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Insulet Corp. (NASDAQ:PODD)

Q2 2014 Earnings Conference Call

August 7, 2014 5:00 PM ET

Executives

Duane M. DeSisto – President and Chief Executive Officer

Brian K. Roberts – Chief Financial Officer

Analysts

Danielle J. Antalffy – Leerink Partners LLC.

William J. Plovanic – Canaccord Genuity, Inc

Raj Denhoy – Jefferies & Company, Inc.

Tom Gunderson – Piper Jaffray & Co.

Benjamin Andrew – William Blair & Company

Michael Rich – Raymond James & Associates, Inc.

Robbie Marcus – JPMorgan Securities LLC.

Steve M. Lichtman – Oppenheimer & Co.

Mimi Pham – ABR Healthco

Jan Wald – The Benchmark Company, LLC.

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2014 Insulet Corporation Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host for today’s call Mr. Brian Roberts, you may begin.

Brian K. Roberts

Thank you. Good afternoon, everyone. Thank you for joining us for our second quarter 2014 conference call. I’m Brian Roberts, Chief Financial Officer of Insulet, joining me on the call today is Duane DeSisto, our Chief Executive Officer.

Before we get started, I’d like to remind everyone that our discussion today may include forward-looking statements as defined under the securities laws. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and are making this statement for purposes of complying with those Safe Harbor provisions. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made.

There are risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Information concerning the company’s potential risks and uncertainties is highlighted in the company’s press release issued earlier today and in the Risk Factors section of the company’s SEC filings, including the company’s Annual Report on Form 10-K for the year ended December 31, 2013. These risk factors apply to our oral and written comments. We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

I’d also like to remind you that the guidance we’re offering today represents a point-in-time estimate of our future performance. You’ll find a link to the webcast of this call, as well as to today’s press release, at myomnipod.com in the Investors section.

And now I’ll turn the call over to Duane.

Duane M. DeSisto

Thanks, Brian. Good afternoon, everyone, and thank you for joining us. Our second quarter results highlighted by record levels of revenue and gross margin, demonstrates the strong progress we continue to make across all aspects of the business.

For the second quarter, we reported consolidated revenue of $72 million representing 20% growth over the same period last year. Demand for the new OmniPod remains high as evidenced by 35% OmniPod revenue growth year-over-year as our easily used water proof tubeless design continues to appeal to customers especially in key demographics such as children. Over 35% of our new patient starts this year are children under the age of 18 with nearly 40% of them aged 10 and under.

Just as an point, the OmniPod continues to make positive strides with healthcare professionals. Since launch in February 2013, nearly 40% of prescribing physicians are new to the OmniPod with over 75% now EP prescribers. In addition to this sweet side to the Pod, HCP has continued to cite the updated insulin on-board calculator. The simplicity of the system is ready-to-wear without assembly and lifestyle connivance is key reasons why they prescribe the product.

And they say, that these features are especially – prescribing the OmniPod to people who have not previously used an insulin pump. Approximately 70% of our patience starts continued to be people who are new to insulin pumping. When these people are asked why they choose the OmniPod, the answer is simple, better glucose control without sacrificing freedom, ensuring the way we can meet the service needs of both our customers and our prescribing healthcare professionals is critical to our long-term growth. As soon as completing the process to transition our patient base in the new OmniPod last fall, we have worked tirelessly to rebuild confidence in our customer service functions, they came under pressure from the demand at the launch.

I’m incredibly pleased to note that we have returned our satisfaction levels to those who see increased transition. Today, over 95% of our patients will refer the OmniPod to a friend and 9 out of 10 patients consider themselves satisfied, very satisfied with the OmniPod as a whole.

To ensure we are meeting the increased demands for larger prescriber base, we embarked earlier this year to expand the commercial field sales team from approximately 110 to 130 people; to do this, we established a new role, the Key Account Manager, who would join existing territories and be tasked with ensuring the high level customer service to critical existing accounts. Our initial new resources were hired by April, trained in the field by early May, the remaining product class has been in the field since June 1.

With these new reps in place, we’re about half of the second quarter, we’re very pleased with their early success. Territories with the Key Account Manager have generated a 10% increase from referrals as compared to a standard territory. We’re seeing even better results in the beginning of the third quarter with referrals outpacing our second quarter results.

With referrals increasing and productivity improving, we enter third quarter with our largest customer pipelines since the launch of the new OmniPod. That said, new patient starts which have increased by approximately 20% year-over-year were impacted in the second quarter by a unilateral change made by a significant managed care plans as their reimbursement polices.

So I think, unexpected reimbursement cost due to code usage by Type 2 products and lower priced cost alternatives the managed care provider stop the only patient shipments and existing customer reorders to reestablish medical necessity for patients. This managed care plan typically accounts for approximately 15% of our new patient starts in the given period and to service through a distributor partner as we do not hold this direct contact with the provider.

Once we become aware the problem our commercial team assisted our distribution partner in resolving the issue for existing patient reorders. We continue to work with our distributor and the managed care provider on finding the appropriate solution for new patients. We are currently backlog in new patient starts until the issue resolved. I am confident that we will resolve this issue in the next few months.

We impacted the business from this issue was approximately $1.5 million revenue in the second quarter and will likely continue to affect the third quarter as well. In total we anticipate this issue to result and up to a $10 million reduction in 2014 revenue.

Our international business with Ypsomed and GlaxoSmithKline have another strong quarter and remains on pace the double revenue year-over-year. Ypsomed continues to takes you in key markets such as Germany, the Netherlands and Switzerland, and just recently officially launched in Italy as well.

Turning to our manufacturing operations, from the third straight quarter we manufactured approximately 2.5 million OmniPods providing the level of stability and predictability, we haven’t had in our history. At a consistent level of 40,000 OmniPods per day, we have been able to improve quality, reduce scrap costs, resulting in an expanding gross margins.

I am very pleased that we achieved two significant milestones in second quarter, as our U.S. OmniPod margins increased to over 60%, and our consolidated gross margin reached 50%. While on a consolidated basis gross margin is continue to be impacted, slightly by pricing the product mix within our neighborhood subsidiary. We are confident that we will see continued gross margin expansion of approximately 200 to 300 basis points per quarter for the remainder of 2014.

Although proud of our progress with the new OmniPod, I am very excited about the many products that we have in the – our pipeline. We expect that these products will keep insulin at the forefront of innovation for years to come. Let me provide you with some updates starting with the exciting news we announced earlier this week. We are very pleased that we have been able to rekindle our development partnership with DexCom.

