Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation's First Quarter 2020 Earnings 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Deborah Gordon, Vice President of Investor Relations.

Thank you, and good afternoon, everyone. And thank you for joining us for Insulet's First Quarter 2020 Earnings Call. Joining me 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 the press release discussing our first quarter 2020 results and second quarter and full year 2020 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 could materially differ from current expectations. We ask that you please refer to the cautionary statements contained in our SEC filings for a detailed explanation of the inherent limitations of such forward-looking statements. We will also discuss non-GAAP financial measures with respect to our performance, namely adjusted EBITDA and constant currency revenue, which is revenue growth excluding the effect of foreign exchange. We have transitioned to these measures as they align with what management uses as supplemental measures in assessing our operating performance and we believe that they are helpful to investors, analysts and other interested parties as a measure of our comparative operating performance from period-to-period. Also, unless otherwise stated, all financial commentary regarding dollar and percentage changes will be on a year-over-year basis and all revenue growth rates will be on a constant currency basis. And with that, I'll turn the call over to Shacey.

Thanks, Deb. Good afternoon, everyone, and thank you for joining us today. The last few months have posed extraordinary challenges for countries and communities around the world as we've grappled with the impact of COVID-19. Our hearts go out to those whose health has been affected and our gratitude goes out to the many medical professionals and first responders on the front-lines. We also hope that all of you joining us on today's call are staying safe and healthy. As a company committed to improving the lives of people with diabetes, the safety and well-being of our Insulet employees and the communities and Podders we serve, have been our top priorities as we navigate these difficult circumstances. In March, we transitioned to remote work arrangements for the vast majority of employees, in line with guidance issued by the WHO, CDC, local governments and health authorities. For those employees performing critical on-site functions, we significantly enhanced safety procedures to include social distancing, PPE protocols, frequent deep cleaning of our facilities and temperature monitoring. I am pleased to report that this transition has been essentially seamless and on behalf of our leadership team, I'd like to express our sincere gratitude to the employees who are continuing to work on-site to ensure we can provide uninterrupted supply of Omnipod to our customers. I am incredibly proud of our global teams’ resilience and compassion in the face of this challenge. While balancing many other demands like working from home, caring for children and keeping their families and friends healthy, our dedicated employees have never lost focus on our mission. Our Insulet team is what makes us such a great company and I want to thank each and every one of our employees across the globe. I'd also like to thank our many supply chain…

Thank you, Shacey. These are challenging times as we deal with the ongoing global health crisis, and I'd like to also say, thank you to the Insulet team, who has shown incredible adaptability, as we have all adjusted to a new mode of operating. And well wishes to all of those impacted by COVID-19. We are certainly not immune to the headwinds created by the pandemic. However, as Shacey stated, we are fortunate to have a durable annuity model with the vast majority of revenue generated in any given quarter coming from our existing customer base. The current global environment is disrupted, but it does not change the significant market opportunity we have and we remain well positioned for sustainable growth over the long-term. We are confident in our ability to continue creating significant value for our shareholders while advancing our mission to improve the lives of people with diabetes. We achieved another strong quarter of financial and operating performance in Q1. The execution of our strategic imperatives is paying off and we continue to invest for growth. As a reminder, the revenue growth rates I will discuss on this call are on a constant currency basis. In the first quarter of 2020, we delivered revenue growth of 25.3%, approximately $7 million above our quarterly guidance range. This strong growth was driven by our global diabetes business, which grew 34% and was $10.5 million above our guidance range. We were able to achieve these results as our global operations and commercial teams did a tremendous job quickly adjusting to the constraints caused by COVID-19. The operations team put measures in place early in the quarter, as we learned of challenges ramping back up our China manufacturing facility in January and the commercial team acted quickly later in March as regional…

Thank you. [Operator Instructions] And our first question is from Robbie Marcus of JPMorgan. Your line is open.

