TANDEM DIABETES CARE INC Q3 FY2024 earnings call

• Record quarterly sales of $243 million, the highest in company history, driven by expanding product portfolio and positive feedback on Tandem Mobi.
• Returned to positive free cash flow in Q3. Saw return to year-over-year new pump growth in the U.S., with more than half pump shipments being new to customers and over half of new customers adopting Tandem pump for multiple daily injections.
• T:slim X2 continues to have customer enthusiasm for its all-in-one convenience and Control-IQ technology. Tandem Mobi is redefining wearability with its tiny size and Control-IQ technology, attracting a younger demographic.
• OUS demonstrated growth in pump placements and high customer retention, with recent award of new tenders in select countries starting 2025 and regulatory win in EU for T:slim X2 with Lyumjev ultra-rapid-acting insulin.
• Expanding product portfolio with roadmap including integration of G7 sensor with Mobi, launch of Tandem Source outside U.S., integration of Abbott's FreeStyle Libre 3 on t:slim and Mobi, and development of new Mobi features like tubeless cartridge option. Clinical progress with Steadi-Set pivotal trial on track and regulatory filing for 3-day indication, and completion of pivotal trial for Control-IQ expansion to type 2 diabetes.

In the United States, Q3 sales were $171 million, representing more than 23% year-over-year growth, with nearly 21,000 pumps shipped. Pumps contributed 51% of sales. Outside the U.S. (OUS), sales grew 31% year-over-year to $72 million, with nearly 11,000 pumps shipped in 25 markets, a more than 30% year-over-year increase in pump shipments.

• Increased annual sales guidance to $903 million to $910 million, 17%-18% year-over-year growth, with $645 million to $650 million in U.S. and $258 million to $260 million outside U.S.
• Reaffirmed gross margin expectation of 51% for full year and adjusted EBITDA break-even.
• 2025 outlook to have multiple new growth drivers, with Mobi key for margin expansion as it scales, and focus on market access strategy through pharmacy channel in U.S. and tender wins in OUS, while balancing growth investments with operational leverage. Acknowledged deductible-driven seasonality impact on U.S. business, with first quarter sales typically stepping down from fourth quarter.

• Seasonality impact on sales and profits, particularly deductible-driven seasonality in U.S. business leading to step down in sales and profits from fourth quarter to first quarter.
• Potential tariff impacts on supply chain, as components and supplies sourced from international sources could be affected by tariffs.

Q: Can you give more color on new patient starts in Q3 versus Q2, and Mobi cadence through 3Q or exiting 3Q?

A: New pumpers were still a little more than half of pump shipments, with more than half of new pumpers being MDI, consistent with expectations. Pump shipments from Q2 to Q3 stepped up modestly due to seasonal dynamics.

Q: Talk about the pharmacy contract announcement in the context of broader pharmacy strategy and progress in coming quarters?

A: It's an important first step in multi-year strategy to drive profitable access and reduce patient out-of-pocket costs. There are additional contracting conversations underway, and more color will be provided as strategy is executed.

Q: How does pricing relate to competitor in pharmacy channel?

A: Contracts need to lower patient out-of-pocket and be at least as good economically as DME contracts, and the announced contract met criteria.

Q: Color on Mobi: Tubeless cartridge option and Steadi-Set?

A: Excited about Mobi: Tubeless making good progress, and expertise in-house for longer wear sets. Steadi-Set pivotal trial to complete this quarter, and 3-day set filed as risk mitigation strategy for FDA questions.

Q: Why growth may slow in 2025 versus 2024?

A: Approach is to focus on predictable revenue streams first, like supply sales and renewals, then factor in new growth drivers after timing and trends are assessed.

Q: Q4 guide and margin metrics?

A: Q4 guidance in line with historical seasonal trends. Margin had benefit from pricing and lower materials costs but faced modest headwinds from Mobi scaling, with benefit expected in 2025 as Mobi scales.

Q: Mix between Mobi and t:slim?

A: Pleased with Mobi's performance and positive reception, but not specifying exact ratio yet as building market awareness.

Q: Type 2 prescriptions and volumes, pre-label expansion?

A: Steady 5%-10% of new starts on a quarterly basis for Type 2, with about 30,000 people using Control-IQ off-label. Expect uptake to increase with active marketing and new indication, potentially moving from 5% to over 25% in penetration.

Q: Market growth and Tandem's position?

A: Core market adoption of pump therapy is accelerating, driven by new products, indications, and improved access, with Tandem holding its own and expecting growth with new products and indications.

Q: Pharmacy migration and scaling?

A: Initial pharmacy contract is a first step, with multiple conversations underway. Too early to talk about volume, but 2025 will provide more color as strategy is executed.

Q: Tariff impacts on supply chain?

A: Supply chain is flexible, with ability to move components and offset expenses, but currently top of mind as tariffs are a consideration.