Over the last couple of months we have announced two collaborations which we believe will provide a combined patients with easier access to the data they need to more efficiently manage the diabetes. The first announcement in June at the American Diabetes Association conference in San Francisco is the integration of certain OmniPod data into DexCom’s first of its kind mobile application.

The second collaboration announced on Tuesday at the American Association of Diabetes Educators conference in Orlando is the integration of DexCom glucose data into a new Bluetooth enabled PDM, which is currently under development.

Our goal with this project is to be able to develop software to similar to what DexCom has under development which we’ll be able to be displayed on our PDM. For both projects, we will each be responsible for our own development cost with much of DexCom’s investment focused on their new mobile application and most of our investment focused on the integration from new PDM. We feel strongly the time is right for these collaborations to move forward.

While we are very excited to be partnering with DexCom again do continue forward with our own CGM enabled OmniPod project with a separate partner as well. As I mentioned last quarter, we have made significant progress over the past couple of quarters with the completion of an insertion study as well as resolving our sterilization challenges. Over the back half of the year, we will be working on prototype development and additional testing to compare for human trials in early 2015.

We also continue to partner with LifeScan on the integration of the variable plug glucose meter platform into the PDM.

In May, we received initial questions back from the FDA, but most of the questions are on additional testing to be completed. At this point, the extra testing has been finished, the report has been compiled. We anticipate responding back to the FDA by quarter end with hope for an approval in the fourth quarter.

We’re also making great progress on our U-500 product and planning to ship with Eli Lilly, and complete their first round of human practice testing this past quarter, and expect to start a second round in the coming weeks. We still anticipate to file the 10-K submission of our product to the FDA by the end of the year.

The number of people living with Type 2 diabetes in the U.S. is staggering and these increases each and every day. New cost effective treatments need to be introduced to help combat this growing epidemic.

We continue to receive positive feedback from many healthcare professional by this collaborative offering. The OmniPod has the potential to be an effective easy to use alternative from improved compliance, improved A1C benefits for these highly insulin resistant patients. We also remain enthusiastic about several opportunities in non-insulin drug delivery space. We believe the opportunity in the drug delivery space is important.

Our Amgen partnership has a chance to be game changer when we look forward to the approval of the product by the FDA. With both Ferring and Amgen products in the commercial phase, we’ve proven that our OmniPod is the solution for subcutaneous drug delivery. Outside of these relationships, we have a number of other initiatives in the development phase. We look forward to discussing additional opportunities in the future.

Finally, let me mention a couple of additional items to note in the quarter. First, we entered into a settlement and license agreement with Becton Dickinson and company to resolve the outstanding patent litigation. Given the uncertainty distraction and continued expense that come with the jury trial, we determined that this was an appropriate time to reach a settlement.

As such in June, we agreed to a $5 million one-time payment has taken its charge of approximately $7 million in the P&L to account from the settlement and the associated legal fees incurred. We also took advantage of the financial markets in the second quarter and refinanced our convertible debt. Through this refinancing which Brian will discuss some more detail. We are able to extent the maturity by 3 years to June of 2019. Reduce our cashes risk rate nearly in half to 2% and increased the conversion price by over 75%, $46.51 million per share.

And with that, I will turn the call over to Brian.

Brian K. Roberts

Thank you, Duane. Consolidated revenue increased by 20% year-over-year to $72 million for the quarter ended June 30, 2014 form $60.1 million in the same period last year. OmniPod revenue grew by more than 35% in the second quarter of last year.

Consolidated revenue for the first six months of this year was $141.2 million compared to $117.4 million from the first six months of 2013, an increase of approximately 20% year-over-year.

Gross profit increased by 33% in the second quarter to $35.8 million as compared to gross profit of $26.8 million in the second quarter of 2013. As Duane noted, we achieved record gross margins in the second quarter as our U.S. OmniPod gross margin eclipsed 60% for our consolidated gross margin of 50% represents a 500 basis point increase over the second quarter of 2013.

Since the transition for the new OmniPod commenced in the first quarter of last year, we’ve gained nearly 700 basis points in gross margin. The increase in margin is a direct result of continued reductions in the overall cost to produce each OmniPod based on the lower bill of materials, higher manufacturing volumes, and reduced scrap charges.

We continue to expect to add approximately 200 basis points to 300 basis points of gross margin in each of the third and fourth quarters of this year as we take further advantage of the efficiencies gained from the new OmniPod.

Gross profit for the first six months of 2014 was $68.6 million, an increase of $16.6 million or 32% as compared to $52 million in the first six months of 2013. Operating expenses increased by $8.4 million or 26% year-over-year to $41 million in the second quarter from $32.7 million in the prior year. This increase is primarily a result of approximately $7 million in settlement and legal costs related to the patent litigation with Becton, Dickinson and Company.

Sequentially, operating expenses increased by $6.4 million from the first quarter of 2014 again due to the lawsuit settlement. We expect the operating expenses in the range of $36 million to $38 million per quarter for Q3 and Q4 reflecting the investments into the sales and marketing functions.

Operating expense were $75.7 million for the first six months compared to $64 million for the first six months of 2013.

Operating loss was $5.3 million compared to $5.8 million in the prior year. Excluding the one-time settlement charges, we would have generated an operating profit of approximately $1.7 million in the second quarter, an improvement of approximately $7.5 million over the second quarter of last year. We expect to be operating profitable going forward.

Interest and other expense was $23.8 million in the second quarter compared to $4.6 million last year. In June, we issued approximately $201 million of 2% convertible senior notes maturing in June 2019, and used $160 million of the net proceeds to repurchase the $115 million of the outstanding 3.75% notes due June 2016.

In connection with the repurchase, we recorded a one-time loss from the extinguishment of debt of $18.9 million. We also called the remaining $28.8 million of outstanding 3.75% notes for redemption in June. These notes were extinguished just last week in exchange for $28.8 million in cash and approximately 350,000 shares of common stock.

Net interest and other expense was $28 million for the first six months compared to $8.9 million for the first six months of last year. Going forward, we expect to record total interest expense each quarter of $3 million comprised of $1 million in cash interest expense and $2 million in non-cash interest expense.

Our net loss for the second quarter of 2014 was $29.1 million or $0.53 per share as compared to a net loss of $10.5 million or $0.20 per share for the second quarter of last year. Excluding the impact of the patent settlement and the extinguishment of the 3.75% convertible notes, our net loss would have been approximately $3.2 million or approximately $0.06 per share, representing a 70% improvement over the second quarter of 2013.

