Insulet Corp (PODD)

• Insulet's Omnipod 5 is experiencing strong growth in both type 1 and type 2 diabetes markets, with sequential and year-over-year new customer starts growth in the U.S., including in both type 1 and type 2 populations. - Growth is driven by conversions from multiple daily injections (MDI), with over 85% of U.S. new customer starts coming from MDI users. - The company is bullish on the significant growth potential in the type 2 market, expecting penetration to double or triple over the next few years. -
• Omnipod 5 is now the #1 insulin pump for new pump users in Europe, demonstrating strong international momentum. - The company achieved international Omnipod revenue growth of 35%, fueled by demand for Omnipod 5 across all international markets. - Despite typical seasonality during summer months, they maintained stable sequential new customer starts. -
• Insulet maintains a strong competitive position due to its high customer retention rates, running in the low 90% range and very stable - , and its advantages in the pharmacy channel, where Omnipod 5's ease of use and widespread access contribute to growth. - Additionally, integrations with popular CGM sensors like Dexcom's G7 and Abbott's FreeStyle Libre 2 Plus are driving growth and providing tailwinds for new customer starts. -

• Insulet anticipates lower retention rates among certain segments of type 2 diabetes patients, stating that "it's quite likely that we'll see different usage patterns and maybe some lower retention in parts of the type 2 population." -
• Increased competition in the pharmacy channel may pressure Insulet's pricing and market share, as competitors are entering the space and could push on pricing as they grow bigger. -
• Past customer service issues during the Omnipod 5 launch due to high demand, where "we had so much demand that... we had trouble answering the phones," may pose challenges if similar surges occur in the future. -

1. Type 2 Market Growth
   Q: Is the industry ready for increased Type 2 penetration?
   A: James stated they are leading and developing the Type 2 market, seeing a lift in September after being the first with an AID indication for Type 2. He expects Type 2 penetration to potentially double or triple over the next few years, adding growth without impacting Type 1 efforts. -

2. 2025 Growth Outlook
   Q: What's the opportunity with new patient starts in 2025, especially with Type 2?
   A: Ana is excited about growth prospects and will provide detailed guidance in February. She highlighted that their annuity model means most revenue growth from new customers will come in 2025, especially as innovations launched in the second half contribute. Price accretion in international markets and strong positioning support 2025 growth. -

3. Competitive Landscape
   Q: How are you approaching competition into 2025?
   A: James noted that despite one competitor's comments, they have industry-leading retention that remains high and stable. They've seen an uptick in conversions from that competitor to Omnipod 5 for two quarters. They focus on driving growth by bringing MDI users onto Omnipod 5, where they are clear leaders. -

4. Defending Pharmacy Channel Pricing
   Q: How will you defend pricing in the pharmacy channel against competitors?
   A: James stated they have a very strong position in the pharmacy channel because Omnipod fits well there. They have Part D reimbursement and long-term relationships with PBMs built over seven years. They negotiate contracts annually and are confident in defending their position and pricing. -

5. Q4 Guidance and Growth
   Q: Will Type 2 launch maintain or accelerate U.S. growth despite Q4 deceleration?
   A: Ana explained they anticipate growth over 20%, and the annuity model means benefits from new customer starts will increase through 2025. James added they have clear sequential growth in new customer starts in both Type 1 and Type 2, providing confidence in Q4 guidance and a ramp into 2025. -

6. Impact of CGM Integrations
   Q: How have CGM integrations impacted new starts or existing customers?
   A: James said sensor integrations have been terrific, with G7 integration in the U.S. being a material part of new customer starts. They launched sensor choice integration in the U.K. and Netherlands, offering G6 and Libre 2, and expect the upcoming Libre 2 integration in the U.S. to create growth tailwinds. -

7. European Omnipod 5 Adoption
   Q: How high can European Omnipod 5 adoption go?
   A: James expects a similar dynamic as in the U.S., with Omnipod 5 becoming the predominant product over time. Due to four-year reimbursement cycles, conversions will be slower, but Omnipod 5 is already the #1 pump in their European markets. Strong new customer starts are anticipated as they roll out Omnipod 5 internationally. -

8. Retention Rates
   Q: How do you measure retention, and how is it trending?
   A: James explained they have high-fidelity data from cloud connectivity, with retention stable in the low 90s. Retention remains very high and doesn't vary much over periods. -

9. Algorithm Development
   Q: Update on fully closed-loop algorithms and their applicability?
   A: James mentioned they have two programs working on different approaches, including one closer to a fully closed loop. Accelerated by real-world data, they've entered early clinical trials. Current Omnipod 5 algorithm already delivers excellent glycemic control, but they see opportunities to further improve. -

10. Basal-Only Patients and Type 2 Retention
    Q: Updates on basal-only patients and Type 2 retention?
    A: James noted that basal-only patients benefit from Omnipod 5, with SECURE T2D data showing similar benefits as MDI patients. They're bullish on both sides of the Type 2 market. Retention has remained strong, though parts of the Type 2 population may show different usage patterns, possibly lower retention. They plan to build customized offerings to improve retention. -

11. Customer Service Focus
    Q: Has launching AID systems impacted patient service focus?
    A: James stated they're focused on building a differentiated end-to-end customer experience. They've scaled commercial capabilities, including customer care and product support, and are committed to providing the best experience to users now and in the future. -

12. European Performance and Pricing
    Q: Is the European #1 status in all of Europe, and how sustainable is price benefit?
    A: James clarified they are #1 in the markets they serve in Europe, impressive without Omnipod 5 in all markets. Ana mentioned that price accretion is expected to continue as they launch in new markets and negotiate premiums for Omnipod 5 due to its value. -

Quarterly guidance for Q4 2024:

• Total Omnipod revenue growth: 13% to 16% - (lowered from 21% to 24% - - )
• Total company growth: 12% to 15% - (lowered from 18% to 21% - - )
• U.S. Omnipod growth: 9% to 12% - (lowered from 21% to 24% - - )
• International Omnipod growth: 30% to 33% - (raised from 21% to 24% - - )
• Drug delivery revenue: $7 million to $8 million - (raised from $3 million to $4 million - )
• Foreign currency impact: Favorable impact of 100 basis points - (no prior guidance)

Annual guidance for FY 2024:

• Total Omnipod revenue growth: 21% to 22% - (raised from 18% to 21% - - )
• Total company revenue growth: 20% to 21% - (raised from 16% to 19% - - )
• U.S. Omnipod growth: 19% to 21% - (no prior guidance)
• International Omnipod growth: 25% to 27% - (raised from 18% to 21% - - )
• Gross margin: 69% - (no change from prior guidance - )
• Operating margin: 14.5% - (raised from 14% - )
• Tax rate: 20% to 25% - (no change from prior guidance - )