Tandem Diabetes Care, Inc. Price & Performance (TNDM)

We assume no obligation to publicly update any forward looking statements whether as a result of new information, future events or other factors. Today's discussion will also include references to a number of GAAP and non GAAP financial measures. Non GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance. And reflects our ongoing business operations. We believe these non GAAP financial measures facilitate better comparisons of operating results across reporting periods. Any non GAAP information presented should not be considered as a substitute independently or superior to results prepared in accordance with GAAP. Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. Participating on today's call are John Sheridan, Tandem's President and CEO Mark Navarro, Executive Vice President and Chief Commercial Officer and Lee Vosler, Executive Vice President and Chief Financial officer. Following their prepared remarks, the operator will open the call for questions. Thank you in advance for limiting yourself to one question before getting back in the queue. I'll now turn the call over to John.

Thanks, Susan, and thank you everyone for joining us on today's call. 2024 was a pivotal year for Tandem, marked by an impressive 18% increase in worldwide sales. I am proud that we set new sales records both in The U. S. And internationally while delivering industry leading customer satisfaction and expanding our portfolio of technology solutions. The highlight of the year was the introduction of our category defining pump platform Tandem Tandem, which experienced continued growth throughout 2024 as awareness of our newest offering increased. Additionally, we implemented operational efficiencies that set the stage for sustained profitability in 2025 and beyond. These achievements were made possible thanks to the resilience, perseverance and hard work of our employees. Thank you everyone, including our distributors, suppliers, clinical partners. For your continued dedication and efforts that contribute to furthering our mission. Tandem now offers the most robust ecosystem With our flagship T:slim and Tandem Tandem, we provide the greatest choice in pump platforms. We offer customers a seamless cloud based experience with our apps and operating system support Tandem enable HCPs with our web based data management We also integrate with multiple leading CGM sensors Tandem next month we will launch our third automated insulin delivery algorithm with Control IQ plus Control IQ has long been considered the best automated insulin delivery algorithm.

With more than two forty million patient days of data logged in our system and 70 plus peer reviewed manuscripts and published abstracts. Over the past five years, it has provided immediate and sustained results across all patient populations, Now we're raising our own bar with the launch of Control IQ Plus. Control IQ Plus offers superior glucose control and best in class by predicting, calculating and adjusting insulin doses including delivering automated correction boluses. Driven by customer feedback, we have added new clinical features as an extended bolus lasting up to eight hours and the option to set a temporary basal rate Activating Control IQ plus is easy. We have introduced a simple setup wizard that allows users to set it in accordance to AACE guidelines. Switch it on and witness immediate results. This is particularly beneficial to people coming from MDI In The U. S, customers also are now able to choose between English and Spanish. Control IQ plus was originally approved for individuals with Type one diabetes, age two and older. As highlighted in yesterday's press release, we're excited that it is now FDA cleared for people living with type two diabetes 18 years and up. This more than doubles our addressable market in The United States positioning us for significant long term growth.

This expanded label indication encompasses all insulin requiring people with type two diabetes. And is based on our recently completed pivotal trial. This trial represents the first large scale randomized controlled study an automated insulin delivery system in more than three hundred people with type two diabetes. Full study results will be presented at the International Conference of Advanced Technologies Tandem Treatments for Diabetes in Amsterdam next month. With Tandem's robust expanded portfolio, we also began executing a multi channel payer strategy. The addition of the pharmacy channel. Which we expect will ensure our best of class products are matched with ease of access and improved affordability. We also began investing in important commercial initiatives to fortify our business fundamentals and advance our short and longer term sales and profitability goals. For instance, in the fourth quarter, we initiated recruitment efforts to support a strategic sales expansion and territory realignment which took effect at the beginning of this year. We identified opportunities to modernize the tools and systems used by our commercial teams, enhance their efficiency and effectiveness, Additionally, leveraging the robust performance of our OUS business, and recognizing the vast potential within the markets we serve, we have begun a multiyear transition to direct commercial operations in select European countries.

Overall, 2024 was a successful year for Tandem with a return to growth. Importantly, we also initiated fundamental changes to key business processes broaden market access options and expanded organizational capabilities to accelerate revenue growth and profitability in 2025 and beyond. And taking a deeper look at the fourth quarter, there are many wins to celebrate. Outside The U. S, we delivered strong double digit growth driven by demand for the T Slim pump platform. In The U. S, we saw strength from both tSlim and MobyPom platforms and in key performance indicators. Such as year over year growth, in the customers coming from multiple daily injections customers renewing from Tandem once again. Our wins in the quarter also came with some challenges. The fourth quarter in The U. S. Did not come together as anticipated. We experienced more muted seasonality in the last few weeks of the year, where historically we have seen acceleration throughout December. Additionally, shipping delays by carriers who did not deliver to customers before the end of the year as planned impacted the timing of revenue reporting, Despite these factors, the underlying trends of our business remained strong and favorable. I will now ask Mark to provide more additional detail on the commercial insights.

Mark? Thank you, John. When I joined Tandem just over a year ago, we put a commercial strategy in place to maximize our portfolio of innovations galvanize the customer experience and fortify our international efforts Our strategy remains and we achieved meaningful progress delivering on it in 2024 And most importantly, set ourselves up well for the longer term. Starting with maximizing our portfolio, in 2024, we demonstrated our commitment to bringing new innovation to market. With the launch of a new pump platform and multiple new CGM integration We also scaled TandemSource, which is now used by more than 90% of our U. S. Prescribers and began offering it outside The United States.

The expansion of our AID portfolio with The U. S. Launch of Tandem was a particular highlight.

Moby is an expansion to our portfolio largely attracting customers who otherwise may not have selected Tandem. At half the size of T Slim, the same weight as two AA batteries, and the size of an AirPod case Moby is defining a new category of AID technology Its tiny form factor coupled with mobile app operation and the flexibility to be worn as many as 20 different ways, including the ability to detach provides patients with an entirely new value proposition in wearability backed by the best in class Control IQ. This new value proposition is attracting a younger population to AIV therapy and earning Movi, excellent feedback from both healthcare providers Tandem Mobi customers.

