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

Good afternoon, everybody. It's Matt O'Brien from Piper's MedTech research team on here with you. Thanks for joining our Annual Diabetes Day conference. We're really excited to have DexCom on with us. From the company is Brice Bobzien, the Senior Vice President of Finance. I think Sean and Matt are kind of in the background as well, listening in. Format of the call is going to be pretty typical. A bunch of questions from me. This is an interactive session, so please do use the Q&A feature at the bottom of the Zoom, if you have questions, or just e-mail me, and I'm happy to ask those questions on your behalf. It's [email protected]. And with those comments out of the way, let's go ahead and get started. Brice, thanks again for the time here today. Really appreciate you hopping on with us.

Of course, Matt, thanks so much for having us. I appreciate the opportunity.

Of course. So let's start with the 8 million pound gorilla in the room, which is that Bloomberg article from a couple of days ago. What has been DexCom's response to that article that did hit?

Wow. It's a good question, Matt. And again, completely understand there's been a significant amount of attention there. And with company policy, our policy is to not comment on specifics associated with anything that's rumors or speculation. And so that's where we're going to land. What I will say is from our perspective, we've talked publicly quite often about being inquisitive about opportunities to set up the DexCom ventures arm recently with Steve Pacelli leading it, which most of you probably know. Balance sheet is strong. We're in a good position. We've done some tuck-in deals with distributor acquisitions over time. And so we're in a position to be inquisitive, but that doesn't necessarily mean we're going to speak to speculation and rumors. What I would say is the partnerships that we have are incredibly important to us, whether it's AID or whether it's digital health partners or distributor partners, those are all important to us, and I don't think anything has changed from our strategic point of view. And so -- but as far as individual areas, we're not going to talk about those.

Okay. Fair enough. And I mean those partnerships have been around for a while, and the clinical community really depends on DexCom for their CGM technology enabling a lot of your partners out there. I mean that's not something you'd never want to really disrupt regardless of things happening strategically at the company. Is that fair?

It's absolutely fair. And we've always done, in our opinion, a really nice job of being able to meet the patient where they ultimately want to be serviced and nothing changes from our perspective there.

Okay. And then I guess last one on this topic. Well, I mean, I'll leave in some other stuff, too. But just historically, how do you think about your partnership strategy and capital allocation priorities, maybe in light of that Bloomberg article that did come out a couple of days ago?

Yes. Like I said, not much has changed. And what we'll do is we'll be inquisitive and we've got the balance sheet to do it. And again, no comments on anything specific, but I don't think there's any major deviation from what you had heard from us previously.

Got it. Got it. Okay. Brice hit that, actually question did come through already. Just can you clarify which companies you have supply agreements with Tandem, Insulet, Ypsomed and who else?

Yes. So most of the major pump and pen providers, we have connection opportunities with and partnerships with. We've talked about some of those -- externally with Ypsomed and some other things. And so we have partnerships with most major players on the insulin delivery front. And again, we feel great about where we're at there.

Got it. Okay. Understood. Maybe outside of what's been rumored. You did mention Brice, a really strong balance sheet. Is there just a general appetite that you have for deals at the moment as we think about some of the various technologies that are out there? And then have those -- have some of the valuations come in to a point where they're more attractive for you to think about deploying that balance sheet to use?

Yes. Specific to M&A, I don't think, again, anything has really changed. It allows us the opportunity to grow our core business, which we've talked about with capital outlay associated with manufacturing facilities, opportunities on the sales force side, DTC, all those things, all the fundamental uses of cash, I think, are consistent. And then where there are opportunities to present themselves like the Australia and New Zealand distributor that we acquired recently. Those are the things that we look for opportunities to ultimately grow shareholder value.

Okay. Okay. All right. So some of these questions are coming through. Right now, let's just go ahead and address them. Just historically, you've talked about being uninterested in pump companies. Are you saying again here today that that commentary of historically is the same?

Yes. All I'm saying is that no comment on anything individual. We look for shareholder value, and that's all we look for. And if there's an opportunity that arises in any one of the fronts, we'll consider things, but nothing specific.

