Tandem Diabetes Care, Inc. (TNDM) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for joining us for our next session here at the UBS Virtual Global Healthcare Conference. I am Matt Taylor, UBS' U.S. medical supplies and devices analyst. And I'm really pleased to be joined by management from Tandem Diabetes. We have today on the line, John Sheridan, who's the President and CEO; and then we also have Leigh Vosseller, the EVP and CFO of the company. So just as a point of orientation for this session, I'm going to be doing about a 40-minute moderated Q&A. If you have any questions, you can send them to me on e-mail or through the conference app, but we'll get started with John and Leigh here with a high-level question. Tandem has had a lot of momentum with its products over the last couple of years, but especially with this new product launch that I think the diabetes community is very excited about Control-IQ. And that was evident in your trends in early Q1 pre-COVID. And so I was hoping that we could start by talking about that and just about how that kind of relates back to the goals and the mantra of the company?

Sure. Thanks, Matt, and I appreciate you having us here today. We -- as you know, we received approval for Control-IQ in the December time frame. And our first priority really was to go out and train the endocrinologists and how to use it, how to prescribe it, what the key features were, and so we did that. We actually trained about 7,000 physicians in the first few weeks for 6 weeks after approval, which we think was extremely important. We introduced the device in mid-January, and the uptake has been incredible. We've had about 35,000 people actually remotely update their pumps. And so I'm sure you've looked at social media, the enthusiasm about the device has been great. People are describing it as life changing. It's not us, that's what people are saying. And people are reporting time in range in the high 80s and low 90s, which is the time in range that people without diabetes have. So the results have been really fantastic. We would have done better in the first quarter without COVID-19. And we anticipated, like I think most people did that in the latter part of March and April, we would see some weakening in demand, some headwinds, particularly with the MDI population, people converting from pens and needles. We think, though, that we did -- first of all, we didn't see it. We saw strength in late March and throughout April. And in fact, we -- in May, in fact, we continue to see 50% competitive conversions and 50% MDI conversion. So the demand has been great, and we think it's largely because of Control-IQ. It does have such a meaningful impact on people's lives and their ability to manage their diabetes that they just want to have it. And we think it was offsetting to a certain extent. In regards to those numbers, I said, we expected to see a reduction in the MDI demand. And because of Control-IQ, we really didn't see any weakness. Leigh, do you want to add to that?

I'll just say some other encouraging points about the first quarter. Again, it's hard to talk about everything without COVID, but a lot of people had been asking us where we thought the MDI community -- what percentage would come from MDI, I guess, this year versus what we've seen in the past? And we started out the year indicating that we were expecting to be at least as good as last year. So -- and just a little bit of history. Historically, typically, about 25,000 to 30,000 people have converted from MDI to pump therapy in any given year. Until 2019, that shifted to something more like 40,000 to 50,000. And so we came into this year with a question of would it shift again this year or just be as good as last year. We believe it needs to continue to shift in order to get to the overall market objective of 50% pump penetration. But since the shift was so big in 2019, there was a question. And if you think about our results, with about half coming from MDI in the first quarter, that indicates that the year was a strong start and potentially another movement in the MDI opportunity. So with COVID in front of us, it's difficult to say what that means for this year altogether. But we think it's temporary what's happening in the world today, and we'll eventually get back to some level of normalcy. And so we're excited about what Control-IQ can really do for us in the market.

Great. That's a great start. Maybe I'll just continue on this. I wanted to ask a few more about Control-IQ in these trends given their importance. And the first one I'll ask is just on the first quarter call, you did give some of this bigger picture guidance for 2020. You specified that second quarter sales could be down if things happened the way you thought they would back then. And you said something like original 2020 guidance isn't off the table. That's one scenario that could still occur. So maybe just going back to some of these comments you just made, could you give us any more color on the most recent trends and how those compare to what you thought would happen about a month ago and what that could mean for the rest of the year?

