For example, we’re starting from scratch in France on our own. It will take us a while to build that growth engine and build that dynamic in Japan. I think what held us back more than anything else is we just didn’t have enough infrastructure and then all fairness our distributor did what was most important for their business in their own minds and there wasn’t that commitment and that drive there. There will be that commitment and drive going forward but it’s going to take a while to build it. It’s not going to happen overnight. We’re very confident we’ve hired a team that can develop the relationships necessary. Japan is very much a market driven by physician and hospital decisions. We think what we’ve got certainly from a leadership perspective, a team that can build those relationships and do the things that they need to do.
This can take a little while. As I’m talking to you, if we’re talking to you two years from now, I have every expectation that’s going to be a very large market for us, but we’ll be very successful there.
Operator: And we will take our next question from Bill Plovanic with Canaccord Genuity. Your line is open.
Bill Plovanic: Great. Thanks for taking my questions. I was wondering if you could just comment on attrition rates, reorder rates, what have you seen with the transition to G7 from G6 and then how do we think about this in the different patient populations as we get out of the IAT patients and into the basal hypo and eventually in non-using?
Jereme Sylvain: 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 two products and that’s 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. What we’ve also found to date, and I think it’s important to start to date, is that there isn’t really as much of a difference in the populations we’ve served across those folks on our products today. We find that there’s only really one category where retention and utilization is markedly different and it’s those on AID systems.
Everybody else seems to follow a pretty similar pattern of retention and utilization and I say that to date because we are moving into new populations. We are moving more into basal. We are moving it more into non-insulin using populations, albeit still a smaller part of our user base, and the hypothesis has always been we expect a high utilization in those spaces. We’ve always been positively surprised, but we are aware that as you move down the acuity curve, there is the potential opportunity for folks to use it maybe a little bit less. That being said, we haven’t seen it today, but we’ll keep you posted as we’re moving through what we’re seeing to help you guys kind of get your arms around it. Kevin?
Kevin Sayer: Yes, and I would add as we head into non-intensive 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 one-time purchases and how often do they come back and then use our tools to find out what the experience is like, what they liked and what they didn’t. The other thing I would add with respect to retention and attrition, one of our biggest barriers, particularly back in the day, was the co-pays of the first quarter when everybody was in the DME world.
Now that we have pharmacy coverage, that barrier has been eliminated a bit and that’s not as big a reason as to why we lose a customer at this point in time as it used to be in the past. We’ve been very successful in working that dynamic. The flip side is, our DME patients have very strong retention rates and very strong utilization patterns because of the attention our fine distributors pay to them. So, it’s a mix of everything, Bill, but I think we’re in a good spot. We will learn in a non-intensive insulin therapy world and figure out how to build product offerings that maximize our experience with those users.
Operator: And we will take our next question from Michael Polark with Wolfe Research. Your line is open.
Michael Polark: Good afternoon. I wanted to ask on one of your salesforce comments, Kevin. I heard about the expansion, faster and higher quality talent than expected. Those folks are hitting street in 2Q. I got that. I also heard about a new team upgraded structure and it didn’t quite follow what you’re doing there and why it’s impactful. So, if you could unpack that update for me, I’d appreciate it. Thank you.
Kevin Sayer: Yes, as we looked out over what we need to accomplish and where we needed more emphasis in the field, there are a couple things that happened. Number one, we realized as we had our reps who were calling on high prescribers also calling on a number of people who weren’t prescribers or 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 endocrinology and high prescribing diabetologist world than with primary care. At the same time, we needed people to call on more primary care physicians. Consistently, we have learned over and over again that where we call on people, we win.
And so, we need to call on more folks, get more people out there. We’ve been much more aggressive with our sampling program over the past several months. We need to get samples to more individuals. We need to knock on more doors and have more relationships. A third element of that is education. As we get to some of these offices where we have somebody who’s only written two or three CGM scripts, we’ve always had certainly some account managers who are regional people used to help train patients if they don’t have doctor training in the office. We made a little more investment there. And then, last, there are many doctors, particularly as we get to Stelo and as we get more into the primary care world, who may not even see a rep. And so, we do have more of an internal salesforce, again on a regional basis, to do more of that work.
So, we’re trying to go broader and deeper at the same time, deeper with our high prescribers in the endocrinology world, and then broader across all aspects of primary care, including training and supporting patients.
Operator: We will take our next question from Steve Lichtman with Oppenheimer. Your line is open.
Steve Lichtman: Thank you, evening guys. I wanted to ask about the non-insulin hypo at-risk group, which obviously does have coverage now and I think you’ve estimated before is about the same size as basal. Are the sales force expansion and moves you’re making, you just alluded to, Kevin, in the commercial organization, helping with those education efforts? Any updates overall you could provide on where you’re at for tapping this opportunity would be great.