Okay. Okay. Fair enough. So let's turn to the fundamentals here for a second. And I know there's another question or 2 that came in along those lines, and I think what Brice just said, kind of addresses those. So we'll leave that there for now. The thing that I'm nervous about, Brice, is the cost of DexCom G6 and eventually G7 in an environment where -- CGM is not completely new to a lot of people in the U.S. and even around the world. So what I'm worried about is just uptake of advanced technologies in the face of an economic downturn. Is that something that you guys are worried about? Kevin said on the last call, not something you're overly concerned about. But is that something we should be keeping an eye on?

Yes. It's something we certainly think about and we evaluate. Our strategy, I think, has been pretty sound from a leaning into reimbursement perspective, and that's always been our position where we lead with reimbursement, we understand where we're at. In the intensively managed population, it's 90-plus percent of the patient population that's covered. And we stated publicly in the pharmacy channel, 70% of our patients can get the device for less than $60 per month. And so it's not one of these major cash outlays, but ultimately, they need to choose against when they know the therapy ultimately provides what they need for their disease. And you layer in outside the U.S. and Medicare and the copay rates are even lower than that. So the major cost burden lands on the payer group, which we've gotten them very comfortable with the ultimate benefits of the technology. So are we completely isolated from any challenges there? Probably not, and it's something we certainly evaluate. But we feel like we're in a really good position, especially with our strategy of leading with reimbursement.

Okay. And I keep getting more and more of these questions on the Bloomberg article, which we'll come back to in a little bit. And I think they are fair questions that aren't directed to that arrangement specifically. But can you just talk about G7? And I know Jereme -- conferences recently, there are some questions as far as what he was trying to say as far as G7 timing, although I thought he was pretty specific. We know it's not coming by ADA. That seemed aggressive just given when you file for approval and when ADA is this year. But anything that would give us -- make us worried about just the general approval timing for that? I know the FDA is still busy with COVID. But I think in that kind of 6-month to 12-month time frame is usually pretty typical for approvals. Is that what we should be thinking about for G7?

Yes. So I would say there's nothing from our end. We're not necessarily concerned about as it stands now. As far as the timing, they ultimately are based on what they're experiencing. It's tough to say, and that's why we try not to even talk about something that's outside of our control. What we have said is we fully believe there's going to be a material launch across the globe, inclusive of the U.S., and there's nothing that leads us to believe in the conversations that we're having, if there's anything that's changed from that.

Okay. And to that end, Brice, I -- everybody on this call today, and I'm assuming everybody didn't hop on just to listen to me talk about diabetes, but knows that I'm not that smart. But Kevin has said over and over again that -- not over and over again, but I've heard him a couple of times, say that G7 is really going to open up the type 2 patient population for DexCom. I don't think the price is going to be different -- correct me if I'm wrong -- versus G6. Why is it that it's going to open up bankrupt? I know the form factor is a little better, but for the simpleton that I am, why is it going to open up type 2 so much for you guys?

Yes. So you're absolutely right. The price point itself, most of our contracts are negotiated on a PMPM or a per member per month or PMPY at this point. So no major deviations as a generational switch from a pure pricing perspective. Kevin's comment, at least in my opinion, really around the fact that this is another level of hurdles that are ultimately working down. You hear a lot of people say they're struggling with wearables and they don't want something on their body. The form factor difference is huge. I mean I've worn a G7 sensor and frankly, for me, it was to the point where I had literally forgotten it was on there. And so if you can get that sort of form factor with the performance of G7 with the connectability, with the -- one thing that I think is sometimes a little bit not fully understood by the investor community is just the real benefit of a 30-minute warm up time. They're not waiting on the device to work for a couple of hours like they have in the past. All of these things I think are catalyst for people to say, yes, okay, I'm ready to jump into this. So it's people who weren't necessarily open to jumping on the technology, we think G7 could potentially change that.

Okay. So it's really the warm up time you think that will be excellent for your type 2 penetration?

I think that's one of the things. And again, that's a real user benefit, but also the ease of use is just incredibly different. Even with our DexCom ONE device, you can see the massive difference in the software solution and the app experience. It feels like an actual app and not a med device app, which is, again, a great thing, and you'll see that with G7 as well.