Sure. It was -- when we came out on the earnings call, we really only have a little bit more information than we had then. And we were pretty confident in giving that guidance for Q2, simply because we already knew the April results, and we had a good line of sight into the May results. So the only really open question on the table was what would happen in June. And with COVID surrounding us, it's hard to make any prediction of whether or not it would imply more pressure, less pressure or how things would transpire. And so we're still here today. We've obviously have a little more data than we did before, but I think it's too soon for us to give any real directional indication different than what we did before. And the way we thought about Q2 was knowing what was in the bag for April and May. With June, historically, we would usually see that as the strongest month of the second quarter, we didn't anticipate that same return to seasonality that we've seen in the past. So at this point, we're still very confident in the guidance that we set, which is at least $85 million for the quarter. And I think the other encouraging point, it doesn't change guidance yet, but it's just to hear that markets are beginning to open up in various states in the U.S. and even geographies outside the U.S. So once we start to see a little bit more experience and what's happening in those markets, we'll feel better about talking about the rest of the year in terms of dollars. But to your point, we did indicate that, yes, there is a scenario where we could get back to our original guidance. It's just right now still anyone guess is as good as mine on how the world might recover, but we're happy to hear that we're starting to see the beginnings of it.

Okay. Yes. So maybe we could veer in and talk a little bit about the OUS trends and outlook. You've only been in that market for a short period of time as you've brought some of the traditional products there. And the other thing that's happened more recently was you talked about a more severe impact that could happen in the short run because a lot of those patients are treated or trained in hospitals. So I was wondering if you could address just how the overall rollout in the OUS market is going? And what we could expect there in the near term?

Yes. So we originally launched, as you probably recall, in the third quarter of 2018. But I would say -- I would almost separate those early quarters where we were mostly focused on Animas conversions, and it's like in the third quarter of '19 is when we really launched what I would call more normal market activities. And so that means we've only been there for a few quarters. But we're excited because there's been a lot of interest in our product. Word has spread, particularly throughout the European countries, the ones we hadn't launched into yet, but now with Germany and France coming online, people were anticipating the product coming. And so thankfully, we got those initial stocking orders out for them in the first quarter. And then to your point, we do expect there to be a little more pressure in the near-term just because patients outside the U.S. tend to visit their physician more frequently in a hospital setting, which has been far more shut down, and maybe not the same telehealth type of opportunity that we've seen here. But once this is behind us, we feel great about our international prospects. With the countries we've added this year, we're now in markets, where in total, there are estimated to be about 400,000 existing pumpers. And like I said, we were just starting to get traction in the third and fourth quarter with what I would call routine market activities. So now we have the real opportunity to go after those patients, when they come up for warranty expirations, to convert to our pump as well as to focus on the MDI opportunity there, which is far less penetrated than in the U.S. So that's -- what's really intriguing about the whole thing is that if you think back to where the international markets today look more similar to what it was like in the U.S. in 2018 before the technology explosion occurred across the diabetes space.

Okay. And then just to finish that thought there as you move through the disruption here. Could you talk about the time lines for any additional countries that you're going to enter into and off to the launch of Basal and Control-IQ in the different areas that's given?

Right. So -- I mean, really, we're just getting started in Germany, France and the Benelux countries, and those were the ones that we really were most focused on for 2020. We haven't laid out particularly the countries that we're looking to next. But I think it's fair to assume that where Dexcom has a presence is a leading indicator of where we might be looking. As well as for us, we focus very much so on where reimbursement is established and it meets our standards in order to meet our profitability objectives. So more to come on that in the longer term. But I think the addition of the countries this year, which is doubling the market size compared to where we were last year, will be a nice growth driver as -- through the end of '20 and even as we move into 2021. And then to your point, from the product perspective, we just started rolling out Basal-IQ in the second half of 2019. And so some of those launch activities are still occurring even today. And we expect to start rolling out Control-IQ in the back half of this year. And similar to my comment on the U.S. and the technology explosion, those are what really have made a difference for us in the U.S. market. So those are something exciting to look forward to in the international markets as they get more legs.

And just as a high-level thought, are there market dynamics or competitive dynamics that would occur in a lot of these markets that would make your probability of success different than it's been in the U.S.? Or would it be largely the same?

