DexCom, Inc. — 2024 Q1

Well, thank you for the question. And it's been every bit as exciting for us as has been -- as you can imagine, Danielle, we have had more media impressions and inquiries and buzz about Stelo from the outside than really anything we've ever done. It's been spectacular. We're very excited for it.

Yes. You asked the question about the sales force. And Kevin certainly pointed to Stelo as a big part of the sales force and expanding the TAM. And so one of the reasons to expand is exactly, as Kevin said, there's a massive opportunity there. However, there's also a massive opportunity in our existing markets. G7 is a wonderful product. G6 is a wonderful product. There's coverage continuing to expand as well in those categories. And so expanding the sales force also allows us to cover more in that category.

Yes. Sure, Robbie. Thanks for the question. The way to think about gross margin and is that of course over the course of the year, we talked -- when we set guidance that this was going to look a little bit like a more typical year. And in a more typical year, you generally see 300 to 400 basis points of expansion over the course of the year. And that's what I'd expect to see over the course of this year.

I'll start with the end and go back to the website. That product is labeled for people not on insulin. It's not necessarily labeled just for people with diabetes. We designed the experience to focus more on those with type 2 diabetes because we believe there's a very, very strong unmet need and a product tailored to that solution, we think can do very well.

Yes. And then to your question on utilization, Larry. It's going to be a little bit of everything. I think there's going to be some users that do use it full time. I think some folks will use it intermittently. That's based on our market research. Our market research is basically has -- for the most part, indicated, once folks are on this product, they want to use it. And I think we've run studies where there was a high either utilization while in study and a high request to continue utilization post study. That all being said, as we think about modeling, we want to make sure we're prudent in doing so. And so we have a variety of utilization patterns that we'll ultimately put out there.

Yes. First of all, there won't be any G6 15-day. We're not going to spend any more money on G6. I can assure you of that. One of the reasons we're launching Stelo with 15 days and our current G7 platform is to learn its performance in this type of environment. As we've talked earlier, we have a level of performance reliability and expectations of our customers. We wanted to make sure we delivered those, and we felt more comfortable at 10 days to start.

Yes. So, I take that one. Thanks, Jeff. I think when we talked about what we expected this year, we really talked about it in the context of basal adoption across the entire population. And we talked about exiting the year right around that 15% adoption across the basal population in the U.S. and the year moving over the course of the year to 23%. So about 8 points of penetration.

No, we have full FDA approval for launch. It has been our experience over time at Dexcom. When we get a very rapid approval, we tend to become very impatient and we launch very quickly. And we've -- from time to time, actually put ourselves in a bind by going out as quickly as we have. We had a launch plan for this product anticipating an FDA approval when it was going to come, and we're going to stick to the launch plan that we have.

I wanted to hit something, Kevin, I think you had said earlier in your commentary that you're seeing growing coverage in plans for patients earlier in their care. So I just wanted to know if you're referencing basal, which obviously, we've heard about, is it not insulin prediabetics, nondiabetics, maybe things that are less traditional, these 3 things about that. And then why -- and then as it relates to Stelo, obviously [indiscernible]. But just any sense of the number of people that have proactively reached out on your website right now to buy the product from the launch.

Well, we haven't anybody reached out to buy it because we haven't offered it for sale, but we certainly have a lot of inquiries. And again, as you go to media impressions, articles, interviews and solicit things like that Stelo has been the biggest offering that we've had as far as news. And as our reps walk into primary care doctor offices, I just spent a bunch of time with several of our field team members. That's the question in the minute they walk in the door, when am I going to see Stelo.

Yes. And Margaret, this is one of the reasons why when we -- last year, we think we talked a little bit about this, is we introduced a cash pay option on our G-Series. One of the reasons in doing so is, as Kevin alluded to, really across the spectrum of managing your diabetes. There's been more interest. And so those plans that do have pockets that do cover everybody with diabetes and the cash pay option have -- there has been some uptake there, certainly not a majority of our uptake and certainly not the materiality of our customer base, but the interest is there.

Yes. So it's a fair question. There are some plans out there that actually do cover really all folks with diabetes -- it's not a majority of plans, but these plans have seen early on the value of CGM as a lifestyle change, a preventative tool and something that ultimately yields results back to the system. And it's the same economics we've talked to you about before. And so some plans have done that. Again, it's not the majority.

Yes.

Yes. So it's -- here's my expectations. The way we're tracking, and again, it's going to depend on how things play out over the course of the year. But we are tracking to a point where G7 as a percentage of our overall sales will eventually move ahead of G6. And I expect that here over the coming quarters in 2024. So that is moving.

