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spk07: Good afternoon, ladies and gentlemen, and welcome to the Insulate Corporation first quarter 2022 earnings call. At this time, all participants are on a 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 touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations.
spk15: Thank you, Dilem. Good afternoon, and thank you for joining us for Insulet's first quarter 2022 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer, Wade McMillan, Executive Vice President and Chief Financial Officer, and Jim Hollingshead, member of Insulet's Board of Directors and Insulet's future President and CEO. Chasey and Wade, along with Brett Christensen, our executive vice president and chief commercial officer, will be available for the Q&A portion of our call. Both the replay of this call and the press release discussing our 2022 first quarter results and 2022 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 Insulet 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 SEC filings for a detailed explanation of the inherent limitations of such statements. We'll also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA 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 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.
spk14: Thanks, Deb. Good afternoon, everyone, and thank you for joining us. Before we turn to our first quarter results, I'd like to take a moment to talk about this afternoon's announcement that for personal reasons, I will be stepping down from my executive positions at Insulet. After careful consideration over some time, I have made the very difficult decision to reduce my professional obligations in light of medical issues and other circumstances that have been impacting my family and those I care deeply about. Effective June 1st, Jim Hollingshead, a member of our board of directors since 2019, will succeed me as president and CEO. I am extremely proud of what we have accomplished in my time as CEO. We have made significant strides to improve the lives of people with diabetes while enhancing insulin's ability to innovate and operate with excellence. Insulet is well positioned for the full U.S. commercial launch of Omnipod 5 and poised for continued growth and impact for shareholders and the diabetes community. I remain profoundly committed to Insulet and the company's long-term success and I look forward to continuing to serve as a director on Insulet's board and as an advisor to Jim and the team. I will be working hand-in-hand with Jim to ensure a seamless transition of leadership responsibilities. In recent years, we have made great progress improving the lives of people with diabetes by delivering consumer-focused innovation, growing the company's global addressable market, and driving operational excellence. Hundreds of thousands of potters around the world are leading happier and healthier lives because of our work and dedication. And with Omnipod 5, we will offer significantly improved outcomes and incredibly simplified diabetes management to millions of people across the globe. I have never been more excited or confident about Insulet's future. Insulet has a deep, talented team and is firing on all cylinders and poised for incredible growth. I know Jim well from our service on the Insulet board together, and I'm delighted that he is the one to step into the role of CEO at this important time. The company will be in great hands under his leadership. He knows our company, our culture, and our team. and the strong relationships he has fostered with our management team will immediately serve the company well and ensure a smooth transition. His significant experience at the rapidly evolving crossroads of medical technology and digital solutions will also be incredibly valuable to the company. Jim has joined us today, and I'd like to turn the call over to him for a few remarks.
spk17: Thank you, Chasey. Shacey and I have built a terrific working relationship, and I'm very pleased that she will continue to serve on Insulet's board and, in addition, serve in an advisory role with the company. Shacey's continued active involvement and oversight will be incredibly valuable. This gives me great confidence that we won't miss a beat. Under Shacey's remarkable leadership, Insulet has delivered tremendous growth. The company has pioneered innovations that deliver on our mission to simplify and improve the lives of people with diabetes. and I will work hard to build on that legacy. On a personal note, I'm excited to spend a lot more time at our company's headquarters. I plan to get a place here and also maintain my residence in Southern California near Insulet's operations in San Diego and Tijuana. I am also looking forward to getting out on the road over the next several months to meet with Insulet's amazing employees, as well as the company's business partners, analysts, investors, and other stakeholders. In closing, I am honored to assume the role of President and CEO of Insulet at this important time, and I'm energized about working alongside our excellent leadership team and talented employees to continue advancing our mission and strategic imperatives. We are well positioned to build on Insulet's momentum to drive significant value for shareholders and to continue to execute our mission. With that, I'll turn the call back over to Shacey for commentary on the quarter.