I think the competitive dynamics are the same. I mean we are going to compete against Medtronic. They have the 670G there. We're bringing Basal-IQ to those markets, and as Leigh mentioned, later this year, Control-IQ. So I think the competitive dynamics are the same as they are here in the states. And when you look at our competitors and our partners, their growth in these OUS markets has exceeded that of the U.S. markets. And so I think that we're clearly just getting started in these new major markets, but we would expect to see similar growth ourselves once we've got our foothold established.

All right. Thanks for that. Let's shift and talk about some of the competitive dynamics in the U.S. You mentioned before when you looked at the first quarter results, a lot of people were concerned about the lack of the Animas placements that you might have this year because you, for a couple of years, were helping those people to get on therapy. But it didn't seem to be a problem just given the amount of share gain and also MDI conversions that you saw. Could you talk about any remaining Animas opportunity that's out there? And whether people should be concerned at all about that dynamic?

Right. It was interesting a year ago, where everyone thought our business was going to just evaporate because analysts wasn't around for us to take advantage of anymore. But here we are, our pump shipments in the U.S. were still up, roughly, I think, 45%, and that's with the Animas dynamic moving in opposite direction. So last year, before the Animas opportunity expired in the third quarter, it have represented around 18% of our new pump shipments. And in this quarter, we're down to less than -- first quarter, we are down to less than 5%, and still we're able to achieve that strong growth rate. And so really, it's a nonissue for us anymore. We don't really even factor it in when we think about rest of year and opportunity.

Great. Okay. And I guess when you think about return to normal, I know nobody has a crystal ball, but let's assume that you do go back to a more normalized environment by the end of the year, and you start to get the volumes that you thought you might achieve pre-COVID. What do you think that means for the future years for '21 and '22? I don't know if you can offer quantitative guidance, but if you can talk about some of the factors that makes diabetes therapy more durable, for example, maybe some of the catalysts that you have that could help to drive demand in those future years.

I think it really comes down to the product pipeline, and you're right, we're not able -- we're not going to give quantitative guidance at this point about those follow-on years. But our product pipeline is so strong right now with the mobile app coming out soon, remote bolus expected by end of year, again, depending on COVID and when restrictions lift as well as t:sport coming in. And frankly, John, if you want to talk more about that, I think that's really what's going to continue to catapult strong growth for us in the longer term.

Yes. I mean we've seen some turbulence because of COVID-19 on the human factors testing for the mobile bolus feature and t:sport. But I think that as markets open up, we'll be able to get back there and actually do this testing. And I think it's really a day-for-day loss in time. But we are very excited about these products and we expect that t:sport is going to be a very competitive offering. We intend to, as we've mentioned, follow-up Control-IQ with updates that are made on approximately annual cadence of updates to Control-IQ. So that's not going to be static. And we're also making a pivot in the organization to -- we intend to maintain our position today as the leader in pump technology and -- with the best pumps and the best algorithms. And we're going to invest in R&D and our organization just to maintain that leadership position. But we have a great deal of data, and the data can be very useful to our customers. So we're now kind of making a pivot in the organization to looking at a digital health platform, where we're developing an ecosystem of data-driven products and services that can really improve the experience. I mean, the mobile app really is our first move towards the patient and just improving their experience and providing the discretion and the ease of use that comes along with that. Similarly, we're thinking about similar products that can support physicians and their offices by making them more efficient, decision support tools, ultimately getting to the point where we possibly provide telehealth services, where we actually have people in the organization that provide therapy advice to augment what the endocrinologist practices do. So we've got a lot of ideas. We're building the organization to support those as we go forward. And we're very excited about our future.

That's great. Some of that's new to me. I guess I didn't want to touch on that again. Maybe I'll go back first to t:sport. You talked about that as being exciting and giving us some new opportunities. Can you talk about what changes with t:sport? How that will be more competitive? And related to this question, does that give you more of an opportunity with the type 2 patient, for example?

