Beta Bionics Inc Aktie

Thank you. Good afternoon and welcome to the Beta Bionic second quarter 2026 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question and answer session and instructions will follow at that time. As a reminder please be advised that today's conference will be recorded on like the hand.

conference over to Blake Deaver, head of investor relations. Good afternoon, and thank you for joining Beta Bionics' second quarter 2026 earnings call. With me on today's call are Chief Executive Officer Sean Saint and Chief Financial Officer Stephen Feider. Both the replay of this call and the press release discussing our second quarter 2026 results will be available on the investor relations of our website. Information recorded on this call speaks only as of today, July 29, 2026. Therefore, if you are listening to a replay, any time sensitive information may no longer be accurate. Also on our website is our supplemental second quarter 2026 earnings presentation and uploaded corporate presentation.

We encourage you to refer to those documents for a summary of key metrics and business updates. Before we begin, we would like to remind you that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations about future events, our product pipeline, development timelines, financial performance, and operating plans. Please refer to the cautionary statements in the press release we issued. earlier today for a detailed explanation of the inherent limitations of such forward-looking statements. These documents contain and identify important factors that may cause actual results to differ materially from current expectations expressed or implied by our forward-looking statements. Please note that the forward-looking statements made during this call speak only as of today's We undertake no obligation to update them to reflect subsequent events or circumstances, except to the extent required by law. With that, I'd now like to hand the call over to Sean.

Thanks, Blake. Good afternoon, everyone, and thank you for joining. Getting down to business, today we're going to cover our financial results for the second quarter, updated guidance for the full year of 2026, and some recent developments in our innovation pipeline. Starting with a brief overview of our Q2 performance, we delivered $32 million in net sales, which grew approximately 38% year over year. The U2 revenue growth was driven predominantly by growth in new patient starts, as well as our growing installed base of users who continued to access their monthly supplies for the islet through the pharmacy channel and who we continue to retain at a high level. The percentage of new patient starts that were reimbursed through the pharmacy channel was a high 30s percentage, similar to the prior quarter. Our gross margin was 59%, expanding 524 basis points year over year. Before I hand the call to Steven, I want to highlight a very important update for Q2.

We published our real-world data on our company website, and it's publicly available for all to see. This data is refreshed continuously and openly in near real-time, without filters or fine print. If an islet user has a provider reported baseline A1C and at least two weeks of data uploaded to our cloud, they are represented on that dashboard. No exclusions applied. Too often in our industry, it has become the norm to publish real world data that doesn't show the whole picture. Selective populations, optimized settings, no baseline comparators, short time periods, strict exclusion criteria. These are all ways that real world data in our industry has become disconnected from the real world experience and unrepresentative of population health statistics. I don't want that point to be missed.

Any data set can be sub-segmented to show how well a system worked in a narrow set of users, and then marketed as what that system is capable of. However, Beta Bionics believes that all people with diabetes deserve great clinical outcomes with minimal work required. So we're setting a new standard in data transparency. The data you see isn't what our system is capable of in a narrow set of users. The data you see is what our system, in fact, does across our broad population. We believe that this is the right way to share real-world data because we're making it easier for healthcare providers, people with diabetes, payers, investors, and anyone else who's interested, to evaluate our outcomes with confidence. We have received very positive feedback on the dashboard and we view that feedback as a reflection of the positive experience that the islet is delivering on the market today.

With that, I'll hand the call over to Stephen to provide some additional detail on our second quarter performance and our full year 2026 guidance. Stephen? Thanks, Sean.

Our revenue performance was mainly driven by new patient starts and the recurring revenue generated from our growing pharmacy install base. New patient starts increased more than 10%, but less than 20% compared to the prior quarter, consistent with our expectations. We continued to expand the insulin pump market as approximately 69% of our new patient starts came from people utilizing multiple daily injections prior to starting on islet. A high 30s percentage of our new patient starts in Q2 accessed islet through the pharmacy channel, consistent with our expectations, and we continue to retain our pharmacy install base at a high level. Moving on to gross margin, Q2 gross margin was 59.0%, declining 45 basis points relative to the prior quarter and increasing 524 basis points relative to Q2 2025. Our gross margin exceeded our expectations, primarily driven by the high margin recurring revenue generated from our financial support. pharmacy installed base and a lower than expected warranty rate. Importantly, Q2 did not benefit from the kind of one-time tailwind that benefited Q1, so we view 59% as a clean read on our underlying gross margin profile and a solid base for continued expansion.

Total operating expenses in the second quarter were $44.5 million, an increase of 37% year-over-year. The increase in sales and marketing expense compared to both the prior quarter and the prior year was driven by the continued expansion of our field sales organization. and increase marketing investments. In Q2, we achieved our previously stated goal of expanding by at least 20 sales territories in 2026. We expect these new sales territories to contribute more meaningfully to new patient starts in the second half of the year. On R&D expenses, the increase relative to the prior year is driven by the mint and bi-hormonal projects. increase in G&A expenses relative to the prior year is driven by continued efforts to scale the company in support of commercial growth and pipeline initiatives. As of June 30th, 2026, we have approximately $225 million in cash, cash equivalents in short and long-term investments. We believe we are sufficiently capitalized to fund all of our key initiatives and remain well positioned to generate free cash flow well ahead of historical diabetes peers.

I'd now like to discuss our updated full year 2026 guidance. We are reiterating our guidance for total revenue of $131 million to $136 million, as well as our expectation that 37 to 39% of our new patient starts will be reimbursed through the pharmacy channel. On gross margin, we are raising our full-year outlook to 58.5 to 59.5%, up from our prior guidance of 57.5 to 59.5%. This updated outlook reflects our strong first half performance, the underlying gross margin profile I discussed earlier, and our expectation for continued contributions from our pharmacy install base, along with the increasing manufacturing scale throughout the year. As we set our guidance, we also considered the benefit from one-time tailwinds in Q1, while recognizing that neither Q1 nor Q2 were impacted by meaningful one-time headwinds. Although we do not currently expect any notable headwinds in the second half of the year, we believe it is prudent for our outlook to reflect a variety of potential outcomes. To briefly comment on operating expenses, we expect a modest increase in operating expenses in the second half of the year relative to the first half, driven primarily by higher sales and R&D expenses.

The sales expense increase reflects the impact of the sales territories we added during the first half of 2026, which will carry their full cost in the second half of 2026. We do not expect to further expand our field sales organization during the second half of the year.

Sean, back to you. Thanks, Stephen. To wrap up the call, I'll briefly touch on our remediation efforts regarding the FDA warning letter we received in late January, and then highlight some key updates in our innovation pipeline. Regarding the warning letter, the company has made considerable progress in remediating the systems that we believe were central to the agency's concerns. As we have previously stated, the two major focus points of the warning letter, the complaints handling system, primarily our definition of reportable complaints, as our post-market surveillance systems are both heavily revised and we believe will meet the agency's expectations. Now, turning to our pipeline, starting with MINT, our patch pump in development. We recently updated our expected timeline to achieve full commercial launch by the end of the second quarter of 2027, subject to regulatory clearance by the FDA. This reflects the FDA's initial feedback on our MINT ACE Pump 510K submission, as well as the significant progress we've made in minitaping. manufacturing readiness.

