Leigh Vosseller: Yes. That’s still the right way to think about it. It’s closely correlated to 1 million customers in the installed base.
Travis Steed: Great. Thanks a lot.
Leigh Vosseller: Thanks, Travis.
Operator: Thank you. Our next question comes from the line of Larry Biegelsen of Wells Fargo. Your question please, Larry.
Unidentified Analyst: Hey, this is [indiscernible] on for Larry. Thanks for taking the questions here. Just starting off with Mobi. How should we think about your share of new starts as Mobi rolls out over the course of the year? Do you expect it will expand the market, take share from MDI and other pumps and/or take share from X2 [indiscernible]?
John Sheridan: Yes. I would say that if you look back maybe 18 months ago, we would – we believe that on the MDIs coming to pump therapy, we are essentially splitting 50-50 with one of our competitors. And I think that as they brought their new device to market, that changed and that was probably more like 65-35 or maybe 70-30. I would say that we absolutely believe that that Mobi is going to reverse that trend, and we’re going to return. We may not get all the way back to 50-50, but we are definitely going to see improvement towards taking more MDI. We also think it’s going to have a favorable effect on competitive conversions as well. I mean the form factor, the wearability that comes along with this device is a substantial improvement.
And when you talk to people who are using it, their response and reaction has been incredibly positive. And these are people who use a variety of different pumps besides Tandem. So, I think that we really believe that this is a year of transition for us. And when we have Mobi with the advanced sensor integrations, I think that’s going to be a meaningful favorable effect on our new pump starts.
Unidentified Analyst: Okay. Great. That’s helpful. And maybe just a follow-up on the renewal opportunity, how are you thinking about the renewal opportunity OUS in 2024? And do the same dynamics supply OUS as in the U.S.?
Leigh Vosseller: Yes, good question. So, I would say the opportunity is really beginning in 2024 for us outside the U.S. They do have standard 4-year warranties as well, much like we do here. The difference is right now in terms of expectations. We are assuming a somewhat slower ramp than what we are seeing in the U.S. right now. So, think of it back to what we experienced in the U.S. years ago as our distributors are developing their own best practices and learnings on how to go out and attract the renewal customers. And so we think it’s a great and growing opportunity, but we are being cautious about how we start off with it, and this will be the first year we start to see anything meaningful.
Unidentified Analyst: Great. Thank you.
Operator: Thank you. Our next question comes from Mike Kratky of Leerink Partners. Please go ahead, Mike.
Mike Kratky: Hi John. Thanks for taking my questions. So, in your presentation today, you highlighted that less than 40% of the 1.9 million people living with Type 1 diabetes in the U.S. use an insulin pump. What does your current guidance range assume as to where this goes by year-end 2024? What are the key factors that you expect to drive increased adoption for 2025 and beyond?
Leigh Vosseller: Yes. So, we haven’t given any specific color on where we think adoption goes by the end of this year, other than we think it can get to well north of 50%, even 60% in the coming years. And so a lot of that depends on how everyone is driving the market. We do believe with the list of products that we are offering that we will be the disruptors this year, and we will begin to expand the market in a way that we haven’t been able to in the last 12 months to 18 months. So, we are very excited about what we can do to push that forward.
Mike Kratky: Got it. And just maybe one clarifying one, I think you mentioned that your guidance doesn’t assume any inflection from the new product launches. I mean does that kind of include any kind of enthusiasm that you have talked about in terms of the Mobi launch and just how that impacts attrition rate or overall pump penetration?
Leigh Vosseller: So, the way we developed the guidance for 2024, I was thinking of it more along the lines of what are the predictable sources of revenue. And not building in anything incremental for what the new products can do for us. So, we are – like you said, very enthusiastic about the opportunity they bring to the table. But from a guidance perspective, we are starting with, I would say, more certainty in terms of the supply stream that we typically see, the renewal opportunity that is growing substantially. Just the number of renewals of opportunity alone is growing more than 30%. So, there is enough growth drivers in there that we can get to 10% growth worldwide. What we want to do is while we believe that we are going to make a real difference in the market with these new products, we want to gather data and trends to use that to better inform updates in the future so that we don’t get ahead of ourselves and you don’t get ahead of us.
And so right now, it’s starting off with what we feel very confident in that we can see in front of us, and that has good predictable patterns.
Mike Kratky: Understood. Thanks very much.
Operator: Thank you. Our next question comes from Matt Taylor of Jefferies. Please go ahead, Matt.
Matt Taylor: Thank you. Can you hear me, okay?
John Sheridan: Yes.
Matt Taylor: Hey. Good afternoon. Thanks. So, I just want to follow-up on that question and clarify. I mean it seems like you are essentially guiding to growth just coming from supplies and renewals. Could you be specific about whether the guidance includes any potential for new pumps to grow? And I guess why wouldn’t they grow given the easy comps and all the new products that you have and the distribution center being in place?
