DexCom, Inc. (DXCM) Earnings Call Transcript & Summary

Please welcome Director of Corporate Affairs and Head of Investor Relations, Sean Christensen.

Good morning, everyone, and welcome to DexCom's 2020 Investor Day. We're glad that you could join us today, even though we would much rather see you face to face. We look forward to being able to do that again, hopefully soon and hope that you and your families are safe and well as we head toward the end of this year. In the meantime, we're excited to present today and have a great lineup of speakers ahead. This includes several of the key leaders of the DexCom management team as we provide detail on DexCom's growth opportunity and an update to the company's long-term financial goals. We're also going to take advantage of the virtual format today to let you hear directly from clinicians who are using DexCom CGM in innovative ways in their practices. These are some of the true leaders in their fields, and we think their firsthand experience will provide you with a valuable perspective as we think of the impact of our CGM systems on the lives of those we serve. Today's presentation will include forward-looking statements, and we encourage you to evaluate these presentations in conjunction with the risks and uncertainties detailed in our public filings with the Securities and Exchange Commission. Before we start with the presentation, we want to make things a bit interactive this morning, and start with a few live polling questions for you. These are questions that we will answer over the course of the next 2 hours. Let's start with the first one. "DexCom has been a leading advocate of CGM technology and supported a broad research program to demonstrate the effectiveness of our CGM systems. How many peer-reviewed journal articles have been written or supported by DexCom clinical scientists so far in 2020?" Again, these are peer-reviewed journal articles. Let's pause for a second and gather your responses. [Voting]

Great. Let's look to the next question. "DexCom closed 2019 with approximately 650,000 patients globally. Based on current trends that we have contemplated in our full year guidance, approximately how many patients are expected by the end of 2020?" This is our global patient base and estimates for the year-end. Go ahead and send in your answers. [Voting]

And let's move to the third question. "DexCom has stated a long-term target of approximately 75% of U.S. commercial sales being processed through the pharmacy channel. Approximately what percentage will be processed through pharmacy by the end of 2020?" This is U.S. commercial. So we're excluding Medicare. How much is going through the pharmacy channel? Let's collect the final answers, then we'll move to the next question. [Voting]

Great. Let's go to question 4. "How many Urgent Low alerts has the DexCom CGM system issued since the launch of G6 in 2018, warning its users of dangerously low glucose levels?" We got a couple more seconds. Go ahead and enter your response. [Voting]

Great. And then our final question. "DexCom has prioritized the pharmacy as the preferred long-term channel for its business in the U.S. Based on IQVIA data, on average, what would be the out-of-pocket cost difference per year for a patient on DexCom G6 sensors versus FreeStyle Libre 2?" Again, this is across all pharmacy plans. What is the cost difference to a patient over the course of a year? Let's wait for final responses. [Voting]

Great. Let's look for the answers to those questions over the next 2 hours and many others as we progress. With that, let's turn it over to Kevin.

Thanks, Sean, and welcome, everyone, to the DexCom 2020 Investor Day. We are excited to update you on the progress that we are making in our mission to empower people to take control of diabetes and, in the future, to work to prevent the onset of diabetes altogether. And although we are absolutely thrilled about what we've accomplished already, today I want to give you a vision of why believe the best -- why we believe the best is still to come. 2 years ago we began our investor update by showing a sustained revenue growth profile with a 10-year revenue compounded annual growth rate of 44% as we approach the end of 2018. Here we are 2 years later and with awareness of CGM technology continuing to rise and customer satisfaction with G6 at all-time highs, we've continued the growth momentum. And even with the law of large numbers, our compounded annual growth has held at that 44% level, and the outlook ahead remains very strong. In fact, the revenue growth that we've seen has far outpaced our own high expectations. And because of this growth, as many of you are aware, we are now approaching our 2023 revenue target and margin goals that we established at our previous Investor Day 3 years ahead of schedule. We've executed on our plans incredibly well over the past 2 years. And now is the right time to reset our long-term goals and let you know how we plan to get there. Today, we are establishing new 5-year financial targets that we believe position DexCom as one of the premier growth companies in the medical technology sector. We see a clear pathway to annualize growth of 15% to 20% over the next 5 years, with revenue reaching between $4 billion and $4.5 billion in 2025 as we continue to push DexCom CGM to be the standard of care for people with diabetes. This is our base case, with little contribution estimated from some of the additional growth opportunities that we feel will be part of the DexCom story, markets like the hospital setting, pregnancy and certain emerging markets. The majority of our growth will continue to be driven by customers with type 1 diabetes and people with type 2 diabetes on intensive insulin therapy. But we are also including the first contribution from people with non-insulin-using type 2 diabetes in our 5-year forecast, which we expect to contribute at least 5% of our compounded growth through 2025. There remains a massive growth opportunity ahead of us, and we are going to invest in the resources we need to capture this growth. Yet even with this investment, we are confident that we can drive additional margin expansion and generate strong leverage. We are forecasting approximately 500 basis points of adjusted EBITDA expansion by 2025 relative to our previous long-term guidance. So here's how we're going to get there and position ourselves as a leading growth company for the long term. Since we last met, we've significantly scaled our business, preparing the company to maximize our growth opportunity. Now is the time for DexCom to be even more aggressive, and we're doing that by prioritizing 3 pillars of growth. The first is our U.S. intensive insulin business, which is our heritage. Many of you believe that this business is on autopilot, but we have plenty of work left to do here and a great growth opportunity still ahead. We remain confident that our core U.S. business will be a key driver of growth over the next 5 years. Our second growth pillar is our type 2 non-intensive business. We believe that we are on the cusp of major adoption of CGM technology in this large population, one that will help drive greater health and economic outcomes for our patients. Today, we look forward to giving you a glimpse at why we are so excited to extend our technology to these customers. And I assure you there is much more to come. Our third pillar of growth is the global expansion of our business. CGM use remains in the early stages around the world, and we believe that there is significant runway ahead for us both in the markets that we currently serve as well as many additional markets that we plan to enter in the next several years. Now I know many of you may be asking, what about your efforts in the hospital markets? What about CGM for gestational diabetes? We remain as excited as ever for those key markets as growth opportunities in the future, even potentially within the 5-year horizon and are continuing to invest in their development. But for now, we wanted to set a clear vision for where we expect our next stage of growth to be focused. Diabetes is truly a global crisis, and it's one that will take innovative technologies like CGM to address. Look at the latest statistics from the International Diabetes Federation. More than 463 million adults globally have diabetes as of 2019. And based on current growth trends and the high rates of prediabetes, that number is projected to reach 700 million people globally by 2045. And in addition, the cost to treat diabetes and the resulting impact of uncontrolled glucose on the body is also skyrocketing. In 2019, IDF estimates that just treating the diabetes alone accounts for approximately $760 billion globally per year. We need to do better. We need to stop these escalating case numbers and costs. So how do we do that? Well, we believe that access to DexCom CGM is a great place to start. Many of you know our technology. Many of you even rely on our technology to manage your own diabetes. But for some of you who are new to the story, we thought a brief introduction to our glucose monitors might help. Here is a quick video that discusses how our G6 system is empowering our users to take control of diabetes. [Presentation]

We started our business here in the U.S. with customers on mealtime insulin, both type 1 and type 2. This is our heritage business, and we have continued to flourish in the presence of additional competition over the last several years. So how have we been able to drive incremental share here in our core market? We've done it by establishing a clinical reputation that is unparalleled, showing that DexCom CGM is the primary factor that drives health outcomes regardless of how patients choose to deliver their insulin. With strong outcomes demonstrated in randomized controlled trials, the clinical community is well aware of the benefit that DexCom CGM can provide. With those outcomes demonstrated, we've driven growth by advocating on behalf of patients for expanded reimbursement. We now have broad coverage for nearly all people with type 1 diabetes and a majority of people with type 2 diabetes on intensive insulin therapy. Costs should not be a determining factor that prevents these people from access to our systems, and our team has done a great job advocating for this purpose. And finally, you have to have the right product to meet the needs of the patient. And that is what we have with our G6 system. With the need for fingersticks eliminated, connectivity with insulin delivery systems and the accuracy that DexCom has built our reputation on, G6 has been a revolutionary system and continues to receive market-leading reviews from our patients. Based on the latest numbers from CDC as well as market data that we've evaluated with our partners, we now estimate that there are approximately 4 million people in the U.S. taking mealtime insulin. This means that even with the strong growth that we've experienced over the past several years, only about 25% of these patients are currently using CGM. We still have a significant growth opportunity ahead of us here in the U.S. And most importantly, we have the right product portfolio, strategy and team to execute on this opportunity and maintain the leadership position that we've established. One of the clear ways that we've established ourselves as a customer-focused leader in the CGM industry is by leading the way in connected technologies. We have committed to our strategy around connectivity and data integration with multiple partners irrespective of the means of insulin delivery with Control-IQ taking market share in the tethered pump space. And with Omnipod 5 slated for our commercial launch in the first half of next year, DexCom remains the clear leader in connected insulin delivery solutions. We are taking a multichannel approach in developing our non-intensive type 2 business model, focusing upon 4 different channels, all of which we believe will become important in this market, which is more than 7x the size of our current markets. Payers. Many of you are familiar with the tremendous amount of work that we have done with UnitedHealth Group. They are utilizing CGM and other data that they have access to in developing a great fully integrated patient experience. Providers. We plan to continue to work directly with fully integrated health care systems like Intermountain Healthcare to develop CGM-based solutions that fit into their provider and patient platforms. Programs. There are a number of diabetes management, analytics and coaching platforms in many phases of development. With our ability to move data directly from our servers to our partners' infrastructure, we believe that we have absolutely the best solution to offer any program. And finally, Patients. Over the longer term, we need to provide a product that patients can easily obtain and payers will cover. We want to be the CGM of choice for all of these potential solutions. With the interoperability of future CGM systems, we're not expecting to establish exclusive relationships in any of these channels. Our data platform, combined with the easy connectivity and software capabilities that we will add in the future, will enable us to lead this market. Right now, we continue to gather clinical evidence, test business models and establish the proper relationships necessary to get a meaningful start in this market and ultimately obtain broad and simple reimbursement and access for people with type 2 diabetes who do not take insulin. With that backdrop, DexCom has embarked on multiple initiatives to generate evidence we need to be able to attack this type 2 opportunity. First, we need a solution that patients and providers will engage in. If we deliver an outcome, but folks are not willing to engage with CGM, then we won't make an impact across the population. Building from a user-friendly solution, we need to establish clear health outcomes. We need to show that we can make a difference in care, both for the patient and the physician. And knowing the health care environment we live in today, we must be able to put our money where our mouth is and demonstrate that our CGM technology can deliver a return on investment. So that is what we've been focusing on. As we begin to initiate our studies and embark on several commercial pilots with our partners, we have seen great results from an engagement perspective. Here are 3 data sets. A recent study was published on the use of real-time CGM and its impact on behavior modification, where 90% of people reported that real-time CGM use drove a healthier lifestyle, and nearly 90% changed their food choices based on feedback from CGM. We've seen greater confidence from our type 2 non-intensive users who feel empowered to address their diabetes. 95% felt CGM made it easier to perform self-care behaviors, and almost 80% feel CGM helps them control their diabetes even when not wearing a sensor, meaning the benefits may be sustainable. And in DexCom's internal programs, we have demonstrated that type 2 patients are very satisfied with CGM added to their treatment programs. Almost all of them had never before used CGM and said G6 was comfortable to wear. People are not just viewing their data, but they are engaging and taking action that is in the interest of their long-term health. This is one of the reasons that not only are type 2 patients engaging with through DexCom CGM but many are expressing a desire to wear a sensor full time. Here are couple of examples of the kind of outcomes that we are seeing for DexCom customers in the type 2 non-intensive population. In July, UnitedHealthcare announced the expansion of their rollout of their Level2 health plan, a program which uses DexCom's CGM for all participants. As you can see here, the outcomes have been outstanding, with significant A1c reductions, reduced medication regimes and even several members achieving remission of their type 2 diabetes with no further need for diabetes medication. Similarly, our partner Onduo continues to generate excellent clinical outcomes from use of CGM in their virtual diabetes clinics, with outcomes for CGM users far outpacing those who rely on fingersticks for diabetes management. We are committed to generating further evidence to broaden access for people with type 2 diabetes and adapt our business model to serve these patients. The economic impact of diabetes is staggering. More than 25% of health care dollars in the U.S. are spent on people with diabetes. This number is 2.3x higher than those costs for people who do not have diabetes. And the cost to treat the disease are only increasing, growing at nearly 4% a year between 2007 and 2017. If this trend continues, in 10 years, the average cost to treat someone with diabetes in the U.S. will reach $27,000 per year. We've identified several of the key levers of costs that must be addressed in order to stop this trend. Let me give you an example. It's hard to watch a television program these days without seeing a commercial for a type 2 diabetes drug. And there have been some great discoveries in these new classes of drugs. But these are also very costly treatments. In fact, we've seen the total cost of type 2 diabetes drug categories more than triple since 2013. This is why several of our partners using CGM in their type 2 programs have quickly identified changes to medication regime and removed unnecessary medications. DexCom CGM has the power to offer insights to patients and clinicians that they simply haven't had before. We believe that we can address this cost crisis that diabetes represents. And one of the reasons why we have this confidence is because of the early data we've seen with our partners, and providers validates the cost savings. Our initial pilot with Intermountain Healthcare last year saw savings of $417 per member per month over a 6-month period for customers using DexCom CGM versus the cohort using standard-of-care daily fingersticks. This translates to nearly $5,000 per patient per year of cost savings. The sources of the cost savings have been across the board: reduced ER visits, reduced primary care and specialty visits, clear improvements to A1c, cumulative reduction to body mass and significantly fewer labs ordered for the CGM cohort. We've expanded this work with Intermountain Healthcare and are also exploring the economic benefit of CGM in the type 2 population with our partners and our own clinical efforts. And finally, turning to our third growth pillar. We have a huge opportunity for growth ahead of us as we look to expand our global presence. Our core international markets of Canada, Western Europe, Australia, South Korea and Japan represent about 6 million people on mealtime insulin, bringing our total current global addressable market for intensive insulin therapy to about 10 million people. The overwhelming majority of these people continue to rely on fingersticks. Today, you will hear more about our plans to extend our footprint in these markets and also how we plan to broaden access over the next several years, bringing DexCom CGM to many of the territories listed here where we have either no presence today or very limited presence. A map like this, combined with the staggering numbers of people with diabetes globally, is one of the reasons why we believe we have a great growth story ahead of us. And even though we haven't focused on additional opportunities today, we are confident that the DexCom growth story is going to evolve the extension into additional markets over the next several years. And our team is -- continues to invest in the development of these opportunities. We received CE Mark this year for use in women who are pregnant with diabetes, and have several studies underway to demonstrate the effectiveness of CGM in women who are pregnant and as a tool for control in gestational diabetes. We are gaining valuable feedback from our effort to assist hospitals and frontline workers during the pandemic. We established a registry in September to efficiently gather data, and the performance of the G6 sensor has lived up to early expectations in our results, including several published studies that have emerged already. We are also well positioned to be a valuable asset to hospitals and clinicians as the market for remote monitoring solutions is quickly developing, leading to reduced readmission rates and better outcomes. Our real-time data and connectivity platforms have us well positioned to grow in that developing market. And finally, we know that truly stopping the growth of type 2 diabetes globally will involve addressing this crisis at an earlier stage. And we believe that there will be several pathways ahead for broader use of CGM for consumers as a tool to prevent the escalation from prediabetes. I can assure you that this excitement extends beyond the 4 walls of DexCom and into the clinic community as well. So as we think of the long-term view for DexCom beyond our growth pillars today, we thought it would be helpful for you to hear from somebody who has been at the forefront of patient care with DexCom CGM during the pandemic.

