Tandem Diabetes Care Inc (TNDM) August 2026 Conference Transcript

My name is Bill Plavonic. I'm a senior medical device analyst here at Canaccord. Welcome to our 46th annual Global Growth Conference. With us up next, we have Tandem Diabetes. And for Tandem, we have Lee Vossler, CFO, and Susan Morrison, the Chief Administrative Officer. We are going to start out with a basic overview of the company. One slide to give you a little background before we get into a fireside chat. With that, I'll hand it over to Lee.

All right. Thank you. Thanks for having us here today. I'll just hit on a few of the highlights because I think we're going to dive deep into the really exciting parts with some of your questions, Bill. But starting with the market overall, it's a very large and highly underpenetrated market. And to contextualize, in the U.S., there are about 2 million people living with type 1 diabetes, and only 40% of people use pump therapy today, meaning we have 60% of people that we can still attract with our technology. The type 2 diabetes population is more than 2 million people in the U.S. and only 5% of people are using pumps. And then we do operate in about 25 markets around the world and in those markets there are about 3 million people living with type 1 diabetes and only about 20% of people using pump therapy today. So a lot of room for us to run. The way we expect to win in this market is number one with the best clinical outcomes, number two with wearability. And we define wearability by offering a portfolio of products. And so we know it's not a one-size-fits-all need for people in the population, and we want to make sure we're offering something that can fit multiple different needs. We have two different pump platforms, and we're excited to share that one of those pump platforms will be able to become our first tubeless option here in the very near future. So we'll be expanding even further into another category where we're not playing very well today or we're not actually competing. And then the last piece, really, that's been a barrier to pump adoption is affordability. So cost has been one of the number one barriers to people starting pump therapy. And by design, the DME model makes it very expensive for people who want to start on It can be $800 to $1,000 out of pocket, even more if they haven't met their deductible. We have moved into the pharmacy channel, and we are setting up a model, a reimbursement model that's a pay-as-you-go model. Therefore, the pump will be given away for free. and people will only pay for the supplies along the way. So it makes it a much different dynamic for people who want to start pump therapy but couldn't afford it in the past. We have about 500,000 people around the world using our technology today, and we're excited, a number of drivers that we have this year and in the future with our rich pipeline. And so we're excited to talk to you a little bit more, Bill, about Tandem.

Excellent.

Thank you for the quick overview. Hopefully you're not getting hit in the eyes by the light. Got it worked out. All right. So we have a lot going on with Tandem, as always. I mean, I've been covering, I think, for three years now, and it seems like there are so many moving parts of this story, it makes it challenging for investors to know what the drivers are, especially for your company, your size and market cap, right? It's the effort to market cap ratio on top of it. But it's a great market. So this is a big transition year for you with the shift to pharmacy for the U.S. business. And then you're also shifting international from distributor to direct. You got, on top of that, we've got multiple new products. You will be the first tubeless patch pump, I think. I mean, we could argue Sequel was out there and obviously Inslet pioneered the market. But you're next up with probably the next key product coming between now and year-end. And then throw a couple more CGM integrations into this. That's a lot. What, I want to unpack all of this, but just to kick it off, where should investors focus the most? Like if I just wanted to say, okay, what one or two things should I focus on for Tandem, what would it be? Let's start high level.

Sure, sure. And you call it challenging. I'll call it exciting because it means we have multiple shots on goal. There's not just one way to win. And as I mentioned earlier, it's about the best clinical outcomes. It's about wearability of the products and it's about affordability. And so we have a number of things underway, but I think in the first and second quarter, even more so, we demonstrated great progress in all of those ways against our initiatives this year. And so at the very moment, we have products in flight. We launched Freestyle Libre 3 end of last year, Mobi Android coming into this year. But I think the three biggest areas of particular drivers would be the pharmacy conversion. It would be the impending clearance of Mobi Tubeless. And it would be the direct transition outside the United States. I think those are the primary focus today. If you talk to anyone in the organization, that's where all of our attention is.

And everything else just kind of helps everything else, helps it all, the system. You know, I am surprised I still get this question on GOP impact on the space. It just surprises me given all the data and everything we've seen. But anything just high level for people?

