Tandem Diabetes Care's (TNDM) CEO Kim Blickenstaff on Q4 2014 Results - Earnings Call Transcript

Jul.31.14 | About: Tandem Diabetes (TNDM)

Tandem Diabetes Care, Inc. (NASDAQ:TNDM)

Q2 2014 Earnings Conference Call

July 31, 2014 4:30 p.m. ET

Executives

Susan Morrison - Chief Administrative Officer

Kim Blickenstaff - President and Chief Executive Officer

John Cajigas – Chief Financial Officer

Analysts

Tom Gunderson - Piper Jaffray

Rick Wise - Stifel

Kristen Stewart - Deutsche Bank

Bob Hopkins - Bank of America Merrill Lynch

Operator

Good day ladies and gentlemen and welcome to the second quarter of Tandem Diabetes Care 2014 earnings call. (Operator Instructions) Now I will turn the conference over to your host Susan Morrison, Chief Administrative Officer. Please begin.

Susan Morrison

Thanks. Good afternoon everyone and thank you for joining Tandem’s second quarter earnings conference call. Today’s discussion may include forward looking statements. These statements reflect management's expectations about future events, product development timeline, regulatory review process and financial performance and operating plans and speak only as of today’s date. There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward looking statement. A list of factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is highlighted in our press release issued earlier today under the Risk Factors portion and elsewhere on our most annual report on Form 10-K, quarterly report on Form 10-Q and other SEC filings. We assume no obligation to publicly update any forward-looking statements whether as a result of new information, future events or other factors.

Kim Blickenstaff, Chairman, President and Chief Executive Officer will leading today’s call. And at this time, I will turn it over to Kim.

Kim Blickenstaff

Thanks Susan. Good afternoon everyone and thanks for joining today’s call. With me is John Cajigas, our Chief Financial Officer.

We made significant progress throughout the company in the second quarter particularly in strategic areas that are important to the long-term success of our business. Revenue, gross margin, and our R&D pipeline are three of the key areas that ultimately impacts our timing to reach profitability as well as any potential capital needs and I am very happy that we were able to demonstrate positive momentum in each.

Starting with revenue, our total sales for the second quarter of 2014 grew 86% to 10.3 million compared to 5.5 million for the same period of 2013. As a point of reference, our Q2 sales were on par with our sales in Q4 2013 which is significant because Q4 is typical the strongest quarter of the year due to the seasonality of our industry.

If you look at our 2014 revenue for the first half of the year, compared to the relative distribution of sales in 2013, we appear to be on track to our revenue guidance of $48 million to $54 million for the full year. Our year over year increase in sales was primarily driven by our sales force expansion from 36 to 60 territories in the first quarter of this year. Our expansion strategy of completing it all within the first quarter was based on our learning from last year’s expansion from 11 to 36 territories. It allows time for new hire activities to be completed and for the reps to begin to become productive in advance of the Q4 peak selling season.

Timing and expansion requires a significant advance planning for many reasons but especially because we need to be mindful of the disruption that can cause in the field. We experienced some of that disruption during the first quarter, as every territory was realigned under the expanded 60 territory structure.

What we saw is that this disruption also impacted Q2. We saw a larger portion of our sales force become more productive but others were still in the process of transitioning accounts and beginning to build new position in diabetes educator relationships. This productivity curve timing reinforces our decision to complete the field expansion in the beginning of the year, so our reps can be focused and settled for the back half of the year and in Q4 in particular.

That being said, even during this disruptive period, our t:slim shipments for the first half of 2014 grew 79% compared to the first half of 2013 which was quite an accomplishment. We believe the current 60 territories provide the appropriate national coverage to support the diabetes community and attract new customers and prescribers.

The next area where we saw meaningful progress this quarter was in our manufacturing operations. Our gross margin improvement is a reflection of this progress. For Q2 our gross margin was 34%, up from 11% for Q1, 70% for Q2 2013.

The second quarter 2014 benefited from improvements in the manufacturing process and increased production volumes. We still expect to see some choppiness in our gross margin throughout the year as we continue to scale manufacturing, identify efficiencies and work to decrease unit manufacturing overhead cost of our products. But the second quarter will play a positive role in the overall margin for the year.

