Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation Second Quarter of 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations.

Thank you, Lauren. Good afternoon. And thank you for joining us today for Insulet's second quarter 2020 earnings call. With me is Shacey Petrovic, President and Chief Executive Officer; and Wayde McMillan, Executive Vice President and Chief Financial Officer. The replay of this call will be archived on our website, and the press release discussing our second quarter 2020 results and third quarter and full year 2020 guidance is also available in the IR section of our website. Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and could materially differ from current expectations. We ask that you please refer to the cautionary statements contained in our SEC filings for a detailed explanation of the inherent limitations of such forward-looking statements. We will also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. These measures align with what management uses as supplemental measures in assessing our operating performance, and we believe that they are helpful to investors, analysts, and other interested parties as a measure of our comparative operating performance from period to period. Additionally, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year basis, and all revenue growth rates will be on a constant currency basis. And with that, I’ll turn the call over to Shacey.

Thanks, Deb. Good afternoon, everyone, and thank you for joining us. While COVID-19 continues to challenge Insulet, our customers, and our communities around the world, the dedication of our employees, partners, and the healthcare providers serving people with diabetes has helped us to deliver an extraordinary quarter on nearly every dimension. We achieved second quarter revenue of over $226 million, exceeding our expectations. This growth represented a 29% increase driven by 27% revenue growth in our total Omnipod product line. It was a record revenue quarter across every single product line. Delivering these results in such uncertain times is a testament to the tremendous execution of our team. We are very fortunate to have strong fundamentals in place. The strength and durability of our recurring revenue model provide us with significant insulation. Our performance in the first half of this year is reflective of our great momentum in 2019 and the first quarter of 2020. While we are seeing an impact of COVID, it’s a two-part story for Insulet. There are many aspects of our performance that we celebrate. We are creating new ways to serve our customers that are more scalable and more engaging. We’re making our supply chain and manufacturing operations more resilient and adding significant capacity in preparation for the Omnipod 5 launch next year. Even in the face of this pandemic, we are making exciting progress on our innovation programs. In the near term, due to COVID's impact on new starts, we have the reality of the compounding impact on our revenue growth rates in the second half of this year and the first half of next. Ultimately, we expect to grow total Omnipod revenue 18% to 20% in 2020, despite this impact. We are building capabilities across the company to maximize our position in the market and serve our mission for many years to come. Insulet will emerge stronger and better from this challenge, thanks to our talented and committed team. On today’s call, I’m going to speak about how we are continuing to manage through the COVID environment, our achievements toward our strategic imperatives, and our longer-term expectations. Wayde will dive into the details of our financial results and guidance, and we will then take questions. We continue to grow our global customer base during the second quarter. As discussed on our last call, we had anticipated 50% to 75% fewer new Omnipod customers as compared to our original expectations at the start of the year. We landed closer to 50%, exceeding our expectations. Our performance was driven by our commercial teams who throughout the quarter expanded utilization of our virtual onboarding tools, piloted novel programs to increase awareness and adoption of Omnipod, and continue to expand affordable access to Omnipod across the globe. It was supported by our innovation and operations teams who helped us to grow our manufacturing capacity and resilience and deliver an exciting new release of Omnipod DASH, while also advancing Omnipod 5 towards commercial launch. This quarter, we made continued progress on our strategic imperatives. One, to deliver consumer-focused innovation; two, ensure the best global customer experience; three, expand our global footprint; and four, drive operational excellence across the organization. Starting with consumer-focused innovation, the Omnipod form factor has been our key advantage since our founding. We hear from Podders around the world who come to us from MDI and other pumps that the ease of use and freedom associated with the pod is life-changing. Over the last several years, we’ve benefited from the differentiated form factor and increasing market access to grow our Omnipod customer base. Last year, we fully launched Omnipod DASH and our growth accelerated, even as other CGM integrated automated insulin delivery systems entered the market. This is a testament to the value of our consumer-focused innovation, including a relentless focus on ease of use, companion apps, and cloud connectivity. In a few quarters, users will no longer have to choose between the Omnipod form factor and CGM integrated automated insulin delivery. Omnipod 5 offers both. Adoption of Omnipod DASH continues to grow, driven by both the ease of use of the platform and our pay-as-you-go business model, primarily through the pharmacy channel in the United States. This is a uniquely differentiated offering that eliminates restrictions and makes treatment accessible to a broader range of customers. We continue to see strong adoption among MDI users in both the type 1 and type 2 segments. In the second quarter, approximately 30% of our U.S. new Omnipod customers were type 2, consistent with last quarter. We continue to make great strides within the type 2 diabetes population, a market we are uniquely positioned to serve, given our differentiated product and our access through the pharmacy with no restrictions and no upfront costs. Coverage for Omnipod DASH continues to expand with approximately 65% of lives now covered, primarily through the pharmacy channel. In June, we also launched a major Omnipod DASH release, including several features that further improve simplicity and ease of use. These include automatic data uploads so that users and their clinicians have instant, real-time cloud access to data without the need to connect and download from a computer. We have been working on that vision for years to streamline clinic workflow, and we have already heard from users how valuable this is to enable telehealth visits in our current environment. We can also now push future software updates wirelessly to our customers, and we are delighted to now offer Spanish language as an option for Omnipod DASH users in the United States. In the second quarter, we saw expanding use of our virtual patient onboarding tools, which have been well received by consumers and healthcare providers. The vast majority of our new customers were onboarded virtually. Omnipod simplicity and ease of use are clearly differentiated in this environment, and both type 1 and type 2 