Got it. Okay. Okay. So -- and again, pricing between the 2, you're expecting to be the same because the one thing that I think is clear from this industry is pricing matters. And so if you can drop the price of G7 a little bit, especially as you get to scale, I think that will help add more patients, but the anticipation is that pricing is going to be stable, G6 versus G7?

Yes. I mean we always think there's going to be some level of pricing negotiation that happens as you grow scale, and it should. I mean there's volume impacts that ultimately allow you to be a little bit more thoughtful. So -- but initially, at the time of launch, we expect them to be relatively close.

Got it. I guess to that end, the big pricing headwinds that you've seen, both pharmacy here in the States and then the pricing changes in OUS that we said last year should largely be behind you heading into '23. Is that fair? And should we still expect a little bit of erosion on the pricing side in '23, but certainly not down 15% or 20%?

Yes. We do feel like we're going to be materially through both of those things. And again, we talk about pricing and it's one of those things, we really like to characterize it as a mix shift headwind. And again, it's going from one channel being serviced within the DME world that has extreme sort of deterrent to getting in with recurring PAs and a lot of different things. To the pharmacy, that's the much easier path for the patient to get it. And that shift ultimately creates roughly the same dynamics on the bottom line. So it makes sense for us to service that population. So that's what the vast majority you've heard us talk about over a period of time. There was the OUS TAM expansion, which I think you would agree that it's proven to be wildly successful with what's happening with growth on the outside of the U.S. side. And so we will be materially through both of those things by the end of 2022. One thing I think it is important to note is as we release products like DexCom ONE and as we penetrate markets further with TAM opportunities, remember, this is volume growth. But it does come in at a bit of a different price point than what our overall blended sort of intensive managed within the U.S. looks like. So there will be a bit of a gap between volume growth and revenue growth, but that's because new volume at a slightly different price point.

Okay. Got it. So a couple of questions here on the business. Can you talk about the margin cadence given the G7 timing is uncertain, i.e., yields on G7 lines, pharmacy mix shifts U.S. versus OUS. And then well, let's just start with that one first.

Sure. Sure. We didn't see at least exiting Q1 any major deviation on that mix shift. Basically, it was in line with our expectations that we set forth in guide. So we feel good about the cadence in which it's being moved and in line with expectations. As far as the margin cadence, I think it's a really good question. There will be some early challenges associated with G7, not because the product itself isn't performing the way we want or what's happening. It's just it's not able to absorb the full amount of the fixed cost early on. And so there will be some things where you see a little bit of a blip early onset where manufacturing volumes are low and the sales volumes associated are relatively low. We quickly anniversary out of that as we get to scale and we feel good about it. We're committed to those mid-60s levels that we put out there in the LRE.

Okay. Okay. Got it. I appreciate that. But staying on the financial side of things for a second here. Well, actually, to backup, I never finished the second part of this question, which was, is G6 launch a reasonable proxy for margin cadence for G7?

Yes. I think it's a reasonable way to think about it because that was the experience we had. I do think we're in a much more favorable position about our readiness for G7 than what we were on G6. And what that required when we were effectively hand in mouth with inventory in the early days of G6, it required expedited shipping and a lot of different things that I hope it doesn't occur with G7. We're certainly planning it for it not to be that way. So it's probably a good proxy, but I think we've learned a lot from G6, and I feel great about the launch of G7.

Got it. Okay. And then longer term, how important is altering the LTV to CAC ratio for DexCom? How important is driving earnings versus top line to the company?

Yes. The LTV to CAC question, I love it, because that's exactly the way we think about investments in our area. And again, we've talked about DTC being incredibly profitable for us. The ROI there is exactly where it needs to be. And again -- but we evaluate it all the time. Our marketing team does market mix models let's say, where is the best utilization of dollars when you're thinking about patient capture and ultimately creating patient interest. And so we do a lot of work there. It is going to evolve in all honesty, right? So these brand campaigns that we have now, a lot of times, we're still educating on the DexCom brand. We'll get eventually more specific as we have targeted areas that we're a little bit more thoughtful about. So the LTV/CAC, there will be some dynamics that will change. But it's one of those things that we evaluate each and every quarter, and it's incredibly important for us internally and certainly in my role.

