Insulet 1Q15 – Revenue of $61 million declines 12% on inventory de-stocking, US sales down 4%; new PDM filing by end of year – April 30, 2015

Insulet held its 1Q15 financial update today in a call led by a confident-sounding (despite the miss) CEO Patrick Sullivan, his third since joining the company in September. It was a disappointing quarter revenue-wise ($7 million lower than expectations), mostly attributed to Ypsomed’s de-stocking of inventory in Europe. Nevertheless, Mr. Sullivan expressed strong confidence in Insulet’s future, particularly on the drug delivery front. There was some hedging on major questions and we heard “one quarter doesn’t a trend make” several times. Sullivan seems to understand well what a strong commercial effort makes and in particular seems very intent on gathering more data – we’re glad to hear this. Below, we share the call’s top financial and R&D highlights.

Financial and Business Highlights

1. Total revenue in 1Q15 dropped to $61 million, a 12% year-over-year (YOY) decline from 1Q14 and a 16% sequential decline from 4Q14. Results were $7 million less than expected, mostly due to $4 million less in the international business (Ypsomed decreased inventory, according to management – this was due in part to the strength of the dollar and may also be related to Ypsomed diversifying its pump offerings).

2. US OmniPod sales of $39 million in 1Q15 declined 4% from $41 million in 1Q14. Revenue declined 10% sequentially in the US. On a brighter note, US new patient starts in 1Q15 reached an all-time record high for any first quarter in Insulet’s history – this was surprising to hear given directionality of pod sales in the US and internationally.

3. Per the Ypsomed inventory de-stocking, International OmniPod sales of $3.7 million declined a dramatic 71% YOY and 72% sequentially. With Ypsomed moving into “traditional” pump sales as well, there is more uncertainty than ever. On a positive note, Ypsomed has forecasted more than 40% growth in the OmniPod patient installed base for all of 2015 – we do think there is a lot of international potential but think that the pump of their traditional pump is a factor that is hard to assess at this stage.  

4. Insulet is pursuing multiple parallel paths to secure Medicare/Medicaid coverage for the OmniPod “as quickly as possible.” Mr. Sullivan called this his “highest priority” this year. We were glad to hear this.

5. As expected, Insulet launched a peer-to-peer physician education program in 1Q15, with more than half a dozen programs completed and another 45 scheduled. Mr. Sullivan has pushed for a greater focus on provider marketing since he joined, and clearly, this is happening quite quickly.

6. Insulet placed its fourth OmniPod production line at Flextronics, which increased production capacity by 20%. This should increase distributors’ inventory predictability moving forward.

7. The new management team continued off-the-charts enthusiasm for non-insulin drug delivery. For 2015, Drug Delivery revenue of $15 million-$20 million is expected, more than tripling from $5 million for all of 2014. We would like to see more happen here before demonstrating confidence since this has been an area touted before where the reality hasn’t matched the plan.

R&D Pipeline Highlights

8. Insulet still expects to submit an FDA 510(k) filing for the next-gen PDM by the end of this year. It was not mentioned, but we still expect to see it at ADA 2015 in Boston.

9. Following encouraging early remarks in the 4Q14 call, Insulet has launched an artificial pancreas project – the team is initially focused on algorithm evaluation and customer requirements. Insulet is in CGM partnership discussions with Dexcom on this front. We look forward to hearing more specifics, particularly with artificial pancreas powerhouse researcher Dr. Howard Zisser as Insulet’s Medical Director – we hope the company does as much as possible to leverage his standing in the field.

10. A clinical trial of the Lilly-partnered U500 OmniPod remains on track, and meetings with investigators are scheduled for the summer. Previously, the goal was to start the trial later this year, with a potential launch in 2017.

Financial and Business Highlights

1. Total revenue in 1Q15 dropped to $61 million, a 12% year-over-year (YOY) decline from 1Q14 and a 16% sequential decline from 4Q14. We’ve never seen Insulet experience such large sequential or YOY declines in sales in any quarter ever. Management shared three reasons why revenue fell $7 million short of the midpoint of the guidance ($67-69 million): (i) $4 million less in the international business, as Ypsomed decreased their inventory levels; (ii) a $2 million shortfall in the drug delivery business due a later-than-planned shipment to Amgen; and (iii) $1 million lower Neighborhood Diabetes revenue from the harsh winter in the Northeast.

