Insulet reported total revenue of $198 million in 1Q20, rising a strong 24% YOY (+25% operationally) on a tough comparison to 29% YOY growth in 1Q19. Sequentially, sales fell 5% from the record 4Q19. The 24% YOY growth in 1Q20 is Insulet’s seventh straight quarter of >20% YOY growth, demonstrating impressive consistency even as Insulet’s base continues to grow. US Omnipod revenue came in at $117 million in the quarter, rising 35% YOY. International Omnipod revenue totaled $73 million, rising 29% YOY (+32% operationally) and 11% sequentially.
With the obvious disclaimer that “the impacts of COVID are difficult to predict,” Insulet chose to maintain its annual guidance. CEO Shacey Petrovic did note that “we expect to come in at the low end” of previous guidance, given the impact from COVID-19. Due to the recurring revenue model of Omnipod, new starts only make up ~10% of Insulet’s revenue in any given quarter. Even though Insulet is expecting new patient starts to decline 50%-75% in 2Q20, 50% in 3Q20, and 25% in 4Q20 as a result of COVID-19, the strong momentum from the back half of 2019 is expected to carry Insulet to the low end of its previously given revenue guidance ranges, although gross margin will be lower.
One year after launch, Omnipod Dash delivered “over 60%” of new patient adds in 1Q20. This percentage continues to rise from “approximately 55%” in 4Q19, ~50% in 3Q19, and “more than one-third” in 2Q19. Driven by Dash, “almost 30%” of Insulet’s total US volume is running through the pharmacy channel. Also driven by Dash, “approximately one-third” of new US starts in the quarter were patients with type 2 diabetes (and there is an endless number of new patients it could provide). Ms. Petrovic also gave an update on coverage for Dash: “over 50%” of Medicare, “approximately 70%” of Medicaid beneficiaries, and “over 60%” of covered lives.
In line with expectations, a software patch for Omnipod Horizon has been submitted to the FDA. With a few weeks for FDA review and efforts around training clinical sites, Ms. Petrovic estimated that the trial would resume sometime in June. Insulet paused the pivotal trial for its Omnipod Horizon hybrid closed loop system in early March to address a “software anomaly.” Importantly, the bug does not affect the validity of the already-collected ~8,000 patient days of data. Despite the pause, Ms. Petrovic stated that she expected “all sites” and “virtually all patients” would continue with the study. Horizon is now “tracking” to be on the US in the “first half of 2021,” changed from previous estimates in late 2020, which were ambitious even pre-COVID in our view.
Insulet reported its 1Q20 financial results this afternoon in a most-inspiring call expertly led by CEO Ms. Shacey Petrovic and CFO Mr. Wayde McMillan. See the key highlights below!
- Financial and Business Highlights
- 1. Global revenue of $198 million, rising 24% YOY (+25% operationally); US Omnipod revenue of $117 million (+35% YOY); OUS Omnipod revenue of $73 million (+29% YOY)
- 2. Full-year 2020 guidance maintained, “although we expect to come in at the low end”; FY2021 revenue goal of $1 billion maintained
- 3. First quarterly net loss in nearly two years; gross margin of 64%; $382 million in cash and investments
- 4. “Producing sellable product” on second US manufacturing line, anticipating slower production ramp due to COVID-19
- Omnipod Dash Highlights
- Pipeline Highlights
- Analyst Q&A
Financial and Business Highlights
1. Global revenue of $198 million, rising 24% YOY (+25% operationally); US Omnipod revenue of $117 million (+35% YOY); OUS Omnipod revenue of $73 million (+29% YOY)
Insulet reported total revenue of $198 million in 1Q20, rising a strong 24% YOY (+25% operationally) on a tough comparison to 29% YOY growth in 1Q19. This growth represents the highest growth in five years in the first quarter. Sequentially, sales were down 5% from the record 4Q19. Sales in 1Q20 came in ~$7 million above the high end of guidance given in February. Growth in the quarter was driven entirely by sales of Omnipod, with about two-thirds (65%) coming from the US market and the rest from the international Omnipod market (35%). The 24% YOY growth in 1Q20 is Insulet’s seventh straight quarter of >20% YOY growth, demonstrating impressive consistency even as Insulet’s base continues to grow. CFO Wayde McMillan also estimated about $4 million of revenue benefit from Insulet customers stocking up on supplies due to COVID-19.