Okay. And then along those lines, what could the company do to alter the LTV, the CAC? Would that be adding to the sales force bag? Would that be driving pricing higher in core CGM? Would that be lowering the CAC via innovation slash upping the NPS? So a lot of thoughts on CAC there.

Yes. I think there's a lot of things. And I think where we go, I mean, you saw the Super Bowl ad a few years ago at this point or a couple of years ago at this point. And that made sense at the time. That was our thought process there, right? Not necessarily -- it didn't make a whole lot of sense this time given new product cadence and those sorts of things, but does it make sense again in the future, and we're evaluating those. And I will say, I don't know that we're anticipating pricing increases or some other things there. But I think we're learning as we go with DTC, and we're being a whole lot more thoughtful. The other thing that's sometimes not necessarily well understood in the CAC calculation is this is cost to acquire, right? And so that includes samples. That includes sales force, and we've doubled the sales force. And now talking to PCPs that we never would have been able to gain those patients in the past, right? Samples allow people to try before they buy. They understand the benefits of the technology and then they have the opportunity to get on it. And so all of those things are great contributions to CAC as it stands now, but they will evolve over time.

Okay. Okay. Appreciate that. So another question came in. I appreciate that DexCom has the balance sheet and is in a position to be acquisitive, but you have the largest -- one of the largest launches in the history of the company coming up right now. Does that affect your appetite to put a capital at the moment?

Yes. I mean, again, I know that's specific to one situation, and we're not going to talk about it. Again, we still -- we know this is a huge launch for us, and we're incredibly invested on making this as good as we possibly can. But that doesn't mean we can't do some things in the meantime.

Okay. I guess just to stick on this for a second. I mean do you have an appetite for bigger stuff in the used equity to do those kind of things? Or looking at a really strong cash position you spent years building, prefer just to use that?

Yes. We evaluate all options. And again, we let our corporate development team think about that.

All right. Okay. I appreciate that. Going back to G7 here, you've got a lot of pump partners. You've got a lot of pump partners out there today -- or sorry, you've got one big pump partner out there today, another one that's building right now. Talk about the handoff from G6 to G7, and any kind of challenges that may pose as you're working through those pump partners.

Sure. Sure. A lot of the work, honestly, falls on the partner themselves, and here's why. We spent a lot of time building different connection points. Obviously, the iCGM clearance, all of these things that make the pathway to a connected device make way easier than it's ever been in the past. So with our API connections and all of those things that we've developed over time, we're actually really well positioned to move forward. Now again, a lot of the actual connection to the new device follows on the pump partner. You heard Tandem say, I think a quarter ago that they think it's 1 to 2 quarters out. And I think they're the ones that should talk about specifically, but I can tell you, we're actively chatting with them on a regular basis, and it's incredibly important to us as well.

Got it. Okay. And then, Brice, I know we got G7 come in, there's some definite positives to that product, but something I hear a lot from people is like, "Okay, maybe Libre 3 not going to be so great, but Libre 4 could be a lot better. They're going to get really close to G7 with that product." Is there a way for you to continue to stay on the technology edge of things versus your biggest competitor? And how should we think about you doing that?

Yes. Honestly, we think we're incredibly well positioned there. And to your point, I don't know that there's been major ways of creating -- reducing the gap on the hardware side. But we've talked for a long time about the fact that we're differentiating through software. And that for us, over time, there is going to be some contraction in what the differential looks like on the hardware side. But because we've spent 10-plus years at this point, building the infrastructure around software, that's where that major differentiation comes from. And we've shown that as an example with D ONE. And so we feel great about our position. I will say that gap has not closed. If you look at real-world performance, if you look at accuracy despite marketing claims, if you look at the feature set that G7 will have in our position, we closed the gap materially on the form factor, all of those things that put us in a really great position on the hardware side, and we're turning a lot of our investments to the software, which should tell you we're out in front of this innovation curve.