So U.S. growth was pretty strong at 24% year-over-year, but it was roughly in line with expectations. And so I'm wondering if you can elaborate on pricing. And I know that's been a big for you guys. What were trends year-over-year and sequentially? And then on Stelo pricing, is it fair to assume more in line with cash pay similar to what your competitor has indicated.

Stelo pricing, I'll start with, and then Jereme can jump into the other. Stelo pricing is going to be competitive. We've got a number of models we're considering. We said we'd bring you more information on that on the next call at ADA and that's when you'll hear more of it. But we'll be very competitive with other cash offerings when we launch Stelo.

Yes. And then to your question on Q1 in terms of pricing dynamics, the pricing dynamics are stable. We don't have a lot of contracts year-over-year that are changing and when we do have those contracts, in general, the pricing headwinds, we do have that typical medical device headwind that's continued to play out. So that is stable.

Yes, sure. I'm happy to provide that, Matt, and thanks for the wishes on the cold. I was trying to impress you with my deep voice, I guess that didn't work. In terms of how the confidence on the year. One of the things that, as we go into a quarter, we try to set a base case. And the base case has risking around things like competitors, things like adoption in the basal base, things like what we would do in terms of channel mix and pricing internationally expansion. And while we said Japan was going to launch, you have to be mindful of that, talking about basal coverage and adoption outside the U.S.

Our penetration with our partner was next to very small. Japan has not been a big market for us in spite of the great coverage that has just come out, which is why we've gone direct and our distributor partner and us have gone our separate ways.

Yes, it's a question we've asked ourselves quite a bit. So I'm happy to give you our thoughts on it. From G6 to G7, we've seen a relatively consistent rate. There hasn't been much of a change in terms of retention utilization across those 2 products. And that's as expected as we upgrade folks from one to the other. Obviously, we think the G7 experience is wonderful, but so is the G6 experience, and we pride ourselves on the experiences that we offer. So that's been relatively consistent.

Yes. And I would add, as we head into nonintensive insulin therapy, we think there could be a number of outcomes here. And there could be a number of use cases for people. One of the reasons to maintain our distribution on our own website to start with is to begin to understand those patterns and to understand what the purchasing patterns, how many people prefer the subscription model versus individual onetime purchases. And how often do they come back and then use our tools to find out what the experience is like, what they like and what they didn't.

Yes. As we look out over what we need to accomplish and where we needed more emphasis in the field, there are a couple of things happen. Number one, we realized as we had our reps who are calling on high prescribers also calling on a number of people who weren't prescribers are doing a bunch of -- going and finding new prescribers that we may not be paying enough attention to our high prescribers. And so as we've set things up, we do have a set of folks who spend more time in the endocrinology and high-prescribing diabetologists world than with primary care.

Yes. And thanks for the question. You're right. It's a big opportunity for us, but it is one that has taken a little bit more time. Obviously, the focus is on basal with a known quantity, but the hypoglycemia unawareness or the severe hypoglycemia event, I should say, those are harder to educate folks. And so to your point, One of the things that we've done and Teri and her team have really focused on is really creating the educational materials and then arming the sales force accordingly to get out there.

Well, we always work on sensor performance optimization, and we have a very, very strong program on that across the board. And Stelo on the G7 platform. So anything we do with G7 certainly can apply to Stelo. With respect to changes that we make, I think I can go back to what I said about G7. We literally had a software iteration every month since we launched G7 and we brought several new features into G7.

Well, again, I appreciate that. And again, we're going to stick to our launch timing here. We have made great investments. We are ready to go. We're on our schedule. We're on our plan. And we're ready to launch to ready when we launch it. Our approval timing was very rapid. We gave the FDA tremendous credit for working through us with that. And our team, great credit for doing a wonderful submission. They did a great job to be able to get where we got so quickly.

Yes. We think about resource allocation. There's obviously a combination of resources, which is what Kevin referred to as supply. And that's absolutely something we have the capacity to go after it. But in terms of resource allocation, then on the support, right?

Well, again, that's also on a geographical basis in the U.S., we're very comfortable with our pricing, our pricing contracts. That's been very consistent over the course of several years. When you look at the product offerings in AID world and if you compare what we have to offer, we offer a number of features that make our offering much superior to anything else that's going to be out there.

Thanks, everybody, for participating on our call today. This really was a great quarter for Dexcom, and we continue to drive the most important innovations in our industry. We're continuing to widen the gap between Dexcom and our competitors by driving more firsts in our CGM user experience, particularly in the G7 platform. Direct-to-watch has been the most requested addition to our experience ever since we launched G5 many years ago and now it's here.