Net loss for the first six months was $35.3 million or $0.64 per share compared to $21.2 million or $0.40 per share for the first six months of last year. Our cash and cash equivalents balance was $175.5 million at June 30 compared to $149.7 million at December 31. As of June 30, we had approximately 55.5 million common shares outstanding.

Finally, as Duane noted, we remain confident in the business and are pleased with our first half results. Gross margin continue to expand and our manufacturing operations continue to excel. The investments in the commercial team should produce a return in the second half of the year and our international business remains on pace to double in 2014. With the patent lawsuit settled and the convertible debt refinancing complete, we are poised to show operating profit going forward.

That said, taking into consideration, the payor issue, which impacted the second quarter and our expectation that it will likely continue to affect the back half of the year, we have adjusted our 2014 revenue expectations to $290 million to $300 million. This change represents a 3% reduction in revenue at the midpoint. For the third quarter, we expect revenue of $73 million to $77 million.

And with that, let me turn the call back over to Duane.

Duane M. DeSisto

Thanks, Brian. In summary, we’re pleased with our second quarter results. Despite recent payor challenge, which I’m confident we will resolve, we demonstrated outstanding revenue growth of 35% in the OmniPod business and 20% overall.

We are well positioned for continued robust growth as the addition of 20 new commercial team members make a positive impact throughout the back half of the year. Our pipeline is strong our gross continuing increase month-over-month, and the team is excited and engaged.

Our manufacturing operations continue to show the levels of stability and consistency never before by Insulet and we remain on track to passing the form of fourth manufacturing line in the next few months. We continue to be an innovative leader in this space with several exciting initiatives in – and I’m pleased to see new opportunities going forward. I’m confident and excited about the strong second half of 2014.

With that operator, please open the phones for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Danielle Antalffy with Leerink Partners. Your line is open.

Danielle J. Antalffy – Leerink Partners LLC.

Good afternoon, guys. Thanks for taking the questions.

Duane M. DeSisto

Hi, Danielle.

Danielle J. Antalffy – Leerink Partners LLC.

Just was a follow-up on the payor issue, number one what gives you guys confidence that you will resolve this issue and then a follow-up to that, what the risk of the business. There is other payors follow suite or do you think that we have possibility?

Duane M. DeSisto

It’s a great question, Daniel. So a) we are confident because as soon as – the thing that makes us a little different – just certainly when I'm called clear is all these projects, all these payor contracts come up for renewal. So, this is an ongoing issue we’ll make this a little different. It was and we are in the middle of negotiating with the distributor and the payor, all three of us together here.

So I don’t want to go too far obviously because we’re working our way through it. But this was a little bit of a knee-jerk reaction what the payors are going through some of the various codes in categories and so they just shut them all down which that the equipment people at risk, it’s the big deal. So as soon as we are made aware of it, we got involved, we got the reorder business turn back on.

The payor has already offered up a potential solution in terms of how to handle this on a go forward basis. We are not exactly thrilled with it – once again I don’t want to throw the details on what the solution is. Sufficed to say it makes the process more complicated, it’s not a price of action at the moment, it’s none of that, just makes the price more complicated.

But it does appear that things were going through the category most notably the stuff that will kind of affect the type 2 patients that they were not happy about. And so as we saw they dug in their first solutions at the door.

So, having said that, could it happen again? Yeah. This is a little bit of a really harsh reaction. Obviously there is – there is not a year that it goes by, we are not – so this was a little bit unusual, took us by surprise because we really want to first contacted. We kind of noticed distributors business being an impact that we start to point them on to it.

They started thinking as, so it took us a little while to get to the bottom of what was happening. But our customers gave us the heads up when we started driving that process. So, a little bit up in the one, and I will gets that – what is clear is insulin pumping that affair kind of anything else that’s out there for Type 1 diabetes patients, and this continues to be more studies proving that.

So, I don’t think that’s going to be a long-term issue, but suffice to say, this is what it is, we don’t have a resolve today, that’s why we are temporally, we have guidance on the back half until we get it resolved. Hopefully, we will get on the call the next quarter, if we got it all resolve, we can give you a little clearer view of it. But, it is resolvable, it’s just legacy that were in the middle of it side, I don’t want to get too far in detail with as the terms of what’s going on.

Danielle J. Antalffy – Leerink Partners LLC.

Okay. That’s helpful. And then just wanted to get your thoughts on that, the partnership with Dexcom, happy to see that – how are you trying to think about that from a growth perspective, is that a big driver for new patient adds or is that just sort of incremental. So how big of a deal should we be thinking about that from a top line growth perspective?

Duane M. DeSisto

Okay, I think – I didn’t have the opportunity to listen in on Dexcom’s call yesterday, but I think it’s – I think it’s going to help, it will continue to help both companies. In the long term, I think the real thing is, when we start trying to figure out how it’s going to be dialed in, really it comes around the timing here, and we’re working out those details. It’s with Dexcom’s Gen5 sensors, so that really is kind of the drivers in terms of when it’s going to impact the business.

Danielle J. Antalffy – Leerink Partners LLC.

All right. Thanks so much guys.

Duane M. DeSisto

Thanks.

Operator

Our next question comes from William Plovanic of Canaccord Genuity. Your line is open.

William J. Plovanic – Canaccord Genuity, Inc

Great. Thank you. Good evening, can you hear me?

Duane M. DeSisto

Hey, Bill.

Brian K. Roberts

Hey, Bill.

William J. Plovanic – Canaccord Genuity, Inc

So just clarity, so the re-order has been cleared up, so the utilization re-order rate should not be impacted going forward, correct?

Duane M. DeSisto

That’s correct.

William J. Plovanic – Canaccord Genuity, Inc

And then so it’s only on the new patients. And then would that also affect your NDI business?

Duane M. DeSisto

What do you mean? Our NDI segment, the neighborhood business?

William J. Plovanic – Canaccord Genuity, Inc

Yes.

Duane M. DeSisto

These aren’t patients that go through the neighborhood with those separate managed care. The managed care payor that goes through our third party distributor but it’s not neighborhood.

William J. Plovanic – Canaccord Genuity, Inc

Okay, okay. And then just – if I look at inventories in the quarter, they’re extremely low or very low. Are there any manufacturing issues or concerns or – I mean it tells us demand is high, but your inventory is burned down a little, I’m just curious on your thoughts on that.

