Tandem 1Q21 – Global user base of “nearly 240,000” includes “more than 150,000” Control-IQ users; revenue of $141 million rises 44% YOY; smartphone bolus feature delayed from 1H21 timeline – May 5, 2021

Tandem reported its 1Q21 financial results this afternoon on a call led by CEO John Sheridan and CFO Leigh Vosseller. See our top highlights below.

Financial Highlights

1. Worldwide pump shipments of 25,352 (+46% YOY); global user base of “nearly 240,000” (+55% YOY); Control-IQ userbase of “more than 150,000”

Worldwide pump shipments came in at 25,352 in 1Q21, rising 46% YOY from 17,378 in 1Q20. Sequentially, shipments fell 23% from 32,685 in 4Q20. In a very positive sign, OUS pump shipments contributed meaningfully to the quarter, more than doubling (+106%) YOY to 8,708 pump shipments (and +7% sequentially, compared to the US where seasonal pressures resulted in a sequential decline). This strong OUS growth “outperformed [Tandem’s] international expectations” and is primarily due to Tandem’s efforts to expand into additional markets and bring Control-IQ into existing t:slim X2 markets. Notably, Tandem saw “broad-based ordering” across all OUS geographies and “strength across the board from all the regions.” This contrasts with 4Q20 when ~half of pump shipments were to Germany. As usual, the majority of shipments came from the US where 16,664 pumps were shipped this quarter (+26 YOY).

• Tandem’s worldwide installed user base is estimated at “nearly 240,000” users, rising ~55% YOY from 1Q20 and up from “more than 215,000” in 4Q20. Tandem also continues to expand its global Control-IQ userbase with “more than 150,000” global users, up significantly from >100,000 in 4Q20. Broken down by geography, Tandem estimates “more than 185,000” users in the US and “more than 50,000” international users. With some quick math, we estimate ~15,000 sequential new adds in the US, up 67% YOY from ~9,000 sequential new adds in 1Q20. On the OUS side, we estimate ~5,000 sequential new adds, up 25% YOY from ~4,000 sequential new adds in 1Q20. As a reminder, we view these estimates as likely conservative as they only represent purchases from the last four years; in reality, Tandem is probably renewing pumps that expired over four years ago.

  • In another cool tidbit, Mr. Sheridan shared that Tandem now has “more than 20 million” patient days of Control-IQ logged. With a user base of 150,000, that means the average Control-IQ user has been using the hybrid closed loop system for ~133 days or ~4.5 months. Tandem has shared some of this real-world data on a few occasions (see ADA 2020 and EASD 2020) – on today’s call, Mr. Sheridan highlighted the results in a recent publication in DT&T. Mr. Sheridan also shared that more of the real-world glycemic and quality of life data will be shared at ATTD and ADA in June. 

  • From a competitive landscape perspective, Mr. Sheridan estimated that type 1 pump penetration could increase from the “low 30s” to the “mid 50s,” and noted that others in the diabetes space believe that penetration could get even higher. As Mr. Sheridan put it, “We think that the new technology is coming to market whether it's CGM or whether it's pump technology with algorithms, is definitely going to reduce the threshold that people face when they make a decision to go from pens and needles to pumps and other technology. We think we are drafting behind the CGM companies. CGM companies get their products on to people who are MDI. They see the benefits of the technology. They see the benefits of working with a company that provides service and support. And I think that they're more likely to consider our pump at that point in time. So, we think that the market's going to continue to expand. And I think as it does, we'll all benefit. And we think technology and ease of use is driving that adoption.”

• Excitingly, Tandem saw an “increasing contribution of recurring pump renewal purchases and supply sales” in 1Q21 with pump renewals up, “both in terms of pump shipments and in accumulative rate.” During Q&A, Ms. Vosseller offered more details about Tandem’s renewal rate. Although she did not share specific figures, she noted that currently, renewal rates are seeing “strong, steady, solid progress.” Ms. Vosseller also pointed investors to 2022 as an important year for renewals, as pump shipments in 2018 “doubled” YOY to ~34,000 pumps and 2022 is the year when those 2018 warranties will be up.

  •  “This year, just think about a continuation of what we’ve been seeing and think about next year being the wild year. […] I think it’s going to get a lot more exciting in the coming years as those become a more meaningful part of the business opportunity for us. And renewals, when you compare it to attracting new customers, […] our goal is to continue to offer innovation to enhance that customer experience so that they will want to stay with us when their warranties expire.” – Ms. Vosseller

• Tandem continues to see “about half” of its new patients coming from MDI, with the other half switching from competitors. This trend has been stable for a number of quarters (4Q20, 3Q20, 2Q20, 1Q20, 4Q19, 3Q19). While 50% of new users from MDI indicates strong market expansion, we heard from Insulet in February that approximately “80%” of its new Omnipod users are coming from MDI, suggesting Insulet is still expanding the pump market more quickly than competitors (we’re looking forward to updates on this tomorrow during Insulet’s 1Q21 call at 1:30 pm ET). It’s also worth noting that both Tandem’s “about half” and Insulet’s ~80% figures have remained stable throughout the pandemic, suggesting there hasn’t been any decline in interest in pump therapy from MDI users, despite the inability to perform pump trainings in person.

