Good day, ladies and gentlemen, and welcome to the Insulet Corporation First Quarter of 2018 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. And as a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations and Corporate Communications. Please go ahead.

Thank you, James. Good afternoon and thank you for joining us for our first quarter 2018 earnings call. Joining me today are Patrick Sullivan, Chairman and Chief Executive Officer; Shacey Petrovic, President and Chief Operating Officer; and Michael Levitz, Senior 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 2018 results and second quarter and full-year 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 statement. Such factors include those referenced in our Safe Harbor statement in our first quarter earnings release and in the company's filings with the SEC. Also, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year basis. With that, I'll turn the call over to Pat.

Thanks, Deb, and good afternoon, everyone. Joining me on today's call are Mike Levitz, our CFO; and Shacey Petrovic, our President and Chief Operating Officer. After my opening remarks, Mike will provide detail on our first quarter results and increased 2018 guidance. Shacey will then follow with an update on our commercial and R&D developments and milestones. We'll then open the call for questions. I am absolutely thrilled with the company's first quarter performance. Our Q1 results once again exceeded expectations with revenue of nearly $124 million, representing year-over-year growth of 21%. We achieved yet another quarter of impressive gross margin expansion to 61.4%, a 300-basis-point improvement. We entered 2018 with strong momentum and are excited about our continued growth and achieving positive operating income this year for the first time in Insulet's history. In the first quarter, we made significant progress on our four key strategic initiatives, namely, expanding market access, executing on our innovation roadmap, building our U.S. manufacturing facility, and implementing our plan to go direct in Europe on July 1. Since the first of this year, we achieved two significant milestones in expanding market access. In January, CMS issued guidance that Omnipod may now be covered under the Medicare Part D prescription drug benefit program. This decision by CMS also provides an easier pathway to secure state Medicaid coverage. And on April 1, we secured in-network coverage of Omnipod with UnitedHealthcare, the largest commercial payer in the United States. These two accomplishments represent a step function expansion of our addressable market, providing a pathway to approximately 40% of the U.S. market or roughly 600,000 individuals who previously had little or no access to Omnipod. We submitted Omnipod DASH to the FDA in January and expect to enter limited market release in the second half of this…

Thank you, Pat. Our first quarter certainly was one of significant progress and I am pleased to walk you through our financial results in the second quarter and increased full-year guidance. Our first quarter revenue growth of 21% exceeded the midpoint of our guidance by $2.6 million, and that was driven by strong performance in the United States and International Omnipod based on our growing worldwide customer base and continued momentum across our markets. Specifically, U.S. Omnipod revenue grew 17%, reaching $70.3 million. International Omnipod grew 53%, totaling $38.4 million. And Drug Delivery was approximately $15 million, down $2 million. Our gross margin increased to 61.4%. That's up 300 basis points due primarily to the significant improvements that we have continued to make in our manufacturing and supply chain operations, offset in part by unfavorable mix due to faster growing international distributor sales. This improvement in gross margin is ahead of our expectations for the quarter and we are increasingly confident in reaching our full-year gross margin expansion objectives. Our operating expenses totaled $75.8 million. That's up from $64.7 million and that's in line with our expectation. As a reminder, this does include our investments to assume commercial activities in Europe beginning on July 1. The net result was breakeven operating profit for the quarter, and we are well-positioned, very well-positioned, for achieving our 2018 objective of EBIT positive for the year. We ended the quarter with $516 million (00:08:06) in cash and investments. That's down from the $566 million we had at the end of 2017 and, as a result of capital expenditures in the first quarter, in line with our plan primarily to support our investments in U.S. manufacturing and supply chain operation. The change also reflects $4 million of cash used in operations in the quarter, which…

Thanks, Mike. I am incredibly proud of our team's continued execution and first quarter accomplishment. Our financial performance is just one of many indicators that 2018 will certainly be another exciting year. Our commercial strategies continue to drive robust revenue and customer base growth. As a result of our strong start to the year, we are reaffirming our expected 2018 full year customer base growth of 15% to 18% in the United States, and we expect to finish towards the high end of our customer base growth guidance in line with revenue. For our international customer base, we expect to grow 20% to 25%. We are making terrific headway on our key commercial initiatives. First, expanding market access for Omnipod; second, preparing for the launch of DASH; and third, standing up our European operations. Starting with market access. CMS's coverage decision and UnitedHealthcare's inclusion of Insulet as an in-network provider for both their commercial and Medicaid members are incredible wins for Insulet and, most importantly, for people with diabetes who are covered by these plans. We have already begun to see the impact of the UnitedHealthcare agreement which went into effect April 1, and this is a great sign for future revenue growth. In addition to pull-through of the UHC access, we are diligently working with all Medicare Part D plan sponsors to secure access so Omnipod will be included in their formulary benefits for 2019. I am very pleased to share the exciting news that two Medicare Part D plan sponsors, Express Scripts and Magellan, have recently added Omnipod as a covered benefit effective April 1 of this year. Securing early access with these carriers is a great leading indicator of our progress to ensure broad availability of Omnipod to all individuals who can benefit from it. On our…

