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

Good morning. Thanks, everybody, for joining us for this next session. And I am Matt Taylor, UBS' U.S. Medical Supplies and Devices analyst. For this session, I'm pleased to be joined by management from Tandem Diabetes. And like our other sessions, this is going to include mostly fireside chat. We have lots of questions prepared. But if there's any that you would like to get in, you can e-mail me or use the question feature at the bottom of the screen. And to kick things off for this session, we're going to have a few slides from Tandem management. I'm joined by both John Sheridan, who's the President and CEO; and Leigh Vosseller, who's the EVP and CFO of the company. So John and Leigh, thanks so much for joining us. Really appreciate your time today. And I just want to turn the floor over to you, John, to get started.

Great. Thanks, Matt. It's great to see you. Yes. Leigh and I are going to give you a brief update on the first quarter of 2021. I want to just say that here's the safe harbor statement. I hope you guys can all see the slides. And I'll just say we had a very strong start to 2021. Our first quarter was actually the best first quarter we've had. It was the second best quarter we've ever had. We saw our revenue grow by 44% year-over-year. And we also saw our pump shipments actually grow by about 46%. We saw improvement in gross margin, and we saw substantial improvement in our operating margin. So really a strong quarter, and it was largely driven by the success and the continued momentum of Control-IQ. We're very excited to see that we have about 150,000 people currently using Control-IQ. It's great technology and the physicians and the people using it are increasingly having more and more confidence and they really love the results and are just seeing life-changing outcomes from that. We have about 240,000 customers who are using the technology now worldwide, and so we're very excited to see that. And another meaningful accomplishment this quarter was just great OUS performance, and Leigh will talk about that as we walk through the presentation. We have, as a company, really focused on developing a simple, intuitive, easy-to-use devices. And we think that, that strategy has really allowed us to grow the business rapidly through our relentless innovation. We are innovating faster than our competitors. In the last 9 years, we've introduced 7 significant products and will, I'm sure, talk about the pipeline as we walk this presentation today. Clearly, we've got a lot of confidence from the results that we've seen in the first quarter. And actually, the results in the second quarter are also continuing quite well. And we feel great about the rest of the year. And in fact, Leigh has -- Leigh and the team have increased our guidance for the rest of the year, which we'll talk about here as well. We have a history of firsts in the company. We're the first to have a touchscreen, rechargeable system, remotely updatable software, which we think is a huge, huge advantage that we have. It's also very, very important to the community of people with diabetes because it allows them to just have real-time access to the technology. We have been working closely with the FDA on the interoperability initiative, and we have taken a leadership position in that. Our Control-IQ system has the first automated correction bolus system. Our mobile app is in iOS and Android. And our mobile app right now, we're under review with the FDA, will be the first to have control of an insulin device from a mobile phone. So we're very excited about that. I'm going to let Leigh talk about the factors that really have driven our success, and those are the same factors I think that are going to continue to drive success into 2024.

Thanks, John. So yes, we have a very ambitious goal of reaching 500,000 customers in our worldwide installed base by the end of 2024. As John mentioned, we already reached about 240,000 at the end of the first quarter. And this goal was originally said at the beginning of 2019, when we had only 80,000 people in our worldwide installed base. So we are very confident in our ability to hit this target in the next few years. And to John's point, we've been successful in the last 3 years based on a few key growth drivers, which we do expect to continue to be in place for the coming years and to get us to this target. The first one really is the massive underpenetration in the market. I'll start by talking about the U.S. here for a second. Pump adoption today has reached about 35% of 1.7 million type 1s in the U.S. That's up pretty significantly from about 3 years ago, where it had been stuck at about 27%, really sets the beginning of pump therapy being an option for patients. And for us, this is remarkable because about half of our new customers come from that MDI population every year. And what we're seeing is that, that's continuing to accelerate. Last year, we estimated in the whole market that about 50,000 to 60,000 people adopted pump therapy from the MDI population. And this year, our Q1 results would suggest that it's going to accelerate again. From an OUS perspective, similarly, massively underpenetrated. There are about 4 million people living with type 1 diabetes in the markets where we operate today and only about 10% to 20% of those people use pump therapy. So again, another great opportunity for us to continue to grow those markets, much like what we've seen in the U.S. in the recent years. We've only recently launched Control-IQ in about half of the markets that we operate in, and we expect to launch it in the remainder of the markets by the end of this year, and we think that's going to continue to drive our strength in those markets outside the U.S. Then you can turn to -- if you think about the number of people that are using pumps already, in the U.S., it's about 700,000 people. Outside the U.S., there are about 400,000 existing people. And the nature of the cycle is that once every 4 years, insurance will generally reimburse for another pump for a patient. So every 4 years, we have the ability to capture patients from the competition when they come up for renewal as well as our own renewal customers. So our renewal opportunity is growing pretty dramatically. If you think about where we've come from in the early years, we had what appeared to be strong growth at that time, but we've had a significant acceleration in the last 3 years. So as we look ahead, that will become a much more meaningful part of our business as we go forward. We continue to improve our renewal efforts. By the end of 2019, we had reimbursed cumulatively about 50% of people whose warranties had expired. By the end of 2020, that had increased to about 55% of everyone whose warranties had expired. Our goal in the long term is to reach a 70% retention rate, and we're well on our way to achieving that.