MDI users can easily get started on Omnipod from the comfort of their homes. Our virtual training capabilities have helped to mitigate the impact of COVID on growth of new Omnipod customers. They also lay a foundation for consumer-friendly, cost-effective, and scalable onboarding of new users to Omnipod 5 when it launches. In addition to the success we’re having with Omnipod DASH, we made great progress on Omnipod 5 and remain on track to launch in the first half of next year. We resumed our pivotal study in June and presented our first data from the Omnipod 5 pre-pivotal study at the American Diabetes Association Virtual Conference. The results demonstrated best-in-class usability, excellent time in range, and statistically significant improvements in hypoglycemia compared to prior therapy. More than half of the participants have completed the Omnipod 5 pivotal study, and all participants should finish by Q4, putting us in a solid position to launch Omnipod 5 in the first half of 2021. Virtually all trial participants have enthusiastically requested to continue using Omnipod 5, so we are supporting an extension phase to enable them to remain on the product. This allows us to collect additional long-term data, which will provide helpful insights for clinicians, payers, and for our Omnipod 5 innovation pipeline. Participant feedback has been terrific. Just last week, we were touched to hear from a parent who said, 'with Omnipod 5, I now have my child back, and my family has their mom back.' We recognize that we’re third to market, and as such, we didn’t design Omnipod 5 just to be an incremental improvement in automated insulin delivery. We designed our system to revolutionize insulin delivery for people living with Type 1 and insulin-dependent Type 2 diabetes and to bring automated insulin delivery to millions of people who still rely on multiple daily injections. Omnipod 5 brings together the pod's compelling form factor, excellent time and range, low hypoglycemia, customizable set points, and adaptability that is designed to limit how much healthcare providers need to tweak the system to help users get great outcomes. Our platform will also offer unique benefits, including complete personal smartphone control, which eliminates the need for a separate personal diabetes manager. Thanks to our effort to put the algorithm on the pod, we expect users to be able to download the Omnipod 5 app, pair it with their pod, and enjoy the benefits of Omnipod—no infusion sets, no separate controller, and nothing else to think about. We also know that smartphone control isn’t for everyone, but we wanted to ensure our users could enjoy the benefits of real-time data being available in our companion apps and cloud data platform. Omnipod 5 personal diabetes managers will therefore include a SIM card. This enables every Omnipod user, even pediatrics without smartphones, and those without Wi-Fi to benefit from our companion apps that will provide real-time insulin and CGM data to caregivers, loved ones, and clinicians. All of this comes in a system that has been designed to be exceptionally easy to start and use, as evidenced by our remarkably high usability scores. We’ve also begun to work on what comes after Omnipod 5. We see the Type 1 pump market nearly doubling in the coming years as more users discover the ease of use and clinical benefits of second-generation automated insulin delivery systems like Omnipod 5 and beyond. We see enormous opportunities to serve those living with insulin-dependent Type 2 diabetes, given our unique form factor and pharmacy access. We are investing to serve these growing markets. We are investing in next-generation technologies and in demonstrating the benefits of Omnipod 5 in expanding populations, including very young pediatrics and people living with insulin-dependent Type 2 diabetes. We are advancing our algorithm to increase automation, improve outcomes, and simplify the experience for users. We are continuing to integrate our products with next-generation technologies from our partners at Dexcom, Abbott, and Tidepool, all with the goal of reducing burden and improving outcomes for the millions of people living with insulin-dependent diabetes across the globe. Now turning to our progress in our international markets; this area of our business has been more heavily impacted by the pandemic, and we are seeing a slower recovery in some European markets. This does not diminish our enthusiasm for our international opportunity, both in terms of continued growth in our existing markets and expansion into others with significant unmet needs. We made good progress throughout the quarter, preparing our markets for the expansion of our Omnipod DASH launch. Our limited market release in the UK, Netherlands, and Italy was successful, and our customers love the product. The international team has been focused on training, market readiness, and launch preparations, and we’re looking forward to moving into full market release with Omnipod DASH early next year. Finally, turning to operational excellence; for the last four years, we have been strengthening our global manufacturing and supply chain operations. We have increased capacity and made our operations more resilient with the addition of our U.S. manufacturing plant to complement our facility in China. This has served us especially well during the current pandemic. As many of you know, during the last 15 months, we began producing Omnipod on our first two highly automated U.S. manufacturing lines. Although the pandemic has impacted how quickly we’ve been able to ramp these lines, we continue to increase capacity and gain efficiencies throughout our global operations. In the near term, this ensures we can deliver the highest quality products to each of our customers. Over the long term, our U.S. manufacturing will provide required capacity and support as demand for our products continues to grow. We plan to further expand our U.S. manufacturing capacity across our supply chain and manufacturing operations to prepare for what we are confident will be enthusiastic demand for Omnipod 5. As part of our corporate sustainability goals, we have taken steps to reduce the environmental impact of our supply chain and operations. To this end, we have localized a large portion of our supply chain to reduce logistics emissions. We also moved to ocean freight, which has the benefit of being both cost-effective and more environmentally friendly. In June, as a further step, we transitioned our company headquarters and U.S. manufacturing facility to be fully powered by solar-based renewable energy. We understand the urgency and importance of protecting our environment and reducing our carbon footprint. We are committed to fostering a sustainable business to support the long-term wellbeing of our customers, our employees, and our communities. In summary, while there are certainly short-term challenges that our business faces due to COVID, our team is rising to these challenges in remarkable ways. The strength and durability of our recurring revenue model provide us with significant insulation and differentiation and are key to our ability to continue to deliver attractive growth in these uncertain times. Our investments in product and business model innovations and our dedicated team position us to drive strong organic growth and value creation in the long term, and most importantly, to improve the lives of people living with diabetes. I will now turn the call over to Wayde.