Great. Thanks for taking the question. And congrats on a really nice quarter. We've – in our checks with endocrinologists, we consistently hear that, pumps are a little harder to train remotely than CGM, but Omnipod stands out as being easier than other competitive pumps to train remotely, plus the cost to access and the cost to use is significantly lower, which bodes well during what should be a pretty tough economic time the next few months or longer here. So how are you thinking in terms – I know most of your new patient starts come from MDI. But how are you thinking about your competitive positioning here going forward, both to patients to basically pay up before a pump, but also versus your competitors, where you might have a lot of benefits versus them? Thanks.

Thanks, Robbie. Yes, I think you are right. Your data supports what we see, which is that we are – there are all sorts of things that make Omnipod a really appealing insulin delivery therapy for patients. And some of those things are even more powerful in an environment like the one we are in. When you think about the move towards a more cost-conscious consumer in this really challenging economic environment, obviously, the fact that you don't have to pay upfront for Omnipod and you are not locked in to four years of therapy, those things are very appealing. But I think probably even more powerful than that is the simplicity of the platform. And in some ways, telehealth just plays really perfectly into our strategy, because our whole goal is to bring the simplest, most consumer-friendly technology to market and if you think about what you need to be able to transition people in a telehealth environment, from multiple daily injections to a new technology, it's got to be simple. And we've developed a technology that is simple enough for kids, simple enough for multiple daily injection users and one that really, if you think about it, has two components, no needles to handle, no infusion sets. So it's just a very simple technology to train on. And I think that differentiator is going to become more powerful in the environment that we are in today. So, we feel good about this trend and I personally am really excited by the capabilities that we've built and expanded on in a really short period of time to be able to lean in during this time and really bring our technology to more people who need it.

Great. Maybe just as a quick follow-up, Insulet stands out as having a lot of China manufacturing exposure. You touched on this a bit in the prepared remarks and you have done a great job ramping up with the new manufacturing facility. I believe, line one is up. Line two is on its way and line three is being built. But how should we think about when you'll have much more dependence on the U.S. manufacturing versus outside the U.S. in case this lasts for much longer?

Hi, Robbie, it's Wayde. I can take that one. And the team saw this risk several years ago when they laid out the multi-year strategy and obviously made a significant investment. I know you've seen it here as well. And to your point, that's giving a lot of tailwinds to the team here during this current challenge that we've got two lines up and running now and producing and that's allowing us to actually build inventory through this time and so being able to stay ahead of demand and demand that's overachieving or outperforming our base scenarios. Regarding the risk in China, I mean, we've got a really strong partner in China. I think we are very impressed by how quickly they took on the challenge and we are able to staff, recruit, onboard, train and safely move people into the facility and get our production up. It was clearly delayed from a typical year-end start. But, given the environment, we were impressed by how quickly both the third-party team and our operations teams work together. I highlighted here some of the costs. We've put some incentives in place to help fund some of the work that our third-party manufacturer was doing and some of the extent they were going to get employees into the facility to get producing for us again after the New Year. So, I think we're going to see a multi-facility strategy from us going forward. And one of the main drivers for our U.S. manufacturing facility was to get redundancy and we'll have redundancy once we have three and four lines running here in the U.S. and keeping our China manufacturing facilities. So we'll achieve that objective once we get our third line up and then eventually onto our fourth line. Next question, please?

Yes. Our next question coming from the line of David Lewis of Morgan Stanley. Your line is open.

Good afternoon. A couple of quick ones for me. Wayde, I appreciate all the great detail on new patient start impacts across the quarter. I wonder, just given that certain geographies are beginning to open up, certain regions in the U.S. are beginning to open up and we are seeing this growing impact to telemedicine here in April as it leads into May. That quantification that you gave us across the quarters, that’s sinking up as sort of the qualitative recovery you are seeing April into May? Or is it sort of slightly ahead or slightly behind?