Thanks, Leigh. And in order to make these -- to continue to drive the success, I mean, the heart of our strategy really is our pipeline, our robust product pipeline. We started off as an insulin pump manufacturer, and we have evolved the product to include integration with sensors and algorithms. And really, we have driven -- now we're providing therapy to our customers. And we're moving to the point where we provide insulin therapy management. As I said, the pump hardware really is key to this. And we will talk about some of the new initiatives that we have and the timing of those coming up. We're also looking at evolving and improving the algorithm over time, making that available to people who are -- who actually are in warranty, we think that's a very big advantage of working with Tandem. And as we've also talked about, we're working with our CGM partners: Dexcom and Abbott. We have also recently expanded our initiatives to include Tandem Source. It's a next-generation cloud infrastructure that's going to allow us to provide a real interesting digital connection with our customer base. So I think when we look at our digital ecosystem, we have -- we really have multiple customers. It's not just the person using the pump, it's their caregivers, it's physicians and its payers. And we think by providing just a wide ecosystem of data-driven products and services, we will be able to connect with each of those entities and provide, as I said, simple, intuitive and easy to use products and systems to allow them to help manage their own diabetes and help manage the diabetes of people who are -- they're taking care of. So with that, we had a strong quarter. We really feel confident about our ability to have a strong 2021 and beyond. We feel that by innovating and by focusing on our customers -- customer service and also just continuing to execute that we're going to continue to see success with the end of this year and beyond. So with that, Matt, I'll turn it back over to you for questions.

Great. Thanks, John and Leigh. So you did a good job of doing part of my job for me. Thanks for that good overview, and there are some places I'd like to dig in a little bit. So just starting with the performance. I mean, obviously, you mentioned a couple of times, 44% growth in Q1, and that included strong composition of growth with high double-digit growth in the U.S. And outside the U.S., you were up over 100%. So I was hoping you could parse that out a little bit, talk about the strengths that you're seeing in the different markets? And then maybe just give us some thoughts on international given you're just kind of starting out there and help us understand where that could go over time?

Sure. You're right. It was a pretty remarkable quarter, especially if you look back to last year and consider the fact that COVID was not yet impacting our business. In fact, last year, I guess it did impact a bit. We had benefit from people that were stocking up on supplies as they prepared for what was coming. And so even with that, we had really strong growth. What's been interesting over the quarter since then is the way COVID has impacted the business. In the U.S., I think that we've pivoted very well, and the market has adapted to telehealth and telemedicine. So that's helped fuel the business as well as Control-IQ rolling out and growing with momentum across the year. We are still seeing some COVID headwinds though, when you think about it, our field reps aren't 100% in offices anymore. We're still not having those live interactions with patients like we were accustomed to with, with camps, with diabetes clinics and classes, and ways where we can interact with patients to really show them the pump. And so there's still some, I would say, modest headwinds in the U.S. at least, but because we've adapted well with Control-IQ and the telemedicine, that's helped mostly offsetting. It's the markets outside the U.S. where it's been pretty tremendous these last 2 quarters in particular. What we saw when COVID hit was that there was an inordinate amount of pressure on those markets and mainly because what we were hearing and seeing is with patients visiting their physicians in the hospital setting, there were a lot of stops and starts. You would constantly hear about market shutting down, markets opening up. And frankly, they were more focused in the hospital setting on that critical care and people who had COVID. So it's really putting things like moving forward with pump therapy on the back burner, if you will. So we saw a lot of pressure in Q2, Q3. And we were also trying to get Control-IQ rolled out. But what really happened in Q4 was in one of our most significant markets in Germany, we saw great strength. And really, what I said was that all of the efforts we've put into place the 2 prior quarters since we officially launched, really just came to fruition. And so when they came to us and said, look, we have all this demand out there. So we need to hurry and fulfill it, we need to put some more inventory on our shelves and get ready for first quarter. And so it was a great fourth quarter, but it was mostly due to one particular market. In Q1, was very different. Germany, first of all, reordered. So it shows that they have continued demand. But what we saw was strength across of the markets and that was the first time we've seen that kind of strength across all of the markets at one time and really in a couple of quarters. And so even though there's a little bit, I think, of COVID effect in this way a benefit to us as the distributors starting to right-set their inventories, kind of get accustomed to what kind of demand is out there and what it can look like going forward. I think it says a lot about what's happening in those markets. And like I mentioned earlier in the prepared remarks, if you think about what's happened in the U.S. the last 3 years with the way technology has really driven pump penetration, I think that opportunity exists for us in the OUS markets as well, particularly with Control-IQ, just starting to take hold there. So we're really excited about the long-term potential for the international markets.