Leigh Vosseller: Yes, it’s a great question. And so we are really focused on that buildup with the supplies that grow and the renewals that grow. And we do firmly believe the new products will make a difference. But until we see these data, these data points, we want to make sure that it’s an informed addition to the guide. And so right now, what’s factored in is that new pumpers will be approximately flat or even slightly down from what we saw in 2023. And as we gather these data points, we will be able to give you additional information about the direction that we are headed. But there are a lot of exciting opportunities to come. We want to make sure as well that we are basing it on trends and that they are sustainable trends because many times when a new product launches, you will see a little bit of a hype cycle with people who have been waiting, that pent-up demand coming in at one time.
And so we want to make sure we understand how – what it’s going to look like after that point in the curve.
Matt Taylor: Okay. Thank you. I will leave it there. Appreciate it.
Leigh Vosseller: Awesome. Thanks Matt.
Operator: Thank you. Our next question comes from the line of Danielle Antalffy of UBS. Please go ahead, Danielle.
Danielle Antalffy: Hey. Good afternoon. Thanks so much for taking the question. Just wanted to ask Leigh a follow-up on the potential contract with the PBM that you are – may be signing before the end of the year. This might be too early to ask this question, but – and we are not going to model this yet, obviously. But just thinking about the financial impact there, I mean just the way the business is set up today and what that could mean. Again, not trying to model this right now, but just even qualitatively from a margin perspective and sort of as you make this shift and how you think about the business longer term as it relates to pharmacy versus DME.
Leigh Vosseller: Sure. So, I think one important point is that we intend to be a multichannel company. Our number goal with advancing into the pharmacy is to get the broadest access possible and to get to the lowest out-of-pocket cost for a patient. Pharmacy can be a good addition to what we offer today to DME, but there are still times where DME might be the better solution. For example, today, we still have roughly 30% of our direct patients that don’t even have an out-of-pocket when they buy the pump. So, what we want to make sure is we are getting the right solutions for people. What does this mean for the business long-term, when you get in the pharmacy channel, it opens the door, I would say, for other opportunities to look at your business model.
It’s too soon to say which way this will go and it may vary by payer and by PBM. It could look just like the DME from the overall revenue perspective or it could look different with shifts of more dollars to supply than off of the pump. And so that’s the TBD part that we will talk to in the longer term as we have more information about the contracts that are in place and the materiality of those to the business.
Danielle Antalffy: Got it. And then just a quick follow-up, as we think about integration with G7, but especially with Libre – and Libre has a very large Type 2, including insulin-intensive Type 2 base. And just curious about how you are thinking about – I hear what you are saying regarding guidance for this year, but just over the next few years and access to the very large Libre installed base, many of whom are insulin-intensive Type 2, and what that could mean for Tandem? Thanks so much.
John Sheridan: Yes. I mean the product is very popular with the Type 2 community in the U.S. and particularly the OUS. And so we see that as a big opportunity for us longer term as well as the Type 1 community as well. I mean there is a significant number of people in the U.S. today that are using the FreeStyle sensors that are not using pumps. And so it’s almost – it’s a clean slate for us to go after and work with Abbott to basically get people aware of the benefits that pump therapy has. So, certainly, in the longer term, we think that integration with Abbott is an important part of our getting to 1 million people using the product in the next several years.
Danielle Antalffy: Thank you.
Operator: Thank you. Jayson Bedford of Raymond James, your line is open.
Jayson Bedford: Good afternoon. Just a couple for me maybe, of your G7 integration so far, what percent have been kind of internal conversions, if you will, versus new users?
John Sheridan: We haven’t been specific about that. I don’t think we are going to talk specifically about people using either of the sensors. I would say that there has been significant uptake. I would say probably – since there is like many tens of thousands who are updating the – have updated their pump, that is probably a larger number at this point in time. But that’s about as much information I think I can give.
Jayson Bedford: Fair enough. Maybe just going lower on the P&L here, wrking through the model, it looks like there is a bigger step-up in OpEx. Where is it coming from? Is it more on the R&D side, SG&A and maybe any changes to the size of the selling effort given new leadership?
Leigh Vosseller: Yes. So, the investments we are making in 2024 will continue to be similar to what we talked about in 2023, and it’s focusing on advancing our program. So, there is R&D investments to come as well as investing in our sales and marketing activities to make sure that we effectively launch these products this year. We are still generating savings, though, from a number of initiatives that have been underway primarily in our customer service and customer technical support organizations. Tandem Source is the foundation that allows us to continue to bring efficiencies in how we interact with customers. And so it can remove some of the requirement or need for having people on the teams available to answer phone calls 24/7.
And so that’s something that we are going to continue to be focused on. This year is not really a year of margin expansion overall for Tandem though, and that’s mostly because of getting Mobi out the door and getting it to scale. But we do have our sight on leveraging in the future and meeting those long-term margin targets.