Okay. Got it. We'll be interested to see what else is coming there. Let's talk about Europe and G7. Talk about when you launch there and how things are going. If there's anything on a finance guy like you, anything quantitative you can provide as far as your performance, that would be great.

Sure. It's funny. I'm right there with you, Matt. I'm thinking how do I think about the quantitative side as much as I possibly can with regards to the limited launch, but it is a limited launch early on. What we are learning is more qualitative than it is quantitative. But I will tell you, I think it's incredibly valuable. And frankly, I think our approach to this launch has been much more thoughtful. What we've learned is the things that can create confusion. What we've learned is where are there some things that we thought were relatively easy to use. It's easy for us to see the trees from the forest when we've been looking at this device for so long, stepping back and how does this actually impact somebody who's a new user to the device. We're learning some things. I will tell you, the feedback is incredible. It's been great. And we're trying to actively source a constructive feedback. In a lot of cases, they just want to provide good, solid feedback. And I think we appreciate them all. But the idea with this is how do we make sure training documents, how do we make sure human factors based discussions are happening in really thoughtful concise ways as we think launches beyond limiting in the U.K. So we're learning a ton. It's going great, and we can't wait to get this thing out there.

Got it. Okay. Any sense for a broader rollout internationally of G7, in the rest of the countries?

Yes. So we haven't necessarily given exact timing, but we did say the broader rollout obviously will happen in the U.K. first. And then from there, outside the U.S. makes the most sense just given the regulatory path. And so that will continue and then with us continue to prep. And frankly, learning a ton outside the U.S. that we can apply to the U.S. launch as well. So we haven't necessarily given exact time lines, and we probably won't get an update at the Q2 call. But things are on track from our perspective where we thought we should be.

Got it. Got it. Okay. What about DexCom ONE. I'm pretty buoyed up on that. I know it's small countries for starters here, but just talk about the rollout there? I know there's been a couple of countries that have already come on and started reimbursing for it. When do you more meaningfully broaden availability of DexCom ONE?

Yes. You're absolutely right. Taking it back to those BELL countries or the 3 Eastern Europe -- sorry, 4 Eastern European countries, that was purely an opportunity to get this device into the hands of people who haven't had reimbursement previously. And so it was a real opportunity to set up an e-commerce site, which we were well familiar with in our approach in Canada and some other markets and put that same sort of technology from an e-commerce perspective in these Eastern European markets. And for people who get access to device in a cash pay environment, to your point quickly, Estonia and Bulgaria ended up having reimbursement for a portion of the population where they can actually get reimbursed for the device that they ultimately got on. And I think that for us was huge, and it just proved our point, but it allowed access for this patient population. Most recently, you know that Spain and U.K., this is true changing of TAM that we hadn't been able to. Historically, outside the U.S., you've heard us talk about this, right? So we paid -- we played in this high-intensity acuity curve where it's those connected devices and/or pediatrics or folks that were -- had challenges with glucose level on the hypo side and the hyper side. That was really what we were limited to, in a lot of cases, from a TAM perspective. The pricing and the technology associated with DexCom ONE now allows us to play in a much broader TAM, inclusive of tenders that we never were able to play in before and channels in the U.K. that we never able to play in before. This is what DexCom ONE allows us to do, and we're incredibly bullish and excited about the opportunity. And remember, the differentiation comes through the way of the experience in the software side, which, again, key to what we had mentioned previously.

Do you envision a situation, Brice, where you guys bring DexCom ONE went to the U.S. or a different form factor for the type 2 patient population, either using insulin or basal-only or not even using insulin at all?

Could be. I would say for the insulin using population, I think the G-Series makes a lot of sense, even basal. I mean, you saw the results of the Mobile study, they were incredibly compelling. I do think there's an opportunity for reimbursement over time in that basal population. Now remember, the type 2 non-intensive population, specific to the U.S. is 30 million patients, where basal is a tranche of that, call it, 3 million of TAM. There's still 27 million, where there's an opportunity to think differently. That could be a differentiation of software. Honestly, I think if we're really thinking scale long term, you'd probably make sense to be on the same hardware device and differentiate through software, but we'll continue to evaluate those things over time. But I would say all of intensively managed, which is basically insulin using as well as basal, I think, absolutely, the G-Series is right technology for them.

