Insulet Corporation

Good afternoon ladies and gentlemen and welcome to the Insulet Corporation second quarter 2024 earnings call. At this time all participants are in 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 and then zero on your touchtone phone. As a reminder this conference call is being recorded And I would now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations.

Good afternoon, and thank you for joining us for Insulate's second quarter 2024 earnings call. With me today are Jim Hollingshead, President and Chief Executive Officer, and Ana Maria Chadwick, Chief Financial Officer and Treasurer. Both the replay of this call and the press release discussing our second quarter results and 2024 guidance will be available on the investor relations section of our website. Also on our website is our supplemental earnings presentation. We encourage you to reference that document for a summary of key metrics and business updates. Before we begin, we remind 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 from period to period. and we believe they are helpful for others as well. 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 Jim.

Thanks, Deb. Good afternoon, and thank you for joining us. 2024 is shaping us to be another year of rapid growth fueled by strong demand for OmniPot 5 and our accelerating pace of product innovation. Our financial results in Q2 demonstrate our strong execution and significant momentum across all of our markets, both in the U.S. and internationally, and we remain the clear industry leader in automated insulin delivery. The insulin team is executing at a high level and with increasing velocity, delivering strong financial performance and advancing our strategic initiatives. These first half results reinforce our confidence in an even stronger second half and another year of robust revenue growth and margin expansion as we continue to deliver on our mission to simplify and improve the lives of people with diabetes. Second quarter revenue exceeded our expectations across the board. In light of first half results and continued strong momentum, we increased full year guidance for revenue, gross margin, and operating margin. On today's call, I'll update you on three things. Our Q2 results and the continuing strength of our competitive position in the market, execution against our 2024 objectives to expand the Omnipod 5 platform globally, and lastly, our ongoing success capturing the value of scale across our business. Starting with financial performance, in Q2, we achieved total Omnipod revenue growth of 26%. including U.S. growth of 27% and international growth of 24%. Omnipod 5 continues to disrupt the diabetes technology landscape. In the U.S., we maintained a strong momentum in new customer starts, achieving sequential growth in Q2 in line with our expectations. Our strategy is to drive market expansion through our focus on bringing people out of multiple daily injections onto Omnipod therapy. As a result of that focus, we continue to rapidly increase our customer base while remaining at the forefront of driving overall market expansion. Our growth in the quarter was driven by increasing new customer starts from MDI users in both Type 1 and Type 2 diabetes. At a market level, we are seeing an emerging dynamic in which customers who have adopted pump technology are switching manufacturers at a lower rate. As a result of that dynamic, and our continuing market leadership in MDI, our new customer starts from competitive switches have become a smaller part of our business. However, we continue to be the net winner in competitive switching, winning more customers than we lose. During the quarter, roughly 85% of our US new customer starts came from people previously using MDI, consistent with the prior quarter, and we continue to take share from our competitors. Across both the Type 1 and Type 2 populations, we benefit from our competitive advantage in the pharmacy channel. The scale and scope we have built in this channel has significantly increased access and simplicity, which in turn help to drive strong new customer starts and maintain very high customer retention. We're also working hard to continue to increase awareness among prescribers, and this work is paying off. A growing number of healthcare practitioners are writing scripts for Omnipod within both the endocrinologist and primary care physician channels. Insulet is the clear leader in Type 1, and our Omnipod platform also remains the clear choice for people with Type 2. We are excited about the huge opportunity for us in Type 2, subject to FDA clearance for Omnipod 5's label expansion, which we hope to receive this year. I will provide more detail in a few moments. OmniPot 5 wins everywhere it goes. In Q2, we were pleased to again deliver international revenue and new customer starts growth ahead of our expectations. As a result of this success, we are significantly raising our international revenue outlook, this time by 600 basis points. We're rapidly approaching a half a billion dollars in annual international revenue for 2024, and we're still in the early innings. The accelerated revenue we are achieving returns us to growth rates above 20% at the high end of our international outlook. We've been able to achieve these results with only two full country launches and two more just getting started, which signals to us significant runway for continued international growth as we expand access to Omnicod 5 in all of the markets we serve. Earlier this year, we promised that in 2024, we would deliver a cascade of