• Despite the lower-than-expected revenue, management maintained confidence in the full-year 2015 revenue guidance: $305 million-$320 million (growth of 6%-11% YOY from 2014 sales of $289 million). For 2Q15, revenue of $67-$70 million is expected, a decline of 3-7% from 2Q14. Consistent with the previous call, the expectation is for a return to sales growth in 2H15. Indeed, the 2Q15 estimate would put Insulet at ~$130 million in sales in 1H15, or 41% of the way to the midpoint of the full-year guidance. Sales are expected to pick up in 2H15 as the new US commercial team gains traction, Ypsomed returns to normal ordering, and the drug delivery business returns to a normal ordering pattern.

2. US OmniPod sales of $39 million in 1Q15 declined 4% from $41 million in 1Q14. Revenue declined 10% sequentially in the US. The performance was in line with expectations, though still uncharacteristic for Insulet – the US business has never seen a YOY decline in sales. Management partially attributed the performance to the rightsizing of inventory levels with domestic distributors (~40% of the US business runs through distributors). We believe greater domestic competition probably contributed as well.

• On the bright side, US new patient starts in 1Q15 reached an all-time record high for any first quarter in Insulet’s history, rising “double digits” vs. 1Q14. Insulet also saw a 36% increase in new patient starts for those under the age of 20. Management attributed these stats to the fresh focus on physician marketing through the new medical education program launched during the quarter (see below).

3. International OmniPod sales of $3.7 million declined a staggering 71% YOY and 72% sequentially. As noted above, the decline was attributed to Ypsomed’s significant de-stocking of inventory. Management still expressed optimism for the international business going forward, as Ypsomed has forecasted more than 40% growth in the OmniPod patient installed base for 2015. CEO Patrick Sullivan remains confident that the international business will return to growth in the second half of 2015 and for the full year 2016.

• Notably, management is not concerned that Ypsomed’s own tubed pump will cannibalize OmniPod sales. Insulet met with Ypsomed in Switzerland in February, where this very topic was discussed. The new Ypsomed pump is apparently focused on the “lower resource areas of the market” and where Ypsomed would be “opted out of tenders that are focused on cost.” Management said the OmniPod is “positioned completely differently” – presumably higher cost – and thus, no cannibalization is expected. Insulet’s head of operations is in Europe at the moment working to improve the supply chain and help get Ypsomed product more quickly.

4. Insulet is pursuing multiple parallel paths to secure Medicare/Medicaid coverage for the OmniPod “as quickly as possible.” Mr. Sullivan called this his “highest priority” this year. It was terrific to hear this, since so many type 1s are losing pump coverage as they live longer. It is not clear what paths Insulet is pursuing.

5. As expected, Insulet launched a peer-to-peer physician education program in 1Q15, with more than half a dozen programs completed and another 45 scheduled. Initial feedback has been very positive. Increasing physician marketing has been a major priority for Mr. Sullivan since he took over last fall. Also on the marketing and sales fronts:

• Customer segmentation marketing initiatives are in development to drive increased adoption of OmniPod. The marketing team is now aligned in several key areas, including pediatrics, each with a specific customer focus.
• Insulet is refining the customer onboarding and training process to improve the retention rate. Although the attrition rate remains very low at ~9%, management pointed out that “a small improvement” can make a big difference, since reorders represent about 90% of OmniPod revenue.
• Insulet has filled approximately 75% of its open field sales positions (the plan as of 4Q14 was to hire 15 new reps, bringing the told sales force to ~150). Management has revised the sales incentive and training programs along with rigorous performance measures to drive greater accountability.

6. Insulet placed its fourth OmniPod production line at Flextronics, which increased production capacity by 20%. Said Mr. Sullivan, “It is now increasingly evident that we are able to supply high quality product in time to meet our US distributors’ increasing end user needs, compared to the early days of our new product launch in late 2013 and 2014 when we had less than 50% of our current capacity.” Going forward, US distributors are expected to be at a reasonable level of inventory, meaning their future orders will reflect true end user demand.

7. The new management team continued off-the-charts enthusiasm on non-insulin drug delivery– “tremendous,” “incredible,” and “exciting” were all used to describe the opportunities. For 2015, Insulet expects Drug Delivery revenue of $15 million-$20 million, more than tripling from $5 million for all of 2014. New President of Drug Delivery Daniel Levangie had his own section of prepared remarks and responded to many questions in Q&A. Insulet’s current partners include Ferring Pharmaceuticals and Amgen, products that have both launched (Amgen just came out in 1Q15). Insulet is also “responding to a fairly robust stream of incoming projects,” and moving forward, plans to be proactive in pursuing other drug delivery opportunities. The new team has begun to sort through the universe of currently marketed subcutaneously administered drugs, and a substantial number of commercial opportunities will be “vigorously” pursued. CEO Patrick Sullivan believes that the drug delivery business can be larger than the diabetes business in the long-run, but the path is longer and higher-risk because of the FDA process.

