COMPANY OVERVIEW. October 12, 2017

Transcription

1 COMPANY OVERVIEW October 12, 2017

2 SAFE HARBOR & NON-GAAP FINANCIAL MEASURES Forward Looking Statements Certain statements in this presentation constitute forward-looking statements, including, without limitation, statements about: the perceived advantages of our products relative to competitive products and technologies; our anticipated growth and other measures of future operating results and financial performance; the development and commercialization of new products; our ability to secure and maintain necessary regulatory approvals for our existing products and new products under development. Our estimates and forward-looking statements are based on our management s current assumptions and expectations of future events and trends, which affect or may affect our business, strategy, operations or financial performance. These statements are not guarantees of future performance and involve a number of risks and uncertainties, many of which are beyond our control. Our actual results may differ materially from those expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements can be found under the captions Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in our most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, as well as in the other reports we file with the Securities and Exchange Commission. In addition, new risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or review any estimate and forward-looking statement because of new information, future events or other factors. Non-GAAP Financial Measures This presentation references certain non-gaap financial measures, including, without limitation, non-gaap sales and non-gaap operating margin. These non-gaap measures have not been calculated in accordance with GAAP and should not be considered an alternative for measures prepared in accordance with GAAP. The presentation of non-gaap information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with GAAP. We believe these non-gaap financial measures enhance investors overall understanding of our current financial performance and our prospects for the future. A reconciliation of the non-gaap financial measures corresponding to the GAAP financial measures is provided on slide 25. 2

3 TANDEM DIABETES CARE Technology for Simply Better Life Only touchscreen interface, remote updatable, intuitive platform with contemporary style and compact size Nearly 56,000 pumps shipped in the past 4 years, representing approximately 10% market share 1 5 new insulin pumps launched since the introduction of t:slim in 2012 #1 rated customer support by pump users since % of HCPs surveyed believe providing great pump customer support is the most important company attribute 3 Robust, near-term product pipeline Key sales projections and cash metrics 4 Q non-gaap sales (est.): $23M - $24M, Q non-gaap sales (projected): $33M - $38M Cash balance at September 30, 2017: $22.5M Goal to reach profitability in 2019 Increasing sales driven by new products, pump renewals and international commercialization Improving gross profits through lower per unit cost of manufacturing and reduced warranty expense Leveraging existing operating infrastructure 1) Based on 550,000 pumpers in the U.S. and cumulative pump shipments through 9/30/17; 2) dq&a USA Connections Surveys ; 3) Tandem HCP Research Report, Summer 2015; 4) Non-GAAP sales are determined in accordance with GAAP, adjusted for the impact of the Technology Upgrade Program. See the information under the heading GAAP to Non-GAAP Financial Measures" on slide 2. Refer to GAAP to non-gaap reconciliation on slide 25. Management s current assumptions and estimates are based on historical patterns, excluding FY See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially. 3

4 DIABETES OVERVIEW Cause Onset Type 1 Type 2 Autoimmune Body does not create insulin hormone Sudden Typically before age 40 Lifestyle Related Insulin resistance where cells do not use insulin properly Progressive Typically appears late in life Prevention None Diet and exercise Therapy Insulin Oral medication, insulin U.S. Prevalence million Apx. 20 million, of which 1.7 million use daily rapid acting insulin Number Using Pump Therapy 1 425, ,000 1) Close Concerns, Insulin Pump Market Overview, January

5 THE HUMAN TOLL OF DIABETES Mental Fear Frustration Embarrassment Anxiety Stress Physical Damage to tissue and organs Coma or even death Seizures Exhaustion Vomiting 5

6 INSULIN REPLACEMENT THERAPY Multiple Daily Injection MDI Continuous Subcutaneous Insulin Infusion CSII 6

7 PUMP THERAPY IS OPTIMAL Basel and Bolus Insulin Release Like The Pancreas Blood Glucose Levels 7

8 T:SLIM X2 THE PUMP THAT GETS UPDATED, NOT OUTDATED Our Flagship Product Only remote updatable insulin pump; intuitive touchscreen interface with contemporary style and compact size Ease of use provides clinical benefits 1,2 Only available pump with Dexcom G5 CGM integration The first step in our mobile health innovation The only Bluetooth enabled pump Key to patient data management Proven ability to attract people using MDI 1) Schaeffer N, McCoy S, Dokken B, Stal M, Shearin E, Chen P, Navarrete J. Touchscreen sensor-augmented insulin pump (SAP) demonstrates less exposure to hypoglycemia and increased time in range compared to non-touchscreen SAPs [Session #EP08]. Paris, France: 10th Annual Advanced Technologies and Treatments for Diabetes Conference; ) Manning M, Noar A, Marin G, Dokken B. Self-reported hypoglycemia reduction in Tandem pump use compared to previous methods of diabetes therapy 8 [session #EP08]. Paris, France: 10th Annual Advanced Technologies and Treatments for Diabetes Conference;