innovations, And in Q2, we continued to do just that, launching multiple platform expansions. Following our successful US limited market release, we entered full release of OmniPod 5 with Dexcom's G7 in the last two weeks of the quarter. Full integration with both G6 and G7 allows us to offer even more choice for our customers and capture the growth and adoption of Dexcom's latest sensor. As a reminder, Omnipod 5 with G7 is now exclusively available through several specialty pharmacies. This has allowed us to deliver an outstanding customer experience and ensure that new customers receive their Omnipod 5 G7 starter packs and pods seamlessly. Demand for our G7 offering is strong. Early results are promising and in line with our expectations. We have been pleased with the performance of this channel. It is operating at scale, and we can flex to meet ongoing increases in demand. And it allows us to focus our inventory on new customers in the near term, which we continue to expect will provide us with a tailwind in new customer starts during the second half of the year. Last week, we provided our existing OmniPod 5 customers a free over-the-air software update, enabling their controllers and compatible smartphones to pair with G7. Existing customers will be able to move to G7 once they see compatible pods appear in their preferred retail pharmacy. Given the success of our specialty pharmacy launch, we recently made the decision to allow the inventory shift in retail outlets to progress at a more natural pace. This will allow us to minimize any potential confusion for our customers and our channel partners, while also minimizing the risk of potential product returns and potential impact on our gross margins. We continue to expect the ease of retail pharmacy, as usual, will provide an additional new customer start tailwind as G7 pods naturally become more widely available, now planned later in Q3. During Q2, we achieved another major milestone with the initial U.S. launch of the Omnipod 5 iOS app with G6, and our limited market release is progressing very well. We are hearing from early users just how, quote, liberating the system is. One potter shared that, quote, OmniPot 5 with the iPhone is the biggest innovation since the introduction of AID. It's a delightful experience having everything on one device, end quote. We also had a potter tell us, quote, OmniPot 5 puts managing diabetes in the background, end quote. It is gratifying to hear this feedback and it gives us even more confidence in our ability to continue scaling our limited release and then transition to full release in the fall. Adding to this cascade of innovation in the U.S., we are pleased to announce that we expect to launch Omnipod 5 integrated with Abbott's Freestyle Libre 2 Plus sensor by the end of this year. We are excited to expand our Omnipod 5 offering to reach customers in the U.S. who have chosen the Libre family of sensors And we are confident this portfolio expansion will generate increased demand for Omnipod 5, just as we are seeing in the early days of our launches with Libre 2 Plus internationally. Turning to international, in Q2, we extended the Omnipod 5 platform into new markets, and we were the first to offer integration with Abbott's Libre 2 Plus sensor internationally, introducing this integrated offering in the UK and Netherlands. This also marked our first sensor of choice pod offering, which is compatible with both Libre 2 Plus and G6. We are hearing from HCPs and patients that both integrations are providing an outstanding experience, including how easy it is to start Omnipod 5 using either leading sensor. Further expanding global reach, we recently launched Omnipod 5 in France, which is one of our largest markets. We are in the early days, and feedback from patients and HCPs has been fantastic. HCPs have noted the very positive clinical outcomes, with particular emphasis on Omnipod 5's simplicity. Demand for Omnipod has always been high in France, and with Omnipod 5, we expect to continue to build on this strength and successfully drive robust adoption, as we have seen in our other international launch markets. OmniPi 5 is now available to the majority of our European customers, and of course, we are not stopping there. We are in the final planning stages for additional launches in Italy, the Nordics, Canada, Australia, Switzerland, and Belgium, with others soon to follow. For all of the countries in our near-term pipeline, you will see us begin local market work to prepare for our planned commercial launches throughout 2025. We will keep you updated on our progress, capitalizing on the enormous international opportunity we are pursuing. Turning to Type 2 diabetes, which represents another significant opportunity for growth in our business. We are already the market leader in our space. In the second quarter, people with Type 2 represented roughly 25% of our U.S. new customer starts, continuing a strong ongoing trend. The type 2 insulin delivery market is large and significantly under-penetrated. The combined patient population using either intensive insulin therapy or basal insulin is roughly three times the size of the type 1 population. This year, we have had two important pathways for innovation in the type 2 space, both commercial and clinical. As you know, we have been commercially piloting OmniFog Go, a product aimed at the needs of basal-only insulin users. The purpose of that pilot has been to accomplish two main goals. One, determine the optimal way to expand our sales force, and two, develop a better understanding of the