This was reflected in DQ and A's recent survey comfort Tandem wear during physical activity. I am proud of the start to Moby's launch. We plan to continue building by amplifying awareness and trialing of this exciting technology. Offering greater access and expected affordability through the pharmacy channel and by expanding its feature set. We also continue to have high expectations for our flagship TSIM pump which has a strong fan base with both new and renewing customers. Its 300 unit cartridge broad CGM and foam compatibility and all in one touch screen use provide high satisfaction and allow for Tandem to meet different needs in the diabetes community. We now have more than three twenty thousand in warranty customers in The United States, And the way we serve them is a differentiating factor for Tandem Tandem. As a result, we delivered double digit growth in renewal both sequentially and year over year while delivering an industry leading customer satisfaction score. For the first time, Tandem won Seagrove's Tandem People Choice Award leading in four out of the eight categories surveyed including favorite pump. In DQ and A, Tandem had the highest Net Promoter Score outperforming all other competitors This reflects our deep dedication and commitment to delivering a best in class customer experience.

Turning to our business outside The U. S. Where we now have more than 160,000 in warranty customers Our consistent outperformance this year was driven by high demand for our T:slim X2 pump and under new international leadership we advanced how we work with our distributor partners and strengthened our commercial capabilities. It's also a reflection of the large and underpenetrated nature of the countries we serve and the future opportunity in these regions. As we look to 2025 and beyond, we are well positioned to drive and scale our commercial strategy. The worldwide AID market has more competitors, larger sales forces and more insulin pump offerings than ever before. 2024 highlighted this as an that we are capitalizing on for the year ahead to increase our share of voice, continue driving sales force and overall commercial effectiveness, and improve how we service those markets. In The U. S, we have successfully executed a strategic realignment and expansion of our sales and clinical teams. This optimization enhanced efficiency while increasing our share of voice in high priority growth accounts. Tandem's technology is incredibly exciting and innovative. And we recognize this is a promotionally sensitive market. So now is the time to invest selectively and responsibly to amplify our market presence and enhance both the customer and employee experience.

We have enhanced our structure, targeting strategy modernize our practices and equip our teams with new capabilities and tools to drive commercial excellence. These initiatives were piloted with our field team in 2024 are now being rolled out and we expect to see increasing benefits starting in the latter half of this year.

Another exciting opportunity for Tandem is our scaling pharmacy channel initiatives. 2025 marks the first year that Tandem is able to offer multichannel durable medical equipment and pharmacy benefit plan coverage. Our team exceeded our market access goals for 2024 by signing multiple meaningful contracts with leading PBMs and we now have approximately 20% of U. S. Lives covered under pharmacy agreements for a mix of commercial and government lives, We believe this is a win for Tandem Tandem most importantly a win for patients who previously stayed on multiple daily injections due to cost barriers. Driving scalable growth in pharmacy is a top priority for our business this year as we work to drive broader access and sustainable growth. Pharmacy is also strategically important as we cost is also a barrier. To help drive change, so that cost does not prevent people from getting the therapy they want and need, we are active in a coalition as well as industry efforts to establish a sustainable Medicare pathway to broaden coverage for people living with type two. Addressing the needs of the Type two insulin dependent population is a strategic imperative for Tandem and one that provides long term growth off With Control IQ plus Type two indication now FDA cleared, the size of our addressable market has doubled.

As a reminder, more than thirty thousand people with Type two use Tandem's technology today and we've seen this success without any dedicated marketing or sales efforts. Our recently completed randomized clinical trials post clearance, highlighting key differentiators that set us apart in this market. We also recognize the needs of this population can be different than people living with type one and we are committed to serving them with tailored solutions. We will soon begin Type two pilot launch activities that will scale based on our key performance indicators. Turning to our business outside The United States, we are continuing to scale our presence in the countries we serve. Historically, our sales have been exclusively through distributors. In 2024, we began laying the groundwork to expand our international presence by onboarding new talent to our regional and in country commercial teams while continuing partnerships with our in region distributors. To build upon this model and drive further growth, we are preparing to initiate direct sales, training and customer support In select European countries starting in 2026, Acknowledging that such transitions can cause some disruption we are working closely with the distributors to minimize impact for all parties involved particularly prescribers, and Tandem Pump users.

This is a natural step in our maturation as a MedTech company and one that is intended to strengthen our financial position by accelerating sales growth and driving margin expansion. It's also an opportunity to gain greater direct insights diabetes community, which is a priority for us as we build out our teams to support local efforts and establish global leadership. As you can see, we have entered and for Tandem Tandem. These steps are critical as we continue to maximize our portfolio expand our addressable market, increase our competitiveness both near and long term and improve the lives of people with diabetes worldwide. I'd now like to turn the call over to Lee to share some more information on our Q4 results and expectations for 2025. [indiscernible] Thanks, Mark.

As a reminder, unless otherwise noted, the financial metrics I'll be discussing today are on a non GAAP basis. Reconciliations from GAAP to non GAAP results can be found in today's earnings release as well as on the Investor Center portion of our website. Annual worldwide sales were the highest ever at $910,000,000 which was an increase of eight We also achieved record fourth quarter sales of $252,000,000 It was the largest in our history and the second quarter in a row of greater than 20% growth over the prior year. This sales performance was driven largely by a strong double digit increase in pump shipments. Starting with color on The U. S. Market, in the fourth quarter, we shipped more than 24,000 pumps and generated sales of $184,000,000 representing 13% year over year On a full year basis, sales were $642,000,000 Pump shipments of nearly 81,000 for the year increased 10% due largely to the Mobi launch and strong retention of our customers through renewal purchases. While pump sales increased 13%. This differential is due to improvements in average selling prices benefiting from continued price increases and favorable mix within the DME channel across the year. We are now consistently seeing nearly 40% of our U. S. Pump and supply business through direct contracts versus 36% a year ago.