We recently retired our manual manufacturing line, out a new cleanroom and now have our semi-automated production line operating in that cleanroom. This marks an important milestone in preparing for commercial scale. As our launch plan is built around these semi-automated lines, we believe we're well positioned to support anticipated demand at full launch and as adoption grows over time. We remain confident in our path to FDA clearance and in our ability to manufacture mint at scale. We believe mint has the potential to redefine the patch pump category and become the leading automated insulin delivery platform in the market. And we're excited by the progress we're making towards bringing it to people living with diabetes. Additionally, we're excited to really begin having a more in-depth discussion as to what constitutes a good patch pump, or in other words, what users want in a patch pump.

We think it's impossible to have this conversation with only one product on the market. It's only when two or more products exist that true comparisons can begin to happen. We're excited for Mint's potential to thrive in that conversation, in our confidence in the architectural decisions that we've made, including the two-part design and importantly, the steel cannula. For our bi-hormonal system in development, in Q1, we initiated a Phase IIa feasibility trial to stress test and iterate the system. During that trial, we identified two key opportunities to improve the system, one focusing on the glucagon assets excipient profile and the other focusing on the dosing algorithms. Beta Bionics is in a unique position here. We're defining what bi-hormonal glucose management is all about.

Is it about greater time and range or complete freedom from hypoglycemia or somewhere in between? It's this conversation that we are exploring, which is our responsibility as the developers of the fundamental technology. We expect these iterations to take less than one year prior to initiating additional Phase IIa trials. We continue to believe the biohormonal system has the potential to be a transformative innovation for people with diabetes, which is why our commitment to the program has never been stronger. Lastly, on our innovation pipeline, I want to cover two opportunities where the island is already being used today by providers and patients, albeit off-label. The first opportunity is in type 2 diabetes, where we estimate that greater than 30% of our new patient starts in Q2 were type 2. We recently gained alignment with the FDA in a pivotal trial design that may enable us to achieve the same results as the previous trial. INDICATION EXPANSION FOR THE ISLET TO INCLUDE ADULTS WITH TYPE 2 DIABETES.

The PIPINAL trial is being conducted on real-world islet users with type 2 diabetes, and we initiated enrollment in July. We ultimately expect to expand ILADS indications for use to include adults with type 2 diabetes in the U.S. around mid-year 2027, subject to regulatory clearance by the FDA. The second opportunity I want to highlight is pursuing a fully closed loop indication. I've discussed in the past that a meaningful proportion of islet users choose to operate the device off-label in a fully closed loop manner, meaning they announce less than one meal per day on average. We've highlighted the clinical outcomes associated with the use of the islet in a fully closed loop manner and those are available in our most recent corporate presentation on the investor relations site. In the coming quarters, we intend to initiate a fully closed-loop pivotal trial in type 1 and type 2 diabetes and pursue the indication formally with the FDA. However, we are not committing to a specific timeline for commercialization at this time.

I want to leave you all with one key message from today's call. We believe we're building the foundation for a category-leading diabetes technology company. Our commercial business continues to gain momentum. The islet is resonating with customers and delivering outstanding clinical outcomes. Our pharmacy strategy is working. And with our expanded field organization, we expect to continue increasing awareness and adoption. Looking ahead, the opportunity becomes even more compelling. We expect mint to launch in less than a year, pairing a differentiated patch pump with what we believe is the most advanced insulin dosing algorithm available.

Around mid-year 27, we expect to expand the algorithm's indication for use to adults with type two diabetes, And beyond that, we plan to raise the bar with our bi-hormonal system. We believe the years ahead represent the most exciting chapter in beta bionics history, and the team is committed to bringing these life-changing solutions to people with diabetes. I want to close today with a heartfelt thank you to our team. As you've seen in today's call, we have a lot of initiatives going on as a company. We believe we have a category-leading product pipeline with a fraction of the resources. Said another way, we believe we're doing more with less, and that is all about our team. I just want to remind each of them that I appreciate it. as does the broader community of people with diabetes.

You guys rock. With that, I'd like to thank you all for joining today's call, which will now open for Q&A.

Thank you. At this time, we'll collect the questions and answer the session. As a reminder to answer the question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. In our first question, customer line of Richard Newitter of True Securities, your line is now open.

Hey, it's Felipe on for RISC. Just starting with the live portal data, I mean, that's a huge feat. You're maybe the first one to actually put live patient data up online for providers to see, I guess, like, what are you doing to make sure that RISC-CoV-2 is actually being.

prescribing physicians are seeing that data and then just one follow-up? Yes, great question, Felipe. We are absolutely telling the healthcare provider community about this. They've always been able to see their own clinics in our healthcare provider portal, so they've had access to this for a while. But in this new portal on the website, you can see the entirety of our user base. But absolutely we're showing them that with our field sales team, but it's absolutely as much about users and others being able to come and take a look at that data there, you know, people who don't have access to our healthcare provider portal. So I'd actually say it's primarily for different audiences.

Great. And then, you know, on mint, you know, some of your competitors have nitpicked the steel cannula. I guess, can you remind us, like, what percent of patients on durable pumps, or if you have an idea of what percent of patients on durable pumps are using steel cannulas versus maybe soft cannulas and why that maybe isn't really a problem for a pass pump?.

Thanks for taking the questions. Yes, that's a good question. I do have an idea of what that mix is with durable pumps. For beta bionics, that mix, and I'm not going to give specifics, but I will say for beta bionics, that mix is quite a bit more heavy toward the steel cannula side of things. we believe in the durability of those systems. We believe in the comfort of those systems. And I think if you go back and look at the evolution into, quote, soft cannulas, they weren't about comfort. I think there's an underlying expectation. expectation that steel must be more, you know, more uncomfortable. But the reality is that a steel cannula is a much smaller system.

It's a much smaller diameter system. And in our case, we're looking at the size of an insulin needle, right? Like a traditional insulin pen needle. So what I would encourage you to do is look at somebody taking an injection with an insulin pen and look at the reaction versus a person inserting a quote soft cannula of any description, whether it be an infusion set or one of the patch pumps that may be available, and then tell me what the reaction was. So there's a lot of things that go into these decisions, but we are firmly convinced that our system is going to be an advantage system from user experience. I want to be real careful here because I don't want to make any claims, but that being said, we have all the beliefs in the world of it. And we look forward to being able to talk in more detail about that. And as I said on the prepared remarks, having that head to head comparison, right? Right now, people are criticizing this decision of ours.

But what we look forward to is a day when somebody has tried the competition, tried us, and then we just ask them, which one did you prefer? And we know where the answer lies, because, you know, newsflash, we've used both.

Moving on to our next question. Our next question comes from the line of Matthew O'Brien of Pepper Sandler. Your line is now open.

Good afternoon. Thanks for taking the questions. Just for starters, Sean, maybe just on the, Sean or Steven, on the pharmacy side of things here in Q2, I know the new patient start numbers were good through the pharmacy, but the supplies number was a little bit lighter than expected. Can you talk about that dynamic and WHAT I'M REALLY TRYING TO GET AT IS DURING THE BACK HALF OF THE YEAR, SHOULD WE EXPECT MORE OF THE THE REVENUE COMING FROM DME, YOU KNOW, FOR THE FULL YEAR GUIDE AND THEN MAYBE STARTING TO FLIP MORE AGGRESSIVELY TOWARDS THE SUPPLY SIDE AS WE HEAD INTO 27 AND THEN I DO HAVE A FOLLOW-UP.

