Dexcom reported global revenue of $405 million in 1Q20, rising 44% YOY (+45% operationally). The 44% YOY growth comes on a tough comparison to 52% YOY growth in 1Q19, the toughest comparison Dexcom will face all year. Sequentially, sales fell 13% from the record $463 million in 4Q19, which is actually an improvement from the 4Q to 1Q sequential declines seen in the last two years (~17% in 2018 and 2019). US sales totaled $292 million in the quarter, rising 39% YOY. International sales were “clearly a bright spot” in 1Q20, rising 61% YOY (+63% operationally) to $113 million. Sequentially, OUS sales rose a very impressive 30% from 4Q19, driven by strength in both Dexcom’s direct and distributor geographies.
While Dexcom never gave out specific guidance for 1Q20, Mr. Blackford noted that 1Q20 revenue came in “above expectations.” Still, due to the reduced visibility around COVID-19, Dexcom has chosen to suspend its 2020 guidance, with Mr. Blackford giving the disclaimer: “This decision does not necessarily imply upside or downside to our prior guidance. Our first quarter performance was above our expectations and apart from the uncertainty created by COVID-19, we would be in a position to raise our guidance today.”
In a major update to Dexcom’s pipeline, Mr. Sayer today confirmed that the pivotal trial for Dexcom’s G7 CGM will be delayed for a minimum of “approximately six months” due to COVID-19. Mr. Sayer attributed the delay to the pausing of new trials at most clinical sites but expressed confidence in the company’s ability to deliver on the product. For over a year, Dexcom had stuck to a plan for a limited launch in “late 2020” with a full launch coming in “early 2021,” but, like so many other timelines, COVID-19 has proven to be disruptive. Despite the delay, we would also note that Dexcom still has a very compelling product in G6 and a delay in G7 may not have a huge effect from a financial standpoint. See valuable quotes from Mr. Sayer below.
In 1Q20, Dexcom saw a record number of new patient additions. Based on Dexcom’s most recent user base update (650,000 in 4Q19), we’d conservatively guess Dexcom now has a user base of ~700,000. For some context, we estimated the entire CGM user base at “just” 0.7-1 million people at the end of 2017, barely over two years ago!
Earlier this month, the FDA temporarily authorized use of Dexcom CGMs for all patients in the hospital during COVID-19. While the authorization is temporary, Mr. Sayer noted the move has already given Dexcom valuable learning opportunities about CGM in the hospital and summarized by saying, “We will be so much more ready to go to this market when it’s time.”
Dexcom’s supply chain is secure and that its manufacturing sites in San Diego and Mesa are both “fully operational.” The company is also in a “strong inventory position” and while were some customers interested in stocking up on CGM and supplies during the pandemic, this impact was limited. The company is also maintaining its plans to expand G6 manufacturing capacity and ramp up direct-to-consumer marketing in the back half of 2020.
Highlighted in Dexcom’s press release, G6 has received regulatory approval in Australia, Japan, and South Korea. Dexcom plans to launch G6 in all three countries “later this year.” Mr. Pacelli referenced regulatory approval coming in Japan on the 4Q19 call, though today he noted that reimbursement “won’t be this year.”
Unsurprisingly, much of the call was dedicated to discussion around COVID-19 and we’ve gathered some of the most valuable quotes at the bottom of this report.
- Financial Highlights
- 1. Global Sales of $405 Million, Rising 44% YOY; US Sales of $292 Million, Rising 39% YOY; OUS Sales of $113 Million, Rising 61% YOY (+63% Operationally)
- 2. 1Q20 Revenue “Above Expectations,” But 2020 Guidance Suspended; “Apart From The Uncertainty Created by COVID-19, We’d Be in a Position to Raise Our Guidance Today”
- 3. GAAP Net Income of $20 Million; Gross Margin of 63%; $1.5 Billion in Cash
- G6 Highlights – Medicare, Manufacturing, and International
- 1. Record Number of New Patient Starts in 1Q20; “Majority” of Medicare Transitioned to G6
- 2. FDA Temporarily Authorizes Use of Dexcom CGMs in Hospital During COVID-19; 3-Hour CGM Data Delay For Clarity Removed
- 3. Manufacturing Remains “Fully Operational”; Doubling G6 Capacity by Mid-2020 and Finalized Decision for Third Manufacturing Site in Malaysia
- 4. Regulatory Approvals for G6 in Australia, Japan, and South Korea; G6 for Pregnancy in UK Launched
- Pipeline Highlights
- COVID-19 Related Quotes
- Analyst Q&A
1. Global Sales of $405 Million, Rising 44% YOY; US Sales of $292 Million, Rising 39% YOY; OUS Sales of $113 Million, Rising 61% YOY (+63% Operationally)
Dexcom reported global revenue of $405 million in 1Q20, rising 44% YOY (+45% operationally). The 44% YOY growth comes on a challenging comparison to 52% YOY growth in 1Q19, the toughest comparison Dexcom will face all year. Sequentially, sales fell 13% from the record $463 million in 4Q19. The 13% sequential decline is actually an improvement from the 4Q to 1Q sequential declines seen in the last two years (~17% in 2018 and 2019). Revenue growth continues to be driven by growing CGM awareness and accessibility as new patient starts hit a record in 1Q20. Presumably, Dexcom’s volume growth is outpacing revenue growth as more of the business shifts towards lower revenue per patient channels (e.g., pharmacy, Medicare). COO and CFO Quentin Blackford noted that Dexcom saw strong growth from its DME, pharmacy, and Medicare channels in the quarter, with pharmacy seeing the fastest growth (potentially from a smaller base). US sales drove about two-thirds (66%) of growth in the quarter.
US sales totaled $292 million in the quarter, rising 39% YOY. Sequentially, sales fell 22% from the record $376 million in 4Q19. In the US, continued expansion of Dexcom’s pharmacy coverage is helping to drive the “fastest growing and strongest sequential uptick” of any channel. At $292 million in revenue, Dexcom’s 1Q20 represents the third-highest US revenue following blockbuster quarters in 3Q19 and 4Q19.
International sales of $113 million were “clearly a bright spot” in 1Q20, rising 61% YOY (+63% operationally). Sequentially, OUS sales rose a very impressive 30% from 4Q19, driven by strength in both Dexcom’s direct and distributor geographies. At 61% YOY growth, 1Q20 represents Dexcom’s fastest growing quarter for its international business since 1Q19 and on a much larger base. During Q&A, Mr. Blackford explained that OUS sales were strong “really across all regions” from Europe to Asia. Once again, Canada (where Dexcom has an e-commerce platform) was highlighted as a driver of growth. Mr. Blackford also mentioned Germany and the UK as “outpacing most other major markets.”