When looking at our sources of business during the year, we continue to see positive trends into the fourth quarter. Renewals and new starts from MDI conversions are two key metrics that are foundational to meeting our long term growth objectives and we delivered on both fronts. Renewals continue to meet historically high retention rates on pace for consistent achievement of 70% within eighteen months of warranty expiration. Renewals were the greatest driver of pump growth but we're exiting 2024 encouraged by our trajectory with Moby driving more MDI users to pump therapy. MDI conversions in twenty twenty four grew double digits and made up greater than 60% of our new starts overall. Q4 also marked the conclusion of our Tandem Choice program, which as previously discussed was an opportunity for eligible T CellMx customers to switch to Moby upon its availability earlier this year. As a reminder, reported pump shipments and non GAAP financials do not include any impact from the program. There were essentially three stages of this program. On a GAAP basis, we deferred a portion of the sales for each eligible X2 customer Upon launching Moby this year, we ceased deferring any portion of X2 sales and began recognizing sales and cost of goods sold with each individual election to switch to Moby.

Now that the program is complete, we captured all remaining X2 sales deferrals in the fourth quarter totaling $30,000,000 For further details on the GAAP accounting for this program, please refer to the accounting policy discussion in our 10 ks.

Turning to our results outside The United States, we shipped approximately 40,000 pumps for the full year and grew sales to $268,000,000 which is a 39% increase year over year. In the fourth quarter, we shipped approximately 10,000 pumps and grew sales 48% to $68,000,000 Similar to The U. S, our OUS pump and supply sales benefited both from volume and price increases.

The majority of our pump sales continue to be driven by customers new to Tandem with strong demand for Tandem X2. Renewals will begin to offer more meaningful contribution in twenty twenty five. Moving on to margin performance, our 2024 gross margin was 51% consistent with 2023, while absorbing headwinds associated with the Moby launch. As expected with scaling volumes, Moby pump manufacturing costs per unit continued to improve across the year and will begin to benefit gross margin as we enter 2025. This positive contribution from Moby will build in the coming years and become more meaningful as we increase the mix of Moby pumps we are selling. Additional leverage will come from Mobi cartridge scaling in 2026 and beyond as the size of the ordering installed base is expected to grow. Gross margins also benefited from favorable ASPs across all products.

For the full year of 2024, our adjusted EBITDA margin was consistent with 2023 at negative 1% of sales which included increased spending year over year to support the mobile launch and clinical trials for new products and indications.

Adjusted EBITDA margin also reflects initial investments to commence the [indiscernible] as well as build infrastructure to support direct operations outside The U. S. Even with these investments, 2024 marked a return to positive free cash flow which is early evidence of our dedication to improved financial strength in the coming year. We ended the year with $438,000,000 in total cash and investments and are confident in our ability to support key operating and non operating commitments in 2025 including debt repayment of convertible notes due and final AMF purchase obligations. Turning to guidance, with Tandem Choice behind us, we are returning to GAAP guidance for 2025, which will be most directly comparable to the non GAAP results we provided in 2024. Worldwide sales are expected to be in the range of $997,000,000 to just over $1,000,000,000 or 10% to 11% growth year over year. This contemplates the impact of certain factors that are critical to meeting our long term sales ambitions that may create some level of disruption in the near term.

In The U. S, our sales for 2025 are expected to be in the range of $725,000,000 to $730,000,000 or growth of 13% to 14%. We anticipate another strong performance with renewals from increased warranty expirations, predictable and growing supply sales Tandem mid single digit growth in new pump starts. This growth in new pump starts will be driven by continued traction with Mobi and other new product innovations. We will continue to vigorously pursue improved market access for our expecting only modest contribution in the meantime. The sales force expansion and realignment that we just completed in The U. S. Has the potential create disruption in the near term and was factored into our expectations. Our move into the pharmacy channel is important for 20% of covered lives under contract. We have not included material benefit from pricing or volume at this time. We will continue to gather and assess data related to new product adoption and channel utilization to inform updates to our guidance in upcoming quarters. As a reminder, both pump and supply shipments typically reflect seasonal patterns across the quarters, which is associated with insurance dynamics in The U. S. Seasonal patterns where both pump and supply sales scale up across the year.

Sales outside The U. S. For 2025 were expected to grow 2% to 4% to a range of $272,000,000 to $277,000,000 This reflects the tremendous market expansion opportunity ahead balanced with the potential for disruption as we prepare to go direct in select European countries. Our sales assumptions factor in $15,000,000 to $20,000,000 of potential headwinds later in the year as we navigate this transition ahead of our planned 2026 launch. In the first quarter, we anticipate minimal disruption and therefore expect sales of $75,000,000 to $77,000,000 from strength in these markets. We expect to demonstrate our greatest progress in recent years in both gross and adjusted EBITDA margins. While I have outlined today certain investments we are making for growth, we have meaningful process improvements, increased use of technology to support our customers. The savings expected to be generated will allow us to fund the commercial investments while expanding margins. We expect gross margin to be approximately 54% for the full year and 51% in the first quarter, including minimal anticipated impact of tariffs, driving towards our long term target of 65 Adjusted EBITDA margins are expected to improve to approximately 3% of sales for the year or an improvement of four percentage points from 2024, with the low in the first quarter at approximately negative 6% of sales.

I'll now hand the call back to John for closing remarks. Thanks Lee. Alongside our operational and commercial strategy to propel business growth, we are unwavering in our dedication to innovation and focus on new technologies. That will bring the greatest benefits to our people with diabetes. In 2025, will further expand our portfolio by launching new technology solutions, First is our integration with Freestyle Libre three, plus with T:slim, followed by Moby Tandem then next is introduction of Android app for control for Moby. Additionally, I am thrilled to announce that we have already submitted Moby for CE Mark and are on track to launch it outside The U. S. By the end of the year. The international launch of TandemSource currently underway will enable the scaling of Moby's global expansion. Another key regulatory filing to highlight is our initial FDA submission for our steady set infusion set. We are pursuing a three day indication as a first step in our regulatory strategy for longer wear times with additional filings to support our product targets. Our commitment to innovation and growth also extends beyond 2025. We are enhancing the features of both T:slim and Mobi platforms, For T:slim, it's continuing to keep our Flex which will be the next significant pump enhancement available within our portfolio.