This is Steven. Hey Matt. The softness that you're seeing in pharmacy supply revenue in the second quarter is driven by what I call a stocking dynamic from our pharmacy customers. And what I mean by this is that our pharmacy customers ended the second quarter with less pharmacy supply. inventory on their shelf than they did at the end of Q1. So the patient demand for pharmacy supplies was consistent with our expectation. The retention on the product is still strong. The new patient starts going through that channel, we're in line with our expectations. But the actual revenue can be pretty dramatically impacted based on ordering patterns from the pharmacy customers. And that's what drove that dynamic.

So nothing notable about the actual business and performance from patients.

Okay. Appreciate that. And then, Sean, you know, one of your competitors that's coming into the patch market has kind of put a bogey out there of being able to supply about 10,000 patients when they launch. Is that a guidepost we can use for beta, or do you think we should, you know, anchor to something less than that or even more than that? Thank you.

Yes, I'm not going to comment at this time on our actual expectations or specifics to our supply or expected supply. Yes, sorry, it's just something we haven't commented on as of yet. What we can reiterate that we've said in the past is we have our own expectations by the end of Q2 27 for mint in terms of what demand will be. we are anticipating the ability to be able to fulfill that level of demand. So embedded in our full commercial launch guidance is, again, our expectation of demand and feeling confident that we will be able to fill that. Now, in the event that demand massively exceeds our expectations, then we could be wrong. You know, the commercial launch that we're describing is not, you know, slowly dripping this product into the market. It's at that time, it's the full launch.

Understood. Thank you. Thank you. One moment for our next question. Our next question comes from Patrick Wood of UBS. Your line is now open.

Beautiful. Thanks so much for the questions, guys. I'll keep it to one. You always get all this clinical data and see a ton of it. And I'm sure people appreciate you putting it out there. I'm curious, particularly for the type 2 patients, have you been surprised by anything in relation to how they've been using iALERT, whether it's you units or having more patients who are not exactly basal, but let's say higher up the acuity curve rather than somebody using a huge amount of units further down. Is there anything you could learn from the data in that type two cohort that surprised you at all in terms of how patients are using it? I hope the question is clear.

Let me clarify, in terms of how they're using it, are you referring primarily to meal announcements, which of course for us is essentially the only interaction that you have, but you did refer to units. I'm not sure if you mean units per day. Yes, can you clarify, please? Yes, just total amounts of units used. You can kind of infer, I guess, obviously type tubing essentially appropriate. aggressive condition, how far down the curve they are. Does that make any sense? Oh, yes. So I think what you're trying to get at is, you know, there's, I think, an expectation of type 2 that the farther down the curve you are, the more insulin you use. You're probably trying to get an idea of whether or not we're getting the early stage or late stage type 2.

You got it. Got it. You know, it's a great question, and I don't have off the top of my head average units per day in our Type 2 population. But what I can say is that, you know, the islet has – we've made a number of design architecture decisions on the product, one of which is our cartridge, which is about 180 units. you know, that decision has been acceptable to our user base, of course. So that means sort of one of two things. One, the the average units per day is comparatively low or it means that despite the heavier usage that you're traditionally you know you're used to in seeing our cartridge change procedure is quite acceptable in that group So but with all that being said I you know, I have an idea of it and it's it's not insane I mean, yes, I don't want to comment specifically I'm not sure it's, I find it more interesting to talk about our meal announcement, um, behavior on on islet users than I do total daily dose.

Totally. Okay. Thanks for the question, guys. Patrick, congrats on the new gig. Oh, yes. Really nice to have you covering us.

Appreciate it. Glad to be here. Thanks, guys. Thank you. One moment for our next question.

Jordan Bernstein of CTO, your line is now open. Great. Thanks, Ed. Jordan on for John here. They're just thinking about as the year progresses on new customer starts, You know, nice beat here relative to our model in 2Q. As we think over to 3Q, Should we think about that being a step up from 2Q, but maybe a steeper slope 3Q to 4Q? In any color, that would be much appreciated.

Hey, Jordan. Yes, Q3 will be a step up from Q2, but the specifics of where new patient starts will end up or what's embedded in the guidance in terms of new patient starts relative to prior quarters, I don't want to comment on. But yes, we're expecting a step up. We added... More than 20 new territories in the first half of the year. Most of those territories start generating demand for the business. And our new territories start generating demand for the business in roughly one quarter. And, you know, and again, you'd expect that to make an impact in the third and fourth quarter.

Makes sense. And then my follow-up is just on that pharmacy dynamic that you were discussing before on the stocking and there seems to be some less pharmacy supply on the shelf. Is that something that you'd call industry-wide or company-specific, just kind of in the context? of a new competitor entering that channel here throughout the year trying to.

Trying to figure out if you could provide some more color on that. Thanks. It's very company specific is the short answer. If you even look at the history of our pharmacy revenue and as related specifically to supply, it's the pharmacy stocking dynamic has fluctuated from quarter to quarter, sometimes semi-dramatically, and it's not fully predictable. And so we generally comment proactively if there's a major impact to pharmacy or from stocking. But point is, you could have another company selling something similar or one of our competitors selling something similar to similar customers and our performance wouldn't necessarily dictate what their particular performance was in terms of stocking in the exact same quarter. So it's very company specific.

Super helpful. Thank you. Yes. Thank you. One moment for our next question. Our next question comes from the line of Mike Crackey of the Ring Partners. The line is now open.

Hey, everyone. Thanks for taking your questions. Can you talk about what ultimately prompted your strategic decision to pursue the pivotal trial of ILIT and Type 2? It seems like you've been getting good traction there without it. And then just as a follow-up, can you confirm whether we should expect Mint to also be commercially available for Type 2 as part of that mid-2027 expected timeline?.

Yes, great question, Mike. So we've been commenting for a number of quarters that we had Type 2 plans, we just weren't really commenting on them. And exactly to your point, we have had quite a bit of success in the Type 2 space. And for that reason, we didn't feel it was the right thing to do to go and run a traditional trial in that space with the expense and the timeline and everything else. So we had already seen the outcomes that we were getting. So there was a process of working with the agency to kind of compromise on the right data that was required for ILIT specifically in order to get that indication. And as we commented in prepared remarks, we did come to an agreement on that. We are looking at our current ILIT users. but enrolling them in a trial.

So that's really what that was about. But why did we do it at any level? Because we're having a ton of success, but we'd love more. And certainly being able to comment on that and sell it publicly is something that we'd like to be able to do. We've achieved the level of success we have without doing that. So it was the right thing to do. right thing to do for us and it's a pretty modest investment considering how we've chosen to do it. Minton type 2. And yes, Minton type 2. Let me make sure I don't get this wrong.

You know, mint itself, the submission on mint is an ACE pump submission. The pump side of things have historically been approved for people with insulin-dependent diabetes mellitus, right? It's the algorithms that have been specific to type one or type two. So to the extent we get a type two indication on our algorithm, that algorithm will be paired with mint, and yes, mint at that time would carry a type two indication as well. the mint system writ large, meaning mint hardware, with the ILIT algorithm.

Understood. Thanks very much. Thank you. One moment for our next question. Our next question comes from the line of Matthew Blackman of TD County. Your line is now open.