So, good afternoon, Dave. Yes, so – and thanks for bringing this one up, because we are hoping that we'd get an opportunity to give a little bit more context on it. Starting with the matching of our assumptions with the global economy and what we are starting to see in the macro environment with different countries and regions opening up. That's why we tied our base assumptions to this gradual improvement through the end of the year. And clearly, we are expecting headwinds through the rest of the year. If it happens that regions open quicker and our customers and patients can get to meet with their physicians and get the therapies that they need to treat their disease sooner. We'll be ahead of those assumptions. But at this point, we're assuming that we'll continue to see these headwinds through the end of the year. And to the second part of your question, how does that compare or contrast to what we've seen in April? I'll use this as an opportunity just to help explain to people the impact of our model and it really shows the durability of our model, because the impact to Q2 is not really impacted that much by new patient starts. As I mentioned in the prepared remarks, approximately 10% of any quarter is due to new patient starts. And so, we're really benefiting from the strong second half of 2019 and strong performance into Q1. And what we've seen so far in April is, revenue continuing to perform well because we're benefiting from that momentum coming into Q2. But behind that, we are seeing a slowdown in our new patient starts. And we really see that in two stages. We track our sales cycle in two main stages, sales leads and then actual new patient starts. So even in front of new patient starts, we are tracking our sales leads and that's where we saw a pretty acute drop-off in March. And so, as that funnel coming into Q2 starts to get smaller, that's where we are seeing the impact and so that's going to impact May and June for the most part. So we are anticipating our new patient starts, although strong through April, will start to slow down here through May and June. And then, it's our expectation that both given the ability for people to return to their endocrinologists and work on different strategies to improve their therapy, including pod therapy, we are assuming we'll gradually improve through the end of the year. And then, as Shacey highlighted, telehealth, we feel we are very well positioned. Our teams were already working on telehealth initiatives, and we were training people virtually. But we have redoubled those efforts now in the face of this pandemic and we are doing, as Shacey said, thousands more and that's growing every day.

Okay. Wayde. Thanks. That's super helpful. And then maybe, Shacey, just one quick one for you, kind of also tied to recovery. But in the ex U.S. impacts, your forecasting is a little heavier than U.S., which makes sense given the different sites of service or how this healthcare is delivered in those two geographies. But how would you characterize the visibility into the U.S. recovery relative to the ex U.S. recovery? Thanks so much and great job.

Thanks, David. Yes, you are right, on ex U.S., just the way that care is delivered there, obviously, many more people living with diabetes get trained on new technologies like Omnipod in the hospital setting, as opposed to the clinic setting. And so, we do anticipate it'll take a little bit longer for some of those markets to return towards normalcy and the headwinds are a little bit more significant. That said, we do have telehealth activities going on and virtual trainings going on in every international market, just like we do in every U.S. territory. And so, I think that's just the nature of what we are dealing with in the U.S. In terms of visibility, we have – we benefit in the U.S. from visibility to our direct customers and that helps give us a sense of what we can extrapolate across the markets. The same thing is true in Europe, although I think the insights into our direct patients aren't as easily extrapolated into additional markets. So that's the challenge we have, is just how fragmented the European market is. But we work every day obviously with our partners and with our team to get those insights and as Wayde said, to be tracking those leading indicators, so that we can manage the business as effectively as we can during this time. Next question?

And our next question coming from the line of Joanne Wuensch with Citi.

Good afternoon everybody and thank you for taking the question. One of the things that I am trying to get my head around is the patient or the new patient adds that aren't happening right now. When do they come back? And how do they come back?