US Omnipod revenue came in at $117 million in the quarter, rising 35% YOY. Sequentially, sales fell ~8% from the record 4Q19. This decline is in-line with the sequential declines seen in 1Q19 and 1Q18; most device companies see a seasonal drop-off in US revenue from 4Q to 1Q as deductibles reset. The 35% YOY growth in 1Q20 breaks a streak of five consecutive quarters of growth acceleration, but of course, 35% YOY growth in a primarily subscription-driven business and on an ever-growing base, is a remarkable number.
Insulet added a record number of new US patients in the quarter. As noted by Mr. McMillan, new patient adds are obviously an important part of Insulet’s growth, but, due to the recurring revenue model of Omnipod, new starts only make up ~10% of revenue in any given quarter. This is a considerable difference from a company selling tubed pumps with a four-year warranty (e.g., Medtronic, Tandem), which realizes the entirety of revenue benefit from a new patient addition at the time that patient is added. Compared to its previous expectations, Insulet is expecting new patient starts in the second quarter to decline 50%-75%, 50% in 3Q20, and 25% in 4Q20 as a result of COVID-19. See more in the guidance highlight below.
Omnipod Dash continues to be a strong driver of new patient starts, delivering “over 60%” of new US Omnipod starts. This continues to grow from “approximately 55%” in 4Q19 and 3Q19 and “more than a one-third” in 2Q19. Impressively, “almost 30%” of total US volume is now coming through the pharmacy channel, no doubt driven by the growth of Omnipod Dash (remarkably, “almost all” of Dash starts in the quarter came through the pharmacy).
International Omnipod revenue totaled $73 million, rising 29% YOY (+32% operationally) and 11% sequentially. The 11% sequential growth comes on an easy comparison to 4Q19, which saw the first sequential international Omnipod revenue decline in six quarters. OUS revenue in 1Q20 came in ~$5 million above guidance. Across international markets, Mr. McMillan estimated about $2 million of positive revenue impact in the quarter from customers stocking up on Omnipods.
Insulet’s Drug Delivery business delivered revenue of just $8 million, declining 50% YOY and below guidance. Mr. McMillan noted this was due to a shift “in the timing of production,” and expects the weaker first quarter to be offset by a stronger-than-usual 2Q20. Even before the unusually weak quarter, Drug Delivery had stalled out at $15-$20 million in quarterly revenue, in sharp contrast to the quickly growing Omnipod revenue. This business gets basically no air time on calls and is clearly not driving Insulet growth anytime soon.
2. Full-year 2020 guidance maintained, “although we expect to come in at the low end”; FY2021 revenue goal of $1 billion maintained
With the obvious disclaimer that “the impacts of COVID are difficult to predict,” Insulet chose to maintain its annual guidance. CEO Shacey Petrovic did note that “we expect to come in at the low end” of previous guidance, given the impact from COVID-19. As mentioned above, Insulet benefits from better visibility than a traditional insulin pump company, as the vast majority of its quarterly revenue comes from its existing customer base; Mr. McMillan: “historically, new Omnipod starts within any given quarter contributed approximately 10% of revenue.” Even though Insulet is expecting new patient starts to decline 50%-75% in 2Q20, 50% in 3Q20, and 25% in 4Q20 as a result of COVID-19, the strong momentum from the back half of 2019 is expected to carry Insulet to the low end of its previously given guidance ranges.
For the full year 2020, Insulet is now guiding for 15% YOY operational growth, compared to 15%-19% YOY operational growth guidance given in 4Q19. The 15% YOY operational growth would imply FY20 revenue in the ~$840-$845 million range. Total Omnipod revenue in FY20 is expected to grow 18% operationally, compared to the previous range of 18%-22%. Full-year US Omnipod revenue is guided for 19% growth (vs. previous range of 18%-22%); full-year OUS Omnipod revenue is guided for 16% operational growth (vs. previous range of 18%-22%). Like Tandem last week, Insulet is expecting to see greater negative impact from COVID-19 in its international markets due to more patients in Europe going to the hospital for their diabetes care. Notably, Insulet is also maintaining its goal to reach $1 billion in total revenue in 2021.