Got you. Okay. Maybe just one follow-up on the short-term dynamic there. So you talked about reordering in Germany and then broad-based strength in Q1. One question I've gotten is about whether there could be a lot of stocking or inventory in the channel. Could you just comment on that and talk about the visibility that you have to end customer demand through your distributors?

Sure. So one thing I'll point out is that, our distributors, whether it's in the U.S. or outside the U.S., they don't really stock a lot of inventory, if you will. They don't hold months and months on their shelves. They're really more of a just-in-time type turnover there in terms of their inventory. And so when they order, it really is usually based on demand that's already built up and the demand that they can see in the coming months. Now outside the U.S., they do hold it for a little bit longer just because of the lengthy time of getting things shipped to them. But at the same time, they're not holding for 6, 9 months out. It's really a very near term. And so what's going to be challenging here in the next quarter or 2 really is this variability that we've been seeing because of COVID. And so now that they've ordered again, some of it's just replenishing what they've already shipped out. And so they're still trying to manage what's this look like in the coming months. And so that's when you look at our guidance, in particular, I've gotten asked a lot about the fact that it looks like there's a deceleration. It's really just considering a typical Q3 seasonality that will come, but also this variability that we might continue to see in the very near term here.

On the guidance, I mean, to be more specific, you did, I think, around $38 million in Q1. The midpoint of the international guidance, I think, is $110 million. And so it would be closer to a $150 million run rate if you just use the Q1 number. Now I know Q3 is usually lower and you have to account for that. But are you being conservative, I guess, because of the fluidity of the dynamics internationally?

Yes. One thing I'll point out to in Q1 that was a bit different, we usually focus on the pump sales as the primary driver because that's the most key and important. But outside the U.S., if you look at the supply sales, last year, we averaged something in the range of $10 million to $12 million per quarter. In Q1, it was more along the lines of $19 million. So even on the supply side, there was some right setting going on there. And I don't necessarily anticipate that's the run rate that will happen here in the very near term. So when you ask about conservatism, what we've factored in this year is really that COVID will continue to have this impact outside the U.S. and it might be variable here in the very near term. So we want to make sure we see something more consistent. We haven't seen a trend, I guess, is the right way to say it. And when we begin to see that trend, we'll be more confident in giving higher guidance in the future.

Okay. Great. Great. And just remind us internationally when Control-IQ will be launching in some of the key geographies? I think you have some coming online this year.

Sure. It's in about -- it's in about half of our markets today or through the end of in 2020. Really, the 2 key markets that it's not launched into yet are France and Germany, and we expect it to be there by the back half of this year. It's -- there, it's about getting the last reimbursement approvals in place. But otherwise, in the other markets, it's been there. We started rolling it out in July of 2020, and we've been doing it on a scale basis, so we're starting to see traction already in those existing markets.

Okay. Great. Great. And then maybe talk a little bit about the pipeline. You referenced it in the beginning there. There's a lot going on here. So this could be a multi-question part of the discussion, but for this year, there's a few enhancements that we should talk about. The first is mobile bolus. And then the second is probably the Control-IQ enhancements that you're going to make. So let's start with those and just remind us what you're thinking of for timing for each of those and for the materiality of those?

