue growth for the fifth consecutive year, a remarkable achievement given upended working conditions and market challenges. In fact, we finished 2020 ahead of our beginning-of-the-year pre-COVID expectations. We achieved record annual and quarterly revenue for both our U.S. and international Omnipod product lines. We also completed the year with a fourth quarter record number of global new customers, driven by U.S. new customer starts that were higher than any quarter in Influx history. While we finished the year strong and overcame most of the pandemic's challenges, it certainly impacted our global new customer additions during 2020. As we look to 2021, this will serve as a slight headwind to revenue growth. Nevertheless, our financial performance has been impressive, and our overall outlook remains strong. Let's turn to our strategic imperatives, centered around expanding access and awareness, delivering consumer-focused innovation, growing our global addressable market, and driving operational excellence. I'll start with access and awareness and what we're doing to deliver the best customer experience. Our primary goal is simple, break down existing access barriers for Omnipod. There are far too many people living with diabetes that don't have access to or are unaware of Omnipod's many benefits compared to other therapies. Outcomes are being limited because access traditionally has been too complicated and too costly. Omnipod offers a simple, discreet form factor and an easy-to-use product platform that is unmatched. We provide our customers broad, affordable access and a simpler customer experience while making it easier to prescribe for physicians. Our new customer starts, industry-leading retention, and customer loyalty are clear indicators of the value Omnipod delivers. We continue to attract approximately 80% of our new customers from multiple daily injections. And in the fourth quarter, between 35% and 40% of our new Omnipod customers were type 2, up from Q3. Our current system, Omnipod Dash, not only marked our move to mobile technology and represents the platform for our next generations, it also is powering our success, attracting both MDI users and individuals with Type 1 and Type 2, as well as expanding pharmacy access. By the end of the fourth quarter, we had secured coverage for approximately 75% of U.S. covered lives for Omnipod Dash, up significantly from last quarter. Today, most of our new customers throughout the globe start on Omnipod Dash. While we remain focused on providing our customers easy access through our pay-as-you-go model and the U.S. pharmacy channel, we also continue to increase Omnipot awareness of the benefits we deliver to people living with diabetes. The diabetes market is dramatically underserved, and increased Omnipot awareness is driving growth. Our recent direct-to-consumer advertising campaign has provided us with great insights. The reaction to our pilot and the early read of key leading indicators have been positive. So we've decided to continue advertising to support our efforts. We look forward to updating you all on our progress throughout the year. Taking a step back, Omnipod adoption and retention have been incredibly strong, despite not having a CGM integrated product in the marketplace. This year, that technological gap will not only be closed, it will be surpassed. We are thrilled to be on the verge of introducing our next evolution of consumer-focused innovation. We could not be more excited, and we know our customers and our future customers have been waiting for our transformative technology. Omnipod 5, our automated insulin delivery system in partnership with Dexcom, is designed to deliver unmatched freedom for people living with diabetes and to greatly simplify insulin management and improve glucose control. We will be the first tubeless, entirely wearable AID system with the algorithm on the pod. Other than a pod change every three days, there will be no need to disconnect or stop therapy. And the number one request from current and prospective customers is the ability to control the pod from a personal smartphone. Our system will be the first to provide full smartphone control. This means we can remove an entire component of the system, resulting in reduced burden and dramatically improved simplicity and ease of use. Our goal is to provide our customers much more and to ask them to do much less. OmniPod 5 will first launch with control from Android mobile phones, and all customers will receive a backup personal diabetes manager with SIM technology. This ensures constant connectivity to data even when not near a Wi-Fi, and this allows for real-time remote monitoring. With Omnipod 5, parents will always know how their children are doing on our system. We've heard from many about how much of a relief it is to have confidence in Omnipod 5 to control glucose and be able to periodically monitor their children in real time. As a result, trial participants have told us that their families are finally sleeping and that they are better parents and spouses since starting on Omnipod 5. Omnipod 5 is disruptive technology that we believe will revolutionize the market and the lives of people living with insulin-dependent diabetes. We are on track for a limited commercial launch in the United States in the first half of this year with pharmacy access and our pay-as-you-go model. Unlike other therapies, Omnipod 5 customers will not have to pay up front. nor will they have an upgrade fee or be locked into a four-year contract. Anyone with coverage, even existing tube pump users, can try