Yes. I think it's a good question, Joanne. It's difficult obviously to predict the future. What our data shows is, and I'll speak mainly to the U.S., because that's where we have really the best insight. But what our data demonstrates is that, in the United States, endocrinologist visits are down 60% since the beginning of March. And of that remaining 40% that are still happening, 15% of those are being delivered via telemedicine. So a pretty significant drop-off. What we see is just a more and more adoption of telemedicine across the United States. So I think that'll help offset it. And I think one of our questions is, how durable is telemedicine, because it's obviously dependent in some ways on reimbursement. But we do track state-by-state new patient starts and as Wayde said, our leads in those markets to see in some of these areas that were hit harder than others, are they starting to recuperate? And so we see indications of that across various markets and that's what we'll continue to track so that we can continue to forecast.

Thank you. And then my second question has to do with the international market, recognizing maybe it will be slower to open up new geographies. How do you think about approaching them? And does what's happening globally changed your view on what markets may be next or not? Thank you very much for taking the questions.

Thanks, Joanne. I don't think this impact today makes us feel differently about the new markets that we had planned to enter. Really, what's – what we are planning for is just to make sure that we have all of these markets prepared for successful launches. And so, in various markets, we might be, for example partnering with a strong distributor partner there. We may be seeking market clearances or even regulatory approvals and we want to make sure that all of that stuff is in place before we launch into the market. And so that's really where we are – when we're thinking about different timelines and potentially early 2021 instead of 2020, it's really tied to making sure that we have everything prepared so that we can have successful launches. Not that we are thinking about different territories at this point. There is a tremendous amount of opportunity, as I always say. We are really in a handful of countries relative to the rest of the world, and that's true even in Europe where we are starting to build a really strong presence there. There is still a tremendous amount of unmet need. So we are going to attack that unmet need. It's just going to be a little bit later than we expected because of these dynamics.

And our next question coming from the line of Margaret Kaczor with William Blair. Your line is open.

Hey, good afternoon guys. Thanks for taking the questions. First one for me, I guess, on the virtual training, I wanted to follow-up on that. I understand 15% of the 40% of patients or remaining were trained virtually. But as you look at that going forward, can you give us the advantages and disadvantages of that? For example, is it easier to get to a patient online or are there cheaper costs associated with that?

Sure. Yes. I think we're seeing a lot of advantages, frankly and not any disadvantages in terms of virtual training. I mean, I think there are always going to be some subset of patients who would prefer in a perfect world to be trained with a clinician or in a clinic. But the feedback from patients on virtual training has been incredibly positive. People are describing it as simple. I can tell you from the one that I witnessed just on Friday that the patients were incredibly comfortable. The family was incredibly comfortable that we were able to get more insight into kind of how they operate by just seeing them at home. And it was a very efficient, very effective training, so. and the feedback has been very positive. So I think this is a trend that will continue regardless of what happens with telemedicine. We are seeing a lot of positive feedback out of this. Our clinicians can be more efficient. Patients don't have to get into the clinic and the feedback has been very positive. It's just so simple. You don't have a needle. You don't have – you have two components, and it's a really straightforward technology to walk a user through. So, it is ideally suited to virtual training.

Okay. Great. That's very helpful. And then in terms of the patient leads and sales and marketing strategies in the interim, I've seen most of your patients at this point are coming from face-to-face visits with ENDOs and strategic discussions with ENDOs and so on. But, are you going to change any of that strategy over the summer or kind of through year-end to maybe get patients through different channels like an online channel? Thanks.

Yes. Thanks, Margaret. I – first, I'll say that it's pretty remarkable to me that actually virtual sales calls are still happening with endocrinology offices and in many cases, ENDOs are really looking for information from us in terms of how we can support telehealth activities. I think earlier in February, we had a webinar focused on telemedicine with Omnipod and like 800 physicians attended that. So there is a tremendous demand out there for this information and insight to how do you do this well, and we've got great resources to be able to support those discussions with ENDOs. So that isn't going away. But to your point, obviously, that's where the headwinds are coming from. We have reallocated resources from a sales and marketing perspective, from things like conferences and travel and entertainment to a more digital outreach, direct-to-patients, to be able to engage them on: one, the benefits of Omnipod, and two, the fact that you can try it, risk-free and you can train all at home without needing to go into the clinic. And so it's early days, but we believe that message will resonate with patients.