Duane M. DeSisto

I think, Bill, it’s a great question, I think from our standpoint what you don’t see there is all the stuff that’s in China moving forward, but having said that, the inventory levels where want to no, I think Q3, you’ll see an incremental up tick in the inventory number, and hopefully by Q4, we’ll be kind of closer to where we want to be.

William J. Plovanic – Canaccord Genuity, Inc

Okay. And then, you have a – was it a fourth line, it’s up incoming, is that still on track or where are you with it?

Duane M. DeSisto

Yes, fourth line is on track, and it should be producing product for us before year end.

William J. Plovanic – Canaccord Genuity, Inc

Okay, so that’s what will help your resolve it in the fourth quarter.

Duane M. DeSisto

Yeah, I mean we continue to make really good progress, I mean obviously, just the level of consistency that we’ve had in production going back the last nine months now has been, I think unique to our business over the last six years at least where that’s been around which is great.

The operations team is doing a fantastic job, I think we’ve seen a little bit of an uptick here in the third quarter in production from them and we should be hopefully near two and three quarters the 3 million pause in the third quarter of this year and then you are growing even beyond that hopefully in Q4 with the addition of line for then producing as well. So, but production is going very well.

William J. Plovanic – Canaccord Genuity, Inc

Okay. And then last question if I may, just if you strip out the 2 million, the 7 million in charges your G&A would have been a level we haven’t seem since 2012 on an absolute nominal basis, is that the right number to go off of I mean you are spending that much on litigation so that’s kind of our new core base rate or how do we think about that. And that’s all I have. Thank you.

Duane M. DeSisto

Yeah, sure Bill, I think that’s right. I mean again in total we are talking about $36 million to $38 million of operating expenses per quarter for Q3 and Q4, Q3 is really the first full quarter where we have incurred all of the charges related to the sales and marketing hires that we did, but on the G&A line yeah, I think that’s accurate, we certainly have worked our way over the course of the last 12 months through the Medtronic litigation last fall, but that in the litigation the couple of these other item and that’s hopefully all behind us at this point.

William J. Plovanic – Canaccord Genuity, Inc

Thank you.

Operator

Thank you. Our next question comes from Raj Denhoy of Jefferies. Your line is open.

Raj Denhoy – Jefferies & Company, Inc.

Wonder if I could ask one about the managed care situation as well, I think Daniel asked this, why don’t you answer it, but just in terms of the what gives you the confidence that you wanted this in other payors as well?

Duane M. DeSisto

Raj, I guess where we are at, we didn’t add this with our products in the market since 2005. This the first time we’ve seen anything like that and part of this I think will makes it a little unusual, is we go through about three distributors in the U.S. that has this one big healthcare contract.

And so this is one of the few that we don’t have the seat on the table – seat at the table and like I said so I think will makes this a little unusual, we were hearing from our customers, we had again engage with the distributor, distributor again engage with the managed care.

So, I think, all the other stock, I mean we have good relationships with these manage care providers. If there’s changes in coverage or anything going on, we are usually involved in the discussion. So I think that’s makes this a little bit of a kind of one off. It’s a major provider so it made it problematic, but like I said, I think everywhere else we don’t think the relationship could extend.

People are thinking about changes in policy, these ongoing discussions, you can kind of anticipate it, you can understand where they’re coming from and there is give and take. This was – by the time we’re going to engage this, it’s just going to shut down the whole kind of insulin pump category, general and that was their solution, and this time they’re turning back on.

So a little different, I’m not saying, it would have been different if we had a direct contact, we had a direct contract with this customer, but I would tell you, this is way out of the norm for what we typically say.

Brian K. Roberts

Yeah, Raj, this is Brian. I just had a couple of things, one is, it’s been well known really over the last year or so, since Medtronic launched 530G, that there were plant that we’re – you’re not wanting to reimburse for that product and we’re holding it back, and your debt has been well documented.

Our understanding is that, this provider, it impacted not just Insulet, it impacted others as well. I think that would be one of the ones that was impacted was the 530G. So it’s not unique, but as Duane pointed out, it is a little unique – in this one as we don’t hold the direct relationship, and so, it just took us a little bit longer, I think to be able to get involved in it.

Hopefully, at the end of just some noise – and we’ll work our way through it over the next couple of months, and we’ll just be done with it.

Raj Denhoy – Jefferies & Company, Inc.

Okay, just one more question on that as well, I think you described it as being related to Type 2 diabetics perhaps being reimbursed, I think, and I don’t even get a lot of detail with what I understood with that perhaps Type 2 diabetics for getting reimbursed for these pumps, is that correct, and that’s what figures this?

Duane M. DeSisto

So one of the – Brian described kind of little bit on the higher end, higher-priced pumps, one of the other things that we’re looking at is, why we’re Type 2 patients. The insulin dependent Type 2 patients being reimbursed for our pump, so that once again, keep in mind Russ, I think you got pretty respective, we’re kind of the third man in on this, so this is – and obviously, we’ll step in the driver’s seat if it doesn’t get resolved the right way.

But we heard that, that was another piece of what they reacted to they couldn’t understand why Type 2 patients. Given that there are other low cost solutions for insulin dependent Type 2s, they were not happy with the fact that some Type 2 patients will be reimbursed.

Duane M. DeSisto

To be clear, they are not our patients.

Raj Denhoy – Jefferies & Company, Inc.

Yeah.

Duane M. DeSisto

These weren’t our charges going through. These were other companies using codes mainly for getting Type 2 reimbursement, that the plans I guess were surprised by.

Raj Denhoy – Jefferies & Company, Inc.

Okay. That’s helpful. And may be just I’ll ask one about the drug delivery business that you commented on, it’s still waiting for the FDA approval on the Amgen pump. But do you have any updates on that in terms of when we might expect that product and I think a level of enthusiasm might have ticked up a little bit too. But maybe you could update us on your expectations where we can expect like its approved.

Duane M. DeSisto

Yeah, I mean for us it’s unchanged and we’ve been in constant dialog with the Amgen folks I think they are working through their process, I don’t want to talk on their behalf, but overall I think we are all feeling pretty confident that the timelines we’ve laid out are still holding true. So, I think overall everything were seem to be hearing as positive and we are moving forward as planned.

Raj Denhoy – Jefferies & Company, Inc.

Okay. Helpful. Thank you.

Operator

Thank you. Our next question comes from Tom Gunderson of Piper Jaffray. Your line is open.

Tom Gunderson – Piper Jaffray & Co.