Thank you. I want to echo Shacey’s gratitude to our Insulet team members who have adapted to these extraordinary times. Thanks to their hard work, we delivered another quarter of strong financial results that exceeded our expectations. We continue to make excellent progress on our strategic imperatives as we invest for growth, enhance our global competitive differentiation, and serve our mission of improving the lives of people with diabetes. In the second quarter of 2020, we delivered revenue growth of 29%, which was $10 million above our guidance range. This strong performance continues to be fueled by our total Omnipod growth of 27% and was $6 million above our guidance range. Regarding new Omnipod starts, we communicated that our guidance for Q2 included an estimate that the pandemic would lower our expectations from the beginning of the year by 50% to 75% with the U.S. closer to 50% and international closer to 75%. Actual Q2 results were favorable in both regions, as the combined impact was approximately 50%. Attrition and utilization came in near expected levels with slightly higher attrition and slightly lower utilization. Breaking down our revenue results by product line, U.S. Omnipod revenue grew 31%, exceeding our guidance range of 21% to 25%. Approximately $4 million to $5 million of the increase resulted from the net impact of estimated distributor channel and end customer inventory levels. In Q2, we grew U.S. volume through the pharmacy channel to over 30% of our total volume. Pharmacy channel growth contributed to the increased inventory levels. Stocking for the pandemic also drove channel inventory increases across all three channels, including our DME and Direct. New Omnipod starts were also favorable compared to our expectations. Our growing customer base and Omnipod DASH adoption primarily through the pharmacy channel, as well as the mixed benefit from the premium on DASH, continued to be the primary drivers of our growth. In the second quarter, volume growth of Omnipod DASH continued to drive over 60% of our U.S. new Omnipod starts. International Omnipod revenue grew 20% compared to our range of 15% to 19%, including a benefit of approximately $2 million of channel inventory build due to COVID and to a lesser extent, better than expected new Omnipod starts. Drug delivery revenue increased 49% to $24 million, which was $4 million above our guidance range. While we expected greater than normal revenue growth in Q2 due to the shift in timing of production from Q1, the overachievement was due to our partners' increased forecast related to the current environment. Overall, we achieved robust revenue growth in the second quarter, building off of our strong momentum from 2019 and Q1 of 2020. Turning to gross margin. We delivered 63%, down 270 basis points year-over-year in line with our expectations. The year-over-year change included headwinds primarily due to the ramp of our U.S. manufacturing lines, as well as an approximate 180 basis point unfavorable impact from COVID-related costs and 40 basis points from foreign exchange. These headwinds were partially offset by the favorable revenue mix benefit from Omnipod DASH growth through the pharmacy channel and pay-as-you-go business model with no upfront charge for the PDM, as well as continued improvements throughout our global manufacturing and supply chain operations. Operating expenses in the second quarter were in line with our expectations, and we ended the quarter with adjusted EBITDA of 20%. Our strong adjusted EBITDA was due to the favorable revenue performance, lower travel and meeting expenses, and timing of certain expenses, including Omnipod 5 clinical trial expenses, much of which moved from the second quarter into the third quarter. Regarding cash and liquidity, we are in a strong cash position with the earliest debt maturing in 2024 and low cash interest expense. We ended the second quarter with $868 million in cash and investments, including the additional cash raise of $477 million from the equity offering in May. The cash raise strengthened our balance sheet and ensures we can continue to invest for growth, including R&D, commercial initiatives, and capital expenditures to execute our strategic imperatives and provide additional liquidity during the pandemic, should we need it. We have a differentiated position in a large and under-penetrated market, and we want to come out of this pandemic stronger by continuing to grow in our global markets. Turning to guidance. Although COVID impacts are not predictable, last quarter we continued to provide guidance in order to help investors forecast our business, understand our growth drivers, and highlight the areas of the business that will be most impacted. Given the information we had and an estimate of the impact of the macro indicators, along with the durability of our recurring revenue model, we maintained our full year 2020 revenue guidance at the low end of our original total company range. As a result of second quarter revenue that exceeded expectations and a stronger second half outlook, we are raising our total company full year 2020 revenue guidance growth rate to a range of 17% to 19% up from our previous expectation of 15%. This includes raising total Omnipod to a range of 18% to 20%. By product line for U.S. Omnipod, we’re raising our expected revenue growth to 19% to 21%, and for international Omnipod, we’re raising our expectations to 17% to 19%. The key drivers of our increased full-year guidance for total Omnipod are the compounding benefit of second-quarter higher new Omnipod starts, which add incremental revenue in the second half of the year, and our expectations of improved new Omnipod starts in the third quarter. In terms of expected new Omnipod starts, our guidance now assumes an improvement in the third quarter, global new starts compared to our guide last quarter. We now estimate that new starts will be approximately 30% to 50% lower than our beginning of year estimate, with the U.S. again at the low end and international near the high end. This compares to the 50% we guided to on our Q1 call. We anticipate fourth quarter global new starts will still be approximately 25% lower, consistent with last quarter’s guide. This results in the achievement of approximately 60% to 75% of our original pre-COVID assumptions at the start of the year. Our revised guidance for new Omnipod starts factors in a gradual improvement from Q2 to year-end. We continue to assume downward pressure on utilization and an uptick in attrition to account for potential pandemic-related headwinds. While current trends are beginning to show signs of improving conditions, COVID continues to create uncertainties, and it is difficult to accurately predict the progression of the pandemic. Our global diabetes business remains well positioned to manage through multiple scenarios and continue strong growth this year, as well as in 2021 and over the long term. Lastly, for drug delivery, we now anticipate growth of 3% to 6% resulting from the increased forecast from our business partner. Turning to the rest of the P&L. On a full-year basis, we are reaffirming gross margin of approximately 63%, which includes an estimated $7 million to $10 million of one-time costs related to COVID safety and mitigation efforts versus our prior guide of $5 million to $10 million. Also factored in is the slower ramp in our U.S. manufacturing lines due to the pandemic. Our 2020 and long-term financial strategy and capital deployment plan remain unchanged. We continue to expect capital expenditures to be consistent with last year, as we plan to invest for growth in our innovation pipeline, global commercial initiatives, and our manufacturing and supply chain operations. For full-year 2020 adjusted EBITDA, we are reaffirming our expectation as a percentage of revenue at the low end of the 13% to 17% range. For the third quarter of 2020, we are guiding to total company revenue growth of 13% to 15%. This includes total Omnipod revenue growth of 12% to 14%. By product line, we expect U.S. Omnipod growth of 14% to 16%, international Omnipod of 9% to 11%, and drug delivery of 23% to 28%. As a reminder, the pandemic's impact on our global new starts in the second quarter has a compounding effect on revenue, which mostly impacts the second half of the year. Nevertheless, the durability of our differentiated recurring revenue model insulates us to a large degree since we generate the vast majority of our revenue from our large existing customer base. As a result, we still plan to achieve double-digit revenue growth in the third quarter of 2020 and the full year, despite the impact of COVID. For our 2021 outlook, assuming market conditions stabilize in 2021, we remain on track to deliver our long-range plan target of $1 billion in revenue. As communicated on our Q1 earnings call, we expect gross margin of 67% to 70% and operating income as a percentage of revenue in the mid-teens, closer to the low end of the range. In conclusion, we had significant momentum to start the year, and our first half 2020 results benefited from that momentum. Our differentiated business model and product platform, operational excellence, and strong financial profile enable us to continue to invest for growth while mitigating the impacts of COVID and related headwinds. As a result, we expect to deliver 18% to 20% revenue growth this year. We have a very healthy and robust business and are well positioned for continued growth over the long term. With that, we’ll turn the call over to the operator for Q&A.

