Josh Jennings: Hi, good evening. Thanks for taking the questions. I was hoping to just ask a follow-up on the type 2 hypo, not it’s on hypo indication, does have coverage. We didn’t think you would, it would move as fast as type 2 basal, but I think you guys talked about a bigger patient opportunity in the US than the type 2 basal patient opportunity. Anything that’s been a bottleneck in terms of penetrating that indication and just how do you see a deeper penetration going forward ‘24, ‘25, ’26. Thanks a lot.
Jereme Sylvain: Yes, thanks, Josh. It’s an area that in all candor it’s gone and we knew this was going to be a bit of a challenge. It’s a big opportunity, but it’s going to take a little bit more time on awareness and getting in front of physicians and letting folks know that, hey, look, if you’ve had a hypo event, you do qualify. And by the way, here’s how to document it. So it has been certainly slower than basal. It’s not been a real all that material contributor in 2023. What we do know, however, is Teri, our Chief Commercial Officer and her team are very, very focused in getting the word out and making sure that folks understand if they are suffering with hypo events, this technology can help and it can help change that and that they do qualify and there is reimbursement out there.
And so it’s working on that messaging and making sure that we get out there and understand where those events are taking place. That is, believe it or not, it is a challenge in understanding how to identify when those have taken place so that we can get out in front of those folks. But we are working on it. We have good data around that. And then making sure, we’re making those physicians that are then serving those patients aware of what the requirements are for documentation so that they can qualify for reimbursement. So there’s some work to be done, but there’s a team working very, very intently on it and making sure that we do arm our salesforce and then arm the community with the information needed to help it grow faster. I think it’s a big opportunity for us, but I think it’s an opportunity that’s going to take a little bit longer to penetrate.
So to your point, I think it’s a driver a little bit here in 2024, certainly an opportunity in 2024, but I think it’s going to continue to slow roll, but over the longer haul, we do think this is a contributor over time that can be meaningful.
Kevin Sayer: I just add to that it feeds to the salesforce investment we’re making in the States. We need to educate physicians and patients. And once you get a population of people who have positive outcomes in this space and they go back to their doctors and those conversations start taking place, this becomes easier, but there’s a lot of seeding that we have to do to do it and we needed more, more feet on the street to do that.
Operator: We will take our next question from Mike Kratky with Leerink Partners.
Mike Kratky: Hi, everyone. Thanks for taking our questions. One clarifying one on basal. You’ve previously talked about framing the penetration within basal population relative to the trajectory you saw in insulin intensive type 2 patients. How would you characterize that comparison based on where you are today and also as you’re looking out over the next few years?
Jereme Sylvain: Sure, yes. So in our long-term guide, we had talked about basal effectively being about six to seven points of adoption as a percentage of the total population here in the US. And I’ll start with the US because internationally, there’s a coverage as we work through coverage there, there’s opportunities. But we had talked about that in our 2025 LRP. In our first couple of quarters, we saw it mirror that to your question, to your point, I should say, that it was mirroring the type 2 intensive, which was about a 9% to 10% penetration rate. Our guide, at least for 2024, assumes the middle between those two, 8%. We got a couple quarters under our belt. It’s very, very positive. But we also want to make sure we’re prudent when it comes to guidance.
And so that’s why we’ve assumed about an 8% penetration rate over the course of 2024. Obviously, if it mirrors that, which we saw in the back half of 2023, there’s opportunities to outperform. And clearly, we’re tracking ahead of our LRP, which I think is both positive signals, I think, for the business in total. But we, again, our guidance has been 8% as a percent of penetration. Hopefully that helps you.
Operator: We will take our next question from Steve Lichtman with Oppenheimer.
Steve Lichtman: Thank you. Good evening, guys. Kevin, you mentioned, to an earlier question, different business models for Stelo. How should we think what the go-to-market could look like? Does it have a Dexcom ONE more direct-to-patient feel? And do you need to make any significant investments in back office support as the denominator really expands as you go after this large non-insulin group?