Beyond that, we plan to further expand our portfolio with a third pump platform, Siggy, Siggy is an ergonomic and rechargeable patch pump We are beginning to accelerate development in San Diego leveraging the expertise of our advanced pump development team and we are excited to bring this differentiated technology to the market. We remain steadfast in our commitment to offer offer the best performing fully closed loop algorithm with industry leading outcomes and minimal user burden. To further this goal, recently signed a multiyear collaboration agreement with the University of Virginia Center for Diabetes Technology to advance research and develop an insulin delivery systems. This exciting collaboration will build on ongoing research as we continue our successful partnership to deliver new innovations, As you can see, 2025 is positioned to be full of tremendous opportunity for Tandem Tandem. The strengths that have driven meaningful growth for us in the past are once again in place today. These include having a differentiated portfolio of technology solutions, Our industry leading customer service and our best in class automated insulin delivery algorithm These drivers, coupled with our actions underway to fortify, strengthen and grow our business include our expanded sales force with modernized tools and systems.

Increased pharmacy channel access, scaling growth into Type two, preparation for direct sales in Europe and the most exciting pipeline in diabetes Each of these is an exciting opportunity independently. Together, they position us for near and longer term profitable growth as we create new possibilities for people living with diabetes. Thank you for supporting Tandem through this exciting transformation. Operator, would you please open the call up for questions?

And our first question will come from the line of Matthew Blackman with Stifel. Your line is open.

Good afternoon, everybody. Thanks for taking my question.

Lee, I was going to give you a multipart question. Apologies that we're starting off like that. But I was hoping to get you to if you could quantify, I think you called out 4Q shipping delays. Can you quantify that for us Tandem whether that was on both the pumps and the supply side? And then also the December trends being soft just any thoughts there on why Tandem to the extent you want to give us some commentary beyond obviously the 1Q guidance, how things are looking in early twenty twenty five on that front? And then on the guidance, I just want to confirm I think I heard it, but Is Type two baked in there? Is Libre baked in there? It didn't sound like it. Just any clarification on what's in there and what would be potentially upside? I'll leave it at that. Thank you.

Thanks, Matt. Certainly, a lot packed into that question. So I think I will start with a few comments on the fourth quarter. And so to your point, asking about where the shortfall came from, The majority of it really came from the fact that we saw a muted seasonal curve in December. So if you think about the last few weeks and as we normally look at seasonal trends, it not only grows across the quarters, but even across the weeks within the fourth quarter December was still by far the largest shipment month we had for the year. It was really just those last few weeks that fell short. And it actually and it showed growth year over year. And so the comment about the shipping delays, it was a contributor. It was not the most meaningful, but it was important just to call out compounding what we were seeing at the end of the year. And we did take those considerations or take those into consideration [indiscernible] None of it took away from our enthusiasm or confidence in continuing to grow the market. We still saw great strength in MDI. We still saw great traction with our renewal opportunities.

And those are the fundamental key performance indicators that we expect to drive the business going forward. [indiscernible] And that will come from the line of Steve Lichtman with Oppenheimer. Your line is open.

Thank you. Evening, guys.

Guess for my one question, wanted to touch on pharmacy.

A lot of progress that you noted there. Can you talk about the next steps for that initiative? Any twenty twenty five goals on coverage you can share? And how you see now that you're at that 20% mark, how you see that playing out here in the coming quarters?

Thanks for the question, Steve. I'll take that one.

So yes, I think we're really focused on pharma We recognize that out of pocket cost matters and we're really pleased with the strong progress we're making in the pharmacy. This year is the first year that we can offer multichannel DME and pharmacy benefit plan coverage. And the good news is we now have patients receiving product through the pharmacy. It's a really important step. It's a win for Tandem, Tandem because we believe that allows us to offer better access and experience. And we do think it will help us with our win rate with both healthcare professionals and patients. But it's obviously a huge win for patients, right? Because those that have been on MDI and haven't been able to go on due to cost barriers. It's been something we've been focused on. So yes, we've signed multiple contracts with with leading PBMs It translates to roughly twenty percent of covered lives across various lines of business, both commercial and government. And we're activating our co pay assistance capability as well to serve that market. So we have those plans obviously pull through that with our field teams and for this year, dropping scale and efficiency in the pharmacy remains a top priority.

And just one moment for our next question. And that will come from the line of Brook O'Neil with Lake Street Capital Markets. Your line is open.

Hey, good afternoon guys. This is Aaron on the line for Brooks Thanks for taking my question. You've mentioned in the past that the Moby pump compared to 10% to 15% lower manufacturing costs and the cartridge being about roughly 20% we expect some to see some meaningful margin improvement from those conversions this year?

Recognizing the guide does call for margin improvement, but just looking to digest that a little bit. Sure. Thanks for the question, Erin.

So you do have it correct in terms of the ultimate at scale, lower manufacturing costs for Moby compared to t slim. As we built up this year, we were facing headwinds with Moby having that higher per unit cost mostly because of the overhead overhead that we were absorbing. But I can say as we exited 2024 and going into 2025, the pump itself will start to become accretive. And that's part of the contribution to the margin improvement in 2025. The cartridges on the other hand still have a way to go before they scale up enough to start showing that benefit, which will begin in 2026. And so this is a multiyear margin expander for us. But everything that we're seeing, we're absolutely on the right track to achieving those targets for the Moby Pump. Thank you. One moment for our next question.

And that will come from the line of Matt Mick with Barclays. Your line is open.

Thanks so much for taking the question and congrats on a really great finish despite the ebbs and flows that you mentioned in December. So I wanted to ask a question about you mentioned some of the additional, the new product innovations that kind of baked into your into your guidance for this year. So maybe highlight what some of those are Tandem then then also one of the questions we get often is, without putting a finer point on the arrival of Siggy, is kind of the pathway of Siggy. It's going to use I suppose, the current algorithms Control IQ plus now, but maybe what other hoops and hurdles that it has to get through in order to get to market? Does that involve a large clinical trial? Maybe just some some high level background on what the pathway is to bring Siggy eventually to The U. S? Thanks so much.

Good thing, Matt. Well, first of all, we're really excited about the launch of Control IQ and that's going to be happening here in a matter of weeks. And it has enhancements to the algorithm, the sort of the usability of the product, personalization and also it will enable children two years and older to start to use Control IQ as well as people who have Type two. So very excited about that. I'd say following Control IQ Plus, we intend to implement Freestyle Liberty three on on T Slim and that then will be followed on to Moby. And then we also are working on the Android version for Moby, which will be available this year as well.