Hi guys. Let’s talk about the payor problem. The so far what I understood…

Duane M. DeSisto

You don’t want to talk about the 35% growth or the 20% year-over-year.

Tom Gunderson – Piper Jaffray & Co.

Well and it really gets down to that because if this is just a speed bump for a company that’s growing its main product by 35% than – we are just going to work on through it but what we need to do is just understand all the details of it to see, that this really is a speed bump. So from next level of detail that I am looking at based on what you are saying to Raj, earlier is it affects all pumps, you have the distributor’s contract as far as OmniPod goes right. Is that what I am hearing?

Duane M. DeSisto

It’s a distributed contract. I am not sure it affects all pumps. I want to be cautious about that. It doesn’t take other pumps.

Tom Gunderson – Piper Jaffray & Co.

But to correct this, do you need to correct it for all the pumps that are involved by this? Or can you focus and get this taken care just for you so that you’re dealing in the things that you can control?

Duane M. DeSisto

Yeah. I know we are dealing in the parts that we can control. The benefits we have is obviously we have a separate coding structure, then the all the other guys, primarily all the other guys. Right, although there is thus seen to little bit due to activity on our course by others, which probably caused a little bit of their inks and was unexpected.

So we can work through our codes in our parts and ultimately you’ll figure out, frankly how do we just get them a little bit more comfortable that the patients that are being pushed through our distributor partner are the right patients to be going on the problem.

As Duane pointed out, I think one of the questions they are holding is really just around medical necessity, and I think within the Type 1 community, medical necessity is pretty well documented. So, we just have to make sure we’re clear with people, and clear with the specific provider, I think of who these folks are, why they need the product, and what do they need to be able to make those approvals in a more timely manner?

Brian K. Roberts

And that’s the part that’s a little bit of a head scratcher, is DCCT has been around for over 20 years, and there is medical necessity that’s virtually irrefutable for Type 1s and I am just wondering that are you running across, did you get kind of thrown out with the bath water kind of thing here? Or is there somebody who’s got their number next up? Or – trying to get – what it takes to correct?

Duane M. DeSisto

So I think Brian adequately described kind of what it takes to correct. I think the situation as you described it. There is some higher price products coming into the market that seems to be slippening to various codes.

Tom Gunderson – Piper Jaffray & Co.

Got it.

Duane M. DeSisto

There seems to be some kind of lower end Type 2 products that it – once again we are not at the table at the moment, but from where we're be in total, there’s some lower end Type 2 products that try to kind of slipping under some of our codes. So the Type 2 in the higher end products both I think sent this provider, the sale case of solution is we shut the door and then we’ll get everybody to come to us as opposed to asking the question.

It’s kind of seems to be the efforts they took; one would be my preferential approach, but it does seems to be the – so like I said, getting the reimbursement, it caused us a few weeks here in the quarter for getting the – getting the reorder stuff turned back on, which is pretty straight forward process, and we think once some of the stuff gets cleared up here, we’d be able to get this turned back on.

Like I said, the only thing that was kind of really unusual for us is, because we did not see it on the table, we started getting customer calls, which led us to call our distributor partner, which led down to call the managed care provider, and which is based on the way I described the batched took up. That’s a good time in the quarter, and we’re working as fast as we can to straighten this other thing up.

Tom Gunderson – Piper Jaffray & Co.

Okay. I got it. Thanks for the extra details. Good job on the 35%.

Duane M. DeSisto

Thank you.

Brian K. Roberts

Thank you, Tom.

Operator

Thank you. Our next question comes from Ben Andrew of William Blair. Your line is open.

Benjamin Andrew – William Blair & Company

Okay, guys. Thanks for taking the questions. I think you’ve said there is about $10 million of impact on the full year, is that roughly split Q3, Q4 residual after the 1.5.

Duane M. DeSisto

Yeah, I think I think it’s kind of pretty much all exclusive Ben and I think what we said is, it could be up to a million. We are hoping today the guidance we’re giving obviously reflects that relatively get this cleaned up year end and hopefully next quarter we can come back in tweet it one more time.

Brian K. Roberts

Yeah, I mean to add to that, I mean basically obviously these new patient starts you delay new patient starts, delay the timing of when the re-orders commit. So impacting Q2 about patient starts delay the timing when the re-orders comes through in that’s the impact to compound little bit so, impact Q2 is about $1.5 million, impacting Q3 is probably above $3 million if you look at it, and then Q4 could represent the other, the other five or so kind of the worst case scenario if we really wanted – up to the whole $10 million.

So, hopefully we’re able to do solve it in time to – the first sem of that Q4 hit obviously new patients that don’t start later we can’t get that timing back, but we can effect it to the others going forward.

Benjamin Andrew – William Blair & Company

Sure, and I guess – maybe hard to know, but if you loose some of these new patients starts, you’re losing for good to maybe one of those other pumps that weren’t impacted or can you tell?

Duane M. DeSisto

I think it’s – at the moment, I think it’s tough to tell, we know who these patients are now, so we’ve opened up a dialog with them. We’ll keep them in the loop and we’re trying to keep them as warm as you can keep them, right?

And I think if it goes on a couple of more weeks, I think we feel good, if it goes on eight more weeks, obviously, some people may lose a little bit more interest. I think the one thing, I think the one thing that we have going for us is, it’s a pretty that people have chosen this product, they chose it for the obvious reasons, and so the goal is something out may not be, what we do worry about is they say, what let me just keep taking my shots, and may be I will go back and make this, we did this at end of the year rightly four months without – right before I might did that was reset.

So, that’s the kind of thing we are concerned about, they – they can’t just say, don’t needed now, I look at it, I look at it late in the year right before my insurance plan reset and I will be able to defend. So, I am not sure we loosing to another pump, but we may just lose some back that comes.

Benjamin Andrew – William Blair & Company

Okay. And can you give us a little more granularity on when in the quarter you became aware of this and when you kind of started to be able – try to be alert?

Duane M. DeSisto

You know, I mean, what’s seems to be clear to begin part of the way we figure this out as you seeing ordering pattern from a distributor so. It looks like it happens really in the beginning part of May, but I would say we really didn’t become aware of it until the earlier part of June, right. So kind of really second week or so in June.

Benjamin Andrew – William Blair & Company

Okay. And just two housekeeping things, did you said gross margins 200 to 300 bips per quarter, is that corporate or OmniPad?

Duane M. DeSisto

Consolidated. I mean there is a wind up being both because the OmniPad side is certainly driving but on a consolidated basis between 200 bips and 300 bips per quarter.