Yeah, I'd say that if you look at the clinical outcomes, particularly for people living with type 2, we actually see the greatest improvement when someone uses a GLP-1 in conjunction with automated insulin delivery. It was demonstrated in our clinical study last year that was published in the New England Journal. And so we really see it as a complementary therapy. And even if it was to slow down the funnel, there's a huge number of people, over 2 million people who are insulin dependent living with type 2 today. So there's an opportunity to help a lot of people using both.

But the biggest pushback I get is everybody's got the N of, hey, this person was on insulin and they're no longer on insulin dependent because they went on a GOP.

And I'd say that's at your very top of the funnel. And so it may slow down the number of people who progress to being insulin dependent, but it is a progressive disease. And so there's a lot of people already in that category. And even if it was to slow down, the funnel coming into it is huge.

The other high-level pushback I get is competition. You know, yeah, SQL come into the market. Beta Bionics come into the market. Now we've got, you know, we went from basically a three-player market to a five-player market. And, you know, everybody else is probably a couple other in the shadows. You know, what's your response to that where it's just going to become so competitive that, you know, it becomes a fight to the death over new patients?

Yeah, I'd say it is a highly competitive market. But Lee touched on three areas that are the basis of competition, where we, I think, have strengthened our profile as a business over the past year and have a forward-looking lens to continue doing so. And that's going to be affordability, clinical outcomes, and then the wearability of the products.

And then let's go into the pay-go model, which is the affordability aspect of it. But, you know, as you look at this transition, where are you now versus your expectations? What are the lever points that could accelerate or decelerate, you know, based on what you're saying today? What should we pay attention to if that's one of the three things we should?

Sure, absolutely. I'll start by saying we're progressing very well, so we're excited with where we are at this moment. The first most important measure is you have to have coverage. And that's something we've been able to gain this year. We're at about 45% formulary coverage. And keep in mind, we're doing this off cycle. So the PBMs and the payers usually operate in annual cycles. And today, they're already thinking about next year. But we're there talking about what we're offering. They like our products. They want competition in the category. And they were willing to bring us in right away. So we were able to kick off the PAYGO model in March. And so we're only three to four months in. There's a lot to learn when you implement a big change like this. We're gaining efficiencies. We're getting better operationalizing internally how things flow through the system. There's a huge change management initiative with physicians. They have to learn differently how to prescribe. We need to build the awareness with patients so that they know that this is an option for them. But everything's going very well. It's a strong start. A lot of people are asking about how from where you are today, how can you get where you want to be? And I would say think about it as directionally we're on the right track. We are focused on where we're going to be in two to three years. And these first early months, while we're doing very well, it's not as important where we are right at this very minute, but the progress that we're making as we go. And so we think we're delivering on all the right pieces in order to get to our two to three year goal, which would be to have about 80 percent of our pumps going through pharmacy.

And as you talk about the docking down the PBMs, then the payers, right, does it have to be in that order? Is there a cadence it has to be, or can you end up getting all the payers and then the PBMs come on? You know, how does that work?

Yeah, you need the PBMs, but you can use the payer relationships to push the PBMs at the same time. And so we're talking to the PBMs where we already have about 80 percent of lives covered. We're also talking to the payers to get them attached to those PBM agreements, and that's where we have about 45 percent of lives covered. And then we need to build the awareness with the physicians. And so one thing that we're doing is we're targeting and letting them know, for instance, if we have a new plan in the Northeast, we go and we make sure that our reps can talk to the physician about the opportunity that might exist with their patients, maybe different from what they could see on the West Coast. And so it's about building that awareness now so people know to come to us that it's now a driver of coming to Tandem. It's not a, if I can afford it, I want to go to Tandem. You don't have to let that stop you anymore.