Sure. Well, first of all, as we've talked about in the last couple of months, we've been interacting with the FDA routinely on the mobile bolus submission, which was made back in the fourth quarter. We've been having great conversations with them. And in March, we actually received questions from them, which we're in the process of addressing today. These questions are -- it's just normal part of the process. It's not to suggest there's anything going on that would affect the submission. It's just a normal part of the process. In fact, we've got very positive response from the FDA on our cybersecurity technology that we've employed. And we think that will probably become the standard one for cybersecurity design technology that's in these mobile features going forward. I think that the -- we have to respond to these questions, and we're in the process of doing that right now. I think we're both learning. It's new technology, and we're kind of on the leading edge of that. And so there is just on the -- we're learning together. And as a result of that, there are some changes that they've asked for, some things that we've got to take care of. And it's going to take us a little bit of time to implement that, and we're in the process of doing that right now. So I would say that we expect to get this back -- we're going to get this back to the FDA and get that review process going again. And there's going to be some delay, but it's not going to be a first half approval as we initially expected. It's is likely to be in the second half and we're just working with the FDA right now to make that happen. So we're excited about that. We think it's going to be a huge improvement to the experience that people have when they interact with the system today. When people interact with Control-IQ and since they've started using Control-IQ, they rarely take their pumps out of their pocket. And the only time they actually ever do that is really to bolus for meals. And so the ability to do that from your cell phone now just gives you a great deal of convenience, improves experience and discretion. So we think that's a really a big initiative. We think it's going to continue to drive MDI conversions and competitive conversions as Leigh mentioned a few minutes ago. When it comes to Control-IQ, we have made a submission back in the fourth quarter. I would say that we've talked about making sort of modest improvements and then more significant improvements that are going to require clinical studies. We would say that these are probably modest and the intent really is to increase the scope of people who can actually use Control-IQ, people with lower body weights, people who use more insulin. So there's a variety of things that we -- we're looking to just improve access to Control-IQ. We're in the stages right now of planning for improvements to -- that are more significant improvements. The ones we've talked about, that would be personalization, adaptability, modifications to the meal bolus features. So those things are in the works right now, and we're going to be doing clinical studies this year. I'd say that those changes are probably not going to be available until the '22 or '23 time frame, where we expect these initial ones that we've made here, hopefully, this year.

Got it. Got it. And John, maybe I'll ask you a follow-up on the personalization, the bigger changes. Maybe you can just give us a sense for if you think about a typical patient or maybe there's a niche segment of the patients that would get more benefit out of this, how would their experience with the first version of Control-IQ differ from that with a more personalized algorithm, more customizable bolus? What kind of a difference would it make in their daily life?

Yes. I think people have personal preferences. It's not a one size fits all condition. And so some people just prefer to operate kind of with lower blood sugars. They just are more comfortable with that, and then others prefer higher. They're just -- maybe they have fear of hypoglycemia, but they just prefer to operate with a higher blood sugar. So right, when we implemented Control-IQ, we implemented it exactly as it was designed by UVA and TypeZero and Dexcom. And so we're now in the process of making changes to allow people to actually adjust the settings. I think that the -- though the overall experience today with Control-IQ is incredibly positive, people describe it as life-changing, and it really is. And so I think this is just -- it's another step to improve the experience. That's really what we're doing here. We're carefully evaluating the feedback we get on the system. As I mentioned in some of the discussions we've had in the past, we have about 20 million days of real-world data for Control-IQ in our t:connect system. And that gives us a lot of information about how people are responding and using it, and it really enables us to make meaningful changes to it. So we think it's going to just -- we're going to continually provide changes over time until we get to the point where we feel like we have a fully closed-loop system, which is what our objective is, that's going to take a longer. But in the meantime, we'll make these improvements available to the patient population using the updater.

Got it. Yes. Understood. Understood. And since we talked a lot about the international dynamics, I was hoping we could maybe do the same kind of discussion around the U.S. It seems like the market is very healthy. I know there was a little bit of COVID impact last year. But with telepresence and telehealth, your business was remarkably resilient. Maybe just talk about how you see the U.S. market evolving over the course of the year? Could you see any improvement? And what's baked into your guidance in those assumptions?

Leigh, why don't you go ahead and get that.

Sure. So what we thought about for this year, first of all, that Control-IQ will continue to drive momentum across the year. It's been pretty remarkable the uptake that we've seen. And as John mentioned earlier, as we gain physician confidence, they are more inclined to prescribe it for other patients that maybe they hadn't considered for pump therapy before. So we think that will continue to be a strong driver of the business across the year. And when you think about what's factored in, we have Control-IQ momentum. We also have for the first half at least, UnitedHealthcare benefit when compared to last year. We didn't achieve full access again until July of 2020. So there's this first half dynamic year-over-year of growth there. And then you think about what's factored in, in terms of a caution perspective, everyone knows our guidance philosophy where we're cautious about things where we don't feel like we have a great deal of control over. And one of those this year is just COVID, as I already mentioned. In the U.S., we're faring better than we had originally expected, but we still expect to see some level of pressure across the year. As that dissipates, then that gives us some upside opportunity on the go forward. The other pieces, as we think about, the competitive dynamics in the market, what we have typically seen and it's not even really just a competition, but any time a new product is introduced into the community, there tends to be some level of noise or turbulence in the market around the timing of, from the FDA approval to that commercial launch. And so with a couple of new products anticipated on the market this year, likely in the back half, we factored in some caution that there might be some of that turbulence or noise in the market. We think it will be temporary. We've seen it in the past. We saw it around our own Control-IQ launch in 2019 in that fourth quarter. And so we anticipate it could happen again, and we're just being thoughtful about that.