Please welcome DexCom's Senior Director of Global Medical Science & Education, Keri Leone.

Hello. My name is Keri Leone. I'm the Senior Director of Global Medical Science and Education for DexCom, and I'm thrilled to have Dr. Carol Levy, endocrinologist and certified diabetes educator from New York, New York. Several significant affiliations with Dr. Levy, and she is a visionary in technology in diabetes care. Her title is the Associate Professor of Medicine and Obstetrics as well as a Director of Mount Sinai Diabetes Center and Type 1 Diabetes Clinical Research at Icahn School of Medicine at Mount Sinai in New York, New York. Dr. Levy, thank you for joining us today.

My pleasure, Keri. Thank you.

So we really want to learn from you from all your expertise. This year has been a year that is unique to the globe and a very difficult year with COVID-19. And amidst all these challenges that we've had, you were at the core hotspot of COVID-19 in New York. So I'd love to actually just learn from you, what was broad takeaways of the COVID-19 pandemic? And how you treated your patients, both inpatient and outpatient as well as pregnant patients during this pandemic?

So thank you, Keri, for asking. I'm going to paint the picture of what was going on in New York City right in the early phases of the explosion of the pandemic. And you're absolutely right, we were the epicenter at that point. Over a matter of 1 or 2 weeks, we had hundreds and hundreds, up to thousands of patients presenting to the hospital needing care with severe elevated blood sugars in the setting of COVID-19. In addition to that, we had patients on the outpatient side who needed care. On the inpatient side, due to the lack of personal protective equipment that was being ramped up at this point, because nobody really expected all of these challenges, we had the limitations and the risks that we had to balance with the nurses of going into a room and performing fingerstick with this patient, which was critical for glucose control, but was an extreme large use of personal protective equipment. So we have to balance that and figure out what was the best way to address our patient care at this point. We believed, although it wasn't proven at that point, that glucose control mattered, but in the back of our minds we were like, how could it not? So the first thought that came to my mind, literally, one of my first thoughts was we need to deploy CGM glucose sensor technology in the inpatient setting. So literally, one of my first calls was to the sensor companies, to DexCom, in particular, and said, "Hey, guys, we need help". And very gracious and grateful, DexCom responded and provide us actually with support for this fashion, and we very rapidly ramped up to start to train and teach staff on the inpatient setting how to manage patients with diabetes with sensor technology. That wasn't a perfectly smooth course. It was an explosion that we were not prepared for, but it worked relatively smoothly, and we'll go through that in more detail. I'm going to shift over to the outpatient side, too, because I think that that's another really important area to consider as this all exploded. So once again, we had no warning in New York. From one day, our office practice was completely opened; the next day we were shut down like basically a door being slam shut. We still had patients who had many questions and needed a lot of care. I cannot imagine us having survived without glucose sensor technology during that point. And I'll give you the spectrum of patients. So these are patients with diabetes. Many of them type 1, some of them were type 2 who really were struggling with glucose control. Many of these women were pregnant. We had no way to reach them without being able to remotely view their data, and it was truly lifesaving. We were shocked in our endocrine division how quickly we deployed telehealth effectively and efficiently. The whole institution was, "Look at endocrine, they're doing great." And I'm like, "Well, we have data, we have stuff we can do." And we really were able to jump in and help our patients. And we learned a lot from that point, and I couldn't imagine ever going back at this point. We are all using much more telehealth than we ever did. And the way telehealth is working is because of the CGM technology. It made all of the difference for us. And on the inpatient setting, we were really able to better intervene with protection of staff utilizing CGM.

Yes. That's great. And I think you are very well aware that the Diabetes Technology Society just came out with the consensus of how to use diabetes technology and what does diabetes management in the hospital look like. And one of the primary consensus points was the use of CGM in the hospital brought a lot of positives, especially over the current standard of SMBG specifically because real-time CGM is proactive with helping to avoid hyper and hypoglycemia. So is that what you saw in the practice?

It definitely was. But even more than that, there was another piece that was the most critical, because you have to remember, again, this was like crisis mode. The alerts from the CGM for both high and low were huge because the nurses they were busy with 5 other patients, they would hear the alert. They would know that they had to address something. The glucose profiles were great for those of us from the endocrine perspective who have the skill set to interpret them, to see especially with steroids being started on these patients. Oh, we know that the steroids peak is going to go. Let's see how this works. Let's see what that patient's glucose profile looks like, and then make intervention based on it. But it was the alerts that were so critical, to really enable the nurses' patients, you ramp up their insulin dose if they get hypoglycemic. Then you have to ramp back, but the nurses were alerted, and we even had insulin drips running out into the hall and CGM receivers out in the hall where the nurses could just look and interact without actually having to go into the room, which was huge. And it really made a huge difference. Both the glycemic profiles and the alerts, it was almost like being on a telemetry unit, which was huge for us.

So in your opinion -- I know that this is not necessarily the standard of care yet as inpatient use, but where are you as far as an endocrinologist and one of the leading researchers in this space? Where is it going to be long term with real-time CGM in the hospital setting?

Yes. So I mean, whenever -- so this is even prior to COVID-19, whenever a patient came in and happened to be wearing a CGM, we're like great. And we would usually be able to let them leave the hospital because then we could monitor them much more easily remotely. Nurses get busy. They forget to do a fingerstick patients off the floor. You have the data you need. I envision this as becoming a tool that can use much more in a forward way. The location of its best use skill set, I think that it could be both on regular wards as well as potentially in the ICU setting. The ICU setting outside of COVID, I think, does have a more of a one-on-one nursing staff, which makes it a little bit different. But I think that both locations, particularly for a very sick patients, does provide huge benefit. And I think that, that's something that we really need to consider. The full rollout, the full implementation, the cost-benefit ratio, all those have to be fully assessed at this point, of course. But I think that from what we've seen, it may be different, but particularly for any patient on glucocorticoids or steroids, I think it's a huge win in terms of helping with patient management and really enables us to be much more aggressive with our treatment than we might be otherwise with a random fingerstick done here or there.

Exactly. Fingersticks are not always done at the most appropriate time when it's needed, right?

Exactly. They'll be done after a meal, but you thought there were done before a meal. You'll make a treatment change, but you really didn't need that treatment change, and you don't really know it. If you can see the whole curve, you get a lot more information.

So let's switch a little bit to the other part of your expertise, which is the treating of pregnant women with diabetes. You have significant amount of research around the use of CGM in pregnancy for the type 1 patient. But can you talk a little bit more about your vision and if you've used a real-time CGM outside of the pregnant type 1 woman?

Yes. So that's a great question. It's funny you asked that because I'm actually speaking next week on this specific topic for the American Diabetes Association. So perfect timing. But -- so basically, I envisioned a much broader expansion. We've had the fortune of being part of multiple different trials. We were early adopters of DexCom use even at the time of G4 for pregnancy. I can't even think of any of my patients who have not been wearing a glucose sensor at this point during pregnancy. It just provides so much more information about overnight glucose profiles, daytime glucose profiles. And from a patient who wasn't doing fingersticks, someone with gestational diabetes, I would envision a huge relief of patient care burden because what's the biggest burden for these woman with gestational diabetes is out of the blue they are given this diagnosis. They have to follow a meal plan. They have to learn how to test their blood sugars. They have to test at least 4 times per day. Patients with diabetes typically are requested to do 8 to 10 fingersticks on a daily basis when they're pregnant to reduce the risk of adverse events to the fetus. We have some data showing the benefits of CGM during pregnancy that have already been published. But what we don't have is a broader spectrum in all populations or the actual accuracy of this data. And there is no accuracy on the DexCom G6 and pregnancy, which we all expect it to be true, but now we have the data. And it makes it so much easier when you provide the patient a device and tell them to utilize it. You say, we know it's accurate. It's been studied. We know this is good, and it relieves huge burden for patients. But I definitely envision an expansion of its use to women with gestational diabetes or type 2 diabetes in pregnancy. There's no doubt. It's just such a logical one. It will save so much money in terms of adverse outcomes to both the mother and fetus longer term. It's a no-brainer in my mind, and it is approved outside of the U.S. for this use at this point. The number of times a patient with gestational diabetes will show up in my office, and this didn't mean it's a criticism. Gestational diabetes is hard. And let's say, she was only able to do 1 or 2 fingersticks for the last 2 weeks, and like, I don't have any information, it's very hard for me to figure out to manage you. Whereas if I just looked up the CGM profile, I would know exactly what need to be done. I'd be able to intervene with insulin or dietary modifications that they need to write that in there without having to say, "Okay, well, we've got to wait another week or I'm going to guess probably based on 2 fingersticks." It will improve outcomes. I can't imagine that it won't. We just don't have the data yet. I mean in the type 1 population, basically, I agree 1000%, and the CGMs that we've used in pregnancy have really enabled us to see things before the patients might and the most critical piece of the overnight, there's always a black hole and it's often a very unstable time blood sugar-wise. No fault of the patients. It's just the way it is because the way that the stomach empties during pregnancy, digestion is slowed. This makes all of the difference to be able to see those profiles and to educate patients. It's huge for patient education.

Yes. If they see it, they almost believe it a little bit more, right?

And the number of times I've actually sat down with patients, both face-to-face in the office or virtually, and say, let's pull up your CGM and let's look at it together. It's so, it gets you like, wow, I never realized that. So it really does make a difference. And I think that it's real-time CGM, not blinded CGM, which has been studied or even intermittent because you miss things. If you forget to scan it once or twice, you don't get that data. So I think real-time CGM here shows the most promise.

Thank you for that. And that's actually an important differentiation that blinded intermittent doesn't always lend itself to the same outcomes and benefits to the pregnant type 1 or type 2 or gestational women.

I agree.

Yes. Well, Dr. Levy, I want to say thank you for sharing your expertise. I always learn every time I get to interact with you, and we thank you for your time today.

No, it's been my pleasure. I'm happy to provide education and information for everyone. It's really a pleasure. Thank you.

Thank you.

And to Dr. Levy, thank you for the incredible work that you have done for your patients during this difficult time. I think you will leave here today with the same kind of enthusiasm that I have for the future of DexCom. You're going to hear about what is shaping up to be a very busy 2021 in terms of the product portfolio. We have a clear growth strategy in place and are moving forward aggressively to drive that growth opportunity and scale our next-generation technology. And as we do that and execute on the plans we are laying out today, we are investing in the foundation of additional growth opportunities that will serve us well into the future. But even with that opportunity laid out, I want to remind you of one important fact about DexCom that shapes everything we do. We are a company that has been built on putting the needs of our customers first, and that is something that will not change. The quotes that you see here are actual ones that we received from some of our pilot activities in the type 2 community. Let me read one of them to you that really hit home to us. "I had an aunt with diabetes that lost both her feet. I thought if I'm going to be here at 77, I need my feet. I need my eyes. I have nothing to lose, and feet and eyes and kidneys to gain by taking control of my diabetes." Our hope is to generate that product, the one that allows people to take control, and that's what we are doing with our CGM technology. At this point, I want to turn it over to our Chief Commercial Officer, Rick Doubleday, who will introduce you to 2 key members of his team and set the stage for how we plan to execute on the growth opportunity that I've laid out for you today.

Next up, please welcome Executive Vice President and Chief Commercial Officer, Rick Doubleday.

Thanks, Kevin, and good morning, everyone. On behalf of the commercial team here at DexCom, I am thrilled to be with you again today. And I'm especially excited to introduce you to 2 of the key leaders in the DexCom commercial organization that I've had the pleasure of working with over the past 5 years, Paul Flynn and Chad Patterson. As many of you know, I recently announced my plans to retire from DexCom at the end of this year and transition into a consulting role. There are 2 key reasons I feel comfortable doing this now: the strength of the company and the depth of the leadership team. Paul and Chad are 2 of our best, and I can assure you that the DexCom commercial team is ready to execute on the exciting plans ahead as we prepare for 2021 and beyond. There are a lot of great things going on at DexCom today, and our team is focused on executing on the company's mission to empower people to take control of diabetes. So before I turn it over to Paul, we put together a video to summarize the recent efforts of our company and highlight our incredible DexCom warriors. [Presentation]