The 50%-75% decline in new patient starts expected in 2Q20 was perhaps higher than we’d anticipated, given the success stories shared around Insulet’s telehealth and virtual training/onboarding efforts. During prepared remarks, Ms. Petrovic stated that Insulet had onboarded “approximately 2,000” new users via virtual training in Insulet’s direct markets alone (~half of Insulet’s business) over the “last several weeks.” During Q&A, Ms. Petrovic also characterized feedback from patients on virtual trainings as “incredibly positive” and called Omnipod an “ideal” device to do virtual training, given its simplicity (compared to a tubed pump). Also during Q&A, Mr. McMillan did note a “pretty acute drop-off” in sales leads in March, expected negatively impact new starts in May and June.
Ms. Petrovic was asked whether the tubeless Omnipod pump might be better positioned than its insulin pump competitors for telehealth-based training: Her answer was very humble: “I don't want to comment on competitive pump businesses, but what we do know just from IQVIA data and primary market research is that in the United States, endo visits are down 60% since the beginning of March. I think that gives you a sense that this 50% to 75% number is probably right in line with what others are seeing. We are bullish on what kind of fit Omnipod is for telemedicine and we believe in that world, we can lean in and do better than others. At the same time, we are relying on endos to build telemedicine capabilities. While we have sped ahead and I think built some really exciting capabilities and support mechanisms for our endo offices, there's still, across the globe, different clinics that are in very different situations in terms of their capabilities to be able to support telemedicine. We're a little bit ahead of the curve and we'll see how this plays out and how quickly endo offices across the globe, particularly in the United States, can start to implement and support telehealth for their patients.” While we certainly acknowledge that these capabilities differ across the globe (as well as across most countries), there is significant room for telemedicine opportunities to continue. We would love to hear more on whether endos not participating in telemedicine do not want to, do not feel they have the skills, or do not have a patient base with the interest or technology literacy.
3. First quarterly net loss in nearly two years; gross margin of 64%; $382 million in cash and investments
Disappointingly, Insulet broke a string of six consecutive profitable quarters, Insulet reported a net loss of $2.1 million in 1Q20. The $2 million net loss compares to net income of $4.4 million in 1Q19. Operating expenses in the quarter totaled $119 million in the quarter, rising ~20% YOY. As a percentage of revenue, operating expenses improved slightly from 62% in 1Q19 to 60% in 1Q20. Gross margin in 1Q20 was 64%, about flat with 4Q19, but down nearly 3% from 1Q19. Mr. McMillan noted about a negative gross margin impact of 1.6% from COVID-19 related costs and another 0.4% from foreign currency exchange rates. Ramping manufacturing production at its new US facility in Massachusetts also continues to present a gross margin headwind. Lastly, Insulet ended the quarter with $382 million in cash and investments, down from $435 million at the end of 2019 – given the $2 million loss, the cash balance is certainly quite high. Mr. McMillan cited planned expenses around Insulet’s US manufacturing and other supply chain investments. Insulet refinanced its convertible debt last quarter and has no debt maturing until 2024 at the earliest.
4. “Producing sellable product” on second US manufacturing line, anticipating slower production ramp due to COVID-19
“Sellable product” began rolling off of Insulet’s second US manufacturing line in early March, ahead of 4Q19 expectations for “mid-year.” However, due to COVID-19, Insulet is expecting ramping of production to be slower than originally planned. A third production line was also expected to come online in 2020 with sellable product “next year” – it’s unclear if those plans have been impacted by the pandemic. As a reminder, the new US manufacturing lines are part of a $200+ million investment to move Insulet’s global headquarters to Acton, MA. The highly automated lines are also expected to be a key driver for Insulet to reach its long-term gross margin goals, while simultaneously driving redundancy.
Mr. McMillan noted during Q&A that Insulet is also “building inventory” currently and staying ahead of demand. Mr. McMillan was also very complimentary of Insulet’s Chinese manufacturing partners during the pandemic: “[Insulet’s] teams saw this risk several years ago when they laid out the multiyear strategy and obviously made a significant investment … we've got two lines up and running now and producing. That's allowing us to actually build inventory through this time and [we’re] able to stay ahead of demand and demand that's overachieving or outperforming our base scenarios. Regarding that risk in China, we've got a really strong partner in China. I think we're very impressed by how quickly they took on the challenge and were able to staff, recruit, onboard, train and safely move people into the facility and get our production up. It was clearly delayed from a typical year-end start, but given the environment we were impressed by how quickly both the third-party team and our operations teams worked together … We’re going to see a multi-facility strategy from us going forward. One of the main drivers for our US manufacturing facility was to get redundancy and we'll have redundancy once we have three and four lines running here in the US and keeping our China manufacturing facilities. We’ll achieve that objective once we get our third line up and then eventually under our fourth line.”
