德康醫療 (DXCM) 2024 Q3 法說會逐字稿

Thanks or Ladies and gentlemen, welcome to the DexCom Third Quarter 2024 earnings release conference call.

My name is Abby, and that will be your operator for today's call.

At this time, all participants are in a listen-only mode and later we will conduct a question and answer session.

During the question and answer session.

If you have a question, please press star one on your touch-tone phone.

As a reminder, the conference is being recorded.

And I will now turn the call over to Sean Christensen, Vice President, Finance and Investor Relations.

Mr. Christian, you may begin for you and welcome to DexCom's Third Quarter 2024 earnings call.

Our agenda begins with Kevin Sayer, DexCom's Chairman, President and CEO, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jeremy Sylvain, our Chief Financial Officer.

Following our prepared remarks, we will open the call up for your questions.

At that time, we ask analysts to limit themselves to one question each so we can provide an opportunity for everyone participating today.

Please note that there are also slides available related to our third quarter 2020 for performance on the Dexcom and investor relations website on the Events and Presentations page.

With that, let's review our Safe Harbor statement.

Some of the statements we will make on today's call may constitute forward looking statements.

These statements reflect management's intentions, beliefs and expectations about future events, strategies, competition, products, operating plans and performance are forward-looking statements included on this call are made as of the date hereof based on information currently available to DexCom subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements.

The factors that could cause actual results to differ materially from those expressed or implied by any of these forward looking statements are detailed in DexCom's annual report on Form 10 K, most recent quarterly report on Form 10 Q and other fees filings with the Securities and Exchange Commission.

Except as required by law.

We assume no obligation to update any such forward-looking statements after the date of this call or to conform these forward-looking statements to actual results.

Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP.

Unless otherwise noted.

All references to financial measures on this call are presented on a non-GAAP basis.

This non-GAAP information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP.

Please refer to the tables in our earnings release and slides accompanying our third quarter earnings call.

For reconciliation of these measures to their most directly comparable GAAP financial measure.

Now I will turn it over to Kevin.

Thank you, Sean, and thank you, everyone, for joining us.

Before we dive in, I want to take this opportunity to share an important update.

As many of you saw in today's press release, our Chief Commercial Officer, Terry lover, has expressed here plan to retire from DexCom.

Terry has a great leader whose advanced our commercial organization and so several areas in the past two years, including the launches of RG. seven system and sell, which I will touch on shortly.

I am thankful for his strong leadership and dedication to DexCom, and she will continue to work with me as a special adviser and consultant through early next year as we navigate the transition and our search for a new Chief Commercial Officer, I will assume leadership of the team and having managed Justine before I can speak to their quality and look forward to leading them.

Again.

There are three primary takeaways I want to convey today reinforced by what I've observed since our last quarter call.

First, CGM remains a premier global growth category and the excitement and uptake we've seen with is still a launch has further reinforced my conviction about the long-term potential of this market.

Second, I feel good about the execution progress at our team is making, both in terms of our commercial effectiveness Dempsey.

And finally, I feel confident in our pathway back to higher growth and continued margin expansion, which Jeremy will discuss in more detail later with those points as a framework for discussion, let's turn to the highlights from the quarter.

Today, we reported third quarter organic revenue growth of 3% compared to the third quarter of 2023, which came in at the high end of our third quarter guidance.

Our team continues to build upon our foundation for long-term growth by delivering new products and customer experiences while swiftly working through the temporary challenges.

To get us back on track, I want to touch on the action items we implemented in the third quarter and the strong progress we've made on the core issues identified together.

These updates demonstrate that we are rebuilding momentum to solidify our growth as we head into 2025.

Beginning with our US sales force expansion, we are pleased to report progress and positive momentum as we move to us.

My learnings from the initial rollout and improve our commercial execution as we anticipated, our productivity metrics improved over the course of the third quarter as we implemented several changes to strengthen our sales effectiveness.

Importantly, new customer starts to return to record levels in the third quarter as we gain greater traction in new and existing physician offices.

We are now encouraged to report that since the expansion of this sales force in April, we have seen our prescriber base expand by nearly 35,000 clinicians.

While the impact of these new relationships is not fully reflected in our third quarter results, they represent a meaningful expansion in a few short months and set us up very well as we work to build on this momentum in Q4 and into 2025 rigs.

Regarding our DME partnerships, we have worked quickly to refocus on those partnerships and ensure that our teams are aligned to the strategic importance of all channels in the US, our leadership connected with our counterparts at the DME distributors in the last quarter to listen and collaborate on strategies that are mutually beneficial through this process, we found opportunities to better partner with these teams in the field as we collectively simplify workflows and provided greater customer experience for all.

While we still have work to do, we're in a far better positioned today than we were at three months ago.

These partnerships are a core part of our strategy, and we are confident in our ability to drive meaningful growth that accrues to both us and our channel partners.

We've also executed at a high level within our international markets.

We saw third quarter revenue growth accelerate from the second quarter levels, nearly all of our direct markets driven by stronger new patient performance and the expanded availability of RG. seven and Dexcom one plus product platforms.

This included the launch of G. even in Australia at the end of September, bringing our latest G Series technology to our customers who have been eagerly awaiting its arrival.

And we continued the expansion of our DexCom one plus system, which leverages our G7 hardware platform with a differentiated app experience.

We've now introduced this technology in 19 countries with France being the latest addition in the third quarter in advance of the start of national reimbursement, including basal coverage in early October.

This provides reimbursed access to more than 600,000 people in this important market.

We also saw Japan returned to growth in the third quarter with our new sales organization gaining momentum in this critical market.

While it is not yet a large component of our international revenue, our team is making strong inroads with the clinical community and building awareness among the more than 1 million potential customers who have access to DexCom CGM.

In fact, we recently delivered our highest new customer starts month since entering Japan in 2019, and we build on this progress in the coming quarters.

Years ahead.