As you can see, there are a lot of exciting things happening at DexCom today. And when we look at the market opportunity in front of us and the number of people who stand to benefit from DexCom CGM technology, we truly believe that we are just getting started. In fact, we have multiple significant product launches planned for 2021. This includes the highly anticipated launch of DexCom G7, our next-generation CGM technology that will offer our customers a best-in-class CGM experience and support further adoption of DexCom CGM technology globally. But we also have additional product launches planned that will help us execute on the 3-tiered growth strategy that Kevin has laid out for you today, beginning with our heritage U.S. IIT business, extending into the type 2 non-intensive market and driving access to our technology globally. Let's start with where we've been since our last Investor Day in December 2018. The U.S. IIT market has been the primary driver of our revenue outperformance relative to our previous long-term guidance. We've driven 2-year compound annual growth of 40% and further established DexCom as the clear leader in CGM for the U.S. IIT market. We've done this while advancing the strategic priorities that will fuel our next wave of growth. We've positioned the business in our preferred pharmacy channel by expanding access by nearly 80% since December 2018. We significantly expanded reimbursement for the U.S. IIT population as well as pushing coverage for type 2 patients on mealtime insulin so that the majority of that patient population now have coverage. And we've advocated for 17 additional states to offer CGM coverage for Medicaid, bringing us to a total of 40 states as we close 2020. We are the market leader in the U.S. IIT space. Due to our leadership position and driving access, we have significantly reduced the reimbursement barriers for many intensively treated patients who stand to benefit from DexCom CGM. And with the U.S. IIT market still only approximately 25% penetrated at this time, there is still tremendous runway in the U.S. IIT space. Think of it this way, 75% of intensively treated patients in the U.S. are still using finger pricks to manage their diabetes. We have tremendous opportunity. The question is, what will it take to drive CGM to the standard of care for those managing their diabetes? What will it take to drive rapid category growth? With significant improvements to access, we've laid the foundation for our 3 key initiatives to make CGM the standard of care. We will drive significant category adoption with our commercial efforts, focused on 3 critical priorities: market awareness, simplified access and the user experience. Market Awareness. We've had tremendous results with our direct-to-consumer platform. Our market awareness has reached an all-time high. This sets the stage for us to accelerate our DTC investments over the next few years. Reimbursement is only one of the key elements to enable IIT patients to access CGM. We've launched multiple initiatives to streamline the process for patients and clinicians that we touch on today. Finally, a competitive advantage for DexCom is our best-in-class customer experience, from how DexCom CGM is accessed to the sensor experience itself to the way we assist our customers with tech support and simple reorder processes. Let me provide some more color on these 3 critical priorities. In order to push forward adoption of DexCom CGM technology in the U.S. IIT population, our market awareness efforts must extend to clinicians, particularly in the primary care setting. As many of you do, I listen to the KOL calls often hosted by our analyst community, which generally focus on high-volume endocrinology practices. But as you can see here, slightly less than half of the 4 million people with diabetes on mealtime insulin in the U.S. are treated by an endocrinologist. That leaves more than 2 million patients who are treated in either a primary care or internal medicine setting. As you can see from the stats on the right, these primary care doctors are often overwhelmed in their efforts to treat people with diabetes. They're dealing with a very complex disease with very limited time to dedicate to the patient's care. We need to ensure that our messaging is reaching this clinical community and that these doctors understand the incredible value of DexCom CGM as a tool to help their patients and drive enhanced efficiencies in their offices. As mentioned, our DTC marketing efforts play a critical role in driving awareness and the adoption of DexCom CGM technology. We began our DTC campaigns in 2015 and have seen an incredible boost to our new patient opportunities as a result. We've taken a holistic approach, building from the stories of our customers. We now have over 10,000 DexCom warriors, which is a significant competitive advantage for us. We have optimized multiple channels, including TV, digital, radio, print, social and search, to bring the right message to the right patient at the right time. DTC has truly become a competitive advantage for us. And with the work that our team has done to scale capacity over the last 2 years, we are in a great position to be aggressive in our marketing campaigns to drive awareness and extend our patient growth in the U.S. We have recently set in motion 2 key initiatives as we seek to grow awareness of DexCom CGM broadly, including in the primary care setting. First, as some of you noticed in late October, we began a significant investment in our field sales force. Our sales force is critical to DexCom's success and has done an incredible job over the last several years to maintain our leadership position in the U.S. This tremendous growth has come while maintaining the same size team for several years. If you recall, the penetration rate for CGM with type 2 intensively treated patients is still only at 15%. To reach the PCPs that care for over 2 million intensely treated patients, we will be doubling our field team over the next 3 quarters. With ample G6 inventory in hand and on the cusp of the launch of G7, now is the right time for us to expand into the primary care community. You heard Kevin speak earlier about being more aggressive commercially. Here are 2 great examples. We are now in an amazing position to offer patients the experience of DexCom CGM without committing to a significant upfront cost. G6 Pro provides one pathway for this kind of experience as doctors can use the product in either real-time or blinded modes for people with diabetes and allow them to experience the product firsthand. Since the launch of G6 Pro in the summer, we have seen the overwhelming majority of patients use the sensor in unblinded mode, getting the same real-time experience as our existing patient base, with the vast majority converting to full-time use. We've also taken the significant step of introducing product samples to clinicians with our Hello DexCom campaign. This gives potential customers the experience of the sensor and a tailored 10-day journey to walk them through the tools that our system provides. We will have enough samples available in 2021 to support any intensive insulin customer that is interested in trying the product and will be one of the main tools we provide primary care physicians to help their patients in 2021. Our early results are excellent, with more than 80% of our customers continuing to a second sensor after their initial Hello DexCom experience. We are excited about these initiatives. We are making the commercial investments to drive rapid adoption of DexCom CGM technology in the intensive space in the U.S. Switching to simplified access, the pharmacy channel is the right long-term channel for us to extend our growth and make it easy to acquire DexCom CGM, especially as we expand coverage into the Type 2 diabetes space. We've detailed our pharmacy strategy before, but for those who may be new to the story, the pharmacy channel is beneficial to all stakeholders involved in our commercial process. Most importantly, the pharmacy channel offers a significantly faster vehicle to get DexCom CGM to the patient. Whereas the durable medical equipment channel can take up to 3 to 4 weeks to process a patient, the pharmacy channel allows a patient to receive DexCom CGM in only 1 to 2 days. It is an easier channel for the clinicians with significantly less administrative requirements. In fact, our market research suggests that doctors are much more willing to prescribe CGM if it's available through the pharmacy channel and allows them to avoid the burdens of DME. And finally, it's the right channel for DexCom over the long term, offering at least the same and, at times, more operating profit dollars per patient as the DME channel but with significant long-term volume upside. So how are we doing in our effort to transition our U.S. commercial business to pharmacy? Well, I can say that the team has made great progress since our last Investor Day. As of the fourth quarter, we are now closing in on 50% of our U.S. commercial volume being processed through the pharmacy channel. We've said that we think this number could reach approximately 75% over the long term. So we are well on our way to complete this transition. We've done this by significantly increasing our pharmacy access over the last 2 years. When we look across the payer landscape at this point, we believe our pharmacy access is at least on par and likely greater than that of our nearest competitor. And we've advocated for this access at levels that are affordable for our patients with payers clearly recognizing the benefit of DexCom technology. In fact, 1/3 of our patients who received DexCom CGM through the pharmacy have a zero out-of-pocket cost per month. Let me repeat that, 1/3 of our patients have zero out-of-pocket costs per month. Furthermore, if you look across the board in the pharmacy channel, without excluding any plans, DexCom G6 is $180 per year cheaper to our patients than our nearest competitor. Patient cost when compared to other available CGM technologies is not a barrier for those with pharmacy coverage. With the pharmacy channel open, the expansion of our sales force, key improvements to simplify the process to acquire DexCom products and a product in the market that is highly regarded by our patients, you can see why we are excited about our opportunity to extend our growth and leadership position in our core U.S. market. We often hear that ease of use is important in the CGM category. We've asked clinicians how they characterize a technology is easy to use, and the answer ultimately comes down to 2 factors regardless of a doctor's CGM brand preference. In our market research, we found that the 2 most common factors that influence a doctor's view of ease of use are the ability for a patient to acquire the product and the ability of that patient to get started for the first time. These are factors that are largely unrelated to a patient's actual experience of the sensor technology. The clear takeaway for us is that we need to make DexCom CGM easy to acquire for our patients, simple to prescribe for their doctors, and the whole process leading to a patient wearing a sensor must be streamlined. We've taken several steps to accomplish this, and given both patients and clinicians the kind of experience that will strengthen our reputation as the CGM of choice. On top of the programs that are already mentioned, such as Dexcom G6 Pro and our new sample program Hello DexCom that make it easier to get started on Dexcom CGM, last month we launched DexCom Start, a program that greatly simplifies both the process of writing a DexCom script and the administrative requirements that go along with it, and the early results we have seen have been outstanding. As you can see from the slide, our survey of clinicians after the launch of our DexCom Start saw a 96% classify the process of prescribing DexCom as easy compared to only 38% prior to launch. We've seen a similar improvement related to the administrative burden with only 8% of clinicians rating the administrative burden as heavy after the launch of the program compared to 59% previously. These are the kind of major improvements that we are making behind the scenes that have a big impact on validating how easy DexCom is to access and use. Our final critical priority is the customer experience. At DexCom, we are hyper-focused on our patients. Our customers remain incredibly satisfied with their DexCom CGM experience, with Net Promoter Scores trending at all-time highs and remaining well above our primary competitors. Importantly, these best-in-class NPS scores are consistent for us across all of our channels. These high Net Promoter Scores result in significant benefits for DexCom. We have extremely low attrition and very high utilization. In fact, according to IQVIA, our customer retention for our type 1 and type 2 intensive customers is 20% higher than our nearest competitor after 12 months of starting the CGM experience. The lifelong value of our patients is considerable. This drives our significant leadership position in the U.S. CGM category with revenue share in Q3 2020 more than 2x our nearest competitor. We have a clear strategy to build on DexCom's market-leading performance in the U.S. IIT business, built around our focus on empowering our customers. But even with the rapid growth that we have experienced in the U.S., we believe that there are great things still to come. Remember, about 75% of U.S. patients using mealtime insulin are still relying on fingerstick technology. To reach these customers, our team has done a great job to remove reimbursement hurdles and open access in the pharmacy channel to simplify the process for doctors and patients. And with significant capacity on hand, we are now in a position to aggressively target patient growth and growing awareness for the DexCom brand. I will now move to our international business. Similarly, we are making great progress internationally and feel that there is a great opportunity ahead of us to take market share in our existing core markets as well as in several new geographies. We continue to advocate for expanded access globally and have had several wins over the past 2 years with our international business contributing annualized revenue growth of 38% over the past 2 years. Our core international markets, which we define as Western Europe, Canada, Australia, Japan and South Korea, represent about 6 million patients using mealtime insulin or about 1.5x the size of the U.S. market, with current market penetration slightly lower than that in the U.S. So how do we build from the existing traction that we've established and go on the offense? The answer involves several key initiatives. We need to simplify access. There will be several ways that we approach this depending on the nuances of the local jurisdiction, but our recent e-commerce expansions are an excellent example of one approach. In Canada, the launch of the e-commerce platform led to a noticeable acceleration in new patient additions, driving 66% new patient growth year-over-year. In both Canada and the U.K., the overwhelming majority of our patients are now served via these e-commerce platforms, with more than 90% of our new patients in the U.K. now coming through the DexCom store. Like the U.S. market, we also need to drive awareness of the value that DexCom CGM brings to people with diabetes. We are investing in targeted DTC marketing campaigns outside the U.S. and bringing the experience that we have established domestically to our global markets. Third, we are going to be opportunistic to go direct in several markets in which the market is favorable. Our largest market, Germany, is a great example of the benefits of transitioning to a direct presence, and we will be active on this front, targeting several countries to transition to direct sales over the next few years. Finally, we will never stop making the case for broader access to our technology. On this front, we are hopeful that our efforts will bring broader reimbursement soon in markets like the U.K. and Canada. We are also pleased to report that we have recently received reimbursement for G6 in France for the first time, a great win for people with diabetes in France and a fantastic opportunity for us to develop in a market in which we have previously only had a minor presence. We are addressing these core markets in several ways, including with well-established distribution partners such as Terumo in Japan. We are also extending our direct footprint, including the establishment of a DexCom office, in Singapore. In addition, we are committed to extending our geographical footprint. We have a clear plan to more than triple our patient TAM by the second half of 2023 by entering several new markets. These are markets that are largely untapped in terms of the current CGM landscape, giving us a great opportunity to establish DexCom as the CGM brand of choice in these diabetes communities. These markets do not include China, where we continue to actively work through the strategy and regulatory pathway. We anticipate having more to share on the front in the near future. So as I hope you can gather from these slides, we have a clear path to drive growth in both our existing geographies and new territories in the next several years following the 3-tiered vision for growth that Kevin established at the outset, and we are confident that the best is yet to come. At this point, I'm going to turn it over to Chad Patterson, our Senior Vice President of Global Marketing, to provide some additional color about why we are so excited about our third near-term growth pillar, the use of DexCom CGM for the type 2 nonintensive community.

Thanks, Paul. As Kevin mentioned earlier, we are taking a multifaceted approach to the type 2 nonintensive market. Let's look at how we're developing several of these pathways and why we're so excited about the ability of DexCom CGM to address what is truly one of the world's most pressing health and economic challenges. I will review some of the details we have learned shortly. But first, let's hear from a clinician who has experienced the benefits of DexCom CGM in his primary care practice.

Please welcome DexCom's Director of Clinical Education, Christy Pospisil.

Hi, everybody. Thanks for joining us today. My name is Christy Pospisil, and I'm the Director of Clinical Education at DexCom. And today, I'm joined by Dr. Thomas Grace from Findlay, Ohio, and we're going to talk a little bit about the role of CGM in primary care. We all are very familiar with continuous glucose monitoring and the uptake and utilization of it in the endocrinology space but talking a little bit more about primary care and how Dr. Grace sees that as a powerful tool in his clinic. So with that, I want to welcome Dr. Grace and just kick it off by asking you to tell us a little bit about your background and how you got started using CGM in primary care.

Hi, Christy, thank you so much, and thanks for this opportunity. A little bit about my clinic. I'm a family medicine trained physician running a diabetes clinic in Findlay, Ohio. I have a background that's kind of a little bit extensive. I was family medicine trained but I worked in the hospital as a hospitalist and a little while I was an intensivist. And now I found myself in the outpatient setting for the past 4 years. I also have type 1 diabetes. I was diagnosed at the age of 3. And so as for my personal use, I'm very familiar with CGM technology. I wasn't a big fan of it until the last few years really when I started my clinic. I think DexCom came out with the G6, and that really revolutionized my thought of what we could use CGM for. And then for me personally using it, that made a world of difference in my own personal life. And so right away, I could see that we needed more people to have this because of the power and the information that it was giving to people. So I use it both personally and in my practice, I'm very heavy oriented on CGM technology.

Fantastic. So we're all mindful of the fact that in the primary care space, a lot of times you're compressed for time. And we think about all the things that a primary care physician would have to deal with. So when you think about prioritizing care and you think about a chronic condition like diabetes, how do you prioritize that in the conversation and get CGM into that patient conversation?

Yes. So it's important to understand that when we talk about chronic illnesses, diabetes should always be put at the forefront. And so -- obviously, I run a diabetes clinic, diabetes comes first. But even in the overall primary care setting, diabetes literally affects everything. So we need to, a, put this first. And, b, the way that we approach it right now is we kind of look at a number, we have an A1c number, and we make treatment decisions based off that number. And what we're coming to realize is that there's a lot more that goes into treating a patient than just one number that we see every 3 or 6 months. When I first started using CGMs, I could say, "Hey, look, here's 2 patients with the same A1c. But outside of that number, they could have very different blood sugars." So from a primary care setting, getting the information that could be garnered from using a continuous glucose monitor is very important. We have limited time with patients. And if we're able to gather a whole bunch of information at once and be able to look at that from a simple print-out that we could get, it allows us to treat our patients, a, way more appropriately; but, b, the fact that the patient's wearing a continuous glucose monitor and seeing their blood sugars all the time gives them the power to make decisions for themselves. It helps them look at things that we don't have time to address in the office, such as making proper dietary decisions all the time, getting physical activity, complying with your medications. It does a world of difference actually.

Yes. I think it's an important point that, really, how much time are you actually spending with a patient versus what they have to do on their own time in managing diabetes. It's definitely a difference in the time spent managing the disease.

Yes. Real quick, Christy. I'll tell you one thing that I found is the majority of diabetes is taken care of outside of the clinic. And it took me a few years to realize this that I thought, "Hey, look, I have a few minutes with this patient, let me get as much stuff done as I can." The more and more people you put a CGM on, the more powerful you see that they can make changes on their own. We can't spend every waking minute with these patients and tell them what to eat and what not to eat. The more flexibility we give them to be able to see what's going on in their own life, to reflect on that and make decisions on their own, the better off that they do.

Yes. I think the other thing is helping us to understand as we go into this type 2 space and we understand that person with type 2, I think -- you and I have had conversations, and you say no 2 patients are alike. But help us to understand, what are the perceived burdens of patients with type 2 diabetes? And how does CGM really help?

Yes. So I tell my patients they're like snowflakes, none of us are alike. And so the burden is diabetes has this negative connotation, "Oh man, I have diabetes, and I know that things are going to go poorly, and then I'm expected to change all these things." That's the biggest worry that patients have, is when they come to the office, "Dr. Grace, I don't know if I can automatically go get activity or more physical activity. Or I don't know if I can make all these dietary changes." In my experience, putting a CGM on them and letting them show what those minute changes that they make, how much it affects their blood sugars does them a world of difference. We call our clinic a judgment-free zone. We're not going to tell you what to do, but if we can give you the power to see what you're doing on your own and how those changes take effect and do ultimately affect your blood sugars, the better off these patients do. And so yes, that's why we're such big fans of CGM technology.

Yes. And thinking about the type 2 patient, what about CGM for those not on mealtime insulin?

Yes. So I've been very lucky to be doing a study in which we're looking at patients that we can't get CGM qualified for. So right now in the world, if you're not on intensive insulin therapy, meaning a long-acting shot occurring once a day and mealtime insulin every time you eat, it's been difficult to get these patients approved to be able to get a CGM. If we're giving CGMs to patients that wouldn't otherwise be approved, so type 2 diabetic on one shot a day or type 2 diabetic on no shots, just on orals or maybe that's trying to improve their life just with physical activity or dietary changes, we've been giving these patients CGMs. And at a 99.9% rate, we're seeing that they're ultimately making awesome improvements so much so that we're getting patients even weaned off some medications or getting them to do the things that they wouldn't maybe have the motivation to do on their own, make dietary changes, get regular physical activity. And so it's been as powerful of a tool as any medication that we have, if not even better, because it's safer.