spk14: Thanks, Jim. We are off to a great start in 2022 with financial results that finished ahead of expectations as our team continues to execute and build on the momentum in our business. We once again had record Q1 US and global new customer starts in the first quarter, building on our success throughout 2021. We have meaningfully advanced our strategic imperatives and are on track for another successful year. Our position in the underserved global diabetes market has never been stronger. We are especially excited about the overwhelmingly positive feedback we have received during our limited market release from users of Omnipod 5, the first tubeless automated insulin delivery system with full compatible smartphone control. The feedback has been nothing short of spectacular. Users love the system and have shared how it greatly simplifies their diabetes management and is truly changing their lives. HCP feedback has been equally strong. Our efforts to bring Omnipod 5 to our international markets are well underway, including our CE mark submission under active review. And we continue to expand our global presence. We also recently shared compelling data from our Type 2 feasibility study at the ATTD Diabetes Conference, which demonstrates the value Omnipod 5 can bring to the Type 2 community. Omnipod offers an unmatched option for people living with type 2 diabetes, given our pay-as-you-go model, pharmacy access, attractive form factor, growing clinical evidence, and unparalleled simplicity. In the first quarter, type 2 users represented approximately 35% of our U.S. new customer starts. Our competitive advantages and exciting innovation pipelines in both the Type 1 and Type 2 market segments position us to drive long-term revenue growth, increase our market share and total addressable market, and expand our margins. Also, last week we published our 2021 Sustainability Report to provide all of our stakeholders a view into Insulet's approach to environmental, social, and governance programs and the exciting progress we've made across a number of fronts. Just a few examples. In 2021, we reached 60% gender diversity on Insulet's board. Millions of used pods were diverted from landfill globally through product take-back programs. And solar panels at our Massachusetts headquarters generated almost 800,000 kilowatt hours of renewable energy. Insulet is committed to the three pillars of our sustainability strategy. resilient operations, sustainable product innovation, and people and communities. And it is encouraging to see us continue to mature across each of these areas. Now, turning to an update on our strategic imperatives, which include expanding access and awareness, delivering consumer-focused innovation, growing our global addressable market, and driving operational excellence. Today, we are working to expand access to an awareness of Omnipod, given the global diabetes market is under-penetrated and growing. We continue to drive increased adoption through the US pharmacy channel, which makes access to Omnipod easier and more affordable by eliminating lengthy lock-in periods and heavy upfront costs. Our pay-as-you-go model removes risk for payers while also providing a superior and affordable experience for our customers. The cost of Omnipod is consistent with multiple daily injections, despite Omnipod's form factor, ease of use, and improved outcomes. As a result, we continue to capture over 80% of our new customers from multiple daily injections. Nearly all of our global new customers start on Omnipod Dash, and in the U.S., do so primarily through the pharmacy channel. Once we move into full market release this year, we can't wait to offer Omnipod 5 solely through the pharmacy. We also continue to drive increased awareness of Omnipod through our direct-to-consumer advertising campaign, as well as our 30-day free trial. Our DTC investment in the US is ramping in support of Omnipod 5. In addition, we continue to invest in DTC in select international markets, which is helping to drive new customer starts and increase awareness of Omnipod. Brand recognition is strong internationally, and these efforts will further raise awareness for Omnipod Dash in advance of our international launch of Omnipod 5. Our Omnipod 5 US limited market release continues to progress as planned. In March, we made the smartphone app available, and we continue to roll out availability on a growing list of Android phone models, including those most widely used in the US. The feedback on full smartphone control has been remarkable and highlights how differentiated an experience Omnipod 5 offers. Consistent with what we've heard to date, I will share feedback from one user who has tried multiple forms of insulin delivery for 35 years, including tubed pumps. He said he has never been in better control. His fears of lows are almost gone. Having diabetes is no longer at the forefront of his thinking. and he has confidence in the algorithm to quickly get him to his customized target. He said he knew Omnipod 5 was going to be good, but he didn't anticipate just how good. All of this feedback validates the years of hard work our teams have put into the development of Omnipod 5 to deliver the best customer experience. With this launch, we have also created a customer service platform centered on simplifying the Omnipod 5 onboarding process. and scaling our ability to train users. As an example, today, if you are a current Omnipod and Dexcom user, you have the ability to adopt Omnipod 5 through a 100% digital pathway without having to meet with a clinician or be trained by a field rep. This makes Omnipod easier to access for our customers. While we continue to test the Omnipod 5 customer journeys, our market access team is successfully securing expanded coverage. We are well on our way to achieving our internal target by full market release. After successful completion of the first phase of our limited market release, we recently expanded the availability of Omnipod 5 through a limited distribution network as planned. Now, any doctor can write a prescription for Omnipod 5 and a growing number of people will have access to it. We know Omnipod 5 is going to be a game changer for people with diabetes and we can't wait to bring it to the broader community. Our Omnipod 5 submission for an expanded indication down to age 2 is under active review with the FDA and progressing well, and we continue to plan for updated labeling this year. We also recently shared compelling data from the initial eight-week phase of our Type 2 feasibility study. This was the first prospective AID study of people with Type 2 diabetes conducted in the U.S., and included participants with an average age of 61 years who used Omnipod 5 at home. Only one individual had experience with an insulin