Okay. Got it. Speaking of technology, something that I've been curious about. I go back a ways in this space. And I remember like 2006, 2007, the thought that you could potentially get a CGM on board of a pump, like a patch pump, the problem was that within tranches of where the insulin was being deployed, it wouldn't work. It went right -- it would get interrupted. Has there been work to try to integrate CGM like with the insertion site for a patch pump or with a traditional tube pump? Is that something that you guys have been working on and crack the code? Is that a possibility? Because I think that would be a killer app if that's the case.

Yes. You mentioned it well. I mean you have been around the space for a long time. There is an interference associated with being close to the insertion site. There's also -- remember, there's a wear period difference, typically 3 days and/or durable depending on who the pump partner is. And so we're not going to throw away a CGM device in 3 days. It just doesn't make any sense, especially when we're actually extending the wear period. We would love there to be something thoughtful over time. We do think that Bluetooth connectivity is actually really great as it stands now, but could something evolve over time? Potentially.

Okay. It doesn't seem like it's a near-term thing tough. Okay. So some more questions coming through here. Do you envision G6 sticking around after G7 has rolled out internationally, so there would be theoretically 3 levels of products, DexCom ONE, G6 and G7, or is it just going to be G6 is phased out over time internationally?

Yes. So there will be a use case for G6 over time, at least as we work through regulatory path of clearance and then ultimately, ability to convert contracts outside the U.S. But I will say DexCom ONE becomes -- it really gives G6 some legs for a period of time. Eventually, DexCom ONE will go to the G7 form factor. But as it stands now, that's a great utilization of capacity on the G6 device. So G6 will be here for a while. But in those markets that are using more G-Series than DexCom ONE or at least the G-Series based component of those TAMs, you will see those move to G7 relatively quickly.

Okay. Got it. And then let's see, we are working with payers and the pharmacy is challenging outside of just approaching them with CGM. What are the most impactful things you can do to increase your leverage with payers, your gross to net spread, breadth of products, et cetera?

Yes. We have these conversations literally every day. And the conversations we lead with the health care economic data and honestly, the clinical data that we've been able to provide. And I think we've talked about the fact that we've been able to maintain a premium to the competition in almost every channel. And what that means is people value the technology. And honestly, we can show that health economic data, where we've talked about this for a long time with some of these partners where you can see $5,000 of cost reduction associated with the utilization of CGM, and that's for a type 2 non-intensive patient. And so there is huge benefits here, and that's how we lead with the patients -- or I'm sorry, with the payer groups. Again, it's always a negotiation as you have volumes growing like ours, there's always been to be conversations on how we can both win in those environments. But I feel like we've really gotten a cadence and we have this payer buy-in. And that's why we talk about -- actually, our co-pays are typically cheaper, more cheaper to the patient most of the time. I don't think people fully understand that.

Do you have a sense for that percentage?

Yes. Well, so I can't give you necessarily a percentage. I can't really talk about the fact that 70% or $60 or less per month. And again, we know there's competitive programs out there that are effectively cash pay base, it's north of that.

Okay. Okay. Another question. Has there been any further discussions on CGM in the hospital setting?

Yes, there has. I think the breakthrough designation was actually a really neat thing. Now, that doesn't mean we're ready to turn this on today. And -- but we did learn -- we talked about sort of leaning into this COVID environment, and it was almost like wartime medicine for a while, right, where we're trying to make sure we could service these patients that needed help. And a lot of times, what was happening is you would have nurses actually going into individual rooms, re-grounding up, using personal protective equipment all over the place to do a finger stick and then walk back out. That didn't make any sense. And quickly, we realized and what the beautiful thing is the FDA realized as well as there is a path to have better technology in this space. And the breakthrough designation really addresses that and talks about it. Now there is work to be done. Again, we're not going to be putting receivers on the outside of rooms that we look at. That doesn't make any sense. The hospital is a very integrated network, but you have to make sure your device works into the workflow. And I think that's where the next step phase goes. But I think people are now being like, yes, this is the right technology, just how do you get the right device with the right connections into that workflow.