Good afternoon, everybody. Can you hear me okay? Yes, we got you, Matt. All right, great, guys. Maybe, Sean and Steven, just from a high level, how did the quarter play out on pumps shift? I know you said in line with expectations, but I think you probably appreciate there's a lot of background noise in med tech and utilization with coverage changes and perhaps macro headwinds. Just wondering, are you seeing or hearing any of this and the fields that bleeding into diabetes at all. And then I've got one follow-up. Yes.

I'll just reiterate that we did think the quarter's new patient starts performance and revenue performance in line with expectations. There was nothing that we saw about Q2 market dynamics-wise or traction with our product that changed our guidance. So I suppose in that respect, everything was, again, consistent with what we expected, and That includes anything related to public policy that may be a perceived headwind. We're just not seeing any of that.

Okay, I appreciate that. And then, Steven, I'm going to push a little bit, reflecting on your scripted comments, but also in response to one of the questions asked, as we think about the 3Q and 4QKs, and I appreciate you don't guide quarterly, but given that you are onboarding and have onboarded new reps, and I think you said it takes about a quarter for them to ramp to productivity. As we think about just the pump shift cadence, is it potentially going to be a little bit more heavily weighted to the fourth quarter than prior years, or no, last year is still a good proxy for how we think about the shape of the back half of the year? Thank you.

Yes, sorry. You want me to go at it again? No, no, Sean just clarified the question for me. Yes, so shoot, now I can't remember. I can't remember. Can you restate the question, Matt? MATTHEW WALKER- yes, sorry about that.

I'll give it another shot. So I think historically, recently, you know, this year you told us to use 2025 as sort of a guidepost from a cadence standpoint, percent pumps ship per quarter or revenue per quarter. And so I know you don't guide quarterly for the third and the fourth quarter. This year is a little bit different. You've onboarded a bunch. a bunch of new territories. It takes a little of time for them to ramp to productivity. So my question is, as we think about the third and fourth quarter, the shape of the third and fourth quarter for 2026, is 2025 still the right guidepost to use in terms of how we should think about the rest of the year playing out? Or no, maybe it's a little bit more fourth quarter weighted given the dynamics of bringing on a sales force, incremental sales force, and driving productivity gains as they work through the back half of the year.

Got you. Yes, the shape that we saw in 2025, generally consistent with what we're expecting in 2026, there's two primary factors driving that. One is that the sales territories that we added in the first half of 2026, we expect, and history would suggest this for us, or validate this, I should say, that the territories will start to get more productive in their second, third, and quarters beyond, meaning the fourth quarter they've had a longer tenure, they've been at the beta bionics for longer, and thus we would expect them to be more productive. In addition, fourth quarter tends to be seasonally more favorable relative to Q3. Now that seasonality is muted for reasons that we've explained in the past, driven by the pharmacy dynamic. But those are kind of the contributing factors, I would say, for how we would see the new patient starts growth in the back half of the year. Okay. Thank you very much, guys. Yep. Sorry to ask you to clarify there.

Thanks, Matt.

Thank you. One moment for our next question. Our next question comes from the line of Jeff Johnson of RW Baird. Your line is now open.

Hey guys, thanks for taking the question. This is Maggie on for Jeff. I was wondering what you guys are seeing on the competitive front at present. One newer company that has come to market with a fairly sizable sales force just in the past six to 12 months and then another company that is newly independent and has made improvements on their own front. Are you guys seeing any changes? sort of pause from positions, anything from your field sales rep, that it's getting harder to win across accounts? Thanks for taking the question.

Yes, great question, Maggie. No, I don't really think so. I mean, I think that, you know, we're obviously aware of the two competitors that you mentioned or alluded to. In one case, actually I would say in both cases, they represent pretty different products to what Beta Bionics is offering. And I think this is a really important point that I don't want to be missed. We've been continuing to educate the market on what ILIT is over the last several years. And it does represent a highly differentiated offering as compared to what some of those other companies are doing, especially the ones that are more on the side where settings are important. And you can see that in some of the sub-segmented data that I referred to in my prepared remarks.

If you're talking quite a bit about your outcomes and the settings required to get that, that's exactly what we're not doing. And that's why we see beta bionics as a sort of a population health tool, something everybody can get or most people can get a good result with. Those other products you mentioned are a little bit the other end of that spectrum. They require quite a bit of aggressive interaction. So said another way, the target eyelid patient is not necessarily a person who would really be striving for a system like that in general. And we also think that over time though, people who actually think they want that kind of system will ultimately realize they don't love managing their diabetes and pivot more our way. But that's a long way of answering the question and saying no, we're not really seeing, you know, they're not pulling our target patient away from us in any way.

Not seeing it. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Michael Porwark of Wolf Research. Your line is now open.

Hey, good afternoon. I'm curious for color on the 20 new sales territories. Are these folks opening portions of the country that previously were not open for ILUT? Or are you splitting geographies going deeper in key places? What's the those 20, how are they focused and what is similar or different to.

the mandate for the existing rep base. Yes. Good question, Mike. So... The way I would describe it is this. Beta Bionics really hasn't had much what we call white space, meaning areas without a sales rep at all for quite a while at this point. So from that perspective, all of these new territories do represent territory cuts. However, it is also true that if you're a rep with a large territory especially geographically large territory, you're going to have a very hard time getting to some of your target accounts, right? You're going to be focused more in, you know, the large city nearest your home, for example. So from that perspective, this will ultimately be – will ultimately result in – stores that never had a rep visit them starting to visit them at this point, which looks more like a new territory. Where that overlaps is when you cut a territory to the the extent that a particular account that was previously writing is now in a new territory's area, that rep is incentivized to go visit that account first.

They were previously writing. They want to shore up that account. They want to make sure they don't stop. That can be a disruptive experience for that account, and we want to make sure we don't provide that. So they're going to start there and they're going to then expand into sort of new store sales, if you will. So it falls somewhere in between, you know, just a complete territory cut where the previous territory was completely visited, which wasn't true for us, and a net new territory, which it really isn't there either.

Hopefully that's helpful. Follow up on that and then I have my proper follow up. Has the splitting happened in 2Q or is that a 2H project?.

Yes, it's happened in 2Q, or in the first half of the year.

The follow-up maybe for Steven in your prepared remark you mentioned, Lower warranty expense is one of the gross margin good guys. I just want to understand. that dynamic. Is there something to read there positively about retention or that's an over read? I would welcome any further color on that mention. Thank you.

The reason warranty expense has gone down or the warranty rate has gone down is we made the screen stronger. So when we first launched the islet, it was shipping with a version of a certain screen strength. And then we've since upgraded the screen to what's called Gorilla Glass 3 to get technical. and now the screen is breaking far less frequently. So that's the impact on gross margin. A second order impact of that could certainly be retention, although that's a little hard to measure, meaning like the screen's breaking less often, patients are happier, how less often are they treating? I don't know exactly what that metric is, but yes, absolutely. It's a better patient experience if the islet is breaking less frequently, and that did have a favorable impact on gross margin. Okay.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Stephanie Elgazi of Bank of America. Your line is now open.

Hi, thanks for taking the question. I wanted to follow up on the new patient starts this quarter. It looks like the quarter over quarter growth of mid-teens at the midpoint that you shared is below the typical historical trend, Q1 to Q2. Is there anything to call out there, or is it just hard to call history.

trend given the initial launch period? Well, I'm not sure I exactly agree with your math necessarily, your calling, you know, this particular quarter down relative to a trend in the past. But again, this particular new patient start quarter met our expectations, and I guess I'll just leave it there.