Revenue from sensors totaled $325 million in the quarter, growing 53% YOY and comprosing 80% of total sales. For the first time to our knowledge, Dexcom bundled its transmitter and receiver revenue (now labeled “Hardware revenue”), which totaled $80 million in the quarter (+17% YOY). The choice to bundle transmitter and receiver revenue together is not too surprising as receiver revenue has become a smaller and smaller contributor to Dexcom’s revenues with the G5 and G6 mobiles becoming easier to use. Of course, when the fully-disposably G7 launches, we’ll be interested to see how these revenue numbers are affected.
2. 1Q20 Revenue “Above Expectations,” But 2020 Guidance Suspended; “Apart From The Uncertainty Created by COVID-19, We’d Be in a Position to Raise Our Guidance Today”
While Dexcom never gave out specific guidance for 1Q20, Mr. Blackford noted that 1Q20 revenue came in “above expectations.” As a reminder, Dexcom gave its 2020 guidance at JPM 2020, guiding for full year 2020 revenue of $1.725-$1.775 billion (+17%-21% YOY). Given that the first quarter historically represents 18%-20% of full year revenue (20% in 2017, 18% in 2018, 19% in 2019), Mr. Blackford’s “above expectations” comment seems accurate: at $405 million, 1Q20 would represent nearly 23% of the high end of full year guidance. Still, due to the reduced visibility around COVID-19, Dexcom has chosen to suspend its 2020 guidance, with Mr. Blackford giving the disclaimer: “This decision does not necessarily imply upside or downside to our prior guidance. Our first quarter performance was above our expectations and apart from the uncertainty created by COVID-19, we would be in a position to raise our guidance today. Ultimately, we believe the underlying demand for CGM has not changed despite the situation with COVID 19.”
3. GAAP Net Income of $20 Million; Gross Margin of 63%; $1.5 Billion in Cash
Building on its first ever profitable full year on both a GAAP and non-GAAP basis in 2019, Dexcom reported its first ever profitable first quarter in 1Q20. GAAP net income was $20 million, compared to a GAAP net loss of $27 million in 1Q19. On a non-GAAP basis, net income totaled $41 million compared to a net loss of $5 million in 1Q19.
Gross margin in 1Q20 came in at 63%, a significant improvement from 60% in 1Q19. Sequentially, gross margin fell from 67% in 4Q19; there was no comment on the drop in gross margin. Still, the 1Q20 gross margin of 63% comes about in line with Dexcom’s previous guidance for a gross margin of 64% in full year 2020. As a reminder, Dexcom began rolling out manufacturing of a new, lower-cost transmitter in 3Q19 which should be 50+% less expensive than the previous one that should be delivering considerable benefit to Dexcom’s gross margin numbers; the G7 will also improve margins when that emerges.
G6 Highlights – Medicare, Manufacturing, and International
1. Record Number of New Patient Starts in 1Q20; “Majority” of Medicare Transitioned to G6
In 1Q20, Dexcom saw a record number of new patient additions. The fact, very briefly referenced by Mr. Blackford during Q&A, went unmentioned during prepared remarks and was largely unnoticed during Q&A until one memorable exchange between analyst Jayson Bedford (Raymond James) and Mr. Blackford.
Mr. Bedford: “I hate to blow my one question on a yes or no question, but Quentin, I think I just heard you say that you generated record new patients in 1Q. Is that correct?”
Mr. Blackford: “Yes.”
Mr. Bedford: “Meaning you generated more new patients in 1Q 2020 than in any other quarter?”
Mr. Blackford: “Yeah, correct. The first quarter of 2020 was a record number of new patients to the company versus any other quarter in history. That's right.”
Dexcom gave its first official user update in two years in 4Q19, when the company said it had “approaching 650,000 net active patients globally.” Based on that figure, we’d conservatively guess Dexcom now has a user base of ~700,000. For some context, we estimated the entire CGM user base at “just” 0.7-1 million people at the end of 2017, barely over two years ago! While Abbott didn’t give a user base update on its 1Q20 call, its FreeStyle Libre user base is certainly “over two million.” The incredible growth seen by these two companies, and the CGM field widely, is remarkable testament to the value of CGM and the massive strides in usability, accessibility, and affordability the technology has seen in the last decade. Notably, there is still significant runway for CGM, even as the market expands at hypergrowth rates. Again on today’s call, we heard Dexcom CEO Kevin Sayer state his belief that CGM penetration could hit 80% in the US intensive insulin users market – this could be conservative in our view.
During prepared remarks, EVP of Strategy and Corporate Development Steve Pacelli noted that a “majority” of Dexcom’s Medicare user base had been transitioned to Dexcom G6. This has been a fairly quick transition as “first shipments” of G6 to Medicare patients began in October and the company aims to complete the transition from G5 to G6 by “mid-2020.” This timing is just in line with Dexcom’s plans to discontinue support for its G4 Platinum and G5 CGM systems in June 2020 in the US. Mr. Pacelli also noted that G6 is also the lowest cost CGM in Medicare, a result of Medicare lowering monthly pricing for class II iCGMs in July 2019. According to one analyst on Dexcom’s 2Q19 call, the pricing is ~13%-14% lower than that of class III CGMs, translating to ~$35 per month per person – wow, $1/day is much less expensive that average pricing. Growth of the G6 Medicare channel is a contributor to lowered average revenue per patient, though the 10-day wear G6 will require one less sensor per month compared to G5 (7-day wear).
2. FDA Temporarily Authorizes Use of Dexcom CGMs in Hospital During COVID-19; 3-Hour CGM Data Delay For Clarity Removed
The FDA’s temporary authorization of use of Dexcom CGMs for all patients in the hospital during COVID-19 was a major topic of discussion on today’s call. Management overall expressed hope about the long-term prospects of getting CGM in hospitals, stating that Dexcom has discussed with the FDA on the topic and hopes to “gather as much data” as possible on the topic during this pandemic. , including but not limited to the sensor’s reaction with other metabolite compounds and the logistics of remote monitoring. Excitingly, management expressed that more than anything, the experience so far has been a significant learning opportunity with respect to observing how caregivers are learning how to use the device, the manner in which the device impacts care delivery, and navigating hospital information technology and data sharing rules. Mr. Sayer eloquently summarized this by saying: “We will be so much more ready to go to this market when it’s time.” Mr. Sayer also noted that CGM manufacturing and delivery has also been a significant financial investment for Dexcom. Of note, Dexcom is not the only company with approval for its CGMs in the hospital, with Abbott FreeStyle Libre officially gaining the green light as well. Just yesterday, Abbott also announced that Health Canada had authorized the use of FreeStyle Libre CGMs in hospitals.