Benjamin Andrew – William Blair & Company

Sure. Any change in product pricing or utilization for patient separate as issue in the quarter?

Duane M. DeSisto

No, not really, PODD price continues to kind of hang in very much of 27 to 28 range for its been for the last probably quarters. Utilization teams within the exception of this group of patient to clearly got delayed out of few weeks seems pretty normal.

Benjamin Andrew – William Blair & Company

Okay. And you got $125 million in cash just turned operating profitable and sustainably well. What do you see doing with that, obviously that’s a fair chunk of cash to have sitting around?

Duane M. DeSisto

Yeah, subsequent to June 30, we effectively used about $35 million of that cash, right, $28.8 million to retire effectively the last part of those 3.75% notes that happened on July 28, and the $5 million backed in payment happened with the first week or so of July.

So the number bounces back to about $140 million, which is really where we kind of begin the year. And yeah, we’ve got a bunch of initiatives and things on the plate, I mean I put this in the good problem to have categories. So I think we’re – we’ll kind of see how the business continues to evolve and develop, and I think you have still debt outstanding, and we’ll kind of continue to monitor or manage against those things.

Benjamin Andrew – William Blair & Company

Okay. And then last from me, any update on when we might see some human data on your CGM partner?

Duane M. DeSisto

Well, where full systems go, still we’re trying to get ready for human trial here in the beginning part of 2015. So that’s a reasonable timeline to think, but if some of the data will go onside that trail.

Benjamin Andrew – William Blair & Company

Okay, great. Thank you very much.

Operator

Thank you. Our next question comes from Jayson Bedford of Raymond James. Your line is open.

Michael Rich – Raymond James & Associates, Inc.

Michael Rich calling in for Jayson. Can you hear me, okay?

Duane M. DeSisto

All right.

Michael Rich – Raymond James & Associates, Inc.

Thanks for taking the questions. I’m not going to ask you about the payor dynamics yet.

Duane M. DeSisto

You can ask me about the 35% growth.

Michael Rich – Raymond James & Associates, Inc.

Well, I was going to ask you about the expanded agreement with Dexcom, it sounds like it’s somewhat depending on their Gen5 timeline, but when are you expecting to file approval for next-gen PDM, I know you were saying, you’d have it displayed at ADA next year, but when do you think you file that, and does that become a PMA, because it will be able to display CGM data or does a cell phone create redundancy that’s huge in your 510(k)?

Duane M. DeSisto

Yeah. So obviously we are going to take that to the FDA to your second question. I think from our standpoint and talking with Dexcom guys, they are at its PMA but our argument would be quite simply that one is going to display that app on the cell phone which is obviously not a FDA regulated device. There seems to be our guess in our logic no reason why our help when we remain 510K.

So and I think from my standpoint, I think we’ve spent some time. We talk to lot of people at the agency. As you can imagine, this all these apps and everything went on, the FDA has the people at EBITDA with listening into all from all the stuff. Unfortunately because we have the scholars and FDA and EBITDA. I am sure if there was going to be anything be in this place, there the DFA will have people there. So I think it’s changing fast and furious.

I think they’re trying to embrace the new technology. So I think we feel good that we got a very strong argument that why would the handheld be a PMA. And if the handheld does turn out that it has to be a PMA, it’s not really the end of world for us. It only becomes a big problem for us if the Pod were to being PMA.

And that’s when we talk about integrating sensing technology into a Pod, that’s why when that time comes, we could have it too perfect. But – so – like I said, our belief is, we think it may be a 510(k) because if you can display it on a cell phone, then our next generation product is not all that different from now.

So that’s kind of how we’re looking at it. And then – so I think to your first question, I think the big update for us, and I think we’ll have a very good handle at this, the ADA next June in Boston it’s kind of going to be where we’ll be able to give you really good timeline, hopefully be able to display this next generation product and one of the better, what will have a much better idea where we are in terms of regulatory process in that.

So the ADA in Boston next year is in Boston next year, so we are kind of excited by the backup. Being a Boston based company that would be kind of a nice coming out party for us. So that’s, you don’t have to timeline obviously the FDA is a big piece of it. I think we will be in a position to show kind of what we are doing in our product strategy there, and then, the regulatory path, needed regulatory path.

Michael Rich – Raymond James & Associates, Inc.

Okay. That’s helps. Thanks. And then the 20% in your patient adds, even lift this issue in the back half of the quarter is pretty solid but are you seeing anything new on the competitive landscape, tend to had a pretty good quarter, you also mentioned increase activities from another new plans on the space anything maybe you can comment on that.

Duane M. DeSisto

I think from my standpoint, and this sounds like a broken record, but we fight for mindshare at the doctor’s office. If we’re given a fair shot, I think – you know it’s pretty simple, you either want tubing or you don’t want tubing, you don’t want tubing with the product.

So we really don’t – we compete with 800 pounds well in this space and we fight for mindshare space and we fight for mindshare at the doctor’s office which really isn’t product-related. And rest of these guys are in this space, and they’re doing what they’re doing, but that’s really not, the competition is really mindshare at the doctor’s office.

Brian K. Roberts

And to the other part of your question, Mike, I’d add that, Duane in his remarks, with the addition of these 20 new sales reps, I mean this is really the first full quarter that they’re kind of out here in the field now, and driving new referrals, and we’re seeing an up tick in the pipeline. I think the sales team overall is very engaged, I think they’re excited about the resources, they’re excited about still then new Pod in their bag, and I think overall we can feel pretty good. So it’s unfortunate that payors is causing a little drop in our kind of patient conversion at the moment to just get some of those people over the goal line, but we believe that’s temporary and the pipeline is still very full.

So I think we’re still feeling very bullish about the second half of the year and 20% new patient adds even with this issue given the size of the payor. I think we’re still pretty happy about it.

Michael Rich – Raymond James & Associates, Inc.

Okay. And then just to clarify sort of peggy backing on that, is it fair to assume then that the change in guidance reflects really only this issue and that underlying trends of the business that James told on track with what you expected.

Duane M. DeSisto

That is 100% accurate, yes.

Michael Rich – Raymond James & Associates, Inc.

Okay. Great. Thank you for taking the questions.

Operator

Our next question comes from Mike Weinstein of JPMorgan. Your line is open.

Robbie Marcus – JPMorgan Securities LLC.

Hi, thanks. This is actually Robbie Marcus in for Mike. Hey guys, I was wondering if you could tell us what the new patient starts would have been this quarter if you exclude the payor issue?