Yes. Sure. Well, so of course, t:sport is half the size of the t:slim. And I think importantly, it will be controlled entirely by a mobile app. And so the benefit that we get from t:sport is the discretion that comes along with that smaller-sized pump and the mobile app. It'll -- of course, it will be waterproof. It will be wireless charging. It will have 200 units. And there's just a number of updates electronically that we've made to the system. But for the most part, I think the discretion is the real benefit. And when we did market research on this, we found that the patient population that was most interested in t:sport was the MDIs and also pediatrics. And so we expect, as we've said, to drive pump penetration from 30% to 50%, and I think t:sport is going to go a long way in doing that. Now on the type 2 question, we've talked to a number of physicians that work with people that have type 2. And one of the things that is, it may not be as well-known, there's a significant negative social stigma because the belief is that people just have had lifestyle issues that have allowed them to get to the point where they are insulin intensive and require just daily insulin to just manage their diabetes. And it's really more complicated than that. But as a result, people -- there's a need for discretion. I mean, people who have type 2 just do not want to be seen or even known that they've got type 2. So we believe that, that discretion that comes along with t:sport is an opportunity for us to actually sort of bridge into that marketplace. We are -- right now, we have about 10% of our pump users who are type 2. We're evaluating data, just a number of them using Control-IQ to see the benefits of Control-IQ. We're also considering clinical studies later this year, early next year, just to help see how this population responds to the product. And then as t:sport comes to market with Control-IQ, we expect to see uptake. And so right now, we're collecting data considering market information and possible marketing information that may go along with the t:sport introduction. And we're going to use this to help evaluate whether or not we actually make design changes in the future to target this particular marketplace.

Got you. Okay, okay. All very interesting stuff. All right. The other thing I wanted to ask about related to this was access. So I think when you're growing like you are, you wouldn't think about companies having an access problem, but people bring up the fact that a lot more diabetes products are being delivered through the pharmacy. So I was hoping you could talk about how you see the state of your access today. Could pharmacy or other alternative models ever help to increase access to your products? Maybe you could give us a thought on that.

Yes. So when you think about access for our product, other than the UnitedHealthcare commercial network, we have access to pretty much every plan within the U.S. and we are able to achieve that by our own direct contracts, which in the first quarter, shipments through the direct channel represented a little over 30% of our sales, or through our network of distributors who have those contracts with the insurance payers. And so first and foremost, our initiative from a managed care perspective is to increase that direct contract penetration rate. So our goal is to get to a 50-50 mix. And why that's so key and important to the question about pharmacy is that's the first step towards building the relationships with the payers and then further evaluating which benefit makes the most sense for patients and for all products in particular. So I don't think there's necessarily a right or wrong answer at point. It's something that we will continue to evaluate. But I'll point out, when you think about a patient and when they're going through the purchasing process or even through the evaluation process, when a physician -- when they meet with their physician, they're not necessarily talking about insurance and benefits. They may be aware or made aware that pump therapy versus -- compared to multiple daily injections is more costly. But the real clinical value that you get from pump therapy today more than pays for itself when you think about the reduction in hospitalizations and other complications that could occur. So a physician is usually more focused on which therapy is right for the patient that they will want to continue using for the long term. Then, the patient can explore the different pump options. And so at that point, the conversation about insurance benefits is usually held when they start talking to the pump companies about whichever pump they've chosen and when they take that step forward. So that's where we will continue to evaluate the pharmacy channel. Will it increase access? I think there is always a possibility, but I don't know that it's actually a barrier to access today.

Got it. Okay. That's really helpful. Okay. And then another pipeline topic I wanted to ask about was your partnership with Abbott. Can you give us an update there? And there's been a question that people have been asking today, Abbott has been talking more about Libre 3. Can you remind us have you been specific about anything with regards to which version you're working with them on or any other aspects of the partnership?

We haven't actually identified the technology that we plan to implement with Abbott. We have been working with them on the agreement. And I would say that if we were to sign the agreement in a few weeks, we could probably expect to see a product available the earliest in the second half of 2021. So hopefully, we can conclude the current discussions that we've got underway and actually just get plans in place for the future. Things are going well. We're just in discussions to just to get the agreement taken care of. But we haven't said anything about which specific technology we plan to implement.

Okay. Well, maybe you could talk more broadly about just the things that you could bring to bear with future combination product systems, whether it's with the Abbott family or with future versions of Dexcom or others. Where do you foresee the evolution of things like Control-IQ going? What are the additional value adds that you can bring to bear there?