“We actually have had discussions with the FDA about this very subject. It is our hope to gather as much data as we can from these patients as they're in this hospital with various compounds being injected to see how our sensor performs in this environment, how well connectivity is, and what we can learn. Our commitment to the Agency is with this opportunity, we'll gather as much data as we can, and we're going to share what we learn, and see if we can, in fact, accelerate that path and get this device approved for use as a glucose monitoring technology in the hospital environment rather than what they're doing with fingersticks … We will be so much more ready to go to this market when it's time.” – Mr. Sayer
“The commitment we've made here from a dollar perspective is large. We put a lot of time and effort, and the hospital team has literally worked around the clock to get this going and so we'll gather the data. We'll file what we see or at least share what we see and then determine the course of action after that. If we see highly positive results, it's not unthinkable that they would give us an accelerated timeframe or cut back on the work that we have to do or possibly change a label to allow us to get there sooner. We're open to all that, and we will look at every one of those opportunities once we're done. But we're really taking this opportunity very seriously.”- Mr. Sayer
During prepared remarks, Mr. Pacelli and Mr. Sayer made reference to the fact that the FDA has removed the three-hour delay requirement for CGM data to appear in Dexcom Clarity. Pushing CGM data to software apps real-time usually requires regulatory submission. Though it wasn’t explicitly stated, the removal of the three-delay is likely a temporary authorization (similar to the CGMs) designed to enable better remote monitoring capabilities and reduce potential exposure for healthcare providers.
3. Manufacturing Remains “Fully Operational”; Doubling G6 Capacity by Mid-2020 and Finalized Decision for Third Manufacturing Site in Malaysia
During prepared remarks, Mr. Sayer informed the audience that Dexcom’s supply chain is secure and that its manufacturing sites in San Diego and Mesa are both “fully operational.” The company is also in a “strong inventory position” and while were some customers interested in stocking up on CGM and supplies during the pandemic, this impact was limited. In Q&A, Mr. Blackford noted the impact of “stocking up” was in the “several millions [of dollars], not tens of millions” and that Dexcom limited the amount of days of inventory on hand that distributors could carry. This was very reassuring news and we were touched by Mr. Sayer’s story of members of Dexcom’s IT teams sleeping on-site to ensure that there is no disruption in patients being able to access products.
Dexcom is maintaining its plan to double its G6 manufacturing capacity by “mid-2020” from its end of 2019 levels. The company is also maintaining its 4Q19 plans to “really turn on” spending on direct-to-consumer (DTC) marketing in the “back half” of 2020. Similarly, at JPM 2020, we heard Mr. Sayer state intentions to roll out “aggressive marketing campaigns” in the back half 2020.
In 1Q20, Dexcom “finalized a decision” to build a third manufacturing site in Malaysia. This is certainly the early stages and we’re years away from any actual manufacturing capacity contribution, but the move is in line with the emphasis we’ve seen Dexcom place on manufacturing in the last couple years. With G7, we’ve heard Dexcom stress many times that it was designed with manufacturing considerations from the start. The company is already planning for G7 manufacturing and is hoping to avoid the same supply constraint issues that have plagues G6 when the G7 undergoes full launch. Dexcom’s experience in moving its customer support from the US to the Philippines should also prove valuable.
4. Regulatory Approvals for G6 in Australia, Japan, and South Korea; G6 for Pregnancy in UK Launched
Highlighted in Dexcom’s press release, G6 has received regulatory approval in Australia, Japan, and South Korea. Dexcom plans to launch G6 in all three countries “later this year.” Mr. Pacelli referenced regulatory approval coming in Japan on the 4Q19 call, though today he noted that reimbursement “won’t be this year.” Dexcom still intends to launch G6 before the end of the year as a cash-pay product. Of course, getting the no-cal, 10-day-wear G6 to more OUS markets will offer a nice improvement over the G5 system and offer nice growth potential for Dexcom’s smaller, but rapidly growing, OUS business.
At ATTD 2020, Dexcom announced CE-Marking for Dexcom G6 in pregnancy. Today, Mr. Pacelli stated that this had now launched in the UK, a great win for patients there. Abbott’s FreeStyle Libre is also CE-Marked for pregnancy in European markets. No CGM (Abbott’s FreeStyle Libre, Dexcom’s G5/G6, or Medtronic’s Guardian Sensor 3) has yet to be approved for pregnancy use in the US, though we know off-label use has become quite common.
1. G7 Pivotal Trial “Minimum Delay of Approximately Six Months” Due to COVID-19
In a major update to Dexcom’s pipeline, Mr. Sayer today confirmed that the pivotal trial for Dexcom’s G7 CGM will be delayed for a minimum of “approximately six months” due to COVID-19. Mr. Sayer attributed the delay to the pausing of new trials at most clinical sites but expressed confidence in the company’s ability to deliver on the product. For over a year, Dexcom had stuck to a plan for a limited launch in “late 2020” with a full launch coming in “early 2021,” but, like so many other timelines, COVID-19 has proven to be disruptive. During Q&A, Mr. Sayer hypothetically expressed that if the company found data on the CGM that could statistically justify a smaller sample size in the pivotal trial, then the timeline could be accelerated although this scenario remains unlikely. Given the uncertainties from COVID-19 around when clinics that run the trials will open and allow patients inside, in addition to the comfort levels of patients to undergo testing, the timing for the pivotal is quite unclear. Mr. Sayer also confirmed that the company has no intention of pursuing full-scale launch until all internal and external standards have been met. On a more positive note, management expressed satisfaction with the company’s supply chain required for G7, indicating that the company is preparing to scale up its manufacturing lines and that its global suppliers are “putting equipment together.” Despite the delay, we would also note that Dexcom still has a very compelling product in G6 and a delay in G7 may not have a huge effect from a financial standpoint. To this end, we’ve expressed similar sentiments about Abbott and the lengthy FDA review we’ve seen for FreeStyle Libre 2.
As a reminder, planned features for G7 include the following: a one-piece fully disposable wearable (integrated sensor/transmitter) that is slimmer on the body (see below); significantly lower cost design (presumably similar to FreeStyle Libre or perhaps lower); iCGM accuracy and factory calibration; 14-15 day wear (or perhaps even 16-day?); an applicator that is smaller, lighter, less plastic, and more convenient; and the Android/iOS mobile apps to display real-time data with Bluetooth. At JPM 2020, Verily appeared to confirm for the first time that the G7 would also contain a built-in accelerometer although later reports appeared to clarify that announcement, indicating that no formalized plans had been determined.