During the quarter, we were also thrilled to launch our newest product sell in the U.S. market.

Still, those launch represented a pivotal moment in the diabetes care and metabolic health landscape.

As now, any adult in the US can access a DexCom biosensor.

It also provides a glimpse into the future of the broader care paradigm as more personalized solutions can encourage better lifestyle management and enable clinicians to make more informed therapy decisions.

We are already hearing this exact feedback from our earliest adopters.

Many of these individuals are engaging with their glucose data for the first time and sharing stories of how still has to change their behavior and provided greater accountability in there lives.

They are also sharing positive feedback on all stages of the product experience, everything from ordering through our e-commerce platform, the speed of delivery by Amazon fulfillment, engagement with the software interface and a seamless reordering and process through our subscription model and a DexCom tradition, we are listening to customers and our are already working to innovate the seller experience and meet the distinct needs of people have prediabetes or type two diabetes who are not on insulin.

Even with the product being targeted to those populations, we've seen plenty of inbound interest for people looking to take advantage of the OTC opportunity early in their metabolic health journey across these cohorts.

Currently, around half of our customers have signed up for ourselves subscription, which is encouraging to see this early in a product launch.

We have historically found that greater CGM usage can lead to improved health outcomes, and we'll be tracking this closely as the market further develops.

In October, we also began our initial expansion of distribution options for CLO.

To start, we've broadened our sales presence and increased our partnerships by providing several of our core Jamie partners access to sell on their platforms.

This gives them yet another great product to engage and more fully broadly serve the diabetes community.

We've also initiated our first B to B sales of fellow.

This includes direct sales to certain conditions as one of the first requests that we heard at the outset of sell.

Those launch was a desire from conditions to have still available for sale within their practices.

We've been very encouraged by Astellas launch thus far, and this is only the beginning stellar.

We'll continue to adapt and evolve as we incorporate functionality that personalize the experience for our customers.

Finally, our team is always working to enhance customer experience across our platforms, and we recently took another exciting step forward on this journey.

Following the completion of the necessary clinical work, we submitted our DexCom G7 15 day, a CGM system to the FDA for review.

This has been a top priority across the organization, and we're looking forward to bringing this product to market as soon as possible.

We will have more to discuss around this product and its commercial rollout in the months ahead.

In summary, the team has worked tirelessly to respond to the dynamics that emerge earlier this year for moving quickly and putting in place the pieces to help us return to the growth levels we expect from ourselves.

And just as important, even as we work through these near-term dynamics, we continue to manage this business for the long term.

With that, I'll turn it over to Jay Army.

Thank you, Kevin.

As a reminder, unless otherwise noted, the financial measures presented today will be discussed on a non-GAAP basis.

Reconciliations to GAAP can be found in today's earnings release as well as the slide deck on our IR website.

For the third quarter of 2024, we reported worldwide revenue of 994 million compared to 975 million for the third quarter of 2023, representing growth of 2% on a reported basis and 3% on an organic basis.

As a reminder, our definition of organic revenue excludes the impact of foreign exchange.

In addition to not CGM revenue acquired or divested in the trailing 12 months, US revenue totaled $702 million for the third quarter compared to $114 million in the third quarter of 2023, representing a decline of 2% disrupted the compounding effect of slower new customer starts from Q2 to along with the decline in our revenue per customer due to shifting channel dynamics and higher rebate eligibility compared to a year ago, this eligibility component alone created a year-over-year negative impact of approximately six points of growth in the U.S. with rebate eligibility now near 100%.

We expect this impact peaked in Q2 three and will moderate over the next couple of quarters.

In the DME channel weeks as we completed in our previous guidance.

However, we were encouraged to see these trends stabilized late in the quarter as our team worked quickly to better align with these partners in the field.

As Kevin mentioned, the DME channel is a core part of our strategy, and we are working collaboratively with our distributors to unlock meaningful growth.

International reach revenue grew 12% totaling 292 million in the third quarter.

International organic revenue growth was 16% for the third quarter.

We saw an acceleration in many of our core international markets in Q3 as we expanded availability of G7 and Dexcom one plus across our footprint.

With our leading product portfolio and the growing evidence of health outcomes driven by DexCom CGM.

We continue to see significant opportunity to expand reimbursed access to our CGM systems in international markets, particularly in the type two intensive in type two basic categories.

Our third quarter gross profit was 625.9 million or 63% of revenue compared to 64.7 of revenue in the third quarter of 2023.

During the quarter, we incurred a 24.6 million non-cash charge on inventory related to some build configurations that we determined were not appropriate for commercial launch.

We excluded this from our non-U.

Gaap results for the quarter, we've made significant progress in transitioning our installed base to the G7 form factor with new pump integrations and the continued rollout of DexCom one plus.

This has enabled us to further scale or high volume manufacturing facilities, which positions us well as we work towards our long-term cost targets.

Additionally, Kevin noted that we recently filed our 15 to $0.87 with the FDA for review this potential clearance.

We provide us yet another compelling cost lever into 2025 and beyond.

Operating expenses were 413.9 million for Q3 2024 compared to 391.5 million in Q3 2023.

Operating income was $212 million or 21.3% of revenue in the third quarter of 2024 compared to 238.9 or 24.5% of revenue in the same quarter of 2023.

Adjusted EBITDA was 300.1 million or 30.2% of revenue for the third quarter compared to 314.5 million or 32.3% of revenue for the third quarter of 2023.

Net income for the third quarter was 179,900,000.0, or $0.45 per share.

We remain in a great financial position close during the quarter with approximately $2.5 billion of cash and cash equivalents.

This cash position, along with our growing free cash flow profile, provides us a lot of financial flexibility we took advantage of this during the third quarter as we quickly executed our previously announced 750 million share repurchase program during the quarter.

Turning to guidance, we are maintaining our 2020 for guidance in the range of 4.00 to 4.05 billion, representing organic growth of 11% to 13% for the year with the third quarter playing out as expected, our guidance reflects the continued ramp in our US sales force productivity.