Thank you. Our first question is from Larry Biegelsen with Wells Fargo. Your line is now open.

Good afternoon, guys. Thanks for taking the question and congrats on a nice quarter. Shacey, just one on Omnipod 5 for you, and Wayde one for you on the margin. So Shacey, just any update on the timeline for iOS integration and how are you feeling about the price premium for Omnipod 5 versus DASH? And Wayde, on the 2021 gross margin, can you talk about the drivers to that 67% to 70%? Should we be thinking about the low end? It’s a pretty big step up from a 63% in 2020. Thanks for taking the questions, guys.

Great. Thanks, Larry. So in terms of iOS, we have not guided any timeframe, only to say that we fully expect to follow our initial launch on Android with iOS. So that work is underway, and as that timeline becomes clearer, we’ll communicate that out. First, we want to get Omnipod 5 to market, which is coming soon. In terms of a price premium, we also haven’t given much insight into our price strategy. The one thing I will highlight, though, is we are entirely committed to a pay-as-you-go model in the United States with Omnipod 5. What that means is all of our existing DASH users will be able to transition to Omnipod 5 without having to worry about a lock-in period or having to pay some sort of upgrade fee. Now that doesn’t mean Omnipod 5 doesn’t warrant a premium because obviously, the performance in terms of hypoglycemia and other key performance indicators certainly deliver value to the market, and so that’s what’s being evaluated. But we are committed to the pay-as-you-go model, and that’s important for us because as we think about the pace of innovation increasing in the market, we want to be positioned to deliver that innovation most quickly to our customers and not make them wait out these industry warranty periods, et cetera. So that’s what we’re committed to, and we’ll see about the price premium.

Okay. And Larry, on the margins for 2021, first of all, margins are an important part of the story for us. We have significant strategies running across the business to make sure that we have the strongest gross margins possible, and we see them as a big part of the differentiated story here for us. When we look at the most recent quarter, what we’ve called out in impact from COVID is 180 basis points in foreign exchange. So if you take out those two one-time items, the most recent quarter would be 65%. COVID is having a pretty significant impact as well as FX on our gross margins. So that takes a bit of a step up away. When we look at how we progress in 2021, we have made a significant investment in our manufacturing operations, mainly here in the U.S. but also in our China facility. We continue to make progress on our operations as well as our supply chain efficiencies. We have high confidence that we will get into the 67% to 70% range in 2021, and we still have high confidence that we can get to 70% over time. We’re just a bit delayed here for a quarter or two, as our teams have shifted focus to deal with COVID and the safety and mitigation efforts related to that. But it has not diminished our game plan to push for 70% gross margins. I know the team is doing a lot to keep that in focus while they deal with the current environment. I’m confident we’ll get back on track here in the next couple of quarters, and we’ll be confident when we issue our guidance for 2021.