pump, and approximately half had never used a CGM. The study results were impressive. The data demonstrated an overall A1C reduction of 1.3%, along with an additional 4.6 hours a day in normal glycemic range. Participants who were previously on MDI experienced reduced time in hypoglycemia and a 32% reduction in total daily dose of insulin. We believe the benefits that users experience during our study are indicative of how powerful Omnipod 5 can be for people with type 2 diabetes, and we remain committed to continuing to innovate to meet the needs of this important group. We also continue to advance our robust product pipeline, including next generations of our Omnipod 5 platform. This includes our iOS development, which is progressing very well, as is our integration work with Dexcom's G7 and Abbott's Freestyle Libre. While Omnipod 5 is a priority today, we know competing and winning in the underserved global diabetes market requires a firm commitment to innovation. We have a compelling pipeline that includes next-generation AID technology, robust data-driven and digital innovations, and additional technological advancements designed to expand our total addressable markets. Lastly, we continue to build on our strong patent portfolio. We had a record-setting number of patent filings in 2021 and expect to set another record this year. Our current technology as well as our exciting innovation pipeline are well protected and should further strengthen our global leadership in diabetes technology. Diabetes is a growing epidemic with millions of people diagnosed each year and Omnipod is already making a difference in 23 countries. We are focused on further penetrating our existing markets expanding our total addressable market by growing our presence in new regions and launching Omnipod 5 internationally. Our CE mark submission is progressing well and we are making terrific progress preparing for an Omnipod 5 international launch. We are further building our teams and advancing our regulatory reimbursement and market development efforts. AID and CGM awareness and adoption are increasing globally, helping to unlock reimbursement and access pathways. As a result, we will be well positioned to leapfrog the competition and have Omnipod 5 become the preferred AID system in our global markets. In terms of market expansion, last month we launched Omnipod Dash in Saudi Arabia and expect to enter the United Arab Emirates shortly. Together, these countries increase our total addressable market by approximately 1 million people. And the overall international opportunity represents a significant long-term growth driver. Our global manufacturing capabilities offer another competitive advantage, and we are taking steps to further strengthen our operations. In addition to focusing on supply chain resiliency and ensuring critical component supply, we are also optimizing our international manufacturing footprint. The current macro inflationary and supply chain environment is challenging. However, our team has been successful in partially offsetting the inflation impact and has also mitigated supply chain risk to ensure uninterrupted supply to our customers. All of their accomplishments should help ensure we have ample component supply and available capacity to meet the demands of our customers including our full launch of Omnipod 5. Wade will discuss our manufacturing operations in more detail. In closing, our first quarter results finished ahead of our expectations, and we are off to a great start in 2022. We are making terrific progress in the limited market release of Omnipod 5. And looking ahead, the balance of the year will include a number of important milestones, including the full commercial release of Omnipod 5, an expanded indication down to age two, and advancement of our innovation pipeline. 2022 is going to be another exciting year for us as well as our customers across the globe. I'll now turn the call over to Wade.
spk16: Thanks, Shacey. Before I get into our first quarter performance, I'd like to take a moment to express my own gratitude towards Shacey and also do so on behalf of all of our employees. Her outstanding leadership and invaluable contributions to both the company and people living with diabetes has set up Insulet for a bright future. She embodies our mission. It has been an honor to learn from her and work alongside the group of leaders she has assembled here. We look forward to working with Shacey in her continued role as a board member and as a company advisor and continuing to benefit from her insights and guidance. At the same time, I'm excited to welcome Jim into his new position. It has been great working with Jim on the board of directors to date, and I echo Chasey's confidence in his deep understanding of our business, our culture, and our team. And now on to our results. We've started the year off well with strong first quarter results, made notable progress in all of our strategic imperatives, and are on a path for another successful year. In the first quarter, we generated 19% revenue growth, finishing above the high end of our guidance range. On a reported basis, for total revenue, foreign currency was a 220 basis point headwind over Q1 of last year. We delivered US Omnipod revenue growth of 21%, exceeding our guidance range. Revenue growth was driven by the compounding benefit from strong new customer starts, as well as increasing volume growth through the U.S. pharmacy channel. Omnipod Dash drove approximately 90% of our U.S. new customer starts and pharmacy channel volume increased to over 55% of our total U.S. volume. International Omnipod revenue grew 12% and was above our guidance range, driven by Omnipod Dash adoption, partially offset by the impact of the pandemic over the past year and AIB competition headwinds. On a reported basis, foreign currency was a 640 basis point headwind over prior year. Our estimated global attrition remained stable. Despite a shift in U.S. volume into the pharmacy channel, global pod utilization also remained consistent with historical seasonality, as we typically see a sequential decrease in the first quarter of the year driven by the U.S. Drug delivery revenue increased 36%. exceeding our guidance range due to production timing. Gross margin was 71% and above our expectations, representing a 460 basis point increase or 490 basis points on a constant currency basis. The primary drivers were improved manufacturing operations, growing volume through the U.S. pharmacy channel, and product mix. These were partially offset by an expected higher mix of costs as we ramp our U.S. manufacturing operations. As a reminder, our current inventory balance includes higher component costs as a result of inflationary headwinds in 2021 that continue in 2022. This will pressure gross