Understood. Understood.

Matt, I would point out when you look at the -- we have great momentum in '21, and we expect that to continue through the end of the year. But when you look at 2022, we've got a full year of mobile bolus. We've got the t:sport system coming to market. We've got the integration with Abbott and with Dexcom's new sensors. And then we also have Tandem stores. So we think we've got a very exciting pipeline in 2021 lined up that's going to really drive accelerated growth in that year as well. And I think that's going to, I think, really cause this -- again, the 4 or 5 factors that affect our growth really come to play next year, and we expect to see that acceleration continue.

Got it. Yes, quite a strong pipeline there. I do want to ask some more on that. Before we get there, maybe I'll just touch on the competitive dynamic. Leigh, could you talk about how much turbulence typically happens with these products? And then one thing I think is important to consider is the FDA time lines for everybody have been lengthened as the agencies working to keep up with COVID. Would you view that as back to normal? And I guess, could you see some of these competitive launches you pushed out? I know Insulet's maybe just a couple of weeks, but I haven't heard anything about Medtronic's launch, maybe that also gets a little bit of a push.

Yes. I think really anyone's guess is as good as mine on what -- how things can move through the FDA. We know what we've seen there, and we here it constantly across the board. And so I think that may continue to impact people's timelines. We're being cautious about what we hear publicly and factoring that in as we think about the go forward. And when you think about the magnitude of it, I mentioned Control-IQ launch as a good reference point. Some folks have remembered the time back in 2016 and '17 when the 670G first came to market, I think that's a very extreme and unique example of noise or turbulence. We don't expect anything along those lines. But for instance, in 2019, when Control-IQ was under FDA review, there was a high level of anticipation about it, particularly, after the ADA when the presentation came out with the pivotal trial results. And so because of the normal timing, I recall, through the FDA, people anticipated that was going to come to market in that September-October time frame. What happened indeed was that the FDA was focused on developing a new category, the iAGC category and so it took a little bit longer than anticipated. And what we saw, even though it was a software updatable option for people, people just kind of waited in those few months to make their pump purchase. So we saw a little bit flatter Q4 and a little bit more beneficial Q1 because of just the timing of those dynamics. And so it wasn't significant, I would say, more modest in nature, and that's what we're factoring in for this year.

Yes. Got it. Understood. And then let's turn to talk about your pipeline here in '22. So John mentioned a bunch of big things that are coming. I'd like to take a couple of them in turn, and let's start with t:sport. So you already covered the time line, but maybe just remind us why you're so excited about it and how you think this positions you for a different segment of the market? And whether it may be healthy in type 2 as well?

Yes. Well, of course, it's half the size of the current pump of the t:slim, and it doesn't have a touchscreen. And so the system will be controlled entirely from a mobile app. And we think the combination of the size used -- and with the addition of the mobile app just increases the discretion that comes along with the -- interacting with the system. And so we think discretion is hugely important. It's all about the patient experience. The size gives you flexibility to move the system, to position it on your body in areas that it's just due to your -- whatever is going on in your life or convenient. And so we think the flexibility and wearability of the system is also very important. So the combination of discretion and wearability, we think, are important. People think about that as they make decisions to choose pumps. And we think that's going to help drive additional interest in Tandem's products. The other thing to point out is it will be a portfolio of products. We'll have the t:slim in the market at the same time as well as the t:sport. And so we think having 2 options. It just gives us the opportunity to appeal to a broader segment of the market because it is a very segmented market.

Understood. Yes. The other thing I wanted to ask, I should have followed up this before, but you mentioned the 670G launch 4, 5 years ago, a lot of those folks are probably coming up for renewal and renewal is a big topic for Tandem in general. But given that there was a mixed experience that a lot of folks had with that product, could that actually play into your hands later this year and into next year as those people look to options for renewal?

