Beta Bionics, Inc. (BBNX) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us at the Bank of America Healthcare Conference. Next up, we have Beta Bionics, CEO, Sean Saint; and CFO, Stephen Feider. So thanks both for being here.

Great to be here.

Good to be here.

Everything good. Okay, so since you just reported Q1 last week, maybe that's a good place to start with an overview of the quarter. Q1 was strong with a 9% revenue beat, and new patient starts beat our expectations by about 450 patients. So maybe just talk about the overall strength and what's driving that?

Yes, I guess a couple of things. I think that the -- you kind of highlighted some of the financial characteristics that we're really proud of. But I think the one thing you didn't say that was a really good thing that happened in the first quarter was that we saw a lot of adoption in pharmacy. So we gave guidance at the prior earnings call that we were going to do above 20% of our new patient starts in the year, in pharmacy. But in the first quarter, we actually did a low 20s percentage. So that exceeded our expectations, and we called up our guidance for the year for pharmacy reimbursement. And just to remind you guys, you probably know this, but pharmacy reimbursement is a subscription model. What it does is allows us to generate over 3x the amount of revenue per patient over a 4 year period than what we see in the DME model. And so we've put a lot of thought into that strategy. And that traction, I think, is something that we're proud of, and got us off to a good start for the year. But other than that, I think you highlighted some of the main efforts.

Yes, the pharmacy adoption was really strong, and definitely want to touch on that a bit more later. But I think you also highlighted just some of the new product launches, driving momentum, and the sales force. So yes, maybe just talk about some of those new products, and the productivity ramp in the sales force.

Well, interestingly, iLet is still a new product, right. We've been on the market for a couple of years now. It does represent a fundamentally different option to insulin pumps. It's a different way to think about it, a different way to set up the product, different way to manage the product. And we are still seeing additional understanding from the healthcare provider community on exactly what it is that we're offering. It is natural that early in the product's life cycle, we're going to be compared directly on outcomes. And I said in the earnings call, outcomes are table stakes. We're proud of ours. You can look at that in our clinical trial. You can look at that in the real-world data we've published, but it misses the point on what we're really selling, right? We're really selling a different experience of insulin pumping, and that's a harder thing to explain, and we don't have the metrics for that in our clinical trials, nobody does, because it's so hard to -- I mean, of course, we have patient satisfaction scores and all that, and they're great. But we don't really have that metric to capture how many decisions you had to make during the day, how many times you worried about your diabetes, how many times you were frustrated by it. And those are the things I think that are starting to catch on, and the healthcare providers specifically starting to understand that, as our patients have come back and reported their experiences on iLet, on a personal basis to their own physicians. So in that regard, I would consider iLet to be a new product. That being said, in Q4 of last year, we launched Libre 3 Plus, we launched Color iLet, we launched our Bionic Circle app, which is ability for parents or caregivers to follow the outcomes of their loved one remotely, which is extremely important, especially for parents of kids with Type 1. And all those things are seeing continued traction, and there are certainly tailwinds for us in the market today.

Did you mention Libre 3 as well?

I did, yes.

Okay.

Anything you wanted to add on Libre 3 or.

No, I thought he didn't mention it. But no, that launch has -- I think we were the first ones in the U.S. that had that integration, and it's an advantage for us.

Yes. And then maybe just follow up on just the broader adoption. Now that you're at 63 territories, the awareness of iLet is getting out there more. Has there been any change in what you're seeing within your prescribing doctor base, and how it's being used or how penetration is moving with those doctors?

Well, I'll take the first part of that, and maybe you can take the second part. In terms of how it's being used and why it's being used, I think that kind of gets back to my answer on the first question. Yes, it's evolving. It has nothing to do with our new sales force, but it will naturally evolve over time. We are doing, I think, a good job and a better job than ever. It's not a new product, but it is something we launched in the latter half of last year is, again, as I mentioned on the earnings call, the ability of our sales force to go out and show a doctor, particular patient cohorts moving from where they were at baseline when they came to iLet to where they are today. And those graphs always look like -- kind of like describing that well -- they look great. And that's been impactful at some level, helping us get that message out about the outcomes portion; combine that with the other part being patient experience, that's important. So that evolution is absolutely changing prescribing patterns, but I don't think it has a lot to do with the new sales force metrics or dynamics. Hopefully, you can cover that part.