While we continue to work through some of the channel and rebate dynamics discussed above through this ongoing execution, inclusive of record new patient starts in the third quarter and our continued rollout of Stella, we are building momentum as we enter 2025 for margins, we are reaffirming our 2020 for guidance of non-GAAP gross profit margin to approximately 63%, non-GAAP operating margin of approximately 22%, adjusted EBITDA margin of approximately 29% with a full quarter now under our belt since resetting our 2020 for guidance, we remain on track to achieve the 4.6 billion revenue and corresponding margin targets embedded in our 2025 long range plan.

With that, we can open up the call for Q&A.

Sean?

Thank you, Jeremy.

As a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary.

Abi, please provide the Q&A instructions.

Thank you.

We will now begin the question and answer session.

If you have a question, please press star one on your touch tone phone.

If you wish to be removed from the queue, press Star one a second time.

Pardon me.

If you are using a speakerphone, you may need to take up the handset first before pressing the numbers.

Once again, to ask a question, please press star one on your touch tone phone.

And your first question comes from the line of Danielle Antalffy with UBS.

Your line is open.

Hi, good afternoon, guys.

Thanks so much for taking the question and congrats on the filing of the 15-day and the progress in the quarter.

And it does sound like a continent and the progress you have made.

And USDA, they'll come in a little bit below consensus.

I'm sure there's some modeling dynamic there that you just got wrong.

But I was just curious if you get any more color on the progress made everything that is through the quarter in August and September and and and maybe anything you can say about that a run rate exiting the quarter, what you can say about it as where rewire with with DME and from a share per se care perspective.

Any any other color you can add would be great.

Thanks so much.

Thanks, Danielle.

This is Kevin.

I'll take that one.

We knew that this quarter was going to be a tad Rocky.

That's why we guided where we did and we achieve overachieved on came in at the top end of that range.

We feel good about that as we exited the quarter.

There's a lot of good things that we saw.

First of all, we can development of the sales organization really took a turn up over the course of this quarter's people got more familiar with their territories, their relationships with their physicians and all those other factors required when you make the changes like we may use that and the new patient adds being at record level.

And that really was happening over the course of the last part of this quarter.

So it was very strong in latter half of August and September.

On top of that, we talk about the 35,000 new prescribers that have been added through the course of this quarter.

And while you when you add a new line, is that 10 new users at the same time, it's certainly one.

And we now have the prescriber base size down to where we hoped it would be when we did this field expansion to whereby we can begin to go deeper, and we believe that's going to be very helpful.

On the DME side, we talked about things stabilizing.

Things did stabilize.

We have that we had estimated and Jeremy said earlier in his remarks that we continue to lose a bit of share.

The first two months of the core much of the quarter.

We saw things start to say about stabilize in September.

That was a positive note.

The other thing that's very positive for us going forward for the sales team is to sell our message because they're calling on more primary care physicians and those who see people with type two diabetes or prediabetes for our audience on that Stella message brings loud and clear.

It offers these physicians a great opportunity to enhance that care model for their patients and also enables those physicians to see if, in fact, it's a more severe patient that they have access to the J series at the end of that, with this momentum, we feel real good about the implied sequential growth in the fourth quarter and the U.S. because it's higher than what we've had in the past, and that's even without a seller attribution.

So we feel very good going forward, Danielle, into the rest of this year rolling into 25 based on what we saw as the quarter finished.

And your next question comes from the line of Larry Biegelsen with Wells Fargo.

Your line is open.

Good afternoon.

Thanks for taking the question of Kevin.

When we aggregate your Q3 results with Abbott, it looks like the U.S. CGM market slowed to about 10% from over 20% in the first half of this year and high 20s before that.

So there's still concerns that the CGM market is slowing.

Is the 10% or so much market growth in Q three, but good number going forward.

Are there one-time items in the third quarter that you think depressed the market banks?

I believe in general again, our next call it a channel mix shifting and things of that nature.

So we believe that our numbers are lower, like we said, based on our execution that we need to make better and the things we just closed last time, we're still very bullish on the category where we believe the market can grow faster than that going forward.

And we want to get back in basal coverage is still early on and we have many other people on intangibles, someone who should I use CGM.

So there's plenty of market to go after.

We don't believe it's just a 10% grower.

Again, when you add the two of us together, that's where we are.

But we believe our performance for pickup going forward.

And your next question comes from the line of Matt Taylor with Jefferies.

Your line is open.

Thank you for taking the question.

I was hoping you could help us understand or benchmark your progress a little better versus some of the things that you said in Q2, like you still expect to get the same new starts in Q4 that you did before.

And can you talk about weather?

Do you think the low end of the long-range plan is still in play 2025?

Yes, sure.

Thanks, Mike.

And I can answer those.

When we talked last time, we talked about a few things that we expected to play out.

one was we saw that we were a little bit behind in terms of the productivity on the sales force.

And we were a bit behind where our new patients for and we said we were going to be about three months behind.

And I think you're seeing that play out.

And so when you look at the performance this quarter, record new patients in the third quarter, I think you're seeing us perform that way.

And we expect obviously, to do better in the fourth quarter as we get more and more effective over time.

Now we said we were about three months behind.

And so we won't necessarily be where we initially thought starting the year, but we are in line with the guidance we gave last time we spoke and we're making progress, as we said in terms of the long-term guide, I think you heard in my comments, we're on track to hit our long-term guide.

We said basically we are on track to hit our 4.6 billion in the same margin targets we gave based on what we're seeing in the business today, which is obviously recommendations this quarter, stability in that DME channel, some of the productivity, of course, in the sales force, certainly outside the U.S. use our international results accelerate a little bit and we have more more more opportunities opening up over the course of this year and into next year.

We feel good about where we're going and we haven't really talked about stellar USD is going to be a real interesting opportunity for us going forward.