margins sequentially each quarter this year as we sell the product out of inventory. I'll provide more color on our expected 2022 gross margin cadence in a few minutes. Operating expenses were in line with our expectations and reflect ongoing investments in innovation, sales and marketing, and international expansion. Our focus to further strengthen these critical areas supports our long-term growth trajectory and expansion of our global addressable market. Operating margin was 12.8%, up 630 basis points, and adjusted EBITDA margin was 21.3%, up 740 basis points. Both were above our expectations due to a higher than anticipated revenue and gross margin improvement, and to a lesser extent, timing. Turning to cash and liquidity, we ended the quarter with over $700 million in cash and the full $60 million available under our revolving credit facility. Our financial position remains strong and provides opportunities to continue to invest across our business. We've taken steps to further strengthen our global manufacturing scale and flexibility including consolidating our production in China into our newer, lower-cost facility. We also expect to invest in a new manufacturing facility in Malaysia. These actions are intended to support our international expansion strategy, further ensure product supply, and drive margin improvement over time. Now, turning to 2022 guidance, we are maintaining our full-year revenue range of 12% to 16%, and raising the low end for total Omnipod by 100 basis points to 16% to 20%. For US Omnipod, we are raising the low end by 100 basis points to 19% to 23%. Our growth within the Type 1 and Type 2 markets will be driven primarily by Omnipod Dash volume growth and our unique pay-as-you-go model and pharmacy channel access. The Omnipod 5 launch and adoption ramp will take time given we are in limited market release for part of 2022 and due to our annuity-based business model. For international Omnipod, we're maintaining our full-year revenue guidance of 9% to 14%, driven by ongoing Omnipod Dash adoption, partially offset by pandemic impacts and AID competition headwinds. As a reminder, we expect international revenue growth will be higher in the second half of the year compared to the first half due to a slightly easier comparison as well as an anticipated improvement in COVID conditions. Lastly, we continue to expect drug delivery revenue to decline 30% to 35% as 2021 levels were elevated as a result of the pandemic. Turning to 2022 gross margins, Despite increasing inflationary and supply chain pressure, we continue to expect to achieve 67% to 68%. The drivers of the decline from last year remain the same. Product mix, including ramping Omnipod 5 volume, higher costs associated with our US manufacturing ramp, and higher component and manufacturing costs associated with inflation. All partially offset by the benefits of our strengthened global manufacturing operations and capabilities, and increasing volume in the U.S. pharmacy channel. We expect gross margin to decline sequentially throughout the year due to the various factors discussed, as well as higher component costs included in inventory. We were happy to exceed 70% gross margin this quarter, and after working through inflationary impacts for the next couple of years, we still have plans to achieve 70% on a sustained basis over time. We continue to expect operating expenses to rise sequentially in 2022 as we increase investments. Key areas of investments include our expanding innovation pipeline, direct-to-consumer advertising, clinical efforts, and the launch of Omnipod 5. As a result of the higher macro and inflationary supply chain and foreign exchange pressures, we now expect operating margin to be flat year over year. Despite these headwinds, we're still focused on expanding operating margin over time. For Q2, given both the expected sequential decline in gross margin and the increasing sequential investment to support the Omnipot 5 launch and other initiatives, we expect a sequential decline in operating margin. Lastly, we continue to expect capital expenditures will grow slightly this year as we continue to invest in key areas of our business. Turning to our second quarter 2022 revenue guidance, we expect total company growth of 12% to 15%, including total Omnipod growth of 17% to 20%. Based on current foreign exchange rates, we estimate the unfavorable impact will be approximately 400 basis points on a reported basis. For U.S. Omnipod, we expect to continue to build momentum with growth of 21% to 24%. driven by the benefits of our recurring revenue model and growing Omnipod Dash volume through the U.S. pharmacy channel. As a reminder and as planned, Omnipod 5 is still in limited market release and will not contribute materially to revenue growth in Q2. We expect Q2 international Omnipod growth of 9% to 12%, driven by continued Omnipod Dash adoption partially offset by the compounding impact from lower new customer starts in 2021, largely due to the pandemic and competitive AID headwinds. We estimate the unfavorable foreign exchange impact will be approximately 1,100 basis points on a reported basis. Finally, we expect Q2 drug delivery revenue to decline 43% to 37% year over year, which is also a significant sequential decline as revenue is normalizing to pre-pandemic trends. There will be choppiness in the remaining quarterly revenue based on our partners' requested order patterns and timing of production. In conclusion, we've begun 2022 much like we ended 2021, strong execution against our strategic imperatives that position Insulet well for long-term sustainable growth. While our mission has not changed, Our ability to deliver on it only gets stronger. We've never been in a better position to improve the lives of people with diabetes. With that, Delam, please open the call for questions.
spk14: Are we open for questions?
spk09: Dilem, are we open for questions?
spk16: I have to dial back in.
spk14: Should I hang up and redial maybe? Yeah, I think so.
spk07: I apologize. Ladies and gentlemen, I apologize for that. Thank you for standing by. If you have a question at this time, please press star 1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. We ask that you keep your questions to no more than one, but please feel free to go back into the queue. If time permits, we'll be more than happy to take your follow-up questions at that time. Our first question comes from the line of Larry Bigelson from Wells Fargo. Please go ahead.
spk03: Good afternoon. Thanks for taking the question. Congratulations on a nice quarter. And, Shacey, you know, congratulations on all the success you've had at Insulate. I know you'll be missed. I'd love to start with a question for Jim. I heard he's on the line. Is that okay? Could you hear me okay? Operator?