Yes. Look, we were the fourth pump company to market in the U.S. And so doctors had familiarity with prescribing insulin pumps, of course, but they had set patterns for their behavior. And when we were the new pump on the market, we needed to make an impact that clearly communicates -- clearly communicated and continues to communicate what our differentiation is. And so that's the simplicity of the product, but also doctors are also semi-skeptical until they see the clinical results that the product is actually doing well in their particular population. So Sean just mentioned that we have this really great mechanism for capturing the clinical data for a given practice that we can communicate to the doctor, but that does take time. Doctors prescribe, say, a certain amount of the iLet for their patients that they think it would be a good fit for. It demonstrates great results. And as Sean said, those charts always look great. And so then the patient comes back -- sorry, the doctor then sees how the product is doing, we then continue to coach them on how their patients are doing on the iLet, and then their behavior, they start to prescribe it to a wider group of their population. So that process takes time, and we're still semi-new. So yes, we have 63 territories, but 20 of those were added in the first quarter of 2025. They made no impact on our revenue in the first quarter. And many of the 43 are actually still relatively immature, because they're in that stage of doctors learning about the iLet, us showing the clinical results, and then upticking their prescribing patterns. So I like the position we're in commercially, because I still think we're new and highly differentiated.

And then on that point, just to follow up on the rep productivity. I guess, do you have a sense of the general time line of how long it takes them to become more profitable? Like when do the 20 that you added in -- or productive -- sorry, the ones added in Q1, when do you start to see contribution from them?

Yes. So we have been around long enough for me to have a very good understanding of what the productivity is like for a given territory. That said, I'm not -- and so I know like terminally what a sales rep kind of generates in terms of the number of iLets that get prescribed. But I won't share that metric or the time line. I think it is sort of important information for us to just understand about our business, but not to share publicly. So I apologize if that's frustrating, but I won't share.

Yes. No. Understand.

In terms of the 20 territories that we added in the first quarter, however, like I said, they weren't impacting our Q1 revenue at all meaningfully. It was an immaterial amount. But we will expect that they will start producing results for us in the second quarter, and then grow from there.

Got it. Maybe just to touch on the revenue guidance for the year. You raised the guide by the $2 million beat in Q1, and now expecting revenue between $82 million and $87 million. And you mentioned you also increased the pharmacy adoption expectations for the year. So maybe just talk about the different puts and takes on the guidance from new patients, but also the increased pharmacy mix.

I may look like I'm going to answer that question, but I'm not oddly. But maybe you could additionally hit the interplay of those 2, and now that's making it harder on us.

Yes. So what Sean -- I'll start with what Sean is referring to first. So we increased our guidance for the percentage of our new patients that are going through the pharmacy channel. What that does is it actually, we don't generate a large upfront payment on the pump itself on day 1, like we would in the DME channel. So what that means is by raising the revenue guidance for the year and raising the pharmacy guidance, we're actually indicating that we're expecting a large -- a meaningfully larger number of new patients that exceeds the percentage increase in our revenue guidance. What are we seeing, though, that gives us this confidence? Number one is the pharmacy channel does actually make it easier for patients to get the iLet, because there's a lower out-of-pocket cost. So it goes from roughly somewhere in the neighborhood of $1,000 upfront payment for the iLet and DME, now down to $300 or near $300 in the pharmacy channel, to get started on the therapy. So that actually creates momentum for new patient starts. So the pharmacy mix is a big impact there. And then look, we're just seeing momentum like from the Type 2 population. I think what we said recently is that over 20% of our new patients in the second half of 2024 were Type 2, and 20% to 25% of our patients in the first quarter came from Type 2 -- sorry, that's for -- what did we say again?

We said 20% to 25% in Q1.

20% to 25% in Q1, yes. And so that's created a lot of momentum for us. And then just the productivity of how the product is resonating within accounts, and some of these new product launches and the impact they're making.