• Management did not share a specific figure on shipments to UnitedHealthcare customers this quarter; however, Ms. Vosseller noted that “it’s tracking along in line with our expectations.” In 4Q20 and 3Q20, we heard that UnitedHealthcare customers accounted for “10%” and “over 10%,” respectively, of all shipments. In Tandem’s 4Q20 call, Ms. Vosseller suggested that in the long-term, Tandem expects shipments to UnitedHealthcare customers “will grow closer to their overall market share, which is estimated at about 15%,” suggesting that UnitedHealthcare customers may be up slightly from 4Q20 and 3Q20 and moving closer to that 15% target. As a reminder, UnitedHealthcare first began covering t:slim X2 for all customers in July. Looking ahead, Ms. Vosseller noted that Tandem will no longer comment on the size of Tandem’s UnitedHealthcare userbase given that “we don’t typically on quarter-to-quarter variations on different payers.”

2. Worldwide revenue of $141 million, rising 44% YOY; US sales of $103 million (+30% YOY), OUS sales of $38 million (+105% YOY)

Tandem reported quarterly revenue of $141 million in 1Q21, rising 44% YOY on a very challenging comparison to 48% YOY growth in 1Q20. Sequentially, sales fell 16% from a record $168 million in 4Q20 – this drop-off was expected as Tandem does most of its business in the US where diabetes device sales typically drop-off from 4Q to 1Q due to resetting deductibles. Despite the sequential decline, 1Q21 still saw the second-highest ever revenue for Tandem, driven by remarkable OUS growth as Tandem expands into new markets and continues to expand Control-IQ into existing markets, as well as continual expanded Control-IQ uptake in the US and an increase in pump renewals. These drivers helped offset some continuing pressure from the COVD-19 pandemic. Tandem’s pump sales represented 58% of all revenue with 28% of sales coming from infusion sets and 13% of revenue from cartridges. The 58% figure compares to 63% in 4Q20 – this is a positive trend for Tandem, as it shows Tandem’s userbase is growing quickly and more of its revenue base becomes recurring (with more installed users, more revenue will come from cartridges and infusion sets of current users).

• US sales totaled $103 million in 1Q21, rising 30% YOY and making up 73% of all sales. As a reminder, Control-IQ launched in the US in late January 2020 and drove impressive 46% YOY growth in the US in 1Q20, making it a tough comparison for 1Q21. Sequentially, sales fell 26% from $139 million in 4Q20, which again, can be attributed to known seasonal US market shifts. US YOY growth was driven by continual expanding uptake of Control-IQ, full access to UnitedHealthcare members, and an increase in pump renewal sales.

• International revenue totaled $38 million in the quarter, up 105% YOY (!) on a tough comparison to 62% YOY growth in 1Q20. Sequentially, sales rose 31% from $29 million in 4Q20. 1Q21 OUS sales exceeded management expectations and were named as a factor in Tandem’s decision to increase its 2021 guidance. Unlike 4Q20 when “half” of OUS revenue was driven by German distributor purchases, high demand was seen across all geographies in 1Q21, including in Germany, where Tandem’s distributor was already reordering in 1Q21. As a reminder, Tandem continues to expand its OUS market access. In its 4Q20 earnings call, Tandem shared plans to launch Control-IQ in 25 international markets by the end of 2021, a goal the company reiterated during today’s earnings call. Given this expansion is expected to continue throughout 2021, Tandem anticipates that this impressive growth is “just at the beginning” and will translate into long-term growth. Worth noting, Tandem expects headwinds in the 3Q21 in Europe due to seasonal shifts as Europeans go on summer holiday.

3. FY21 revenue guidance raised to $625-$640 million, representing 25%-28% YOY growth and primarily driven by raise in international revenue guidance; still guiding for FY21 gross margins of “approximately 55%”

Tandem has increased its FY21 revenue guidance to $625-$640 million, representing YOY growth of 25-28%. The updated guidance represents a $25 raise at the midpoint, compared to the $600-$615 million revenue guidance given at the beginning of the year. The guidance raise is driven by higher expected international revenue. Broken down by geography, Tandem is now guiding for $500-$510 million in US revenue, raising the low end of the range by $10 million (but not the midpoint). Outside the US, Tandem is now guiding for $125-$130 million in revenue (+50%-56%), a $20 million midpoint increase. Tandem anticipates that OUS sales will represent “approximately 20%” of total sales in 2021. The company reiterated its guidance for FY21 gross margins of “approximately 55%” and adjusted EBITDA of 14% to 15% of sales.