Why, for the supplies, right, I think which caught almost everybody off guard, which is a genius move, taking your existing customer supplies, shifting them to the pharmacy model. Even your competitors didn't see that one coming. Why can't that go faster? I mean, if I'm a patient, and DME usually means I'm paying a lot out of pocket for any DME. If I ship to pharmacy, it's going to be a whole lot less. why wouldn't everybody sign up for it immediately if they're already covered? Like you're saying you're going to exit at 20%. I think it is a U.S. sales or whatever it is overall. Why wouldn't, if you have 45% coverage, why wouldn't everybody sign up almost as soon as you offer it? Because you do it on supply renewal. So DME is supplying probably every 30 or 90 days for the most part. Why wouldn't those people automatically shift?

Yes, yes. So it goes to some of the changes that you have to make, change management in the channel. First thing that we do when a patient comes up to order their supplies, we check both benefits, and if they have coverage, we explain to them what that looks like. Now, at that point, we're comparing supply cost to supply cost, and in some cases, people's out-of-pocket for DME on supplies is very low, $20. Some people have no out-of-pocket. So first of all, it has to be compelling financially. Then we help them to understand that it is compelling if it can be for them and they're willing to change and why might they not be willing to change for some people it's just inertia it's different if it's around the same cost it's like why bother I'm fine with where I am but once we convince them that it's the right thing then we have to go to physicians to get a new prescription and so when you think about what was happening in the second quarter and what's going to continue to happen is physicians like us are very interested in getting more people on pump therapy so they can get the better outcomes if a physician has to prioritize what do I have time for in my day-to-day. My patients who can already get their supplies in DME, I can put that aside and focus on the patient that needs to, I need to convince them to be on pump therapy. I need to help them decide what pump to choose. And so that's why we maybe saw a little bit of outpacing on the pump side, but we're going to continue to work with the patients to help them understand the benefits and work to move them over at the same time.

Okay. I'm going to shift to actually a guidance question. I try to stay away from these. But your new pump starts were flat year over year, in the second quarter, a few hundred short of your internal plan, even with the 20% plus sequential jump, you need roughly 12% to 13% year over year in the second half to reach that guidance. What are the two or three concrete drivers of that acceleration? And how much are you already seeing as we've gotten through July and into August?

Yes, yes, very early in August. But so traditionally, our year has a steep curve to it at the back half of the year. So we're still going to have 80 percent of our shipments in the U.S. through the DME channel this year. And remembering this is ish, right? So the assumptions we gave for pharmacy, they're modeling assumptions for how to get to the revenue plan. But let's say 80 percent will be going through DME, the largest portion of those people purchase in the fourth quarter. So that's just one natural driver of why you have more growth at the back part of the year. We also have the building momentum for the products we launched earlier this year, late last year. As I mentioned earlier, Freestyle Libre 3, Mobi with Android. And, in fact, adding Android to Mobi has continued to help drive that growth. And we saw that Mobi became more than half of our new pump starts in the second quarter. So good traction there. And then pharmacy. You know, the fact that our sales reps can go out and share with people, let's check your benefits. You might not have any out of pocket. So all of those drivers together will continue to gain momentum and help us drive that load, you know, team's growth in the back half of the year.

And I think a lot of focus by investors is new patient starts and then MDI and your MDI mix has gone up. And, you know, it's like, OK, so-and-so is gaining a point of share, losing a point of share, the minutiae of it all. But MDI has been a bright spot for you. What's the durable growth rate of the MDI funnel? because that's really the underlying growth of type 1 and type 2, and even the 70% as you go more type 2, it will drive MDI higher because most of them have never been on anything. But what is that, removing that affordability barrier through pharmacy, how should we think about just you and grabbing market share and your fair share, whatever it may be as we move forward? Yes.

Well, we believe that we're well positioned with the tools we have in our bag today and adding the MobiTubeless opportunity later because today we're operating in the space that's the durable pump space. And so with MobiTubeless, there's a whole other segment of the market in which we have not been competing. And so, you know, not to put a number on it, but we grew MDI conversions mid-single digits this year in the second quarter. And so we're just at the beginning. All these drivers are just building momentum, and they are the catalyst that will continue to drive that growth for us. And we're talking all about the U.S. We haven't even talked about the international markets, where we have great growth opportunity there as well.

