Tandem Diabetes Care Q3 2025 Conference Call Summary Company Overview - **Company**: Tandem Diabetes Care (NasdaqGM:TNDM) - **Date**: November 11, 2025 - **Context**: Discussion of Q3 2025 results and future outlook Key Points Financial Performance - Q3 2025 results showed solid performance with outperformance relative to market expectations, primarily driven by pricing strategies [2][4] - U.S. pump sales experienced a slight decline year-over-year, indicating challenges in the market [2][4] - Pricing improved in Q3, with mid-single-digit year-over-year growth attributed to the pharmacy channel [5][13] Sales and Market Dynamics - The company is undergoing a transformation in the U.S. market, which has led to some turbulence but also signs of improved sales rep productivity [4][11] - September 2025 was noted as the strongest month of the quarter, with expectations for continued sales momentum into Q4 [6][12] - Pharmacy sales accounted for 5% of U.S. revenue in Q3, primarily driven by the introduction of t:slim supplies [7][8] Product Pipeline and Innovations - The company is prioritizing the launch of the tubeless Mobi product, expected to be a significant growth driver in 2026 [18][19] - The integration of Mobi with FreeStyle Libre 3 is anticipated, enhancing product offerings [23] - A fully closed-loop pivotal trial is set to begin in 2026, leveraging existing algorithms and clinical data [24][25] Competitive Landscape - The market is characterized by significant growth potential, with new entrants and competition emerging [34][35] - The company acknowledges the presence of competitors but believes in the overall market opportunity for all players [34] Type 2 Diabetes Market Opportunity - The company is expanding its focus on insulin-intensive Type 2 diabetes patients, which represents a significant market opportunity [42][46] - Current penetration of pumps in this segment is around 5%, with expectations to increase to 25-30% over the next few years [47] International Expansion - Tandem is moving towards a direct sales model in certain international markets, anticipating a minimum 30% ASP premium [51][52] - The transition is expected to be accretive to the bottom line, despite initial OPEX increases [52] Operational Efficiency - The company is implementing measures to improve operational efficiency, including automation and process improvements, which are expected to support a larger install base without proportional increases in headcount [56] 2026 Outlook - Gross margins are projected to improve by at least 300 basis points in 2026, driven by increased pump volumes and pricing benefits [54] - The company is optimistic about achieving OPEX leverage through enhanced sales force productivity and restructuring efforts [56] Additional Insights - The company is cautious about the competitive landscape and is monitoring new entrants closely, indicating a need for time to assess their impact [35][37] - The management emphasized the importance of understanding market dynamics and adapting strategies accordingly, particularly in the context of new product launches and market penetration efforts [41][46]

Financial Data and Key Metrics Changes - The company reported organic sales growth of 7.5% excluding COVID test sales, with earnings per share rising to $1.30, reflecting high single-digit growth compared to last year [6][7][16] - Adjusted earnings per share of $1.30 was in line with consensus estimates, and foreign exchange had a favorable year-over-year impact of 1.4% on third quarter sales [16][17] - Adjusted gross margin was 55.8% of sales, reflecting a decrease due to tariffs, while adjusted operating margin increased by 40 basis points to 23% of sales [16][17] Business Line Data and Key Metrics Changes - Nutrition sales increased by 4%, driven by a 10% growth in international markets, particularly in adult nutrition products like Ensure and Glucerna [8][9] - Diagnostics saw modest sales growth excluding COVID testing, with core lab diagnostics growing 7% outside of China, while point-of-care diagnostics grew by 8% [9][10] - Established Pharmaceuticals (EPD) sales increased by 7%, led by double-digit growth in key markets, with strong contributions from therapeutic areas like gastroenterology and cardiometabolic [10][11] - Medical devices experienced a 12.5% sales growth, driven by double-digit growth in diabetes care and cardiac rhythm management [11][12] Market Data and Key Metrics Changes - The U.S. diagnostics market grew by 10%, while Europe saw growth of 6% to 7%, and Latin America grew in the mid-teens [46][47] - In China, the company faced headwinds from VBP pricing dynamics, but growth in other segments like EPD and nutrition remained strong, with overall growth in China around 5% to 7% when excluding diagnostics [65][66] Company Strategy and Development Direction - The company aims to sustain high single-digit organic sales growth and double-digit EPS growth, supported by new product launches and easing headwinds from diagnostics [20][25] - Investments in innovation and a robust pipeline are expected to drive future growth, with nearly 200 clinical trials planned for next year [24][25] - The company is focused on expanding its market share in key segments, including diabetes care and cardiac rhythm management, with new product launches like Volt and dual analyte sensors [22][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting consensus estimates for 2026, citing underlying momentum in the current portfolio and new product launches as key growth drivers [20][21] - The company anticipates a recovery in the diagnostics business as headwinds from China moderate and new products are rolled out [48] - Management highlighted the importance of addressing barriers to CGM penetration in the basal segment and emphasized ongoing efforts to increase awareness among primary care physicians [78][80] Other Important Information - Recent product launches contributed nearly half a billion dollars in sales this quarter, adding over 100 basis points to organic sales growth [8] - The company is advancing its biosimilars strategy, with several regulatory approvals expected in the near future [10] Q&A Session Summary Question: Thoughts on 2026 sales and EPS consensus - Management is comfortable with the consensus estimates for 2026, expecting continued growth driven by product momentum and easing headwinds [20] Question: U.S. diabetes growth dynamics - U.S. diabetes care grew 19%, with expectations for strong growth next year driven by new product launches [29][32] Question: Diagnostics business headwinds - Management acknowledged challenges in the diagnostics segment due to VBP in China but expects a recovery as these headwinds moderate [44][48] Question: Cardiac rhythm management growth - The cardiac rhythm management segment is experiencing significant growth, with expectations for continued market share gains [67][69] Question: Structural heart market outlook - Management is optimistic about the structural heart market, particularly with upcoming product launches and competitive advancements [75][76]