So all We feel very good about these. We think that they're going to be meaningful improvements to the sort of the appeal of the products and drive significant revenue growth opportunities in the market. Addition to that, we're also rolling out TandemSource and mobile OUS. Which we're excited about. And I think that that's been happening now Tandem think that we're going to be going country by country as we get into the year. We did also, as I mentioned, file for CE Mark for And so certainly there's uncertainty that comes along with the that the MDR certifications in Europe, they've gotten more complex over time. But we would expect to hopefully have that on the market OUS before the end of the year. So those are a lot that's a lot going on here for the 2025 and we think it's really meaningful progress Tandem think it's our commitment to innovation. The questions about, Siggy. Siggy is going to be an ACE pump. It's going to be interoperable. And so just like t slim and [indiscernible] once it's approved as an interoperable pump, we can use any of our approved algorithms on it Tandem we would intend to do that.

And so it's still a little ways away. So any enhancements that happen to Control IQ or any additional improvements we make to algorithms in the meantime will be available on Siggy as soon as it does come to market. I hope that answers your question.

Thank you. One moment for our next question. And that will come from the line of David Roman with Goldman Sachs. Your line is open.

Good afternoon. This is Phil on for David. Thank you for taking the question. I thought I'd go to the OUS business. Some solid outperformance in 4Q versus your guidance. But if I do the math, even if adjusting for the direct to the distributor to direct transition that's contemplated. It still represents some slowing year over year trying to adjust out some of the twenty twenty three one time distributor in France.

I guess the question is, is what's contemplated and the underlying there with renewal become maybe some expectation for slowing ahead of the Mobi rollout and launch OUS. Sure. Thanks, Phil. I'll acknowledge first there have been a lot of moving parts in our business outside The U. S. Over the past couple of years and in 2025 as well. But I'll say from the perspective of the market, it's still vastly under traded and we've been demonstrating great strength and traction If you think about where our business has been coming from in the past few years, it's it's really almost all new customers to Tandem. And so renewals only began to be contribution in 2025. And so we do anticipate there will be [indiscernible] in preparation for 2026. But outside of that, we feel very strongly about our opportunity in those markets and we'll continue to push forward there. And so as we start the year, we're always thoughtful when we put our guidance into place about what the risks and opportunities are for the business Tandem putting more weight to the risks Tandem this is true for the whole worldwide business.

And that's reflected in how we built the guide for 2025 for OUS. But we do believe there's a great opportunity for us to grow. Thank you. One moment for our next question.

And that will come from the line of Chris Pasquale with Nephron Research. Your line is open.

Thanks. I wanted to ask about the U. S. Sales force expansion and clarify how far along you are in that process today Tandem how we should think about timing of any potential disruption associated with that And then given the news about Type two, does this give you the coverage that you need to really capitalize on that opportunity and call on the primary care physicians who manage a lot of those patients? Or are you going to need to do more to really get it at that opportunity? Mark, why don't you take that?

Yes, Chris, thanks a lot for the question. A couple of questions in there. So yes, I mean, when we step back, we felt like it was the appropriate time to selectively invest in the field force expansion just based on the potential of the portfolio Also just looking at what competition is doing, with their sales forces, we know this market is a promotionally sensitive market Tandem frankly we hadn't realigned in several years. So the realignment will do a couple of things. I think first off, it does create optimization and efficiencies as you get through the a realignment process. And then the expansion, it was clearly going to give us some boost in increasing our share of voice. And what's important here is this is going to allow us to really call on the right high growth HCPs the ones where we believe have the greatest potential. And growth opportunity. As we've in this some of those or haven't called on them in the prior years, So Tandem the realignment and the expansions allows us to really go deeper in each of those more high potential accounts Now in terms of disruption, I mean, this was very front and center and we did this expansion in quarter four.

So we start this year right now with higher share of voice. We are completing the [indiscernible] And so it's live. And we are very intentional on how we went about this to ensure that we minimize disruption.

In quarter four, the field teams were focused on selling Tandem so there was no impact to Q4.

And we've got a really good experienced team on board that knows how to manage realignments and expansions And so that continues to serve us well.

Now into the second month of the year.

I'll try to comment on the future sales force expansion. I think, hey, we continuously evaluate share of voice needs what competition is doing in line with our growth and profitability goals. For now in type two, we're really primarily focused on those high insulin prescribers. I think it is more than those and those like PCPs. But what is very important is we designed this sales force, restructure Tandem alignment. It's designed with the Type two expansion in mind. As well as as we expand in pharmacy. So down the road, we can easily scale up over time if we want to put more share of voice into primary care. But for the time being, we're we're focused on the immediate caller market. Thank you. One moment for our next question.

And that will come from the line of Larry Biegelsen with Wells Fargo. Your line is open.

Good afternoon. Thanks for taking the question. Hey, John, I wanted to focus on the Type two launch and opportunity in The U. S. So the mid single digit growth in new starts, how much is contemplated from Type two How long is the pilot going to last, John?

Tandem Type two, I think for about 5% to 10% of new start today for you guys. For pod, it's 30% now. Is there any reason your percent of new starts from Type two can't increase to 30% in the next few quarters? Thanks. Yes. Let me go ahead and just kick it off and I'm going to hand it over to Lee and Mark to add some insights from their perspective. First thing I want to do about Type two is I want to thank the FDA because this was a stressful time for them as you might imagine. And I think they did a great job of getting this through their system. And guys are just as committed to helping people with diabetes as we are. So just a hats off to them. That being said, as you said, Larry, it's a large underpenetrated market. It's about 5% penetrated in The U. S. Essentially doubles addressable market. And the great thing about Control IQ is it brings the same benefits that people with Type one have experienced to the Type two community. And I think that as we've seen it over the last couple of over the last year or so as we've done marketing research, we're finding that people who have type two are more willing to consider pump therapy.

And so in the past, we might have said that we can get from five percent maybe to fifteen I think that with this the new smaller easier to use technology in the market, we think you can get to over 25% in the next three point five years.

So, I think that with that, I think I'll let Mark talk a little bit more about our go to market strategy. And we'll go from there. Mark, I think you're on mute.