Omnipod Dash Highlights
1. Omnipod Dash delivers “over 60%” of new patient adds in the quarter, continuing strength in pharmacy, MDI users, and type 2s; coverage expansions
One year after launch, Omnipod Dash delivered “over 60%” of new patient adds in 1Q20. This percentage continues to rise from “approximately 55%” in 4Q19, ~50% in 3Q19, and “more than one-third” in 2Q19. This is a very impressive rate of adoption and good news for Insulet as Dash generates higher revenue per user. We’d imagine Omnipod Dash is also particularly well-positioned for the current environment with COVID-19 for a few reasons: (i) Dash has no large upfront cost, allowing patients to “try-out” the pump without being locked-in for a four-year contract; (ii) Dash may be easier to onboard virtually, as there is no infusion set or tubing to deal with; and (iii) Dash may be easier to access, given its availability through the pharmacy channel. Omnipod Dash is continuing to drive many positive trends in Insulet’s overall business:
Driven by Dash, “almost 30%” of Insulet’s total US volume is running through the pharmacy channel. This number continues to rise from “over 25%” in 4Q19“over 20%” in 3Q19, 15%-20% at the end of 2Q19, and 10%-15% in 1Q19. This is a seriously impressive transition and one that should benefit both patients, providers, and Insulet. We would love to have a better sense of how much opportunity there is for a higher percentage to change.
“Approximately one-third” of new US starts in the quarter were patients with type 2 diabetes. This is an increase from “almost 30%” in 4Q19, and a very encouraging sign for Dash’s strength in this large and vastly underpenetrated market. Insulet claims a total addressable market of type 2s of 2.5-3 million – we believe this is conservative. When asked if Insulet was seeing any difference between utilization or attrition rates for users with type 2 diabetes, Mr. McMillan stated they had seen no “material difference” – this language is a bit more confident than Insulet has offered in the past, where they’ve described utilization rates in type 2s as no different than type 1s, but too “early to conclusively say.” We imagine for most people with type 2, they are able to see more ROI on their move to Insulet because their starting A1c may be higher. We’ve heard multiple people with type 2 note an A1c or time in range that is “too high” for their liking but their providers do not suggest insulin – we believe so many HCPs would see huge success with putting more people with type 2 on Insulet, particularly with more concentrated insulin.
Though it wasn’t explicitly shared, we’d guess that Insulet is still seeing ~80% of new patients coming from MDI. In the closest reference, Ms. Petrovic shared that “about 80%” of the “approximately 2,000” new users virtually trained on Omnipod in the last several weeks came from MDI. This encouraging to hear, as one might speculate that pump-naïve users might be more hesitant to switch to pump therapy in the current environment where in-person pump training is difficult or impossible. It’s worth noting that Tandem also reported no slowdown in rate of MDI conversions last week; they have typically seen about half of their new users coming from MDI. There are advantages with both pumps, and Tandem has the edge now with the closed loop, but we imagine Insulet would certainly have the edge as far as discretion and ease of use and ease of training would be concerned (no sets required, pharmacy channel).
Coverage of Dash continues to expand: at the end of the quarter, coverage had been secured for “over 50%” of Medicare and “approximately 70%” of Medicaid beneficiaries. For commercial payers, Ms. Petrovic estimated coverage for “over 60%” of covered lives – we cannot imagine why this is not higher. As of the most recent coverage update in November, “more than 50%” of US covered lives had coverage for Dash. Notably, perhaps the biggest win the quarter, Ms. Petrovic shared that coverage for Dash with Cigna (~17 million covered lives) was secured last month. She also noted an additional benefit of coverage through the pharmacy, rather than DME, channel: pharmacy coverage is less likely to differentiate between type 1s and type 2s requiring meal-time insulin.
2. Broader European and Canadian rollout of Dash pushed back to “early 2021”; “well-received” in markets where launched
Omnipod Dash began launch in the UK and Netherlands at the end of December, where it has been “well-received.” Broader rollout in Europe and Canada was previously expected this year, but due to COVID-19, the company is pushing those to “early 2021.” Additionally, Insulet was planning to enter five new international markets in the Europe and Middle East this year; those have also been delayed to “early 2021.”
