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Questions and Answers
Good day, ladies and gentlemen, and welcome to the First Quarter 2019 Insulet Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.
I would now like to introduce your host for today’s conference, Deborah Gordon, Vice President, Investor Relations and Corporate Communications. Ma’am, you may begin.
Deborah Gordon — Vice President-Investor Relations and Corporate Communications
Thank you, Lauren. Good afternoon and thank you for joining us for our first quarter 2019 earnings call. With me today are Shacey Petrovic, President and Chief Executive Officer; and Wayde McMillan, Executive Vice President and Chief Financial Officer. The replay of this call will be archived on our website and our press release discussing our first quarter 2019 results and second quarter and full year 2019 guidance is also available in the IR section of our website.
Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and involve known and unknown risks and uncertainties that may cause actual results to be materially different from any future results implied by such statements. Such risks and uncertainties in addition to the inherent limitations of such forward looking statements include those referenced in our Safe Harbor statement in the first quarter earnings release and in the company’s filings with the SEC. Please note that we assume no obligation to update these forward looking statements even if actual results or future expectations change materially. Also, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year basis.
And with that, I’ll turn the call over to Shacey.
Shacey Petrovic — President, Chief Executive Officer and Director
Thanks, Deb, and good afternoon, everyone. Improving the lives of people with diabetes through our innovative technology is at the core of everything we do, and we made great progress with our innovation and other strategic imperatives during the quarter. In the first quarter of 2019, we continued our strong growth trajectory coming out of 2018 which was a year of tremendous execution and foundation building for long-term sustainable and profitable growth. Our transition to profitability and our significant progress on the strategic imperatives position us for continued operational and financial success over the near and long-term.
We are accelerating on many fronts including the start-up of our highly automated U.S. manufacturing, our Omnipod DASH U.S. full market release, and the corresponding shift to a pay-as-you-go model. These major accomplishments were years in the making and they are coming to fruition while driving total revenue growth of 29% in the first quarter. And the total diabetes product line with the benefit of our direct operations in Europe grew over 30%. Our growth rate confirms we are successfully converting multiple daily injection users to Omnipod and given our low penetration into the global Type 1 diabetes market and even lower penetration into the insulin dependent Type 2 market, Insulet has a uniquely long runway for growth.
Today, we believe Omnipod users account for low single digit percent of the total global insulin dependent user population. To achieve our 2021 revenue target of $1 billion it requires us to move to mid-single digits penetration of this available market. We have multiple levers to drive this growth, global expansion, innovation like Omnipod DASH which helped us grow further into both the Type 1 and Type 2 insulin dependent diabetes market, and our Omnipod Horizon automated insulin delivery system, which will be a game changer for people with Type 1 diabetes. We’re off to a terrific start in 2019 having entered the year in a position of strength.
On today’s call, I’ll review progress on our strategic imperatives and provide financial highlights from the first quarter. And then, I’ll turn the call over to Wayde, who joins us for his first official call as CFO of Insulet. Wayde will provide further details on our financial results and share an update to our 2019 guidance. And then, we’ll open the call for questions.
Before I cover our financial and strategic highlights, I’ll start by saying what an exciting day this was for Insulet. This morning, we held our ribbon cutting ceremony to officially commemorate the opening of our new worldwide headquarters and U.S. manufacturing facility. We were joined by our keynote speaker, Massachusetts Governor, Charlie Baker; State Senator Jamie Eldridge; town of Acton officials; Podders from around the country and many of our dedicated employees. It was a wonderful morning celebrating this important accomplishment and Insulet’s exciting future. In a few minutes, I’ll provide an update on the progress we’re making getting our new highly automated manufacturing lines up and running.
Moving on to the Q1 financial summary, in the first quarter of 2019 we delivered approximately $160 million in revenue exceeding our guidance and representing a 29% increase year-over-year. We drove gross margin to 67% a 550-basis-point improvement from one year ago. And our strong performance resulted in another profitable quarter and a great start to the year. We made important progress throughout the quarter advancing our strategic imperatives to expand market access, to accelerate product and business model innovation, to grow our global footprint, and to drive operational excellence. Ensuring more people have access to our products continues to be a top priority. During the first quarter of 2019, we expanded coverage for an additional 5 million Medicare and Medicaid beneficiaries bringing our total coverage to greater than one-third of all Medicare lives and over half of all Medicaid lives.
We also continue to secure coverage for our recently launched platform, Omnipod DASH. We ended 2018 with approximately 100 million covered lives for DASH with the majority through the pharmacy channel. And by the end of Q1 we expanded that coverage to an impressive 130 million covered lives. And just recently, we secured distribution through Cardinal Health, one of the largest wholesalers in the country to complement our established and expanding pharmacy distribution network. Looking ahead, we continue to believe that market access expansion and business model innovation through the pharmacy channel provides a pathway for sustained growth. We are leveraging this broad coverage position with our launch of DASH mainly through the pharmacy channel. Our pay-as-you-go model is a clear differentiator and will continue to be a key driver of strong performance in the United States. It also provides several competitive and strategic advantages for us as well as for Omnipod patients, providers and payers. Unlike traditional insulin pumps, DASH does not lock patients in to a four year commitment and it is the only insulin pump with no upfront cost to get started. This means we have removed major barriers to adoption for new users. Customers can now adopt a new technology like DASH without having to wait until their lock-in period has expired.
And on the payer side, we have reduced the risk and cost of member attrition because there is zero upfront cost for Omnipod DASH. We already have thousands of people who have placed pre-orders for DASH and we are laser-focused on expanding coverage, so all of these individuals will have access to our exciting technology. Customer feedback on the DASH product has been terrific, but we know in our business that just as important as terrific technology is seamless and capable customer support. During our limited market release we built critical new competencies, such as automated integration with our specialty pharmacy partners, online ordering for DASH, and the ability through the appeals process to assist patients who don’t already have DASH coverage. These efforts required significant investments of time, resources and capability building. And while that process was complex, the customer experience should be simple. As a result of these investments, we are now in a much stronger position to ensure our customers have the best patient experience. There is great enthusiasm and demand for DASH and we will continue to build capabilities and access as we launch into the market. We could not be more excited to be delivering the DASH next generation mobile platform to our customers, and we look forward to their benefiting from this remarkable product and business model innovation.
As the market research predicted, DASH has shown high satisfaction rates among people living with Type 1 and insulin dependent Type 2 diabetes. In fact, the Type 2 customer segment expressed enthusiasm for DASH’s ease of use in particular the CalorieKing food library and easy to set temp basal profile. We believe DASH and its pay-as-you-go and pharmacy advantages will be very appealing to people living with insulin dependent Type 2 diabetes, thanks to the system’s zero upfront cost model and its unparalleled simplicity and discretion. As they come to market, our concentrated insulin program can help us further penetrate this segment. We successfully completed you U-500 summative human factor study […]
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