“If we could run a 14-day study and put several hundred people on it for 14 days that would be relatively simple. These trials are not that simple. There's going to be at least four in-clinic days where blood is drawn for 12 hours, and we can only handle two to three patients at a time at a clinic per day. These trials are very well orchestrated and scheduled from a logistics perspective. We do not know when clinics who run these trials are going to open back up and allow patients in, to run these kinds of studies, nor do we know when patients are going to run and allow themselves to be subjected to this kind of study. We're putting that [delay] time in there [of six months] knowing there's going to be a while before things get back to normal in these large clinics. Many large clinics where we do these studies aren't even letting patients come in the door now, let alone patients come in for clinical trials. We've put this timeframe on it. How could it, in fact, accelerate? It could accelerate if we found data on the system that would enable us to statistically reduce the size of the trial. But let us, again, remind you, we're not shooting for just anything. We're shooting for iCGM standards and that is a high bar. That is not an arbitrary bar set by the FDA. That's a high bar. We've met it with G6 and we executed a perfect study to get that done. We've got to execute perfection again” – Mr. Sayer
“We have suppliers that we're not in control of who are rapidly putting equipment together and building things for us. We have orders for this equipment all over the world waiting for it to come in to get those lines up and running. We will remain committed to the fact we will not do a full-scale launch of this product until we're ready to go completely. On top of that, while we wait, we have a fantastic product with what we have in G6, and so we will continue to refine and make that better.” – Mr. Sayer
“I think the teams are doing a great job of pushing forward as well as we can, as fast as we can on G7 and just the automation capability from a production perspective. Clearly, having folks out of the office creates some challenging disruptions in the pace at which you move. But I think overall, we're navigating it quite well. At the same time, our supply chain is one where it's global in nature. We rely on folks from all over the world to help us produce our product. And we've done a great job of managing G6 to-date. G7, we've managed through it as well, but there have been situations where you have a temporary impact here and there and you got to quickly navigate through it to make sure everything stays on track and on time. To-date, we've done that well, but that's some of the uncertainty that starts to get introduced in the environment that we find ourselves navigating through. To-date, we're handling it well, but there's a lot of balls in there, and we're doing the best that we possibly can.” – Mr. Blackford
Slide taken from Dexcom’s JPM 2020 presentation.
2. Not Mentioned: Tidepool Loop Integration, G6 Pro, Direct-to-Apple Watch, and Hospital and Pregnancy Studies
Given the busy nature of the call, other pipeline updates on Tidepool Loop, G6 Pro, Direct-to-Apple Watch transmission, and a New Adhesive were not provided. A summary of the latest news is included below.
Dexcom’s G6 Pro, which received FDA clearance in October, and at the time, was supposed to begin shipping in “early 2020,” went unmentioned on today’s call. As a reminder, the system has the same form factor as the G6 but contains a fully disposable Bluetooth transmitter, real-time blinded and unblinded modes, and gives user the option of the receiver or G6 app for viewing data. Making the device fully disposable also eliminates the HCP burden of having to keep track of and clean transmitters, while also preparing Dexcom for the manufacturing of its fully disposable G7. It’s unclear whether this device has launched yet.
At ADA 2019, Dexcom signed as a partner to integrate G6 into Tidepool Loop, following similar moves from Insulet and Medtronic. Updates on the integration partnership were not provided today, but Dexcom has previously championed itself as a support of “patient choice” and “interoperability.” Six-month data from new Loop users recently read out at ATTD 2020, showing a 1.4 hour/day increase in Time in Range and A1c drop from 6.8% to 6.4%.
Dexcom is expected to launch direct-to-Apple Watch data transmission within the next three months. The feature will require the new low-cost G6 transmitter, which saw its first full quarter of production in 4Q19.
Dexcom is also currently running several pregnancy and hospital studies (our coverage). We haven’t heard many updates on these studies recently, though there has certainly been movement around CGM in both settings recently (see above). We’d also heard plans for arm-wear indications “coming soon” (ATTD 2020) – those also were not mentioned.
COVID-19 Related Quotes
“First and foremost, we wanted to discuss the impact of COVID-19 and Dexcom's response. The past few months have brought and likely will continue to bring unprecedented challenges to global health and economic systems as a result of the virus. While this has been an incredibly difficult humanitarian crisis, we have also seen many encouraging examples of collaboration around the world from public and private entities. We have seen people working to bring care to those in need, protect the health of the vulnerable and support the well-being of workers and families. From the outset, we recognize that Dexcom has an important role to play. Our customers rely on our CGM technology to safely manage blood glucose and deliver insulin. In many cases, these are people with diabetes who have relied on Dexcom CGM since diagnosis, meaning they haven't known a world without the peace of mind of real-time continuous glucose monitoring. People with diabetes are also at heightened risk for complications with COVID-19, highlighting the importance of good glycemic control during these challenging times. We set out with three core priorities: keep our employees safe, continue to serve our patients, and work to help our communities. To meet this challenge and support these core priorities, we set in motion several initiatives. We quickly moved the majority of our global employees to home-base work arrangements. This transition enhances safety of all of our employees, including our teams who remain on-site and benefit from a less dense work environment. Our IT and emergency response teams have done an excellent job to enable this shift and provide necessary resources for our teams to continue to function effectively and care for our patients.” – Mr. Sayer
“I could share numerous examples of Dexcom teams going above and beyond to ensure that our customers receive product and the support that they need. But I'll share one that stands out to me. In order to ensure that our products were supplied in a timely manner, we have members of our IT teams who are willing to sleep on-site to meet the needs of our employees and our patients. As this story demonstrates our employees care deeply for our patients, and we continue to work on new ways to enhance customer support in these unique times.” – Mr. Sayer
“Our employees care deeply for our patients, and we continue to work on new ways to enhance customer support in these unique times. This includes our announcement yesterday of a program to provide financial assistance to our existing patients who have lost or may lose access to insurance coverage for their Dexcom supplies as a result of COVID-19. This program, which we plan to launch in the next several weeks, will provide up to two 90-day supply shipments for only $45 each and provide relief to our patients in what is clearly a very challenging time. As it pertains to our customers, both the patient and the clinician, we are working on ways to ensure we have the appropriate infrastructure to support their evolving needs. Our extensive virtual resources for patient and clinician training and customer support are proving to be especially important as the world embraces the increasing use of telemedicine platforms.” – Mr. Sayer
“As Kevin noted, the safety of our employees remains our number one priority. However, as an essential provider of medical devices, there are certain functions that must be performed on-site despite shelter-in-place orders to ensure continuity of supply. As a result, we are incurring incremental costs to assist our employees and ensure their safety to the greatest extent possible and expect to continue to do so in the near-term as we support our people through this crisis. We expect to continue to incur costs related to our COVID-19 response until macro business conditions return to normal.” – Mr. Blackford
“As we look forward, our commercial team has begun leveraging our extensive data platforms, which should prove especially valuable for patients and clinicians in an environment where telemedicine business is quickly becoming the norm.” – Mr. Pacelli
“We recognize that diabetes doesn't take a break-even for pandemics, economic slowdowns or high unemployment. Now more than ever, we have a responsibility to patients that have supported Dexcom over the years and made us the company that we are today. We're therefore working quickly on the rollout of our patient assistance program to provide access to Dexcom CGM for the many individuals, who have lost their jobs as a result of COVID-19. In addition, we realized helping a patient staying can control their blood glucose, also assist family members and clinicians providing immediate relief to our health care system. Our core belief remains unchanged. If we do our best to take care of our patients, the business will always move in the right direction. Every intensive insulin-using patient should have access to real-time CGM. We'll work tirelessly to make that happen. COVID-19 has had a disproportionate impact on the diabetes community. This awful virus is also attacking the pancreas of people without diabetes.” – Mr. Sayer
Q: You pulled guidance, but you do have a month of performance here what's happened in April. Could you walk us through how we should think about expectations for 2Q? And how to think about the impact to prescribing in a recovery? How remote telehealth can help or hurt prescriptions of new patients? And how to hink about the impact down the P&L as new sales might be disrupted, offset by some of the new venues that you've been able to secure here with testing?