1. Omnipod Horizon software patch submitted to FDA, pivotal to resume “probably sometime in June”; tracking for US launch in “first half of 2021”
Insulet paused the pivotal trial for its Omnipod Horizon hybrid closed loop system in early March to address a “software anomaly.” At the time, a software update to patch the bug was expected by the end of April, and seemingly on track, that update has now been submitted to the FDA. With a few weeks for FDA review and efforts around training clinical sites, Ms. Petrovic estimated that the trial would resume sometime in June. As of Insulet’s 4Q19 call, just one week before the trial was paused, Ms. Petrovic shared that ~8,000 or ~21,000 total patient days of data had been collected; importantly, the bug does not affect the validity of those ~8,000 patient days of data. Despite the pause, Ms. Petrovic stated that she expected “all sites” and “virtually all patients” would continue with the study. Horizon is now “tracking” to be on the US in the “first half of 2021,” slightly delayed from the “early 2021” timeline set when the trial was paused – the timing is likely not too different from what might’ve happened with COVID-19 (this is speculation and was not stated).
Due to COVID-19, Insulet has also had to update trial protocols. Most notably, following FDA review of the protocols, clinical sites will be re-trained for virtual protocols for follow-up and monitoring of patients before the trial resumes. Insulet planned to share pre-pivotal data at ADA 2020 (which has now gone virtual) – it’s unclear if this is still the plan. The timeline for publication or read-out for the full pivotal results was also not estimated.
Once again, Ms. Petrovic stated Insulet’s intentions to do a “limited market release” for Omnipod Horizon before a full launch: “We will do a limited market release. It's best practice with any new technology to do a limited market release. We will do what we can to bring this technology as rapidly and through access and other methods to patients as quickly as possible, because we know there is a significant demand out there, but it is going to take us a little bit of time to get through the limited market release.” We don’t know how orders will be prioritized, but we imagine a long wait list.
2. Cloud-to-cloud integration with Glooko for Omnipod Dash coming “this year,” bringing wireless data transfer
In exciting news, Ms. Petrovic stated during prepared remarks that Insulet intends to bring cloud-t0-cloud integration with Glooko for Omnipod Dash “this year.” This will be a very valuable convenience win for both patients and providers, bringing wireless uploading of Omnipod pump data into Glooko and removing the burden of cabled data transfer, which has been viewed as a hassle. This feature is especially valuable right now, where telemedicine visits are more common. Tandem plans to roll out no-cable-uploads in the “coming weeks” as it launches its t:slim X2 smartphone app broadly.
Q (Robbie Marcus, JP Morgan): In our checks with endocrinologists, we consistently hear that pumps are a little harder to train remotely than CGM, but how Omnipod stands out as being easier than other competitive pumps to train remotely, plus the cost to access and the cost to use is significantly lower which bodes well during what should be a pretty tough economic time in the next few months or longer here. I know most of your new patient starts come from MDI, but how are you thinking about your competitive positioning here going forward, both to patients to basically pay up for a pump and also versus your competitors where you might have a lot of benefits versus them.
Shacey Petrovic, CEO: Yeah, I think you're right. Your data supports what we see which is that there are all sorts of things that make Omnipod a really appealing insulin delivery therapy for patients and some of those things are even more powerful in an environment like the one we're in. When you think about the move towards a more cost-conscious consumer in this really challenging economic environment, obviously, the fact that you don't have to pay upfront for Omnipod and you're not locked in to four years of therapy, those things are very appealing. But I think probably even more powerful than that is the simplicity of the platform. In some ways, telehealth plays really perfectly into our strategy because our whole goal is to bring the simplest, most consumer-friendly technology to market, and if you think about what you need to be able to transition people in a telehealth environment from multiple daily injections to a new technology, it's got to be simple. We’ve developed the technology that is simple enough for kids, simple enough for multiple daily injection users, and one that, really if you think about it, has two components. There’s no needles to handle, no infusion set. It’s just a very simple technology to train on. I think that that differentiator is going to become more powerful in the environment that we're in today. So, we feel good about this trend. I personally am really excited by the capabilities that we've built and expanded on in a really short period of time to be able to lean in during this time and really bring our technology to more people who need it.
Q: Insulet stands out as having a lot of China manufacturing exposure. You touched on this in the prepared remarks and you have done a great job ramping up with the new manufacturing facility. How should we think about when you'll have much more dependence on the US manufacturing versus outside the US, in case this lasts for much longer?
