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

Next up, we have Beta Bionics, Stephen Feider, Chief Financial Officer; and we have Blake, Investor Relations. Right -- that's right. Great.

So maybe to start out, you reported strong in Q1, revenue 2.5%. Maybe just high level, kind of what trends you've seen in the quarter and drove the beat versus expectations.

Well, happy to be at the conference. Thanks for hosting. Let me just say that. It's good to be up here with you. So the main tailwind that we have for our business that allowed us to outperform. And what we're excited about is we're seeing more and more adoption in the pharmacy channel. And what the pharmacy. So in the first quarter, we had a high 30s percentage of all of our new patients to reimbursed through that channel. Why that's important is for people who are -- for patients who are considering purchasing a pump the out-of-pocket that you see in pharmacy is something like $25 or less per month, whereas contrasting that to the DME reimbursement, the out-of-pocket is closer to something somewhere in the range of $500 to $1,500. So a dramatic difference in price, and that creates a much easier product for the patient to purchase better for Beta Bionics. So number 2 is we are expanding the field sales team. So we did an expansion in the first quarter of 2026. We are continuing to expand in the second quarter. And the guidance that we've communicated is that we'll grow the territory presence in the United States by at least 20 territories in 2026, and all of that will be front-loaded in the first half of the year. So what that is -- what I'm telling you here in saying that is that we're both growing adoption for our product because we have new territories. We're a differentiated product with growing confidence in the outcomes of what we're doing and the automation of -- that's embedded in the product. But secondarily, sorry, in terms of the -- that's in terms of the same-store sales, but we're also growing the actual field sales presence. So there's a lot of places in the country that don't have familiarity with the islets. And by growing the field sales team, we're -- that's allowing us to expand our footprint and grow awareness of the product.

When you think about Q1, now that you've seen all the other reports, how do you think your share trends in Q1 and when you look at the other kind of upper parts from new patient starts?

Yes. We're evaluating Q1. And I think that even just from the meetings I've had with investors already today and post like all of the pump companies now reporting I think the perception is that maybe Q1's performance or Q1 in total for new patient starts across the entire pump industry was a little soft. I think I may agree with that. However, the seasonality did not surprise us at all. So I think our pump our performance in terms of new patient starts in Q1 was in line with expectations, and there's nothing that I would point to that compressed influence pump adoption in Q1 that for the market to like come to understand as to why the results were they were. I think that people just didn't -- don't appreciate that Q1 is the biggest step change seasonally. The drop from Q4 to Q1 is the biggest step change seasonally that we see in insulin pumping. So -- we actually like feel really good about what we -- our Q1 results, and we're for the tubed insulin pump market, we think we're doing great. We're actually beating the competition. Our sales reps are performing at a level of efficiency that's exceeding the other 2 pump companies. And all that to say, we are going to need a patch pump to win in this market. And we'll launch one at the timing that we've communicated in the past, but we just feel really good about our spots.

On seasonality, a couple of quarters ago, you were saying kind of less seasonal Q4 to Q1, more of a headwind versus like normal typical seasonality in Q4. And now you have one of your competitors talking about more seasonality in Q1, like what -- how do you kind of match up the 2?

Yes. I think, well, -- what -- I guess I've been consistent with my communication is that I think that in terms of the step changing seasonally, and this is by looking at the patterns of seasonality for the last 5 years, trying to normalize for new product launches trying to normalize for any outsized like onetime factors. We see the largest step change downward from Q4 to Q1, a medium step change upward from Q1 to Q2, flat Q2 to Q3 and then a small step change up from Q3 to Q4. And now we're back to that large step change down. And that's trying to normalize for like all factors. And so I've actually seen the market that way like for a while. Look, our -- one thing to note is when you compare what I just said to our last year's results, meaning Q4 '24 to Q1 '25, the step change down wasn't as strong, but we did launch a product right at that time. We launched the Color islet. So I think that, that sort of mucks up the comparison. But I think we've been the way I just communicated is how I've seen it since I've been in the industry.