Thank you. Our next question comes from Robbie Marcus of JPMorgan. Your line is now open.

Thanks. And there’s a lot I can ask about in the quarter here. But Shacey, I actually want to focus on two longer-term focus questions on points that you made. The first was that the number of pump users could double over the coming years. I’m guessing coming means something like 5-ish. So if there are 400,000, 500,000 pump users in the U.S., I mean, that’s a massive new patient opportunity over the next several years. I just want to make sure that I’m thinking about it the right way, and how should we think about the number that Insulet can possibly grab during that time?

Yes, you’re seeing it the way we see it, Robbie. We see this pretty significant technology inflection happening in Type 1 and actually beginning to happen in Type 2. A lot of this is driven by adoption of CGM. We know there’s going to be great demand; it’s one of the most anticipated developments in the pipeline with Omnipod 5. We do see that we’ve always said we thought 50% was a reasonable estimate for penetration into the pump market because you just needed to look at pediatrics. We’re seeing pediatric patients expand utilization of pumps in Type 1 pretty rapidly. The expansion of CGM has driven more adoption too, so we believe that’s a realistic total addressable market for us and an exciting one. We look at CGM penetrating into Type 2s now; for us, that’s just pipeline. We see a tremendous opportunity to bring Omnipod 5 to people living with Type 2 insulin-dependent diabetes. We have the right to win in both of those markets. We have specific, really differentiated form factor advantages, and we’re really excited about what integration with our sensor partners will bring to both of those populations.

Thanks. And maybe if we think about, Shacey, the comments you made on the lower new patient adds in 2020, and that will impact the back part of this year and the first half of next year. I just want to make sure, do you see something with street numbers that worry you? We all know this is a recurring revenue business model, and fewer new patient starts equal somewhat of a headwind next year. Does something worry you about where the Street is for next year? Because seeing what your competitor is doing with an integrated offering, Horizon 5, potentially, should be even better. There’s a lot of enthusiasm around the launch next year. I just want to make sure that’s more just the reality of the business model rather than trying to talk down expectations. Thanks.

That’s right, Robbie. We are not worried. I just always take the opportunity because we have such a different business model relative to obviously other insulin pump players out there, to educate on that. Wayde, I don’t know if you have any other color you want to add regarding the Street estimates.

Yes, first of all, it’s a really good question because one of the reasons we elected to provide guidance last quarter was to give insight for people to understand our business model. The reason that Shacey is highlighting here is to remind people that in the recurring business model, that we’ll be dealing with this headwind for the second two quarters of this year and into the first half of next year. But having said that, we have a lot of positive drivers in the business, and when we—specifically with respect to your question on estimates, we have raised our guidance more than for the Q2 beat here. So, there should be some room in the second half, as you know, we’ve also taken up the second half guidance.

Thank you. Our next question comes from David Lewis of Morgan Stanley. Your line is now open.

Good afternoon. Thanks for taking the question. Just a few questions for me; I’ll start with Shacey. So Shacey, during this earnings season, a lot of diabetes companies have talked about international sluggish recovery related to the U.S., and just sort of can you walk us through how this dynamics ex-U.S., or varying versus the U.S.? Is it country-specific, or do you think it’s across multiple regions of your ex-U.S. business?

Sure. Yes, David, you’ve hit on it. The recovery that we’re seeing in Europe is definitely more modest than what we’re seeing in the U.S. today, and it is very much varied across the markets. Some are doing okay, and then others like France, which is obviously an important market for us, are still very challenged. Hospitals don’t open, and many of those new patients would be served by the hospital and they are occupied with other priorities. It’s kind of a tale of multiple parts across Europe. The other area that is more challenged is endo visits. There’s been slower uptake of telehealth in Europe, and many larger European markets see their Omnipod or new pump starts in hospitals rather than in private offices. Hospitals are really challenged right now in many parts of the world. We’re seeing encouraging signs across all of our markets regarding endo visits starting to reopen, in terms of our pipeline and new starts, but we’re not back to normal. Even endo visits in the United States are not back to where they were pre-COVID levels. So it’s encouraging, but in Europe, we forecast that it will be a much more moderate recovery from here through the rest of the year.

Okay, very helpful. And then kind of related question, just thinking about the broader new patient start impact. Improving here in the third quarter guidance from prior, you’re still saying 25% new patients start impact for the fourth quarter. So, the way to think about that is that simply a reflection of a conservatism, or if I say you’re ahead of pace here, you're sort of assuming, you’re a little ahead of pace, but resurgence of flu season could impact that in the fourth quarter? And I guess the question I would say is, I would sort of assume that the channel will be more able to handle a resurgence given telehealth patient conditioning, physician conditioning in the back half of the year. So, just help us understand that 25% maintenance relative to the improvement in the third quarter? Thanks so much.