• Several analysts asked if the minimal increase in US guidance was due to expected competition in the back half of 2021 due to anticipated new arrivals in the US AID space. As a reminder, Insulet’s Omnipod 5 is expected to launch in a “limited market release” in 1H21 and Medtronic’s MiniMed 780G is anticipated at some point likely in 2021, increasing competition for Tandem. Overall, Mr. Sheridan simply stated, “We’ll just have to see what happens as they do gain approval.” However, he offered more commentary on MiniMed 780G specifically, offering Germany as an example: “Right now, one of our competitors [MiniMed 780G] is available OUS […] in the German market. You saw that in the last two quarters we’ve done extremely well in Germany, and we did that with Basal-IQ. Control-IQ is not even there yet, so we’re excited that we’re going to compete effectively against that product.” He later added, “I think that while Medtronic is a formidable competitor, I think we feel comfortable that we can compete effectively against them in the OUS countries as well as here in the States.”

4. Gross margin of 52% in 1Q21; $513 million in cash and short-term investments; net loss of $5 million in 1Q21

Tandem reported gross margins of 52% in 1Q21, up slightly from 51% in 1Q20. Per management, this improvement is due to “expected leverage from cartridge capacity investments” made in 2020 and adds to Tandem’s confidence in their ability to achieve 2021 margin targets. Sequentially, gross margin fell from 55% in 4Q20. Gross margin continues to be impacted by royalties associated with Control-IQ (due to Dexcom’s ownership of TypeZero), but this expense is expected to decline as a percentage of sales over time. In 1Q21, Control-IQ royalties represented “1%” of sales, compared to “just over 1%” in 4Q20 and 3Q20 and “2%” in 2Q20. As a reminder, Tandem guided for FY21 gross margins of 55% in 4Q20, in-line with goals shared at the company’s 2018 Analyst Day.

• Tandem ended the quarter with $513 million in cash, cash equivalents, and short-term investments. Tandem saw “strong cash flow” from operations in the quarter and the $513 figure is up $29 million from the end of 2020. According to Ms. Vosseller, 1Q21 represented Tandem’s first-ever positive operational cash flow first quarter in company history.

• Net loss in 1Q20 totaled $5 million, an improvement over a net loss of $14.9 million in 1Q20 and down with a net income of $17 million in 4Q20. Operating expenses in 1Q21 totaled $77 million, rising from $64 million in 1Q20 (+20% YOY). This is roughly 54% of 1Q21 sales, compared to 65% in 1Q20.

t:slim X2 and Control-IQ Highlights

1. Smartphone bolus control delayed from 1H21 launch timeline; no new timelines, but Tandem working to bring feature to market “as quickly as possible”

In a significant pipeline update, Tandem is no longer expecting a 2Q21 clearance and launch timeline for its smartphone bolus feature. The delay follows communications with the FDA in March, though Mr. Sheridan emphasized that the correspondence is “part of the normal interaction with the FDA when you have a submission like this.” As a reminder, Tandem had submitted its mobile bolusing feature to the FDA as of November 2020 and was initially planning for launch in 1H21. Tandem aims to bring this feature to the market “as quickly as possible,” but (not to surprisingly) chose to provide any specific timeline. In terms of competition, with the delay, it now seems likely that Insulet will be the first company to bring smart phone pump control to users in the US with its expected limited launch of Omnipod 5 in 1H21 (i.e., within the next two months). Regardless of specific timing for Tandem’s mobile bolus feature, we do not imagine it will face a significant competitive disadvantage as Insulet has shared that the full market launch of Omnipod 5 is expected to extend into the end of 2021 and potentially into early 2022. We think much less is “known” here as time goes on, just because there are slowdowns that are completely beyond much of what the companies can do. Indeed, additional review time is not unprecedented, especially in light of the significant work the FDA has done surrounding COVID-19 related approvals as well and the novelty of Tandem’s mobile bolusing submission.

• As a reminder, Tandem’s mobile bolusing feature will be available to both Android and iOS users. For in-warranty t:slim X2 users in the US, smartphone control will be offered “for no cost” and users will be able to upgrade to smartphone control via the Tandem Device Updater which first launched in 2016. This will also be a competitive advantage, at least initially, over Insulet, which expects to have smartphone control for its Omnipod 5 system for Android users first.

• During Q&A, Mr. Sheridan provided additional commentary on Tandem’s communications with the FDA: “This is just part of the normal interaction with the FDA when you have a submission like this and I think that I don’t want to comment specifically about things in our interaction with the FDA. But, I will say, we’re very pleased with their response to us on cybersecurity, and I think that might have been one of the areas of greatest risk and I think we’ve alleviated any concerns that they’ve got there with our response and our design, so we feel very positive about that. I’ll also say that the FDA remains very supportive of using mobile technology in medical devices, particularly in insulin pumps, and, so, I think that’s also a positive. And I think that we still remain very confident that we’re going to get approval for this product. It’s just this is just a normal back and forth interaction. I think that clearly, we’re going to have to now respond and there’s inherent uncertainty in dealing with the FDA in the review process, but this product’s coming to market.”