Okay. That's helpful. And just the overall health of the pump market and some type 1, little more penetrated than type 2. But when you look at the overall health of the market, is the market maturing? Is it falling? Is there still a lot of opportunity for the going to sustain double-digit growth?

Yes. I think the pump market is far healthier than what Perception currently believes type 1 market continuing to grow. I don't want to comment specifically on like what -- I obviously have a perspective on what it's going to grow this year, what it grew last year, depending on which analyst model you look at, you could get a different number, but healthy growth certainly last year, a lot of that driven by type 2, but still growth in type 1. And I see the same for the market going forward.

New patient starts in 2026, you talked about a lot of variability and trends throughout the year. I think you still talked about 21,000 to 23,000 new starts. Just trying to understand what gives you the confidence to meet that and help us understand some of the, I guess, your variability that you talked about.

Yes. Well, we didn't actually -- we don't guide to new patient starts. So we have we, of course, understand that the consensus is built from the analyst models, and we do our best to shape the analyst models to where we like them to be, feeling good about the new patient starts consensus and again, acknowledging that we do have some control over how those numbers get created. But I actually feel like new patient starts is reasonably predictable for our business. We have sales territories that now we have enough experience and historical data to suggest what a current territories expectations can be based on their ramp rate. So to me, that's actually an area of our business that is reasonably predictable.

And then I assume you assume that you're going to be taking continued share kind of at the same rate in guidance or.

Well, look, like I just said a moment ago, I I'm proud of how we're winning in the tube pump market. So I think we will continue to be a winner in terms of where -- getting new patients from that particular subset of the patients who are willing or are currently wearing an insulin pump. I think some of that what I -- if I was going to like confirm or give you a number as to what we thought our market share was going to be for the rest of the year, would almost sort of be like forecasting what the patch pump competitors, new patient starts are going to look like, which I don't really want to do. What I will say is that I really like our position here and that we've built a differentiated product. We've got -- grown confidence in the algorithm that we have. The clinical outcomes are fantastic. We have all the cash we need and we're set up perfectly to launch our patch pump into a market that clearly that's what a lot of patients would prefer. And when we do, I really like our position.

When you think about, I guess, the competition of the market, the form factor is converging more to a patch pump, you're kind of one of those converters, if you will. Like how do you think the market starts to compete when form factor is more of the same? Is it more on the algo? And how do you continue to differentiate that?

Well, I think that the form factor to be a patch pump that I would consider to have a credible chance to beat the incumbent, I think that you have to have a patch pump user experience that is as good or better than the incumbent. -- that's perhaps obvious. But what's maybe not obvious is when you actually look at the solutions that our competitors are planning to bring to market, there are some significant deficiencies relative to what the incumbent is. So I don't really see like a patch as a patch as a patch pump. Like by the way, there already are patch pumps that are cleared that no one really cares that much about and no one is trying to go buy because they're inferior to the -- again, the incumbent, like I just said. So I think one really notable characteristic that is like an obvious user experience disadvantage that we haven't really come to fully appreciate yet is that if you have to recharge your device, like meaning you either have to carry 2 reusable portions of the device or you have to take your device off and then recharge it. Like to me, that's such an inferior experience relative to the incumbent patch pump, but I don't see that as a competitive form factor. But -- let's say then we -- like look at our product that we plan to bring to market Mint and with the incumbent patch pump, which I think Mint is as good or better of a user experience, then what's going to matter to get to your real question, is the algorithm and the clinical outcomes and the ease of use for patients and the ease of use for the health care provider, primary -- and pharmacy reimbursement. So all those areas -- and that's why I think Beta Bionics is a market leader. So we need this form factor ultimately to compete at the grand level.

Are there potential improvements on your algorithm as well?

I don't have any specific commentary on that. Here's what I'll say, here's what we're not doing. We're not sitting back and just saying this is going to be our algorithm for here and never more because, of course, we're not. algorithm is a core competency of us, but I just -- I haven't commented publicly on like what exactly we're considering.