Thank you. I just will echo the gratitude and the excitement we have about being able to scale our impact in Type two diabetes. And so so we'll soon, in this quarter in March, begin our two pilot launch activities and we'll scale that based on how things go Tandem based on various performance KPIs As I mentioned earlier, we're going to target high insulin prescribers A big focus is going to be around activating and expanding the pharmacy channel recognizing how important that is for Type one and Type two.

And work to establishing a sustainable Medicare pathway to broaden coverage. There is naturally a lot of market development work in this particular category of pipe two. So we've recognized with our other industry partners, we have our work cut out for us at going to take some time to develop the market. And to ensure that we've got really good long term growth potential. But we're excited to roll out the results we will be presenting next month in Amsterdam ATTD. We're really excited about unveiling those results. And then all of course, all the follow on medical communication clinical training and so forth that comes along with it. So we have a big year ahead of us. And the last thing I think we'll say is that we do recognize that the population needs here in Type two are different. From Type one. And how we're approaching it more committed to serving this population with tailored solutions.

And that will come from the line of Shagun Singh with RBC. Your line is open. Great. Thank you so much for taking the question. I wanted to touch on the 2025 guidance Tandem appreciate you guys have this base case guidance philosophy. You've factored in some of the headwinds, but is it possible for you to share maybe a range of outcomes like given that you have type two, you have the OUS renewal opportunity, Libre integration, the pharmacy channel where you're making progress. Anything you can share on the range of outcomes or to help us really put that into those opportunities into perspective for 2025 would be helpful. Thank you. Sure. Happy to take the question.

So from a guidance perspective, to your point, we looked very closely at what are the predictable recurring revenue streams to start And obviously, renewals have been something that we have a consistent track record with that will already just because of the new opportunities in 2025 create a step up in growth. Consistency in our supply sales from our very large installed base of over 480,000 people, And then when we thought about the new factors, what if you want to call it, are the new product and feature introductions that we have in 2025, we're super excited about all of these opportunities. Tied to the new products, the pharmacy initiative. But some of these are really multiyear contributors Tandem we're just getting started, Mark, just about the pilot for Type two pharmacy with their very beginning phase. Really nothing else here in the first quarter at least. And so from a guidance perspective, we factored in modest contribution from those in 2025. And so what's important, I think, is it really is the impact it could have on new starts for Tandem. And we factored in about a mid single digit growth in new starts year over year in The U. S. I should say in particular.

And Shagun, this is not unusual. We've done this in the past where we we're pressing hard to get these systems into the market and to benefit from them. But until we have evidence and understand exactly how they're going to affect us, we're going to take a more conservative position.

Thank you. One moment for our next question.

And that will come from the line of Matthew Taylor with Jefferies.

Your line is open. Hi, good afternoon guys. This is also Matt on for Matt Taylor.

Especially those not on the pump. So maybe if you can help us understand how that launch has progressed thus maybe the kind of momentum you're seeing about it maybe how you think about this from a guidance perspective in terms of it being a driver of your new starts next year?

Yes. We have Libre two integrated today with with t slim and we're working on bringing Libre three to market here in the relatively near future. I think that the availability of the product is going to be it will be shipped on new pumps and also be made available to people who currently own pumps through a software upgrade. Right now though, if you look at the installed base in The U. S. For FreeSlide Liberty three, is roughly 300,000 or 400,000 people who have who use the the system, use the sensor that have Type one who don't use pumps. And so I would say that there is a large market development opportunities, an opportunity to collaborate with Abbott as we bring this technology to market. And we see the benefits So if you look out over time, we've said we can get upwards close to 1,000,000 people using our technology and these 400,000 people in The U. S. Represent a big part of that. And so we will be working closely with Abbott and our own sales team to make sure that we take advantage of that.

Thank you. One moment for our next question. That will come from the line of Mike Kratky with Leerink Partners. Your line is open.

Hi, everyone. Thanks for taking our questions. Maybe just to go back to an earlier one on understanding the dynamics of the fourth quarter I think you mentioned the unexpected timing of revenue reporting in the fourth quarter.

But It looks like the guidance for 1Q is Still down about over 20% at the midpoint in The U. S. So was there anything specific that fundamentally contributed to that December weakness that you saw And I think you mentioned that there was no impact to your 4Q sales from the sales force realignment. So just wanted to to clarify what's giving you the confidence that that's the case. Mark, would you like to talk about the commercial environment a bit?

In the fourth quarter going into first Yes, of course. Happy to, Lee.

And thanks for the question, Mike.

So I mean, as John and Lee both pointed to some of the things that happened in Q4. I mean there was a little bit of a meeting on the seasonality. I think I stepped back and I reflect on the full year and there's some macro factors that I think we continue to to observe that continue to be a challenge. I mentioned out of pocket costs for patients. And how important it is to make these accessible. And so that's really under to strengthen our position in pharmacy. And so I think that played into some parts of it. I think overall from a competitive standpoint, I think we recognize first of all, this is like a super large underpenetrated growth market. There's going to be some entrants here and there. Tandem we continue to see kind of two large competitors.

A new one that's been scaling, but we feel good. We feel like we're holding our own and As Lee mentioned, despite December of it, we're still a really good, I think month. In fact, it was like the largest shipment month we had all year and with really sizable growth versus last year's December in 2023. So the underlying fundamentals feel good about it. It was a record quarter. Healthy year over year and quarter over quarter growth. We really like what we're seeing on the MDI side.

And of course from a renewal perspective.

Thank you. One moment for our next question.

And that will come from the line of Danielle Ants Antalffy with UBS. Your line is open.

Hey, good afternoon guys. Thanks so much for taking the question. Just to follow-up on the Type two opportunity. Just curious, so I appreciate there's still a lot of market development to happen Tandem you guys are going pilot this and all that. But just curious about and by the way, congrats on getting that approval. How to think about type what's important to a type two patient based on the small percentage of patients that you have on pump today Tandem some of the market research you've already done from a feature perspective, time and range versus pharmacy versus footprint of the pump, flexibility, etcetera, and also, how a patient utilizes that pump Is it pretty in line with what you see from type 1s like 20 fourseven three sixty five? Is there or is there some different adoption patterns we should be or utilization, excuse patterns we should be considering. Thank you so much.