Kevin Sayer: That is a great question. And that is a very, very pertinent topic of discussion and meeting here within the walls of our company. We are very much evaluating very efficient ways to serve such a large patient group, had a patient group that may interact differently with us than those who’ve been on insulin over time as we build those models out. So we’re looking at distribution models that appear different than what we’re doing today, so we can most efficiently get that product to people. And again, starting with cash pay gives us some opportunities to do things a little different than we’ve done in the past. And so you’ll have to stay tuned for that. It’s a very thoughtful question and very much in line with everything that’s going on here every day.
Operator: And we will take our final question from Matt Miksic with Barclays.
Matt Miksic: Hi, great. Thanks so much for fitting in. So one follow-up on margins and kind of mix as you drive G7 to be a bigger part of your business. You mentioned before, I think we understand the ramping G7 volumes improving gross, large, and profitability of that product line over time. Just wondering if you could share maybe how we should think about the long term. Like in other words, G7 is more profitable now. I mean G6 more profitable now, rather just maturity of those lines so G7 exceed that. Does Stelo trail G7? Does Dexcom ONE with G7 kind of trail that maybe, just some sense directionally of where those are headed over the intermediate and long term would be super helpful as you drive these volumes up. Thanks so much.
Jereme Sylvain: Yes, so maybe what I’ll talk about is how we’re thinking about the cost of the product. And then I think from there we can kind of make some calls on how we think about margin from that perspective. And I’ll maybe comment a little bit on the on the service model, which I think is also important because that’ll help from the operating margin. So as you think about the G7, just the product itself, as of today, it costs more than G6. And so that’ll eventually we expect over the course of this year flip. And as you kind of get your models kind of bent out into kind of laid out, we expect to get down to a $10 sensor, irrespective of whether it’s 10 or 15 days as we exit the 2025 LRP into early 2026. So that gives you some kind of feel for where we’ll get to the cost of each sensor.
Now, each sensor, the hardware is about the same cost, whether it’s Stelo, whether it’s Dexcom ONE, or whether it’s the G-Series. It’s the support models, the software, the support, the R&D, the investment in it. And then of course the service models that ultimately then change it. And so as you think about all of the work that we put into the G-Series, the G -Series will have the highest reimbursement, but it’ll also have the highest service model and then most investment in software and otherwise. Dexcom ONE is a little bit more of a different service model, and thus we are able to reduce the burden associated with some of the warranty and then the support cost that play into that. And then Stelo is in a 15-day form factor. And so that’s helpful from a gross margin perspective as you think through that over time.
So I think that’s the way to think about the cost profile. We haven’t launched the price of Stelo at this point, so we can’t necessarily give you the specific margin at this point. Otherwise, it’d be pretty obvious how we’re thinking about it. But over time, as that comes out, I think it’ll help align the models. And I think there’s real opportunities here as you think about a 15-day product starting with Stelo, but as that then makes its way through Dexcom ONE and the G-Series over time, again, more levers there where there’s some real opportunities in those product lines to continue to drive profitability. So I think there’s levers across all of these. I hope that gives you some context. I realize I’m not giving you a P&L for each one of them, but at least it gives you some context at the hardware costs, and we differentiate on the OpEx costs and service models, and then, of course, the days of wear on each one.
Operator: And ladies and gentlemen, at this time, I would like to turn the call back to Mr. Kevin Sayer for closing remarks.
Kevin Sayer: Thank you very much. It’s very easy during these earnings calls to talk about percentages and margins and future technologies, financial guidance, competitors, a whole host of important and engaging topics. But as we wrap up today, I really want to focus on 2023, which is truly the most remarkable year in our history. Let’s review these numbers again. $700 million in organic revenue growth, more than a $1 billion in EBITDA, 600, 000 new customers in our active user base, standing up a plant in Asia without missing a beat, and, of course, launching our G7 product all over the world. While best-in-class technology is foundational and fundamental to these types of accomplishment, it doesn’t happen without exceptional people going above and beyond. So as we close out 2023, I want to thank our, I guess we are, we’re now more than 10, 000 Dexcom employees around the world. Incredibly well done. Thanks everybody.
Operator: Ladies and gentlemen, this concludes today’s call and we thank you for your participation. You may now disconnect.