We got a couple of months under our belt, great progress to date and looking forward to sharing more more as time moves on with Stella.

And your next question comes from the line of Jeff Johnson with Baird.

Your line is open.

Thank you that SG&A as a mini to follow or a two-parter, if I could just first question, just as you talk about the record new starts in the US, is that with or without Kellogg's, appreciate understanding that I and then is kind of tie into that.

You don't with volatility last quarter to ensure my patient model is off a little bit.

When I look at at least what my model spits out, it's healthier patient volumes in the US, your installed base I'm sorry, in the US is probably up somewhere around 27, 28% year over year.

This quarter you did the negative 2% U.S. revenue growth.

So I guess I'm is there any way to help us bucket tend to that 25 to 30 point spread between what I think you evolve your installed base grew in the US and what your revenue grew?

I know you I know you talked about the six points of headwind from rebate.

Is there anything else to help us kind of bridge that 25 to 30 point gap?

Thanks.

Yes, I can take that.

So first off, record new patients is does not include Stella.

So we're excluding Stella.

This is really our G series, large D series are called our insulin product base like for like apples for apples record quarter.

So hopefully that gives you some context there in terms of where we're going.

While we're not necessarily giving our patient base, I think we gave a patient base last quarter and that really implies mid 20% growth in terms of that patient base.

Now in the current quarter, Jeff, we are we are seeing a little bit of the kind of the Q to come performance rolling through in the third quarter.

And so as you as you know, as you think about patient starts, you know, the big the big kind of tie in between both patients and unit volume, you really feel it in the subsequent quarter.

So if you think you know, 25% at last point, we gave it a little bit tighter than I think your models implying.

So it's not too far off, but it's tighter than that.

I'm in terms of the year over year over year delta, certainly you've pointed out rebates.

The biggest piece that remains between the two is where folks are getting their product.

And we talked about losing share in the DME in the second quarter and to a lesser extent, some here in the third quarter.

While the majority of the new patient starts were going through the pharmacy is that delta takes place over time.

It creates a widening of based on the channel that we've historically seen.

Now as that stabilizes, we expect that to start coming closer over time.

But that's the reason why you see that our unit volumes are still strong as an organization.

We're still excited about this over the longer term, but we needed to navigate through the stabilization of those I think you saw in the third quarter.

So hopefully, that gives you some context on the model big piece if it's going to be that channel shift in addition to rebates, but predominantly channels shipped.

And your next question comes from the line of Robbie Marcus with JPMorgan.

Your line is open.

Okay, great.

Thanks for taking the questions.

I guess question I wanted to ask in the DME channel, it sounded like you've stabilized your position there.

I was just hoping you could give us some more detailed look as to what exactly you're doing there is price effect or how are you changing the relationships?

And is it unreasonable to think that you could get back to where you were in out two, three, four years ago with your standing with DMAs or should we think about just gradual improvement?

Thanks to that.

Yes, this Kevin, I'll take that some of the actions we put in place.

First of all, we obviously have met with the leadership of all those companies and listened to them and and heard what they had to say by and large, these partners has served us well.

And as far as getting elongated, we do very well where we disrupted the applicant.

Robbie, again, as relationships in the field where we changed literally every single sales territory, the DME rep relationships were lost frequently between our rep in their territory and the DME rep and the corresponding territory.

In addition to that, with respect to channel balance, what are the things we learned to?

one of the perceptions of our DME partners is that we were not balanced that if we had an opportunity center, many of the drug store, we send to the pharmacy immediately without checking the DME channel.

So we've had now encourage our team to be a lot more channel agnostic.

And if there's an opportunity go to DME and it looks like that's going to be very good alternative for our patients will pursue that opportunity for those patients and put more business in that channel.

Vixs ag partners in these companies, as I've spoken with them, my conversations about centered around prices, turnaround volume.

Let these guys why as more patients with to get more prescriptions when you get a more prescriptions center that channel and we need to get more prescriptions referred to us through that channel, as we said more there, why we're confident we'll get more back the other way, as we said last call, and I'll say again, while we think we stabilize this again, technical Alphaville backup is going to happen overnight.

And so we but we needed presence in the time to market as well because many of these patients are Medicare Type two patients.

And we have been calling out a lot of the physicians in that primary primary care communities, served them at all those pieces backup.

We think we've taken very good steps to shift and the other direction.

We've taken very good steps to get more referrals to put it into the pipeline and serve our customers, and we believe we're on the right track.

one of the other things we've done by the way with our JV partners, as we talked about in the call, we've offered them stellar patient.

They may not be on ancillary.

You have other medical conditions by offering Stelara, these guys they have an opportunity to market and sell to their very large patient basis even outside of typical diabetes therapies with respect to their health.

So we're looking forward to them being a great additional stellar distribution channel for us as well.

And your next question comes from the line of Joanne Wuensch with Citibank.

Your line is open.

Good afternoon and thank you for taking the question.

And congratulations on submitting the 15-day G7 to the FDA.

Could you please give us a little bit of an update on your thinking as number one, the timing of when that might be approved?

And number two, what you think financial impact will be as we think about our 2025 members?

Thank you.

You know what?

I'll start with approval timeframe.

We have been at it and we think it's a very good filing that we won't go too far as far as speculating on when they're going to approve our filing.

Conversely, we did submit his fellow filing with the 15-day product that was very clean with very good data and got it approved very quickly.

We would love a fast approval here.

And as far as 2025 impact, a lot of that will depend on launch timing and how long it how long it takes us to roll through the customer base.

And we'll give you more color on that as we go.

I'll let Jeremy talked about the financial impact.

Yes, obviously, Joe, and you know, this was really really well as we as we speak.

To go into some of these contracts where it's a monthly fee, that's going to be a big opportunity for us.

As of right now, we talked about our long range plan guide in 2025 and 65%.

And that's where we are that all being said, we know this is an interesting lever.

And so we'll give you more clarity as we start to roll out commercial plans on when we expect those levers to be in the business.