Well, I think the important element of the product that's with -- on the sensor is that its iCGM and its gets the iCGM designation. Clearly, that's what G6 has today. And when you talk to Abbott, they're very confident that they're going to get the iCGM designation for the next-generation device that's under review today. So I think that having that enables us to implement the technology without the requirement for the regulatory process, which would include a clinical study. So it's a big time-to-market benefit for us. We are not trying to affect, in any way, the competitive dynamic between Abbott and Dexcom. We're just trying to provide choice to the people using the system that we've got here. So I think by integrating the Abbott sensor onto our product, this is for those people who prefer that device, and it just enables our system to work with it. In the preliminary conversations that we've had with Abbott, and clearly, this is the case with Dexcom, we believe that the sensor can work with Control-IQ and that we'll just have to get into the details, technically, once the agreements has been taken care of.

Got it. Got it. Okay. Okay. Could you maybe offer a view based on your experience with Control-IQ? If you look 5 years down the road, what percentage of type 1 patients, maybe or overall pump users, do you think will be using some kind of closed-loop or combination?

I think its -- I think the hybrid closed-loop and ultimately closed-loop element is very, very important. But there's also just the ease-of-use piece, the reduction in burden that comes along with interacting with the pump and the new technologies coming to market, we think that's what's driven the uptick in penetration that we've seen in 2019. And we think that's what's going to get us to the 50% penetration that we expect to see in the next 3 to 5 years. So I think that developing these products that are simple, intuitive and easy to use, increasing the discretion. I think the mobile app will go a long way to doing that, adding other features, just enabling data to be made available to other app developers who can creatively look at how to use that data to improve the experience that the person using the pump has and as well as just the advances that we plan to make into Control-IQ technology, all of which is designed around improving the outcomes as well as improving ease of use. I think that the easier you make it to use, people are more compliant and you will see better outcomes. So we're excited about the future. And we think that we definitely have confidence in getting to 50% penetration. I think as we start to achieve that goal, then we start to look at what are the factors that are affecting us getting even beyond that, which is, I don't think we plan to stop at 50.

Okay. Okay. I'll go back to -- Leigh, you were talking before about trying to get United on board. And I think Control-IQ is a key part of that strategy. Now you have the publication. Can you give us any update there on the conversations you're having? And are there any other payers like that in the U.S. or outside the U.S. that could be key wins for you in the next year or 2?

Well, as you know, we don't talk specifically about any individual payer relationship. But you're right, the -- I think that Basal-IQ and Control-IQ have really opened up the conversations with the payer organizations, and we're now speaking to all of them. And not only that we're speaking to the -- to meaningful people in those organizations who can make decisions and can support bringing Tandem into their individual groups. So we're excited about these conversations are going well. As Leigh mentioned, we've improved our direct business from 25 to 31 in the last year, and we expect to see meaningful progress throughout this year as well.

Got it. Okay. Different topic that you talked a little bit about on the call is really necessary at this time. And that's a lot of the shifts that you've had to make in the organization to enable remote training, working, connecting with your patient and customer base. So I was hoping you could touch on a few of those aspects and talk about how Tandem is positioned to be able to do that effectively?