So Dr. Grace, in light of the broad spectrum of therapeutics for type 2 diabetes, where do you see DexCom fitting into the patient journey?

Yes, great question. In my clinic, we actually use CGM technology first. I want the patients to know what's going on in the background with their disease. I want them to be able to see what happens when they make good dietary decisions and what happens when they make poor ones, what happens when they get activity and what happens when they don't get activity. Again, knowledge is power. And so the best way to treat a disease, we think of medications all the time. But this sometimes is as powerful, if not more powerful than medications that they're using because they can see how their meds work, how physical activity works, how not drinking -- what happens when you drink a milkshake, right? What happens when you don't drink a milkshake? That information is so powerful for the patient. And for the practitioner, the people treating this disease, that information gets simplified into a one-page printout that we see, that they -- when they come into the clinic and I can easily adjust their medications in a minute or 2 based on this information. So in my personal clinic, we give them CGM first, let them go for a week or 2, maybe even a month to learn their disease a little bit, come back and then we adjust medications. It's interesting, too, that diabetes isn't decreasing in this world. We know more about it than we've ever had in our life. We have better technologies like CGM than we've ever had before. The rate of diabetes is exponentially increasing, not just in the United States, but all over the world. In my mind, the thing we should be doing for these diabetics, first off, is letting them see their blood sugars so they can make improvements on their own before throwing medications at them.

So Dr. Grace, this has been a great conversation. In our last minute, would you tell us a little bit about where you think diabetes or -- excuse me, CGM and diabetes will be in the future?

Yes. If we're not using this in every patient with diabetes in the next 5 years, I've personally failed. I can tell you time and time again, case by case, patient by patient how people have improved using this technology. It's come a long ways. This isn't a new technology. It's been around for decades, and it's really improved in the last few years. It's obviously of benefit to any and everybody. There shouldn't be anyone that's type 1, type 2, pre-diabetes or -- I can even see an asset for this use in patients that are struggling with weight, right? If you can see your sugars all the time and you can see how your food choices affect your weight, this could be beneficial there, too. There's really an unending population of people that should be using this and we really barely even scratched the surface with. And I will tell you that it has gotten better with the insurance companies covering this. This was tough to get a while ago, and it's getting easier and easier. I think people are finally seeing the light that, hey, look, the more that I [ know about ] my disease, the better off I can do. And so this is -- if you had to have knowledge about diabetes as a disease, this is the most informational technology that we have available. Really, it should be standard of care. That should be, if I had to say. If you're getting diagnosed with diabetes, there is no more poking your fingers because poking the fingers at this point is antique. We shouldn't be doing that to our patients anymore.

I couldn't agree more. Dr. Grace, I want to thank you again for your time today, and thank you for telling us a little bit about your clinic and how you use CGM in practice. And with that, I'll just wrap it up and say thank you, everybody, for joining.

Yes. Thank you, guys.

We continue to hear more and more stories from the field similar to what Dr. Grace just reported: people empowered, significant health benefits and lives changed. We know that there are many doctors excited about the potential for CGM for the broader type 2 market. But what about the patients themselves? Well, let's start here with this market analysis that we did prior to our launch of G6 back in 2018. In an extensive market research survey, before the CGM market really inflected, we found that approximately 2/3 of type 1 patients and those with type 2 on mealtime insulin responded favorably to the concept of CGM. As the last 2 years have indicated, the market is moving towards this level of adoption and awareness as the technology grows. We recently conducted a similar survey of the type 2 nonintensive patient population. So what did we see? Nearly the exact same with 2/3 responding favorably. We also found very similar patterns of tech adoption preferences between intensive insulin users and the type 2 nonintensive community. So given the adoption we've seen in our technology over the last 2 years and the clear similarities between the 2 segments, we feel like we are truly on the cusp of another market inflection in the broader type 2 market. But even with the clear excitement over the use of CGM in the type 2 nonintensive market, we know that the experience and the needs of these patients are not the same as our mealtime insulin patients. One element that sit out immediately to us was the fact that medication management, often the primary focus of intensive insulin category, is nowhere to be seen in the top 5 needs for the nonintensive patients. These are different population with different user needs. Replacing fingersticks is important, but it's only one small element of what these patients need. Type 2 diabetes is complex and forces a person to balance diet, exercise, complex medications and several other factors in order to effectively manage this disease. DexCom has the power to do far more for these patients than simply replacing fingersticks. So how are we going to get our CGM to these patients? First, we're doing it with a direct partnership with UnitedHealthCare via their Level2 platform. In January 2018, we first announced our collaboration with United to assess a solution built from DexCom CGM data and utilizing an app built by the DexCom team for their members with type 2 diabetes. Since then, thousands of patients have been treated through the program, and the outcomes from the pilot are very encouraging: significant A1c reduction; medication regimes optimized with unnecessary medications removed; and their members achieving a 76% time-in-range, well above the industry standard established by the American Diabetes Association and averages that are seen in standard care today. As Kevin mentioned, the outcomes have been strong both clinically and financially. But most important, patients with type 2 diabetes are seeing meaningful quality of life improvements and feeling more hopeful and better than ever. Building from these results, United announced the launch of this program as a health plan, offering it to an initial 230,000 eligible participants with type 2 diabetes in 2021. In fact, we at DexCom are offering the Level2 health plan to our employees in 2021, and we're working on several important updates to make the user experience even better and accelerate the rollout of the program. We are also bringing DexCom CGM to the type 2 nonintensive community by partnering with several leading digital health programs, including Livongo, Welldoc and Onduo. We often receive this question from investors. Why partner with these programs versus developing your own solutions? These players accelerate our ability to generate DexCom awareness of CGM and the evidence of a significant utility in the space, which we believe will ultimately unlock broader access. We have a great appreciation for the complementary platforms these partners have developed to drive support and drive savings to payers, self-insured employers and integrated health systems. As the world shifts away from fingersticks, DexCom CGM will be an integral part of these offerings. Look at Livongo, for example, with well over 400,000 members with diabetes and patient numbers recently growing at greater than 100%, we have a channel where we can deploy DexCom CGM across a large and growing patient population, leveraging the data platform and real-time data tools that we've built to support our partners. We are confident that DexCom CGM will have a major impact in the management of type 2 diabetes and comprehensively address the needs of payers, providers, programs and most importantly, patients. To say it again, we can and we will do more for these patients than merely replace fingersticks, and we will continue to develop the insights and solutions to address this global health crisis. One of the reasons we're so excited about the type 2 nonintensive segment as a key pillar of our growth is that we're already starting to see the results with the combination of the channels I just mentioned as well as the early adopters paying cash for DexCom CGM. On our second quarter earnings call, we mentioned the steady growth of our type 2 intensive base, which at the time had reached 20% of our U.S. base and continues to be a nice growth driver for us. But in addition to those patients, we've also seen a growing adoption of type 2 nonintensive patients, gravitating towards our product in conjunction with the growing understanding of CGM as well as our market awareness efforts. With both of these segments growing, we now have greater than 25% of our U.S. base comprised of people with type 2 diabetes. To summarize our commercial efforts, we have a clear strategy to extend our growth profile and bring DexCom CGM to the many people globally who stand to benefit from better glucose control. We are doubling down on our U.S. investment in our U.S. sales team and executing on our strategy to simplify the process to prescribe and obtain our CGM systems. We are confident in the impact we can make in the type 2 nonintensive population with the right partners in place to start bringing DexCom CGM to these patients. With the excitement that we see in these patients, we expect type 2 nonintensive sales to contribute at least 5% to our revenue growth CAGR in our base 2025 forecast. And finally, we're going to drive awareness of the benefits of our products globally with a significant expansion of the territories that we serve occurring in the next 3 years. We're going to continue to push because this is just the beginning of the DexCom story. Before we close this section, let me remind you what motivates the team here at DexCom. This is our why. It comes back to customers, the thousands of people who are already benefiting from our technology and the millions of people who stand to benefit from the use of CGM in the future. It is these faces that make coming to work at DexCom every day an absolute joy, and it's why we are not going to slow down.

Next up, please welcome Executive Vice President and Chief Technology Officer, Jake Leach.

When we speak about sensor technology, it's natural for most people to jump directly to hardware platforms, but I want to start today at the same place where we began here at DexCom: with the customer. Our mission to empower people to take control of diabetes begins with understanding the needs of people we serve. Diabetes is such a complex condition, whether type 1 or type 2, that several decades ago a leading researcher in diabetes behavioral science created a standard measure to assess the mental health of diabetes patients and caregivers. It's called the Diabetes Distress Scale. The latest research suggests that between 30% to 40% of people with diabetes experience significant diabetes distress. They need a solution that simplifies the process of balancing insulin and carbs, optimizing medication, seeing the impact of healthy diet and moderate exercise and ultimately, improving quality of life. We focus our innovation efforts around a simple goal: to create a truly best-in-class customer experience. This includes all aspects of the customer journey, simple access to the product, the sensor experience itself, the tools that we develop around the sensor data, the resources that we integrate to assist patients and their caregiver sand ultimately, the experience of reordering supplies. It's this holistic emphasis that leads to a reduction in diabetes distress and customers that feel empowered. We've taken this approach to understanding our customers and their needs and set out to validate our products with actual results, which is one of the reasons why our competitors often use our studies to support the use of CGM broadly. Many of you are familiar with our landmark DIaMonD and GOLD studies. But we've also been willing to assess our technology with populations of people with diabetes that are often deemed too difficult to control or purposefully excluded from clinical trials. You've seen this from us in the past with our HypoDE study, where we purposefully enrolled people with documented hypoglycemia unawareness in order to document the protective features of our CGM. Recently, we've taken a similar clinical approach with various trials demonstrating health outcomes and other patients' willingness to engage with our technology. This includes young children from traditionally underserved groups, teens and young adults, and even those who are legally blind who are utilizing our connectivity with Apple's Siri feature. These are powerful examples of how the tools that we have built functioning across the spectrum of people with type 1 and intensively treated type 2 diabetes. Now we are embarking on the next phase of our journey, and the emphasis on research and outcomes is not slowing down. We're actively looking at the opportunities for patient care with DexCom CGM beyond type 1 and intensively managed type 2 diabetes. Currently, we are supporting more than 120 clinical trials around the world: hospitals, specialist outpatient clinics and community settings. So far in 2020, our clinical scientists have written or supported over 30 peer-reviewed articles. And unlike the unreviewed letters to the editor that our competitors like to use in their marketing materials, our publications in 2020 include multiple articles in JAMA and The New England Journal of Medicine. Our research is a reflection of our confidence in our CGM systems as well as our efforts to understand the needs of our customers. Our research also informs the way we've invested in tools that our patients need. These include tools like our predictive alerts, which utilize glucose trend data to provide customers with a predictive alert that gives them a warning 20 minutes prior to an impending low glucose. Built from the accuracy of our system, these alerts give patients the opportunity to respond before they're in a dangerous low range. Not surprisingly, we've seen incredible real-world results from these alerts and the prevention of hypoglycemia with a 33% to 40% reduction relative to our previous G5 system, which only had threshold alerts. The benefit of the advanced warnings are not limited to the prevention of hypoglycemia alone. By allowing a customer to make a measured response based on advanced warning we've also seen a significant reduction in both the number and frequency of rebound hyperglycemia. These are the kind of solutions that allow for balance and significant improvements to time-in-range for our patient base. In addition to the alarms themselves, our cloud connected SHARE system and Follow app bring loved ones into the fold to support people with diabetes and provide them with additional encouragement and safety. We've spoken before of specific cases of parents of young children and also children of older parents being alerted in their Follow app and taking quick action to assist their loved one, and in some cases, even saving their life. The quotes here are just a sample of the stories we receive from our customers. Look at the words that are frequently used: comfort, peace of mind, freedom. These are the kind of tools that relieve the burden of disease management. To give you a big picture sense for the importance of our alert technology and how important these SHARE and Follow platforms are, keep in mind that as of November, we had more than 42 million Urgent Low alerts notify customers of dangerous lows. 30% of those alerts occurred in the critical overnight hours. These are tools that are truly saving lives. We've taken our research on the customer experience, whether that customer is a patient or a clinician, and we've used it to develop the highest-rated diabetes data solution, our DexCom CLARITY software. In CLARITY, we have built a software solution that is able to identify patterns that patients and clinicians can see and act upon. We've embedded encouragement for our patients with our Best Day feature, knowing that people with diabetes often grow frustrated with how frequently they're told what not to do. And the results of these tools are clear. Our patients who engage with the CLARITY app have significantly higher retention and better health outcomes. When clinicians download the CLARITY software, we see a meaningful increase in their prescribing habits. And finally, during this pandemic, we've seen a rapid adoption of CLARITY in the primary care setting as clinicians have recognized the clear value of the software and its ability to help them manage their patients remotely. As the first iCGM on the market and still the only one indicated for use with automated insulin delivery systems, we are the forerunner in the category of interoperability and are advocates for patient choice in insulin delivery. With Insulet's Omnipod 5 preparing for a first half of 2021 launch, we feel that our leadership in this category will result in us having integrations with the leading tethered pump on the market in Tandem's Control-IQ and the leading tubeless pump in Omnipod 5. We are also very excited about the development progress that Lilly and Novo Nordisk are making in their Bluetooth-connected smart pen technology. And we continue to believe that the solutions we're working on with those 2 teams will enable significant improvements in the user experience and ease the burden of diabetes in the MDI population, which represents the vast majority of insulin intensive users across the world. Two years ago, we stated that we believe that by 2023, 50% of our insulin-intensive customer base will be using a connected insulin delivery device in combination with our CGM, and we believe that we are on track to hit that mark. Connected systems are truly the future of diabetes technology. And we are working to extend our leadership in the category with these key partners and the tools that we've created to support the integrations, including our DexCom artificial pancreas algorithm technology. We've spent years developing a connected ecosystem that enables flexibility in the way our CGM data is applied and integrated into other systems. Everything starts with the body-worn G6 transmitter and sensor. The G6 transmitter utilizes Bluetooth technology to connect directly to the G6 app on a smartphone, either iOS or Android, as well as simultaneous communication with a medical device such as the G6 receiver display device or a connected insulin pump. Data automatically flows from the G6 app into our secure cloud infrastructure, allowing us to power the real-time remote monitoring Follow app. Our secure cloud also powers the CLARITY web and mobile app, enabling clinicians to see their patients' data, access patterns and give insights. The days of having to physically download patient data in a doctor's office are long passed. In addition, this cloud connectivity allows for integration into EHR systems. We have built our system to allow users to seamlessly transfer their CGM data to other digital health apps. We are the only diabetes company that offers a comprehensive suite of APIs, developer tools and dedicated technical resources to power these third-party applications. As of last month, we had more than 2,300 developers registered to access these tools, over 30 different digital health apps that users can choose to link their G6 app and share their CGM data. Currently, we have over 100,000 of our CGM users taking advantage of this connectivity into third-party systems. These tools clearly align with our focus on the customer and our recognition that even as we develop tools to empower our users, there are additional benefits for our users that come from the ability to integrate their CGM data with other systems. We believe that our cloud infrastructure and technical capabilities set us up well to be the preferred partner of choice for future programs built around CGM data. These include programs like Level2 by UnitedHealthcare, which both Kevin and Chad have addressed as a key component of our strategy to bring DexCom CGM to millions of people with nonintensive type 2 diabetes. It includes the ability to support several of the up-and-coming consumer health and wellness apps, which are gaining in popularity and more and more data is emerging showing the significance of glucose to metabolic health. It also includes clear extensions of our technology for remote patient care, such as our integrated solution with Current Health's remote patient monitoring platform, which offers clinicians the ability to actively monitor patients post discharge and help to address the all-too-common occurrence of hospital readmission. As you can see, we've invested significantly to establish a partner-friendly ecosystem and data platform in the best interest of our customers and one that goes far beyond the sensor platform itself. We've demonstrated the ability to create tailored software, data access solutions with account management and some key services to support our partners, such as regulatory consulting and customized technical support. This provides us a strong competitive advantage as we press forward with our 3 pillars of growth over the next several years and well into the future. We believe that our suite of tools offers both partners and patients a CGM experience that is truly unmatched. And we are taking this suite of tools that has largely been built around G6 and setting out to make them an even better solution by pairing them up with our next-generation CGM. Let me introduce you to Dexcom's G7. [Presentation]