Kevin Sayer (CEO): If I gave you whole much April color, then I'd be giving you guidance, and that's what we just said that we weren't going to do. That being said, we remain very bullish in our business, as you can see by the first quarter results. And we have learned very much that the impact of the connectivity of our device with telemedicine is becoming very, very well-known within the physician community. We hosted a webinar last week and had 900 participants sign up. We don't get 900 people to anything here. That was a huge win for us as we talk and learn more about that. So we think particularly with our system, how it goes to the phone and then CLARITY, and the physician pulling CLARITY up wherever they are working, repreenting a big win for patients. We know that diabetes, and I'll talk about this a little more later, but it's not going to go away and these patients need to be careful. We think we solve a very serious problem by getting data to patients and their caregivers in a very timely basis. You heard us also talk about getting CLARITY more towards a real-time platform that could literally give a patient the oppportunity to call their doctor and say, hey, what's going on with me? And caregivers aren't, I'm sure, following all the time. A more real-time CLARITY is going to give that caregiver a good answer. We see situations where we have a good answer. We're bullish on the business going forward. Things are just a little different now.
Quentin Blackford (EVP and CFO): The thing coming out of the quarter or over the course of the quarter is the strengh in the core business. I think from our perspective, we're as bullish as we've ever been on where we're at in this opportunity, the runway that exists in fron tof us, and probably even more son ow when you think about the long-term just with the hospital opportunity opening up probably sooner than what we anticipate. The whole play in telehealth and telemedicine happens because we know we have a device that works better there than anything else in the marketplace, and folks seem to be understanding that. To Kevin's point, the 900 folks that joined the webinar were directed towards telehealth and telemedicine. There's a real interest out there, and I think long-term, we feel incredibly bullish about where were' at. In April, the new patient starts were odwn a bit, but we have seen it start to rebound a bit in April. I think that continues to build over time, but we need to see that play out and have some certainty there before we can get back to where we feel comfortable providing guidance. There's just too many things that are uncertain at this point int ime that we need that greater clarity on. I would just reiterat though the underlying strenght. The fact that people are recognizing the value of this product and what it means in the marketplace, from a long-temr perspective.
Q: Can you talk a little bit about how new patient adds, patient training, things like that could look post COVID if we are in a world where telehealth is a more prominent part of patient management specifically for diabetes, I would think that that ultimately would favor CGM, but just curious about how you think if that could change your long-term expectations around penetration in these markets and maybe a little bit of color of postcodes, what things might look like based on what you're seeing today?
Mr. Sayer: First of all, as we talked about in our call, 70% of our patients train themselves with the material that we provide and we've also had remote coaching services through Dexcom care to help these patients as well. We've anticipated a day like this with respect to training for a long, long time, which is why we moved away from the model we previously had whereby we could make this easier and get patients on the system. So we don't see that changing much at all. As far as new patient opportunities and new patients coming in, whereas in the past, many times that was a result of an office visit. Now it's coming in possibly through a telemedicine conference with a healthcare provider. They can also be coming in through our direct consumer marketing. Our online efforts are – all the things that we have and then we have to turn around and figure out a way to get the proper paperwork from the healthcare provider. One of the other things that's key to remember in Quentin's remarks, he talked about how our move to the pharmacies accelerating. As we go to the pharmacy, the paper work requirements for healthcare providers come down significantly, so again making the whole process easier. And that's been our goal from the beginning to get this process easy enough to whereby. We can get the penetration that we thought we could get. And I've said for years that 80% penetration and intensive insulin users with CGM should be our long-term goal and it still is. And the easier we make it, the faster penetration will go and those efforts have not changed and won't change as a result of COVID. As far as post COVID world and what I see is demand. I think if anything, people are going to be more concerned about controlling their diabetes to make sure they're healthy. So if something like this happens again, that will not become a complicating factor because their diabetes is in control, not running rampant. So again, we see this as an opportunity to almost increased retention and increase usage within our current patient base as much as it is to grab new ones. So I don't want to sound opportunistic – too opportunistic about this, but we have an answer to a serious problem here and we think people will come to it.
Q: Have you had any discussions with the FDA on whether data you'll collect in these COVID patients could be used to maybe accelerate a broader approval down the road for hospital use? Do you think you'd still have to go through the lengthy pivotal that seemed like it might have pushed hospital approval out two to three years from now or one to two years out anyway? Is there a way to accelerate that with some of this data that you'll be collecting here over the next X months with the COVID pandemic?