Finally over the few months, the company made significant progress with our new products in development. Most notably was our recent submission of a premarket approval or PMA application to the FDA for the t:slim G4 insulin delivery system which integrated our t:slim technology with Dexcom’s G4 platinum product. While our submission is just the first step of the regulatory process, product approval is up to discretion of the FDA. We are estimating that it will be called a 12 of 18 cycle review.

This is an important exciting milestone for Tandem as work to expand our product portfolio to meet the various needs of the diabetes community. We’ve also made progress on t:flex, our large volume cartridge which pulls 480 unit of insulin compared to t:slim’s 300 units.

Following our PMA application for the t:slim G4, our internal resources turned their attention to t:flex product. The design and development work is now complete and we're wrapping up final test. It will take a few weeks to compile and review the 510(k) which we anticipate filing with the FDA in the third quarter and it’s typically a six month review cycle.

Approval to market the t:flex is ultimately at the discretion of the FDA but we will be our commercial plans with the goal of watching t:flex some time during the first half of next year.

He t:flex is an exciting product for us as it is uniquely designed to support the segment of the market of people with greater insulin needs and people type with II diabetes who are insulin dependent. We believe there are around 1.2 million people in the US type II diabetes use, daily rapid acting insulin and may be insulin candidates, of which only 50 million to 100000 probably use a prompt. So you can see why we consider this to be a significant opportunity.

I’d like to now turn the call over the John to provide further discussion on our Q2?

John Cajigas

Thanks, Kim. Good afternoon everyone. Today I will provide some key metrics and color on our financial results focusing primarily on sales and gross margins for the quarter and then I will discuss the outlook for the remainder of 2014 and beyond.

Overall I'm pleased with the financial results of the quarter and what we've done operationally both are important for achieving our 2014 guidance our long-term goals. As Kim touched on the bulk of our sales force transition is now complete and our manufacturing organization continues to generate greater efficiencies as we scale and start to prepare to manufacture potential new products.

Also other parts of the organization have done a very good job of improving their functions as we grow and adapt to being a public company.

Turning to our sales and product shipments. I am very happy with the growth we've experienced both on a year-over-year basis and on a sequential basis as well. Sales for Q2 grew 86% to 10.3 million from 5.5 million in Q2 2013. Home sales accounted for 85% of our total sales in Q2 compared to 91% in Q2 of 2013.

t:slim sales grew 74% year-over-year while our supplies and accessories more than tripled year-over-year. T:slim shipments for Q2 were 2235, and grew 64% on a year-over-year basis compared to 1363 pumps for Q2 of 2013. T:slim shipments for Q2 alone exceeded our total t:slim shipments for the entire first half of 2013. We see this as important to our prospects for achieving our growth expectation.

Similar to Q1, we believe the primary driver for Q2’s year-over-year increase was our sales force expansion during 2013 and early 2014. Increasing our sales presence has improved the visibility of Tandem as a company and our product to our target audiences, patients, diabetes educators and doctors.

As of June 30, our cumulative shipments since our t:slim launch in Q3 of 2012 have grown to approximately 11,500 pumps which we believe represents 2% to 3% of the total US insulin pump market.

Looking at our sequential sales performance, our Q2 sales grew 27% from 8.1 million in Q1. Our pump shipments in Q2 grew 30% over Q1. Items impacting Q1 that we previously have discussed with you, seasonality and the disruption associated with our sales force expansion had less of an impact in Q2 than Q1. As a reminder, we expect our new reps to reach their steady state productivity within 9 to 12 months from the date of hire. For our new reps, the first one to two months involve training and territory introduction. Generally they begin to generate sales orders in the second and third month. Sales orders then flow through our insurance verification process and with product shipments occurring generally 20 to 30 days later.

For our existing reps, while the sales force expansion does not involve retraining for them, they too are going through a territory introduction process. Existing reps are transitioned prior account relationships to a new rep and at the same time meeting new accounts they previously did not cover would spend a little time with. This resulted in the average productivity of our existing reps tipping down as they start to address new geographies.

Instructions is now tapering off. Though for some territories they may lapse into Q3. We expect the average productivity of our reps to slowly increase going forward. We still anticipate the delayed sales force expansion to 60 territories will have the greatest impact in Q4 similar to what we experienced in 2013 when we expanded 11 to 36 territories.

Moving on to cost of sales and gross margin. I am very happy with the manufacturing performance this year as we continue to scale and make improvements and become more proficient in our operations. Our overall gross margin for Q2 was 34% compared to 11% for Q1 and 7% for Q2 of 2013. The primary reason for the improvement in the gross margin was a decrease in the per unit manufacturing overhead cost per product driven by increases in our production volume.