Stephen said something there about the pharmacy channel being easier, and a benefit to patients and it most certainly is. And I just want to dig into that for 2 seconds and say that there's a very good reason that we talk about a percent of our new patient starts coming through pharmacy. And that is because that is the metric that describes what percentage of our patients are actually getting the benefit, lower co-pays, easier access that the pharmacy benefit provides. That's the metric that matters, and we'll continue to report that one.

And then on the gross margin guidance for the year, you were able to increase the guide to 50% to 52% from the prior at least 50%, despite that increased pharmacy mix, which is an initial headwind on gross margin. So talk about some of the drivers of gross margin as well.

Yes, we saw some benefit from our -- it's really just scale. So we saw some benefit from our bill of materials going down slightly at the start of the year, and that advantage will -- or that benefit will be sustained throughout the rest of the year. And then we're getting more leverage from our fixed manufacturing overhead structure. So as we build more -- like as we sell more, we build more. As we build more with this constant cost structure and fixed overhead, it's a lower cost per -- pretty simple.

Yes. And then on tariffs, I know you don't expect a big impact there, given the Nairobi Protocol, but you do source some components from China. So maybe just remind us how you're thinking about the potential impact from China, if there's any difference now, given the recent news on the tariffs there?

Yes. So some non-custom components like our device charger, it's a Qi charger that's kind of like generic that could be used with any device. That's not eligible for the exemption of the Nairobi protocol, but it's like -- and then there's like a couple of other components like that. But those are very trivial in nature to our bill of materials, and the tariff impact on them is minimal -- on our financials is minimal from those. But all of the custom components on the iLet are exempt from that protocol.

Okay. And then maybe just to follow up on a few points that you brought up. But maybe just talk us through the process of getting a PBM contract that you mentioned in Q1, the Prime Therapeutics contract. So maybe just what that process is like with the underlying health plans turning on, and kind of how much visibility you have into the pharmacy adoption cadence for the year?

Great question. So let me hit it this way. Pharmacy adoption -- true pharmacy adoption, percent of new patient start changes are really driven by 3 things. Step #1 is the PBM contract. Big shocker here, what that does is it sets things like rebates. Those rebates go to the PBM. Those contracts are comparatively easy to get. PBMs want money coming their way. They're not getting it if you don't have a contract with them. Step one is comparatively easy. Don't mean to minimize that. Step 2 is adoption by the underlying plan. This is where you have to discuss with the plan, the fact that it is beneficial to them to adopt this item that's on the menu with the PBM for the benefit of their users and their members; why it benefits them to not have to police pumps, et cetera, et cetera. That is still -- I mean, I think we have a compelling argument as evidenced by our adoption, but it's a real discussion at that point that you have to have there. There's generally no contract that happens there, because they're having a conversation with the PBM to change their plan and their coverage. And step #3, which is extremely important is what I referred to on the earnings call is logistics. If a script gets written, generally in pumps, we're going to get, a thing called the statement of medical necessity, right? It's just a paper that gets faxed over to us, and we can fulfill that or it becomes dead. If you want to fulfill that in the pharmacy space, you need to keep it as a pharmacy prescription. You need to be able to check pharmacy benefits, you need to have a contract with fulfilling pharmacy. All those things need to be in place. Even if the plan will pay for it, you need to have many other steps in place to actually fulfill that script. And that's why when all 3 of those things are done, you end up with a patient actually getting coverage and a shipped pump through the pharmacy channel, and that becomes a percentage of your new patient starts. So a little more detail on how the whole thing works, soup to nuts.

Yes. No, that's helpful. And not leaving a lot of time here, but wanted to touch on the patch pump really quickly. Since you mentioned you'll have that at ADA as part of your investor event, maybe just quick last thoughts on patch pump and the ADA event.

I have 10 seconds. Commercialize by the end of '27. What else you needed to know? No, we will. We'll show current progress in the product at ADA. We're excited to do a demo of the product. And I don't want to say much more about it, but that will obviously be webcast and what not. It should be a fun event.

Yes. All right. Thank you.

Thanks, Joanna.

Thank you.