Yes. We absolutely expect that to occur. You're right. So it was in the '17 time frame when people first started getting on the 670G. And what we've seen in recent years is a continued increase in the number of people converting from other pumps. And so now that people are making that lap on that 4-year warranty cycle, we think that will continue to drive competitor conversions for us going forward. You might ask the question, but 780G is coming, and so won't that encourage people to stay? What we're seeing today, at least outside the U.S. is that we're already competing against 780G very effectively. And in fact, one thing I didn't mention about the dynamics in Germany were that we've only started shipping Basal-IQ there and that great surge of momentum that we saw in fourth quarter and the continued demand in the first quarter is when we're competing with the 780G in that market in particular. So I think that says a lot about what we're going to be able to do in the U.S. when 780G launches here. But you're right, I think we have a great opportunity from folks who are ready to make the switch, and that will continue to grow this year and next year.

Got it. Understood. And what -- when you look at the renewal of the slide that you showed before, you've made a lot of progress on retention, I think 55% is the current state. You want to get to 70%. Can you talk about how long it could take to get to that? And what do you view as the long term? And could you go higher than 70% over time?

Yes. So it's interesting. What we're going to see in the next 3 years is the increase in the denominator is going to be pretty significant. And the numerator when you think about our renewal calculation will lag a little bit because what we see is that it's about a 4-year warranty cycle, but it seems that people are, on average, it's more like a 5-year renewal cycle for us. But we do expect to continue to make progress in that cumulative rate. It might not tick up as fast as what we saw from '19 to '20 where it grew 5 percentage points. What we've really been doing in these years where we were looking back to periods where we had a smaller volume of pumps seen that are coming up as opportunities is focused on that process so that we can continue to drive that penetration in our own renewal base. But in the coming years, we expect that we'll continue to grow towards 70%. And in fact, we look back and there are pockets of times within our own history where we're already achieving 70%, and we need to do that on a consistent basis to get to that on a cumulative basis overall. But things are moving in the right direction, absolutely.

Right. And then in general, in the past, ex renewals, about half of your new customers are coming from MDI and half from competition. Do you expect that to continue to be the mix? Or could it shift going forward?

Yes. I think we have a great chance to keep that balance that we've been seeing because, first, we're seeing that the MDI community continues to move to pump therapy at an accelerated rate. But back to our earlier conversation about the people that might choose to make the switch to Tandem, we're probably in as good a position as we've ever been in order to continue to attract people from competitive products.

Great. Great. And the last few quarters, you've really increased the [ amount ] that you're talking about type 2. And so I was hoping that you could talk about the type 2 opportunity at a high level. And then some of the product features, the enhancements, the approvals, that could help you increase engagement and the appeal of your offering to the type 2 market. Could you help us understand that?

Sure. Well, there's approximately 2 million people that have insulin intensive type 2 in the United States, and about 200,000, about 10%, use insulin pump. And that's -- we're a little -- we're a little less than 10% of our current patient population that have type 2 that use our system. And I think that in the coming ADA and the ATTD early in June as well as last year at the ADA, we presented data of people who actually have type 2 and have used our system. And they've seen substantial improvements in their outcomes, really, really meaningful improvement in time and range for that group. So we're excited about it. We actually are going to present data on the first full year of Control-IQ, with about 9,000 people with type 1 and about 400 people with type 2 who have used it for an entire year. And they maintained that improvement through the entire time frame. So as far as our -- we think that there's sort of an immediate opportunity to use our current products, to use Control-IQ and t:sport, which we think will be appealing to the type 2 community. And then longer term, look at a more discrete offering that's really targeted towards the type 2 community, which is going to be a measured years in terms of when it would be available. And so our first strategy really is to get Control-IQ approved for the type 2 community. Right now, it's obviously only for type 1. We have a great deal of data, which we hope will be adequate for the FDA to give us that approval, but we need to get in front of them and have the conversation. And we're very close to doing that. And I think that if it were to require a clinical study, then it's probably a year plus out in time before we'd have that. And then I think that, as I mentioned, I think that t:sport with Control-IQ, you get the discretion that comes along with it and using the mobile app in the size. We think that's going to be meaningful and very appealing to the type 2 community. So short term, let's focus on the existing products. Let's get them ready and teed up so that can actually be used by the type 2 community. Longer term, we'll be looking at more specific product enhancements and features for that group as well.

Got it. Great. So a couple of questions I wanted to ask here from the audience. One is talking about closed loop and the enhancements that brings, are you finding that, that has opened up reimbursement in any countries or areas that had more limits for stand-alone pumps?