Our gross margins on the t:slim continue to be higher than our gross margins on our supply and we expect it to remain higher in the future. Our future gross margins will continue to be impacted by this and other factors such as the percentage of sales channel through distributors and changing mix of third-party payers with varying levels of reimbursement and any new product that we may sell in the future.

Even though we've grown considerably over the past year we are still at a relatively early stage of commercialization. So we continue to anticipate variability in our quarterly gross margin as we manage our production capacity and output, improve our processes, implement additional automated manufacturing equipment and continue to expand our manufacturing facilities in overall operation.

Looking at the rest of our P&L, our operating loss for Q2 was 18.3 million compared to 20.8 million for Q1 and 13.7 for Q2 of 2013. Growth in our sales volumes, manufacturing efficiencies and operational improvements throughout the company have driven our ability to gain sequential operating leverage during Q2.

Our operating expenses in Q2 were 21.8 million compared to 21.7 million in Q1 and 14.1 million in Q2 of 2013. On a sequential basis, our operating expenses were fairly consistent while the increase on a year-over-year basis was primarily associated with the headcount growth in our commercial organization as we expanded our sales and clinical infrastructure.

Our operating loss included significantly lows of non-cash stock-based compensation. During Q2 we recorded stock-based compensation of 3.5 million compared to 3.8 million in Q1 and $0.5 million in Q2 of 2013.

Moving on to guidance, we still expect our full 2014 year sales to be in the range of 48 million to 54 million with sales being heavily back end loaded to the fourth quarter due to seasonality and increasing productivity of our sales force we expect during that period. No sales from potential new products are assumed in this guidance. As a reminder of the impact of seasonality, approximately 35% of our sales last year were achieved during the fourth quarter.

We expect our operating margins for 2014 to be between negative 130% and negative 140%. This includes non-cash stock-based compensation that we currently estimate could range from 15 million to 16 million. Gross margins are key factor in our achievement of this operating margin guidance.

With respect to cash, at June 30 we had approximately 96 million in cash and investments. In July we made two large cash payments of note, we made a $1 million milestone payment to Dexcom for the filing of our t:slim G4 PMA application with the FDA. We also made the final $1 million license fee payment to Smiths under our 2012 agreement where we acquired certain rights to patents. We expect our current cash investments to be sufficient for operating needs to release in the 18 months and it could possibly last beyond that to cash flow breakeven.

Key factors influencing our cash flow expectations involve rep productivity, our ability to timely file and secure regulatory approvals and successfully commercialize potential new products such as t:slim G4 and t:flex as well as our ability to gain leverage within our operations as sales expand and new products currently in development roll out.

Additionally we have access to an additional $30 million under our agreement with Capital Royalty if needed. And with that, I will turn it back over to Kim.

Kim Blickenstaff

Thanks, John. To follow up on John's comments on our mix of third-party payers, our sales to distributors in the second quarter was approximately 70%. When we use distributors the impact continues to be slightly lower ASPs and typically the loss of the infusion set sales as they often have direct prior relationships with the manufacturers.

Our goal is to ship to a greater percent of the business from distributor to payers directly. However the timing of the contracting process varies from payer to payer. For the most part, our combination of direct payer contracts and the use of distributors has allowed anyone interested in purchasing t:slim and have [ph] to do so while taking advantage of the health insurance benefits.

As an update to our last call, we previously announced our signing of national contract with Kaiser that allowed us to service all Kaiser patients in Northern California on a direct basis. Today I am very pleased to share that additional regions within the Kaiser network, including Southern California, Colorado and Pacific Northwest were agreed to implement the national contract and they will go live in late Q3 and early Q4.

Based on the membership information Kaiser provides publicly, our agreements will now cover approximately 90% of Kaiser’s 9.5 million lives. The customers’ purchasing experience as well as our training and ongoing customer support excellence is very important to us at Tandem. This is why I was extremely proud to see the results of a recent independent survey by the dQ&A which showcased t:slim ranked as number one among insulin pumps available today both for overall satisfaction and customer support satisfaction. This patient panel survey consisted of more than 1200 people who gave feedback on 17 pump and pump support attributes. And t:slim was ranked number 1 in 14 of the 17 categories, including effort required for training.