Thank you. Our first question comes from Chris Pasquale with Guggenheim. Your line is open.

Hi. Thanks, guys, and congrats on the quarter. I just want to follow up on the European announcements. You've laid out a couple of partnerships in the past week here. Where are you in terms of having the infrastructure in place to handle the crossover to direct? What else should we expect to hear from you in the next couple of months?

Great. Thanks, Chris. Yeah. I think we are in great shape. We now have the infrastructure in place and we're ready to assume that business as of July 1. Where we're still doing some work and executing is on the intermediaries. So, just as a reminder, more than 80% of this business goes through intermediary. Many of these intermediaries work with our current distributor. So, in effect, we'll be sort of getting one middleman out of the scenario. But we do have to go in contract with all of these intermediaries. We're in the process of doing that and fully confident that we'll have that in place. We now have inventory in Europe ready to serve patients as of July 1. Obviously, we made the announcements about our team in place and we're just going to make sure then that all those intermediaries have product to be able to serve patients starting July 1 as well. So that's the work that's underway now. Our plan is really on or ahead of track at this point and we're feeling increasingly confident about that transition.

Great. And then just one on reimbursement, there's a lot of moving pieces recently with some of the wins you've had. Could you just give us an update on your total covered lives in the U.S. at this point?

I don't have that number handy. I think that's something we could follow up on. I will tell you we've made a great progress, so when we think about Medicaid, for example, I know we're sitting now just with Medicaid lives at about 10% of the population, around 25 million, 23 million covered lives. I don't have the number specifically for commercial, though. But in general, really broad coverage now particularly with the UnitedHealthcare decision, I mean, that is the largest commercial payer in the market. And as I said, that's already starting to make an impact in our new patient starts and shipments this quarter already this month.

Great. Thanks.

Thank you. Our next question comes from David Lewis with Morgan Stanley. Your line is now open. David Ryan Lewis - Morgan Stanley & Co. LLC: Good afternoon. Shacey, I wanted to start with the U.S. market. How would you describe market dynamics here sequentially? And then a related question is, as I think of what first quarter performance you delivered right in the middle of the guidance for the year, is it safe to assume as you think about Animas, United, Medicare that you can sort of build on this momentum here in the first quarter over the next couple of quarters?

Yeah. Thanks, David. So, in terms of just market dynamics, Q1 is always our softest quarter, and that's just simply due to sort of seasonality in the business. Every year, our deductibles reset in Q1 in the U.S. And so that typically is our latest quarter. That said, it was a very strong quarter year-over-year. And with any of these decisions, as we've said many times, because of the business model, they are really a compounding effect over time. So UHC just went into effect April 1, and we're already starting to see that in new patient starts, so we will expect that benefit to compound for the rest of this year and 2019. I think you mentioned Animas from a competitive dynamics. We do still see people taking advantage of the pathway that we have for Animas users to be able to adopt Omnipod, and we would expect these Medicare, Medicaid and increasing access wins to continue the compound. We think a lot of that impact will come in 2019. But we're obviously guiding to a strong year of 18% growth in the United States in the installed base. David Ryan Lewis - Morgan Stanley & Co. LLC: And, Shacey, just on pipeline real quickly, is DASH timeline soft commercial fourth quarter still makes sense and I think you're going to have a Horizon clinical update potentially in the next couple of months here. Any updates on those, and I'll jump back in queue. Thanks so much.