With G7, we've taken all of the great features that we've established with G6, features that have resulted in market-leading patient satisfaction scores and have made them even better. G7 is a real-time factory-calibrated continuous glucose monitor with iCGM level performance, a simplified application and start-up process and a faster warm-up time. We've packaged all of this into a fully disposable form factor that is 60% smaller than our current G6 wearable and introduces significant cost reductions across the manufacturing process. This G7 wearable technology is paired with a brand-new app experience that includes real-time glucose information, combined with personalized insights designed to further enhance the unique value users get from DexCom CGM. Take all these features together, and you can understand why we are so excited about G7 as a key driver of the growth story that we've laid out today. Based on the improvements we have made across the board with the G7 platform, we are confident that it will only increase the market-leading customer experience scores that we are already receiving with G6. We are encouraged by the performance we saw from G7 in our pre-pivotal clinical studies, which we presented at this year's Annual Diabetes Technology Meeting. We are seeing consistent accuracy and performance across days of sensor wear, wear location and within pediatrics and adults. We've begun our pivotal studies and are expecting to launch G7 in multiple markets in 2021. We remain focused on extending the sensor wear period of the G7 platform beyond 10 days and will initiate an additional clinical study in the future to support this extension of sensor wear time. With the improved form factor and scalability of the G7 platform, we are well positioned to extend DexCom's growth for many years to come. We've spoken today about being aggressive in our 3 pillars for growth and believe that this is just the tip of the iceberg of what we can address with the G7 platform. For example, if we take a look at prediabetes, according to the CDC, more than 1 in 3 adults or 88 million people living in the United States have prediabetes. Most people with prediabetes, over 85%, don't know they have it and go on living their life undiagnosed. This is concerning because many think of prediabetes as only a warning sign. However, prediabetes is a serious health condition. Increased blood sugar levels put people with prediabetes at increased risk of heart disease, stroke and other comorbidities. And as the name suggests, prediabetes is a precursor for type 2 diabetes. Over 30% of those with prediabetes will develop type 2 diabetes within 3 to 5 years, requiring a lifetime of careful blood sugar monitoring. Diabetes impacts every organ of the body and if not managed effectively, type 2 can lead to a host of health complications, demanding frequent trips to the doctor and impacting quality of life. Fortunately, prediabetes is reversible if immediate and lasting lifestyle changes are taken to maintain blood sugar and glucose levels. This is why controlling glucose is so important to long-term health and well-being. In this recent clinical study, we can see how health outcomes improve when glucose is controlled, and time-in-range increases using CGM systems. In one study, participants using CGM systems saw changes that might be expected with the use of CGM management in diabetes. For example, 89% changed their medication to better meet their health needs, significant improvements to time-in-range and A1c, a key indicator of blood sugar management, fell 1.6%. But the results went far beyond this. Participants also saw a decrease in weight, averaging 9 pounds, and significant improvements in blood pressure, LDL-cholesterol and triglycerides. With glucose readings every 5 minutes, continuous glucose monitoring technology can be incredibly effective at illustrating how behavior and lifestyle choices can immediately impact our glucose. Empowered by data, people with prediabetes can spot trends and patterns and make different choices to keep levels under control, stopping type 2 progression and maintaining well-being. We are seeing more and more data like you see here. Glucose control is not simply for the [ health of many ] with diabetes but is essential to the health of the whole person and our efforts to drive wholesale change across population health. We are scaling the G7 platform to address this level of acceptance of CGM technology. We're thinking big about the kind of health outcomes that CGM can provide. And before we turn it over to Quentin for a review of our financial outlook, I want you to hear directly from someone who is pioneering the use of DexCom CGM with this kind of big-picture vision in mind.

Please welcome President and CEO, Kevin Sayer.

Well, this is going to be the most interesting part of our Investor Day, for me anyway. It's truly a privilege to do an interview with Peter Attia, who's worked with us here at DexCom for a while. Peter's and DexCom's relationship started with the 2 of us sitting next to each other on an airplane at which point in time, he asked me what I did, I asked him what he did. And we found out there was really a link here into what Peter is trying to accomplish in medicine and what we're trying to do with glucose values. And I always knew Peter was very smart based on when I talked to him, but then Peter did me the favor of letting me be on his podcast. And I can tell you all the podcasts I've been on don't compare to the number of comments and people reaching out to me about Peter's. Literally, people I've known for years, rush -- run up to me, and I think, "Oh, you're glad to see me." And they go, "Do you really know Peter Attia?" And I get to tell them that I do. So Peter, welcome to our Investor Day. Tell us a little bit about your practice in general and what you do.

Well, thanks for the kind words, Kevin. So my practice focuses on longevity, which is a bit of a hokey term. It's almost something I hate saying because it sort of sounds like there's elixirs and lotions and potions involved. But the reality of it is it's trying to figure out how to lengthen life and how to simultaneously increase quality of life. And I don't mean supernaturally like live to 200 or something. But I mean how would you add 10 to 15 years to an already great life at a higher quality?

And how did you get to that place? I know you've done a number of things. How did you get to that place where you wanted to specialize, Peter, after all the other things that you've done?

Well, I mean, I trained in surgery, and it was a very traditional type of training. And became actually quite disillusioned with medicine and left in 2006 when I felt that all of this great specialized training I had, and I was training at -- it was probably the best hospital in the country at the time, seemed to do so much at the end of the line. So we had -- we just could do these incredibly heroic things at the end of life, when someone's abdominal aortic aneurysm ruptured and we could do some heroic operation that might extend their life by a couple of months. But it felt very frustrating to me that we weren't doing anything to avoid that situation altogether. And so it really was the birth of my daughter that kind of got me thinking about mortality in a different way, and I suspect many parents can relate to that. It's the first moment when you -- for some of us at least when you start to think about someone else more than yourself. And so with her birth and obviously the birth of subsequent children, I just became more and more interested in this idea of preservation of a high-quality, healthy life to have more time to enjoy with them and hopefully their kids and maybe even one day their kids' kids. So it started as my own obsession for myself that then grew into a practice.

So with longevity, how did you bring glucose control or glucose as a sign into your practice, into your thoughts? Was there a tipping point? Or what was your glucose journey to get where you are with CGM today?

It really came from a very thorough investigation into what drives mortality. So if half of what we're trying to do is delay death, you have to understand what that means. And without going into all the details, just for the sake of time, I'll just get to the punchline. If your interest is in living longer, you have to delay the onset of chronic disease, full stop. And that might sound obvious, but it wasn't an obvious conclusion, especially when applied to mere mortals like us who maybe don't have the centenarian genes that are going to get us to 100 no matter what we do. So if you want to delay the onset of chronic disease, that really means delaying the onset of 3 enormous processes: atherosclerotic disease, so the underlying condition that predisposes to heart disease and stroke; cancer; and neurodegenerative disease of which Alzheimer's disease is hands down the most prevalent. And each of those diseases has a number of things that drives them. So for example, in the case of cardiovascular disease, this is a disease that's driven by lipoproteins, inflammation, endothelial function and metabolic health. You can go through the same sorts of predisposing factors for cancer and Alzheimer's disease, but the one thing that is common to all of them is metabolic health. So I describe it to my patients as these 3 pillars of disease that sit on a table or foundation of metabolic health. And metabolic health has a number of components, but there's nothing more central to it than insulin resistance. And if you want to understand insulin resistance, you have to understand glycemic response. And there's no better way to do that than to be able to measure glucose in real time every minute of every day.

So you've been working with DexCom CGM as that tool to measure glucose. How do you use the CGM with your patients? How often, how frequently? How have you incorporated CGM into this journey that you're doing?

Well, I would say right now, Kevin, probably a little over half our patients. And most of our patients do not have either type 1 or type 2 diabetes. We have 2 patients with type 1 diabetes in the practice and none with type 2. But still fully 50% of our patients, if not slightly more, use CGM. And we create a very clear set of goals for patients, which is based on 3 parameters. So what is your trailing average glucose? What is the standard deviation of that glucose? And how often do you exceed a certain threshold that we would set for you? So an example of that, these would be kind of what I would call reasonably aggressive goals but by far not the most stringent. We would say, "Look, we would like to know that your average glucose is at no more than 100 milligrams per deciliter, that your standard deviation does not exceed 15 milligrams per deciliter and that you never exceed 140 milligrams per deciliter." And we might start with less stringent goals at the outset, but we continue to increase the standard in the hopes of driving those numbers lower and lower.

And how long do you have your patients wear it? [ Do they wear it ] all the time? Do they wear one? Or what is your typical use case for your patients?

We ask patients to give us 3 months. Because a lot of times, as you can imagine, Kevin, people are a little bit reluctant to do this, and especially if it's not necessary. It's probably one thing for somebody who's been checking their fingersticks their whole life to realize, "Oh, wow, you're going to relieve me of that horrible burden, and all I have to do is put this thing in once." But we're dealing with a demographic of people that have never had to poke their finger once. And part of it is, look, I've been doing it for 5 years. So that carries some weight with them. But the other thing is I say, "Look, this is going to do 2 things for you that you can't imagine until you get there. So I'm asking you to take a leap of faith." The first is it's going to give you insights that I can't even give you, meaning, day in and day out you are going to see how the foods you eat, the way you exercise, the stress you're under, the effect of the sleep you had the night before, you're going to see how that affects glucose. The second thing it's going to do for you is become the most powerful behavioral tool you've ever encountered. It is going to change the way you interact with food because there's this Hawthorne effect of wearing this device that gives you feedback. And so I'd just say, "Look, do it for 3 months. If at the end of that time, you think I'm crazy, great. No problem, small investment." And most people, at the end of 3 months, say, "This thing is phenomenal."

So Peter, there's -- people often say for a glucose -- a CGM of this nature, we don't have to perform at the accuracy level that DexCom does, so it can be a lot less accurate. What are your thoughts on that?

So I disagree with that. I think once people really get into this device, the gamification becomes significant. And there's a big difference between an average blood glucose of 100 and average blood glucose of 115. And that difference might not be enormous if you're dealing with trying to differentiate between 260 and 230, but it is very significant at the level of 100 to 115. And there's another big advantage that I think DexCom has over the competition, which is the ability to force a calibration. And even though the G6 does not require calibration, we encourage our patients to calibrate it every day. And I think that's what produces the high-fidelity results that we see, which is within a couple of days that sensor learns and you're basically accurate to 1% to 3%.

And there are some of our patients that do that. That's why we kept the optionality in, and we knew it was important to some people. So Peter, all the learnings you've got from all of your patients on CGM and on yourself, give me a couple highlights that the people that are going to hear this might be a little surprised about it, things you've learned and you've learned from your patients in wearing CGM full time.

Well, I'll try to give it with respect to maybe each of the different sort of lifestyle metrics. So I'll say that a bad night of sleep will do a lot more to trash your glucose in the subsequent day than most people realize. Now if you study sleep literature, this shouldn't be surprising that sleep literature is full of studies that demonstrate that interrupting a person's sleep even for a few weeks, let alone the more chronic sleep deprivation that many people experience, will produce profound insulin resistance. And this is by -- documented by the gold standard, things like clamps and things like that. So for people to realize that is pretty amazing. I think another thing with respect to exercise would be on 2 sides of this. One is very intense exercise raises blood sugar in the short run, and that's not something to be alarmed with. That's normal physiology. That's the hepatic glucose output that -- I can push my glucose levels to some of its highest readings just doing intense exercise. I could hit 160 milligrams per deciliter exercising. I might only a couple of times a year hit 160 from food. So that's something that's pretty interesting. On the flip side of that, you realize what your capacity is for glucose disposal once you've depleted glycogen through exercise. So you could consume the same meal under a no-exercise or a post-exercise scenario and you have very different glucose kinetics.

Very, very different. Yes.

And I would say the third thing that many people are startled by is the amount of so-called healthy foods that are categorically garbage as based on what they do to your blood sugar. And the list of that is too long to get into. But just ask anybody who's worn CGM what these healthy protein bars did for their blood sugar.

Well, I've worn enough CGMs and eaten enough unhealthy things, I can give you a list. And some of the unhealthy things are not as bad as you think they are, the others are much worse. Peter, thanks so much for our time, this has been a -- your time. This has been a great discussion. I think we have a tremendous opportunity here in this field of medicine. And with pioneers like you, we'll get there. Thank you very much.

Thanks, Kevin.

Now please welcome Executive Vice President, Chief Operating Officer and Chief Financial Officer, Quentin Blackford.