Yes, this is the most important metric for us. Our attrition and utilization metrics, although ticked up, are very similar to our historic levels. It’s all about new patient starts for us. We’ve estimated the U.S. around a third impacted here in Q3. As Shacey said, given the dynamics internationally, we’ve called it 50% international impact, and we’re seeing a slower recovery there. We’re making sure that we keep some room for ourselves for a resurgence here. If we see headwinds in certain states within the U.S. or regions outside the U.S. start to be more impacted, obviously, at the low end of the range, 50% impact overall for us would mean Q3 would have to look like Q2. We hope that we’re not going back there; that’s the low end. We hope that we can improve on that, and get closer to 30% at the high end of the range, and that’s on a global basis. Regions combined would have to be 30% for us to be at the high end of the range. We see a lot of different scenarios playing out. Obviously, we don’t know where the pandemic is heading. We’re trying to do our best to give ourselves a good estimate here.

Thank you. Our next question comes from Jeff Johnson of Baird. Your line is now open.

Thank you. Good afternoon. Shacey, I wanted to go back to some of the comments you made on Omnipod 5 and some of the potential competitive advantages you’ve listed through form factor and customization, and what have you? I thought the adaptability point you made was interesting, and we’d love to hear you maybe flesh that out a little bit. I’m not sure off the top of my head; I know, exactly what you were referring to there. Thanks. And then I do have a follow-up. Thanks.

Sure, Jeff. Yes. When I talk about adaptability, I’m referring to other systems that are in the market, where there are still many dials to adjust on these systems in terms of various inputs regarding, for example, your basal rate, total daily dose, or insulin to carb ratio, such that, if the algorithm and the system are not working effectively, they have to go back into the physician for adjustments. Our system has been designed to grow and learn with the patient, and consciously, we’ve taken a lot of those adjustments away so that the system can actually do its job and adapt better for the patient. The goal there is to make it much easier for the clinician and the patient to rely on the algorithm, to grow with the user. For instance, if the user adopts a new exercise routine that reduces their insulin needs, the system is designed to notice that and learn. Similarly, as children grow and may require more insulin, the system adjusts. That’s what we’re really excited about regarding adaptability. We’re also very excited about the flexibility of the system, including customizable set points that should make it user-friendly. It was demonstrated at ADA when a moderator compared our usability scores to iPhones. That's how simple the system is designed to be.

Yes, understood. Very helpful. And then Wayde maybe just – I think you mentioned here just in passing to David’s question that attrition was maybe down closer to a third below your expectations at the start of the year, and I know that’s relative to expectations. I think if I look at your competitor, who gives pretty clear numbers and you can back into numbers, their new patient starts in 2Q seemed like they might have been flat even up 10% or 15% year-over-year from an MDI population perspective. So, if your new patient starts in Q2 were down 50%, relative to expectations, but if I adjusted that maybe, down 10% or 15% or something, can you help me bridge that gap between a competitor being flat to up and you guys maybe down year-over-year on new patient starts from the MDI channel? Thanks.

Sure. Just to start with, we still get most of our new patients from the MDI channel; it’s about 80%. I can’t really speak to the math for the competitors, but I can give you more insight into our pipeline. We had record new patient starts quarter-on-quarter coming into 2020, and we set our guidance appropriately. We weren’t expecting continued record new patient start quarters every year, but still had a significant number in there. Coming in at 50% of our expectations globally is strong. The U.S. was better than the 50% and had a pretty good quarter there as well as evidenced by the 31% growth rate in the quarter. We certainly got the benefit of inventory. But we’re still mid-20s growth rates for the U.S. Although we were exceeding that in the last few quarters of 2019 at 26-27% growth rate ex-inventory build, I believe a 31% growth rate is strong. It gives you a sense that yes, we’re off our expectations for the year, but it's still very strong new patient start growth.

Thank you. Our next question comes from Joanne Wuensch with Citibank. Your line is now open.

Good evening, everybody. Thank you for taking the questions. I have two quick ones. I think you mentioned the moderator at ADA and the commentary there; we really haven’t had the chance to sort of catch up with you post-ADA. I was curious if there’s anything else you want to highlight that really caught your eye?

Coming out of ADA, I think, what would be noticeable is just that we’re in this sort of technology adoption era, and the increasing pace of technology in the market for people living with diabetes is a really exciting time. There were multiple automated insulin delivery systems, multiple next-generation sensors presented. When we think about what that could bring to people living with the disease, it’s very exciting. To me, this year’s ADA was remarkable with thousands of physicians dialing in to listen to our presentations. There’s tremendous enthusiasm for automated insulin delivery and what it will bring to the community.

And my second question is, as you prepare for the Omnipod 5 launch, can you walk us through sort of the steps that you think about so that you’re not in back order supply right out of the gate once it’s out the door?

Sure, that’s a great question. We’ve been thinking a lot about that right now. We’ve been preparing and have been already thinking about how do we build capacity to be very strong from an inventory perspective. The next steps for us outside of getting through our clinical work and securing clearance are to think about market access. As I mentioned with Larry on the first question, we are committed to this pay-as-you-go model. Everyone will be able to transition to Omnipod 5, as soon as they have access. We’re not going to regulate this with a four-year warranty or upgrade fees; there will be tremendous demand both among our existing users and what we anticipate among new users. A lot of that will be regulated by access. Our teams are thinking about how they can rapidly expand access, particularly in our pharmacy channel. We’re fortunate because we did all the work to establish our business model, new wholesaler distribution, and pharmacy access. This should go much more smoothly and rapidly than it did with DASH. We know that patients across all demographics can be trained at home, which helps us scale onboarding and training.