Yes, I was just trying to think about your competitive positioning. If you're competing on the algorithm, other companies obviously advancing their algorithms. There's continue to close the loop, if you will. Just like how does your offering stack up as those other algorithms have been talked about for the market?

Yes, we have to maintain the lead, which means continued innovation, what I like to call this disrupting yourself. So the disruption of ourselves means make improvements to fully automated or fully closed-loop algorithmic technology for insulin only and then also to have bipormonal technology, which means automated for insulin and glucagon. And we've talked about the merits of that product in the past, too.

Great. On patch pump, what's the kind of the -- where kind of -- I know you're not going to say a lot, but just would you help us understand one question that we get is how can beta manufacture this product. So that's kind of maybe how I'd ask the question, somebody at your scale, ability to manufacture the demand and that's kind of where the competitors have gotten tricked up in the past on patch pumps.

Yes. I brought on to make my point was figured you would ask something like this.

Okay. So we have -- this is the reusable portion here. This is what you would fill up with insulin. -- every 3 days and replaced with the adhesive and you throw that away. And then here is the reusable portion. There's no recharging required for this. What happens is you're wearing the patch pump when they both are assembled, you take this off your body, you set the reusable aside and then you put the reusable back on to the new one, okay? So that's the step we're adding. But the key thing you asked about manufacturing is the reusable portion lasts 2 years. It's where all the expensive components live. The bill of materials is actually pretty high on this. But again, it's fully waterproofed everything. No recharging to reiterate. But the actual like thing that you have to make at and millions and millions a year of is this disposable portion. And yes, that is hard. But what should give investors confidence that we Beta Bionics can pull it off. I think number one is the design decision. So like actually think about what is really in here. It's 2 batteries, a cannula, you have to put a needle in the exact right place, of course. There's a bonding mechanism to bond to the reusable portion. Yes, there's adhesive. So like that's kind of it, reservoir. So that's not like -- obviously, in a highly regulated sterilized clean room environment like that is difficult. But it's not like building what the patch pump incumbent is doing today, which, by the way, is insanely impressive, is building a fully disposable patch pump every 3 days for like under $10. That's not my estimate, not theirs. That's impressive. So this is just a way easier design, all right? Number two is we already do it. meaning we already make disposable products that keep like millions and millions of disposable products with sterilized clean room environment, semi-automated manufacturing equipment in Irvine. We already do that today. We make the cartridge and the cartridge connector, and we have a massive installed base that uses one of those every 3 days, each of those. So this is not a new skill for us. We're not like standing up like, oh, gosh, we get a mint is how are these guys going to create a clean room environment. This is already a core competency. So I think that should help you understand. [a highly regulated sterilized clean room environment like.

What's the hardest part of the whole process?

The hardest part of the whole process is -- this is now a CFO answering a manufacturing engineering question. Obviously, I have an opinion because I'm really close to the project. I think it's just a needle placement like getting it dead on, which, by the way, is the hardest part about the cartridge connector too like it has to be like extremely precise, the tolerance is really small.

To get the needle through the canula or...

Can you put like -- what's going to happen is there's -- the needle inserts when you push this insertion mechanism in. And like when you actually place the needle in this particular device every time, like making millions and millions of them, the precision of that has to be like so dead on like that to do that like in a semi-automated manufacturing environment with like machining is like reasonably difficult.

Yes. If it's not right, then it's not sensor but the pump cells and doesn't jet

Well, you have testing mechanisms in place, so you would never like ship one, but that it would cause scrap and yes. Okay. No, that's helpful, right. And I guess the plan is still. We will commercialize it by the end of 2027.

And that's more depending on manufacturing, not FDA approval?

Well the chart for this project is big, of course. But the 2 like big items are, there's the regulatory bar and then there's like the manufacturing readiness bar. And our estimation is that the manufacturing readiness bar will take longer than the regulatory bar. We started them both in parallel, of course. So like they're not -- we're not waiting to get a clearance before we work on manufacturing capability, but that is the gating item in our mind currently.