Mr. Sayer: We actually have had discussions with the FDA about this very subject and it is our hope to gather as much data as we can from these patients as they are in this hospital with various compounds being injected and to take care of their help to see how our sensor performs in this environment, how well connectivity is and what we can learn. Our commitment to the agency is with this opportunity will gather as much data as we can and we're going to share what we learn and see if we can in fact accelerate that path and get this device approved for use as a glucose monitoring technology in the hospital environment rather than, than what they're doing with fingersticks. And as we gather data, we'll take advantage of this opportunity. I think Jeff, the learning’s we've had so far are astounding to us, as we're into a different channel with a different physician group, with different caregivers who haven't seen CGM before with rules and regulations around hospital IT departments and connecting a phone within their security system. We've had learning’s that we would have never anticipated. We will be so much more ready to go to this market when it's time. The commitment we've made here from a dollar perspective is large. We put a lot of time and effort and the hospital team has literally worked around the clock to get this going and so we'll gather the data, will file what we see or at least share what we see and then determine a course of action after that. If we see highly positive results, it's not unthinkable that they would give us an accelerated timeframe or cutback on the work that we have to do are possibly change a label to allow us to get there sooner. We're open to all that and we will look at every one of those opportunities once we're done. But we’re really taking this opportunity very seriously.
Q: Can we just talk about G7 for a second? I think most people had expected a bit of a delay here, but it's a 14-day trial. So the six month delay I think is a little bit longer than some had expected. So I guess the question would be what would have to happen for it to be pushed out that entire six months or what could happen to where that delay is not necessarily that long?
Mr. Sayer: It’s not just a 14-day study. If we could run a 14-day study and put several hundred people on it for 14 days that would be relatively simple. These trials are not that simplistic. There's going to be at least four in clinic days where blood is drawn for 12 hours and we can only handle two to three patients at a time, at a clinic per day. So these trials are very well orchestrated and scheduled from a logistics perspective. We do not know when clinics who run these trials are going to open back-up and allow patients in to run these kinds of studies. Nor do we know when patients are going to run and allow themselves to this kind of study. So we're putting that time in there knowing there's going to be a while before things get back to normal in these large clinics and many large clinics where we do these studies aren't even letting patients come in the door now, let alone patients come in for clinical trials. So we've put this timeframe on it. How could it in fact accelerate, because accelerate if we found data on the system that would enable us to statistically reduce the size of the trial. But let us again remind you, we're not shooting for just anything. We're shooting for high ICGM standards and that is a high bar that is not an arbitrary bar set by the FDA. That's a high bar. We've met with G6 and we executed a perfect study to get that done. We've got to execute perfection again. So we've given ourselves this timeframe to make sure all our plans are locked down, that we can get the centers open, they can go and do this and we'll be methodical and thoughtful about it. If there's some way we can accelerate that we would, but we gave you this because we typically are prudent in our guidance and what we speak and what we think and that's what we see right now.
Q: I wannted to get a little more color on the impact of the patient support program and also the mix headwind that I'm assuming would happen as patients move from commercial to Medicaid coverage? So any color there of how to think about the headwind for those two programs?
Mr. Blackford: I think what you're asking is exactly what we struggle with in terms of defining any certainty around what it – what it's going to be. As we continue to see the fallout from an unemployment perspective in the States and even globally how that ultimately shows up or translates into our numbers, it's hard for us to predict. You’ve take an existing patient who has been paying, in line with their program or their plan they've been on for some period of time and all of a suddenly fall into the patient assistance program. You're right? There is going to be a mixed impact on the business. I think that's part of the challenge with trying to draw the line on exactly where that's going to be. And until we have greater color on where those rates – unemployment rates ultimately fall out and the impacts ultimately fall out to our patient base, it's hard to predict. So that's what leads to putting us in a position where we ultimately feel best at this point just to pull guidance. Again, we couldn't be more bullish around what's going on inside the business, but we know there's going to be mixed impacts and shifts over the next several months. So right now the visibility is limited.
Q: Just wanted to follow-up with some more specific question about the hospital? And, so when we look at the sensors that are going out there, can you give us some sort of information in terms of the data sharing agreements that you guys have with the hospitals trialing? So what data are you targeting again? What endpoints are the hospitals and yourself interested in? And our patient's consent it to you or the hospital using the data at least on a de-identified basis, so that you can get kind of a larger national registry at least?
Steve Pacelli (EVP of Strategy and Corporate Devlopment): Don't read too much in net at this early stage. This is something that literally the hospital team work 24/7 to get products into the hospital to reduce the risk to caregivers, right. They weren’t able to take fingersticks because they have to – really, they have to actually change out their PP every time they would have to go pick a finger and they were just – they couldn’t do it. So right now we are capturing data. This is all about being able to remotely monitor these patients to help the caregivers in the hospital provide better care. To the extent we have data down the road that we're obviously retaining, we'll look to see what we do with it. But right now we’ve not made any plans to do anything specifically with the data, either with a hospital or on an automized basis or otherwise.
Q: Just want to come back to the first quarter a little bit here. Kevin, you touched on this briefly in your preamble. We think about the effect of stocking and the effect of inpatient use. I'm assuming inpatient use was pretty minimal in the first quarter, but both these, these positive offsets potentially was stocking several million or tens of millions, and was the inpatient opportunity here recently several million or bigger than that, just trying to get some sense of the framework of some of those positive drivers here?
Mr. Blackford: Yes. With respect to the inpatient, that was minimal, I mean it didn't move the needle at all. On the stocking side, you're talking several millions, not tens of millions by any stretch at all. It was on the lower end. I think that the point that we were making in our prepared remarks was there's several questions out there around whether or not stocking is driving results in the first quarter. And that the point is, there are several distributors who would have liked to have had the opportunity to stock up ahead of some of the uncertainty that they saw. But frankly we weren't in the position or we weren't enabling that to take place. We monitor this very closely. We have provisions in our agreements with those distributors; now limit the amount of days of inventory on hand that they can carry and so we monitor that. And so while there was an expressed interest to stock to a greater degree, we did not enable that and therefore it was not a driver of the results. And that was the point we were trying to get across.
Q: I'm curious what you have seen either in the month of April or in previous recessions when it comes to attrition. And do patients start going back to traditional fingersticks? And anything you could say, because many of us on this call did not cover the stock back in 2008 or 2009 or 2001 or 2002 would be helpful if it's relevant?
Mr. Pacelli: What I would say is no, I mean we've obviously had a very strong quarter driven by both existing patient base and new patients back. If you remember back in the 2008-2009 timeframe, we were still on the 2007 and the 2007 plus, which those technologies just weren't really ready for prime time. It really wasn't, if you remember it wasn't until we launched the Gen 4 PLATINUM and I think it was Q4 of 2012 that you really saw the inflection in this business. We really moved to a must have versus a nice to have in terms of our technology. So I don't know that you could possibly make a comparison to back that. I mean, back in those days it was Terry and I just trying to raise money, every opportunity we could to keep the lights on. So it's just a different, it's not even a comparable business at this time.
