Jeff Johnson

Jeff Johnson asked for Insulet's early thoughts on how it plans to protect and extend its competitive moat in the patch pump market, especially with potential two-piece patch pump entrants expected in the next 18-24 months.

Answer

Ashley McEvoy, President and CEO, stated the primary focus is expanding the market by converting MDI users. She highlighted Omnipod 5's differentiated technology, strong competitive sourcing in Q3, frictionless customer experience, pipeline investments (like phone control and next-generation products), and a diversified, resilient supply chain as key elements of their competitive advantage.

Jeff Johnson asked about Insulet's strategy to protect and extend its competitive moat in the patch pump market, particularly in anticipation of potential two-piece patch market entrants over the next 18-24 months.

Answer

Ashley McEvoy (President and CEO) emphasized expanding the market by transitioning MDI users to AID, highlighting Omnipod 5's differentiated technology, strong competitive sourcing in Q3, a frictionless customer experience, pipeline investments (e.g., phone control adoption from 45% to 55%), and continuous capacity investments for a resilient supply chain.

Jeff Johnson asked about the phasing of the $200 million operating income cost savings, specifically if it's a net number and how it will be distributed over the next three years, and whether a similar remeasurement gain is expected in 2026.

Answer

Ron South, Senior Vice President and Chief Financial Officer, confirmed the $200 million is a multi-year, net operating income improvement, but the specific phasing for 2026 is still being assessed. Regarding remeasurement gains, he noted they have been a regular part of the business but no significant ones are expected in the near future, with clarity to be provided in the 2026 guidance.

Jeff Johnson asked about the phasing of the $200 million operating income cost savings, specifically if it's a net number inclusive of reinvestments and how it might be split over the next three years. He also inquired whether a similar remeasurement gain should be expected in the model for next year.

Answer

Ron South, Senior Vice President and Chief Financial Officer, stated that the $200 million is a multi-year, net operating income improvement, with phasing details for 2026 to be provided with future guidance. He noted that remeasurement gains have been a regular part of the business but did not commit to a significant one for 2026, promising clarity in future guidance.

Jeff Johnson from Robert W. Baird & Co. asked about the phasing of VBP tailwinds in China for the implantables business and whether the flat Q1 growth represented a trough. He also inquired about the pricing strategy for PanOptix Pro versus the original PanOptix.

Answer

CEO David Endicott attributed the flat implantables growth to the soft U.S. market and expects the VBP tailwind to last until mid-2026. CFO Tim Stonesifer added that the VBP comp normalizes in Q2. Regarding pricing, Mr. Endicott declined to share specifics but acknowledged the strategic flexibility offered by having two distinct premium products.

Questioned the feasibility of the back-half guidance, which implies significant year-over-year EPS growth, and asked for the key drivers behind this expected ramp-up. He also requested factual details on the operational overlap between Patterson's dental and veterinary businesses in light of the strategic alternatives review.

Answer

The expected back-half EPS growth is attributed to lapping the significant negative impact of the Change Healthcare disruption from the prior year's Q4. Additional tailwinds include lower year-over-year interest expense and a reduced share count. Regarding the operational overlap between the dental and vet businesses, it's described as a 'mixed bag,' with some shared distribution and service centers, but also many facilities that are specific to each segment.

Sought clarification on the ongoing Change Healthcare impact, asking if it's due to lower monetization on new platforms or continued disruption to consumable orders. Followed up by asking if any customers were permanently lost and requested quantification of the separate impacts from Change Healthcare and the prior-year UPS issue on consumables.

Answer

The ongoing impact is primarily due to the new claims processing platform having a slightly lower revenue per customer than Change. The disruption to consumable orders is viewed as a temporary timing issue. No customers were permanently lost, though a small number found alternative claims processing solutions not integrated with Patterson's software. The UPS issue was quantified as less than a 1-point impact, with the Change issue being larger.