9 DEXCOM TECHNOLOGY BENEFITS OUR PATIENTS ECOSYSTEM Dexcom G5 Adult MARD 9% Medtronic Guardian 10.6% (Based on 2 calibrations/day) Finger Sticks/Day Calibration 2 calibrations/day required 4 calibrations/day recommended 2 calibrations/day required Glucose Data Sharing SHARE feature allows up to five followers to monitor a user s glucose None Source: Company websites and product user guides. 9

10 TANDEM DEVICE UPDATER Simplifying Life Through Technology Only updatable pump system available Significant opportunity to drive product adoption by offering new software updates G5 integration offered to 12,000+ t:slim X2 customers within days following approval One-third of t:slim X2 customers updated their software within 30 days following approval 85% of customers who updated indicated they were satisfied or extremely satisfied with the update process 10 10

11 THE GOAL OF AUTOMATED INSULIN DELIVERY NORMAL GLUCOSE CONTROL 11

12 PLGS: PREVENTING HYPOGLYCEMIA Further Improving Patient Lives t:slim X2 with Predictive Low-Glucose Suspend Reduces basal insulin to help minimize the frequency and duration of hypoglycemic events Algorithm utilizes Dexcom s G5 CGM data Designed for software to be offered to current t:slim X2 customers Milestones completed: Feasibility study successfully completed in August 2016 Pivotal Study IDE approved by the FDA in May 2017 Enrollment for pivotal study commenced in August 2017 Next steps: Completion of pivotal study anticipated by YE 2017 Launch goal: summer 2018, subject to FDA approval Note: The graphics presented on this page are for illustrative purposes only, and do not reflect individual results 12 12

13 HYBRID CLOSED LOOP (HCL): BETTER LIFE, LESS BURDEN Leap-frogging the Competition t:slim X2 with Hybrid Closed Loop Increase or decrease basal insulin to minimize hyper/hypoglycemia and improve time-in-range Deliver automated correction boluses Brings together leading technology - t:slim X2 Pump, Dexcom s G6 CGM sensor and TypeZero algorithms Data collected in NIH-funded International Diabetes Closed Loop (IDCL) Trial to be used in Tandem PMA submission Launch goal: 1H 2019, subject to FDA approval Note: The graphics presented on this page are for illustrative purposes only, and do not reflect individual results 13 13

14 T:SPORT EVEN GREATER DISCRETION & FLEXIBILITY Refining product requirements through market research 50% of t:slim s size Uses a short infusion set Controlled via a separate device or mobile app Gives durable pumpers a more discreet option Preserves current reimbursement model Active development Resource prioritization to automated insulin delivery products Controller Pump 14 14

15 BLUETOOTH ENABLES OUR MOBILE HEALTH STRATEGY 1. t:connect (pumping, BG and CGM data) #1 rated consumer software by pump users since % of Tandem customers have a t:connect account 2 Upload 3 times per month, on average 2. t:connect HCP Streamlines t:connect use for multiple patients and office efficiency 3. Tandem mobile application (in development) Wirelessly upload data to t:connect Integration of data from 3 rd party sources Receive notification of pump alerts and alarms Designed to support future pump-control capabilities 1. dq&a USA Patient Connections Surveys, Data on file. Tandem Diabetes Care, Inc

16 OUR PATHWAY TO PROFITABILITY Differentiated Current Portfolio Innovative Pipeline New, Incremental Revenue Opportunities Improving Gross Profits and Cash Flow Tandem Device Updater only updatable pump Clinical benefits Only available pump with Dexcom G5 integration Superior form factor enabled by differentiated technology Only pump with a touchscreen t:slim X2 with G5 & PLGS t:slim X2 with G6 & HCL Mobile application t:sport Capture infusion set sales through our t:lock Connector Growing pump renewals opportunity International markets Reduce component costs Reduce warranty costs Manage scale of operating expenses 16 16