The t:slim was designed based on market research to be easy to use and easy to learn with the modern look and feature set and I was very happy to see this recognition of our products and especially of the excellent service provided by our team who train and support people who use t:slim.

I believe this type of feedback also underscored why we continue to see that in the second quarter an accumulative shipments today approximately half of our t:slim customers are people who report being new to pump therapy. This is exciting because numerous studies have shown significant health and quality of life benefits that come from using an insulin pump and I'm pleased that t:slim is allowing more people with diabetes to enjoy this benefit.

Overall I'm very happy to see t:slim gain traction both from people new to pump therapy and those switching from a different pump. As John mentioned we anticipate the year will be backend loaded with the fourth quarter being the strongest due to the timing of when people typically meet their annual deductible and coinsurance requirements, as well as the new Kaiser agreement that will be in effect by that time.

In addition to our sales efforts, for the remainder of 2014 the company will be focused on continuing to improve our operational efficiencies and bringing new products to market that will support the diabetes community.

With that, I will turn it over to the operator for questions.

Question-and-Answer Session

Operator

(Operator Instructions) First question is from Tom Gunderson of Piper Jaffray.

Tom Gunderson - Piper Jaffray

Kim, on -- you mentioned that 70% coming from distributors, that’s up just slightly probably, not meaningfully from Q1 but can you give us -- and you talked a little bit about Kaiser, have there been any wins or any changes in any of private payers since the last call that you can mention?

John Cajigas

Hi Tom, really it’s just a steady progress, I don't think there's any real meaningful contracts besides the Kaiser one, there are some other ones that are in negotiations, including large ones. But at this point I’d rather not discuss until they become more meaningful and substantive.

Tom Gunderson - Piper Jaffray

And then my next and last question is can you talk a little bit about competition. Did you see any changes from the other pump companies in Q2 as you start to grow larger and any impact from any new entrants out there?

Kim Blickenstaff

Well, I would say that the landscape is pretty much consistent with what we saw last quarter. Obviously the Medtronic 530g is a new offering and so they have pretty tight control over their established base. So they tend to get to their own customers first. So I think that’s first and foremost just probably the biggest competitive element out there. And I think the Snap product – yeah the Asante Snap product I think is being launched regionally, that was down in the Southeast and so there were some activities localized there but really those are the only two things that have – sort of call it, the competitive landscape, that’s pretty much consistent with last quarter.

Operator

Next question is from Rick Wise, Stifel.

Rick Wise - Stifel

Let’s start with gross margin. You said -- both you and John said that you expect to see some choppiness but help us think through some of the puts and takes as we look at the rest of the year. And a couple questions around this – is this 34% basically sustainable and sort of however likely to improve sequentially in each – in the third and fourth quarter, maybe starting there?

John Cajigas

Hi Rick, this is John. Basically if you look at 2013, you'll see – if you look at our quarterly margins you will see choppiness and a lot of this just as we scaled up and as I previously mentioned a big part of sort of our margin story is sort of volume. I think us hitting 34% is very good. I think it's not – to me, it’s personally not a surprise that we would do that considering the volume that we picked up on. I do expect our margin to increase as we move towards our long-term target which is in the low to mid 60s. And that’s going to be primarily volume driven as well as new product entrance into our manufacturing process. If you are looking more short-term to now and end of the year, I think we can still see some meaningful progress primarily because of the volume story. But if we are working on a lot of things to improve sort of the efficiency side of the business besides the volume that I think will have meaningful impact.

But we are at a small-scale that one this step or one issue in the manufacture could have a little bit of a hiccup. So that's why we still expect to see some choppiness because we saw it last year.

Rick Wise - Stifel

Can you give us a little more clarity on the – sometimes in the past you’ve talked to us about the conversion rate, MDI conversion rates versus out of the switches, can you update us there?

Kim Blickenstaff

There has really been a substantial change on the margin of the MDI versus switches which has -- remains about 50:50. So that going forward we expect sort of to see that remain consistent with that 50:50 split we’re seeing right now.

Rick Wise - Stifel

And maybe last from me, I appreciate the sales associates is moving around and those original 36 reps there in different territories, maybe can you give us any color on how many reps are at or close to peak and you must be approaching 12 month experience in 25 or 30 reps at this point, and again maybe how many of those have been moved around, any more color on that whole productivity metric would be great.