Got it. And then on the mint manufacturing capacity and being able to meet demand at the launch, just any progress you can share on the confidence you have driving that and, you know, just where you're at now with getting ready for that capacity and what may be left to do.

Yes, definitely understand what you're trying to get at. I think that In general, we've provided a number of updates lately that are the reasons for our upgraded confidence here. Obviously, we talked about the submission of our 510K. We talked about our clean room construction. We've talked about our semi-automated lines being up and running so much so that we've retired our manual lines. In the past, you've heard me talk about our progression from manual to semi-automated. That would be our launch configuration and followed by fully automated of mid-advanced that would come on in the future.

Those are a very long lead item. So, without getting into the exact details of our production rates and our yields and I think I'll just say that, you know, trying to give a little bit of color today on where we are and obviously we see the underlying numbers and we, you know, based on the timelines to launch here, we're feeling good. We're seeing what we need to see at this stage. This is not our first product launch ever and we're seeing what we need to see to be able to continue to make that statement.

So hopefully that's helpful. Thank you. One moment for our next question. Our next question comes from the line of Jeffrey Cohen of Lindenburg Thelman. Call your lines now open.

Hey, good afternoon. Thanks for taking our questions, Shawn and Steven. Just one follow-up on manufacturing. Can you hypothesize with us regarding margins and how you may think that plays out on MIM and how that might compare to either with the increased efficiency and the automation?.

Yes, just so I make sure I don't answer the wrong question, Jeff, you're asking about Mint gross margin profile after we launch it? Yes, what you would anticipate, yes. Got you, thank you. Well, without giving you a specific number for gross margin that we're targeting or an outlook that we're targeting, I'll just say this. Manufacturing cost was very much embedded in the design of mint, meaning the ability to manufacture and the corresponding cost, so like you mean the reliability of it. yields and the corresponding cost of the actual device itself. And that's why we've done the two-part architecture where we have a reusable portion of the device, which is replaced every two years. And that's where all the expensive components live. And then the actual component of mint that gets thrown away every time a patient changes his or her insulin is actually quite inexpensive in terms of the bill of materials, because all it is is batteries, cannula, the syringe, and the adhesive with, of course, a few other components. But again, all the expensive components in the reusable portion.

So at any level of real scale, meaning millions of parts manufactured or millions of mints manufactured annually, our gross margin profile on mint, we believe will be advantaged relative to the patch pump competition. And again, that's because of our design. And so that gives you some directional sense as to what kind of gross margin profile we're talking about. Um, and also embedded in that too, is, uh, the CapEx associated with getting the mint production capacity to the level that's required. Uh, it's reasonably CapEx light, especially the first phase of mints manufacturing development, uh, where it's semi-automated. Uh, That is very capex light. There's more labor costs, of course, that's the trade off.

But then as mint capacity grows in the future and we move to full automation, more capex, but still reasonably light relative to numbers you're familiar with from our competition and then labor costs, it drops out of it. So here from all this, that cost is, very much at the forefront of all decision making. User experience being number one, but cost right there in the mint design. And that's part of how we're going to be building a profitable market leading company.

Thank you. One moment for our next question. Our next question comes from a line of Richard Newiter of Securities.open.

Hey guys, sorry, it's Felipe. Just one follow-up. This is like the second or third quarter that multiple durable pump players are moving into the pharmacy channel, so I'm just wondering if you could give us an update. Are you seeing any changes? You're the furthest along of those players. Are you seeing any changes in your conversations with the PBMs? Are PBMs more open to coverage, I guess, like.

What kind of changes are you seeing? Yes, great question. You know, I think that multiple players moving in here definitely helps everybody. It becomes – the conversations become more normal at some level. It becomes – you know, nobody wants to do anything out of the ordinary, right? So the more of us do it, the more – It's going to be easier for those that follow. We did pave this road a little bit, at least on the tube pump side, and that's okay. But yes, we're happy to have everybody. I think that ultimately the Pharmacy Channel benefits people with diabetes, and yes, it is getting a little easier to do. as we do it and as we provide a roadmap to have it done.

Are the conversations evolving? mildly I guess there's just a little bit more you know a little bit more understanding of what it is that we're doing But beyond that, no. There's no seismic shift here.

Yes, I think maybe one other point I'd add is we've always desired to have the islet reimbursed in the pharmacy channel as the predominant reimbursement. strategy in the long term. And I think what actually helps that strategy is other tubed insulin pump companies moving towards pharmacy. And in order for that vision that I've just described to be fulfilled, I don't think it can just be Betabionics being the only company that's prioritizing pharmacy. pharmacy or preferring pharmacy as their reimbursement path. And so, yes, maybe it creates, like, in the short run, a small bit of, like, negotiation over time with the PBMs and the decision makers at the PBMs because there's more pump companies. But, look, we like our differentiation and our ability to win those. those discussions. And then in the long term, this is absolutely healthy for a company like us that wants our product to be reimbursed in pharmacy. And that goes for Islet and Mint, of course.

Thank you. One moment for our next question. Our next question comes from the line of Frank Taganin of Lake Street Capital Markets. Your line is now open.

Great, thank you. I'll follow up on the pharmacy channel questions in slightly different context. I know we've talked about in the past one of the gating factors to getting mint broadly adopted and having that unconstrained launch is really the pharmacy channel contracting. Can you remind us and walk us through how that process will go once you have that approval or if you need the approval prior to those contracting discussions, and then how should we think about that kind of impacting the launch cadence.

Hey, Frank. Yes, look, ILIT's position with pharmacy PBMs, meaning the relationships we have, the contracts that we have, and then the underlying health plans is absolutely the runway that will help us get covered significantly faster than if we didn't already have islet on the market. So in some cases, these are the exact same agreements with the PBMs, with the underlying plans, with an amendment to add a new NDC code. In other cases, it's a new agreement, but the point is we've already convinced chief medical officers or the decision makers at these respective accounts of the merits of IOLIT clinically and the users and what their experience is on the device. And so there's no new sales process from zero. All we have to do is convince them that what our hardware is, why it's differentiated, why they should cover what the predicate is. And so that's... I can't really understate how important that is for us to be able to have coverage that we'll feel good about at launch. like I guess CFO answer here. The other side of this is like, what I don't want you to hear is that we will have the level of pharmacy coverage that our patch pump competitor will have on day one.

That will take us time. And I think it's actually really helpful that that road has already been paved that we can follow, but we will not right out of the gate have the same level of coverage that, that they have. But I think, look, there's other, I'm just going to take a quick moment to make the point how, set up Beta Bionics is for Mint and how well positioned the company is and this plan that we've laid out years ago, how well it's playing out. And pharmacy coverage is only one part of that. But you think a company like us with a proven algorithm, proven in terms of clinically, that has confidence from healthcare providers, has confidence from patients. truly differentiated in terms of what its value proposition is. We talked about pharmacy reimbursement and how we've already become experts in that particular area that matters. We have a commercial infrastructure in place, a brand that's well recognized, and this is all exactly how you would draw up a launch for a product like mint. And, you know, I guess so if you can't tell, we're kind of we're excited about it.

And I guess, Frank, just coming back to the pharmacy point. I appreciate you asking.