And our next question coming from the line of Ryan Blicker of Cowen. Your line is open.

Hi, thanks for taking my questions. Can you talk a little bit more about what to assume within your revised Horizon timelines? When are you assuming the trial restarts? And then, do you still expect to conduct a limited market release prior to a full launch in the U.S.? Or do you believe you could broadly launch Horizon in the U.S. upon FDA approval?

Thanks, Ryan. So we are anticipating just a little bit of time, a few weeks of FDA review for the submission to restart the trial. And then, we've got to retrain sites, et cetera on just the virtual protocols for follow-up and monitoring of patients. And so, we think that's going to take a little bit of time, probably sometime into June, I would guess, before we restart the trial. And in terms of a limited market release, we will do a limited market release. It's best practice with any new technology to do a limited market release. We will do what we can to bring this technology as rapidly and through access and other methods to patients as quickly as possible because, we know there is a significant demand out there. But it is going to take us a little bit of time to get through the limited market release.

Got it. Very helpful. And then I apologize if I missed this. But what proportion of the new patient starts in the U.S. were through the pharmacy in the quarter? And what proportion of your overall U.S. installed base is now going through the pharmacy? And do you believe the transition to the pharmacy could be accelerated at all in the U.S. due to COVID-19? Thank you.

I'll take maybe the pharmacy issues and then Wayde can talk about what percentage of our new starts. I am not sure if we gave that detail. But in terms of the overall base, we now have almost 30% of our U.S. customers going through the pharmacy. And actually, when I think about how do we really scale this business, we've always been thinking about how do we help our customers get the best customer experience through self-service, through easier training, et cetera. And we've talked a lot about that. Our virtual training tools and our web-based training tools. But the pharmacy is a big piece of this, too. This work was underway for us, because diabetes is an epidemic and endocrinology is in short supply. And so we need to innovate the business model to be able to ensure that we can meet this rapidly growing demand in this unmet need. And so, of course, all of the telemedicine stuff that we talked about is a piece of that. But the other piece of that, if patients need care and potentially aren't in their physicians' offices frequently, the pharmacy could play a really exciting and really important role, because unlike your endocrinology office, there is a pharmacy on every corner and if we could leverage that channel to educate, inform, and support patients, that could be a much better customer experience. And of course, it's a channel that we, right now, from an insulin delivery standpoint or insulin pump standpoint, own. And so, very – we see it as a worthy investment in a way to provide the best possible experience and the most cost-effective scaling commercially of our business.

Hey, Ryan, it's Wayde. And just to add on there to round off your question. As Shacey said, our installed base in the pharmacy is at 30%. We didn't give exact pharmacy new patient starts. But DASH, we did and DASH is 60% of our new patient starts, almost all of those were through the pharmacy as well as type 2 has grown to be a third of our new patient starts and the majority of those are through the pharmacy as well. So, DASH and type 2 are a big part of what's driving the volume growth now to the 30% going through the pharmacy.

It's great to see, too, just the progress we've made on establishing access through the pharmacy. It's a big piece of why we've been able to expand so much and in fact, just in the last month, we've even secured Cigna coverage in the pharmacy channel, which is – that's part of why we saw that tick-up in commercial coverage and part of what continues to drive adoption through the pharmacy channel.

And our next question coming from the line of Jeff Johnson of Baird. Your line is open.

Thank you. Good afternoon. Hey, Shacey, I wanted to follow-up maybe on the questions around new patient starts and the 50% to 75% decline in the second quarter and then the gating thereafter. Trying to triangulate that with your comments about the ease of use of prescribing through telehealth and that. Do you think that 50% to 75% and then the third and fourth quarter numbers that you are giving, how do you feel like that compares maybe to the broader insulin pump market at this point? Are you guys doing better than? About the same as or worse than? Just given your comments on the ease of prescribing, I would think better than. But just would love any kind of competitive intelligence you are hearing out in the field from your docs on what those numbers represent relative to market.