Sure. Yes. So, DASH, we're very excited about that. We're on track. We expect to be moving into limited market release sometime probably mid-summer, late summer, just based on our interactions with the FDA. And we forecasted or planned for a six-month limited market release which would take us to the end of the year. But two things to note about that. One, we're going to – I think the team is doing a great job planning for this launch, and we're doing all the right things to make sure that we have a successful launch. Obviously, we've learned a lot by watching this market and others launch new technologies into it, and we want to get this one right. So we're going to take the time to do that. But we always have the opportunity to accelerate that. So, if we get in three, four months into it and everything is going to plan, we could certainly move into commercial launch at that point. The last point that I'll make is that any new product launch works differently for us than it does for others in this market, again, because of the business model. So we are not going to have – it doesn't impact us in that we don't sell a piece of capital equipment right off the bat, right. This is again about the slope of the line and increasing new patient starts. So, if we move the launch up a quarter or move the launch back a quarter, it doesn't materially impact revenue. And then I think you asked about Horizon. We're going to have some great clinical updates at ADA on Horizon, so very excited about that data that I think is really compelling and in free-living settings down to age 2. So really exciting progress there that we'll be sharing with the community on our IDE 3 which is currently underway.

Thank you. Our next question comes from Joanne Wuensch with BMO Capital Markets. Your line is now open.

Thank you very much for taking the question. Can you hear me okay?

We have you loud and clear.

Excellent. Thank you. Two questions. The first one is, your gross margins seem to be improving faster than we had expected and even faster than your guidance of 60% to 61% in the first half. What is helping drive that a little bit better or a little bit faster?

This is Mike Levitz. So we have, over the last number of years, just continued to improve our oversight in our operations side of our business, and that just continues. We couldn't be more thrilled with the work that our operations team is doing. And so we've talked in the past calls about driving down scrap, driving up product quality, driving efficiency. All of those things are true. So we are – we have a lot of opportunities ahead of us. At our Investor Day (00:27:50) November of 2016, we laid out what the key drivers are from our gross margin expansion, and that is continue to drive improvements in the operations, which we continue to do and I expect us to continue to do through the year, driving down component pricing and sourcing. We absolutely are doing that and just getting started with that. And the product platform that we have first with DASH and then the other products that introduced after that that we've already described here are all in the same base platform. And that enables us to drive component savings. And then also even mundane things such as the move from air freight to ocean freight, all of those initiatives are really ahead of schedule, on or ahead of schedule, and we expect to drive significant margin expansion in those areas this year. The move, too, that we'll see in the second half, the move to direct in Europe, will drive a run rate 400 basis points improvement in gross margins. So half-year impact of that is about 200 basis points. And then really things are going to improve even further as we deliver on U.S. manufacturing beginning in the – in the beginning of 2019. That program is doing very well. And so we have a number of initiatives to drive gross margins. We've laid out our multiyear target to 70% and are very confident of that. But in the quarter, there was nothing unusual. It's just continued strong execution.

Blocking and tackling.

I'll continue. So just one or two things going away. My second half of my question is you sound very organized on the international move. What can go wrong? What do you worry about? Thank you.

Yeah. It's a great question. I think what we – what does a flawless execution look like? We would be perfectly ramping down one channel and equally perfectly ramping up another channel. On July 1, every patient and every clinician and every government body would know to call Insulet instead of our current distributor, and we would have perfect supply and awareness throughout the market. And so, obviously, that's the goal, but I think none of us are – certainly in our guidance, we're assuming that there's going to be some bumps in the road as that plays out. But we're doing everything that we can to drive awareness in the marketplace and make sure that patients, clinicians, government bodies know what's happening as of July 1 and that they know to call us, and then we're certainly reaching out to all of the intermediaries that serve this market. But I think it's just really about awareness and making sure that everybody understands what's happening and that we don't create confusion in the marketplace, and we're working very hard to do that. I would say a lot less is keeping me up now on this program just as we've built such a talented team, so experienced and really understanding what needs to happen and kind of helping us execute successfully on the program.

Thank you. Our next question comes from Ravi Misra with Berenberg. Your line is now open.

Hi. Thank you for taking the questions. Just a couple of questions on the U.S. installed base. You're guiding to that 18% or at the high end of that 18% range that you've given. I'd like to understand some of the dynamics around patient attrition, especially with the Medicare coverage decisions and the analyst conversions. Are you seeing any early benefit from that or, I mean, how is this translating to new patient adds or attrition rates?