spk07: Yes, one moment, sir. One moment, please.
spk13: Dylan, are you on the line?
spk07: Yes, I am on the line.
spk13: Okay, we've dialed back in. So you've got the insulate team back here, Shacey, Wade, Brett, and Deb.
spk07: Okay. All right, so go ahead, Mr. Bigelson. Could you please repeat your question?
spk03: Sure. Well, first, Shacey, congratulations on the nice quarter here, and congratulations on the success you've had at Insolent. I know you'll be missed. I heard that Jim was on. Shacey, is it okay to ask Jim a question? If not, I have it. Sure, if Jim is on. So, Jim, I think maybe this is the first time many of us are hearing from you, certainly in this role. So Jim, you've been on the board of Insulet since 2019, so you know the company well. So I'd love to hear what your goals are over the next year, and how are you thinking about Insulet more broadly? Do you see opportunities outside of diabetes? Thanks so much for taking the question, and congratulations on your new role.
spk17: Thank you, Larry. I really appreciate the question. Look, I have been on the Insulet board now for three years, and the first thing I want to say is it's such an honor to be entrusted with leadership for our next chapter of growth by Shacey and by the whole board. I think Shacey's leadership has just been remarkable. It's one of the main reasons I was drawn to join the board and was so privileged to join the board. And Shacey has accomplished so many things in her tenure here, seven-year tenure here, and three years as CEO. We wouldn't have time to list them all. But I will say one of the main things that Shacey has accomplished is she's built this incredible executive team here at Insulate. And so You know, when I think about stepping in, I think we're not going to miss a beat. I think the key thing is that we continue to grow. We continue to succeed with innovation. We're driving opportunities to change the lives of people with diabetes. We're in the middle of a fantastic product launch with a revolutionary product. And, you know, couple that with the fact that Shacey is going to stay on the board, which is, you know, I'm just really excited that she's going to continue to advise us in a formal capacity. I think the key thing is we're just charging straight ahead and we're not going to miss a beat.
spk07: Thank you. I'll show our next question. It comes from the line of Robbie Marcus from J.P. Morgan. Please go ahead.
spk00: Oh, great. Thanks for taking the question. Congrats on a nice quarter. And I'll also add, Chasey, we'll miss you. Wish you the best. And Jim, welcome. Looking forward to working with you. I wanted to ask on new patients here. Maybe you could walk us through what happened in first quarter in terms of new patient ads. Some of your peers faced some difficult times in January, February. Maybe if you could comment on U.S. new patient growth and international new patient growth and what it was for the quarter and how it trended. You know, we're looking and focused more on the exit rate. And I just wanted to clarify the comments you made. Is a full launch still possible in the second quarter? I just wanted to clarify it based on the comments you made. Thanks a lot.
spk14: Sure. Yeah, thanks, Robbie. Maybe I'll just reiterate at a high level, Q1 was a record quarter for us both globally and in the U.S. It was a record Q1. So, you know, really strong start to the year. Brett, did you want to add some detail there?
spk01: Just, you know, Robbie, we're sowing our strength still. The only tubeless form factor in the market is simplicity of Omnipod. And then we do believe, again, that the message that the fastest pathway to Omnipod 5 is to get Dash, and that seems to be resonating, and we believe there's a little bit of a lift there as well. But, you know, all in all, this is another record quarter for new starts, and we're happy with the performance in the U.S. and around the globe.
spk14: And to your second question regarding Omnipod 5 and the full market release, we were excited to expand our limited market release. I think Brett and the team did a really smart thing there, expanding through specialty and mail-order pharmacies, which is about where 20% of our business goes through today. About 80% of it goes through retail, and we're not yet in retail. But I would just caution anybody from thinking about it as a flip of the switch. So we're going to continue to ramp here towards full market release, and right now we're going from sort of hundreds of patients to thousands of patients. So, of course, I guess June is still possible, but, you know, we have to give ourselves the room to take any learnings that might occur from, you know, this move from hundreds of patients to thousands of patients and make sure that we react to those, incorporate those learnings, and that we are fully prepared for a full market release and entering into the retail channel when we get there. So hopefully that gives you good guidance.
spk07: Thank you. I'll show the next question. It comes from the line of Travis Speed from Bank of America Securities. Please go ahead.
spk06: Hey, and congrats, Jason, on all the things you've done at Influx. I miss working with you as well and look forward to working with you too, Jim. So on the Omnipod 5 rollout, I guess just to get a little more color on some of the initial feedback you've gotten from some of the initial users and trying to understand the cadence here of the launch, like what's the next step? Are you going to go to the retail channel all at once or step by step? And just a better understanding of kind of the rate limiting factor on the rollout would be great. Thank you.
