Tandem Diabetes Care, Inc. Q3 FY2025 earnings call

Modernization of Commercial Operations

• In the U.S., measurable benefits from commercial changes implemented throughout the year, including redefined end-to-end processes, new technology platform deployment, and organizational restructuring to improve efficiencies.
• Outside the U.S., commercial transformation focused on preparing for direct operations in Europe, with direct sales initiatives beginning in the U.K., Switzerland, and Austria in early 2026, and additional countries to follow.

Driving Innovation

• Awaited FDA clearance for Mobi Control app for Android to expand the worldwide addressable market. t:slim X2 fully available with Abbott's FreeStyle Libre 3 Plus integration in the U.S. and global rollout planned. Expansion of Source Cloud Infrastructure for Mobi and t:slim mobile app deployment in multiple countries. Expanded Type 2 commercial efforts from pilot to full promotion of Control-IQ+.

Reshaping the Business Model

• Pursuit of multichannel reimbursement strategy. Successfully increased pharmacy benefit coverage for Tandem Mobi to over 40% of U.S. lives. Started selling t:slim supplies to existing customer base through pharmacy benefit in September, with early uptake encouraging due to affordability, convenience, and simplified refills.

In the third quarter, Tandem Diabetes Care achieved record Q3 sales. In the U.S., third quarter sales were approximately $176 million, driven by ASP increases on both pumps and supplies. Pump shipments in the U.S. were over 20,000. Outside the United States, sales were $74 million, primarily increased due to favorable foreign currency exchange rates, with pump shipments just over 9,000. Revenue contribution: U.S. sales accounted for a significant portion, and international sales contributed another part, with foreign currency dynamics playing a role in international sales performance.

2025 Outlook

• On track to achieve double-digit growth to $1 billion in worldwide sales, with U.S. sales ~$700M and international sales ~$300M. Reaffirmed gross margin expectation in the range of 53% to 54% of sales, with Q4 expected to be an all-time gross margin record in the mid- to high 50s. Adjusted EBITDA expected negative 5% of sales.

2026 Expectations

• Anticipate returning to new pump growth driven by MDI conversions from new product introductions and increased pharmacy access. International market expansion with direct operations scaling, aiming for nearly 15% of international sales from direct market sales. Goal to deliver gross margin of at least 60% in Q4 2026 and drive continued adjusted EBITDA improvement and positive free cash flow.

• Competition in the diabetes care market could impact market share and sales. - Payer dynamics and potential price erosion in the pharmacy channel. - Uncertainties in product development timelines, such as delays in FDA clearance for new products.

Q: Matt Miksic asked about cadence of new products, pharmacy progression, and geographic initiatives.

A: John Sheridan mentioned focus on Mobi, waiting for Mobi Android approval, moving Mobi to O-US countries, implementing FreeStyle Libre 3 and tubeless Mobi. Leigh Vosseller added building across 2026 with pharmacy progress and commercial team productivity green shoots.

Q: Larry Biegelsen focused on price and pharmacy supply uplift.

A: Leigh Vosseller said price increase was increasingly a contributor, balance from DME in first half, pharmacy in third quarter, and baseline to think about for 2026.

Q: Chris Pasquale asked about 2025 seasonality.

A: Leigh Vosseller said 2025 seasonal curve factored in 2024 experience, with about 30% of full year shipments in fourth quarter, renewal being more than half, and new renewal opportunities in fourth quarter.

Q: Danielle Antalffy asked about new patients to Tandem pump.

A: Leigh Vosseller said renewals were a little more than half of shipments, new starts had MDI conversions about 2/3, expected turnaround in 2026 with new product introductions and pharmacy access.

Q: David Roman asked about new pump growth and competitive dynamics.

A: John Sheridan said form factor and market access important, focus on pharmacy channel to reduce out-of-pocket and improve physician prescribing, and innovation like FreeStyle Libre 3 approval, Mobi Android approval, and product enhancements will improve competitive basis.

Q: Mike Kratky asked about pharmacy coverage for Mobi.

A: Leigh Vosseller said contracts with major PBMs, 40% payer lines attached, working on improving access within plans and expanding through pull-through, with operational aspects to scale efficiently.

Q: Joanne Wuensch asked about Sigi as next-generation Mobi.

A: John Sheridan said Mobi Tubeless is first extended wear pump, prioritized for launch, Sigi development combined with Mobi platform, and Mobi Tubeless expected to do well in marketplace.

Q: Suraj Kalia asked about fully closed-loop system and new pump starts.

A: John Sheridan said fully closed-loop system works with all CGMs, working with UVA for pivotal study next year. Leigh Vosseller said pump shipments normalized between Q2 and Q3, strong renewal growth, but new pumps pressured due to competitive conversions.

Q: Elaine asked about O-US strength and headwind.

A: Leigh Vosseller said O-US outperformance due to foreign currency, underlying trends in line with expectations, $10 million headwind due to distributor inventory destocking and buybacks ahead of direct launch, with underlying market growth strong.

Q: William Plovanic asked about Type 2 launch and new patient starts.

A: John Sheridan said leveraging pilot lessons, moving to full commercial launch, pilot territories productive, market development needed, and pharmacy channel and tubeless will improve uptake.

Q: Michael Polark asked about Tubeless Mobi timeline.

A: John Sheridan said prioritizing Mobi Tubeless for launch, 2026 launch, working to bring it to market as fast as possible, and it will differentiate Tandem.

Q: Jeffrey Johnson asked about U.S. pharmacy breakdown and contracts.

A: Leigh Vosseller said 5% revenue from Mobi, starting to lean more towards supplies with t:slim in Q4, contracts structured like traditional DME model with upfront pump reimbursement and ongoing supplies, considering other reimbursement models for future.