Thank you. Our next question comes from Danielle Antalffy with SVB Leerink. Your line is now open.

Hey, good afternoon, guys. Thanks so much for taking the questions and congrats on a really strong quarter, given what everyone’s going through right now. Wayde, if I could, just one question on the guidance, sorry to harp on this, but I guess as I look through the back half of the year implied guidance for Q4 plus what you gave for Q3, it does look like on a comp adjusted basis, growth is decelerating, and I’m just curious to pick your brain about that. Just given the fact that it feels like we’re past peak unemployment, it feels like attrition should actually stabilize at this point and maybe new patient adds should start to accelerate. Just a little bit of color there would be great.

Sure. I hope you’re right on unemployment. I think we’ve got long ways to go to understand where we’re at in this pandemic. But it really speaks to the point Shacey highlighted in her opening remarks and I provided more detail in my remarks as well is the way our business model works. When we take half the new patient starts we were planning out of Q2, and even though we have an improving Q3 and improving Q4 through the end of the year, when you take new patient starts out, it creates a headwind to the growth rate compared to last year. It highlights the tough comp we created for ourselves in 2019. Second half of 2019, we launched DASH, entered the pharmacy channel, and launched our pay-as-you-go model. We had record new patient starts each quarter through the end of 2019, so we’ve set up tough comps. All metrics are fairly consistent; sales, price, utilization, attrition; it's all about new patient starts. With COVID headwinds here, although we have improving new patient starts through the end of the year, they will not be record-breaking as last year. That will impact our growth rates with those tough comps. We’ll see how we go; the pandemic is making forecasting harder than ever. I appreciate we put these stakes in the ground last quarter, and we’ll continue to measure ourselves against them in Q3.

Yes, thanks for that. And yes, I was going to say, Wayde, this pandemic is really making you work hard for your money there. The follow-up question I had was on a potential bolus of new patients, and I’m not sure how you guys are thinking about this, but as patients start to go back to their endo, do you expect to see a bolus of new patients at some point? Anecdotally, I have a friend who just recently got diagnosed. He wants to go on the Omnipod. He’s waiting though. Just curious how you guys are thinking about a potential bolus at some point.

Yes, it is something we’re thinking about. It’s difficult to predict. We know that endo in the U.S. has less visibility; endo visits are significantly down, and a portion is telehealth. Physicians are less likely to transition to new technologies via telehealth than in-person visits. I do think there is this dynamic where people who need better technology and care aren’t getting it today. It’s concerning because it’s a vulnerable population regarding COVID. We will do everything we can to educate the community and clinicians about how easy it is to get a prescription to trial the device at home. There may be a bolus of people; we’re not counting on it, but I hope that everyone who needs care is getting it or will soon as the economy reopens.

Thank you. Our next question comes from Margaret Kaczor with William Blair. Your line is now open.

Hey, everyone. Thanks for taking the questions and congrats on the quarter. I wanted to follow up first on virtual training. There are a lot of benefits now; you’ve kind of alluded to the future benefits, and can you outline for us maybe the speed of patients coming on, how that differs versus in-person, as well as the cost? Is this hundreds of basis points of margin, for example, in the time, or can you cut down the time by a third?

I’ll start with the first part, and maybe Wayde can comment. Although I don’t know how much insight we have yet into sort of the cost differential or the impact on margin. The feedback from both clinicians who’ve attended training with their patients has been absolutely fantastic regarding virtual training. One piece of feedback is that it’s simpler to schedule in everyone’s life. We see more easy scheduling, and we can leverage our field team better to schedule and support multiple areas or territories. All of these things bode well, and we view this, as I said, as a viable, exciting way that we can scale our Omnipod 5 training and delight customers, because customers love being trained at home.

Yes, the only thing I could add is just keep in mind what Shacey said; it’s early days. There are some silver linings with the COVID pandemic; we’re forced into more virtual trainings. We’re learning that there are benefits; patients enjoy getting trained in the comfort of their own homes, and we find efficiencies. We don’t have to have our clinical reps in driving distance to all the customers we want to bring on in person. It’s going to be a mixed bag over time. There are benefits to being in person, and we know that clinicians see those benefits to seeing their patients in person. We’ll keep in mind that it’s early days, and we’re learning a lot.

Okay, great. Helpful. And then I just wanted to follow up in terms of some of the commentary on next-generation products. You guys obviously find the treasure around the corner, and you’re already starting to talk about G6, maybe some other software, digital health advancements. As you look at that next-generation product, you referenced type two. I assume you’ve done a little bit of work on what are the primary gatekeepers to adoption, why haven’t pumps succeeded? Access is one, but how do you address some of the other issues on the engineering side, limiting patient touch, seamlessness, and the payers?

Sure. Margaret, I think we’ve learned a lot, because of DASH. We’ve seen a great uptake in this patient population as a result of the simplicity of the platform and how powerful pharmacy access is. Understanding how that user segment uses DASH has given us insight into how Omnipod 5 and future generations could be impactful in that population. I don’t want to reveal too much there competitively, but we will start the clinical work just to evaluate our technology in that population. We’re confident based on our experience with DASH and the fact that more and more people living with insulin-dependent type 2 are adopting CGM that we have a great technology to bring to that market.