Yes. Sure, Jeff. I think I don't want to comment on kind of competitive pump businesses. But what we do know, just from IQVIA data and market – primary market research is that in the United States, ENDO visits are down 60% since the beginning of March. So I think that gives you a sense that this 50% to 75% number is probably right in line with what others are seeing. And while we are, I would say, bullish on what kind of fit Omnipod is for telemedicine and we believe in that world we can lean in and do better than others. At the same time, we are relying on ENDOs to build telemedicine capabilities. So while we have kind of sped ahead and I think built some really exciting capabilities and support mechanisms for our ENDO offices, they are still across the globe. Different clinics are in very different situations in terms of their capabilities to be able to support telemedicine. So, we're a little bit ahead of the curve, and we'll see how this plays out and how quickly ENDO offices across the globe, frankly, but particularly in the United States can start to implement and support telehealth for their patients.

Our next question coming from the line of Jayson Bedford of Raymond James. Your line is open.

This is Matt Wizman on for Jayson. I appreciate all the color and visibility you guys have been giving. It's much appreciated. My question is on the type 2s. So now that there is been a bit more time with kind of a more substantial amount of type 2s in the base, have you noticed any change in the utilization or attrition dynamics with these types of users? And then also, could you speak to the broader type 2 reimbursement environment on the commercial front, especially given how – on the CGM front, some payers have been a bit more friendly? Thanks.

Great. Hey, Matt. I can – this is Wayde. I can answer the first part of the question and then hand it to Shacey for the second part. So, we have not seen a material change as type 2s have become a bigger part of our mix of products. Our utilization has stayed pretty steady through Q1 and also through the first month of April. And in fact, one of the things that was on our radar when we set our annual guidance at the beginning of the year and one of the things that we thought could have pushed us to the lower end of our original guide was attrition, because, we had done a lot of new things, a new channel, a new product, a new business model with the pay-as-you-go model. And so, we left ourselves some room in the original guide that we could see attrition tick up. And what we experienced in Q1 is actually our attrition ticked down a little bit. We performed very well in the first quarter with slightly better attrition than we had seen historically. So we're very happy about that. As I mentioned in my prepared remarks, though, as we head into this more recessionary-driven environment, we are adding a tick-up in attrition and a tick-down in utilization, just because we don't know what the recessionary environment holds for us and we are going to start there and put that stake in the ground and then we'll monitor it as we go from here.

It’s great, Wayde. And in terms of your second part of your question around reimbursement for the type 2 patients, one of the things we really like about the pharmacy channel is that there are – there isn't really a distinguishment between reimbursement for type 2 or type 1, if they require insulin. And so there are fewer restrictions. It's a simpler channel to access your technology through and it really doesn't distinguish between type 1 or type 2, provided the patient is insulin-dependent and needs an insulin delivery mechanism. And then, of course, we always educate payers on the fact that Omnipod reduces total daily dose of insulin and provides very clear benefits for both patient segments. And so, we've been fortunate to establish broad reimbursement through the pharmacy channel that doesn't distinguish between the two segments.

Our next question is coming from the line of Travis Steed of Bank of America. Your line is open.

Congratulations on a strong Q1 and everything you're doing for patients. Wayde, I just wanted to make sure I fully understood the year-over-year reductions you gave in new patient starts. Were those reductions versus last year or versus your original guide? And then, the change in the full year guide, it sounds like the majority of the change is coming from those new patient starts being lowered. I am just curious if there is any more color you could provide on what you are assuming on attrition and expansion of the patient support program.