17 PUMPS ARE THE KEY DRIVER Reimbursement Frequency Pump Cartridge Infusion Set Once every 4 years Once every 3 days (120/year) Once every 3 days (120/year) Payor Reimbursement $4,000 - $5,000 $ $3.00 $ $10.00 Network of distributors used for 70% - 75% of sales Distributors pricing adjusted for a logistics margin Pumps represent greatest percent of sales due to significant ASP differences Not a traditional razor/razorblade model due to reoccurring pump reimbursement cycle Infusion sets make up 60% - 70% of a direct customer s annual supplies revenue (apx. $1,200 - $1,600) Infusion set revenue was typically lost prior to 2017 due to distributors purchasing dynamics 17 17

18 INSULIN PUMP BUSINESS MODEL Highly seasonal business Sales are typically back-end loaded (Q1 lowest percent of sales, Q4 highest percent of sales) Highly influenced by timing of when people typically meet their insurance deductibles Customer Order Payor Contract? DTC sales model (commercial payors and patient coinsurance) Billed using existing HCPC codes with longstanding defined allowable rates Utilize direct contracts with commercial payors or distributor arrangements Distributors earn a logistical (not selling) margin Volume based discounting for infusion set sales Process w/ Payor Process w/ Distributor Single Case Agreement Allowed? Negotiate Single Case Agreement w/ Payor 18

19 MEANINGFUL PROGRESS TOWARD PROFITABILITY Actual ($ in 000 s) Total Product Sales $29.0 $ 49.7 $ 72.9 $88.5 Pump Shipments 6,472 10,822 15,483 16,938 Gross Profit $6.2 $15.3 $26.6 $28.2 Operating expense $55.6 $90.9 $95.6 $101.6 Operating Loss % -170% -152% -95% -83% 1 Compound annual sales growth of more than 30% from 2013 to non-gaap sales estimate: $95M - $100M 1 Improvement of gross profits driven by higher pump gross margins and steady increases of pump supplies volume Operating expenses have grown at a much slower rate than sales and gross profits Leveraging multiple products, the easy to train/easy to use aspects of our products and common hardware platform of our pipeline 1) GAAP; 2016 and 2017 Non-GAAP. Non-GAAP sales are determined in accordance with GAAP, adjusted for the impact of the Technology Upgrade Program. See the information under the heading GAAP to Non-GAAP Financial Measures" on slide 2. Refer to GAAP to non-gaap reconciliation on slide 25. Management s current assumptions and estimates are based on historical patterns, excluding FY See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially 19

20 THE IMPACT OF SEASONALITY Percent of Yearly Shipments 45% 40% 35% 30% 25% 20% 15% 10% 5% 2016 seasonality masked by: 1H strength from t:slim G4 launch 2H competitive headwinds 0% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 E 4Q17 E Sales $8M $10M $14M $18M $12M $16M $16M $29M $20M $23M $21M $25M $18M $21M $23M- $24M Gross Margin 11% 34% 33% 37% 23% 31% 35% 46% 35% 36% 26% 31% 35% 38% 1 1 $33M - $38M 1) Q is preliminary and not yet complete. Q is based on management s current assumptions and estimates based on historical patterns where 35% - 38% of our annual sales have typically been in the fourth quarter, excluding FY See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially. Note: GAAP; 2016 and 2017 Non-GAAP. Non-GAAP sales and gross margin are determined in accordance with GAAP, adjusted for the impact of the Technology Upgrade Program. See the information under the heading GAAP to Non-GAAP Financial Measures" on slide 2. Refer to GAAP to non-gaap reconciliation on slide

21 DRIVING TOWARD PROFITABILITY AT 15% MARKET SHARE 1 Launched t:flex (May) & t:slim G4 (Sept) Launched t:slim X2 (Oct) 9% Launched t:slim X2 with G5 (Aug) 11% Competitive opportunity Renewals 15% 6% t:slim X2 PLGS t:slim X2 HCL 3% International 1% E Goal 2 1) Based on 550,000 pumpers in the U.S. and cumulative pump shipments through 9/30/17 2) Based on management s current assumptions and estimates. See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially. 21