• We look forward to receiving more impressions from users – from our view, while we imagine there will be a range of views on mobile blousing, we would guess most would see it as upside, even if they’ve been waiting some time. Unlike CGM, where users can switch very easily, that’s not nearly as true for pumps. For now, we think the more closed loop that is possible, the more closed loop that is sought; the “boluses” of real-world data drive higher closed loop preference.

2. Control-IQ launch in Canada with roll-out in Germany and France to follow “later this year”; OUS competitive implications

Tandem continues to grow its momentum internationally, with Control-IQ launching in Canada in 1Q21 following regulatory approval from Health Canada in November 2020. Tandem’s total Control-IQ user base now totals “over 150,000 people,” a number that will only grow as Tandem plans to launch Control-IQ in Germany and France “later this year.” According to comments from Ms. Vosseller, Germany and France represent Tandem’s two largest OUS markets, presenting significant growth opportunities. These updates are in-line with comments from 4Q20 when Tandem shared its plans to expand Control-IQ into “25 geographies” by the end of 2021 bringing the total addressable market to ~4 million people; in those geographies, Mr. Sheridan noted that pump penetration “on average is less than 20%,” representing a significant opportunity.

3. Pivotal study for Control-IQ in children ages 2-6 has commenced enrollment; real-world Control-IQ data published in DT&T reiterates glycemic and quality of life benefits

Excitingly, Mr. Sheridan updated listeners that a new study investigating Control-IQ in children as young as 2 has started enrolling. According to Mr. Sheridan’s comments, the study will likely run throughout the year and “will include a large number of participants to help further support a lower age indication.” A small pilot study of Control-IQ in toddlers and preschoolers (n=12) was presented at ADA 2020 and we first learned about a full-on pivotal trial for 2-6-year-olds at EASD 2020. While Mr. Sheridan noted that this age group doesn’t represent a huge sales opportunity, he emphasized the importance of improving glycemic control in this age group. In the US, MiniMed 770G is currently the only AID system approved for use in children down to the age of 2.

Slide taken from EASD 2020 represents pivotal study (pilot study for 2-6-year-olds) data various age groups.

• In April, DT&T published one-year real-world data from 9,451 Control-IQ users (83% type 1; mean age 42 years) that demonstrated Time in Range improvements of +2.4 hours/day from 64% at baseline to 41% after 12-months. In this real-world investigation, the improvement in Time in range was “noticeable” after two weeks and was maintained for the full 12-month study duration. According to these data, type 1s saw slightly greater Time in Range improvements than did type 2s improving +2.5 hours/day (63% to 74%) and +1.9 hours/day (67% to 75%) respectively. These results were similar to Tandem’s Control-IQ pivotal trial results published in NEJM in October 2019, which showed that Time in Range increased 2.4 hours/day from 61% to 71% with the most significant improvements in glycemic control coming over night. During prepared remarks, Mr. Sheridan shared that the data published in DT&T would also be presented at ATTD in June and that Tandem was “encouraged” to see promising data among type 2s as the company works to expand indications for Control-IQ to include patients with type 2.

4. Control-IQ algorithm updates, Tandem Source, Dexcom G7 and Abbott CGM integrations all scheduled to launch “between now and the end of 2022”

Though mentioned only briefly on today’s call, we know from Tandem’s 4Q20 update that the company is working on Control-IQ algorithm updates, developing its second-generation data management application Tandem Source, as well as working to integrate Control-IQ with Dexcom’s G7 and Abbott’s CGMs and expects to complete all of these projects by the end of 2022. Mr. Sheridan expressed that Tandem is “making good progress across all of [its] R&D pillars that focus on the expansion of our hardware offerings, automated insulin delivery, digital health systems and integrations, and other advancements.”

• Tandem has filed two Control-IQ enhancements with the FDA to allow for “greater personalization in certain rates and ranges” and to add an indication for Sanofi’s biosimilar rapid-acting insulin Admelog (insulin lispro). However, as of 4Q20, it did not appear as though the FDA had begun the review process for these enhancements with management stating: “We’re waiting on the FDA right now to get onto this and to begin to actually look at the review process.” In 4Q20, Mr. Sheridan hinted that these approvals may come through in 2H21 as the FDA’s capacity frees up in the “latter half of 2021.” In term of increased personalization, our understanding of these updates is that they include expanded body weight and correction factor ranges as well as additional undisclosed factors that are slated for clinical trials this year.