Duane M. DeSisto

I mean again, I’d rather not get into taking these numbers and subtracting that, I mean again we’re so far year-to-date, we’re still up about 20% in total, we were on track I think for a solid Q2 as I talked about at previous conferences, and we’re expecting that we’ll be able to kind of continue to hang right at least around this 20% number a little better throughout the back half of the year.

Robbie Marcus – JPMorgan Securities LLC.

Okay. So we should assume that the 25% number is now kind of off the table for 2014?

Duane M. DeSisto

Well, I mean again, I think you’ll have to see exactly how this issue resolves and it’s exactly anyone want it resolved, but we’ve adjusted the guidance down, the amount that we think is appropriate to account for this specific issue.

Robbie Marcus – JPMorgan Securities LLC.

Okay. And then, even with the issue you guys are coming very close to profitability, how are you thinking about profitability in 2014 versus 2015, are there any benefits were pushing at the 2015 and how should we’ll be thinking about shares and the tax rate once you guys become profitable.

Duane M. DeSisto

Well. We’ve got 55.5 million shares outstanding, there’s certainly some options and other things out there which are all disclosed in the SEC filings, the only other big thing that’s out there is obliviously this new convertible debt issuance that we did in June, so those numbers are all up there. One of the nice things about the convertible debt issuance was that, we effectively were able to take dilution down by about 20% as compared to, if you look at the number of underline shares compared to what the old one was versus the new one.

So at some point this thing actually did convert, which its not really not the goal of these. It still would have saved about I think a little over 20% of the original amount of shares where. Here in regards to profitability, again I'll put these into the high class problems right and turning profitable is ultimately a goal. We will get there. We were operating profitably in Q2 if we back out the veteran lawsuit.

We’ll continue to be operating profitable for the back half of the year. There is some of this non-cash expense that goes through exactly where it lands. And then – so they have a lot NOLs we won’t be paying specific writing a check that much for quite a while to come but more to come I guess around tax rate and other things as we get further down the line.

Robbie Marcus – JPMorgan Securities LLC.

Okay. Thanks a lot.

Operator

Thank you. Our next question comes from Steven Lichtman of Oppenheimer. Your line is open.

Steve M. Lichtman – Oppenheimer & Co.

Thank you. Hi guys. I guess first question on the pipeline opportunities. Have you guys have talked about additional indications potentially with Amgen specifically. Any of them when we could hear on that and then also potentially other partnerships. When could we potentially hear on that front as well?

Brian K. Roberts

Sure. It’s Brian. So on answer like I mentioned earlier really is going very well. I don’t think, I think its fair to assume and I think we set this price previously that’s fair to assume that until this final one gets over the goal line completing, we are actually get it into the marketplace, we are not going to really move forward with additional project until that point in time.

Several conversations with those guys, we feel like there is some good opportunity is there and believe the partnership will expand. But obviously getting off the start line here on this first one in the positive manner will go a long way to making sure that those happenings.

That said, sense really the press release in announcing the answered partnership. We’d had lot of inbounding asking to us asking about our product several meetings, several calls, several different I’d say kind of regulatory agreements in place where were we were working on other initiatives now, and has some other interesting things here in the pipeline.

Duane M. DeSisto

And I think, as Brian described here, I think it’s the point now that we’re actually out actively recruiting the business development person for that business. So we now have, why I said, I think we described this before the phone rang, we answered, the phone is ringing a lot, so we’re actually taking next step, we’re going to invest the money in terms of the business development person to help us start kind of – looking at these opportunity size in the month.

So we’re excited about it, it seems to be a significant line of interest, I guess we’re ready now to invest in terms of another person, and the guys have been doing, and they’re doing a great job, it’s now – it’s now – even more feet on the street to really start qualifying this.

Steve M. Lichtman – Oppenheimer & Co.

I got, and then international obviously showing great growth, where have you guys been successful so far, and where do you see some of the biggest opportunities geographically, I mean just a – comment around from the way you’re seeing that, that international business looking forward?

Duane M. DeSisto

So I think, our partner internationally, Ypsomed, they’re throughout most of western Europe, they continue to take market share – penetrate the markets, the obvious big ones, the Scandinavian countries, Germany, they kind to the way – we just – they just launched in Italy, while that’s not a major market, it did subside.

I think the two opportunities that we continue to press forward with them on is, we’re going through the process in France, which is a very big market, very good reimbursements. So we haven’t had dime one out of France yet. And then the other obvious one I think is in China, that has a – kind of very healthy insulin pump business.

I think if you look at a company like Novo and some of the insulin suppliers and see how much money comes out of the Pacific Rim, it’s pretty surprising how big that business. So we do think those are the two big opportunities both of which in France we are in the hopefully, I would say hopefully here because we’ve probably been in the couple of times, but we think we are in the final stages with Ypsomed in terms of getting reimbursement and in China we continue to work our way through their SFDA some of that’s kind of.

Steve M. Lichtman – Oppenheimer & Co.

Okay. Great. And then just lastly on the new sales that you’ve brought on board in the first half with 20 new people, when did they hit the ground and they’ve – when do you start expecting the start producing similar trends, so we start seeing some effect in the back half of the year.

Duane M. DeSisto

Yeah, I mean, of the 20 people basically half of them hit the ground first week of May, the other half hit the ground first week of June. So, again they averaged half a quarter basically just the amount of time they probably learned how to drive to the various places they were going to right, but even with that we did see a little bit of an uptick in these Key Account Manager territories versus if you will standard territories. They were up about 10% in the – one versus the other, which is a positive and we’re still seeing that momentum going into Q3. So, yeah I believe we will see some positive impact out of these folks in the back half of the year.

Steve M. Lichtman – Oppenheimer & Co.

Okay, great. Thanks, guys.

Operator

Our next question comes from Mimi Pham of ABR Healthco. Your line is open.

Mimi Pham – ABR Healthco

Good afternoon. On the managed care issue. Is there any implication related impacts for your pending Type 2 launch next year?

Duane M. DeSisto

Mimi, that’s a great question. And I think you remember what we said, time and time again is, is I’m not sure just having the Type 2 pump and going into that marketplace that you’d ever get reimbursement for. When we go with Lilly with the drug, we were a full blown clinical results, and this is a subset of Type 2 patients that are highly insulin resistant, and typically have failed at everything else.

So we feel confident, we think the hurdle, the medical necessity hurdle will be – or there will be a lot of that, but we’re pretty confident that, this is kind of the last stop on the train to these patients, and it would be very well received.