22 MEANINGFUL GROSS MARGIN PROGRESS E 55% Increased Production Volumes A& Manufacturing B Process Improvements 32% Increased Production Volumes Reduction in Component Costs Improved Warranty Costs 21% Goal Pumps: largest percent of sales, greatest impact on gross margin Expected 20% reduction in pump component cost 2016 to 2017 Reduction in warranty expense from 12% of sales in 2016 to 7% in 1H Positive supplies gross margin Breakeven was reached Q3 2016; increasingly positive margin each subsequent quarter 1) 2016 is Non-GAAP. Non-GAAP gross margin is determined in accordance with GAAP, adjusted for the impact of the Technology Upgrade Program. See the information under the heading "Use of Non-GAAP Financial Measures" on slide 2. Refer to GAAP to non-gaap reconciliation on slide 25. 2) Based on management s current assumptions and estimates. See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially. 22

23 CATALYSTS TO 2019 PROFITABILITY GOAL Q first full quarter offering t:slim X2 with G5 Only available Dexcom G5 sensor integrated pump Validation of the Tandem Device Updater Animas exiting the market 90,000 customers worldwide Multiple clinical trial milestones for two automated insulin delivery products Renewal opportunity 1 10,500 pumps in ,500 pumps in 2019 Infusion set strategy to capture 100% of sales on track for achievement by year end 2017 Gross margin improvements driven by lower pump costs and warranty costs; greater impact with increased pump volumes 1) Assumes 4 year reimbursement cycle for total pump shipments in 2014 and

24 TANDEM DIABETES CARE Technology for Simply Better Life Only touchscreen interface, remote updatable, intuitive platform with contemporary style and compact size Nearly 56,000 pumps shipped in the past 4 years, representing approximately 10% market share 1 5 new insulin pumps launched since the introduction of t:slim in 2012 #1 rated customer support by pump users since % of HCPs surveyed believe providing great pump customer support is the most important company attribute 3 Robust, near-term product pipeline Key sales and cash metrics 4 Q non-gaap sales (est.): $23M - $24M, Q non-gaap sales (projected): $33M - $38M Cash balance at September 30, 2017: $22.5M Goal to reach profitability in 2019 Increasing sales driven by new products, pump renewals and international commercialization Improving gross profits through lower per unit cost of manufacturing and reduced warranty expense Leveraging existing operating infrastructure 1) Based on 550,000 pumpers in the U.S. and cumulative pump shipments through 9/30/17; 2) dq&a USA Connections Surveys ; 3) Tandem HCP Research Report, Summer 2015; 4) Non-GAAP sales are determined in accordance with GAAP, adjusted for the impact of the Technology Upgrade Program. See the information under the heading GAAP to Non-GAAP Financial Measures" on slide 2. Refer to GAAP to non-gaap reconciliation on slide 25. Management s current assumptions and estimates are based on historical patterns, excluding FY See slide 2 for information regarding forward-looking statements and additional risks and uncertainties that could cause actual outcomes or results to differ materially. 24

25 GAAP TO NON-GAAP RECONCILIATION 1 Sales (in millions) Q1 Q2 Q3 Q4 Q1 Q2 GAAP $20.1 $23.0 $12.3 $28.9 $19.0 $21.3 Non-GAAP - - $20.7 $24.8 $17.5 $21.3 Gross Profit GAAP $6.9 $8.2 ($1.6) $10.1 $6.8 $8.0 Non-GAAP - - $5.4 $7.7 $6.0 $8.1 Gross Margin GAAP 35% 36% (13%) 35% 36% 38% Non-GAAP % 31% 35% 38% 1) A Technology Upgrade Program was launched in Q Sales and cost of sales for eligible t:slim and t:slim G4 shipments were subject to deferral beginning 7/1/16. The amount deferred varied based on a number of factors, including the model of pump involved and the timing of the initial sales relative to the availability of certain future products. In general, the deferrals had the effect of initially decreasing our GAAP sales even when the number of our pump shipments increased. We discontinued new sales of the t:slim and sales of the t:slim G4 significantly decreased following the launch of the t:slim X2 in Q4 2016, resulting in a significant decrease in the amount of sales and cost of sales related to new product shipments that were deferred under the program. The deferred amount of sales and cost of sales are recognized at the earlier of when the obligations under the Technology Upgrade Program are satisfied or when the program expires. If a customer elected to participate in the Technology Upgrade Program, we recognized upgrade fees received, if any, and the associated costs at the time of fulfilling the obligation. We expect to recognize the majority of the remaining deferred sales and cost of sales in the quarter ended September 30, 2017 when the program expires. 25

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