• Tandem Source will be Tandem’s second-generation data management application. Tandem Source will replace Tandem’s current t:connect web platform, bringing providers, users, and caregivers a personalized app- and web-based dashboard with data and insights that drive diabetes management improvements. According to comments from Mr. Sheridan in 4Q20, Tandem plans to first launch Tandem Source in “select” international markets “later this year with a domestic launch to follow.” As well, as a reminder, Tandem acquired the popular “CGM companion” app Sugarmate back in June; we’re so curious to see how much of the Sugarmate functionality makes its way into Tandem Source.

• Though the field still don’t have a concrete timeline for Dexcom’s G7 regulatory approval in the US – as of last week, G7 had yet to be submitted for CE-Marking and the US pivotal was ongoing – Tandem shared in 4Q20 that it expects to integrate Control-IQ with G7 “within one month” of G7 clearance. Tandem also has plans to integrate with Abbott’s sensors, and while these two integrations are unlikely to launch in 2021, we expect them to be strong growth drivers in 2022. Notably G7 will be the fourth (!) Dexcom sensor to integrate with Tandem’s technology, assuming that Abbott’s closed loop functionality emerges. Turning to Abbott, following a finalized partnership in June 2020, we heard in 4Q20 that Tandem is currently targeting integration “as soon as possible in 2022” followed closely by a US launch. At this point, although it is still unclear which FreeStyle Libre CGM will be integrated, clearly this will depend on “the timing of Abbott’s FDA clearance supporting AID use,” as Mr. Sheridan emphasized. While we think it’s long beyond that the time this would have been considered very easy and straightforward, we hope for some speed soon so that those that don’t have the best CGM coverage can still take part in the closed loop.

Pipeline Highlights

1. t:sport FDA filing date moved back “a few weeks” and “may slip into 2022”; US launch still slated for “summer of 2022”

Tandem’s t:sport insulin pump is still “on track” in its development timeline, but its FDA filing date has been moved back “a few weeks” and “may slip into 2022.” This delay is driven by the delay in Tandem’s smartphone bolus submission. As a reminder, t:sport uses the same “foundational” iOS and Android apps as the mobile bolus feature for t:slim X2 does. As discussed above, the FDA review for Tandem’s mobile bolus feature is delayed due to unspecified discussions and issues, which have resulted in “learnings” that Tandem intends to apply ahead of time in its development of t:sport. In all, the delay to t:sport’s submission will be “measured in weeks,” suggesting a relatively quick turnaround. As a reminder, the submission timeline for t:sport was already delayed in February from 1H21 to 4Q21 due to opportunities to improve system useability that were revealed during human factors testing. During today’s call, management shared that Tandem is making “great progress” on these user interface improvements and is “pleased with those results.” Per Mr. Sheridan, “By addressing these items up front, we believe our t:sport regulatory filing will be more complete and ultimately result in a faster path to clearance and commercial availability,” meaning that management anticipates that the delay in t:sport’s FDA submission will not impact t:sport’s commercialization timeline and launch, which is slated for “probably sometime in the summer of 2022.” Tandem’s operations team is working to prepare the company’s manufacturing capacity ahead of t:sport’s 2022 launch.

• As a reminder, t:sport is a screenless, wirelessly controlled tubed pump (short infusion set), which will include the Control-IQ algorithm and iCGM integration (no new clinical data will be needed). t:sport is half the size of the current t:slim; will switch to a syringe-driven pumping mechanism (a big manufacturing change for Tandem); and will add wireless charging, water resistance, an on-device bolus button, and an easier fill process. Closed loop will still run on the pump if the phone is out of range, keeping Tandem more competitive with the on-body system design of Insulet’s Omnipod Horizon.

 Slide taken from Tandem’s 2018 Analyst Meeting (note that the launch timeline expectation is no longer up to date)

2. Penetrating the type 2 market: CeQur Series C5 investment helps broaden Tandem’s portfolio; type 2 indication for Control-IQ and t:sport will help drive adoption

During Q&A, Mr. Sheridan was asked about Tandem’s recent investment in CeQur in an oversubscribed Series C5 funding round totaling $115 million. As a reminder, CeQur plans to commercialize its CeQur Simplicity insulin delivery patch with “limited market release” in the US sometime this year. In CeQur’s press announcement, Mr. Sheridan is quoted: “CeQur Simplicity is designed to address a large, underserved segment of the diabetes market by providing a simple, low-profile and comfortable alternative to injections. We recognize that there is not a one-size-fits-all solution for people living with diabetes, and this investment aligns with our goal to advance diabetes care by expanding the set of tools available to provide customer choice and ensure optimal therapeutic outcomes.” During today’s call, Mr. Sheridan reiterated these values, stating: “With regards to CeQur, we’re excited about the investment. As you know diabetes is not a one-size-fits-all condition. There are many market segments and there’s different use preferences in each of these segments. And so, this investment just aligns with our strategy to support solutions that meet the needs of these different segments, particularly in type 2.”