What we're seeing today is it's opening the doors for conversations. The first conversation have been in the U.S. It hasn't been outside the U.S. long enough to really drive that same enthusiasm, at least with the reimbursing organizations. And so in the U.S., though, we're talking to payers, we're talking to payers at a different level than we have in the past, where you walk in the door and usually you talk to the contracting arm of the organization. What Control-IQ is doing is getting us to people at the medical director level, people who are -- really understand clinical outcomes and clinical benefit and how that might impact reimbursement and cost savings for their systems overall. So the focus has mostly been in the U.S., but we're starting to have those conversations outside the U.S. And so we're really working through our distributors to do that. Our distributors are the reimbursement experts when you think of those markets and so we're working with them and through them in order to talk to those reimbursing organizations there. But we have high confidence that it will make a difference for us.

And have you ever been able to get a premium for Control-IQ in any of these areas? Or is it just more of a sweetener for payers and stakeholders to engage with you?

Yes, we actually have. We haven't really talked about it much out loud because that's been on a very small scale basis. Nothing I could say of a material nature where I could point to an outcome in our overall business model, but we are having conversations, and we have had price increases because we've been able to share the value and the data with payers. And so I think it will be a continuing trend over time. In fact, enhanced reimbursement is one of our key objectives to driving gross margin improvement. And so it will come. It's just going to be a long time to get there.

Understood. Okay. And then a couple more I have here. One is the t:sport timing outside of the U.S., can you remind us what that could be relative to the U.S. time line?

We haven't really talked about it. It's definitely -- it's going to take probably, I'd say, at least 6 months to a year to get to that position, but we haven't really spoken about it specifically.

Okay. Great. Great. And then just going through this last one. So basically, the question is about guidance for this year. And I guess the way I'd parse it out is, what does it assume for market growth? Obviously, you've been gaining share, but what do you think the broader market could grow this year? And could you touch on your pricing, I guess, both like-for-like, are you seeing any material changes? And then how does international mix change the pricing dynamics?

Sure. So starting with market growth. In the U.S., when we came into the year and set the guidance initially, we were looking at it as at least as many people would move from MDI to pump therapy this year as we saw in 2020. And last year, we estimated in the whole market about 50,000 to 60,000 new pumpers. What we saw in Q1, if you just look at our growth, obviously, that is a bigger increase. It would imply a bigger number, I guess, I would say. And so we think that, that market will continue to accelerate, which fits into what our overall thesis is, is that where 35% of people are using pumps today, we think that will be 50% in the coming 2 or 3 years. So it only makes sense that, that population has to continue to increase. And I think Control-IQ will make the difference outside the U.S.. It's been pretty stagnant there, very underpenetrated. I think we'll start to see that movement in the coming years. It will be harder to talk about overall because everything we talk about there is at an aggregate level. But country by country, I think we're going to start to make a difference in terms of the use of the products there, with the advanced algorithms. And then from a pricing perspective, at least From the U.S. perspective, we continue to focus on getting more direct contracts and that enhanced reimbursement I just talked about. I don't anticipate we'll see significant shifts in the average selling prices this year in particular, but expected to tick up over time at a modest level. Outside the U.S., though, what we've seen in the past few quarters is some variability in terms of reimbursement. And that's just has had to do with the mix of geographies in any given quarter. We -- like I said, we haven't gotten on that steady cadence or trend yet to see a standard mix, but it's settling in from a pump perspective in the low 2000s, and I think that's probably a reasonable way to think about it, at least in the coming few quarters until we get to some sort of trend.

Okay. Great. Okay. I think that's it for the incoming question. So back to our regularly scheduled program here. But John, I wanted to jump to you and maybe ask you about the ecosystem that you talked about. And how that's important to a lot of the stakeholders. You've got Tandem Source that's going to be coming out here over the next year or so. Maybe talk about how your ecosystems differentiated and what that adds to the appeal of choosing Tandem versus a competitor?