Kevin Sayer: Yes and thanks for the question. You’re right, it’s a big opportunity for us, but it is one that it’s taking a little bit more time. Obviously, the focus is on basal. It’s 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 Terry and her team have really focused on, is really creating the educational materials, and then arming the sales force accordingly to get out there. And so, if you have a situation where we are expanding our sales force and reaching broader and touch points, where a lot of these folks are seen, right, they’re seen really across the gamut of the healthcare spectrum, that expansion does allow us to get out there and educate more.
But the biggest challenge is the education. It doesn’t come to top of mind for individuals and prescribers that when this event takes place, I qualify. And that’s just some more work we’re going to have to continue to do on education. Again, more touch points, a good thing, and the team is working hard at that.
Operator: We will take our next question from Josh Jennings with TD Cowen. Your line is open.
Josh Jennings: Hi, good afternoon. Thanks for taking the questions. Kevin, you mentioned that you’ll have numerous iterations of Stelo over the course of the first 24 months of launch, and I wanted to just see if there’s any other color you can provide on those iterations. And are they mostly going to be on the software side, or is one of the iterations going to be an increase in the rate of sensors lasting the full 15 days, and how important is that expansion to the success of Stelo? Thanks so much.
Kevin Sayer: Well, we always work on sensor performance optimization, and we have a very, very strong program on that across the board. And Stelo is on the G7 platform, so I think we do a 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’ve literally had a software iteration every month since we launched G7, and we brought several new features into G7. We expect a similar ramp with Stelo once we launch it, and we have a number of features on a roadmap over the next 12 months that we would add to it from a software perspective, particularly as we learn what engages people as we start. But we’ve been very vague and will remain vague about the features we’re going to have at launch and those that we’re going to add for competitive reasons. We’re just not going to give everybody else a roadmap.
Operator: And we will take our next question from Matt Miksic with Barclays. Your line is open.
Matt Miksic: Great. Thank you so much for taking the question. And Kevin, I just wanted to maybe go back also to some of the comments you made earlier in the call on the Stelo approval and kind of maintaining the timeline for the launch. If you could just talk – you said things like want to make sure our manufacturing capacity is there and don’t want to rush the launch post-approval. It would be also great to understand, just given the excitement about what this product could mean outside of the diabetes community, how you’re thinking about prioritizing like supply and resources and business development, market development, between those two opportunities going forward? Thanks.
Kevin Sayer: 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, though. We’re ready when we launch it. Our approval timing was very rapid. We give the FDA tremendous credit for working with us with that, and our team, great credit for submitting — for doing a wonderful submission. They did a great job to be able to get where we got so quickly. But we are going to stick to that time frame. And we think one of the reasons this will be successful is we will have everything lined up and ready to go the way it’s supposed to be when we launch it. In all fairness, I’ve lived through many product launches here, and every time we go too early, I end up dealing with three days.
I’m saying I because everybody’s in my office with three days inventory and what are you going to do? We are devoting the proper resources. We have several G7 manufacturing lines in Malaysia. That factory just came up this summer. We manufacture G7 here in Arizona as well, so we’ve got plenty of G7 capacity and we’ll be running those lines. And we have lines dedicated to Stelo and we’ll go there. But we’re going to stick to our plan. We’re very comfortable with it. We’ll be ready to go when it’s time.
Jereme Sylvain: We think about resource allocation, and 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, and what do we do from a sales and marketing and where do the resources go? We’re making the decisions that really quite frankly are in the best interest of returns to the company and then serving the unmet needs. So, expect us to continue to look at that accordingly. One of the things we are doing this year, and I think you can see we’ve made it a priority, is as we go through the organization and drive efficiencies, it allows us to reinvest in the business.
And all those efficiencies we’ve been able to get in working through leverage in the business has allowed us to do all the work we’re doing around Stelo, which includes all of our launch plans. So, we’ll continue to do the robust work that we do around resource allocation. It’s really important for us to do so in order to continue to scale, but also to scale efficiently and appropriately.
Operator: And we will take our final question from Mike Kratky with Leerink Partners. Your line is open.
Mike Kratky: Hi, everyone. Thanks for taking our question. How are you thinking about the possibility of seeing additional pricing pressure for G7 as one of your competitors starts to get AID integration, which has historically been part of your value proposition for payers?
Kevin Sayer: Well, again, that’s also on a geographical basis. In the U.S., we’re very comfortable with our pricing contracts. That’s been very consistent over the course of several years. When you look at the product offerings in the 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. With Dexcom, patients can connect three devices at the same time. They have the Share follow system, they can connect to the phone, and they can now connect directly to Apple Watch. We’re very comfortable with our pricing position here over time, and our pricing is set up in our U.S. contracts regardless whether it’s AID, or people use centers without it.