• Mr. Sheridan’s clear interest in CeQur in the type 2 population plays into efforts we’ve seen in recent quarters from Tandem to increase pump penetration among type 2s. To that end, Tandem reiterated plans to pursue a type 2 diabetes indication for Control-IQ. Mr. Sheridan also highlighted the 378 patients in the recent real-world DT&T publication on Control-IQ that were using Control-IQ already (off-label). For the type 2 subset, Time in Range improved from just under 70% to 78% using Control-IQ – very impressive. Also in the pipeline, Tandem’s smaller t:sport insulin pump remains the company’s “starting point” for meaningfully approaching the type 2 market, but Mr. Sheridan again noted the company will eventually have a dedicated type 2-focused solution. We also heard discussion of this on the company’s 4Q20 call, where Mr. Sheridan suggested a few areas of focus: simplification of the user interface and tailored support.

Analyst Q&A

Q (Steven Lichtman, Oppenheimer): So, my first question’s on international – great to hear the progress there. I was wondering if you can provide any color on how trends have changed and I assume accelerated as you've launched Control-IQ in various countries particularly with a couple of other countries you mentioned expecting to come online with Control-IQ later this year.

Leigh Vosseller, CFO: Hi, Steve. Thanks for the question. It's really interesting as you think about it, we're just at the beginning of the Control-IQ rollout. In fact, we haven't even launched it yet in France and Germany which are two largest markets and we're seeing great strength already without it. I think what we're seeing in the US with Control-IQ and the momentum that it’s driving is an indicator of what we can expect to see in the OUS market.

For now, I don't think we have a great trend in terms of what's happening there. There's been a lot variability in ordering patterns from the distributors just based on the dynamics that they're fighting with the changing COVID environment. But it is encouraging to think about how this might translate into the long-term growth for us.

Q: Great. Thanks, Leigh. John, you talked about type 2 and you're increasingly talking about type 2. I was wondering if you could frame it for us sort of where you guys are at overall. You talked about seeking an approval for Control-IQ. You made the investment during the quarter in CeQur. Can you sort of update us your thoughts overall on where Tandem is on approaching the type 2 market?

John Sheridan, CEO: Absolutely. Well, first of all, we're very excited about the data that was in DT&T , the 400 users that saw substantial improvement in Time in Range over the last year. So that was great data and great to see. But we are still working on sort of a longer-term plan and strategy that involves clinical study, design, the user interface, and channel access.

So those are the – sort of the lead things that we've been working on. But as we said before, our first step is to take advantage of our existing products. Control-IQ is currently not indicated for type 2. And so we really want to work with the FDA to get approval for that. It may require a clinical study, but we're still in – we need to begin the conversations actually to get approval for that. And then obviously we believe that that [indiscernible] with the smaller form factor discretion is also going to be very appealing to the Type 2 community.

So, with those two products almost in the bag, we plan to move forward with those aggressively here in the near future. And then we'll be working on longer-term issues that we'd be looking at a discrete form factor specifically for this community, and just take advantage of the newer products potentially simplifying the user interface. And, also in the meantime, studying just the channel and market access dynamics so that when we actually get to that point where we have these newer products we can be successful.

Q (Larry Biegelson, Wells Fargo): Hey, guys. Thanks for taking the question. Congrats on the strong quarter and just one question on international and just one on CeQur. Leigh, how do we think about the cadence this quarter for international sales? The guide, if we look at seasonality last year, using Q1, you would come in well above the guidance. And I'll ask a CeQur quick question up here as well. John, that your quote in the release they put out obviously caught people's attention. What attracted you to that pump? How do you think it compares to the incumbent and any color on the time line?

Ms. Vosseller: I'll start, Larry, with the international question. So when you think about the cadence, it is a little bit difficult to predict just based on this variability in the ordering patterns that we've seen. It started with Q4 with a little bit unique because so much of that opportunity came from one particular distributor at least half of the business in the fourth quarter. This quarter we saw everyone ordering. But I can't tell you that I see a particular trend that can help us develop a confidence in exactly how it will play out. I think the thing to think about the most is generally speaking; we expect pressure in the third quarter just due to typical seasonality outside the US because of European holiday season. And otherwise, we expect continued growth as we gain traction across the new markets and continues to roll out there.

Mr. Sheridan: All right. And then with regards to CeQur, we're excited about the investment. As you know diabetes is not a one-size-fits-all condition. There are many market segments and there's different use preferences in each of these segments. And so, this investment just aligns with our strategy to support solutions that meet the needs of these different segments, particularly in type 2. When you look at the CeQur Simplicity, it's a simple, low simplicity it's a simple low profile and alternative to injections and it's a valuable tool and it will appeal to customers who really are in a very different segment that we're operating in today. And so, the intent here really has to learn about this particular segment as we formulate our type two strategy. Specifically, about the segment working closely with CeQur to understand that but then there's broader type two issues I think we can learn from working with CeQur about as I mentioned market access, about working with PCP versus endos.