Pipeline Highlights

8. Insulet still expects to submit an FDA 510(k) filing for the next-gen PDM by the end of this year. The timing was consistent with the 4Q14 expectation. This would likely put approval in the early/mid-2016 timeframe. The new PDM will have touchscreen technology, incorporate Bluetooth, and presumably still include the integrated Abbott BGM (per the renewed agreement). Given that Dexcom’s Gen 5 is at the FDA right now (approval and launch expected by end of year), it sounds like a PMA filing of a Gen 5 integrated OmniPod PDM might not come until very late 2015 or sometime in 2016. 

9. Following encouraging early remarks in the 4Q14 call, Insulet has launched an artificial pancreas project – the team is initially focused on algorithm evaluation and customer requirements. Insulet is in CGM partnership discussions with Dexcom and believe the company is a “very promising and strong candidate” – of course, the two companies already have an existing partnership to integrate Dexcom’ Gen 5 data into the OmniPod PDM and Insulet data into the Dexcom Gen 5 app. Dexcom’s 1Q15 call yesterday shared its strongest commentary yet on the artificial pancreas, though called for pump partners to step up to the plate and commit to more than just sensor integration. We look forward to hearing more specifics, particularly with artificial pancreas powerhouse researcher Dr. Howard Zisser serving as Insulet’s Medical Director. Insulet’s move in this direction is terrific to see, as automated insulin delivery is a must-have for any pump company to stay competitive in the next decade.

• There was no update on the CGM-integrated OmniPod, suggesting this R&D project is not really moving. We had always thought this was a long-shot, and believe a partnership with Dexcom makes more strategic sense for Insulet. The one-device-on-the-body is compelling, but not enough given the R&D risk of investing too heavily in this project. Certainly, Dexcom is moving lightning fast on the pipeline front. 

10. A clinical trial of the Lilly-partnered U500 OmniPod remains on track, and meetings with certain investigators are scheduled for the summer. This was more vague than the timing shared in the 4Q14 call: a clinical trial was expected to start later this year and commercialization was expected in early 2017.

Pipeline Summary

Questions and Answers

Q: The drug delivery business was up by a few million. Why weren't you able to manufacture that product? My understanding was that this was product was supposed to have been sold or filled in the fourth quarter. The approval didn't come until late, and now it sounds like there's maybe some more manufacturing changes that need to happen or ramp up so that you can fulfill the rest of the Amgen order. Is that true?

A: Yes. Let me try to explain. The approval of the Amgen product didn’t occur until late in the fourth quarter. We were not able to build product prior to FDA approval. It's important to keep in mind that the drug delivery product is different than our diabetes products. The differences are in the supply chain and in the manufacturing and sterilization process. As a result of that, these longer lead times and longer sterilization interval caused us to come up a bit short during the quarter.

We have that under control now, and we are manufacturing product. We have product in the sterilization process right now, and we will make up this $2 million shortfall before the end of the year.

Q: As you look at the guidance for the second quarter, it seems like the big delta is coming from the international side of the business. Can you give a little bit more clarity as to what in the business gives you confidence that these orders are going to start taking place again in the second half of the year? How does the revenue you generated in the first quarter flow through in terms of what we'll see in the second quarter?

A: First of all, I think we're very confident with Ypsomed’s prospects for all of 2015. We traveled to Switzerland and met with their team earlier in the first quarter, and I would say they have a very strong plan to provide 40% increase in their installed base in 2015 over 2014. In addition, they’re moving into new territories during this year. We're very optimistic about their prospects, they have a very good plan in place, and we're very confident in their ability to execute. I think the challenge for us in the second quarter is the residual impact of them wanting to reduce their days-on-hand inventory due to the strength of the US dollar. The US dollar has had a significant impact on many multinational companies this year, and I think this is an impact we're seeing on our business. They buy the product in US dollars, but the Swiss Franc is obviously subject to the strength of the US dollar, and they wanted to reduce their exposure.

Q: I believe the initial expectation and guidance for OUS revenue was to be about flat for the year, with growth again in the second half, and growth for the full year in 2016. To be clear, is the expectation still about flat, or is the updated view on OUS that we should be expecting a decline?