But nothing more exciting, as you can imagine, at least in my world of having this opportunity to lever through the business and we're really excited about as well.

So I think the thing we talk about those investors is gross margin, but there's also customers who are really looking forward to the longer extended wear period.

And that's another great thing that we're going to offer through this product line, things coming fairly soon.

And your next question comes from the line of Michael Pollard with Wolfe Research.

Your line is open.

Good afternoon.

My question is on opening stellar DMEs and doctors directly had been working under the assumptions fellow in the U.S. would kind of go for your lowest price point?

Yes, $100 per patient per month.

1,200 a year.

And now if you're introducing a channel and dairy, these folks have to earn margins.

So can you help me just understand how you're going to price it with DMEs and and doctors and, you know, two, three years from now, how much is still low?

Are you doing direct versus through these partners in your mind?

Thank you.

Yes, it's a fair question.

We've always And first off, you know, really appreciate your note on Stella pump earlier.

I thought it was it was I'm glad you're wearing it and really appreciate you going through and doing the comparison there.

In terms of in terms of how we're thinking about partners, you know, we always have thought about partners and whether those printers are DME providers, orders or bulk purchases or other forms and other different distribution channel.

And you can imagine we're looking at they've all been part of the long term contemplation of in terms of how we then think about that and how that runs through the financials.

Remember on stellar.com, we obviously bear a lot of the commercial work shipping work.

All the work takes place associated with that.

When you go through partners on some of that OpEx goes at some of the shipping costs ultimately accrue to the partner as part of the fulfillment and part of their work going on.

So when you think about it, we will be pricing.

Obviously, they have to get a margin on it.

And so we will be pricing.

And accordingly, at the same time, the cost to us is incredibly low.

And we ship in bulk and we go from there is not too dissimilar from the economies of scale that we saw going into the pharmacy channel where we knew that he can be it's a very efficient model.

So I think you can expect to see that over time, you'd expect to see it as we look at other channels, even beyond those which we're working on as we speak.

So it's always part of the plan, but still.com will always also be part of the plan.

And so I think you can imagine we have a few different opportunities, all of which are crew, I think, down to the bottom line.

But bottom bottom line operating margin in a very similar manner.

And your next question comes from the line of Mathew Blackman with Stifel.

Your line is open.

Good afternoon, everybody can hear me.

Okay.

Yes.

Okay.

I'm curious just how you're thinking about competition Type one sort of pump integrated segment and particularly next year when there's can be more competition.

And what I appreciate you probably don't want to be too explicit, but how are you going to defend your position there?

You considering doing head to head studies?

Really just trying to understand what the messaging is going to be to physicians and patients when there's another sensor option out there?

Probably sometime next here.

Thanks.

Well, I'll start every study and they say ID system has been done with the Dexcom sensor.

So there are in a head-to-head studies.

They've all been run with Dexcom at least with our pump partners, and that's the data they published for their time in range.

Look, we serve, you know, several hundred thousand AID. system users right now, and the results of those IAD. systems with our partners have been incredibly good.

We were very closely with them on a regular basis to talk about the new features were about to bring on board.

We update our hardware and our app experience, our interfaces with them on a regular basis to enrich the experiences of their customers.

And we believe we do that better than anybody else builds over time.

Our reputation in this market and one of the places we've been always strong as in this Type one market because that has been where we have had the largest market share advantage for very long time, and we intend to maintain that through the higher quality of our product.

And at the end of the day, it matters.

The accuracy of DexCom is tried and trusted and proven to these patients.

I've been to several that's kind of diabetes fundraiser season.

I've into a few fundraiser things that I've seen numerous Omni-Path and Tandem users who are now using G7.

Certainly the tenant ones for me on the bonds are starting to switch their their belief index comment.

Our centers is incredibly, are warming.

And it's very important to say that as a great customer base for us and we'll continue to serve.

At the same way we always have.

And your next question comes from the line of Travis Steed with Bank of America.

Your line is open.

Thanks for taking the question.

I wanted to ask on the 2025, how you're thinking about the US recovery in that 25 at the US is back to double digits.

I don't know if there's any first half, second half comments you'd like to throw in and any rebate eligibility in 2025.

And I don't know if that includes fellow or not.

Just curious if I want to reiterate that stellar guide for 24 plus some color on that yet either.

Sure.

I'll give you some of the commentary.

So certainly assumes a stable market moving into 2025.

So stable adoption, stable penetration trends moving from 24 to 25.

It also assumes stable, not necessarily winning share back, but stable trends through the DME share and then certainly us continuing to do well.

Retail channel, which we have seen seen over the past quarter.

We expect to see for the rest of the year.

It does include Stella and we've can we've considered a bunch of different ranges opportunities.

You can probably imagine, given we're only a couple of months into launch, there's multiple different opportunities and ranges.

Kevin alluded to two different channels we're launching right now across both DME and bulk.

And you can imagine there's a few more channels will be launching here over the coming months.

Which were all really excited about and going into a holiday season.

And those will be a first ever USOTC. holiday season with was a stellar job out there.

So there's a lot of things we're going to learn over the course of the range stability in terms of what those numbers aren't felt good about the $4.6 billion number.

And so that includes all of that.

And so hopefully that answers the question, of course, we'll give you some more clarity by quarter as we get into the end of the year.

But you can probably imagine just given comps what you can do the math on what the comps would look like.

And we obviously have a little bit more challenging comps in the first half capital, the easier comps in the back half.

Certainly as we're talking about Q. three, but nothing funky there.

Just just naturally lapping comps.

The rebate question, you've got your our percent, correct hundred percent rebate is assumed.

And so you won't necessarily have that had been.

And your next question comes from the line of Marie Cable with BTIG.

Your line is open.

Good evening.

Thanks for taking the questions.

I guess I wanted to follow up on the rebate sharing.

I think I heard maybe I missed it, but I think I had a six points of impact the growth in Q3.