Sure. So, in the U.S., attrition has remained fairly steady at about 9%. So I think we've shared that number, and that hasn't materially changed. And really, when we think about these wins around UHC and Medicare, even these early Medicare wins don't go into effect until April 1, and UHC went into effect April 1. And so that's why we say most of the benefit, both in terms of new patient starts, installed base growth, and the potential impact on attrition, is likely to be more of a 2019 and beyond impact. We do know that market access will impact attrition. We know that people trade off the product because they lose access to it. And so, we are very excited that, if we're successful, and we fully expect to be, in implementing coverage with these Medicare Part D plan sponsors, that we should see a nice impact on retention of our patients starting in 2019.

As well as new patient starts.

And new patient starts. Yeah.

And this is Mike. Just to clarify, one other point is when we talk about our customer base, it really is in many ways because of how much goes through distribution channels and estimate, and it's a backward-looking estimate. And so a lot of these benefits, they may already be contributing, but we won't go to report that out or see that right now. But we are seeing tremendous momentum.

Great. Thanks. And then, my follow-up question is just around the kind of profitability ramp of the business. You broke even this quarter, kind of still guiding to nice low-single digit operating margin for the year. How should we think about the phasing of that profitability given some of the investments that might be made in the second quarter? I'm assuming perhaps to support the European expansion. Is this going to be kind of like a steady increase in profitability or where – or is there going to be a little extra investment in 2Q to account for those changes coming in Europe? Thanks.

No, it's a great question. One of the things that I talked about on our last call is how this is going to impact us, because it's an interesting year. We give full year guidance, but we gave more clarity around first half, second half on the last call because we're making those investments now for ramping up the team. As Shacey described and Pat described, we've built an amazing team. We now have 100 people. But they're coming in – a lot of those are recent here and are coming and ramping up through the year. So we'll have a run rate of expenses by the time we get through the second quarter without the benefit. The benefit comes beginning really in the third quarter when we have the sales that correspond to it. And so we do expect to see a step change from the first half of the year to the second half of the year. I talked about gross margins going up 400 basis points on a run rate basis, so half year, 200 basis points, for the full year impact. So we do expect there to be a step change as we do this. The guidance that we've provided, we believe, is realistic because this is not a small transition. It is an incredibly meaningful one, a really exciting one. We've made great progress, but as Shacey said, we haven't built our guidance assuming that everything goes perfectly. The good news is that we'll have a really good indicator when we're on the next call how we've gone through the transition. And so we're looking forward to that, but everything right now is looking very good. But we will report out to you as we continue to make progress.

Thank you. Our next question comes from Margaret Kaczor with William Blair. Your line is now open. Margaret M. Kaczor - William Blair & Co. LLC: Hey. Good afternoon, guys. Thanks for taking the questions. First one for me is on Medicare and just to follow up on Express Scripts and Magellan. Can you give us a sense of what percentage of Medicare patients are covered by those two, whether there are any other steps that you have to go through to start billing for these sponsors or are you already seeing some patient adds for Medicare at this point?

Sure. So, I think, you may remember from last quarter's call that the top eight plan sponsors account for 80% of the population. So I don't have specific numbers that I can provide, but I will say that ESI is one of those top eight. Magellan is not. It's a little bit smaller. So, great win with both of these plans and there is nothing more that we need to do starting April 1 for these patients to access their Medicare benefits through these providers in Omnipod and we have started to ship Medicare patients now. So we're starting to see this benefit pay off, very early days though.

And I would just add – this is Mike – that Medicare is really exciting and meaningful for us. Medicaid is probably a bigger impact for us because of the pediatric population. And so those wins are really – they really increase in speed after getting the Medicare Part D decision. And so that that again, as Shacey said, is going to benefit us from a new patient start standpoint probably beginning in 2019, but definitely on the revenue side then. So, a lot of exciting things. Margaret M. Kaczor - William Blair & Co. LLC: Got it. And just to follow up on that discussion. And you guys talked about having new customer adds 15% to 18% and on the higher end of that in the U.S. How much of that is being driven by Medicare, Medicaid and UNH? Is it that 150 bps from the midpoint to the high end, really, what could drive it higher or lower as you go on throughout the year? Thanks.

Yeah. Thanks, Margaret. So just to clarify, the 15% to 18% which – in the United States, we believe, will be 18% is installed base growth. So new patient starts are actually higher than that, but that's just – that accounts for attrition and the overall installed base growth. And market access wins are clearly contributing to that, so very excited about that progress and so UHC to a greater degree. I wouldn't say at this point Medicare and Medicaid are contributing significantly to that. It's primarily UHC and then just commercial execution, patient awareness, et cetera.