patient profile that presents in non-specialist practices so we can better serve patient needs. This pilot has led to our identifying multiple patient profiles and designing our go-to-market strategy. In parallel, We have been pursuing clinical work to expand our offerings for people with type 2 diabetes, most meaningfully with our pivotal trial with Omnipod 5 called Secure T2D. We recently presented the trial data at ADA, and I want to take a moment to summarize some of the key top line results. Secure T2D is the largest study ever completed for the use of automated insulin delivery in type 2 diabetes, with approximately 300 people completing the protocol. The study participants were highly diverse and representative of the general population in the U.S. This is important both from the point of view of health equity and because the study results will be clinically relevant to patients as they present in the real world. The clinical outcomes were striking. Omnipod 5 delivered an average A1C reduction of 0.8 with increasing benefit across the study population as baseline A1Cs were higher. Those with a baseline A1C greater than 9, on average, achieved an A1C reduction of 2.1. More than half of the participants were concurrently on GLP-1 therapy, and notably, results were the same across all cohorts, whether or not on a GLP-1. Importantly, roughly 20% of study participants were currently on basal-only insulin injections, and they also benefited in line with intensive insulin users. In this population, a key barrier to insulin adoption is the risk of hypoglycemia, and in secure T2D, there was no increase in hypoglycemia. Finally, among several other demonstrated benefits, study participants reported a clinically valid and meaningful reduction in diabetes distress. These remarkable results clearly demonstrate Omnipod 5's benefit for people with type 2 diabetes. On the basis of these results, in June, we filed for expansion of our indications for use for Omnipod 5 with the FDA. Now that we have such strong results from our clinical trial work and the rich learnings from our Omnipod Go commercial pilot, these two innovation streams will come together. In anticipation of FDA clearance of our label expansion, during the coming quarters, we will make targeted investments in our sales force to extend our currently successful sales model and expand our feet on the street to further penetrate the Omnipod 5 prescribing base, and we will focus our efforts on Omnipod 5. We strongly believe Omnipod 5 will provide benefit to a wide range of insulin-using type 2 patients, both those using MDI and those on basal-only insulin therapy. Therefore, Omnipod 5 will replace Omnipod Go as our offering for people with type 2 diabetes on basal-only insulin. We are grateful for the patients and the HCPs that participated in our pilot, and we look forward to supporting them in their transition to other Omnipod therapies. Leading with Omnipod 5 in this space will enable us to serve more customers by leveraging and streamlining existing operations, supply chain, and manufacturing, and it eliminates the need for ongoing investments in product lifecycle management for a separate product platform. More importantly, We are confident we have a clear right to win in the Type 2 space. We expect to be the first to market in Type 2 with an AID offering, and not just any AID offering, but with Omnipod 5, which is the product platform that quickly leapfrogged into market leadership once we launched it in Type 1. Omnipod 5 will bring all the benefits to Type 2 patients that it already delivers. Ease of access to the pharmacy channel, low to no upfront cost, market-leading ease of use, and the unique discretion and convenience of a wearable, disposable patch pump with the day-to-day simplicity of full phone control with both Android and iOS. All of that while delivering the striking clinical benefits we have just established with our pivotal trial. We are excited to bring the best automated insulin delivery offer to the Type 2 market by the end of this year, pending clearance by the FDA. Anna will have more detail on the financial impact of our refining strategy in a few moments, but the biggest financial impact will be the opening of a new addressable market for us, which we fully expect will fuel our growth. Before I hand over to Anna, I'd like to briefly discuss our expanded global manufacturing capabilities. We've been successfully investing in process innovation in our Acton facility, which is meaningfully contributing to gross margin expansion. and we have made significant investment in a new state-of-the-art manufacturing plant in Malaysia, which will enable us to scale faster and expand margins and cash flow. We are thrilled to have begun producing sellable Omnipod 5 product in Q2 in Malaysia ahead of schedule. Our new facility is over two times the size of our U.S. facility, and we expect it to be accretive to gross margin in its first full year of production, ramping as volumes increase. Our advantages in scale position us to grow our global business profitably and seamlessly meet the growing demand for Omnipod 5, which represents an important and distinct advantage over competitors. Shortly after this call, several members of our executive team will travel to Malaysia to attend our facility's official grand opening. We look forward to celebrating this occasion with our local team, as well as the many other Insulate employees globally who helped make this happen. With that, I'll turn the call over to Anna to walk you through our results and guidance.