Yes. Hi, Travis. Thank you. So to the first part of the question on new patient starts, it is versus our guide and our previous expectations for 2020. And of course, those are estimates, right? We have really good visibility into Q2, as I mentioned, walking through the two-stage sales cycle there. And really good visibility for Q2, obviously, in this environment, there is going to be more uncertainty for the second half and what that holds. But we thought it was important to just lay out these key metrics and put a stake in the ground, so that we can then help you understand the key drivers for our business here and then we can message to it as we go throughout the year. As far as the full year guide goes, the key is new patient starts. We think that, that will be the most significant metric to watch for. If we just pull up and think about our business model, we have this advantage of a durable recurring revenue model. And so even when we see new patients get impacted like we did in March and the inability for our customers to get to the ENDO office, I mean, it's a really unique dynamic and with that, the momentum of our business carries. And so we've got really strong growth rates in Q1. We're putting a strong guide in for Q2 and what we have to manage then is this compounding of new patient starts. So if we go through two or three quarters of restrained new patient starts, that's going to weigh on our growth rate, especially given the tough comps we had, because we performed so well at the end of last year. So when we annualize into that tough comp, we are going to…

And Travis, I'll just comment on your question regarding the patient assistance program. We don't look at that as hitting revenue, because these are patients who would not be able to afford the product anyways. And so I'm really, really proud of this program. I am proud of the fact that Insulet was out front and that we can help support patients who otherwise might not be able to access the product. But we didn't view that as a revenue headwind, because those patients would have probably had traded off the product because they can't afford it.

Okay. Operator, we are over time. But why don't we try to get through at least one, maybe two more, please?

Our next question, coming from the line of Matt O'Brien of Piper Sandler. Your line is open.

Hi guys. This is Drew on for Matt. Thank you for taking the question here. I wanted to start off a little bit on your sales channels a little bit. I believe you said about 30% of your volume was due to the pharmacy. Appreciate that color. And definitely should help you in this type of environment. But I guess, diving in on the other 70% of the business, are there any barriers presented by this epidemic outside of patient willingness, that kind of thing that could limit the patient access through the DME, be it’s availability, people not being able to process paper work, anything like that?

I think one of the challenges in the DME channel is the limitation of access for people living with type 2 diabetes. So that's one area where we likely will not see access or availability. And then, I am not sure about the others. We haven't really seen trends that would indicate that there is a particular challenge with the DME environment that isn't being experienced in the pharmacy channel with the exception of type 2 access.

Next question, please?

Our next question coming from the line of Kyle Rose of Canaccord. Your line is open.

Great. Thank you very much for taking the questions and congrats on a strong quarter. Two questions for me. One is, the delays on new patient starts and kind of the assumptions you are seeing in guidance, I appreciate the commentary around the decline in ENDO visits. But maybe just help us understand maybe the – what the falloff is like from leads to starts. Are you seeing bottlenecks more on the training side? Is it more from a patient resources and economic side, just not wanting to commit to a pump at this time? And then, just second question, I will ask it now, is just, what have you learned through this telemedicine and virtual training process that you think can – that you can apply towards Horizon launching and patient onboarding from that perspective as far as bringing down barriers to adoption and just improving the overall ease of use in the pump ecosystem from a longer-term perspective? Thank you.

Great. I think Wayde can take the first part of your question and I'll address the second.

Sure. Sounds good. So we typically see a few weeks to a month lag between our sales leads, and then leading into our new patient starts. And so, as I mentioned, we saw the decline in sales leads really hit in March. But our teams have done – this is in direct reference to Shacey's prepared remark, where she talked about the ability for the team to transition to working remotely and working through telehealth and we've done a great job through the end of March and into April transitioning what was in the pipeline into new patient starts. And so, when we guide to a reduction in new patient starts of 50% to 75% for Q2, it is a result of looking at that sales lead pipeline, what happened to it in March, what we've seen happen to it in April and what we are calculating will be the impact in May and June. So that's the way the math works on that one. So from a training perspective, that you mentioned, Kyle is, our teams are doing a great job. As Shacey said, we are into the thousands in the first few weeks and ramping every day. And that's both U.S. and OUS. The IT teams have worked with the marketing teams to rapidly learn what are the bottlenecks – worked with the HCPs to find out what are the bottlenecks and these teams every day are clearing hurdles, and we are getting more efficient at being able to train people virtually.