Small follow-up, just a very specific answer to your question, Frank, and I love Stephen's answer there. In answer to your specific question, do we need approval prior to signing these agreements, the answer is sometimes. But we don't need it to go out and start doing the work. And part of that work, as Stephen said, was laid by ILIT. Additional work is being done.

done now. I'll leave it at that. Okay, that's helpful. And then just a big picture question, and not sure if you'll be comfortable commenting on this or not, but I'll try. How should we think about the leverage profile coming back into the model? Obviously, investment is first and foremost today, and we're seeing OpEx going to grow at about the same rate of sales, if not sometimes a little bit faster. When should we see that line cross where that revenue growth starts to really outpace the OpEx investment?.

I love the question. As you know, I haven't communicated a specific number for where we start generating free cash flow. So I'm not going to today. But look, what's become the expectation for diabetes med tech companies in particular in terms of what revenue scale or what revenue is required in order for you to start generating free cash? Don't don't use that when you're thinking about beta bionics. We're in a different different universe in terms of what our expectations are for ourself. and what revenue level is required. And I guess just also hear that... profit and free cash flow generation. And returning that to shareholders is just a core principle that are in Sean and I in building companies. And yes, I guess you're just going to have to take my word for it and look at our history and what we've done.

But I won't particularly... pick a particular level, we'll start generating free cash, at least for the moment. Fair enough. That's helpful. Thank you.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Sean Saint for closing remarks.

I'll just say appreciate everybody's time and understanding today and willingness to dig in. We're excited and hope everybody sees that in our comments today. With that, I'll close it.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

[Audio Gap] Analyst at Bank of America. Next up, we have Beta Bionics, Stephen Feider, Chief Financial Officer. And we have Blake, Investor Relations.

So maybe to start out, you reported a strong Q1, revenue 2.5%. Maybe just high level kind of what trends you see in the quarter and kind of drove the beat versus expectations.

Well, happy to be at the conference. Thanks for hosting us. Let me just say that. It's good to be up here with you. So the main tailwind that we have for our business that allowed us to outperform and what we're excited about is we're seeing more and more adoption in the pharmacy channel. And what the pharmacy -- so in the first quarter, we had a high 30s percentage of all of our new patients get reimbursed through that channel.

Why that's important is for people who are -- for patients who are considering purchasing a pump, the out-of-pocket that you see in pharmacy is something like $25 or less per month, whereas contrasting that to DME reimbursement -- the out-of-pocket is closer to something -- somewhere in the range of $500 to $1,500. So a dramatic difference in price, and that creates a much easier product for the patient to purchase better for Beta Bionics.

So number two is, we are expanding the field sales team. So we did an expansion in the first quarter of 2026. We are continuing to expand in the second quarter. And the guidance that we've communicated is that we'll grow the territory presence in the United States by at least 20 territories in 2026, and all of that will be front-loaded in the first half of the year. So what that -- what I'm telling you here and saying that is that we're both growing adoption for our product because we have new territories. We're a differentiated product with growing confidence in the outcomes of what we're doing and the automation that's embedded in the product.

But secondarily, sorry, in terms of -- that's in terms of the same-store sales. But we're also growing the actual field sales presence. So there's a lot of places in the country that don't have familiarity with the iLet. And by growing the field sales team, that's allowing us to expand our footprint and grow awareness of the product.

When you think about Q1, now that you've seen all the other reports, how do you think your share trended in Q1 and when you look at the other kind of reports from new patient starts?

Yes. We're evaluating Q1. And I think that even just from the meetings I've had with investors already today and post like all of the pump companies now reporting, I think the perception is that maybe Q1's performance or Q1 in total for new patient starts across the entire pump industry was a little soft. I think I may agree with that. However, the seasonality did not surprise us at all. So I think our pump -- our performance in terms of new patient starts in Q1 was in line with expectations. And there's nothing that I would point to that compressed insulin pump adoption in Q1 that for the market to like come to understand as to why the results were they were. I think that people just don't appreciate that Q1 is the biggest step change seasonally. The drop from Q4 to Q1 is the biggest step change seasonally that we see in insulin pumping.

So I actually like feel really good about what we -- our Q1 results and we're -- for the tube insulin pump market, we think we're doing great. We're actually beating the competition. Our sales reps are performing at a level of efficiency that's exceeding the other 2 pump companies. And all that to say, we are going to need a patch pump to win in this market, and we'll launch one at the timing that we've communicated in the past, but we just feel really good about our spot.

On seasonality, a couple of quarters ago, you were saying kind of less seasonal Q4 to Q1 is more of a headwind versus like normal typical seasonality in Q4. And now you have one of your competitors talking about more seasonality in Q1. Like what -- how do you kind of match up the 2?

Yes. I think, well, what I guess I've been consistent with my communication is that I think that in terms of the step changing seasonally, and this is by looking at the patterns of seasonality for the last 5 years, trying to normalize for new product launches, trying to normalize for any outsized like onetime factors. We see the largest step change downward from Q4 to Q1, a medium step change upward from Q1 to Q2, flat Q2 to Q3 and then a small step change up from Q3 to Q4.

And now we're back to that large step change down. And that's trying to normalize for like all factors. And so I've actually seen the market that way like for a while. Look, our -- one thing to note is when you compare what I just said to our last year's results, meaning Q4 '24 to Q1 '25, the step change down wasn't as strong, but we did launch a product right at that time. We launched the color iLet. So I think that, that sort of mucks up the comparison. But I think we've been -- the way I just communicated is how I've seen it since I've been in the industry.

Okay. That's helpful. And just the overall health of the pump market and some type 1 a little more penetrated than type 2. But when you look at the overall health of the market, is the market maturing? Is it falling? Is there still a lot of opportunity for that kind of sustain double-digit growth?

Yes. I think the pump market is far healthier than what perception currently believes. Type 1 market continuing to grow. I don't want to comment specifically on like what -- I obviously have a perspective on what it's going to grow this year, what it grew last year, depending on which analyst model you look at, you could get a different number. But healthy growth certainly last year, a lot of that driven by type 2, but still growth in type 1. And I see the same for the market going forward, too.

New patient starts in 2026, you talked about a lot of variability and trends throughout the year. I think you still talked about 21,000 to 23,000 new starts. Just trying to understand what gives you the confidence to meet that and help us understand some of the -- I guess, the variability that you talked about.

Yes. Well, we didn't actually -- we don't guide to new patient starts. So we have -- we, of course, understand that the consensus is built from the analyst models, and we do our best to shape the analyst models to where we like them to be, feeling good about the new patient starts consensus and again, acknowledging that we do have some control over how those numbers get created. But I actually feel like new patient starts is reasonably predictable for our business. We have sales territories that now we have enough experience and historical data to suggest what a current territories expectations can be based on their ramp rate.

So to me, that's actually an area of our business that is reasonably predictable.

And then I assume you assume that you're going to be taking continued share kind of at the same rate in guidance or...

Well, look, like I just said a moment ago, I I'm proud of how we're winning in the tube pump market. So I think we will continue to be a winner in terms of where -- getting new patients from that particular subset of the patients who are willing or already currently wearing an insulin pump. I think some of that what I -- if I was going to like confirm or give you a number as to what we thought our market share was going to be for the rest of the year, would almost sort of be like forecasting what the patch pump competitors new patient starts are going to look like, which I don't really want to do.