Mr. Sayer: About the only thing I could add to that is, we have done everything we can to make it easier for our patients to get CGM even during these tough times. In 2008 or 2009, we had zero Medicaid coverage. We had no Medicare coverage. We had no pharmacy benefit where the co-pays typically significantly lower than it is through DME. And pricing has been somewhat lower. So I think we've done everything we can to position our business to be more successful during a time like this and to help our patients continue on the therapy. But again, now you have what may be a recession tied to health care event, we may see exactly the opposite. The patients absolutely have to have this to it healthier, believe that they do. Again, part of the unknowns that we're trying to work through and trying to manage.
Q: I appreciate the additional commentary with respect to the G7 clinical trial, but maybe help us understand what you can do over the course of the next six months from a manufacturing perspective to help accelerate maybe the launch timing. Because if I remember correctly, you're going to get approval before year-end, but the launch wasn't really going to take place until you had capacity and that was a 2021 event. Can you help us understand what happens behind the scenes, while the trial might not be going and how that might help the eventual commercial pace when it does launch?
Mr. Sayer: Let's be clear. We never said we'd have approval by year-end, and we said we expected a 2021 launch with a limited launch by the end of 2020 was our goal without meaningful financial impact in 2020, if we had a limited launch. There are things we can do to accelerate those studies possibly. On the manufacturing side we have similar circumstances to what Quen described earlier about the core business. We have suppliers that we're not in control of or rapidly putting equipment together and building things for us. We have orders for this equipment all over the world, waiting for it to come in, to get those lines up and running. We will remain committed to the fact, that we will not do a full scale launch of this product until we're ready to go completely. And on top of that while we wait and sometimes we forget, we have a fantastic product of what we have in G6 and so we will continue to refine and make that better. I don’t know Quentin , if you have any other things, we can do on manufacturing…
Mr. Blackford: No, I think the teams are doing a great job of pushing forward as well as we can, as fast as we can on G7 and just the automation capability from a production perspective, clearly having folks out of the office creates some challenging disruptions in the pace at which you move, but I think overall we're navigating it quite well. At the same time, our supply chain is one where it's global in nature. We rely on folks from all over the world to help us produce our product. And we've done a great job of managing G6 to- date G7, we've managed through it as well, but there have been situations where you have a temporary impact here or there, and you've got to quickly navigate through it to make sure everything stays on track and on time. And to-date we've done that well, but that's some of the uncertainty that starts to get introduced in the environment that we find ourselves navigating through. So to-date we're handling it well but there's a lot of balls in the air and we're doing the best that we possibly can and if we can pull it forward to Kevin's point, we certainly will look at those sorts of things.
Q: You did mention accelerating pharmacy channel mix. So I'm curious, if you had any feedback from payers talking particularly about holdout payers that may now be more willing to accommodate pharmacy access for DexCom and similarly, has there been an impact in the last six weeks or so on the insurance verification process? Is that moving along smoothly? Is it similar to the pace you've seen in the past, faster or slower? Any help there would be appreciated, thanks.
Mr. Blackford: Yes, so I think from a pharmacy perspective, the comments that we made were clear that we've seen the uptick in that pharmacy channel progress at a very rapid pace and its one channel that we always thought just has tremendous potential for us and we've proved that out over the course of the first quarter. As a matter of fact, we talk about new patients being a driver of growth, for the first time we saw record new patients in the first quarter, despite the fact that we saw slow down in the very back end of the quarter. And so I attribute a good part of that to the pharmacy channel. We haven't seen payers or at least I couldn't speak to any particular payers here in the last several weeks who have opened up more incremental pharmacy access, but we have seen payers who are willing to think differently around the requirements that they might have on patients ordering product such as clinical site visits or coming in to see the clinician, they're allowing that through telehealth, now telemedicine, we see more and more payers who are moving that direction each and every week. So we are seeing a changing dynamic from a payer perspective, haven't seen it so much in terms of opening incremental pharmacy access in the last several weeks, but there is an appetite for change here.
Q: What if I could maybe ask about international a little bit, so the 41 million increase to 60% plus was notably strong. And so I'm curious if there was particular markets in which you saw that growth. And as a related question, as we think about Germany, the UK being some of the more impacted markets with COVID, what are your thoughts around how those will trend over the next several quarters?
Mr. Sayer: International was clearly a bright spot in the quarter and really it was across the entire international region, whether it was Europe, Asia both regions performed incredibly well. Canada was a driver of the overall growth with the e-Commerce platform we put in place there we couldn't be more happy with the results that we see. I think one of the interesting data points coming out of the quarter, while Germany is a large market for us, continues to have great success. The UK also growing quite aggressively, very significantly outpaced most other major markets, which was nice to see. So a lot of runway continues to exist in all of these markets, but really strength across the board, even through Asia and Australia. So there's not one country to really pull out and attribute all this success to, it was performance across the entire slate that led to the overall outcome that we communicated.
Q: I hate to blow my one question on a yes or no question, but Quentin, I think I just heard you say that you generated record new patients in 1Q is that correct?
Mr. Blackford: Yes, correct.
Mr. Sayer: The first quarter of 2020 was a record number of new patients to the company versus any other quarter in history, that's right.
Q: Subsequent to UNH coverage, is there any quantification you can provide on where commercial payer coverage for intensely managed Type 2 patients is in the U.S. today? And then can you also give us an update on the reimbursement environment in Japan and South Korea as you plan to launch later this year?
Mr. Blackford: The reimbursement with intensive Type 2 is obviously most of their Medicare patients we have that covered. After that it is really been payer-by-payer, we announced a healthcare Type 2 coverage today, we also have had another large payer expand their Type 2 intensive use policy, just hit us today, that'll be another win for us. I think a lot of the payers as we go to the pharmacy have actually included Type 2 as we've gone there as well. But it's a gradual thing. It's not going to happen overnight. We keep having wins and our payer team is doing a job staying on top of that and we're kind of getting the message out that insulin users and insulin user and they all need access to this. So our Type 2 intensive use patient base is growing significantly and becoming a much larger part of our business.