spk01: Yeah. Hi, Travis. It's Brett. I can give a little bit more color on the limited market release to full market release. So It's probably helpful to start with the end and how we are defining the full market release. And we do define a full market release as being in the retail channel, which, as you said, is where 80% of our pharmacy business is today. So this next phase is with a limited distribution network. And that just means mostly mail order and a smaller number of distributors. But it does mean that any physician can write a prescription and any patient that has access and reimbursement can get on product. They just have to go through a channel that maybe they're not currently going through in the pharmacy channel. So it won't be a flip of the switch, as Jacey said. We'll continue to progress in that way. What's exciting, I guess, about this next phase is that it does test our scale. So we started with hundreds, a predetermined number of patients in the LMR. Now we're going to start driving prescriptions scaling the release, and it will continue to scale until we get to the full market release. It will continue to learn. A lot of what we're learning today is around the pathway that patients take to get on product. If you remember, we talked about the limited market release and probably hundreds of different pathways depending on what a user's current experience is with CGM, with MDI, tube pumps, etc., that they could take and a unique training pathway for each of them. So some of the things we're learning in LMR is just how to tweak that experience a little bit to maybe set better expectations with some of those patients so that when they start, they know exactly what to expect with Omnipod 5 And we'll continue to learn, but we're right on track to what we said we would do, which is sometime between three and nine months. We're three months in now, and we're excited about this next phase. But the next phase really is, after this one, really is full market release, and we'll just progress until we get there, which is a retail launch.
spk07: Thank you. I show the next question comes from the line of Jeff Johnson from Bayhead. Please go ahead.
spk10: Thank you. And, Shaci, nothing but the best. I just want you to know how much I've appreciated holding you up as such a great example of professional success for my 17-year-old daughter. And let me just ask a question outside the U.S. I know a lot of questions on the U.S. 05 launch, but outside the U.S., have you had any conversations with EU regulatory authorities at this point? Just maybe any updated thoughts on timeline to CE mark and how soon you could maybe flip over to commercialization once you do get CE mark? Thank you.
spk14: Sure. Thanks, Jeff. I'll maybe just give you an update on the submission, and then Brett can talk a little bit about the market development and market preparation for launch that's underway. So we've had a lot of back and forth with our notified body, and we believe that the submission is progressing very well, no red flags. And, you know, we were really well prepared because we had such a comprehensive FDA submission and also because our data was so strong. So we do feel like we're in a really strong position. The only challenge in terms of giving you guidelines or guidance for timing is just that the MDR pathway is just a relatively new pathway, both to us and our notified body. So that's the challenge, but we are making great progress and feel very confident about that happening. It's just hard to give you some particular timing on that. And then there's been a ton of work underway preparing for market launch. So, Brett, if you want to provide some color on that.
spk01: Sure. Yeah. Hi, Jeff. We're doing a lot of work now to prepare for the launch of Omnipod 5 outside the U.S. And contrasting it to our Dash launch, if you remember when we got approval for Dash, it was pretty quickly that we rolled out to all of our markets internationally and very quickly got to almost 100% of all new starts on Dash. The difference with Omnipod 5 is probably twofold. One, there's infrastructure with the cloud that's going to be unique by country depending on data privacy and different requirements. The other thing is reimbursement. So the reimbursement pathway for each country is different, frankly, because this is a new category of product where Dash was simply the same category as our legacy product. So there's different reimbursement pathways, different infrastructure to consider, and so you'll probably see more of a staged launch by country outside the U.S. once we do get clearance.
spk07: Thank you. I see our next question comes from the line of Steve Lichtman from Oppenheimer. Please go ahead.
spk04: Thank you, Chasey. All the best to you, and good luck, Jim, in your new role. I wanted to also ask on financial, excuse me, on international. I saw some nice upside there in OneQ. I guess, one, are you seeing some of the Omnipod 5 excitement starting to build given greater visibility that it's coming with the CE mark filing and U.S. approval. So seeing some pull forward, as Brett mentioned earlier with U.S. And it would seem that based on the second quarter guidance coming off of this better one, Q, that you could be trending toward the high end of your full year range. So overall, how are you feeling about that international business even ahead of Omnipot 5?
spk01: Yeah, Stephen, I can comment probably on the first part and pass it over to Wade for any color on guidance. But yeah, we're really pleased with how the international markets are performing. Of course, there's a ton of optimism and excitement for Omnipod 5, and it's why we are excited to be under CE Mark Review, and we're working ambitiously to get it to market. It's just like the U.S. We know it will make a difference in new starts in demand and that there's this desire to have the best form factor paired with an AID system. So, of course, there's tons of interest outside the U.S. We're trying to manage that with our current base and expectations with our partners over there, but that's why the work is so important that we get it to market and we're excited about the CE mark. And again, we'll plan accordingly, but we'll phase the launch depending on readiness of each market, considering the size and opportunity And we're just excited to get there. And maybe, Wade, you can talk a little bit about what that means.