What I will say is that I really like our position here and that we've built a differentiated product. We've got growing confidence in the algorithm that we have. The clinical outcomes are fantastic. We have all the cash we need and we're set up perfectly to launch our patch pump into a market that clearly, that's what a lot of patients would prefer. And when we do, I really like our position.

When you think about, I guess, the competition in rest of the market, the form factor is converging more to a patch pump, you're kind of one of those converters, if you will. Like how do you think the market starts to compete when form factor is more of the same? Is it more on the algo? And how do you continue to differentiate that?

Well, I think that the form factor to be a patch pump that I would consider to have a credible chance to beat the incumbent, I think that you have to have a patch pump user experience that is as good or better than the incumbent, that's may perhaps obvious. But what's maybe not obvious is when you actually look at the solutions that our competitors are planning to bring to market, there are some significant deficiencies relative to what the incumbent is. So I don't really see like a patch as a patch as a patch pump.

Like by the way, there already are patch pumps that are cleared that no one really cares that much about and no one is trying to go buy because they're inferior to the -- again, the incumbent, like I just said. So I think one really notable characteristic that is like an obvious user experience disadvantage that we haven't really come to fully appreciate yet is that if you have to recharge your device, like meaning you either have to carry 2 reusable portions of the device or you have to take your device off and then recharge it.

Like to me, that's such an inferior experience relative to the incumbent patch pump, but I don't see that as a competitive form factor. But -- let's say then we -- like look at our product that we plan to bring to market mint and with the incumbent patch pump, which I think mint is as good or better of a user experience. Then what's going to matter to get to your real question, is the algorithm and the clinical outcomes and the ease of use for patients and the ease of use for the health care provider, primary -- and pharmacy reimbursement. So all those areas -- and that's why I think Beta Bionics is a market leader. So we need this form factor ultimately to compete at the grand level.

Are there potential improvements on your algorithm as well?

I don't have any specific commentary on that. Here's what I'll say, here's what we're not doing. We're not sitting back and just saying this is going to be our algorithm for here and never more because, of course, we're not. Algorithm is a core competency of us, but I just -- I haven't commented publicly on like what exactly we're considering.

Yes, I was just trying to think about your competitive positioning. If you're competing on the algorithm, other companies obviously advancing their algorithms. There's continue to close the loop, if you will. Just like how does your offering stack up as those other algorithms have been talked about for the market?

Yes, we have to maintain the lead, which means continued innovation, what I like to call this disrupting yourself. So the disruption of ourselves means make improvements to fully automated or fully closed-loop algorithmic technology for insulin only and then also to have bihormonal technology, which means automated for insulin and glucagon. And we've talked about the merits of that product in the past, too.

Great. On patch pump, what's the kind of the -- where kind of -- I know you're not going to say a lot, but just would you help us understand one question that we get is how can Beta manufacture this product. So that's kind of maybe how I'd ask the question, somebody at your scale, ability to manufacture the demand and that's kind of where the competitors have gotten tricked up in the past on patch pumps.

Yes. A broad one to make my point figure you would ask something like this. Okay. So we have -- this is the reusable portion here. This is what you would fill up with insulin every 3 days and replaced with the adhesive and you throw that away. And then here is the reusable portion. There's no recharging required for this. What happens is you're wearing the patch pump when they both are assembled, you take this off your body, you set the reusable aside and then you put the reusable back on to the new one, okay. So that's the step we're adding.

But the key thing you asked about manufacturing is, the reusable portion lasts 2 years. It's where all the expensive components live. The bill of materials is actually pretty high on this. But again, it's fully waterproofed everything. No recharging to reiterate. But the actual like thing that you have to make at and millions and millions a year of is this disposable portion.

And yes, that is hard. But what should give investors confidence that we Beta Bionics can pull it off. I think number one is the design decision. So like actually think about what is really in here. It's 2 batteries, a cannula, you have to put a needle in the exact right place, of course. There's a bonding mechanism to bond to the reusable portion. Yes, there's adhesive. But like that's kind of it, reservoir. So that's not like -- obviously, in a highly regulated sterilized clean room environment like that is difficult. But it's not like building what the patch pump incumbent is doing today, which, by the way, is insanely impressive, is building a fully disposable patch pump every 3 days for like under $10. That's not on my estimate, not theirs. That's impressive. So this is just a way easier design, all right?

Number two is we already do it, meaning we already make disposable products that keep like millions and millions of disposable products with sterilized clean room environment, semi-automated manufacturing equipment in Irvine. We already do that today. We make the cartridge and the cartridge connector, and we have a massive installed base that uses one of those every 3 days, each of those. So this is not a new skill for us. We're not like standing up like, oh, gosh, we get a mint, how are these guys going to create a clean room environment. This is already a core competency. So I think that should help you understand.

What's the hardest part of the whole process?

The hardest part of the whole process is -- this is now -- this is a CFO answering a manufacturing engineering question. Obviously, I have an opinion because I'm really close to the project. I think it's a needle placement, like getting a dead on, which, by the way, is the hardest part about the cartridge connector too, like it has to be like extremely precise. The tolerance is really small.

To get the needle through the cannula or...

You put like what's going to happen is there's -- the needle inserts when you push this insertion mechanism in. And like when you actually place the needle in this particular device every time, like making millions and millions of them, the precision of that has to be like so dead on that like that enough to do that like in a semi-automated manufacturing environment with like machining is like reasonably difficult.

Okay. And if it's not right, just a concern [indiscernible] the pump fails and doesn't ejects.

Yes. Well, you'd have testing mechanisms in place, so you would never like ship one, but it would cause scrap and...

Okay. No, that's helpful. And I guess the plan is still kind of...

We will commercialize it by the end of 2027.

Okay. And that's more depending on manufacturing, not FDA approval?

Well. Yes, so the Gantt chart for this project is big, of course. But the 2 like big items are, there's a regulatory bar and then there's like the manufacturing readiness bar. And our estimation is that the manufacturing readiness bar will take longer than the regulatory bar. We started them both in parallel, of course. So like they're not -- we're not waiting to get a clearance before we work on manufacturing capability, but that is the gating item in our mind currently.

I guess because you probably assume like your existing patients are going to switch over. So you're going to -- on day 1 manufacturing need a decent amount of capacity.

Yes. Not only will some of the existing patients want to change over, but new demand, perhaps pent-up demand from announcements before you launch it. So yes.

Okay. Maybe just give us a state of affairs in the pharmacy channel. You talked to a lot of payers, PBMs, just kind of the, I guess, receptivity to moving more of these devices into the pharmacy channel.

Yes. Okay. Well, I said at the start of the conversation why pharmacy is a major advantage because it's a lower out-of-pocket cost for patients. That's a big one, but it's -- we actually -- it's a advantage reimbursement model for us as a company. It looks more like a subscription model. I don't want to revisit the entire business model. I've done that a ton, but it's no upfront. We don't get paid upfront for the pump itself and then we get paid over time in a recurring revenue model relative to DME where it's all upfront.

So I believe that over time, insulin pumps will be reimbursed as a pharmacy benefit. I think that it's clear to me that's what payers actually prefer. It's advantage for the company. People jump from insurance to insurance. And the way that modern day consumerism works is you pay for things when people are on your product and they're actually using them. So like in the eyes of a payer, like the payer wants to pay if the patient is using the device and on their insurance, not like, hey, I was -- I bought them a pump this year and then next year, they're on a different insurance plan. That's not the -- so you get the point.