A: We expect it to be flat vs. last year. Essentially what's happening is that the growth that they’re going to see is picking up for the reduction we're doing in the inventory. So, flat year-over-year.

Q: As Ypsomed moves to launch its own pump in the coming months, can you provide an updated perspective on what’s giving you comfort that that won’t be a significant factor in their expectations and your expectations for them with the OmniPod?

A: The difference there is that the Ypsomed pump – which we spoke to them about earlier in the first quarter – is focused on the lower resource areas of the market, and where they are would be opted out of tenders that are basically focused on cost. The OmniPod is positioned completely differently, and we don't see any cannibalization occurring between those two market segments.

Q: Could you comment on reiterating guidance despite the lower first and second quarter, at least relative to consensus? It's very back-end loaded. How are you feeling relative to how you're thinking about the growth in new patients for the year? Is there a potential upside given your positive commentary and what you're seeing so far in Q1?

A: One quarter doesn't make a trend. I think we're going to need to get some more experience under our belt as we get into Q2. I will say that the commercial team that joined in early January has really hit the ground running, and I think we’ve had a significant impact. They have really exceeded my expectations on their ability to really have an impact this quickly.

I think all of the signs are pointing in the right directions. But we have work to do. We want to make sure we have all of the foundations in place to make sure that we have a very solid commercial effort.

It's going to take some time marketing to the payers and to the clinicians with some of the preliminary clinical data we have. Therefore, we have to build out the marketing message before we get too overly optimistic.

Q: In drug delivery, I want to confirm that its just Amgen this year, and, if not, how much of Amgen is included in guidance?

A: With respect to the drug delivery guidance, we have two commercial relationships: one with Ferring, and the other with Amgen. The Amgen relationship is the new addition, so you would expect that the lion’s share of the growth will come from that. Overall, it's $15 million to $20 million for the year.

Q: Even with the first-half shortfall from Ypsomed, do you still expect that your OUS revenues will be flat year-over-year at the $50 million you reported last year?

A: We expect our international revenues to be flat. We do see a residual effect of the inventory days on hand reduction target that was a reduction made in March; we're going to have some residual in Q2 as result of that. Remember that about 25% of our OUS business comes from our other distribution partners in other parts of the world, Canada and Israel.

Q: The US OmniPod sales were down 10% sequentially, but you said the attrition rate held at 9%. Are you sure about that? How confident are you in that attrition number? Is that 10% decline really all inventory destocking it to your distributors because that's a pretty big drop-off?

A: We did have destocking in the quarter that affected our US OmniPod business.

Q: Generally, how do you ship pumps to Ypsomed throughout the quarter? Is it right at the end of the quarter? What is your visibility into those ordering patterns? Is it a three-month or six-month?

A: We have full-year visibility into Ypsomed plans and what their expected out-of-their door sales are going to be at the end-user markets. We have those sales projections that they are focused on, and then you back that into the days-on-hand inventory that they are comfortable with. What we saw in the back half of March was their desire to reduce that days-on-hand even further than we anticipated at the end of February. So, it was taking it down even further based upon our ability to manufacture and supply product to them, as well as the strong increase in the value of US dollar.

Q: Couldn’t they absolutely do that to you again, if their forecast doesn't come through?

A: We are developing a new relationship with Ypsomed. As I mentioned, we went over there and are going to continue to go over there frequently. We have our Head of Operations over there, as we speak, working on improving the supply chain and the delivery of product, and trying to help them get it much more quickly. I think it's a new relationship, and we have a person on the ground in Europe whose total focus is on Ypsomed. We’re developing the relationship, and we have the constant dialogue. We’re are very confident about their projections for the future, and we’re working hand-in-hand with them. We’re supporting them in the expansion into new markets that they wanted to open up previously; we're going to open up those this year. We're very optimistic and very pleased with their performance thus far and are confident in the future.

Q: You've put together a great management team, but you don't really have anybody on the team that has deep diabetes experience. Could you react to that and, as you are now a little bit further into this, relate your experience in diabetes vs. some of the other businesses?

A: The senior management team doesn't have direct experience in the diabetes space. They do have a lot of experience in growing new and innovative products in the medical device markets and have been extraordinarily successful. All have dedicated themselves to learning the diabetes market extensively. To counter the other piece of it, we have a medical director on board [Howard Zisser]. We have our clinical services managers in the field that interact with not only the sales folks but with our management team to help us learn the diabetes business and some of the nuances and the attributes of the diabetes space. I'm very comfortable that, with the existing capability we have within the company as well as the dedication from the team to learn diabetes; we’ll learn it in short order and have a very positive impact in the space.