Jayson Bedford: Is this – are you increasing the size of the sales team?
Leigh Vosseller: It’s always under evaluation.
Jayson Bedford: Okay. Thank you.
John Sheridan: We are definitely looking at investing in the sales organization OUS. That’s one of the things we are doing, but U.S. is still under evaluation. We just – as you know, Mark Novara just joined the organization, and he is working with the sales leadership to evaluate that carefully for the U.S.
Jayson Bedford: Perfect. Thank you.
Operator: Thank you. Our next question comes from the line of Jeff Johnson of Baird. Please go ahead, Jeff.
Jeff Johnson: Thank you. Good afternoon guys. Maybe just two clarifying questions at this point in the call. So, Leigh, did you say that – sorry, renewals in the U.S. were up 50% or slightly above 50% for the year or for the fourth quarter?
Leigh Vosseller: For the year, they were up more than 50%, the shipments themselves.
Jeff Johnson: Okay. So, that – our math would put renewals probably pushing the upper 12,000, maybe even not quite to 13,000. I know you don’t give that number, but is our math for the fourth quarter renewal number somewhere in that 12,500 to 13,000 range, at least ballpark accurate?
Leigh Vosseller: I would say that’s a little on the high side, Jeff. I can help size up, I would guess, I would say, for the year, when you think about – we had about 50,000 opportunities for the year, and we said we renewed about half of them. Also, we still have people from years prior. And so as we think about, as John mentioned earlier, our renewal goal is 70%. So, moving the needle from that 50% to 70%, for instance, on that cohort from 2022 and it’s there on top of that. And so I am not going to really give you any specific color on Q4. Again, I would say that your number was a little bit on the high side.
Jeff Johnson: Okay. That’s helpful. That’s good enough. And then, John, you mentioned in the call that you expect the MDI competitive kind of percentages, 50-50, where it’s been quite a while. The competitive part of that number to go down going forward, I mean, one, how quickly and to what extent does that decline from the 50-50 mix that you have had? And I don’t know if I heard in the fourth quarter, was it close to 50-50, and you just expect that ratio to maybe shift going forward, or did it already start to move in the fourth quarter? Thank you.
John Sheridan: Yes. I mean I think that there is two things going on. One is we think we are going to be more successful penetrating the MDI conversions. So, more people are going to move to pump therapy, which is going to obviously make the MDI conversions a larger portion. At the same time, when you look at competitive conversions, the renewals for our competitors is also – the number of the installed base is dropping. So, I think that the available competitive conversions is dropping as well. So, I think that’s kind of the two dynamics. And I think it’s just one of those gradual trends we will probably start to see. It could be by the end of this year or early next year, it will be more meaningful.
Leigh Vosseller: And we can confirm, it did stay around the 50-50 market.
John Sheridan: Yes. I would say for the fourth quarter, but I think it’s something that we are going to see in time.
Jeff Johnson: Yes. That makes sense. Thanks guys.
Operator: Thank you. Our next question comes from the line of Joanne Wuensch of Citi. Please go ahead, Joanne.
Unidentified Analyst: Hi. This is Felipe [ph] on for Joanne. Just quickly on the competitive environment. It seems like some of your competitors are bridging the gap on AID offering. So, I am just wondering, have you seen – especially in the U.S., have you seen any pickup in competition from the two competitors. And then OUS, maybe one of your competitors is releasing a patch pump with an AID integration. So, I’m wondering if you are feeling anything there?
John Sheridan: Well, I mean I think I know which competitor you are talking about in the U.S. And I would say for us, at least, it’s kind of hard to parse their numbers. I think that – what were the pump starts last year, are they new pumps or updates? And so there is a number of things out there that really make it hard for us to figure out what’s going on there. I will say though that our U.S. competitor with the two pump has got a better product in the market. And I think as a result of that, they are doing a better job of retaining their own renewals. I would say that that dynamic has been relatively stable over the last two quarters. We absolutely saw an impact, but it’s been relatively stable. And I think that as we bring new products to market and they become more visible in the marketplace, we do expect to see competitive conversions grow as people become familiar with the enhanced wearability and choice of our portfolio.
So, we think that it’s a timing issue with us. I mean I think that we are just getting started now in the introduction. I think in the second quarter or late spring when the – when X2 with – excuse me, Mobi with G7 is available, we will see an uptick from that, and I think we will see steady progress throughout the year. So, I think that – again, I think that our portfolio is going to help us just keep the competitive conversions in our favor this year. OUS, there is – we have been competing against the product that you are talking about in the U.S. We are very familiar with it. We think that Tandem still has absolutely the best AID system in the market. And we hear that from physicians. And I think that with the wearability options that we are providing right now and choice with sensors, we think that in combination with our AID system really does differentiate us here and in the OUS countries.