But I think you have to go at it, once again, as we think about how big diabetes is, how expensive it is, it has the potential to bankrupt the United States as well as the rest of the world; I think you have to go out at the real clinical – I think that’s kind of how we propose that from day one.

Mimi Pham – ABR Healthco

Okay. And then regarding – Dexcom last week during their earnings call said that they were ending their ending their CGM program because of technology failure to human testing. So it seems like this might add more risk to your Pod and CGM. Are you thinking about working with DexCom on the?

Duane M. DeSisto

I think for us we would take nothing of the table. We would work with anyone that obviously has a sensor. I think the last step of DexCom we wanted to do short-term and we continue to talk everybody about what we wanted to long-term.

Having said that, I think where we are just to understand what our mindset is. We really do believe that’s reality issue, now that we think there are products out there they can survive this reality issue. We do think that this all-in-one app, I guess we think about where medicines selling, we are talking about basically having a sensor added to our product and we have the base, we have the insertion system, we have the power, we have to do engagement. We think this will be an incredibly cost effective way to incorporate -operate for insulin dependent patience into a Pod and we are approaching it cautiously. We are not running down the street, we think we get it all work now, but we are listening and talking to everybody we have tested everybody sensors. We are moving forward and talking to all of those guys we think that this is the work with and we still think standard of care someday is going to be one thing on the body and one thing either on your phone or one your hand.

Mimi Pham – ABR Healthco

Last with Medtronic I don’t know it’s not going to pursue a disposal pump anymore, is that helping at all the fields first maybe some and those who wanted to stick with Medtronic given, they can durable today and down the road disposal, where they you talked about.

Duane M. DeSisto

Yeah, once again I think it’s depends on the particular and I am not going to say it does not help, I think from our standpoint, I think what’s pretty competitive in the marketplace is filing mind share with these guys in the office. They will more since whatever the new messages and they will go back into those offices with whatever the new message is. And so like I said I think from our standpoint, we heard them, okay I’ll take the mapping words at the time being and what we are going to driving hard and as far as we are concern this still the guys to be.

Mimi Pham – ABR Healthco

Okay. Thanks.

Operator

Thank you. Our next question comes from Jan Wald of Benchmark. Your line is now open.

Jan Wald – The Benchmark Company, LLC.

Good afternoon everyone. A couple of short questions most everything else has been asked and answered. I guess, one thing is you are looking for margin improvement on the second half of the year. What makes you feel comfortable that you are actually going to be able to achieve the goal that you set for yourselves?

Duane M. DeSisto

Yeah, I mean most of it is, at this point from our perspective relatively locked and loaded, we’ve continue to work with our supply chain on the bill of materials as we continue to work our way up the volume curve. We’ve got some – a very clear path on kind of reduced, continuing to take costs out of product, which should drive us the additional, call it 400 or 500, 600 basis points of gross margin that we should see in the back half of the year.

Jan Wald – The Benchmark Company, LLC.

Okay. And just on the sales force, can you comment – it looks like you had a pretty nice bump in – moreover they were located and working – how should we understand that going forward – is the 10% bump kind of a bump or is it something that you continually leverage overtime – and you see that your Key Account Managers getting into a larger proportion of the accounts that you have or how do you see that program building?

Duane M. DeSisto

Look, it’s great question. I think from our standpoint, right now we’re sitting back watching the testing, we like everything we see, but I think we had said, what drove us to this particular decision last year we had tested it in one particular area, just to make sure that this was the right approach. And then, so what really kind of drive this with some of these key accounts is, when you see the sales reps that had a great deal of success and they can no longer expand beyond their current installed base, because there is a correlation between spending time in the doctor’s office and really developing a relationship with them. So, we are going to watch it, we are going to continue to watch it and it is a program that I think over time we will continue to expand if we keep seeing the results fits in.

Jan Wald – The Benchmark Company, LLC.

Do you see the, I mean, how you are using the key account managers, are they going into your largest most important accounts at this point or once have you seen sort of a gross slowdown because the sales people they have already gotten to the point where they taken much further.

Duane M. DeSisto

The way we are working is, we’ve had sales reps go into a territory been widely successful. All of a sudden, 50% or 60% of – 40% of their business is coming out of three accounts. What you see is the territories that the sales rep has to back-off and spend more and more time in there.

So what we are doing with those accounts is, we’re bringing in this person to maintain that relationship, maintain the Insulet relationship with them and free it up. So what really is, we have a clinical specialist, which is key to all this, because educators want to deal with clinical specialists. Then the Key Account Manager really becomes the farmer, and the sales rep goes back being a humper in the territory. And we can do that, because I think we’ve been at it long enough, in every territory we have 20 top accounts, and then the next 20 accounts, we evaluate where business is coming from, we evaluate how much time the sales person is spending in those particular accounts.

And so we’ve kind of developed a little bit of a model that we think– we can see the relationship between time spend, orders coming out of the office, what the potential of the office is and that’s how we kind of drove the first handful key account managers. And like I said once again we are monitoring it, if it continues to be a successful program obviously, we will roll out in other areas.

Jan Wald – The Benchmark Company, LLC.

Thanks a lot and congratulations on the 35%.

Duane M. DeSisto

Thanks.

Operator

Thank you. Our next question comes from William Plovanic of Canaccord Genuity. Your line is open.

William Plovanic – Canaccord Genuity, Inc.

Great. Thanks. Just two detail questions. One is intermodeling, one is – you’ve trying to gave generalities for the international growth year-over-year what – was it up 100%, 50%, 75% or nominal dollar amount can you give us an idea where that is? And then my second question it is all modeling related is, roughly what was the old NDI business in the quarter. And that’s all I have, thanks.

Duane M. DeSisto

Yeah, I mean, I’ve taken all the neighborhood business was effectively flat with where they were in Q1, and the international guys, the international that fleet on pace the double for the full year. So that’s where that kind of continuing the track and probably been getting more specific than that.

William Plovanic – Canaccord Genuity, Inc.

Okay, great. And see you next week.

Duane M. DeSisto

You, bet.

Brian K. Roberts

Thanks, Bill.

Operator

Thank you. There are no more questions in the queue at this time.

Duane M. DeSisto

Thanks, everyone, for joining us today and we look forward to updating you with our Q3. Have a good night. Take care.

Operator

Ladies and gentlemen. Thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.

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Source: Insulet's (PODD) CEO Duane DeSisto on Q2 2014 Results - Earnings Call Transcript
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