So, I think there's a great deal of education that Tandem can gain from this relationship and I think that we can help CeQur as well in many ways. And so, we're excited about the opportunity and I think this is just kind of one element in our strategy to get into the type two market effectively.

Q (Matthew O’Brien, Piper Sandler): Thanks for taking the questions. Just looking at the guidance and there's not a lot to pick on here but I just want to make sure I'm asking you this question just so we're clear on it all. Looking at the guidance, you beat by $23 million versus what we're modeling you're pushing the midpoint of the guidance range up about $25 million. Almost all of that is international. So, is there anything given the competitive dynamic or anything else to really call out domestically as to why may be you didn't bump up things a little bit more in that piece of the business which is still 80% of the overall business?

Ms. Vosseller: Sure. I'll just start by saying our philosophy and approach hasn't changed at all just a few months ago when we talked about guidance for the year. We talked about the positives and also a few of the things that we were more cautious about. And when I think about the positives it's really the momentum we've seen from Control-IQ in the US it's been building now for quite some time and we're just starting to see it build outside the US. I should add that we have United Healthcare as a tailwind also at the beginning half of this year since we didn't have access until July of last year. The items that we're cautious about would still be that COVID dynamic, I would say more so outside the US than in the U.S. It's not that we're not seeing it here, but we think that the Control-IQ momentum is largely offsetting it. And then the other area is the potential for some noise in the market in the back half of the year as it relates to the competitive dynamics. And so, I still think all of those factors are in play. We – to your point, we we're still very pleased with our domestic results, still outpaced our own internal plan. And we look forward to seeing further growth across the year.

Q: Okay. Maybe just to be clear, you're not incrementally more nervous about the competitive noise in the marketplace in the back half? Is that fair?

Mr. Sheridan: Not at all. I think we're very confident in our position and I think that's why we raised guidance both OUS and domestically.

Q: Got it, that's really helpful. Leigh, I didn't hear any comments as far as what the contribution was from United or on the replacement side in terms of quantitative figures. Would you mind providing those?

Ms. Vosseller: Sure. I'll talk to you a little bit about how those turned out. So, from a renewals perspective first, we did see just like we've been seeing across the recent quarters, about four to eight quarters, we saw an increase in the volume compared to last year as well as an improvement in our cumulative rate. And I think those are key factors. Right now, renewals are really about strong steady, just that solid progress. And what you've been seeing in the baseline is easy to predict off of. What's really exciting about renewals more so with what's going to come next year. When you think about the comparison of 2017 which are new opportunities this year and the 2018 shipments which are new opportunities for next year, those doubled in terms of size. And so, this year, just think about a continuation of what we've been seeing and think about next year being the wild year, I guess if you will. And then from a United perspective, it's just tracking along in line with our expectations. It's clearly up year-over-year because we didn't have access in Q1 of last year. But it started in the baseline in Q3. And we're just trending as we would expect. We likely won't comment to the particular size of it going forward because we don't typically comment to quarter-to- quarter variations on different payers. But now it is a good part of the baseline. And so, we are happy with where it's tracking.

Q (Brooks O’Neil, Lake Street Capital Markets): Thank you. Good afternoon. Congratulations on the great start to the year. I'm curious. Obviously, there's been what I would call widespread expectations about the new pumps from the competitors. Do you guys think you lost business in the first quarter as people waited to see what those new products looked like? Or how do you think the market is responding to you in light of the expectation that these new pumps are catching up to where you've been for a long time?

Mr. Sheridan: Yeah. Brooks, I don't think so. I mean, we obviously had a great quarter. Right now, one of our competitor's pump is available OUS. And it's particularly available in the German market. You saw that in the last two quarters we've done extremely well in Germany, and we did that with Basal-IQ. Control-IQ was not even there yet. So, we're excited that we're going to compete effectively against that product.

You can't market these products in the US until they've been approved by the FDA, and neither have in the US. So, I think it's unlikely at this point that we've seen any impact. We'll just have to see what happens as they do gain approval. There'll probably be more noise and we'll probably won't see that until the second half of the year.

Q: I understand the competitive issue, but I'm curious about your comments on the mobile bolus and then subsequently, t:sport. Is your sense that the FDA believes that your mobile capability works and is safe, but they just want a little bit more information? Do they want more data? Help us to understand kind of how you read the FDA's response and feelings about that product.

Mr. Sheridan: Sure. I think that this is just part of the normal interaction with the FDA when you have a submission like this. I don't want to comment specifically about things in our interaction with the FDA. But, I will say we're very pleased with their response to us on cybersecurity and I think that might have been one of the areas of greatest risk. I think we've alleviated any concerns that they've got there with our response and our design. So, we feel very positive about that.