Got it. Okay. Appreciate that. Let's go forward to -- how do you think about penetration of the type 1 patient population in the U.S. using CGM, especially that DexCom [Technical difficulty] now is like, hey, they're getting pretty penetrated in type 1s here in the U.S. There's not a long way to go. How would you respond to that?

Yes. So certainly, the adoption of type 1 has been tremendous. We believe it's 50% to 55% penetrated as it stands now in the U.S. And so -- but remember, for all intents and purposes, it's really been from 2015 to 2022 where that growth has happened, and that took us 7 years effectively to get to the penetration level we are now. Now again, I think adoption comes on a little bit more rapidly. But to say there's only a few years of growth there, I think that's pushing it. What I would say is I think there's meaningful growth in all of the intensively managed over the time horizon. I mean effectively coverage on the type 2 intensive side is 85-plus percent, which is approaching that of what we see in the type 1 side. So that opportunity is massive as well. I mean -- and then the other thing I think about, we are the only connected CGM with these AID providers. And what that means is, let's say we do get to a competitive environment, we should win in that environment. And we haven't spent any time thinking about it. It's blue sky for us, right? This is introduction of CGM. We believe 2 players can play there. But at some point, if it gets into a competitive environment, I'd want my device going into [ that time period ].

Yes. Okay. So let's talk about this. I mean, type 2 is coming. Mobile is going out there on the insulin using side. What about the non-intensively managed type 2? I haven't heard an update on Intermountain or Level2 in a while. What's the latest and greatest there?

Yes. So those are still progressing nicely. So what I would say is think about it this way. And I think sometimes even when we messaged this, we talk about type 1, type 2 intensive, then we talk about type 2 non-intensive. Basal is really a part of that type 2 non-intensive population, so a tranche of the non-intensive. So that 30 million TAM in the U.S., it's about 3 million for basal. We've seen with Mobile and with ADA's sort of messaging around this being the standard of care, we think that starts to be the next area of growth. As far as type 2 non-intensive beyond basal, you're right, that's where Level2, Intermountain, WellDoc, all of these, all of these partners become an opportunity for us. I will tell you, Level2, I think is going incredibly well. I'll give you an example of the sales pace we received because we use United and we're a self-insured program under United. They've been able to create enough evidence for themselves. Now remember, United is a major player. They're not going to use this proprietary evidence to put into the field. They don't want that competition. But if they're willing to tell us that they'll effectively leave their diabetes costs, which is generally the lead to be growing 20-plus percent annually, they'll leave it flat for year 1 and actually bring it back year 2 and year 3, it tells you there's a bunch of savings being created in these programs. And so that for us is again a component of this evidence, something that we can use beyond United, like Intermountain Health. Remember, they did the study in a COVID environment, which is a little bit weird and a little bit challenged from their perspective. But they did it and they did it really well. And it proves the fact that they saw roughly $5,000 savings annually as well in the non-intensive space. And there's been a number of different data points that are sort of triangulated into this $5,000 savings number. I think what's important to note is that doesn't -- that didn't even include a change in prescription-based medicine. So one of the top 3 major cost savings that you would have, reduction of mezz wasn't included in that $5,000. That was hospital visits, that doctor visits, all of these other things, there were savings. We expect to see an update for the extension of the trial that Intermountain did soon. Again, we're eagerly awaiting it much the way you are, but I can bet based on what we've seen now, we're going to see a significant savings in this population. And now it's us convincing the payer group that this is the device we need to use.

Okay. So your -- and I don't want to put words in your mouth, Brice. But it seems like your enthusiasm for the type 2 patient population, if they're using insulin, if they're in a non-intensive group is every bit as enthusiastic as it has been.

100%. On the type 2 intensive and basal, absolutely. Still something to learn on the incremental component of non-intensive, but we're learning it every day. And again, now it's a messaging. You know how these things work.

Got it. Okay. Appreciate that. A few questions coming in here, why did you decide to split the stock now? And given the pullback would you still split it?