Mark, I'll just kick that off and hand it over to you. But I would just say that a couple of things are important to people with Type one. First of Type two, excuse me. First of all, I think it's the simplicity of the system. It really does have to be easy to use. Discretion is another very [indiscernible] I think the financial elements are something that we need to deal with. And so I think that when you look at this, we've got Mobi, it is small, it's convenient. Moving into the pharmacy channel, it is addressing some of the out of pocket expenses that that the Type two community will have to deal with. And I think that we feel pretty well positioned to take advantage of this marketplace. And I think we're going to kick off this pilot and learn a lot more. But I think it's one of those opportunities that we think it's giant for us and we're excited to be in it Mark, you want to add anything to that?

Yes. Thanks, John. I think the only thing I would add is that we're going to two points.

Is that from a portfolio perspective, what we feel good about is that we can offer choice. And that there's one similarity between type one and type two is that not not one size fits all Tandem that we've through our market research recognize that there are unique segments and Type one, but also in Type two Tandem in some cases type two really favor a larger reservoir with 300 units of insulin Tandem they like the on screen compatibility and use of t slim. Others we know are going to really like MoVI because of the small form factor and its versatile wear. So I think we feel good about being able to offer that choice. And as we load up more CGM integration on Moby, we believe that's going to be equally important. The other point I'd say is that We have a lot of experience working with Type two.

I think we've shared before, we've got about 30,000 people living with Type two using our technology today. And so we've got great experience training now working with them. We understand some of the important nuances to deliver compelling and effective training.

And we're naturally looking at how to scale that, digitize it, modernize it. And make it the best experience possible.

Thank you. One moment for our next question. And that will come from the line of Jason Bedford with Raymond James. Your line is open.

Good afternoon. Just maybe on the pharmacy, the twenty percent of lives is bigger than I thought. So I guess my question is, how does this impact the P and L and your guidance in 2025? Meaning, is it a driver of revenue growth? Does it impact margins? Or is it just a little early right now?

Thanks for the question, Jason. So I'll start by saying we're very pleased with the progress we've already made acquiring these contracts coming into the year. And we're still in the very early stages. And so from a guidance or [indiscernible] from a volume and an ASP perspective. But I think that's the point as we look forward This complement our channel strategy and will help us drive towards meeting our future profitability goals And I think most importantly overcome the affordability question for many patients. So the sixty percent of people into type one not using pumps today there's a cost sensitivity there Tandem this gives us that opportunity to really lower that out of pocket cost and drive more people to pump therapy. Thank you. One moment for our next question.

And that will come from the line of William Flovannik with Canaccord.

Your line is open.

Great. Thanks. Good evening. Thanks for taking my question.

Want to go back to the pharmacy. You've been signing these contracts. I think one of the questions I get is, how does this impact cash flow? Typically, if with the Payvigo product, you'll get you have a capital piece. Do you get paid that capital piece up front or is that smoothed over the length of the contract? And then so how is this going to impact your free cash flow? And how are you thinking about longer term, just the business in general? I mean, I see it seems like as you're crossing that CASM into positive free cash flow, you're taking the opportunity to transition the international business, realign the U. S. Sales force, kind of like turning '25 into a transition year. Is this just taking the incremental free cash available and investing in the business now for leverage in the future. For taking my questions.

Yes. Couple of really good questions. I can on the pharmacy very quickly. The pharmacy gives us the opportunity to think about our business model and our structure and how reimbursement may work. At this point, the volume we've anticipated is very small Tandem there's no change to the business model that we have in place. So bottom line, no cash flow impact with the contracts that we kicked off right now. And then to your point on the long term of the business, and this is more generally about cash flow, they're very important things that we need to do to set up the business appropriately to drive that long term growth to meet our ambitions for growing top line. And we are always looking for ways to make those investments, but fund them in other ways of cost saving initiatives. And so as we turn the quarter to being free cash flow positive again this year, we look forward to the opportunity to be able to make these investments that will have multiyear benefit for the organization. We also have initiatives in place so that we can show a bit of leverage in 2025 even in this investment year.

Thank you. One moment for our next That will come from the line of Mike Polarc with Wolfe Research. Your line is open.

Good afternoon. Just one model question. I appreciate the 2025 guidance comment mid single digit growth expectation for new U. S. Pumpers We all stab at this number, but Lee had interested if you're willing to comment on 2024 U. S. New pumpers. What was [indiscernible] growth rate either for the full year or in the fourth quarter Thank you for taking the questions.

Sure. Great question, Mike. And so what I can share about new customers, so we've often talked about our sources of growth being renewal and new pumpers. And within new pumpers, we often break again into NDI and competitive conversions. Our focus is purely on MDI conversions. 2024 was a year where we knew, we anticipated Tandem we saw the competitive conversions would start to decline purely because the opportunity was declining. And so our focus is driving the growth of the business through the MDI conversions.

The NDI then returned to growth in the second quarter, grew each of the quarters Q2, Q3 and Q4, and it was double digit growth year over year. And so that's one of the key underpinnings as we thought about the 2025 guide. In building in that build up.

Thank you. One moment for our next question. That will come from the line of Matthew O'Brien with Piper Sandler. Your line is open.

Afternoon. Thanks for taking the question. It's a two parter as well. I just want to be clear about a couple of things that you've said on the call. The Q4 end of year impact that you saw. I'm just wondering if that wasn't competitive specifically with another durable pump company in the market. With a good product there, the halo effect that's probably happening on the patch pump side of things. Is that something you saw in Q4 that's lingering here somewhat into Q1 and could impact the full year? And then secondly, the guide, Lee, if I look at the number of additional pump sales you need to make this year, I know there'll be a little bit more bump. From the renewal cycle, but it's also at a time you've got a restructured sales force where that didn't go well for one of your CGM partners recently. And it's just assuming a big, big ramp in the back half of the year especially I think a lot of folks are going to be concerned about you being able to hit without getting a massive tailwind from Type 2s and a massive tailwind on the pharmacy side. So how do we get comfortable you can do all that again with the restructured sales force?