Kim Blickenstaff

We’re probably not giving that level of granularity but I don't think we’re at 12 months peak experience for anybody with the reset of what we have done – did in the first quarter. Every territory got reset, so if you look at a territory like New York, it has certain geography, last year that was probably cut by two thirds. And so really that person is starting [completely over in that], that’s pretty much a team throughout that original group that we have. So I don't we have anybody that we would say is at that 12 month peak. I think we reset everybody to zero and we’re probably in the 3 to 5 month sort of aging time period for the majority of sales force. Obviously we need to see people, having sequential gains going forward in order to hit our numbers for the balance of the year which we expect to and obviously there is a seasonality at that end of the year that’s going to be a big pattern.

Operator

Our next question is from Kristen Stewart of Deutsche Bank.

Kristen Stewart - Deutsche Bank

I just wanted to ask – the Dexcom 1 million that you guys had I guess paid to them in July, was that accounted for in this current quarter from an R&D expense basis or will that be something that gets recognized in the third quarter?

Kim Blickenstaff

That will be a third quarter territory.

Kristen Stewart - Deutsche Bank

And then just I guess in talking with – or keep on that theme I guess with t:slim G4 I guess as you’re now calling it, what should we expect to see in terms of dialogue with the FDA? I guess will you be having the meeting with them at some point just to go over the filings and what kind of gives you the confidence I guess behind the 12 to 18 months review process?

Kim Blickenstaff

Well 12 to 18 months sort of in the experience of everybody in that PMA pathway and on the 510(k) side, we’ve consistently taken six months on that track. So I think we’re just sort of forecasting what everybody else has been experiencing. And obviously there will be dialogue, there is obviously rounds of questions as you move through the process, and I don’t know that we’re going to be commenting publicly on that as we move along. But it will give us better clarity as the timing which we will update people as we know more.

John Cajigas

And the FDA did accept our filing as of today.

Kristen Stewart - Deutsche Bank

And then just on flex again, that you said was in a couple weeks, is that correct, you’d be filing for that?

John Cajigas

Yeah, it’s a few weeks, not just couple of weeks. We’re basically in the process now of gathering the filing and putting it together and it’s got to go through a review both internal and legally and then we will be submitting that as soon as we are done.

Operator

Our next question is from Bob Hopkins of Bank of America Merrill Lynch

Bob Hopkins - Bank of America Merrill Lynch

So a couple things. First just on the guidance, you mentioned that last year roughly 35% of the year came in the fourth quarter. Is that what we should expect for this year as well in your view, roughly 35% of the year coming in the fourth quarter?

John Cajigas

I am not giving specific guidance on the fourth quarter but if you look at what we did in 2013, we went to an expansion and even through that expansion you can see what impact was – it was heavily back end loaded to the fourth quarter. And it was roughly 35% and that is sort of on a GAAP basis. And I just want to remind you that in Q1 of last year we recognized 1.9 million of product shipments, that we actually shipped the prior year because of the deferred revenue accounting, so if we just look at activity it’s probably closer to 37% on a sort of non-GAAP basis –

Kim Blickenstaff

About 35% is sort of the industry average as well, right, John in terms of seasonality spread, so we wouldn’t expect something much different.

Bob Hopkins - Bank of America Merrill Lynch

Just curious – I mean the street consensus is think about 35% already anyway, so just curious as to the message you’re trying to send there on the guidance and then two other quick things, first and in terms of the cash position, and the cash burn, just curious as to when you might consider raising equity again and I ask because at the time of the IPO you made it pretty clear to everybody that this IPO was not necessarily going to get you to profitability that you might need to do another raise before you get there. So I am just curious as to when you look at the business today, the cash burn today, cash level today do you think 2015 is a year where you may need to do another equity raise?

John Cajigas

Our cash expectation is minimally 18 months. I think really for us it depends on how the productivity ramp of existing sales force plays out as well as when and if we get approval for t sensor and t:slim G4 and t:flex and then what that does to it. I think we have a comfortable runway to be able to see that into next year before deciding whether or not we need to use the cash. So really it’s sort of looking at middle 2015 before we can get to a point where we might to sort of do something on that.

And then the other piece of that is -- we still have access to $30 million on our Capital Royalty which we can draw up until March 31 of next year and that will extend the runway for us to make that decision.