Thank you. Our next question comes from Danielle Antalffy with Leerink Partners. Your line is now open.

Hey. Good afternoon, guys. Thanks so much for taking the question and congrats on yet another solid quarter. I wanted to see if we could talk a little bit more about the guidance raise. It seems like you're raising precisely by the Q1 beat, and it just feels like you have a lot of momentum going in the right direction from a top line growth perspective, UNH being one of them. Shacey, I appreciate you saying that the 2019 contribution will be more meaningful. But I have to think that there will be some contribution in 2018. So I just want to make sure I understand why not feel – why shouldn't we feel better about the rest of the year from an outlook perspective given all that seems to be going your way right now, knock on wood?

Danielle, this is Mike. I'll start, then I'm sure Shacey will add additional response to your question. In terms of the guidance specifically, so it's been our practice that, generally speaking, in the first quarter, we really don't change our guidance a whole lot because you give the guidance for the year so close to when you come to the first quarter. And that's been our practice, and we follow that. I think if it's not clear from the statements we've made, I think we need to make it abundantly clear. Things are, look, going very well across the business, and we really are, we're seeing tremendous growth. In the U.S., these wins are incredibly exciting. They're not 2019 wins. They're wins now. But from our recurring revenue stream, we don't get as much of it as some of the other players in the space do because they have a one-time upfront capital. We have it spread over years. In terms of the overall guidance, we have a big transition with Europe coming midyear. And so, our guidance reflects – there's a wide range of outcomes there. We're going to be able to report back in a very short period of time how that's looking, and it's looking great right now, but you know what, we need to execute on it. So I wouldn't read into the guidance raise anything other than our confidence and it – we made a similar guidance raise last year in the first quarter and so that's what's reflected in it. Shacey?

Yeah. The only – I'll add two bits of color. So the first is, as I alluded to in the script, is our new patient starts are up significantly this quarter versus a year ago. But as we always say, it's just the business model, right, it's all about installed base growth. That's what will drive our revenue growth in a given year. So we could not be more excited about the momentum and the potential that the United agreement, for example, and these access wins offer, and they're clearly showing in our metrics. But it compounds over time just because of the business model. The other thing I'll say is there was a little bit of noise in the market this quarter because of the United win. Their current distributors that were serving that business are no longer serving that business because we're serving it directly. And so we also saw them just reduce their inventory to account for that change. And that's a little bit of noise or headwind in the market.

Got it. That's actually great color. Thank you so much for that, guys. And one follow-up question, if I could, on the pipeline and your Horizon AP product. Do you guys have any sense, so Dexcom has obviously talked about – who is your partner in that project, has talked about potentially faster time to market for some CGM products? Does that impact Horizon at all? Have you started having conversations with the FDA on what their new view on CGM could mean for integrated insulin delivery products? Thank you so much.

Sure. Yeah, Danielle, we applaud the agency for finding creative, faster ways to accelerate innovation to the market. It's really exciting what they did with this iCGM designation, and we are participating in these discussions around enabling interoperability with both the agency, Dexcom and others in the industry. So we're definitely a part of those. I think it's a little too soon to share how those might impact our partnership and development programs with Dexcom, but really looking forward to sort of capitalizing on that in any way that we can.

Thank you. Our next question comes from Robbie Marcus with JPMorgan. Your line is now open.

Great, and thanks for taking the question. Shacey, maybe one for you. We've had a lot of transition in the market over the past year with J&J exiting the business and 670G really failing to launch last year and into early this year. So maybe you could tell us sort of how you think the market in general has been shaping up and what sort of share you think you have now and where you think the market's growing in the U.S.?

Sure. So, Robbie, I say it every time and I'm not sure that it kind of gets through, but I say it to our team too, we really don't look at other tube pumps as our competitors. And so, these failed launches and/or exits from the market, they've given us a little bit of a tailwind but really not anything of substance. And when we look at where our new patients are coming from, still the vast, vast majority of them are coming from multiple daily injections. There's different estimates on how in the United States the pump market is growing. I hear anywhere from 5% to 7% CAGR anticipated over the next five years and other people who say maybe it's not growing to that degree. All I can comment on is the fact that we are growing and the vast majority of our business is coming from multiple daily injections, and so we're clearly growing the overall market. And it may be that the other players are really taking from an existing base as opposed to growing the market. I think that's the beauty of Omnipod as it really helps people transition from MDI to the benefits of continuous subcutaneous insulin infusion.