Omnipod at any time for free with our 30 Days of Freedom trial. Omnipod 5 will be offered at price parity with Omnipod Dash in the U.S., While we know our AID system commands a premium, our focus is on securing broad payer coverage and customer access. Like Omnipod Dash, the majority of Omnipod 5 customers will have a pharmacy monthly copay of under $50. Pricing Omnipod 5 at the same level as Omnipod Dash will drive affordable coverage, accelerated customer adoption, and is consistent with our efforts to eliminate barriers and broaden access. We anticipate we will be in a limited launch period for the majority of this year. This gives us time to secure broad pharmacy coverage since Omnipod 5 will be available in only this channel. We are confident Omnipod 5 will be a game changer for people living with diabetes and believe the primary driver of a broader commercial rollout will be consumer access. We have invested ahead to build our manufacturing and supply chain operations and are more than prepared to meet market demand. As we gear up for our highly anticipated launch, we continue to build clinical evidence to support many applications of Omnipod 5, as we believe our technology can provide enormous value to broad groups of patients within multiple markets and settings. We therefore will continue to heavily invest clinically and have a robust roadmap, including our ongoing work to expand our indication to preschoolers ages two to six. We recently completed our preschool pivotal study, and we are compiling the data for submission to the FDA. The study had 80 young children on product, and we are delighted to share that 100% have completed the trial, and 100% have elected to continue into an extension phase. This is a clear indication of the value that Omnipod 5 can deliver for these young children, and we continue to plan for an expanded indication by the end of this year. Also, enrollment for our Type 2 feasibility study continues. Upon that study's completion, we plan to conduct additional studies with the goal to further expand Omnipod 5's indications. Lastly, from a clinical perspective, we look forward to presenting our Omnipod 5 pivotal data at the endoconference next month. If our pre-pivotal data is any indication, it should demonstrate just how powerful Omnipod 5 is for improved outcomes and improved quality of life. We are incredibly excited about the upcoming launch of Omnipod 5, and a successful rollout remains our top priority. But we also continue to advance an innovation roadmap that extends well beyond our AID system. In fact, in 2020, we doubled the number of product development employees to support our robust roadmap, particularly in the areas of software development and data science. We are committed to investing in future innovations to deliver increased value to our customers for many years to come. We are working on innovation programs designed to drive unparalleled simplicity of our user interactions with our systems, improved outcomes through algorithm advancements, insights and value from our growing data sets and analytics, and user choice of sensor and smartphone integrations. We are committed to integrating Omnipod 5 and our future generations with multiple CGM platforms and are delighted to be partnering with Dexcom and Abbott Libre in these efforts. Their CGM offerings are helping to drive increased Omnipod adoption in both the Type 1 and Type 2 segments. This is extremely beneficial as the global diabetes market remains critically underserved and far too many people remain uninformed about their treatment options. By working together, we expect to deliver a long line of innovative offerings that further improve the lives of millions of people around the globe. Now, turning to global expansion. During the fourth quarter, we entered five new countries within Europe and the Middle East. Just this week, we expanded into Turkey and plan to launch in Australia later on this year. In the countries we serve today, we estimate there are 11 to 12 million people living with insulin-dependent diabetes. We are in a strong position to capitalize on this large addressable market given our focus to provide simple and widespread access to Omnipod, a technology we know greatly simplifies lives and provides better outcomes and quality of life. We are expanding internationally in a targeted and strategic manner and are building our go-to-market plans to enter larger geographies over time. We expect our total addressable market will grow significantly as we continue to expand internationally, bring innovations like Omnicod 5 to market, and further displace legacy therapies. We have made significant investments throughout our entire global business to support our robust innovation pipeline and global expansion. And in the face of COVID, the progress we made this past year in our manufacturing and supply chain operations was remarkable. We not only maintained a high-quality production system, kept facilities open, and met product demand levels. We also opened a new manufacturing facility in China and installed our third U.S. manufacturing line, further expanding our manufacturing and supply chain redundancy. In summary, we delivered another strong quarter, finished the year on a high note, and entered 2021 with significant momentum across our business. Our competitive differentiators remain unparalleled, and the upcoming launch of Omnipod 5 will significantly strengthen our market position and marks a major milestone in our mission to simplify and improve the lives of people with diabetes. I will now turn the call over to Wade.