We'll get there. I promise. And since you rolled over to Moby Tubeless, I'll go there. Scaled to half launch. 2027 is the first full year. It should be material. How meaningful can this inflection be? I mean, it's long awaited, right? Well, it's on time, but everybody's kind of been waiting for these patch pump alternatives.

So we filed with the FDA in the second quarter, and now we're just waiting on that clearance timing. And from there, we're going to start the scaled launch. We're excited about it. We think this presents a huge opportunity to play in a segment that we haven't been able to address historically, especially with a differentiated feature like extended wear, wear times of up to seven days in combination with tubeless, we think it's going to have an impact on the market.

I want to unpack the regulatory pathway a bit because it's a little unique. I mean, the algorithm's there, the extended wear approval is there, like even the pump itself is there. So it's really just a sub, it's like a couple of disposable components and maybe the carriage it sits on. So from a regulatory risk, it seems like it's less than most?

I think that's fair. We have recently approved predicate devices and that always helps. It always is a conversation with the FDA, but we feel very comfortable with the submission that's in place and look forward to bringing it to market.

We talked about ADA on your last conference call and the physician panels and the excitement there, but we have other competitive patch bumps arriving later this year and this year, next year. How do you plan on remaining differentiated in what could become a crowded market?

Sure. I think you can differentiate from a form factor perspective, as we touched on with the extended wear portion. Also, it's going to be the only system that allows you the flexibility to wear it as tube or tubeless. That's a decision a person can make when they're changing out their supplies. And so that's a meaningful feature also. I think we also differentiate the actual hardware by the software that we offer. Control IQ plus is the best algorithm that's available and we plan to maintain leadership in AID by furthering that with a fully closed loop algorithm. So you have to look at it as the strength of the system and so we're going to start to with differentiation with the form factor and then build on that by strengthening our algorithms.

I want to shift into type two. Your competitor this quarter talked about a hiccup into that market as they've gone deep into it. I don't think you've really, you have the label, but it's not something you've delved into yet super deep. My speculation was that you're really waiting for Moby Tubeless to give you a kind of a real fighting chance in that market. What, you know, as you think of the physicians, one of the questions I got today at lunch was, as we get in this type 2 market is, how are the physicians or the prescribers going to differentiate amongst these products, and who's making the decision for that patient? Like, are they going to see all four, five, six pumps, or is it going to be they're going to be offered one or two? You know, what is your diligence come back with for that?

Yeah, it's going to be what drives the greatest compliance, and that's going to be systems that are easy to use. I'd highlight with our algorithm, for example, we moved from having to require a person to do carb counting to doing fixed unit dosing. And that was approved for people living with type 2 as part of Control IQ Plus last year. So with that, that also brings an ease to the prescriber because they have to train less. A big portion of this is the prescriber's ability to identify who is going to be successful with the therapy and then us as a company identifying how do we support them from a training perspective and make this easy? How do we support them from a hardware perspective? For example, if you don't need to change out or do an insertion on as frequent of a basis, does that allow for it to be easier for the user? And we think that's a driver for type 2 adoption also.

Another question on type 2 I received at dinner last night was that 200 units isn't enough for a type 2 patient. What percentage of the type 2 population does 200 units not cover?

I love the question because it's not enough over what period of time, right? If you can change your insulin cartridge separate from the infusion site, you're no longer tied to trying to match those two up every two or three days. For us, you put in one infusion site and you can change it out as many times as you need to without having to do a new insertion. So it starts to reduce the dependence on the volume of insulin that's available at any one time. MOBI, the tubeless cartridge, holds 200 units of insulin, but you can see you could change that out three times if you needed to, or even more, depending on what the person's insulin needs are, which is particularly important for people with greater insulin needs, people living with type 2.

And then if the C-peptide requirement was eliminated, how do you see that impacting the type 2 market for CMS volumes?

Well, it would be a great opportunity. So today, roughly, or a little more than half of people in type 2 are Medicare age. So we do really need that to help get us more traction in the market. Today, physicians could prescribe it, even with that test, and they would have to go through an appeal process many times to really lobby to get someone on the pump, and it's too much work and effort. So to get that out of the way can make a significant difference for us in our type 2 opportunity.

