Insulet Corporation Wells Fargo 21st Annual Healthcare Conference

Thanks, Larry. Thanks, Larry. Pleasure.

Larry, first of all, it's great to be here in Boston, our hometown. Before I get into the timing and the data, let me just first share our perspective on the type 2 market, which we see as a tremendous growth opportunity for Omnipod, as well as the AID category. It's the largest TAM in the category with the lowest penetration. If you look at the 2.5 million people who are using basal bolus insulin, AID has around a 5% penetration, and CGM is well north of 50% plus in that area. In the basal-only population, we have the indication we haven't yet promoted that, and CGM is around 30% penetration. So collectively, that represents about a $28 billion TAM.

The second is the American Diabetes Association guidelines recommend AID for people with type 2 diabetes because that has a superior clinical and economic value proposition to MDI patients. We pioneered this indication on behalf of the industry. We have tens of thousands of very satisfied Podders with type 2 diabetes, and so we are very committed to nailing the first 90 days so more people can benefit. As you know, we enjoy a reoccurring revenue business model, so it's really about the lifetime value of the patient. Now, when it comes to timing and the data, Larry, we saw late in Q2 some of the trends start to elevate versus our expectations. We did a very strong forensic. We identified with the root cause. We've implemented actions on those. One of the areas that we've innovated on is really the transparency and the frequency of some of our KPIs.

Attrition, as one example, is a bit of a lagging indicator. It allows for people to have a pump holiday, if you will, and so we've addressed that, of looking at some of the more real-time data of our KPIs. I will tell you it's early on. It's been less than 30 days, and some of these programs are going to have time before they have a durable fact. So in the headline, I'd say this is an execution challenge, nothing to do with the structural advantage or attraction of the market, and we're acting with urgency.

Yeah. I would say it happened, we saw it trending ahead of our expectations at an elevated rate in Q2. We've identified several root causes of why we saw some elevated attrition levels, and we're taking actions. Those five actions I spoke about on the Q2 call, I'm happy to elaborate more.

Yeah. Again, we've been at type 1 for 25 years. We're newer to type 2. When we were setting our expectations, we studied the CGM analogs. Again, they've been at serving the type 2 community, both basal bolus as well as basal only, for more years than we have. We looked at what good would look like. We, again, as I said, we saw an elevation versus that. They're not near the levels that you mentioned, Larry. Importantly, we're getting after that. Again, we have a reoccurring revenue model, so it's worth it for us to nail the first 90 days. As I shared, the demand is really strong, and the data will show that once we get them past 90 days, retention rates really stabilize. So there's several things that we're doing. The first thing is sampling.

We deployed a sample program to kind of demystify the fear of trying AID therapy. The vast majority of the volume in AID is coming from the MDI category, and so for some, there's a fear factor of wearing insulin on your body. So we deployed samples. We uncovered, when we did a territory analysis, that in certain territories that we had a prescription that accompanied the sample, and when we adjudicated the health insurance, we had much higher retention rates. So we've tightened up that best practice and are now deploying that across the country. The second thing we did is related to our sales force incentives. Again, going from a type 1 company to a type 2, we needed to evolve.

We are still ensuring that we have good quality new customer starts, but we are also going to hold them accountable for durable starts that first month, that first 30 days. I was in the field last week. They are very enthusiastic to win with the company on patient success. We have augmented our customer service reps to make sure that we have the right kind of resourcing and staffing. We have also added clinical retention specialists that we are now deploying in the field. Then we have launched a new data platform, which enables really strong patient engagement and clinician engagement, and that is called Omnipod Discover. In our limited market review that we were doing in quarter two, we had around 12,000 people with diabetes in the program and around 1,600 clinicians. We saw not only just stronger customer satisfaction, but we saw elevated retention levels.

It is worth it for us to nail the first 90 days. We see a tremendous opportunity of growth ahead of us.