And so where do you think most of the J&J patients are going, because it's something like 50,000 in the U.S., 40,000 international? Are they all going to Medtronic or are you able to capture a good portion as well?

I don't know where they're all going. I can say that, certainly, there are still patients that are taking advantage of our pathway to ensure that Animas patients who want to have the option to use Omnipod. So I think I said it last quarter and the same is true this quarter, typically, anywhere from 80% to 85% of our new users are coming from multiple daily injections. Now, it's closer to 70% to 75%. So that differential is probably the uplift that we're getting from Animas users.

Thank you. Our next question comes from Jeff Johnson with Baird. Your line is now open. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good evening, guys. So just a couple of follow-up or cleanup questions, I guess. But, Shacey, going back to the question on Horizon, you're not yet in pre-pivotals or pivotals. Is there any way to move G6 into that pre-pivotal and pivotal trial? And if not, Horizon will be a PMA product, so would it make sense to think that switching out from G5 to G6 in a whole new iCGM world and what have you and once Horizon has PMA approval, that could be a very fast process? So, even if Horizon comes out with G5 in the end of 2019, it's a three- to six-month path only to get G6 integration.

So, Jeff, we fully expect to enter into pre-pivotals and pivotals with G6. Jeff D. Johnson - Robert W. Baird & Co., Inc.: You do. Okay.

Yeah. Jeff D. Johnson - Robert W. Baird & Co., Inc.: That makes it very simple then. Thank you.

Yeah. You're welcome. Jeff D. Johnson - Robert W. Baird & Co., Inc.: And then one other question just on the international change-out here in July. So I get the customer care and logistics intermediaries, what you announced today. Italy and Nordics was a bit of a surprise to me. I guess, is there a reason those markets needed an actual distributor relationship for you guys? Just trying to figure out why maybe not going fully direct there, and does that have any implications, Mike, on how we think about that up-charge on the price side and all that across your European business?

Yeah. So, the great thing about this move is that we were able to get a lot closer to the markets. We were able to sort of design our go-to-market strategy and our organization to suit what we saw as the myriad of opportunities across the market. But they're very different business models in every market, very different in their level of diffuseness in terms of the purchasers and the customer base. And so we just opted to go through distributors in those two markets mainly because we felt like it was our strongest position to serve those markets based on the number of buying points and the number of customer points and support required across them. So, ultimately, we just thought it was the best way to go, and we're excited about those partnerships.

And this is Mike. I would just add that we've talked in the past about how concentrated our base is. When you look at, I think we've talked about France, Germany, the UK and the Netherlands representing roughly 75% of our base, those places that we aren't going through distributors. The places that are less impactful and it makes sense to – using distributor makes complete sense. And again, in France, as you may recall, that also – that goes through what's called the cost of care (00:47:59) as an intermediary as defined by the French market. So that in the core countries where we have the most significant presence, that's where we're going to have our reps calling on customers and on physicians and so on. In terms of the financial impact of this, this has all been contemplated in the guidance that we provided. And so, I reiterated in my comments about the 50% uplift in pricing from our historic distributor pricing. That's all in. That include – that's – nothing has changed, and everything that we're seeing is in line with what we've stated for guidance. So absolutely no change.

Thank you. Our next question comes from Steven Lichtman with Oppenheimer & Company. Your line is now open. Steven Lichtman - Oppenheimer & Co., Inc.: Thank you. Hi, guys. Shacey, I know you've made – over the last several years, you've made investments in the commercial organization in the U.S. I was wondering specifically this year, are you looking to meaningfully grow the commercial footprint in the U.S.? And if so, about how much do you expect to do so?

So, Steven, we did grow. In fact, we're done with that expansion now, and there – I think most, if not all, of the positions are full. We did that at the very beginning of the year, and we grew – in total, we grew the sales organization which I would characterize both as the external, the field based, and the internal or inside sales team, we grew that by approximately 25% thereabouts. And the internal team focuses on pipeline management sort of getting interested patients through the pipeline. And then the external team is comprised of salespeople and clinicians. And so they support our existing base which obviously is growing, as well as new patient starts.

And this is Mike. I would just say that we did that expansion because we expected these market access wins. We've made the investment. You've seen in some of our OpEx increase, a good portion of that or within that OpEx increase was an investment in really driving market access. And now we're seeing the fruit of that investment and we need – we want to have the salespeople to take advantage of the increased demand. Steven Lichtman - Oppenheimer & Co., Inc.: Got it. Thanks. And then, Mike, you reiterated on the OpEx or the operating margin side for the year. Just specifically within that, the stand-up costs for Europe still we should be thinking sort of in the $45 million to $50 million range. Is that fair?

