This paragraph introduces the Dexcom Second Quarter 2023 Earnings Release Conference Call and provides an overview of the agenda. It also includes a Safe Harbor statement to remind listeners that any forward-looking statements made during the call are subject to various risks and uncertainties.

Dexcom reported strong organic revenue growth of 26% in the second quarter of 2023, and is continuing to expand access to its product. In the U.S., its launch of G7 is gaining momentum due to its ease of use, discrete form factor, faster warm up time, and redesigned software platform.

Dexcom G7 has been designed to be appealing to a broad market and this is being validated by the 8,000 physicians that are now writing scripts for G7 in the U.S. that were previously not prescribing Dexcom. Additionally, all major PBMs now cover Dexcom G7 which is bringing their total number of G7 covered lives nearly in line with their G6 levels. This is helping to keep out of pocket costs low for customers, with the majority paying less than $20 a month in the pharmacy channel. Furthermore, CMS has expanded coverage for type 2 diabetes and non-insulin users who have experienced hypoglycemia.

Dexcom has seen increased demand for their products in both the Medicare and commercial markets in the US, and have seen a notable uptick in demand for their Medicare products. Internationally, they have seen an acceleration in share gains due to access initiatives and product portfolio strategy, and have recently expanded their G7 launch into 6 new markets, including Canada. They have plenty of inventory to support the broader rollout.

DexCom ONE has been used to enter new markets, broaden access in existing markets, and even serve as a catalyst for reimbursement in some regions. At the American Diabetes Association's 83rd Scientific Sessions, evidence was presented that DexCom CGM could be used beyond the intensive insulin population and even outside of insulin use. A real world study of more than 7,000 adults with type 2 diabetes who were not using insulin saw a 40% increase in time and range and a clinically meaningful improvement in A1c levels. At an Investor Day, Dexcom shared their vision for the future and increased their LRP, provided detail on access wins, and shared their plan to launch a product specifically for people not on insulin.

In the second quarter of 2023, the company reported worldwide revenue of $871 million, a 26% increase on an organic basis compared to the same period in 2022. U.S revenue totaled $617 million, a 21% increase, and international revenue grew 38%, totaling $255 million. This was due to strong customer uptake of the G7 product, as well as the recently finalized CMS coverage providing a tailwind to the Medicare business. The bridge program impact was negligible in Q2, and it is expected to remain small going forward.

In the second quarter, international organic revenue growth was 40%, and the company has been gaining market share in international markets for nine straight quarters. In the UK, the company has seen an acceleration due to increased reimbursement, clinical recommendations, and the launch of their newest product. Insulet also extended the launch of Omnipod 5, powered by G6, to the UK. Gross profit for the second quarter was $553.5 million, but due to the temporary step back to scale G7 production, the gross margin was lower than the second quarter of 2022. The cost profile of G7 will improve as they increase production volumes, and the Malaysia facility recently initiated commercial production.

In Q2 of 2023, operating expenses were $395.1 million, an increase from $347.6 million in Q2 of 2022, and operating income was $158.4 million or 18.2% of revenue. Adjusted EBITDA was $232.6 million or 26.7% of revenue, and net income was $139.4 million or $0.34 per share. The company also completed a convertible bond offering early in the quarter, providing significant financial flexibility to support organic growth. Additionally, the Malaysia facility began producing commercial product during the quarter.

In Q2, the company reported its highest revenue quarter ever and its largest year-over-year dollar growth in history. The G7 launch was marked by excellent execution across the board, and the product was introduced into 13 international markets. Through commercial efforts, new physicians were brought into the ecosystem, and manufacturing initiatives drove process improvements ahead of expectations. R&D enabled five flawless upgrades to the G7 app. The company is raising its full-year revenue guidance to a range of $3.50 billion to $3.55 billion, and its non-GAAP gross margin guidance to 63%. Additionally, its non-GAAP operating margin and adjusted EBITDA margin are expected to be approximately 17% and 26.5%, respectively.

Kevin Sayer explains that the company had a great international quarter due to their plan to make their product more accessible, the G7 and Dexcom ONE launches, and increased access across the board.

Jereme Sylvain and the Dexcom team have seen success in the 13 countries they have launched in, thanks to their portfolio strategy, G7 launch, and coverage and access wins in the US. Their success has allowed them to raise their guidance for the second half of the year, which is expected to reflect the strength of the first half.

Jereme discussed the U.S. market, noting that there is a more challenging comparison in the back half of the year. He also noted that basal is now starting to fold into the core business, and while no exact numbers were given, it is assumed that basal is part of the growth. He also noted that they have increased their confidence in the base case and are looking to outperform. Finally, he was asked if any of the sequential improvement from 1Q to 2Q was due to basal, and while he did not provide an exact number, he noted that it was only a partial quarter contribution. He also mentioned that there has been no movement yet on basal only in France.