Bob Hopkins - Bank of America Merrill Lynch

And then lastly from me just trying to gauge your confidence in the back half of this year and the reason I ask is that since the IPO the quarters that you guys have been delivering -- been a little bit less than the street's been forecasting, and the rep productivity that you need in the back half is substantially greater than you've experienced during the first half. I think we’re all aware of some the things that have gone on but maybe if you can mention some of the things that just give you confidence in the back half guidance given the things that have gone on so far this year that would be helpful and appreciated?

Kim Blickenstaff

Well, I think we’ve drawn our experience from our expansion, from 11 territories, 36 and then what we saw there in terms of rep timing of productivity improvements and how that all played out during the course of the year. The first quarter of the year is always the most challenging one and so it was sort of within our expectations for how much sort of disruption we had that was self-inflicted by trying to do this expansion in that quarter, as well as the relative distribution of sales volumes throughout the year. So the only thing I can say is we will see these productivity gains in the second half of the year contributed both by I think seasoning of the reps and by the seasonality spread. And so those two factors I think are real, we have seen in both in the prior year and that's the best forecast we have right now.

Bob Hopkins - Bank of America Merrill Lynch

And do you think that it can really help in the back half, and are there contract wins that you may be expecting over the course of the rest of this year?

Kim Blickenstaff

So I think those were headwinds last year and we basically were locked on Kaiser, so I think that really opens up a third of basically the patient population herein the state of California, so we’re going to have several happy reps here that are in California that will see less of a headwind for them getting volume gains.

John Cajigas

And on the managed care front, we are in the middle of negotiations with several payers out there including couple large ones and I am hopeful that we will have those done and that will impact during this year at some point.

Operator

Next question is from Scott Schafer of William Blair.

Unidentified Analyst

Just two quick ones from, in terms of the guidance, question on the op margin, a couple things that obviously helped at this year to increase the gross margin was – and a nice increase the contract wins will help gross margins going forward and even some of the operating expenses came in a little lower than we had expected, I guess what’s your expectations for the second half where you reiterate the guidance of 130 to 140?

John Cajigas

Well you mentioned the previous question, I think gross margin will play a story in that if we continue to see the improvements we expect. The other aspect of that is sort of our management of our operating expenses and I think we did a very good job this quarter managing to sort of almost flat level. I do expect them to increase as we move along, we’ve got a couple large tradeshows we participate in, in the third quarter plus a lot of our expenses are employee oriented and if we do very well then commissions and bonuses also sort of ramp up as we move along.

And then also I mentioned the two charges that will be impacting the Q3 numbers as well. So I think that sort of to play out that, I think sales can be a big part of the operating margins as well as the gross margin impact just having the volume out there.

Unidentified Analyst

And then one other one on the actual pump and the way that's reimbursed and the warranty on that, is that covered for the entire 4 to 5 year that the patient is on that and if it does break do you guys see any incremental revenue from any kind of replacement hardware?

John Cajigas

So we do have a four year warranty on the pump and it is replaced or fixed at that point. So as far as incremental revenue related to warranty currently we don't have that.

Unidentified Analyst

Okay and then one quick one other, in terms of expansion of manufacturing facilities, I know, you said t:flex would be somewhere in 15 and obviously some of the new products rolling out, do you plan on increasing or expanding the facilities and what do you think that could do for margins?

John Cajigas

I think overall we are expecting to expand the facilities from a corporate standpoint, we just recently here in the second quarter at the end added about 20,000 square feet to our footprint, but the manufacturing is generally contained in one area and new products are generally going to be used in existing facility that we have today. There will be some incremental investments for some ancillary equipment and some things that are unique to the new products that are on our current product today but for the most part we're not rebuilding manufacturing facilities for new products in a whole.

Operator

Thank you. No further questions at this time. I will turn the call over to management for any closing remarks.

Kim Blickenstaff

Thank you very much. Thanks again everybody for joining us this afternoon and thanks for the questions that we just answered. The company will have representatives heading to Orlando next week with the American Association of Diabetes Educators Annual Meeting which is August 6-9. This is an important meeting for Tendem as we believe certified diabetes educators play a vital role in supporting people with diabetes. We continue to look for ways to partner with diabetes community to build awareness and home therapy in a peaceful and sleek modern design and easy-to-use interface. So in conclusion I was pleased to see positive momentum this quarter through the company and especially in the first half of the year, I look forward to keeping you updated on our progress in our future conference calls. Thanks for joining us.

Operator

Ladies and gentlemen, thank you for your participation in today's conference .This concludes the program. You may now disconnect. Have a wonderful day.

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