Wayde McMillan, CFO: The teams saw this risk several years ago when they laid out the multi-year strategy and obviously made a significant investment. I know you've seen it here as well. To your point, that's giving a lot of tailwinds to the team here during this current challenge that we've got two lines up and running now and producing. That’s allowing us to actually build inventory through this time. And so being able to stay ahead of demand and demand that's overachieving or outperforming our base scenarios.
Regarding that risk in China, I mean we've got a really strong partner in China. I think we're very impressed by how quickly they took on the challenge and were able to staff, recruit, onboard, train and safely move people into the facility and get our production up. It was clearly delayed from a typical year-end start. But, given the environment we were impressed by how quickly both the third-party team and our operations teams worked together. I highlighted here some of the cost. We put some incentives in place to help fund some of the work that our third-party manufacturer was doing and some of the extent they were going to get employees into the facility to get producing for us again after the New Year.
I think we're going to see a multi-facility strategy from us going forward. One of the main drivers for our US manufacturing facility was to get redundancy and we'll have redundancy once we have three and four lines running here in the US and keeping our China manufacturing facilities. So, we'll achieve that objective once we get our third line up and then eventually under our fourth line.
Q (David Ryan Lewis, Morgan Stanley): I wonder just given that certain geographies are beginning to open up, certain regions of the US should being to open up and we're seeing this growing impact of telemedicine here at April as it bleeds into May. That quantification that you gave us across the quarters, is that syncing up to the qualitative recovery you're seeing April into May or is it sort of slightly ahead or slightly behind?
Mr. McMillan: Thanks for bringing this one up, because we're hoping that we'd get an opportunity to give a little bit more context on it. Starting with the matching of our assumptions with the global economy and what we're starting to see in the macro environment with different countries and regions opening up, that's why we tied our base assumptions to this gradual improvement through the end of the year. Clearly, we're expecting headwinds through the rest of the year.
If it happens that regions open quicker and our customers and patients can get to meet with their physicians and get the therapies that they need to treat the disease sooner, we'll be ahead of those assumptions. But at this point, we're assuming that we'll continue to see these headwinds through the end of the year.
To the second part of your question, how does that compare or contrast to what we've seen in April – I'll use this as an opportunity just to help explain to people the impact of our model. It really shows the durability of our model because the impact to Q2 is not really impacted that much by new patient starts. As I mentioned in the prepared remarks, approximately 10% of any quarter is due to new patient starts. So, we're really benefiting from the strong second half of 2019 and strong performance into Q1.
What we've seen so far in April is revenue continuing to perform well because we're benefiting from that momentum coming into Q2. But behind that, we're seeing a slowdown in our new patient starts. We really see that in two stages. We track our sales cycle in two main stages, sales leads and then actual new patient starts. So, even in front of new patient starts, we're tracking our sales leads, and that’s when we saw a pretty acute drop-off in March. As that funnel coming into Q2 starts to get smaller, that's where we're seeing the impact. That’s going to impact May and June for the most part. We’re anticipating our new patient starts, although strong through April, will start to slow down here through May and June.
It’s our expectation that both given the ability for people to return to their endocrinologists and work on different strategies to improve their therapy, including Pod therapy, we're assuming we'll gradually improve through the end of the year. Then, as Shacey highlighted, telehealth, we feel we're very well-positioned. Our teams were already working on telehealth initiatives and we were training people virtually. But, we have redoubled those efforts now in the face of this pandemic and we're doing, as Shacey said, thousands more. That’s growing every day.
Q: In the ex-US impact, your forecasting is a little heavier than US which makes sense given the different sites of service or how care is delivered in those two geographies. But, how would you characterize the visibility into the US recovery relative to the ex-US recovery?
Ms. Petrovic: On ex-US, just the way that care is delivered there, obviously many more people living with diabetes get trained on new technologies like Omnipod in the hospital setting as opposed to the clinic setting. So, we do anticipate it will take a little bit longer for some of those markets to return towards normalcy and the headwinds are a little bit more significant. That said we do have telehealth activities going on and virtual trainings going on in every international market just like we do in every US territory.
I think that's just the nature of what we're dealing with. In the US, in terms of visibility, we benefit from visibility to our direct customers and that helped give us a sense of what we can extrapolate across the markets. The same thing is true in Europe, although I think the insights into our direct patients aren't as easily extrapolated into additional markets.