Sure. We, like everybody, were surprised with the speed at which we had to make that conversion. I mean, in early March, the organization was all working in the offices and our sales organization were interacting with endocrinologists in their practices. And by the end of the month, our entire organization had shifted to working from home. And the endocrinologists had gone to complete virtual interaction and virtual visits as well as virtual training. So the good news is that our sales organization has great relationships with these endocrinologists. We speak to them every day. Interestingly enough, since they have been at home and since they haven't been involved in -- the multiple office visits they have to when they're in their practice, they've actually been more accessible to us. And we ourselves were able to make the transition effectively. And as I saw that happen, they've actually even asked us to help them do it. So we've been working with practices, sharing the things that we do to communicate. We tend to use Teams internally in Tandem because that's something we've had in place, and I think it's really helped us make this transition, but we have been helping them with Teams or Zoom or whatever they need and feel comfortable with. We've also been making -- explaining and showing how they can implement t:connect at home, which is very, very essential in terms of just providing therapy guidance. So that's working well. And I think that there's a little -- right when this transition occurred, there was definitely turbulence. But I think that what's happening now is people are getting used to it. They're talking -- physicians are talking to themselves -- amongst themselves, excuse me, trying to just discuss best practices for just providing the therapy guidance and management in their office visits. On the training side, we've been training people remotely now for at least a year, and we did that intentionally to just improve the efficiency or CDE organization. They spend a lot of time at cars. Obviously, if they can do virtual trainings, they are more efficient. It's less expensive. And the focus, though, was primarily on people and competitive conversions. So now with the -- this COVID-19 situation, 100% of our training today is done virtually. And fortunately, what happened early on is the FDA actually allowed us to do MDI training for -- using virtual training capabilities. So we have established the process. We have videos that we provide early on in the process to get people familiar with what we have. We have a t:simulator app that replicates the exact function of the pump. We do the training. We follow-up in a couple of days. We have surveys. And it's been amazing. The survey is actually the results. The satisfaction levels have been higher since doing these virtual trainings than they were face-to-face. I think it's just because people appreciate the fact that we can do it. And we haven't seen any -- we haven't really seen any effect and complaints where people who had been trained virtually have had problems and had to call back into our customer support center. So the transition has gone very well both in the interactions that we have with the physicians and supporting physicians make the transition themselves to virtual visits and in training. And I'll say that when you talk to people who are out there doing this, it's their belief that it's not going to go back to a full face-to-face -- all visits face-to-face as it has been in the past, that virtual is going to remain a meaningful part of this practice and this diabetes management going forward.

Sure. Yes. That makes sense. Do you have any predictions or feedback points on that last point to think about how much of that will actually stick when you look out a couple of years?

I don't want to say a random percentage, but I think it's definitely going to be a meaningful part of the practice. I have a friend who's an endocrinologist in Los Angeles, and she's moved entirely to virtual visits. And she's told me that her patients don't want to go back. It's a lot easier just to sit in your home and have a visit versus driving through Los Angeles. So there's a lot of factors, I think, that are contributing to this. And I think that -- I think there's an opportunity for companies like Tandem to use the technology that we've got today and the technology that we're bringing on and the directions that we're moving to address this need and provide systems and services that allow the physicians and patients to interact effectively in this environment. And that's something that we're definitely thinking about.

And just the L.A. market could be 100%.

That's correct, maybe New York, too.

Okay. So let me ask you a couple bigger picture margin questions. I think you made some comments on the call, you weren't really backing off your longer-term margin or patient goals. Could you talk about the biggest factors driving margins as you get through this disruption? And is there anything that is coming out of this? You mentioned all this virtual stuff, I mean, does that add to your ability to deliver operating margins? Or is it not that material?

So I'll start with gross margins and talk about the initiatives in place right now. And one in particular, we're doubling the size of our cartridge manufacturing and which -- from which we'll get leverage on the go forward. Another major driver could come from the t:sport product, depending on when it's launched and how quickly it scales to become a piece of the business. It was designed with cost efficiencies in mind. And of course, neither of those have anything to do with what we're experiencing in COVID-19. But one of the factors, as John mentioned, would be remote training possibility. Trainings are a part of our gross margin. That's where the cost fall into cost of goods sold. So the more we can do on a remote basis could create more efficiencies in the long term. And as he mentioned, that was one of our efficiency drivers before COVID-19 came about. And so fortunately, we have the foundation in place for that initiative. But then moving on down to the operating margin line, I think not only us, but everyone in the world is learning something different about how their workforce can be productive without everyone necessarily sitting in an office side by side. And so not that we're ready to make any wholesale changes, but we're trying to take the learnings that we are seeing just week-by-week on what's effective, what makes people work more productively, and do reduce commute times and some work-from-home opportunities help in that regard? And then in the longer term, does that play into the size of facilities that we need in order to support employees? So at this point, I mean, I don't know -- I think it's too soon to say it can have a significant or give a percentage to the type of improvement we could see. But those are the factors that we are evaluating that could provide benefit in the long-term beyond some of the initiatives that we already had in place this year. And you're right, we were not pulling back on any of our initiatives. A lot of what we were investing in this year was laying foundation for longer-term leverage. So for instance, we continue to expand in Boise, Idaho, where it's a lower cost geography in terms of labor and facility space. We are continuing to invest in our IT solutions to make our customer support teams more effective as well as other parts of the organization. And so this year, there were a number of investments we were making that did not necessarily drive this year's sales levels, but would help us achieve our long-term 25% operating margin target, and we will continue to move forward on those.