What's being assumed in the Q4 guide for four points of impact from the remaining share?

Yes, it's less than that.

And so I think that number was going up as we moved into Q4 of last year.

We don't have an exact number to give in that guide.

Obviously, we generally don't guide to specific items like that, but it won't be six points.

You'd obviously peaked in Q three.

It's going to be less than Q4.

And so I think you can you can safely assume that again, haven't given a specific number yet, but again, at the models are you'd expect that the ASP.s would be pretty consistent moving in from Q3 to Q4 because we do have them at 100% rebate rate.

Your next question comes from the line of Matthew O'Brien with Piper Sandler.

Your line is open.

Good afternoon.

Thanks for taking my question.

And maybe just to follow up on the 25 outlook, Jeremy, you know, 4.6 billion that's about, I don't know, something like $500 million of growth absolute year-over-year.

You've done that before.

You would have done that this year without the mix headwinds.

But this time around, you're going to be trying to do that kind of growth with no patients that maybe are going to use products, much, Basil fellow, et cetera.

So how do you kind of deconstruct getting that kind of absolute growth next year on top of the fact that you're going to have some competition on the pump side of things?

And then maybe a little bit of price on the DME side of things.

Thank you.

Yes, sure.

And I think and appreciate the comments.

Certainly, you know, StellarOne when we've always assumed that and in our modeling is you're not necessarily going to have the same retention utilizations Dello, but still it was a brand new category for us.

You got to remember the comps relative to next year to this year are certainly different.

As you step back and you think about a record new patient quarter this quarter, and obviously, I'm as our sales force continues to get more and more productive, you're going to expect to add more patients next year.

So when you think about it in terms of just net absolute dollars, when you say well, gee, there's there's new patients added record new patient in our core insulin business.

I mean, as that rolls forward and more access opens up your going to have more opportunities there.

And so I would expect that as we moved into 2025, on top of that, you're going to have a new product launch and stellar in the US that can also contribute as well.

So when you think about both of those, you're not wrong in the sense that Stella utilization and retention should be lower, but it's going to be against the backdrop of really no revenue in the first half of the year.

Is it only partial revenue here in the third quarter of the year.

So hopefully that gives you some context towards it oftentimes the growth of the overall business.

And that's why we as we've gone through it, we felt good about reiterating that LRP by.

I guess the other thing I'd add, Jeremy, we have a 15-day product to launch in 2025 as well, which we believe will have great, albeit great revenue enhancer for us.

Your next question comes from the line of Bill Plovanic with Canaccord Genuity.

Your line is open.

Great.

Thanks.

Good evening.

Thanks for taking my question.

Just on a fellow, I think the original guide was 40 million this year to see whether it be diagnosed prediabetes, your take two in transferring to the G7 product and if so, kind of what are your kind of expectations for that as well?

Yes, this is Kevin.

I'll take all of those.

I don't know that we've necessarily seen a lot and I mean, we've heard some anecdotal stories, but we haven't seen a massive trend of people diagnosed.

But what we have seen is as our reps have gone into primary care offices with the seller message, we then find out they have people with diabetes who actually have coverage G7 and they can get one that's reimbursement insured.

So that has led to much better and much more positive conversations with our sales force as we go into new offices, we believe that's a trend that actually could play out very well over the course of the year.

That's why we designed this and as experience for those with pre-diabetes and type two diabetes, now that answer, but rather than Australia, health and wellness play, we felt that was the most lucrative market for us to go after first basic because we could migrate those patients to reimburse solution over time.

I do have diabetes with respect to our revenues for the year, we'd projected 1% of revenues and that we can extrapolate that $40 million.

Our goal and launching Stella this this year is to learn whether that's 30 million or 40 million.

And most important thing is that we learned what to do.

Our learnings have been spectacular.

Amazon Fulfillment was the first big learning of several people.

I talk to order the first day.

We put it on the market got with the next morning.

We've never experienced anything like that a DexCom at the same time, as I said in my prepared remarks, we've had positive feedback on the app.

We've had positive feedback on the website.

We have also had some things that we've been told we can do better with respect to our customer service model is a lot of these people have never interfaced with a product like this.

We will learn as we go to more distribution channels and we get again to a more diverse group of people over and over again, we've got a base right now over 70,000 users on our product.

We launched a couple of months ago.

That's a huge success for us.

As far as we're concerned, we've given our guidance for the quarter.

We reaffirmed at seller right now for us as a huge success.

And we are really looking at things we can do to enhance the experience of those users going forward are to make it more sticky and to add more.

So, so far, so good with Stella, we're very pleased.

Yes.

And your next question comes from Jayson Bedford with Raymond James.

Your line is open.

Good afternoon.

I have a few questions that require short answers.

I just wanted to come back to the new user add commentary just for clarification.

And this was a record for 3Q or any quarter.

The comment apply to both US and international and have you seen any notable change in attrition?

Thanks.

Yes, it's a record for any quarter, Jason.

We generally don't break out US/OUS, but it's a record for any quarter, not three Q, but any quarter in terms of in terms of attrition, we haven't seen many changes in attrition by category.

So we've generally talked about the bands where you have insulin intensive users had traditionally stayed in a band.

You have the Basil user that traditionally stays relatively close and they're kind of clustered in their into that same band.

And then we we all know that the non-insulin user tends to be in a band of its own.

Those continue to remain very similar.

Categorically.

And your next question comes from Joshua Jennings with TV Cowen.

Your line is open.

Hi, thanks for taking the question.

I just was hoping you could help us think through the risk of persistent channel mix shift from DME to pharma with to pump players looking to access the pharmacy channel for their own products.

I guess a two-part question is what I mean it is the Omnipod five share gains and and that access through the pharmacy channel and driving from the mix shift you're seeing, do you think it's a risk that these other two players are going to be accessing the pharmacy channel over the next 12, 18, 24 months?

Thanks, Juan.