That’s the challenge we have is just how fragmented the European market is. But, we work every day obviously with our partners and with our team to get those insights and as Wayde said to be tracking those leading indicators so that we can manage the business as effectively as we can during this time.
Q (Joanne Wuensch, Citibank): One of the things that I'm trying to get my head around is the patient or the new patient adds that aren't happening right now. When do they come back and how do they come back?
Ms. Petrovic: Yeah. I think it's a good question, Joanne. It's difficult obviously to predict the future. What our data shows – and I'll speak mainly to the US because that's where we have really the best insight, but what our data demonstrates is that in the United States, endocrinologist visits are down 60% since the beginning of March. Of that remaining 40% that are still happening, 15% of those are being delivered via telemedicine, so pretty significant drop off. What we see is just you know more and more adoption of telemedicine across the United States, so I think that will help offset it. I think one of our questions is how durable is telemedicine because it's obviously dependent in some ways on reimbursement. But, we do track state by state new patient starts and, as Wayde said, our leads in those markets to see in some of these areas that were hit harder than others are they starting to recuperate. We see indications of that across various markets, and that's what we'll continue to track so that we can continue to forecast.
Q: My second question has to do with the international market. Recognizing maybe it will be slower to open up new geographies, how do you think about approaching them, and does what's happening globally change your view of what markets maybe next or not?
Ms. Petrovic: I don't think this impact today makes us feel differently about the new markets that we had planned to enter. Really what we're planning for is just to make sure that we have all of these markets prepared for successful launches. So, in various markets, we might be, for example, partnering with a strong distributor partner there; we may be seeking market clearances or even regulatory approvals, and we want to make sure that all of that stuff is in place before we launch into the market.
When we're thinking about different timelines and potentially early 2021 instead of 2020, it's really tied to making sure that we have everything prepared, so that we can have successful launches, not that we're thinking about different territories at this point. There's a tremendous amount of opportunity.
As I always say, we are really in a handful of countries relative to the rest of the world and that's true even in Europe, where we're starting to build a really strong presence there, there's still a tremendous amount of unmet need. So, we're going to attack that unmet need. It's going to be a little bit later than we expected because of these dynamics.
Q (Margaret Kaczor, William Blair): I understand 15% of the 40% of patients are retrained virtually. But, as you look at that going forward, can you give us the advantages and disadvantages of that? For example, is it easier to get the patient online or is there a cheaper cost associated with that?
Ms. Petrovic: I think we're seeing a lot of advantages frankly, and not any disadvantages in terms of virtual training. I think there are always going to be some subset of patients who would prefer in a corporate world to be trained with a clinician or in a clinic. But, the feedback from patients on virtual training has been incredibly positive. People are describing it as simple. I can tell you from the one that I witnessed just on Friday that the patients were incredibly comfortable. The family was incredibly comfortable, that we were able to get more insight into kind of how they operate by just seeing them at home. It was a very efficient, very effective training and the feedback has been very positive. I think this is a trend that will continue regardless of what happens with telemedicine. We're seeing a lot of positive feedback out of this. Our clinicians can be more efficient. Patients don't have to get into the clinic and the feedback has been very positive. It's just so simple. You don't have a needle. You have two components and it's a really straightforward technology to walk a user through. It is ideally suited to virtual training.
Q: In terms of patient needs and sales and marketing strategies in the interim. I assume most of your patients at this point are coming from face-to-face business with endos and strategic discussions with endos and so on. But, are you going to change any of that strategy over the summer kind of through year end to maybe get patient through different channels like an online channel?
Ms. Petrovic: First, I'll say that it's pretty remarkable to me that actually virtual sales calls are still happening with endocrinology offices and in many cases endos are really looking for information from us in terms of how we can support telehealth activities. I think earlier in February, we had a webinar focused on telemedicine with Omnipod and 800 physicians attended that. So, there's a tremendous demand out there for just information and insight to how do you do this well. We’ve got great resources to be able to support those discussions with endos. That isn't going away. But to your point, obviously, that's where the headwinds are coming from. We have reallocated resources. From a sales and marketing perspective, from things like conferences, and travel, and entertainment to a more digital outreach direct to patients to be able to engage them on, one, the benefits of Omnipod, and two, the fact that you can try it risk-free and you can train all at home without needing to go into the clinic. It’s early days, but we believe that message will resonate with patients.