Okay. Very good. So a couple of questions I have just to kind of round out the discussion. I think we've covered a lot. But I did want to ask you about your renewals. So obviously, now you're entering into a period where you have more folks who have been on therapy and may want to renew. Could you just talk about some of the trends that you've seen in renewals? And any help that you can give us to understand how to try and predict how that will evolve going forward?

Yes. So renewals are one of the exciting opportunities. In my mind, it's kind of like international. It's a small piece of our business today, but we expect it to become much more meaningful on the go forward. And renewals, in particular, of course, it's based on who we issued pumps to in years past. And so in 2020, we're still looking back to people. Honestly, the people who got their pumps originally in 2012, there are still some of them that are coming through the renewal cycle this year. But for the most part, it's more on the people whose warranties expired in 2015 and 2016, which were strong years for us. We were 16,000 and 17,000 pumps in each of those years. So in terms of our progress so far, by the end of 2019, more than 30,000 patients had expired warranties in our population. And we have renewed a little more than half of them. And so this year, 16,000 more are coming up for renewal that get added to that pool. And our progress has been nice and steady. I think becoming pretty predictable. But the way really to think about it is when a warranty expires, that, that renewal will occur sometime in the 1- to 2-year time frame from that warranty expiration. So you can see that our denominator is growing pretty rapidly just based on pumps we ship, but the numerator lags a little bit just because of that time element. But like I said, we're making good progress towards our ultimate goal is to have a 70% retention rate, and we feel like we've made great strides towards that. One driving factor is our pumps have become more reliable. But in order for a person to get access to the new technologies through software updates, you have to be in warranty. So that's hopefully one motivating factor to help people keep coming back to access new technology and help encourage them to go through the renewal process sooner rather than later.

Okay. Okay. And then also related to the renewal cycle and people re-asking for pump. Could you just speak to the economic sensitivity of diabetes therapy? I think some investors have questions about whether if we have high unemployment, you may see that show up in numbers. Are there any prior experiences that you could draw and speak to what that could look like? And what would you do, if anything, to mitigate that?

Yes. So I think one way to think about it and that we -- that people will look at pump therapy. Years ago, it was really just another way to deliver insulin, but now it provides such great clinical benefit that a small investment in pump therapy can really alleviate future costs in terms of hospitalizations and long-term complications. And so when you look at it from that perspective, it's not a very significant investment compared to what you can save if you will go ahead and move forward with it. But having said that, it's still daunting to folks when they're facing uncertainty about their employment levels or their insurance plans. And so one thing that we have always offered in, we'll continue to offer and we're being as accommodating and flexible with folks as possible is that, we offer payment plans for that upfront payment associated with buying a pump that can help them spread it out, so that, hopefully, that onetime payment doesn't become a barrier to them getting on the therapy. Our plans are pretty flexible. We today offer anywhere from 12- to 24-month payment plans for folks that are interested. And during the COVID -- this time of COVID right now, we're offering more flexibility in those payment plans in terms of when people start or deferring some of those payments. So that's our response right now. We'll continue to evaluate the situation and make adjustments as we go forward if necessary.

Got you. Okay. Well, we've covered a lot, and I think we're at our allotted time. So I just want to thank both of you for spending time with us today. I know your schedules are very busy, especially during this period of disruption. And so I think everybody appreciates giving us all these insights on what's happening with your business. And I want to wish both of you the best luck as we move through this challenging period and hope that you can manage through it well. And maybe we'll get to do this in person sometime soon.

It sounds good. Thank you.

That was nice talking to you. Thanks very much and stay safe.

Thank you. Take care. Bye.