Sure. Great question, Matt. I'll kick this off Mark may want to chime into it. So first of all, from the Salesforce expansion perspective and the impact on 2025, We did anticipate there could be disruption, no matter how well you plan or execute. There can be a little bit of turbulence, initial peak as people are going out and meeting their docs and getting acquainted with their new territories and realignments. I'll have Mark can speak to how diligent we work and how we're executing on this. But we factored in the beginning of the year that it could be a bit more disruptive. And so to that point, on the ramp across the year, it's partially seasonality, taking in consideration the impact we saw at the end of 2024 with a little bit muted seasonality really in just the last few weeks of the year, but also assuming that these with the territory realignment and the expansion, we'll start to see more productivity as they get to the back half of the year. And so to that Q4 softness, I would say, there's a myriad of factors that contributed. It's hard to pinpoint a single one. It wasn't it has been across the year of an increasingly competitive environment Mark mentioned the macro factors we've seen across recent years, more and more people becoming sensitive to cost, use of high deductible plans and such.

There are so many things, but I can't say if there's any one thing that turned out a dime in those last few weeks. It just was a little bit more muted than what seen in the past.

Yes, I would just say that nothing changed competitively throughout the year. I mean, it was basically it was static and I think that we held our own. Certainly, there's a lot of competition, but I think we held our own.

And that will come from the line of Josh Jennings with TD Cowen. Your line is open.

Hi, good evening. I was hoping to ask on the type II indication. I guess first just to ask you your views on the Basel opportunity. Is that in play with the current label? Or do you need to show more data for Control IQ to be approved there and for you to take advantage of that opportunity? And maybe just touch on Type two coverage for Tandem pumps where it stands and when it would be full? Thanks a lot. Yes. Josh, the approval we got was for type two diabetes in general. For insulin use with Type two using our algorithm, And so it involves it's all insulins Tandem it's all manners of which insulin can be delivered to you either [indiscernible] So it's all there. And so think Basal only is something that's not necessarily an area we're focused on. If we decide to, then we can do that with this algorithm. Lee, you want to just comment on Sure. The Type two coverage. And so I'll say first and foremost, from a commercial pretty much the same coverage as it would be for a Type one. So there aren't any real limitations from a Type two perspective.

From a Medicare perspective, there's still some onerous requirements and we are engaged and working actively with other industry players in order to get changes made with that national coverage determination, which has been received by CMS and is on the docket for review, which is don't yet have any color today on when they will actually get to it. So we are working hard to pursue that improved coverage overall.

Thank you. One moment for our next question.

And that will come from the line of Jeff Johnson with Baird. Your line is open.

Hey, thank you. Good afternoon, guys. Congrats on the Type two coverage. I wanted to focus another question there, which I apologize. I know a lot of the questions have been on Type two. But I've really been trying to gain this out. And John, I'd love to hear your thoughts or anyone else's thoughts. If I look over the last two point five years up until six months ago, both you and your biggest AID essentially we're off label for Type two. And I think during that time is best I can break out numbers, you guys were winning about 25% share of the Type two new starts that were coming in. The other company winning maybe 75%. Not when you're both going to be on label do you think those shares shift? I think a rising tide is going to help everybody, but do you think that 20 five-seventy 5 split or maybe my math is off a little bit, but somewhere in there, does that share shift or does the share shift at all now that you're both going to be competing on label? And how is it different if you're both on label versus maybe six, nine months ago when you were both off label?

Yes. The first thing I'll say is what I mentioned a moment ago and that is that certainly as new technology comes to market, it's smaller, it's more convenient to use. And the therapy benefits are substantial. We believe more and more people are coming to market. So So the opportunity is big Tandem I think the penetration is bigger than we had thought it was in the past.

I would say when it comes to Type two and on the competition in the marketplace, it really comes back to the pipeline. Market access and the things that we're working on. And so I would anticipate that we're very confident in our pipeline and we think it's going to be more competitive as more of these features and systems comes to market. So I think that I think we're going to begin to take more share in Type two and in Type one.

One.

And that will come from the line of Travis Steed with Bank of America. Your line is open.

Hey, thanks for taking the question. I did want to ask on the gross margin ramp over in the course of 2025. I think it's 51 in Q1 Tandem '54 for the full year Just if there's any other additional color on that a specific reason why now was the time to do it, if it was related to Type two or if it's what seeing in the competitive environment? And if it's if you're calling on more primary care doctors or if it's all kind of just focused on [indiscernible] the Endo Yes. Thanks for the question, Travis. I'll start with the gross margin and turn it over to Mark from the commercial expansion perspective. For gross margin, what you typically see in, again, I'll say the normal year is that gross margin improves across the quarters as pump sales ramp in The U. S. But pump being the highest gross margin contributor. In 2025, in particular, we have the added benefit of Mobi scaling up across the year. So we sell more and more Mobi pumps, that will also provide even greater contribution to the margin. So we're starting the year at 51% per percent. And I think it's I'd like to point out that that's flat to what we just demonstrated in the fourth quarter when usually we take a bit of a step back.

In Q1 for gross margin. So we're at a new starting point for the year. And confident in our ability to deliver on that. [indiscernible] Yes. Thanks, Travis, for the question. I think the timing was right for us to do this at the end of last year.

And set up ourselves for for 2025. I think it's a combination of factors.

Timing. I mean, number one is that we do think the portfolio has got a lot of potential. We're really excited about what we can offer with our technology. And the market is promotionally sensitive. We know that. We've done our in several years. And what that sort of means is that the marketplace has grown and changed tremendously over the last few years. And for us to recut territories and alignment, creates greater efficiency for our sales teams.

Gives them better workload balance, they have better reach and frequency Tandem can just really concentrate on those high potential accounts. But it's really important. Tandem then secondly, we believe we needed some extra extra share of voice in order to compete and continue in this current market within The U. S. And alongside that is also new tools and capabilities. It's not just about sales force expansion. As John mentioned, we've been piloting a number of different tools to better understand Tandem segment a HCPs and help enrich our messaging. New selling tools. And so again, we feel good starting this year where we have stronger share of voice We know exactly where to go.

What to say, how to say it with a bunch of high impact tools that really can support the field.

Thank you. I'm showing no further questions in the queue at this time.