This Kevin, I'll take that, Jeremy.

You can add to my comments when I'm done, we've seen such a major shift of our volumes to that pharmacy channel, particularly on the commercial side, where many of these pumpers reside that the DME commercial channel is not near as large segment for us as it used to be the majority of our DME business, certainly as and Medicare and then the government channel greater spend another see distribution in the pharmacy channel.

We're well positioned to serve that.

If we can get again, as long as we're channel-agnostic and our users can get their product where they want to and get it in a manner that is efficacious for them and have a great experience.

We will remain channel neutral on that front.

Yes.

And just as a reminder, the Medicare fee for service channel, i.e., the non Medicare Advantage channel is reimbursed to be a part BIE. DME.

And so it won't necessarily shift to the pharmacy anytime soon.

So there's a certain limitation on what you could expect even within the DME channels because of the reimbursement schemes as they exist today.

So hopefully that's helpful.

At least in thinking about the persistence of any sort of change there.

And your next question comes from the line of Shagun Singh with RBC Capital Markets.

Your line is open.

Great.

Thank you so much.

So I just given the leadership transition in the US, can you talk about your confidence in the commercial strategy getting into 2025?

And then more specifically on Stella, what's your plan for accelerating this plant in 2025?

And then on the GE 15, G7 15, the center, you know how you're preparing ahead of the launch, including with respect to supply.

Thank you for taking the question.

Okay.

Let me start with the 15-day product.

Again, this will be manufactured on our current manufacturing lines and put together with the same way, the current 10 day product is manufactured.

We already manufacture a 15-day product and our sale of product.

So we're not concerned about having the capacity to build the 15-day center.

It's a question and when we turn on and how much inventory we billed in advance of what markets we serve with that product with respect to sell an expansion, a couple of things going on there.

Number one, we have a number of scheduled enhancements to this fellow app over the course of 2025 and even through the course of 2024 to make this a much rich your experience for those who use it.

So you'll see a steady stream of things come with fellow.

And also again, Jeremy and I both talked about the additional distribution channels where that product can be very well positioned and sold to potential.

So end user sales, distribution channel expansion.

Remember, our US sales force is only have one sales cycle to talk about several and offices yet.

They will continue to talk about that in office system will get more and more coverage there.

With respect to knowledge on the physicians part, over the course of 2025, familiarity will breed growth.

And we've got to get that message in front of people more than once we get them to go there.

With respect to the commercial change, we'll miss Terry.

She's done a great job here for the same time.

We have a lot of good leaders in this organization.

As I said earlier, I've spent quite a bit of time with the heads of sales and marketing report to me directly for a while before Terry came.

So I'm familiar with this, and we have a great team of leadership that the company, and we will quickly find a new chief commercial officer to add this group.

At the same time, I'm not concerned about the leadership of our U.S. team.

They're very, very good and very strong and very experienced in the industry.

We will we will work very hard at this point.

We're fine.

And your next question comes from Chris Pasquale with Nephron Research.

Your line is open.

Space.

I want to ask a couple of questions about the 15-day sensor.

Jeremy, are there any incremental costs associated with that product or a scale?

Should it has the same cost profile as the current version?

And then I know you guys ticket time moving that forward because you really wanted to optimize durability.

Do you expect the survival to footwear time to be similar to what patients are experiencing today?

Yes.

So I'll start with the second one.

We expect the durability to 15-day to be to be solid and we wouldn't was a solid, obviously any and additional data where a sense are you always run into more risk in channels, but we got it to a point where we believe the survivability is going to be very well received by the community.

And so that's the work that's the expectation as it launches.

In terms of the product itself, the standard cost really doesn't change at all, certainly will be mindful of some of the changes we're making across the board in terms of just adhesives and things that you're already seeing starting to play through our product.

But the standard cost doesn't change to the extent that we add a little bit there for warranty here and there just because what can go wrong over five more days, however, knocks off an arm or are you just split it out?

We'll always be mindful of those types of things.

But the standard caution change too much of there's real opportunity here for us for us.

And your next question comes from Mike King with Leerink Partners.

Your line is open.

Hi, everyone.

Thanks for taking my question.

To what extent did you benefit from competitor CGM shortages towards the end of the quarter in the US?

Can you help quantify how much of an impact this may it had on your US growth into the queue, if any?

And is your current revenue guidance assume any potential contribution from that dynamic in 4Q?

Yes, we had heard about some of the disruptions here and there and at the end of the day, you know, everybody goes through these types of things.

What we ultimately expect at the end of the data you have to write a script when you write a script has to be branded.

And when you write that script, you ultimately go fill it.

And so we didn't necessarily expect that we didn't see anything necessarily changed or what we really saw was our sales force getting out there and getting more interest in DexCom.

Obviously, you know, um, folks go through these these challenges and they come and they go.

I don't know that have changed all that much out of that change our trajectory.

I think what you really saw was we're seeing it in our metrics is our sales force has done a really nice job bringing in new physicians and really getting the message in front of them in conjunction with both RG. seven as well as fellow.

That's what you saw.

Can you.

Our next question comes from Matt Miksic with Barclays.

Your line is open.

Matt, please check your mute button.

Hearing no response.

We will move to our next question from Steve Lichtman with Oppenheimer.

Your line is our plan.

Thank you.

Hi, guys.

You talked about part of the improved international performance in the quarter, coming from the turn in Japan.

As you guys took over looking into 2025, you talk about what you see is the biggest drivers internationally?

Yes, this is Kevin.

All stores.

We've opened up a tremendous amount of access across the world over the past several months.

I said in my prepared remarks, for example, we just launched DexCom one in France in October where reimbursement is now have enough and we have access to 600,000 more individuals in Japan.

There's access to a main individuals.

Both of these markets include basal insulin as well.

We're seeing access wins in several of the EU markets that are more mature on the Intensive Insulin side, particularly with respect to type one opening up access slowly to Basil patients and having disposal opportunity come forward.