Mr. Sayer: I don't have a great update for you on – new update for you anyway on Korea, but with respect to Japan, we did get our G6 approval. So that's an approval for consumer use, the professional use clinician product. We don't currently have reimbursement. So when we launch that product in the consumer channel before the end of this year, it'll be a cash pay product, what we've elected not to do is follow a competitor and accept really subpar reimbursement based on kind of fingerstick level pricing. We're just not going to go there with that, we're going to do our work, provide the Japanese government with the appropriate data, outcomes data and establish real reimbursement for real time CGM. So that won't be this year, but we'll give you an update when we have more.
Q: Can you quantify all the impact on new patient starts in April? Just looking for a rough sense for how significant the disruption has been. And then Quen, I just want to make sure I heard you right, that you've already seen those numbers begin to rebound, that seems a little fast. Wondering whether you have any sense for why that is, are physicians getting better at telemedicine, because it seems like most areas are still pretty locked down.
Mr. Blackford: Yes, we're not going to comment specifically on where it's at. I think, there's been a lot of research, a lot of surveys that have been done that we've seen that would indicate, new patients starts might be 40 or 50% of what they previously were, we haven't seen it to that extent, but they certainly have been impacted. And to the point I made earlier, we have seen it start to come back a bit. I think folks are just getting comfortable understanding, that there's other means of being able to interact with their physician, learn about the product and ultimately get the product on to them and that's the telehealth, telemedicine capability that continues to develop. I'll point you back to the webinar that we had just two weeks ago. Over 900 physicians dialed into that webinar to learn of the value and ways to introduce CGM through telehealth. I think that speaks to the interest level that's out there. So I think it will continue to build over time, how quickly it goes, it's hard to say and that's part of why the uncertainty exists and gives us pause on the guidance that's out there and leaving it there. But, overall I think, down the road telehealth, telemedicine is going to play a much bigger part than what we've seen historically.
Q: You talked about the strong cash position you're in, which is particularly important during this time. You also mentioned being opportunistic with the cash. Can you provide any color on where that cash can be put to use for growth initiatives beyond the manufacturing expansion, any other broader thoughts on potential use of cash that you can provide?
Mr. Blackford: Well, I think certainly the new market opportunities that we've been after for a while now with Dolan and team leading that effort, we've been very clear around hospital, is there a way to accelerate that? There certainly seems to be an interest level beyond hours now sitting on the other side, but there's the hospital or the FDA, we want to make sure we're opportunistic and think about that in a way that can accelerate it. I think that there's, potentially in that space, even more than just the device itself, but how do you improve efficiency in the hospital setting? Even from an IT capability perspective, thinking about those sorts of things, we think about gestational diabetes, pregnancy, the whole Type 2 non-intensive space, I think that market remains significant. And I think, we're seeing each and every day that there's a validated opportunity in that space and we want to go fast. So we're keeping our eyes open out there in those spaces, around the opportunities that exist and if there's opportunities to kind of really put the foot on the gas pedal, we're going to look at those sorts of things. So that's what we mean by being opportunistic.
Mr. Pacelli: Yes. I just add one more thing, as far as cash because I'm the one driving Quen and his team on this. We talk about doubling manufacturing capacity before the first half of the year is over. We're pushing to get that, but that's a lot of capital equipment, as we go to a lot of G6 automated lines and get those up and running and get more lines up at our contract manufacturers, we then have a significant capital investment in G7 equipment that will be coming. And we talked about investing in a third manufacturing site in Malaysia. So there's going to be a lot of capital equipment. So we purchased the other place that we will definitely be using cash as we invest in our businesses, just in our infrastructure and in our systems. We will – if we've learned anything through this, we need to make some more investments on that side too. Our team has been fantastic with the tool they had when you give them some more tools. So we have a lot of capital use for that money for organic growth as well.
Q: Just a question about the financial assistance program, you're providing about six months worth of supply to patients. Can you just help us understand kind of, would that be something that would be shipped out, immediately if someone signs up and also how do we think about it if the economy continues to kind of show these unemployment numbers, how willing is the company to kind of extend these programs for beyond that six month period? Is there anything that would be gating you to that?
Mr. Sayer: Well, we'll start with our six month period. As we got to that conclusion, as we've modeled that out, we're certainly comfortable with that. We're very comfortable with again, helping our patient base out. These are the people that built our company, made it what it is. And as I said in my prepared remarks, the more I traveled before this pandemic, the more I learned. There are a lot of people who have no idea how to manage their diabetes without a CGM. So we will continue to try and get product to patients. We'll evaluate the economic consequences of what we do as we roll this out over time. You know, three years ago if we had to do this, it would have been even much more difficult because we had very little Medicaid and we didn't even have Medicare up and running. Now with Medicare approval and Medicaid, there are some states where these patients have been employed can go to Medicaid programs, but it's very inconsistent and sporadic, even though we have. I want to say 60% of Medicaid programs cover – some only covers for kids and some make it very difficult. So we will continue to push for more Medicaid coverage during this time to try and Medicaid that and we'll see how it goes and we'll keep track. But, it's important that we make sure these people can stay on the system and we think this is a really good opportunity for us. So we will continue to do that.
Q: Just at this point from my perspective maybe, Quentin could you help us out a little bit with, as we looked at the operating expenses trending forward, you alluded to better managing the supply chain would assume you'd keep higher levels of safety stock, have higher costs in the shorter run and appropriately so on the labor side. Just maybe help us, when we look at the first quarter, was that reflected in the 1Q results or just any way you can maybe help us better understand how we should think about maybe the margin structure as we start to go through the year, ex the capacity build out and maybe similarly from the DTC effort, what you're looking for there to kick that up just from a change in the COVID-19 situation.
Mr. Blackford: Yes, I think if you go back to the guidance that we set coming into the year, we spoke about some of the different levers that were in there. And certainly some of the things that were going to weigh on the organization being specific to G7 trials, development of the automation lines, ramping G6 as quickly as we can and doubling it, and DTC being a significant investment. I think, while we've walked away from guidance on the full year, those sorts of drivers are still going to be in the spend profile and they're going to be more heavily weighted in the back half of the year. So while you're seeing a 1,300 basis point improvement in operating margin in Q1 it's not likely that you're going to see that same sort of improvement in the back half of the year, because there's going to be all these incremental investments that we know that we need to make and that will set the company up for growth far into the future and we're going to commit ourselves to invest in those ways. So I think you're going to continue to see some good leverage in the first half of the year. I think in the back half of the year, you're going to see the P&L start to look a little bit differently as we make some of these key investments into what I think all of us understand to be critical growth drivers of the future. So I'll leave it at that, the P&L profile will shift a little bit, but overall we still remain committed to the longer term goals that we put out there at Analyst Day just year and a half ago or so.
--by Ani Gururaj, Albert Cai, and Kelly Close