Sure. Well, I guess, we talk specifically about Tandem Source. We're rolling it out right now, OUS, and this is going to give us one system internationally right now. That's which, right now, we're working with a third-party in OUS countries. So this is going to be a big step for us because we think that we have the connection with people who are using our system and we'll have an improved connection when we have the system now internationally. So it's also -- it's a -- it's going to be one system that has the -- it represents the complete interaction with the company. You can go on to Source and you can basically see your data. You can basically purchase supplies. You can interact with our customer service organization. And sources -- it's also -- it's the digital back end, but it's also -- it's the mobile device as well. They'll be integrated. So you'll be able to do this on a mobile device as well as on your computer. So we think that's very important. It's also customizable. Today, if you were to talk to 10 physicians and ask them how they want to see the data presented that helps them manage people's diabetes, you'll get 10 different answers. And so it's using tile technology. And so with that technology, you can basically move tiles around and actually present the information that you find to be most meaningful when it comes to just evaluating people's diabetes and helping with treatment. So we think that customizability is going to be hugely important. But when you sort of think about the general -- where the -- where we're going in consumer devices generally, it's all about the experience that you have and the ease of use with interacting with these different companies. And we think that's incredibly important for Tandem as well. Again, the ability to use your mobile app to text or just chat with one of our CTS organization people, the customer service organization, to get answers to some of the experiences that you might be going through at that point in time. It's very, very important. Purchasing supplies from your mobile app is also important. So it's this ability to build an ecosystem of data-driven products and services around the pump, we think will increase the stickiness of the device. And so the benefit of that is that people become accustomed to the value and the experience that they have in interacting with Tandem. And then they want to continue to purchase our pumps or they want to -- the people who have competitive pumps will move to Tandem and also people who are using needles and pens are more likely to move to Tandem as well. So it's all about driving the sort of the increased interest in the company and the products and seeing the benefit in our revenue growth.

Okay. Great. Great. So we only have a couple of minutes left, and I have a few more questions here. I just wanted to flag the time. But one thing I did want to ask about was your investment in CeQur. And then talk about that slice of the market, what does this mean for any aspirations that Tandem could have to get into other segments of insulin delivery, for example? And what can you learn from this investment?

Well, it's a low-profile device that is essentially an injectable. So essentially, it almost represents a pen or a needle in a different form factor. And so it's also -- it's a segment of the market that we're not experienced with at all. And I think that by working with CeQur, we have an opportunity, I think, to learn a great deal about this segment as well as the broader type 2 space. I mean there's a lot of information, I think. We understand there's channel access. There's working with PCPs. There's just a great deal of information. I think we have the opportunity to learn from the relationship with CeQur. So we're excited about it. But it's a cool device. We think there's going to be interest in using it. They're just getting started right now. We think we can help them on sort of the commercial scale upside, and they can clearly help us with information about type 2, which we're excited about.

And what are your latest views on getting into the pharmacy channel or other channels? How could that help your business develop over time?

Yes. It's interesting. The question is always why aren't you in the pharmacy channel? Should you go there? And I think what we don't talk about a lot is the benefits that we actually see in the DME channel and why it makes a lot of sense for us at this point. Just the nature of our product itself fits more cleanly into the DME channel. And I think, one thing that is underappreciated is the pricing stability we've seen there for years and years. So if you think about it, pumps have reimbursed at a pretty constant level. And when you talk about the pharmacy channel, what you tend to be -- add to your conversation is about pricing headwinds that come with that trade-off that you have there. So we see that amazing stability, and that's something that we want to keep hold of. And the other piece is the visibility we have to our customers in the DME channel. Considering it's a 4-year renewal cycle and that relationship is very important, that customer experience, the visibility we get in the DME channel when a person first places their order is key and important to that relationship building. And so what we see is that when we interact with the patients, we learn more and understand about them. So when we train them, we have a better chance for helping them be more successful with pump therapy on the go-forward. And it's important right upfront to give people that best experience, so they want to stick with you in the long term. So one thing that we're focused on when people talk about the pharmacy channel like, but it's so much easier to get your prescription filled. So we're looking at the DME channel and saying, well, how can we optimize that? So you can get the same look and feel and we can keep the benefits that we have today. And we're really focused to some of the conversation on Tandem Source that John mentioned. Part of it is, how can we streamline that ordering process. So a patient puts in the order. And on average, it takes about 30 days from that date to when they actually receive their pump in the mail. What we can do is work with the physicians who have to work with us during that time frame. And it's the back and forth, the paperwork pushing those types of interactions, how can we make that more efficient, shorten that time frame and automate it as much as possible. So there's very little interaction. And then you get that same look and feel and DME works great for us. So pharmacy is something we'll continue to keep our eye on if it makes -- if we think it could make a difference in terms of access. But today, we're not seeing or hearing that physicians are making their decision on what to prescribe based on which insurance channel it might go through.

All right. Very good. We're about out of time. So I think we should probably end there because we did cover a lot of ground. And so I want to thank you both for spending the 45 minutes with us, and a lot of good feedback, business seems very healthy. And so we look forward to you executing the rest of the year and the best of luck.

Thanks, Matt.

Thanks, Matt. It's great talking to you.

You too. You too, as always. All right. Take care.