And I think on your question tied to what have we learned about Horizon, I mean we continue to learn every day. But I'll tell you that the most exciting thing from my perspective about Horizon is that, it really has been designed from the outset to be the simplest technology on the market and so that will lend itself very, very well to a telehealth environment. And the other great thing about Horizon, besides its simplicity, is that there is real-time access to cloud data. And so that will be – that should enable some really easy and effective interactions between patients and physicians, whether they are happening in the clinic or in particular, if they are happening via telemedicine.

Next question, please?

Our next question is coming from the line of Danielle Antalffy of SVB Leerink. Your line is open.

Hey, thanks. Thanks so much for squeezing me in. Congrats on a really strong quarter. It's good to see. I had a quick question on attrition and sort of what you are seeing or what, I guess, you saw in the last few weeks of the quarter. I know you have this patient assistance program. How you are seeing that be utilized? And yes, I guess, maybe let's start there.

Sure. So I can start, if you like, Shacey. And I just mentioned to a previous question there that through Q1, actually attrition was a little better than we've had historically. And so, in the face of the pay-as-you-go model where we thought we could see some higher attrition. We actually saw lower attrition. As we get more acute into the month of March, it becomes harder to know if someone's actually attrited. It takes a bit of time to figure out if they've just skipped an order or if they've attrited. But we actually saw the opposite. I called out in the prepared remarks that we are estimating a $4 million of end-customer stocking. And to break that down, we have really good insight into our direct business, which makes up about – still makes up almost half of our business. So, we know exactly when a customer asks for an order earlier than it would typically be shipped. And so, we estimated about $4 million worth of customers pulled the orders from Q2 into Q1. And just to clarify for guidance for Q2, we are not assuming any impact in Q2. We are assuming Q2 has the same pull-ahead from Q3. And we expect that we'll see the other end of that headwind in the second half when it normalizes out. So, we kind of saw the opposite, Danielle, where we saw some strength in March, because of customers ordering. We are assuming we are going to see that again here in the second quarter. As far as attrition goes, I think it's probably a little too early for recessionary impacts to start pushing on metrics like attrition in the first month here of April. So that one is still a TBD and we'll monitor that one very closely. As far as the financial systems program, we are not quantifying it right now, because we don't know exactly how many people are going to take advantage of that program and how utilized it will be. As Shacey mentioned, it's just really important for us and right in line with our mission to make sure that if there was someone who in the U.S. has lost their job and lost their insurance and whether they are in the process of getting coverage through Medicaid or another means to insurance, we wanted to be there to backstop them. And so, we can't quantify that one at this time. I prioritized it in our list of gross margin headwinds at the end, because I think it'll be one of the smaller headwinds. But we'll – that one is yet to be determined.

Okay. Great. I’ll just leave it there. Thanks.

Thanks, Danielle.

Thanks, Danielle.

And then, we'll just take one last question please.

[Operator Instructions]

We can leave it there then.

Yes. If there is no one on that, thanks.

Yes. Thanks, operator. So, thank you. Despite volatile market conditions, we delivered strong operational and financial performance in the first quarter. The team adapted quickly to challenges and executed on behalf of our customers, shareholders and other stakeholders. So we'll continue to monitor the situation and keep you all updated to the best that we can during this unprecedented times. And I just want to close by thanking our global Insulet team across three continents for their relentless hard work and dedication. It's because of you, that our team remains safe and healthy, that our customers know they can rely on us, even in the face of this pandemic to get the product and support that they need. So thank you all for joining us today. And our heartfelt thoughts and wishes go out to all of you and your families to stay safe and stay healthy. Thanks.

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