Thank you, Kevin and Peter. As you have had the opportunity to see and hear this morning, we have an outstanding future in front of us with tremendous growth in store and importantly, many avenues ahead to ensure that growth is realized. Importantly, as we pursue those opportunities, our goal is to deliver an outcome that can generate significant financial flexibility, which enables us to continually reinvest into and pursue the various growth avenues that exist. And we do that by driving the revenue growth that we've spoken about earlier today, in addition to a continued focus on delivering operational efficiencies like we have before with just a few examples, like designing significant cost out of our systems or putting automation in place of manual effort. As a result of this dedication, we're continuing to deliver greater operating leverage as well as by driving more efficient G&A capabilities with automation, utilizing our global footprint to take advantage of synergies where they exist and ensuring that we prioritize and invest our spend on the most impactful areas creating future value. With that focus and as a result of the great work that the team has done to date, we are today dramatically increasing our financial outlook for the company by more than doubling our projected revenue estimates in our long-term outlook. And while significant, we continue to believe that we are just scratching the surface of where this has the potential to go over time. The last time we spoke to you from our Investor Day in 2018, we had set our goal to deliver roughly $2 billion to $2.5 billion in revenue by 2023. Not only have we nearly achieved that objective 3 years earlier than anticipated but we have also delivered on the long-term profitability objectives that we had laid out at the same time. And here we are today, now anticipating that we will double revenues once again to $4 billion to $4.5 billion, which would reflect a compound annual growth rate of 15% to 20% over the next 5 years. We expect a gross margin profile that will remain consistent with that perspective that we laid out historically in the mid-60s range of roughly 65% and we'll deliver incremental improvements in our operating and EBITDA margins by another 400 basis points each. Within this model, as we approach 2025, we will have delivered a financial profile that will generate approximately $1.3 billion of annual operating cash flow, putting us in a very strong position to further pursue value creation opportunities beyond what we're speaking to here with meaningful financial flexibility to do so. That financial profile and flexibility is important because while these revised financial metrics represent significant increases from our prior Analyst Day, by no means are they stretch goals. They are measures that we feel highly confident in being able to deliver, particularly when you come back to the market opportunities and the runway that exists that you've heard our teams talk about over the course of this morning. Again, only roughly 25% of U.S. intensive patients understand and utilize the value of CGM today. We expect that the vast majority of patients in this market will come to realize and utilize CGM over time. The U.S. nonintensive market sits at only 2% adoption today. And importantly, we see significant progress beginning to be made in this particular market space as we speak. External data from sources like IQVIA would indicate that there are a significant number of type 2 nonintensive patients beginning to utilize CGM already. We see it in our own data as we now see more than 25% of our patient population represented by people with type 2 diabetes, which includes nonintensive insulin folks. Further, when looking at the results coming back from many of the programs that we've participated in with payers, it's convincing that CGM can and will improve the outcomes for nonintensive type 2s, and we see that catching on with the payer partners as they receive the financial benefits of these outcomes and continually increase the scope of their programs. Global expansion remains a large greenfield of opportunity. And from Paul's presentation today, you now have a better understanding of how we'll continue to expand our presence in that vast field that sits in front of us. Finally, the opportunities that reside in new markets are significant, possibly the largest opportunity of any of the focus areas we've provided today and something that you'll see us put resources into for the foreseeable future. Before we get into our long-term financial drivers, it's important to take a step back and recognize that we've been down this path before. We've been here and we've delivered. We will do this once again. Looking back, we nearly doubled our revenues in the last 2 years alone, delivering more than $850 million in incremental revenue, while more than doubling our patient base. We've increased our gross margins from 64% to 66% despite navigating through the mix transitions created from charging hard into the pharmacy channel, while also strategically stepping price down towards our long-term goals. And importantly, we've delivered roughly 1,200 basis points of operating margin improvement during the last 2 years, delivering on what was our long-term operating margin goal at the time of 15% despite continuing to invest heavily into innovation and building out commercial capabilities as a result of meaningfully levering our G&A spend profile. It's important to understand how we've been able to deliver such significant improvements in our financial profile to date. This hasn't been achieved by simply going after low-hanging fruit in the business. Instead, this has been accomplished by bringing an operational discipline and focus on operational excellence to the company. It's been transformational change like introducing robotic process automation that has enabled us to reduce head count requirements by more than 20% in particular groups. This is something that stays with us and will generate benefits far into the future. It's accomplished by completely redesigning product configurations and manufacturing processes to reduce product costs, like our transmitter, by more than 50%; or increasing capacity by more than 4x with automation equipment that will let us lever and scale against our overhead costs for years to come; or utilizing our global footprint to place people resources into cost-efficient locations, reducing labor cost by more than 60%, while at the same time improving customer satisfaction; or introducing more efficient scalable platforms like our e-commerce platform that lets nearly 50% of new patients in these markets move to a self-service sort of model. It's these sorts of transformational changes that have taken place. These types of changes are not easy, but you should see that through a culture committed to progress we've been able to grow at an incredible rate while transforming the business at the same time. I want to play a video that begins to demonstrate the sort of automated improvements that we've been delivering over the last couple of years and will continue to move towards with our G7 manufacturing processes. [Presentation]

Exciting as the last 2 years have been and the reality that many of these focus areas will continue to pay dividends far into the future, we're just getting started with respect to what sits in front of us. Many of you may have seen the recent announcement of our intent to put in place a global business support center in Lithuania. This will replicate much of what we did for our U.S. business in Manila and do the same thing for our European business. As part of our operations transformation efforts that we launched in the last 12 months, we've invested into procurement professionals and systems that will allow us to drive both direct and indirect cost out of our systems. This is the big reason why we are more confident than ever to be able to deliver a product cost profile of less than $1 per day. We've expanded in a significant way into Malaysia, a lower-cost jurisdiction that will drive cost benefits for years to come on both our G6 and G7 product platforms with the plant designed from the ground up for DexCom manufacturing. And we've completely redesigned our logistics and delivery capabilities in the states that will begin to take effect next year, dramatically reducing the cost profile associated with getting our product into our patients' hands when needed. As you know, when we drive this sort of operational discipline and excellence into the business, opportunities are created, and we're extremely excited about those that sit in front of us. What we have demonstrated and will continue to demonstrate is that we will be efficient with the spending of dollars so that we can place the right investments to generate shareholder returns. To date, you've seen us reinvest portions of these dollars into expanding partnerships or opening up new markets that have meaningful potential in front of them. We'll continue to leverage G&A and prioritize R&D spend to redirect dollars into continuing our efforts to build out a world-class sales and marketing capability, while improving the customer experience and broadening reach into the primary care physician offices, where many of the type 2 patients are seen today. And finally, we'll continue to heavily invest into scaling our manufacturing as we've never been more bullish on the opportunity to open new markets and produce product at a lower cost point than once thought possible, which put even greater opportunities on the table. So let's turn to the future financial measures that we've laid out for you. As already mentioned, we expect revenues to grow from $1.9 billion this year to $4 billion to $4.5 billion by 2025. That represents an annual compound annual growth rate of 15% to 20% over this planning horizon, and importantly, contemplates that we will continue to realize roughly 7 to 8 points of channel mix shift as we further expand into the pharmacy channel in the next couple of years. Once we are through that, which we expect to be towards the end of 2022, we are planning with an assumption of a 2% to 3% price reduction per year, comparable to what you see in most medical device markets. As we have always committed to you, if we can navigate through this in a more efficient way, then there will be upside to our numbers. We expect that you'll continue to see the makeup of our business evolve as we continue to globalize our company and open new markets, with the international contribution moving from roughly 20% today to roughly 30% in 2025 and new markets contributing somewhere around 15% during that same time period or nearly $700 million of revenue. I also want to take a moment and speak to our strategic efforts to move further into the pharmacy channel. It's something that gets a lot of attention, particularly as we navigate through this temporary short-term mix pressure that it puts on our revenue. It's imperative that we continue to pursue this channel aggressively if we plan to address the additional 75% of the patients in the intensive market alone that don't use CGM, let alone the millions more that we expect to come on to CGM in the nonintensive market. To date, we've made outstanding progress and are navigating our way into the pharmacy channel with nearly 50% of our existing commercial patients now receiving their product as a pharmacy benefit. Importantly, we are about 2/3 of the way through this transition and expect that we have roughly 1/3 left to go that will play out over the next 2 years. Ultimately, we believe that roughly 25% of commercial lives will remain as a medical benefit as certain payers have refused to change to a pharmacy benefit. I also want to reiterate that the pharmacy channel is the channel of choice for us, not only because of the ease of access for the patient and the need for scalability, but also due to the fact that the profitability profile of a patient moving through the pharmacy is comparable, if not more attractive, to us than a DME benefit. The illustration on the slide before you attempt to lay out the financial comparison of the 2 channels. In the pharmacy channel, revenue is less, primarily as a result of the rebates that are paid. However, the cost to support those models are significantly less as freight costs come down from not shipping product to each and every individual. In addition, support infrastructure associated with benefit investigation, billing, collections, denials as well as bad debt write-offs come down dramatically, which ultimately results in an operating profit profile that is equivalent, if not greater, on a dollar basis and certainly stronger as a percent of revenue. You're seeing this play through in our existing results as we've made tremendous strides into the pharmacy channel as well as significant improvements in our profitability profile. There is a reason that they are moving in similar directions. Turning to gross margins. We expect our gross margin profile to continue to be in the mid-60s as a percent of revenue. We've realized many of the benefits that we laid out 2 years ago at our Investor Day, but additional opportunities remain around design changes, particularly with the G7 product coming out, which was designed with low-cost manufacturing in mind as well as introducing a much lower-cost receiver. We'll continue to leverage much of our existing infrastructure that we've put in place in the last several years as volumes dramatically grow, leading to another 200 basis points of improvement related to manufacturing efficiencies. We anticipate that these improvements will then be offset by the continued push into the pharmacy channel that we've discussed, which will prevail for the next 2 years, and then expecting roughly 2 to 3 points of price pressure on an annual basis beyond that, which is roughly 75 basis points of gross margin pressure per year or 3 total percentage points in this 5-year outlook. All that considered will take you to roughly 65% gross margins over the planning horizon with our commitment to deliver better, if possible. Turning to adjusted EBITDA margins. We expect to drive another 400 basis points of improvement over the planning horizon. This would indicate that we will drive a further 500 basis points of improvement from our operating expense profile with leverage in our R&D and G&A spend being the primary drivers of the improvement as we redirect resources into further building out our global sales and marketing capabilities. Importantly, R&D dollars will continue to grow, just not at the rate of revenue. The investment into sales and marketing will be directed towards expanding our commercial presence into the primary care physician offices, expanding global reach into new markets and increasing efforts around direct-to-consumer and sample programs as we continue to drive awareness around the value that CGM has to offer and importantly, further differentiating the DexCom patient experience. It's important to note that given the meaningful improvement in our profitability profile over the last couple of years, that the progress over the next 5 may not be linear. We advanced at a much faster pace than originally anticipated and therefore may find ourselves making investments over the course of the next 5 years that will not allow the progress to be linear over the planning horizon. We are committed to delivering this improved financial profile, but importantly, will not forgo investment opportunities in the near term to drive future growth. In addition to the significant profitability improvements that we are driving, there are other levers that we will continue to push and pull on to deliver incremental value. Importantly, during this horizon, we will transition into a cash taxpayer. This is something that we have been mindful of and planning for a while now. Over the last several years, we have implemented a global tax structure that will allow for a tax rate in the low 20% range, ultimately moving into the mid-teens over time. This will generate significant cash savings, leading to long-term gains in shareholder value and improved earnings per share profile. Further, we've put in place a very flexible capital structure with a very low cash cost while maintaining significant liquidity, enabling us to be opportunistic when needed to invest in underpenetrated markets or be opportunistic with M&A or even pursue share buybacks if we didn't see other viable opportunities to utilize that cash. In wrapping up, there's never been a more exciting time to be a part of the DexCom story, and we've never been more convinced of the opportunity that exists here to create differentiated outcomes for our investors. We're uniquely positioned to drive industry-leading growth from significantly underpenetrated or untapped markets, deliver meaningful operating leverage improvement while balancing strategic investments, proactively addressing becoming a cash taxpayer and the future dilution that will come from it, which will result in meaningful EPS growth that will far exceed top line growth, all the while, while delivering an outcome that will provide the financial flexibility to set us up for the next 5 years of further increasing and creating shareholder value. Thanks again for your time today. We couldn't be more excited to have you with us and for the future of what we have in front of us. It's truly unique and not found in many places. With that, we'll now move to a question-and-answer session. Thank you.

We will now transition to Q&A.

All right. Thanks, everybody, for listening to our presentation. I hope you found it informative. We certainly did as we were putting it together and provided a very good reflection of our business and plans.

We'll now turn it over to Q&A, and we'll be taking some questions for a while. So go ahead.

Our next question comes from Margaret Kaczor of William Blair & Company.

So first one is maybe a little strategic and I'll tie in a little guidance towards it. But maybe strategically, as you look at some of these partnerships that you referenced, like the Level2 with UHC, do you expect any of these to be exclusive to DexCom? Or maybe you can drive more faster growth? And really, the question is, how do you position yourself so that that switching cost of going to another player is more difficult? And then just to tie in the guidance. I was a little surprised, frankly, that the gross margin guidance came in what it was on 2025 just given the comments from Quentin on the $10 per sensor COGS, which basically gets me to $360 of COGS per year with full utilization. That's G7 and a 10-day sensor. So even at $1,200 per year in revenue per patient, that's 70% gross margin. So maybe just rightsize me on the delta there.

Thanks, Margaret. I'll take the first part of your question with respect to these programs. And we talked about a bit earlier. I think in this age of interoperability, it's going to be very difficult to have exclusive relationships per se. But what we're trying to do is build an infrastructure around just the form factor of the sensor to whereby we can create an experience where we are the preferred partner. And with our interconnectivity opportunities, the ability to connect to multiple devices, the ability to pull data from the cloud through APIs, the ability to have a different app experience for a different patient group and to integrate within the apps that our partners are putting forward for their patients and offer the ability for them to represent that experience that's powered by DexCom rather than jump from a DexCom experience to their experience and everybody be confused. So by creating that experience, we believe we can position ourselves with these partners to whereby we will be their preferred partner. Combined with that, the performance of our sensor, the ease of use of our G6 system currently and combine that with a much easier experience with G7, we believe we can absolutely put ourselves in the driver seat with these programs going forward, and we're very focused there. The other question, Quentin, I'll turn the margin question over to you.

Sure. Margaret, we're incredibly excited about where we could go with the margin. I think we see clear line of sight to continue to drive efficiency there. There's no question about it. At the same time, as we look into the future, the need to continue to scale and invest is going to be significant. We're not talking about tens of millions of units. We're talking about hundreds of millions of units as we look at these potential markets that we're going to be able to serve. So our profile in terms of the forecast contemplates significant investments as we continue to stand up factories and build out that capability. I think at the same time, when we talk about the cost profile of being that $10 profile or $1 dollar per day in a 10-day use profile, that's really the cost of the product. You still have other support costs that you have that are tied into it that hit the gross margin as well. So the freight cost, for example, getting it out into the hands of a patient, that could evolve over time as it goes more directly towards the consumer. Potentially, depending on which market you're serving, that model can evolve. There's the warranty cost that also contributes to that as well. And then you heard us talk a lot about the value of the patient experience. We continue to look at that as being something unique in terms of how we think about serving the patient. I don't think that the broader market thinks of it that way. But there continues to be cost and investment that's going to be required to build that capability out as well. So you've got those aspects playing into the margin. I feel incredibly confident at that margin profile. If there's the opportunity to deliver better, we certainly will, but we're very confident that we can deliver [ on the ] margin.

Our next question comes from Jeff Johnson of Robert W. Baird & Company.

Can hear me okay?

You bet.

All right. Great. So Quentin, I thought I'd maybe ask you a couple of questions on the channel mix that you talked about. One, if I take your 7 to 8 point [ channel mix ], it sounds like maybe $140 million to $160 million ballpark of pricing or channel mix headwinds next year. That's down versus this year or a little bit less bad versus this year. So one, can I just confirm that math? And number two, just to push you a little bit, if you're already at 50% pharmacy, I would assume that big move happened this year, you had the step down in Medicare from Class 3 to Class 2 when you went to G6, really hit a lot this year. What drives the pricing after you get through 2021 to another 7 or 8 points in '22? It seems like most of that might have anniversaried mostly through '21. But just any help there would be good.

Yes. Jeff, we're not going to give guidance on '21 at this point in time. Clearly, we'll talk more about it as we get around the turn of the year. And probably around the JPMorgan conference is historically when we've put guidance out there. I think the encouraging thing is we've made a tremendous amount of progress through the headwinds that are there from a channel mix perspective of getting into the pharmacy. And we've only got about 1/3 of the way left to go. Now that remaining 1/3 that we have left to go continues to happen off of a bigger base of business. So you got to keep that in mind. So the dollar impact, I think, will continue to be very comparable to what we've seen for the last couple of years. And I think that plays out through '22. I just think that it's going to take another 24 months or so to get all the way through that and get to the endpoint that we think ultimately the mix will look like. The reality is there's some payers who just refuse to go towards the payer -- or the pharmacy model. They're going to continue to stick in DME. But I think based upon what we've laid out for you today, and not getting into specifics around '21, the right way to model it is something comparable to what we've seen for the last couple years. Obviously, it's stepped up a little bit this year. You're going to continue to see that for the next 2 years. And then I think once you're past that, you're going to see some headwinds that are probably more reflective of what you generally see in the medical device industry, which, from our experience, is closer to that 2 points or so. And I couldn't point you to specific things today that are going to lead to that 2 points or 3 points of price, but we're just trying to be thoughtful in our modeling to ensure that we contemplate it so that if it materializes, that it's not downside to our forecast, there's only upside to it. So that's how we've thought about those expectations.

Our next question comes from Robbie Marcus from JPMorgan.