Q: On the international guidance, can we assume that what’s baked into guidance is contractual minimum, or are there structural minimums for Ypsomed in 2015?

A: There are contractual minimums for Ypsomed in 2015. What we have baked into the guidance is actually reflective of what they are saying their end-user demand will be 2015.

Q: I realize the US OmniPod business was down slightly, but can you give us an idea of the year-over-year growth in the direct US OmniPod business?

A: We haven't broken out the pieces between direct and indirect US business. The breakout that we’re comfortable with is provided on our website on the investor page. That is probably as far as we are willing to go with the breakout for now.

Q: On the international side, can you clarify if new patient starts was up or down year-over-year, and where are you on new patients? I know you’re saying the business will be flat year-over-year, but do think there will be growth in the new patients international, and what will that be? And then that same question for the US business.

A: On international, as I indicated, Ypsomed anticipates growing their installed base 40% year-over-year. We gave you the census of the install base in January, and we’re going to update that on a yearly basis, not on a quarterly basis, for the total patient population worldwide. I think you have enough information from back in January to triangulate it.

Q: Would you say Q1 was indicative of the year for Ypsomed? Or can you not because they are destocking and they would also be destocking starter kits and we just can't see that yet?

A: We have visibility into their quarterly new patient starts, and I would say that their first-quarter, new patient starts were in line with our expectations on what they were planning for the year.

Q: The gross margins were strong in the quarter; my sense is that is because of the mix between US and international. How do expect gross margins will trend over the balance of the year?

A: For the full-year, as we talked about on our last call, we do expect a lot of our growth to come from our US business and our drug delivery business. Both of those are the higher-margin revenue lines for us. So, I expect that what you're seeing in Q1 should trickle throughout the year.

Q: As international picks up very strongly in the back half, as you're suggesting, it should start to bend that back down, correct?

A: We're going to get lift from going direct to Canada, which we expect to do at the end of the second quarter or early third quarter.

Q: On the operating expense line, the $41.4 million I believe is a new high watermark in terms of overall spending. Should we expect that you're going to keep it plus or minus that $41 million level for a while now?

A: Some of that $41 million had some one-time charges. I think we’re likely to be investing as we look at the revenue plan that we have as well as the opportunities to further develop the OmniPod product – for example, CGM integration and focusing on the artificial pancreas opportunity – in addition to some of the investments we're going to need to make in the drug delivery opportunities to build that business out.

Q: Given that in the US, or in general, new patients in a given quarter don't have a lot of impact on reported revenues, and we have this big second-half, first half change in revenues, is that second-half spike only usage, or is there an assumption of inventory recovery in the back half baked into the guidance?

A: I think that we will have the balance of the inventories in both international distributors and domestic distributors will be right-sized so everything will be reflective of end-user demand. We won't have those underbrush.

Q: If you look out three to five years, and you've had some time to work the opportunities on the new drug side, what is your goal for revenue from that business? How do you think about where we can be in the longer horizon?

A: We very high objectives. However, we have not given any guidance past the 2015 and aren’t prepared to do that right now.

A: As you look at the opportunity, there are a number of drugs that the use of the OmniPod technology for subcutaneous drug delivery could be tremendous for. As I've said before, and still believe, the drug delivery business can be, in the long run, larger than our diabetes business. However, it takes longer, and it is a higher risk, obviously, because of the FDA process.

Q: Does the assumption that sales are flat internationally assume that there's a significant stocking order with the new distributor in Canada in the third quarter?

A: We're going direct in Canada, as I indicated, at the end of this quarter or early next quarter. That will be our inventory in Canada, so there won’t be any significant stocking order at all.

Q: Is the new patient growth a worldwide number or US number?

A: The new patient starts that I indicated being the record in the first quarter was US only. With the new team it's hard to find a metric that they could have an impact on in the same quarter in which they came, so I chose that as the indication. That was US only, and we have not given any new patient starts growth internationally.

Q: With Amgen, you weren’t able to get them the supply you expected in the first quarter. It also sounds like you're not expecting to make it up in the second quarter either, and that's actually take longer. Can you clarify this why its slipping a few months?

A: I didn't mean to confuse. The drug delivery product that we weren't able to get out the in Q1 will ship in Q2.

Q: Does the US OmniPod business grow in the second quarter?

A: Yes. It grows in the second quarter.

 Q: Could you highlight who your CGM partner is for the artificial pancreas project?