And how are you thinking about fully closed loop and the impact on type two? Because, I mean, to me, easy use is probably the biggest thing to ever drive markets. And, you know, if you, I would imagine that that would take training from how long does it take to take it to train a type two patient today versus if you had a fully closed loop system.

You're right. You're requiring so much less of the person. And for us, we're really looking for a clinical target for time and range at 70 percent plus. And so we're confident in the ability to improve lives, improve outcomes while having no meal enunciation from the patient. That being said, if they want to engage with the system, if they want to provide additional information, we're providing the personalization options for them to be able to do so. So to your question, that allows for a health care provider to support the systems easier and have a greater degree of confidence in their patients' outcomes because they're not going to have to have the same degree of interaction with the device.

And then I promised I'd get back to OUS. You continue to transition the OUS markets. I think it was 13% was direct as of the last quarter. How should we think about this cadence of future transitions? and what percentage of OUS sales do you expect shifting to direct over the next two years?

Yes, it's expected to continue to grow. We're not giving that percentage yet for next year, but we just started in three markets, the UK, Switzerland, and Austria, the beginning of this year. We're moving into France later this year, and we have other markets already queued up for next year, which we'll be talking about further as we get closer to those launches. But it's a meaningful opportunity when you compare, first, if you just say price to price. Every country we step into, it's at least a 30% step up in selling prices. And so you just get the nice margin benefit from that alone. But being closer to the patients in those markets will also help us drive more volume. So we can get to know the customer better, the physician better. We can bring our practices we've used for renewals here in the U.S. and we can help penetrate those markets further and renew our own patients more rapidly than what we're seeing today. So we're excited about the opportunity to have more of a direct relationship.

What's the eventual target for direct versus non-distributed?

We haven't laid that out yet.

And in this transition, kind of what has gone right and what have you learned that you had to pivot on?

I mean, I would say it's like anything. I talked about the implementation of pharmacy earlier. You learn something every single day. And so it's about how you bill. It's about how you connect with the customers. And there's lots of learnings along the way, but nothing that I would say was startling. It's just normal learnings and learning curve that will just make us more operationally efficient, things that we can quickly change and modify so we can move ahead faster.

I'm going to open it up for questions here, see if there's any questions in the audience.

Actually, Bill, there's one.

Oh, go ahead.

Just adding on to the, honestly, it becomes more complex. Can you repeat the question?

So the operating model for as we go direct and the complexity of it. So what we've been doing is we have to implement new systems because we don't have a direct relationship today. So we're implementing new CRM and ERP systems in every market. We have to build out the customer support functions, and we're looking at ways to leverage that across multiple markets. So we're not building independent shops in every country where we go direct. It's about having the sales force in place. It's understanding the reimbursement requirements. So there's a lot of work. It's building a little mini company every place we go direct. But we've learned a lot already being there across the years. And the value of being able to directly market and sell, we think, is incredible for our business. And so it's good for us for long-term margins.

I wanted to circle back on the fully closed loop. You have the IDE approval in the second quarter. You plan to start the pivotal trial later this year. This is going to eliminate the meal announcement for both type 1 and type 2 users. Realistically, what's the timeline to market? and do you plan on running that study with existing users, new users, and which pump do you expect the trial to be based? Is this a MoviTubeless trial? How should we think about this?

So we're designing the system to be able to use from people who are pump naive, so new to pump therapy, multiple daily injection, as well as people who are converting from a competitor's system as well as from our own. And so it's designed for all comers. And so we haven't said specifically which of the pumps we're going to use. In general, if you think about these studies, 18 months roughly, it's all going to depend on the time for enrollment. And to emphasize your point, this is designed for both people living with type 1 diabetes as well as people living with type 2 diabetes.

I think we're out of time. So are there anything you'd like to leave us with or questions we didn't ask?

I just emphasize that Tandem has tremendous opportunity. We touched on a few of them here today, but we're transforming our business model both in the United States as well as internationally. And you're going to see that in terms of profitable growth as well as starting to really expand our impact on the diabetes community.

Great. Thank you very much. Thank you.