Just to be clear as it relates to – you used the term stand-up costs for Europe. So, when I spoke on the last call, I talked about the run rate costs of the European business meaning, because it's kind of a ramp through the year, I wanted to talk about this new business model of being direct. The run rate cost will be, yes, $45 million to $50 million on an annualized basis. And so, we really have that team in place as we get into the middle of the year. And so you see the run rate of OpEx on an annual basis of $45 million to $50 million. I also talked on last call about some upfront costs, non-recurring costs to stand up the business, and we expect that that would be the non-recurring costs in the year around $10 million is what I guided to last time. There is no change in that guidance. So, everything we guided to relative to the spending is on track and that's what we expect for the year. It wasn't really all that material in the quarter as it relates to non-recurring costs, but we're doing all the things we expected to do, and we're either doing as well or better than we expected to do them.

Thank you. Our next question comes from Doug Schenkel with Cowen and Company. Your line is now open.

Hi, this is Ron (00:51:40) on for Doug. Thanks for taking my questions. Amgen stated on their Q1 earnings call that they're in final preparations to launch the Onpro kit in Europe. Was this already contemplated in their previous forecast to you? Can you remind us how big of a volume opportunity Europe is for Onpro? And do you think your Drug Delivery business will return to growth in 2019?

So I'll start I guess with those questions and, Mike, you can add any color if you have it. But ultimately, we don't really have insight into what was contemplated or not contemplated in the forecast from Amgen, just really what their forecast is, and our guidance and our raise of guidance is based on Amgen's forecast. And it's sort of the same response in terms of the market opportunity in Europe for Neulasta, Onpro. It really is a question best directed to Amgen. We are working with them to support all of their needs as they enter that new market and certainly excited about the partnership, but we have committed to them to let them comment on their business opportunities.

And, Doug, (sic) [Ron] this is Mike. We were pleased to raise the guidance on Drug Delivery for this year. In terms of 2019, we just gave 2018 guidance, so I don't want to get ahead of us on 2019.

Got it. And then it's been awhile since we've got an update on Drug Delivery outside of Neulasta. Can you give us at least a qualitative update on how the pipeline is progressing? Is the pipeline progressing and do you think any of your partnerships will progress to the point that we hear more about them by the end of 2019? Thank you.

Sure. So, yeah, we continue to have discussions with pharmaceutical partners and some technical feasibility work, et cetera. I think we've said all along we don't expect another Amgen really in the next few years. And obviously, all of these partners are very – take confidentiality very seriously, and so we can't give a lot of color on that. I will say two things. We still see this as a great opportunity, but as we've continued to say over the last year, year-and-a-half now, it's really a longer-term opportunity, these programs. When we're testing molecules in the – in many cases, in Phase 1, oftentimes, the molecule doesn't meet its endpoints and/or as we get through technical feasibility, something is uncovered. And so these are just longer-term programs. We see them as a long-term potential benefit. And I think what's really exciting is just to see where we are from a margin expansion standpoint and for a growth standpoint despite that slight headwind that we have because of Amgen's forecast. So we'll certainly keep you posted. Unfortunately, we can't really give a lot more color at this point in those activities.

From a guidance standpoint – this is Mike. From a guidance standpoint, when we talk about our 2021 target of $1 billion in revenue, 2021, given the time horizon that Shacey talked about, we never really expected Drug Delivery to play a significant portion in that. So, as we look right now, the nearest term opportunities are within U.S. Omnipod and International Omnipod. And even by 2021, a lot of that's in existing market. So it's really coming out of 2021, what continues to drive significant growth for this business are the expansion into other markets outside the United States for the Omnipod and the opportunities in Drug Delivery. So, when we talk about the $1 billion target going from where we are now, that's largely driven by the U.S. Omnipod and internationally in existing markets, and then the growth beyond that is really the significant opportunity that Pat described and Shacey described.

Thank you. And our final question comes from Jayson Bedford with Raymond James. Your line is now open. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon. Thanks for squeezing me in. So just a couple of questions. Getting back to the U.S. growth, the quarter-to-quarter move, the seasonality seemed a little bit more pronounced at least relative to the last couple of years. The fourth quarter was obviously quite strong. Was there something exceptional that you saw in the fourth quarter that maybe you didn't see in the first quarter?