Q (Ryan Blicker, Cowen): Can you talk a little bit more about what the coronavirus means within your revised Horizon time lines? When are you assuming the trial restarts? Then, do you still expect to conduct a limited market release prior to a full launch in the US, or do you believe you could broadly launch Horizon in the US upon FDA approval?
Ms. Petrovic: We are anticipating just a little bit of time, a few weeks of FDA review for the submission to restart the trial. Then, we've got to retrain sites, et cetera, on just the virtual protocols for follow-up and monitoring of patients. We think that's going to take a little bit of time, probably sometime into June, I would guess, before we restart the trial.
In terms of a limited market release, we will do a limited market release. It's best practice with any new technology to do a limited market release. We will do what we can to bring this technology as rapidly and through access and other methods to patients as quickly as possible because we know there is a significant demand out there. But, it is going to take us a little bit of time to get through the limited market release.
Q: What proportion of the new patient starts in the US looking to pharmacy in the quarter and what proportion of your overall US installed basis is now going through the pharmacy. And, do you believe the transition to the pharmacy could be accelerated at all in the US due to COVID-19?
Ms. Petrovic: In terms of the overall base, we now have almost 30% of our US customers going through the pharmacy. Actually, when I think about how do we really scale this business, we've always been thinking about how do we help our customers get the best customer experience through self-service, through easier training et cetera. We’ve talked a lot about that, our virtual training tools and our web-based training tools. But, the pharmacy is a big piece of this too. This work was underway for us because diabetes is an epidemic and endocrinology is in short supply. We need to innovate the business model to be able to ensure that we can meet this rapidly growing demand in this unmet need. Of course all of the telemedicine stuff that we talked about is a piece of that, but the other piece of that if patients need care and potentially aren't in their physician's office as frequently the pharmacy could play a really exciting and really important role because unlike your endocrinology office there is a pharmacy on every corner. If we could leverage that channel to educate, inform and support patients that could be a much better customer experience. It’s a channel that we, right now, from an insulin delivery standpoint or insulin pump standpoint own and so we see it as a worthy investment and a way to provide the best possible experience and the most cost-effective scaling commercially of our business.
Mr. McMillan: Just to add on there to round off your question, as Shacey said, our installed base in the pharmacy is at 30%. We didn't give exact pharmacy new patient starts, but DASH, we did and DASH is 60% of our new patient starts. Almost all of those are through the pharmacy as well as type 2 has grown to be a third of our new patient starts and then majority of those are through the pharmacy as well. So, DASH and Type 2 are a big part of what's driving the volume growth now up to 30% going through the pharmacy.
Ms. Petrovic: It's great to see to just the progress we've made on establishing market access through the pharmacy. It's a big piece of why we've been able to expand so much. In fact, just in the last month, we've even secured Cigna coverage in the pharmacy channel which is that's part of why we saw that tick up in commercial coverage and part of what continues to drive adoption through the pharmacy channel.
Q (Jeff Johnson, Baird): I wanted to follow up maybe on the questions around new patient starts and the 50% to 75% decline in the second quarter and then the gating thereafter. I’m trying to triangulate that with your comments about the ease of use of prescribing through telehealth and that, do you think that 50% to 75% and then the third and fourth quarter numbers that you're giving, how do you feel like that compares maybe to the broader insulin pump market at this point? Are you guys doing better than, about the same as, worse than, just given your comments on the ease of prescribing? I would think better than, but just would love any kind of competitive intelligence you're hearing out in the field from your docs on what those numbers represent relative to market.
Ms. Petrovic: I don't want to comment on kind of competitive pump businesses, but what we do know just from IQVIA data and primary market research is that in the United States, endo visits are down 60% since the beginning of March. I think that gives you a sense that this 50% to 75% number is probably right in line with what others are seeing. While we are, I would say, bullish on what kind of fit Omnipod is for telemedicine and we believe in that world, we can lean in and do better than others. At the same time, we are relying on endos to build telemedicine capabilities. While we have kind of sped ahead and I think built some really exciting capabilities and support mechanisms for our endo offices, there's still across the globe different clinics are in very different situations in terms of their capabilities to be able to support telemedicine. We’re a little bit ahead of the curve and we'll see how this plays out and how quickly endo offices across the globe, frankly, but particularly in the United States can start to implement and support telehealth for their patients.
--by Albert Cai and Kelly Close