I really want to focus on G7 and the future of the technology. This is a big question that investors have unanswered is really what differentiates G7 from the competition and how do we think about all the hundreds of millions of dollars of R&D that you're spending. So I was hoping you could just touch on why G7 will be different from what we see future iterations from your competition. And where people should really think about the next leg of innovation? You bought TypeZero, we haven't heard much about that. How do we think about what's beyond G7 as exciting as it is?

Well, thanks, Robbie. And I'll start with G7. And Robbie, I can start very simply. You saw the Net Promoter Scores of G6 and how our patients feel about G6. There isn't one thing that G7 doesn't do better. It's better in every single stretch of the way. So as we look at what patients can expect with G7, that's what they can expect. And with respect to differentiation from competition and things that we do already, let's remember, DexCom has always performed better than everybody else, and that starts with performance. G7 will perform spectacularly going forward. I'll go to Jake in a minute and maybe some of the engineering features he would want to talk about. But G7 with its size, its connectivity, its interoperability and all of those things is going to be a very special product and a winner form factor for us. We will never stop innovating at DexCom. And as you look beyond G7, certainly, we have a lot of improvements planned. But with respect to scaling and manufacturing and investing and getting ourselves positioned to make hundreds of millions of things, that's a platform we're going to rely on for quite some time. I'd also add to that, with this G7 platform, with these electronics, this insertion system and such, we certainly have the opportunity to put other types of sensors in that same core platform and learn things. Now with respect to other innovation, and you talk about TypeZero or things of that nature, again I'll go back to our philosophy. There are some things that we do very well, and we'll continue to do that better than anybody else. The TypeZero algorithm is showing tremendous results with the Tandem pump, and we'll continue to evolve that and look at next generations of that, combined with using all the things we've learned there for potential decision support opportunities like our predictable or glucose alert algorithm. But in addition to that, there are other people who will do remarkable things in those fields, and we absolutely intend to pair our G7 technology with that going forward as well. And so we'll continue to improve. And Jake, maybe you could jump into a couple of the other improvements you'd see us looking at going forward on the G7 side.

Yes. Thanks, Kevin. Thanks, Robert, for the question. We look at G7 as a platform. And as Kevin mentioned, it has the capability to sense alternative analytes, analytes beyond glucose. Another area that we're continuing to invest and work in our R&D team is our software ecosystem. We have a unmatched integration with both mobile apps as well as insulin partners. We're really excited about the work that we're doing with Novo and Lilly on the connected pens. We really see that that's going to drive connected care in the MDI population. So all of those areas are where our investments are going. We're also, though, never stopping the innovation. We'll continue to innovate even on the G7 platform, and we continue to innovate on G6. Just last week, we got another approval for improvements to the G6 algorithm, which further enhances the customer experience around sensor use. And so we're innovating across all platforms, including those beyond G7.

Our next question comes from Matt O'Brien of Piper Sandler.

So I'd really like to focus on the guidance, especially on the insulin-using patient population out there. I know numbers are getting bigger out here, and you probably want to give a little bit of conservatism. But this comment that this is a baseline for the business going forward is interesting to me just because you grew 40% in '18 and '19 essentially just in the insulin-using group, even roughly 30% here in '20 with a big pricing headwind and with COVID going on. So as we look forward, the pricing headwinds are going to pull back a little bit, you've got G7 rolling out, international expansion, still low penetration here in the U.S. Why the big deceleration in the insulin-using group going forward? Should it really be more like '24/'25 where that decelerates and the nonintensively managed type 2 increases? And I guess the real question is, why isn't this more of a worst-case kind of scenario versus a base case?

You know what, I'll let Quentin talk to the numbers, and then I'll add a little bit after. Quentin, go ahead.

Yes. Well, Matt, I think -- look, we're incredibly confident and at the same time bullish in the forecast that we've put out there. I think our approach to guidance has always been one of we're going to put together a highly confident case that we believe we can deliver to you. We're going to contemplate the headwinds that are out there. To the degree that we can navigate those effectively, there's upside to the business. And you listened to us lay that out this morning, and you can think about all those opportunities beyond kind of the core intensive business that we have not contemplated in the financial guidance really. That all becomes upside to it. I think what we're learning is, and we're validating that there are real business opportunities there. But there's not a lot of clarity exactly what the business model might look like or economics might look like, but there are real opportunities. And like I said, that's all upside to where we go. Within the core intensive business alone, look, our forecast really only contemplates the fact that we get to about 60% adoption of technology in the core IIT marketplace. I think it's probably closer to 80% on the type 1s and maybe around 40% or so on the type 2s, blended for roughly that 60%. I think the challenge you run into is, just like with any market where you see mass adoption of the technology, you typically have your early adopters and fast followers. But then you start to get into more advanced stages of that market that have to convert over and try to predict -- to try to predict how quickly they come is very difficult to do. And what we don't want to do is get out ahead of ourselves and ultimately be describing why we're missing numbers but still growing at incredible rates. And we just don't want to put ourselves in that position. So I think what I would say is we are positioned better than ever to really go after the opportunity in probably the most aggressive way we have or ever have been positioned. We've got more inventory on the shelves than we've ever had before. It's no longer going to be a bottleneck for us. We got more capacity there than we've ever had before. We're turning up the dials from a DTC perspective. We're now able to sample products. So we're as bullish as we've ever been. But at the same time, we want to be mindful that we're getting further into this market, and we don't know exactly how quickly folks convert. Will they convert? They will. How quickly is the question. So we're just trying to be prudent with it. We're not signaling anything. We couldn't be more bullish about the opportunity.

I would echo those comments, Quentin. We could not be more bullish about the opportunities sitting in front of us. It took us 10 years or plus to get to our first $1 billion and then another 2 to get to the next. That kind of scale requires a lot of work and effort. We -- I said last time, I thought CGM penetration should reach 80% across the intensive insulin users and I still believe that, Matt. So if there is acceleration, if there is more upside, that is great. But look, as you look at $4.5 billion out in 5 years, that's a good number. That's a very large, successful business. And we'll start there. And if things get better and we see more clarity, we certainly will update that plan. Let's go to our next question.

Our next question comes from Travis Steed of Bank of America Securities.

Quentin, I had a question for you on 15% to 20% growth CAGR. And in light of the 7 to 8 channel mix headwinds in the first couple of years of that CAGR, is it -- are you assuming higher patients in the first half and lower patients in the second half so the revenue growth CAGR is pretty stable? Or is it lower revenue growth in the first half, higher revenue growth in the second half once you get past the channel mix headwinds? And I don't know if you can say what the non-intensive revenue base is today in light of where you expect that to be in 5 years from now.

We're not going to get into the setting clear expectations around the cadence of what growth looks like at this point in time. It's not too far out that we'll set '21 expectations, and I think you'll start to see some of that. I will make a couple points. Obviously, as we navigate through the channel shift to pharmacy, that's creating some headwinds in the earlier part of the 5-year forecast. As that goes away, it's no longer there. Your reported growth rates are probably going to be more reflective of patient volume, unit volume growth than what our historic rates have been. So I do think you start to get beyond some of those headwinds. But at the same time, you have the law of large numbers that you start to work into as well as you get into a bigger unit base, patient base and revenue base in those outer years. So I think you got to keep all of that in mind. Again, we'll give more clarity around '21 here in a pretty short period of time. With respect to the non-intensive patients, look, we have not broke out what's in the base today. We're not going to break that out at this point in time. As that continues to grow, and I think we continue to have success there, and it continues to expand beyond where it's at today, you'll hear us talk more and more about it as it becomes a meaningful contributor. But clearly, over the 5-year horizon, we expect it to get there. We haven't talked about how quickly or what contribution in the near term. So we're not going to provide that yet.

Our next question comes from Danielle Antalffy from SVB Leerink.

My question is on the sales force expansion. And I guess as we think about where the focus has been to date historically, it sounds like it's been much more on the endos. How are you deploying this or plan to deploy the sales force between endos and PCPs? And how quickly can PCPs become a more meaningful contributor to the patient base?

You bet. Paul, why don't you start with that one?

Sure. Thank you for the question. If we go back to the presentation we've been talking about, there's about 4 million people with mealtime insulin in the U.S. If you take the type 2 segment of the category that you're referencing, it's still less than 15% penetrated. The bulk of those patients are supported and cared for by PCPs. This is the reason why we are investing in the sales force at this point in time, for us to drive education for the PCPs and the value of CGM not only for their patients, but also for their office as well. And in doing this, we're not only going to accelerate G6, we're also laying a platform for G7 and also category development over the long term for the type 2 non-intensive patient population. So we just see this as an important long-term strategic investment to really drive that growth. So Danielle, there is tremendous opportunity in the type 2 segment of that market space, and it's primarily in the PCP channel. And that's one of the main reasons why we're making this investment. Kevin?

Thank you, Paul. I've -- and Danielle, I'd also add, we recently announced an extension of our relationship with Lilly with respect to using G6 and their new rapid-acting insulin to help educate more physicians as well. I think in addition to the sales force expansion, we will use other opportunities with our partnerships and relationships to get more coverage, to get more voices out in all markets, international and domestic as well.

Our next question comes from David Lewis from Morgan Stanley.

Just one for me here. Just I wonder if you can give us any sense of what the sensor use assumptions or annual revenue assumptions are for the non-intensive type 2 population. And kind of related to that, as you think about ARPU for this business in 2020 versus 2025, what's a decent way of thinking about that? Does it break through in 2025? Any parameters you can give us on either of those would be super helpful.

Well, I'll start with the profile of the type 2 patient. And we really haven't given guidance on what that's going to look like with respect to the revenue per patient because we're pursuing 4 options here. We've got the program, the providers. We've also got the patients and the payers. It will depend on how those relationships break out. Our fundamental assumption in all this is that taking care of something that -- somebody that's not on insulin is not going to be the same economic value as somebody that's on insulin, that it will be a lower revenue per patient. And the utilization will be determined as time goes on. I can tell you in our studies and the work that we've heard preliminarily, our type 2 patients, while the programs and providers say, "We'd like you to wear a couple of sensors and call it a day," patients come back and say, "Yes, I want this all the time." There's very much a willingness of type 2 patients to our CGM all the time. So we have a lot of work to do as we pursue those 4 opportunities and establishing reimbursement for this as well for those patients. But I think the best way to do it is to get it on people, to get clinical results, to show the cost savings and to show that people who wear it can be compliant. It will be less, but there will be more patients. There will be some who will wear it intermittently. There's also, David, a diagnostic use case, which is for your time-in-range annual checkup. We have a number of experiences thought out over time. Chad, do you want to add maybe a little bit to that as to what we've learned and expand a bit on what we've learned with this patient group as far as reimbursement and such?

Yes. Yes, happy to, Kevin. And thanks for the question. I think we've learned a couple of things. Number one, that there's a high interest -- a high level of naivety to the category. But when introduced to the concept of CGM, there's an immediate level of interest and desire, and we know that consumers and customers are willing to take action. And I think you hit on it, Kevin. Once they try the product, they don't want to give it back. They believe -- they see the results, and they believe that full-time use and long-term use is really the key to controlling their diabetes. So we couldn't be more excited, and we really see as the category evolves, it's going to open massive opportunities for us to develop unique solutions and experiences to meet new customer segment's needs. And I think as Jake laid out, we have a really unique position with our sensor platform, our data technology and platform as well as our software expertise and our focus on the customer experience puts us in a really unique and powerful position to meet these customer needs moving forward.

Our next question comes from Joanne Wuensch from Citi.

Can you hear me okay?

Not real well.

Can you hear me?

We really can't. Tell you what. Let's take a break from Joanne, go to our next question and see if we can bring her back later.

Our next question comes from Matt Blackman from Stifel Financial.

Just reflecting on the push into the primary care community. I guess the first question is, how important is primary care penetration to the 15% to 20% LRP or the 5 points of growth for non-intensive, however you'd like to frame it? And beyond increasing, let's call it, feet on the street and sampling, is there anything that needs to be refined in terms of the technology or even the data presentation to get after these clinicians? I'm just thinking through the burden on primary care physicians today and perhaps a lower threshold to interpret and interrogate data in general and CGM, specifically.

Thank you. I think Paul, why don't we start with you? And then Chad, if you'd add to Paul's answer, I think that would be great.

Sure. I think when you take a look at it, as we said, the significant opportunity for us here going forward is the education of the primary care physician on the value of CGM. And you hit on a point that's really important, and that's the ability to be efficient within their office. We have tools such as CLARITY and other platforms that we're working on that will make it more efficient and more effective for the physician in caring for their patients. So it certainly is a core aspect of our revenue opportunity and new patient growth going forward. Chad?

Yes. I would just add to that, Paul, that we are absolutely focused on that segment and understanding their needs and ensuring that our products and our data platform is well tailored to meet those needs and improve that interface between patient and prescriber. And you're going to see a lot of innovation and renovation from us in the future to ensure that we're optimizing that channel.

Our next question comes from Kyle Rose of Canaccord Genuity.

Kevin, I just had one more of a bigger picture question. I think at the last Analyst Day, you said you expected DexCom to one day be a software company. We've obviously seen major investments in the back end with CLARITY and some of the customer support functions. Just trying to understand, when you think about it from a long-term perspective, I mean do you see the commercial business and the revenue side of the equation being driven solely from sensor sales? Or do we see another revenue stream emerge from a long-term perspective when you think about partnerships with some of the service providers for the non-intensive programs and just some of the other growth opportunities here?

You know what? I love that question. As one of your analyst partners once said to me in a one-on-one, "I think you guys are in the first inning of a 9-inning baseball game." And I think on the software side, that's where we are. We're in the first inning. We ask these questions all the time. What are patients willing to pay for on the software side? What features -- do we offer a base app with a whole bunch of decisions support features or with algorithms and stuff of this nature? I think the most important thing to know is we're building an infrastructure with our new software platform for G7 to whereby we can configure it to be that way. In the past, we've looked at these as almost linear tasks, and this is a medical device. And we'll get this thing done. We get it filed and get approved. And now we're looking at the future and saying, "We need to build really a software platform that we can change, that we can work with, that we can add things to." And so we're absolutely -- and I would even tell you, the individual experience for a patient, as we look at the type 2 patients we're talking about, the features that drive our type 1 business and that drive our intensive patients are not going to be the same features that Chad talked about. So you're looking at a different app experience. As you listen to Peter Attia speak, while we talked about accuracy being important, there are other things that one would like to add to what that patient visualizes or possibly take away from what that patient visualizes. If they don't want to deal with the data all day long, let's give you a report at the end of the day. So I think our software journey has just begun. Now the question becomes, how do you allocate the price between the device that you sell and the software that the patient uses? Could there be a licensing model someday whereby we sell devices at a lower price and we get money on the software side? This is -- quite honestly, this is why I come to work every day, and this is why Paul and Chad smile whenever my phone -- they see my number on the phone. We talk about this incessantly, but I do believe the business will migrate to whereby there will be multiple models to serve multiple patient groups. It won't be the simple business it is today, and that's how you get to all these people. We're looking forward to it.

Our next question comes from Ryan Blicker of Cowen & Company.

Maybe just following up on the non-intensive opportunity, I believe your guidance implies around $800 million or more of non-intensive revenue in 2025. Am I doing that math correctly? And then given how early it is, what gave you confidence in establishing that number today? And just following up on non-intensive revenue per patient, acknowledging it will be lower than insulin users, given the magnitude of direct cost savings being generated, let alone the indirect long-term cost savings, could it be $500 a year for DexCom or even close to $1,000 per year for DexCom in the U.S.?