This is Mike. There always is this this big seasonality piece. And so, no, there really wasn't anything all that extraordinary. Q1 was very strong. It was in line with our expectations. In fact, we beat our expectations. As Shacey mentioned, with the new access wins, there was some ramping down of existing intermediaries. Now we're going to be going direct with UnitedHealthcare as an example, so that did. That was a headwind in the quarter. But by and large, I mean, we always have expected this kind of seasonality. Jayson T. Bedford - Raymond James & Associates, Inc.: Is there any way to quantify the inventory drawdown at the distributor level?

I wouldn't call it – I mean, I guess, maybe you could say around $1 million or something like that. But it's hard to say exactly how much that is, and that's just a natural – the opportunity before us is significant and that's why we raised our guidance for the year in the U.S. And so the access wins are a much bigger impact than the small ramp-down because we really, with the United side, (00:56:57) we get so much more coverage by being direct than the small piece that we lost from the transition from an intermediary.

Thank you. And actually, we have time for one more question. So we will take the line from Kyle Rose with Canaccord. Your line is now open.

Great. Thank you very much for squeezing me in here. Just one quick question and then a follow-up. Just I think we understand the dynamic of you using the intermediaries versus you building out the direct infrastructure on a country-by-country basis. But maybe just help us understand how many more of these intermediary contracts should we expect to see before you go live and how many other countries do you think you'll use the intermediary model in? And then, from a longer-term perspective, I mean, does that change the operating profile in the margin expectations internationally given you have less infrastructure to build out? And then, a quick question for Shacey, on the Horizon, any updated thoughts on whether after the third IDE trial, you'll be able to move to pre-pivotal or if there's going to be maybe another IDE trial before that step?

Yeah. I'll take the first piece. Our current distributor in Europe uses intermediaries and/or distributors in a good portion of the market. So, by going direct, we will be interacting with those intermediaries or distributors directly and basically, as Shacey said earlier, removing the middleman that we have today. So when you look at France, as Mike mentioned, that's going through the (00:58:32), there's a number of them, you contract with them individually as well as many of the other markets where you have probably 80% of our business going through Europe. When we are completely up and running, we'll be using either intermediaries or distributors in the marketplace. Not different from what our current distributors does today. The benefit is we're going to get that 50% improvement in our end user pricing and substantial 400 basis points improvement in our gross margins.

Yeah. And, Kyle, we don't anticipate any other full distribution partnerships, so we got our team established in the other markets in which we serve outside of Italy and Nordics. All of that is in play. So we'll work through, as Pat said, distribution intermediaries, but we don't expect any full distribution partnerships outside of Theras and Nordic Infucare. The rest of the team is in place and we're ready to go. And then I think your last question was on Horizon. We will give an update as soon as we're done with IDE 3 and reviewing that data. I just don't want to comment too early as I've always said. As we get done with these IDEs, we review the data, we evaluate if we're ready to move into pre-pivotal or into the next stage or if we need to do another study. And because we're – especially since we're focused on kids, the data looks terrific so far, but I'm going to wait and see it all and then we'll update everybody on kind of our next steps with Horizon.

And this is Mike. Just to fully answer your question, you had asked about our guidance and what's contemplated from a margin standpoint given the intermediaries. So, in United States, as an example, we go through distributors, but it's our sales force, it's our product support, it's our customer service. So, the infrastructure that you think of the direct business, we're having that same infrastructure in Europe apart from these two markets of Italy and the Nordics. All of what we guided to from an expectation on it being accretive as a business and improvements in gross margin, all of that is – everything we're doing now is in line with those stated plans and expectation.

Thank you. That concludes our question-and-answer session, so I'd like to turn the conference back over to Patrick Sullivan.

Thank you, operator. Look, we are absolutely thrilled with our first quarter financial performance and very excited about the significant opportunities before us in 2018. We've made significant progress expanding market access, executing our innovation roadmap, building our U.S. manufacturing facility, and implementing our plan to go direct in Europe on July 1. I'd like to thank the Insulet employees in the United States, Canada, and now Europe for their hard work and commitment to ease the burden and improve the lives of people living with diabetes around the world. Thank you for joining us on the call today. We look forward to speaking to you on our second quarter conference call where we will update you on our successful European transition. Thanks for joining us.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.