spk16: Yeah, sounds good. You know, as Brett said, we're doing very well competing with the form factor. And so we've been in this low teens, low double digits range now for a little over a year. And, you know, it's good double digit growth, but we know we could be growing faster if we had our AID system, as we've talked about. We just don't participate in that part of the market today. And so that's what's reflected in our Q2 guide, as well as you mentioned, Steve, for the full year. And just a reminder, the second half of the year guide is a little stronger because we have a slightly easing comp, especially in Q4. And then the impact of the pandemic over the last four quarters, just to remind everybody with our annuity model, impacts us. And so even though the pandemic is easing, we're still annualizing those quarters from last year. And so as we do that throughout the year, you'll see our growth rates start to strengthen in the second half.
spk07: Thank you. I show the next question comes from the line of Danielle from SCB Securities. Please go ahead.
spk11: Hey, good afternoon, everyone. And, Shaci, I can't even tell you how bummed I am to hear that you are leaving, and you will definitely leave. You've been a girl crush of mine for a long time. So don't worry, you'll stay my girl crush. So just a question on primary care physician. You know, we've been doing a lot of work on the diabetes space, and it feels like there's just still so much learning to be had on the primary care side of things. For pumps and CGMs, which is actually the crux of a lot of the work we've been doing, I'm just curious about how you guys at Insulet are going after the primary care doctor and how it's different versus the endo and how you think the mix, the prescriber mix will evolve over time. So, yes, I'll leave it at that. Thanks.
spk14: Thanks, Danielle. And, you know, I'm not going anywhere. I do plan to do everything in my power as an advisor and a board member to continue to support insulin success. And I know it's in great hands with Jim and this outstanding team. Maybe, Brett, you want to comment on the primary care?
spk01: Yeah, Danielle, we spend a lot of time thinking about primary care because we desire to penetrate the type 2 market in particular more vigorously. Many of them do reside with primary care. So today we're getting leads in primary care, mainly through our DTC campaigns. We get a lot of patients to see their physician and And so we're sort of reactive for the most part with primary care because we're waiting for a patient to become a lead, and then we're reaching out to that particular primary care doc and getting them started on Omnipod Dash. But we also do call on a very small number of primary care physicians, but mainly those that sort of operate like an endocrinologist and write a lot of insulin prescriptions, for instance. We get good information from IQVIA. We know who they are. But we do want to expand more into that segment. I think a couple of things are the challenge with primary care that we have to solve for. One is just their willingness to tackle complexity. And they see pump therapy in general as being more complex than something they typically do today. So we have to solve for that. Virtual trainings is a way we can do that. The simpler we make the product, the easier it is to onboard, the pharmacy channel, low co-pays. All those things we're doing will help for sure. The other thing is just breadth. There's over 200,000 primary care physicians in the U.S. We obviously won't have a sales force to tackle that. So we'll look to penetrate primary care in the future through more direct-to-consumer, more digital marketing, and then ultimately better solutions and products that more distinctly fit the type 2 segment. But there's a lot of work to do there. Most of the success we're having with type 2s today is within the endocrinology segment, but we know the opportunity is massive. We do get a lot of leads from direct-to-consumer.
spk07: Thank you. I'll show our next question. It comes from the line of Joanne Winch from Citi. Please go ahead.
spk12: Good evening, and may I also say thank you and good luck. I don't know. I think more than that, I might start crying. So two quick questions. What percentage of your new patients were type 2? And the second question has to do with... Your new patients that are coming on and you expect to see using Omnipod 5, are those transfer students from your current platform, or do you see it pulling more patients from MDI and or tubed PUPs? Thanks. Thanks, Joanne.
spk14: Yeah, in my prepared remarks, I mentioned 35% approximately of our new users were type 2, so it's great to see continued really strong growth, particularly in a record Q1. And as it relates to Omnipod 5, you know, we've been pretty limited there. So it's a very small sample at this point relative to our total base. So we said, you know, hundreds of patients. And they're coming from all segments because we wanted to test every customer journey that we can. So we're in still process of testing all those customer journeys. But we've got people coming on from MDI, from existing Omnipod users, and also from tube pumps and AID pumps and managing to get really good insights across each of those customer journeys. As we look ahead, we've talked about the fact that today we get 80% of our new users from multiple daily injections, and it'll be really interesting to see what happens with that segment. I think we believe that Omnipod 5 has the power to continue to grow the overall market and bring great, better outcomes, better quality of life to people who are relying on multiple daily injections. But we also know that this is a more competitive offering for those people who were choosing AID over form factor, and now they can have both. So we're pretty excited to see what that means for our percentages and our ratios and whether or not we have transfer students or new students as we look forward. Thanks.
spk07: Thank you. I'll show the next question. It comes from the line of Matthew O'Brien from Piper Sandler. Please go ahead.
spk05: Afternoon. Thanks for taking the question. And, Chasey, I hope everything's okay, manageable, and best of luck to you going forward. You know, just to follow up a little bit on Joanne's question, the comment about, you know, maybe I think Brett mentioned a little bit of a push on the DASH side this quarter. And then I think you said type 2s are 35% this quarter. And I don't want to make too big a deal of this, but, you know, 35 and 40 is what you said last quarter. So what I'm really getting at is are you seeing more type 1 patients coming on getting access through Dash to get access to Omnipod 5? Thanks.