Additionally, a lot of these markets don't even access intensive insulin use for type two patients and access is coming there as well.

So access will be a big driver in the markets that we serve more than anything else over 2025.

And your next question comes from Patrick Wood with Morgan Stanley.

Your line is open.

Brilliant.

Thank you for taking the question.

Just curious for the for the record new stops and just what you think the business overall, if you could give any qualitative commentary between what you've seen with in type one versus type two?

I know stellar mixes that up a little bit, but just the kind of the source of growth than others.

But those markets split out of that and you know what the record new patient starts excludes develop.

So I think it's helpful to know that when Kevin alluded to 70,000 folks using Stelo, that's not in the numbers.

We're quoting around record new patients.

And I think what you saw, I think what you're seeing now is continuing to see a pretty robust adoption really in all categories you're intensive.

Insulin continues to lead the way across T1 and T2 and intensive insulin, and we expect that that coming into the year.

But Basil continues to also be relatively strong.

And what you're seeing more and more of as we deep dive deeper dive into these physicians where a lot of Basil patients are seen, that's where a lot of work was taking place over the course of the third quarter in terms of getting on getting back to productivity and you're starting to see more and more of that.

So it's really broad-based across the insulin using population.

You are seeing a lot of nice uptake in the non-insulin and health and wellness population and stellar, but that's not an inclusion.

Our record new patient number.

And your next question comes from PC Kirby with Redfern Atlantic.

Your line is open.

And good evening.

Thanks for taking my question.

Appreciate any near complements influences panels that with Last of all, I mean, any insights you have around we ran returned to normal?

And also any further color you can get on with hands and reliability of the products?

Yes, this is Kevin.

I'll start with that.

With respect I said earlier, 50% at least 50% of our individual signed up on the subscription model and reordering has just begun.

We're happy with the reordering rates right now.

So that's going very well.

But it's our release.

We have more to learn there with respect to retention and with respect to reliability and customer interface, this has been great for us.

We have a completely different service model with fellow with what we can sell about online.

And we've learned a lot through that.

We've learned just some things we can do better than we've learned.

There are some things that worked very well.

We're trying to develop a much more efficient, easy service model for these customers.

Just given the nature of this business and things we can learn and apply to our core business later on as we hear from these users, we are learning also that a consumer market has different expectations for glucose sensor than somebody who has intensive insulin therapy.

Somebody on intensive insulin therapy knows that physiology comes into effect from time to time.

And this sensor may turn off at seven days, just say that this doesn't work anymore, but they depend on that sensor for their life.

So they okay turned off at seven days.

I can deal with that.

We'll in your consumer and you buy as fellow and in terms of seven days had just paid for this license turning off at seven days.

So we are learning how to deal with that patient and that individual that customer to create the proper experience.

That's why I said earlier, the most important thing of the stellar launches that we learn that we learned a model that will delight our customers when they use this product that they choose to use this product three or four times a year, then let's make sure we create an experience that is delightful three or four times a year.

If we do a good job, hopefully we can keep on the product all the time and have continue issue.

Is it still early to tell how usage and retention and all that's going to be because we're just a couple of months into the launch now, but we're seeing reorders.

We're seeing people sign backup on subscription to get more at a rate that it's very, very good with respect to our expectations.

And your next question comes from Margaret Kaczor Andrew with William Blair.

Your line is open.

Hi, everyone.

This is McCauley on for Margaret.

Thanks for taking our question.

Just a follow up on some of the earlier questions on the LRP.

You previously mentioned I call it 70 30 U.S. OUS sales split out.

Does that imply a larger U.S. contribution now in order to hit the low end at the 4.6 billion?

And maybe just to follow up on the 15-day durability.

So I think achieved the roughly 80% in the studies.

But how does that compare to what you've seen in the first couple of months with the launch?

And any commentary on at the 15-day G7 was able to exceed that?

Yes.

So I think, um, in terms of the LRPE., as you're thinking about the splits, the splits are roughly that.

I mean there there's a lot that goes on in terms of what those numbers are, including now the new Stella product.

And so we'll see.

What I would say is, as you're thinking about from a growth rate that expect the international business to continue to grow based on the trajectory you're seeing today, any additional wins to continue to do well and obviously, the U.S. to do well as well as we stabilize our core markets and obviously stellar jumps.

And so it's in the general seven to 30 ballpark.

I wouldn't draw that necessarily 0.0 lines and get overly overly stuck up on that.

But in general, that's the splits we expect in terms of how you're thinking about Stelo, it's lasting how long it lasts.

What we are seeing is quite quite a few centers.

Most centers lasting the 15 days.

We're seeing the performance in the field mirror that of which we've seen.

And obviously in our submissions, it's interesting, it is more and more people learn how to use the product and it becomes more and more familiar.

You see those numbers go up.

So you might have seen in the first couple of days folks on unsure of how to use the product may be applied in appropriately applied to the wrong place.

And we ultimately they we ultimately had to make sure we navigated through some of that education.

But we're looking at centralized and we're seeing sensor light lasting out to those 15 days and seems to have got a pretty common clip.

So we're very excited about that.

Obviously, with the G7 15 day, we got to a survival rate we felt good with.

And so you could imagine some as we're submitting that a number that we feel good with just like we feel good with the stellar number.

We'll wait to give more data on that as that data becomes available through our submission and hopefully approval here in the near future, you guys will see it on, but we are comfortable with what we had in terms of survivability and that submission.

And we have no further questions at this time.

I would like to turn the call back to Mr. Kevin Sayer for closing remarks.

I would just like to thank everybody for participating today and we'll talk to you again at 1st of the year.

When we start providing guidance for 2025.

Officially have a great winter, everybody, and we'll talk again soon.

Thank you.

Ladies and gentlemen, this concludes today's conference.

We thank you for participating.

You may now disconnect.

To me.

I mean, thanks.

Thanks.

Thanks.