A: We have not highlighted our artificial pancreas CGM partner. We're exploring opportunities. We are in discussions with Dexcom. We have worked on an agreement with them to potentially provide their G5 sensor to bring data to our OmniPod PDM. We think that they are very good promising and strong candidate. We've had discussions with them and will continue have discussions with them along those lines.

Q: In terms of Q3-Q4 for the US OmniPod side of the business, what are the net patient starts?

A: We expect new patient starts to continue to increase throughout the year. But again, if you look at the new patient starts in any given quarter, there are small fraction of the overall OmniPod revenue, and the vast majority of the revenue comes from the reorders. We haven't given guidance on new patient starts for the year. It's all baked into our guidance overall for that $305-320 million in overall revenue for the business.

Q: Could you speak to utilization trends that you saw, both domestically and abroad within your OmniPod wear base? I'm still trying to do some of the math as I think about the adds on patient and your growth targets.

A: I think on the OmniPod utilization I would characterize it as remaining unchanged. It's basically been very consistent.

Q: When we think to the drug delivery business, specifically in June, could you remind us what we should be looking for in terms of metrics as you initiate?

A: As I said, we're going to begin our commercial activities in June. We have identified a target list of pharmaceutical properties that we're going to go after to try to develop a relationship with and a development agreement with. Today, we have in hand a handful of early-stage development agreements, and our objective is to add to that throughout the year. We’re not going to give specific numbers of agreements, but certainly we would expect to add several new development agreements to our portfolio during the year.

Q: With the US OmniPod business, you said up is that “up.” Is that year-over-year or sequentially?

A: Sequentially. I don't think of it year-over-year. It’s flat year-over-year, and up sequentially.

Q: You’re reaffirming guidance, but it seems, given first half guidance, that we are probably shooting for the low-end of expectations?

A: We're shooting for the range of $305-320 million at the midpoint.

Q: As you talk about what's going on with the new sales organization that you’re putting in place, do you have a sense of some of the activities in terms of rate or impact you've already seen vs. what that rate or impact may be in Q3 or Q4? I'm trying to get a sense of how the effectiveness of your field organization is assumed to be different in the back half of the year vs. the first half of the year, given that it's obviously new.

A: The new part is the leadership team. The sales organization, by and large, have remained consistent. We've had only about a 5% turnover rate in the sales organization, and I think that's going to be consistent. We put in place incentive plans that have provided more incentive for the sales organization. We’re going to improve the training and customer service organization so the patients have a better patient experience. We are doing the medical education – we've already done a handful; we have 45 scheduled, and we’re going to continue to do that throughout the year. And we’re really focusing on managed care. Managed care makes a big difference in this market. I think we are somewhat handicapped at the moment by our Medicare and Medicaid coverage. We do have some state plans that are covering for Medicaid as we speak, but we need to get the Medicare coverage to really open this up in a big way, and we're focused on getting that done. The sales organization is focused on the fundamentals, the basics, the blocking and tackling, the management of the team, making sure that they are making their requisite number of calls per day, calling on physicians. I think that is all about the fundamentals, and we have the team in place to drive and execute, and I’m confident we saw that in the first quarter.

Q: In Amgen’s call, it talked about 800 customers using the product – that’s a quarter of their large customers, high acceptance of both plans. Are you constraining them at this point with the supply you are able to provide?

A: We've been supplying according to their forecast and in terms of their utilization. We've been able to supply to their forecast.

Patrick Sullivan: Thank you very much. While we took some very definitive and deliberate steps this quarter that impacted our first-quarter results, we continue to believe there are many long-term untapped opportunities that exist for Insulet. I'm very encouraged by the progress we've made in laying the groundwork to support our path to success. While we're in the early stages of the long-term transition, our experience senior leadership team and respective teams have made great progress executing on the key initiatives.

We are well positioned to capitalize and improve our commercial execution. In addition to our commercial efforts are the sales and marketing investments or raise awareness and drive results. We're keenly focused on R&D investments to build our leading class products. I'm confident we have sound strategy, which is in line with, if not exceeding, our planned timeline to execution. I'm also confident that our strategy will lead to long-term accelerated growth in shareholder value creation.

I can tell you that I’m even more energized now by the many positive prospects I see ahead. With the right leadership, focused strategy, and commitment to consistent execution, I believe we have a winning formula to deliver long-term growth. I'm excited to share with you our progress as 2015 unfolds, and thank you for your participation in the call today.

-- by Adam Brown, Hannah Martin, and Kelly Close