I'll take this big-picture first, and then I'll pass the details down to Quentin. We're very confident in that number, given the number of patients that are just in the U.S. with type 2 diabetes and what we've learned from the outcomes of the results so far. We're very confident we can get to a number at least that large, if not larger. The revenue per patient opportunity is going to very much depend on who the actual person paying for it is and who the customer is going to be. I'll talk -- let -- Quentin, if you want to talk a bit more about how you roll that model up and give a little more color, that would be great.

Yes, sure. So Ryan, the number that we talked about in the presentation itself is $700 million. So you're in the ballpark, but that's the number that we formally communicated within the prepared remarks. In terms of how we looked at it, and you've heard Kevin talk about this, you've heard the team talk about this, there's various models. Obviously, you've got the Level2 model. We've got other programs or working with other payers. There's always an aspect of direct-to-consumer potentially in here, too. So we've laid out all the models together. Clearly, there's an incredible number of patients to be able to address, and we've kind of applied, based upon our learnings to date, what we best understand of how those models might come together. The reality is, I guarantee you, in 5 years from now, the way we've kind of assumed it to come together would be different than what it does come together.

Absolutely.

So it's very hard to model it or even to give you guidance on how to model it today. But when we look at the opportunity as a whole, we're incredibly confident in that number and being able to deliver it. But how we do it -- we may even decide to structure some of these programs differently as we learn more about them. So I can't give you the final outcome of what the structures look like here. As we get more insight to it and more confidence behind it, we'll share that with you. But right now there's multiple models we're looking at.

Our next question comes from Jayson Bedford of Raymond James Financial.

Just along the similar lines, can you talk about the economics around G7? And I guess specifically, do you expect to generate the same amount of revenue per user with G7 than you do currently with G6, assuming the same user profile? And then just as a related question, any comments on how you'll segment users on G7 versus G6?

Paul, why don't you start with the pricing and the segment question? And Quentin, add to what Paul would offer.

Pricing. So we don't see -- when we bring G7 in, it's going to replace G6. Our goal will be to transition those patients over as quickly as possible. So we don't see really a difference as far as our pricing models go. In the U.S., we're going to transition that G6 space as quickly as we can over to G7. Quentin?

Yes. I think to that point, with Paul, his team has done a tremendous job with the payers and putting contracts together that let us step into these in relatively short order. There's a little bit of time but not much time to move G7 into these contracts in lieu of G6. So I think you can actually step into them pretty quickly. And to his point, we don't think about the pricing in any meaningfully way that's different than G6 within the particular channel. Clearly, there's different pricing for a DME channel G7 product versus a pharmacy channel G7 product. But outside of that, we don't think of it significantly differently.

And just one thing I'd add, Jayson, as far as transitioning -- how we would segment G6 versus G7, we want to get to G7 across the board as fast as we can. So we will roll out primarily on a geographical basis or specific markets where we continue to support G6 versus G7 as we go. But this transition in our large markets will occur as quickly as we possibly can do it.

Our next question comes from Matt Taylor of UBS.

I was intrigued by your longer-term guidance, including 15% of revenue mix from the new markets. And I was wondering if you could articulate more about that. Which of these new opportunities do you think will be a bigger part of that mix? And any updates on data from the hospital side of things?

I'll start there. And then maybe, Steve, we haven't heard from you, if you want to talk about some of the hospital data. That $700 million that we have out there, that is primarily a type 2 non-intensive number. That's where that one is coming from. We have not estimated large numbers coming from hospital, gestational diabetes, health wellness or some of the other places we intend to go over time. As you heard from our key thought leaders, those are definite upside for us that we will continue to pursue. This guidance and this meeting is very similar to what we did in 2018. We gave a base case with those markets we're comfortable going after where we have results and data and are confident we're going to have approvals. Steve, do you want to talk a bit about hospital data and give us some [ input ] there?

I think that's critically important. I mean you guys heard during the course of the prepared remarks of how critical this technology is going to be in the hospital. It's not even just hospital, there's potential opportunities for kind of hospital to home monitoring, particularly in light of kind of glucose excursions and adverse events related to glucose becoming kind of a never event in the CMS vocabulary. I think it's -- yes, it's just right, Kevin, what you said. We laid out a base case this morning. And clearly, the hospital is a huge upside opportunity. You guys have heard us speak previously around the decision to focus on non-insulin-using type 2s versus the hospital is really driven by regulatory and the FDA was kind enough to allow us some flexibility to get our products into the hospital. But we still have to do the work. So when we look at kind of '21 and even into '22, we've still got to do quite a bit of work to show the outcomes related to the hospital. But I'm a firm believer, I think everybody on the management team is firm believers, that the hospital opportunity is kind of the next big thing for us for sure.

Our next question comes from Joanne Wuensch from Citi.

Can you hear me now?

You sound like a robot.

Yes. I'm sorry, Joanne. As I've often said, these technologies work a very large percentage of the time. And when they don't, it can...

Better?

Try -- are you willing to try again?

I'm trying. How is that?

Okay. That works.

Okay. There is a slide which you talked about, some percentage of your CGMs being used with closed-loop systems. And I want to go back to that and get an idea of how you think the closed-loop systems that are rolling out now and over the next couple of years really drives CGM utilization.

You know what, I'll start there. And Paul or Chad or Steve, if you guys have anything to add, please do. I think we're just seeing the beginning of our closed-loop systems that go with DexCom driving things. Response from Tandem has been very good. I've had a couple of personal experiences. A dear friend here in the Carlsbad area where I live, his son was diagnosed with diabetes. And he looked at all the pumps and called me up. And he said, "Why wouldn't everybody use the pod?" He was really thrilled for the opportunity to have an integrated pod system for his son going forward. I think this will drive a tremendous amount for us. And so I think they'll be big winners for us in the next several years. And what it will do is, I think it will change the dynamic. There will be, I think, more pump users because they're really getting a lot out of the devices. So we're looking forward to that and are very well positioned there. Steve, Matt -- I mean, Steve or Chad, if you have anything else to add to that?

Yes. I think it's great. I mean you guys saw the recent announcement by Lilly. They're actually dedicated not just to the pen side, which we talked about at length, but they're still very focused on driving an automated insulin delivery system, integrating a pump with Ypsomed. So yes, I think there's great opportunity here. Again, we have taken a position and we remain agnostic with respect to how patients take their insulin. They need to be on CGM. If they -- clearly, we think the benefits of the automated insulin delivery systems that we're developing together with TypeZero and others are critically important. But if patients choose to remain on MDI, we hope to develop the tools to allow them and give them that guidance and that decision support capability they need using an insulin pen together with CGM. I mean CGM continues to be the linchpin here.

Our next question comes from Chris Pasquale from Guggenheim Securities.

Quentin, just a couple details on the financial piece. Given all the talk about investing on the SG&A side, does operating margin have to move in the other direction before we see that 400 basis points of leverage? And if you could just help us think about timing around tax, when you actually become a taxpayer? And if it's different at all, when that low 20s rate could start to be reflected in your adjusted earnings?

Yes. I don't think -- we're not going to give, again, particular guidance around the cadence of what the margin improvements look like as we march towards the 30%. I will tell you, we are far beyond where we thought we would be at this point in time in terms of our profitability profile. The team has done a wonderful job of being disciplined, of introducing efficiency opportunities, of really driving operational excellence. That's got us to where we are at today, but we're not going to forgo an opportunity to invest into these significant incremental market opportunities as well. They're too massive. They're too significant. So I'm not going to give guidance around, again, whether it steps up linearly or if it steps backwards. At this point in time, we're going to look at investment opportunities. And we're going to do what's right for the long-term value of the business and how we drive that. So that's how we think about profitability overall. The second part of your question, remind me, where you're going with that? Maybe he dropped off.

I think what he asked, are we going to see a step-down before we see a step-up in...

I think I've addressed that one. So if there was another part of it, I apologize for not addressing that part.

Yes. Quentin, can you hear me?

I can, yes, Chris.

Yes. I was just asking about the tax rate, when you actually become a taxpayer. And then to the extent that it's different, when we should be factoring in that tax rate to the adjusted earnings number?

Yes. Great question. Look, given the progress we've made from a profitability perspective and now in a position where we've got several years of cumulative profits, you're going to see us flip a valuation allowance very quickly, which is going to immediately put us into a position of having to report a tax rate. So you're going to see an effective tax rate. I would expect you're going to see that in the course of 2021. So it would be part of our guidance, but you're going to start to see that show up in the models. In terms of being a cash taxpayer, we've got quite a bit of NOLs that we're going to continue to work through. So even though we're reporting a tax rate, we won't be a cash taxpayer for a bit longer. That will go out into the future, and then we'll start to talk about what that looks like once we transition into it. But you're going to start to see a tax rate. It's going to be in that mid-20s range, which is what we talked about in the prepared remarks. And I expect you to see that show up in '21.

Our next question comes from Steven Lichtman of Oppenheimer & Co.

You talked about the big expansion opportunity outside of the U.S., of course. Wondering what are the key new countries you see as needle movers for you over the next 2 to 3 years? I know you mentioned France reimbursement. Obviously, we've talked about Japan in the past. Any additional color on the near-term geographic expansion opportunities would be great.

Yes. I'll hand that off to Paul.

Sure. Thanks for the question. In the short term, in the midterm, we have tremendous opportunities. If you take a look at some of the top markets in the world, Germany, Canada is a great example, Canada is a market that still is very underpenetrated from a CGM point of view. And we have very aggressive plans to drive demand in Canada. The e-commerce platform there is really driving demand for us. We have tremendous upside opportunity in the U.K., also in Germany. Japan is a tremendous opportunity for us that we're making very good strides on as well. If you look further out in really trying to triple our TAM, going from 6 million to 18 million to 19 million, we'll be looking at Brazil, Mexico, Russia, big markets like that. So very excited about the international opportunity and the tremendous strides that we're making. Kevin?

Thank you.

Our next question comes from Raj Denhoy from Jefferies.

Wonder maybe if I could ask kind of a broader question about competition. It hasn't really come up too much. Clearly, big markets, you guys are doing everything you can to penetrate into them. You do have one competitor, others potentially coming, with technologies which they would consider maybe comparable. I'm sure that's debatable. But how would you have investors sort of think about the competitive dynamics and its impact on your success both in terms of driving revenue and then also potential impacts on your margin and pricing?

Sure. I'll handle that, Raj. It's a good question, and we take all competition very seriously, from the existing competitors to the future ones. And we look very closely at them. I think -- and our fundamental belief is the investments we're making now on the scale side, the investments we're making in Malaysia, the investments we're making with the automated lines in Arizona, where you're talking hundreds of millions dollars, are going to be the differentiators. We're going to be able to produce hundreds of millions of sensors rather than tens of millions of sensors at a cost much lower than what we produce today. So as competition comes and as we look at pricing and things that can happen, we will be ready, and we'll be in a position to absolutely go after that. And I think that, quite candidly, if you were to go back 3 -- 2 years ago when we did our first one, that would be the biggest difference. We're in a much better position to scale now than we were before. We had the right product then. We still have the right product on the market today. We will continue to have the right product going forward for our future set. The next piece, other than scale, is going to be what type of experience you can generate for these patients to keep them engaged and involved in the system and generate the health care outcomes necessary. If you look across that type 1 scale, all the way from the automated insulin delivery system down to the person who really just wants some information to do better, we can offer all those experiences. So in addition to being able to offer the quantity of sensors, we're going to have to offer the experience that keeps the patients compliant, that makes them healthy, that the various reimbursement authorities are going to be willing to pay for in the various geographies. We've invested heavily in the U.S. with respect to our sales force, our payer relationships and those things. What we have lacked internationally is the infrastructure to go and do similar things. We'll be building that infrastructure out over the next several years as we grow the rest of our business and our scale. So you'll see us making those investments as well, and we'll catch up. We'll get a bigger presence in many of these areas, and Paul is working with the team on plans like that now. So I -- 2 things: First, you've got to have scale. And as we learned -- as we went through the G6 launch, when we didn't have scale and didn't have enough product, how painful that was. We're not going to put ourselves in that position again. But if you don't have the right experience, the scale doesn't matter, and we believe we can create that between us and our partners and our connectivity and all the other people we work with. So that's how I see the competition and how I see the future.

Yes. If I can just add, Kevin. I think that's critical because many of you have been around this business for a long, long time, Jake longer than actually any of us here. But we've had competitors making claims that they were as good as or better than DexCom for years and years. And it all comes down to real-world performance. And until we get these things out in the market and we're competing head-to-head on actual performance as opposed to kind of cherry-picking some data, as Jake mentioned in his prepared remarks, I think we feel pretty good about where we're sitting.

We have time for one more question. Our next question comes from Ravi Misra of Berenberg Capital Markets.

I hope you can hear me okay.

You're good, Ravi.

So I just wanted to get a little bit more clarity, no pun intended, on the type 2 opportunity. You've talked a lot about that today, I think, more so than the last few -- the last Analyst Day, at least. Just help us understand the segmentation of that space, if you will. I think kind of the dream opportunity is anyone who's -- first, it was intensive insulin, now it's non-intensive insulin. How about in that non-intensive insulin segmentation, what's kind of factored into your ramp assumptions? What kind of patient do you think is best kind of positioned to benefit from your technology, at least now, near term, medium term, long term? And how do you intend to go after those subsegments of the type 2 market?

There is no one better for this question than Chad. Chad, take it away.

Yes. It's a great question, a loaded question, and I think Dr. Grace said it really well. I mean our vision is that every person with type 2 diabetes and beyond is going to be on a sensor in some form or fashion over the next several years. And in terms of who and how and what experience they get, that's the work that we're doing truly, is to understand how the segments break out and how best we can serve them, whether it's serving them through a partnership like we have with Level2 or it's in the future doing it other ways, whether it's direct or several other things that we're considering. We really believe that we're going to find ways to serve this audience in multiple models in the future. And we're really excited and bullish in seeing the way it's going to play out.

And we have done the work, in all honesty, to look at, okay, this patient segment wants these features, and other one wants these other ones. We are very prepared to address the various segments of that market with product offerings and experiences that would be appealing to them. And for some of them, that will be full-time wear with the data that we have today. But with others, it is going to be a different data set. And even as we get into CLARITY, and I think it's a good question as well, as I've had discussions with some primary care doctors, it was remarkable for me to hear, this is what we want. We just want the patient to come in and see X versus what -- I've sat in an endocrinologist's office and have seen those appointments. We're going to have to change this experience across the board, and we're very excited to do so and very focused on all of that. So I guess that would wrap up our questions for today, and I'm going to offer just a little bit to close. And thanks, everybody. This has been a long morning, afternoon for some of you. And we hope we've been clear about what our intentions are. And again, we presented a base case scenario that there is some upside from, and we know that and we do this intentionally. We are responsible in how we monitor our business and monitor our spending. Last time we presented a base case, and we shot up through it in almost a couple of years on the bottom line side and on the top line side. I would love to be sitting here in 2 years and say the same thing to you again. We'll see how that goes. We have some exciting market opportunities now built in here. As I listen to Dr. Levy and know what those doctors have been through combating COVID and diabetes in the hospital, as I listen to our primary care doctor who's putting this on all his patients, and just based on my relationship with Peter and what I've learned from him and seeing what's happening in his patients, there's an opportunity to take this technology in many, many places. And we will develop those experiences and the platforms to do so. We couldn't have a better team. You saw these incredible people that I get to work with every day and not the same way we used to, but hopefully, again, some day. It has been a great day. This company is in a better place than it's ever been, and the opportunity just gets better each and every time we talk to you. Thank you for your time, everybody. We really appreciate your continued support.

Thank you, guys.

Bye.

Thanks, everyone.

This concludes our questions for the day. Thank you for joining DexCom Investor Day.