I'll also say that the FDA remains very supportive of using mobile technology in medical devices, particularly in insulin pumps. And so, I think that's also a positive. And I think that we still remain very confident that we're going to get approval for this product. It's just, this is just a normal back and forth interaction. I think that clearly, we're going to have to now respond and there's inherent uncertainty in dealing with the FDA in the review process. But this product's coming to market and we'll keep you informed as we know more about it from our interactions with the FDA.

Q (Matt Taylor, UBS): Hey, thanks for taking the question. I just wanted to follow-up on a question there about the cadence and the environment. I know there's still some uncertainty. Could you offer any color on recent trends? Did things improve through the quarter? Is there any trend to extrapolate through April? Anything that you can provide on that would be really helpful.

Mr. Sheridan: There's been strong demand into the second quarter as well. We’re excited about 2021 and we have confidence that we're going to achieve the goals this year that we set out for ourselves, as well as the next couple of years based on what we're seeing now and the positive reaction to Control-IQ from the physicians who are prescribing it, as well as the people who are using it, it's just outstanding. As we talked about, we have 150,000 people who are now using it and we have good momentum. We have incredible momentum that physicians are prescribing more and more systems, we have their confidence and trust and the people who are using it. I mean, I can't tell you how many positive anecdotes I get daily from people using it that are so motivational to our whole organization. But, I think we're in a great spot.

Q: And then just to follow up on international, there was definitely an outperformance there sounds like relative to what you expected that was broad based. Is that what you think is going to continue I guess broad based ordering or just wanted some more specificity on if there were any kind of pockets of strength that you would call out?

Ms. Vosseller: Yeah. It was really strength across the board from all of the regions. We were happy to see everyone was ordering, including Germany who just played such a substantial order in the fourth quarter already reordering in the first quarter. It's hard to say if their orders today are a new trend within each country. They're still wrestling a lot with the COVID dynamic. So how is it impacting their local markets? How do they get their inventory right set as they think about the demand that's in front of them? It’s a bit of a challenge for the distributors throughout this to try to figure it out. But what I think is we're hearing loud and clear is there's enthusiasm and there's a lot of awareness about what we're bringing. And I think again, it will be something that we will continue to see in the long term.

Q (Ravi Misra, Berenberg Capital Markets): Good evening, everyone. So, my question, it's around the 20 million days Control-IQ. That's a rather large number. Can you just help us think about kind of longer-term, some of the innovation that you think you can extract from that data whether it comes to algorithm refinements or kind of any value-add capabilities you can add for the patient? Then, maybe my second one, I'll just ask it upfront, for Leigh, just on the guidance and the leverage metrics. It looks like international leverage was a lot better than you thought it was given the sales outperformance this quarter and you brought that number up. But it seems like you're kind of holding fast to the profitability metrics that you had laid out in the prior call. So just kind of wondering what's the offset there given kind of the revenue outperformance? Thank you.

Mr. Sheridan: Yeah, that's a great question Ravi about how we use the data. As you can see, we have a tremendous amount of data and we have invested greatly in our data science team and our algorithm teams. And they're looking carefully at this data to do just what you're saying. We're mining the data. We're looking for exactly how the system performs. And we're looking for opportunities to make improvement in the overall performance of the system, its interactions, as the algorithm works. And I think this is really the data is what's driving the next formulation of the next steps for our Control-IQ advancements in time.

I think that there's the algorithm itself that's on the pump. There's also data that we collect. I think we can probably help physicians optimize settings over time for the people who are using the pump. So, there's algorithms that could potentially exist in the cloud that could support and make the physician. So, we consider a customer as well more efficient as they interact and provide better therapy and more effectively for their patients. And then there's also just the product itself. We see how the product performs. It helps us to understand where the opportunities are for improvement. And clearly we've taken a lot of that information and we've applied it to t:sport. And we're going to continue to apply it to the next generation products.

It's a treasure trove. It's hugely important to us. We're fully taking advantage of it. And we're building teams out to know how to do just that. And I would finally say that when we work with payers – payers really value this data as well. And we see ourselves establishing dashboards with this type of information that we can make available to payers to help them see the benefits of our technology and potentially go back to them to look for additional reimbursement for our products and time.

Ms. Vosseller: And, Ravi, to your question on the margins, I think I would just start by saying that this just gives us even more confidence in achieving those margin targets we've set for this year. And one way to think about it is this is when we set our operating plan, it's based on the revenue assumption. And there are many things that people in the organization would like to spend money on that we can't necessarily afford within the construct that we put together. And so by having an overachievement in sales it allows us the opportunity to maybe advance some of those initiatives or investments. Or go ahead and put them on the table for something that we could do this year as opposed to maybe putting off for next year. So we still feel very confident hitting those margin targets. And it will allow us to keep moving forward towards meeting our long-term objectives as well.

--by Hanna Gutow, Katie Mahoney, Albert Cai, and Kelly Close