Yes. So for us, the stock split for us, we wanted to have the opportunity for people to take a position in DexCom. And in a lot of cases, it's not only external, but it's internal and the ESPP programs and some other things, there's really no differentiation, obviously, in the ultimate valuation. And so -- but if there's opportunities for -- to think differently and optically it looks a little bit differently, then we would address that. Now when we started the conversation, the stock price is at a bit of a different position, but it doesn't mean we should change the strategy.

Okay. Got it. And then any commentary that you can provide on -- too much information, but does utilization that you see of G6 as far as stand-alone patients versus one of your pump partners. And I know Insulet is new to AID, but I know much of their patients are definitely using it. So any sense for kind of the split between those channels?

Yes. So what we have said is G6 from a utilization standpoint, both AID as well as stand-alone is the highest utilization rates we have ever seen, and they've improved over the period of time in which G6 has been in the market. We do believe it's best in class. We haven't necessarily put that number out there. But we do believe our utilization is higher than that of the competition, and we feel great about that. And it's even higher when there is a device that is ultimately connected.

Okay. Okay. I appreciate that. I think we have a reimbursement adjustment with CMS that potentially summed up in the back half of the year. What should we anticipate as far as the ruling there goes?

Yes. So there's been a couple of different movements. There's a CPI adjustment that happens within the CMS channel or the Medicare channel, where they try to understand inflation and then there's an inflationary adjustment. And we talked about that a bit, and it's not necessarily what we're hearing on the way of inflation now, but there is a little bit of a step up. Now on the flip side of that, there's a sequestration component that had been waived for a long period of time. And what that means is basically an administrative fee of, call it, 2% associated with this reimbursement landscape, where they waived it during the COVID period. That is expected to come back on in the back half of 2022. So what happens is you get a little bit of benefit on the CPI side and then you get the sequestration coming back on. And so materially, there's not a material difference ultimately in the reimbursed price.

Okay. Okay. I have to think about that a little bit more. Okay. I appreciate that. So let's see, on the manufacturing side for G7, you've got a new AID partner coming online now and obviously, TAM is doing well and you guys have a ton of patients. How do you think about the ability to manufacture enough G7 for yourself, for your existing pump partner and then your new pump partner? When will you be able to do that?

Yes. I'll tell you. I feel like I've said this ad nauseam. I can't tell you how much better I feel with G7 than I did G6. And that's existing patient population, that's acceleration of anything we can possibly do to convert these folks. That's what we want to do, especially within the G-Series environment. I feel great about our opportunity to cover that certainly through 2022. And then remember, as we enter 2023, we now have the Malaysian manufacturing facility that's up and ready to roll as well. And so we feel great about our position from a capacity perspective, and we don't feel like it's going to be a limiter to our TAM expansion opportunity at all.

Okay. Got it. Another question came through. Well, let me just ask this clarification question first. Just to be clear, Brice, you guys are comfortable using equity if you needed to for any kind of transaction, whatever that may be?

Yes. No comment on any specifics there. Sorry, Matt.

Okay. No, no worries. The last one here, and we're coming up on time here. So you talked about the importance of the primary care channel for type 2 users. Do type 2 intensive users also come through the PCP? Or is that more similar to T1s or ENDOs or other touch points?

Yes, it's a great question. What we found is there's actually more type 2 intensively managed patients than we realize that we're servicing the PCP environment. And so when we started to really understand that, and to your point, we sort of had this type 1 focus and then we were working on reimbursement for type 2 intensives. And what we said is we have to think about the landscape and the long-term play there, and that was the doubling of the sales force. So yes, honestly, even into the type 1 space, as you really get into those high penetration levels, some of those are serviced at the PCP world. And we now have the opportunity to touch a much broader landscape of that environment than we ever have looked for.

Got it. Okay. All right. Well, I'm looking at the time here, and we're just about out of it. So I think I'll wrap up there. Brice, thanks so much for all the feedback here. There's a ton of questions and a ton that you really got through. So I appreciate that, and thanks, everybody, for joining us as well.

Yes. Thanks so much for the opportunity, Matt. See you, everyone.

All right. Thanks, Brice.

Bye-bye.