spk14: Sure. Great question. And I think we likely are. And that was Brett's point, that, in fact, the fastest way to get onto Omnipod 5, which we know today is indicated for the Type 1 user, is through Omnipod Dash. So we do believe that part of that is what's driving our record new customer starts and also probably driving a slight shift in percentages there. But I don't want to dismiss the fact that 35% of our new users are type 2. The product Omnipod Dash is still doing tremendous things for that segment, bringing better outcomes, and still obviously an incredibly appealing product that's driving great growth there.
spk07: Thank you. I'll show the next question. It comes from the line of Jason from Bedford. Please go ahead.
spk02: Good afternoon, and Chasey, I wish you the best. I hope everything works out. So I understand the current phase of the limited market release, and it was kind of touched on before, but any physician can write a script, but the user has to access the technology in this specialty channel, kind of the non-retail pharmacy channel. I'm just wondering, is this due to capacity on your part? Is it more of a reflection of your discussion with payers? Just wondering what you need to see before you broaden the launch.
spk01: Hi, Jason. It's Brett. I can give a little bit of color around that. So, yeah, any physician can write a prescription. You're right. And any patient that has access to the product, they just can't. For instance, pick up a prescription and walk down the street to their Walgreens or CVS and expect to get Omnipod at that retail location for now. There's a couple of reasons why we would do this and use this limited distributor network for the LMR and this expanded phase of the LMR. One is, you know, we just get better visibility to who's starting. You know, once you start to ship product to the retail channel, it's out there. And so we don't have as much visibility, and that doesn't help us with our goal of really monitoring people that are coming on, monitoring their experience, and having the ability to quickly reach out to them if necessary. So this keeps us closer to the patient. It keeps us closer to the process. We get more feedback on their onboarding pathway, and it just gets us more comfortable with finally shipping product to the retail channel, which is, again, how we'll define full market release. So It's a good step. We think it does broadly open up access, but at the same time helps us meet our goals of measuring and monitoring as we expand to the retail launch.
spk07: Thank you. I show our next question comes from the line of Margaret Carzo from William Blair. Please go ahead.
spk08: Hi, everyone. This is Brandon on for Margaret. Thanks for taking the question, and I'd like to just echo the sentiment from the rest of the Southside community and thank you for all your work and congrats on building a great organization here. I wanted to focus my question on the Type 2 pathway as well. We obviously saw really encouraging data with Omnipod 5 at ATTD. So that was both in MDI and Bazel. What are the next steps here for you to kind of keep moving forward getting an Omnipod 5 Type 2 label? Do you need to make any software or hardware changes? Do you need an additional trial to kind of understand the market? Or can you kind of just roll into a pivotal? So, any color you can give around there just to understand at least the pathway if we can't get a timeline on that. Thank you.
spk14: Sure. Thanks, Brandon. Yeah, the data was really strong. It was really great to see. You know, our feasibility study included Type 2 users that were at a pretty low baseline of control. So, I mentioned many who had not used a CGM and only one who had used a pump. So really representative of that broad type 2 population out there. Baselines were at 32% time and range for basal only and 46% time and range for MDI. And depending on that cohort, we saw a 30% to 50% increase in time and range. So quite extraordinary performance there. So I think overall, we feel like the feasibility data accomplished what it did or what we set out to do, which is demonstrate that this technology has probably enormous value in the type 2 population. So this supports our discussions. This data supports our discussions with the FDA to determine the right size and design for our pivotal studies. This is really probably the wrap-up of our feasibility study, and then we will move into a pivotal. We believe that pivotal study is likely to look very similar, based on our early discussions, very similar to the type 1 pivotal. So, you know, hundreds of patients over three months looking at similar endpoints. But we need to finalize those discussions. We're in discussions with the FDA on a number of fronts regarding type 2 diabetes and Once we finalize that design and then start recruiting for the pivotal, you guys will be the first to know. And I guess I just emphasize that in the meantime, you know, we have this great product with DASH that's making a difference for people with type 2. That will continue, you know, to drive value for us. And it also continues to help us learn more and more about the clinician population, the patient population that we're serving with type 2. Thank you.
spk07: Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Shaycee Petrovic.
spk14: Shaycee Petrovic Thanks, Dilem. So I think you all know that it has been the honor of my career to lead the remarkable team at Insulet. And I know the company is in great hands with Jim leading the organization into its next chapter. As you heard today, Insulet is delivering terrific results and is poised for even greater growth and value creation for our shareholders and people with diabetes across the globe as we progress toward the full U.S. commercial launch of Omnipod 5. I am really excited to continue supporting and contributing to our success as a director and advisor. Insulet is just getting started, and our future is very bright. Thanks for your support, your comments today, and taking the time to join the call. Have a great afternoon.
spk07: Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.
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