Thank you. Our next question comes from Jayson Bedford of Raymond James. Your line is now open.

Hi, good afternoon. Just a few quick clarification questions. On the Q2 new patient ads, you did 50% of your original goal. Did you quantify the level between U.S. and international?

Hi, Jayson. We have not quantified that, but we can provide more color. The U.S. was better than the 50%, and outside the U.S. was closer to 50%. The combination of the two got us to that 50% for the quarter.

Okay. What was the estimated impact of stocking in Q2? I thought it was $6 million to $7 million, but I just want to be sure?

Sure. It was actually very similar to Q1. For the U.S., we had an impact of $4 million to $5 million and for outside the U.S., it was $2 million, totaling $6 million to $7 million impact globally.

Thank you. Our next question comes from Travis Steed with Bank of America. Your line is now open.

Hi, good afternoon. Thanks for taking the questions. I’ll ask both of mine upfront in interest of time. Wayde, the 30% to 50% that you’re guiding to below expectations for Q3, just curious how that compares to what you’re seeing in June and July. Are you assuming it gets worse here, or are you assuming that it stabilizes? And then Shacey on Omnipod 5, can you walk us through some of the road map here between finishing up the trial, submitting the data, when we’re going to see the data and some of the gating factors to launch that earlier in the first half versus later in the second half? Thanks for taking the questions.

Sure.

Yes. So regarding Q3, the 30% to 50% new patient start reduction from expectations is better than we saw in Q2 at 50%. Everything below 50% is an improvement. That is a result of seeing gradual improvement coming out of Q2 into July. There are regional differences. We see our reps getting back and meeting with customers and physicians, but in other cases, that stops. Clinic by clinic, they’re turning on and off. There’s a lot of variability out there, but we’re seeing improvements coming out of Q2, which is why we’re guiding to a 30% to 50%.

Sure. As I mentioned, all of our participants will have completed the Omnipod 5 study by Q4. We don’t provide estimates on submission, but the completion of participants in the trial gives us confidence in a limited market release in the first half of 2020. We’ve been invited to share our data at ATTD, and we expect to do that in February, likely at a virtual conference.

Thank you. Our next question comes from Matt O’Brien with Piper Sandler. Your line is now open.

Hi, good afternoon. This is Jason on for Matt, and thanks for taking the questions and squeezing us in here. Really just focused on one point here, Shacey. Just wondering if there’s been any newer adjusted contracting we should consider with payers heading into the launch of Omnipod 5? I mean, do you plan to have all that in place heading into 2021? Is that a dynamic you’d expect to work through once you get this system approved? I just wonder how that payer dynamic plays into some of the access points you’ve talked about on a couple of questions.

Yes, we’re in a good spot because this is an amendment to existing contracts, as opposed to what we had to accomplish with DASH, where we had to build relationships and establish contracts and pricing. We are ahead of the game there; we plan to use the data to establish reimbursement. That data will be available shortly after our participants complete the trial in Q4. I would imagine by the end of 2020 or beginning of 2021, our teams are working hard on establishing access for Omnipod 5.

Okay. And then just within that, just one quick follow-up. If it is as simple as an amendment, would that amendment be the same if you’re seeking a price premium or would it be a simple amendment, if you’re seeking access?

No, Jason, you’re hitting on a really important point, and this is the debate going on internally currently. We know that the performance of Omnipod 5 warrants a premium. It’s a product that delivers remarkable outcomes for users. We’re weighing that against how quickly we can establish access. That work is underway with the teams, and we haven’t shared where we ultimately plan to be in terms of premium pricing. Access will happen much more quickly with a minimal premium than if we attach a larger one. That’s the balancing act.

Thank you. And we have time for one last question. This question comes from Matt Taylor of UBS. Your line is now open.

Thanks for taking the question. Since nobody focused on it, I wanted to ask about drug delivery, since it was a lot higher than you had forecast. I think it makes sense during COVID that you want to have more at-home delivery of these drugs. Can you comment on whether you think that’s going to be a lasting trend? I know you don’t have the full forecast past a few quarters, but do you think this could change the trajectory of that business?

Thanks, Matt, for the question. I really think it’s durable, to the extent that the pandemic is durable. I don’t know that it significantly changes the trajectory, it’s great to see the power of the pod in drug delivery. But it’s probably not an area where we see dramatic shifts, and I maintain that there are no opportunities more attractive than the massive growing market before us in diabetes. We see the CGM and technology adoption at this inflection point, and we’re on the cusp of launching Omnipod 5, so that’s where we’re focused. Thanks, Matt.

Thank you. This does conclude today’s question-and-answer session. I would now like to turn the conference back to Shacey Petrovic.

Great. Thank you. Despite the continuing effects of the pandemic, Insulet delivered strong operational and financial performance, and our team continues to demonstrate an ability to adapt quickly to challenges and execute on behalf of our customers, shareholders, and stakeholders. To all of our employees, I want to thank you for your relentless hard work and dedication. I’m incredibly proud of how we’ve rallied together to support one another and to ensure we continue to advance our mission. Thank you all for joining us today, and we look forward to providing updates on our progress throughout the remainder of the year.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation, and have a wonderful day. You may all disconnect.