Jereme Sylvain discussed the contribution of basal coverage in the U.S. during Q2 and the expectation of robust coverage in France with the launch of Dexcom ONE. He noted that in markets where they have coverage, they expect to take their fair share of the market. Jeffrey Johnson asked for clarification, to which Jereme replied that they expect to do well in France once they launch and have broad coverage to compete with their competitors. Larry Biegelsen asked about the guidance for the second half of the year, to which Jereme responded that they are expecting similar growth as the first half, despite the tailwinds provided by pricing, basal, and G7.

Jereme Sylvain states that they have no lack of confidence in the back half of the year and that they raised their guidance by $65 million. He also states that the base case is 20-22% growth and that they are being prudent in their estimates. He then goes on to explain that they expect the seasonality of the third quarter to be similar to the past two years. Kevin Sayer then states that they cannot quantify the contribution of Dexcom ONE in the quarter outside the US.

Dexcom has benefactors in countries where it has launched, and is about to launch in France and Latin America in Q3. Its G7 series has been successful in the U.K. and Germany, and its direct efforts in Australia have taken good share in the Australian and New Zealand markets. Approximately a third of new patient starts come from Dexcom ONE, while the majority of growth comes from the G series platform.

Jereme Sylvain explains that Dexcom uses mixed marketing and sales models to determine the effectiveness and return on investment of their promotional activities. The commercial leadership team assesses the spend and pivots as needed. The promotional materials will continue to change based on what works best and will focus on demonstrating why Dexcom is the right product for customers.

Jereme Sylvain explains that the company's previous guidance of 1.5% of total revenue for the year for basal is no longer applicable as it has been folded into their core business. He states that the performance in the quarter was higher than expected, and that is why the guidance was raised. Kevin Sayer adds that the promotional materials are continuing to evolve, and they are looking closely at plans for the next two years.

Jereme Sylvain from Dexcom reported that the company has been gaining share in major geographies and their G7 product has been accepted well, with the majority of users being new to Dexcom. He also reported that despite this, their pricing and margins remain strong.

Kevin Sayer explains that the reception for basal insulin has been warmer than expected. He attributes this to the increased awareness of CGM adoption and the fact that CGM is now more accepted than it was when they initially launched. He also believes that providing patients with the necessary information to manage their condition and get the right dose will create a large market for basal insulin.

In 2017, when Medicare approval was granted, the money had to be given back to CMS and distributors were unwilling to take the business. However, the environment has become much more positive and G7 is seeing great results from the patients who use it. 8,000 new prescribing clinicians have been added, mostly primary care physicians, and it is believed that G7 is taking share from competitors due to its ease of use.

Kevin Sayer discusses the challenges encountered and anticipated in the PCP channel, such as the difficulty of getting documents and getting them to the right distribution channel for Medicare patients. He also mentions that the sales force is finding a meaningful number of Type 1s in that channel.

Kevin Sayer and Mathew Blackman discussed how document gathering is the biggest channel in PCP offices, and how the company has worked with distributors to streamline the process. They also don't have a specific PCP sales force, but reps have geographic territories and call on both specialty diabetes clinics and primary care physicians. Kevin Sayer also noted that type 1s are found in PCP offices, and there are opportunities to drive awareness beyond the typical endocrinologist space. Marie Thibault asked a question about a competitor's DTC launch.

Jake Leach from Dexcom is excited about a new product specifically designed for non-insulin users. The product is designed to connect the dots between diet, exercise, and glucose levels. The price of the product will be announced closer to the launch date.

Dexcom is confident in their ability to launch a 15-day non-insulin device early next year, having completed a clinical study on the G7 platform that met the ICG M criteria. Dexcom's access strategy is ever-evolving, with different products in their portfolio being used in different markets and regions to gain access and coverage. They believe they have the products necessary to penetrate the basal and broader type 2 patient population outside of the US, particularly in the EU.

The Dexcom ONE platform is moving to the G7 platform in the near future, which will open up more opportunities internationally. In the U.S, Dexcom has been successful in driving average out-of-pocket costs for patients prescribed with G6 and G7 down to $20, which has been a driver of share gains in the U.S. This is due to the company's focus on the customer.

Dexcom has worked hard to keep co-pays low for its product, due to its strong product, good retention rates, and the fact that it leads to better health outcomes. The company is also working on pre-authorization and other access infrastructure to make it easier for physicians to prescribe the product. Their goal is to reduce the burden on those impacted by diabetes by providing more coverage.

Jereme Sylvain discussed the 15-day sensor product for TOS not on insulin, which is set to launch in 2021. He believes that this product is specifically designed for this group and can provide outcomes that payers will pay for in the long-term. However, it will take time to generate the necessary evidence in order to be reimbursed. The call then concluded with closing remarks from Kevin Sayer.

Kevin Sayer thanked everyone for participating in the call and praised the efforts of the company for a successful G7 launch, with the operations, engineering, and bond offering teams all performing well. He concluded by saying that it was a great time to be at the company, and that they were just getting started.

This summary was generated with AI and may contain some inaccuracies.