I think the important question I want to answer here, and I'm actually going ask Blake to help me with this, but I think there's a lot of concern amongst the investor world that I'd hope to clear the air on a bit. And it's that there is this big cram down in price risk in pharmacy. Like oh, once everyone moves to pharmacy, could a [ rogue ] decision-maker at one of these companies create a race to the bottom in price that puts all this downside pressure on insulin pumping? Or is that already kind of looming and like this is something that all the companies are aware of and they're just not.

And the answer to that is no. I'll do my best here to like attempt to tell you why I believe that strongly that the insulin pump market in terms of price in pharmacy is reasonably well protected. Obviously, there's some risk, but I just don't see that -- I don't see that for us. And I hope we as an industry can get better at communicating why. So here's my attempt.

Number one is that insulin pumps are not commoditized products. When a doctor prescribes a patient with an insulin pump, number one, it's based on that patient's needs because the actual user experience of the algorithm is dramatically different from one patient to another. Whether they can and are willing to interact with the device, their sophistication with counting carbohydrate, the settings that they set that they manage, all that is starkly different. The other thing in terms of -- sorry, I'm losing my train of thought. Blake you might help me out here.

Sure. The other thing beyond the commoditization is just in terms of the actual profile of profitability and gross margin of these different companies in terms of even where the market leader in insulin pumps is today that's getting reimbursed in the pharmacy channel there. We would argue that they're not that the industry in general isn't making money hand over fit such that it would become a clear target for payers to want to desire to cut price. So we think that pricing in general is -- can be competitive but also highly rational and is highly rational today, which wouldn't necessarily create a cram down on price.

And beyond that, I would just encourage folks to think about this not necessarily like a pure medical device, but we are talking about the pharmacy channel, and there are numerous pharmaceutical analogs in oncology, immunology, you name it, where there are different classes of drugs that treat different patients for different reasons, whether it's biomarker-based, whether it's severity of your condition, a really good example of this is the irritable bowel disease market. There's about 8 drugs in that market from, I think, call it, like 2004 to 2000 -- today. Don't quote me on exact here, but there's about 18 years there where because these different classes treated different people for different reasons, 18 years were priced not only sustained, but actually increased over the long term. That included multiple different drug classes and even biosimilar entrants in some where maybe that drug was used to treat a small portion of patients.

So. Yes, sure, the brand drug did see price compression from the biosimilar, but the rest of the market still held up in terms of pricing. It wasn't until Humira had a biosimilar entrant in 2023 and Humira treats outsized proportion of these patients in that 8 drug market that the actual broader market started to see price compression. So until or unless, and we would argue that we are a long ways away from this. But until or unless there is a level of commoditization in insulin pumps and dosing algorithms that creates that level of commoditization or that the more patients can benefit from a variety of different therapies for different reasons. We just don't expect to see that pricing compression.

So I'd encourage folks to think about it that way. Insulin pumps are prescribed specifically for the type of pump that a patient or a physician thinks that a patient would benefit from. And there are numerous factors that influence the outcomes from lifestyle to insulin sensitivity to things like exercise that just make different algorithms work for different reasons.

And so the combination of all of those factors make us quite confident. We believe that pricing is going to be quite sustainable for a long time in this world.

How do you think about -- or how important are like rebates and tiering on different PBMs for insulin pumps?

All right. Well, pharmacy benefit plans have 3 different tiers in terms of pharmacy coverage, that's well understood. Our product is going to always fall and mint will be the same, fall into -- for the foreseeable future will be a Tier 2 or Tier 3 product.

We evaluate which position, either Tier 2 or Tier 3 that we would -- that we want based on the economic model associated with that physician, and I'll explain. There's a difference in the amount of rebates that you pay, like probably the manufacturer pays to be covered as Tier 2 versus Tier 3. And so just take whatever that -- just imagine that difference is say, like I'm just picking a number, 5%, and that's what's the rebate difference.

Well, the other difference between a Tier 2 and Tier 3 position is the co-pay that the patient pays when they're covered on that particular product. And that co-pay difference is not perfectly clear to us, but we have a really strong sense of what that co-pay difference is between Tier 2 and Tier 3 when we're deciding which position we want to target. So what we do is we look at -- and again, it's hypothetical, we look at that 5% difference that we have to pay in rebates for Tier 2 versus Tier 3.

And then because we buy down co-pays, all patient co-pays to $25 or less, which is what we do currently on iLet, and we're not sure what we'll do yet on mint. But because in this case, we buy down co-pays, we can look at how that 5% in gross dollars is going to compare to the difference between the co-pay buydown that we'll have to pay to get Tier 2 versus Tier 3 position. So if the rebate is going to cost us, say, $40 per month difference to be on Tier 2 and the rebate to get to Tier 2 position, we would only pay, let's say, like $25, then we actually would prefer to be on Tier 3 in this particular case because buying Tier 2 cost us more than the rebate difference.

And to a patient, this is all opaque. So like the patient doesn't see what their co-pay is, the buydown happens automatically, and that's kind of how we think about it. So I get a lot of questions about like I'm glad you asked this. I get a lot of questions about how this dynamic works, and it's actually really simple. I hope is the takeaway there. It's just a math problem.

To make something crystal clear because we get this question a lot, but the pricing that we've disclosed in the pharmacy channel, that is net of all the things Stephen just described, net of co-pay assist, net of rebates, net of any other discounts.

Okay. And when you think about the difference for the patient between Tier 2 and 3, it's the co-pay as all they see. But they don't because they buy it down, right? So the patient -- it's net neutral depending on what tier it is. What else matters between Tier 2 and Tier 3 other -- factors?

It's just a rebate and co-pay.

Yes, that's it.

And then why not any Tier 1s?

Tier 1 is like generic. So pumps are not close to generic.

Okay. So you wouldn't even go there. I'm still learning the pharmacy...

Again, I think I'm trying to communicate this as like a really simple concept, but I do appreciate that the investor world like needs to understand this because I started our whole conversation by saying that the move to the pharmacy model is a major advantage for us to manage reimbursement. So I think understanding the dynamics of it and giving confidence is important.

When you think about the payer perspective, not the PBM, but the payer is paying more per month. And we talked about having the -- it's a monthly fee, not a big upfront fee until paying when they're using it. What -- are there any other aspects in the pharmacy channel for why a payer would prefer that over the DME?

Yes. The economic model, like we've talked about and yes, over -- if we -- if and when we retain patients for longer on our product, then the payer net-net pays more into the pharmacy reimbursement model than they do in DME. They see it as a risk transfer and they like it for that reason. So I'll just reiterate that point.

The other important element of payers being more inclined to cover pumps in pharmacy is that they want patients on pumps. So because the out-of-pocket is so dramatically higher in DME, they see that as cost prohibitive in many ways. And so more patients on pumps is considered economically beneficial and just better overall for like health of the patient.

It also matters to the amount of work that goes into verifying and processing and monitoring the claims around where a beneficiary on that plan who's on a pump that they bought through DME for $4,000, $5,000, what have you, and where that beneficiary actually is at that given time, that's a lot of work that's required, and there's a lot of human hours behind that, that goes into their SG&A line, even though it's different from, say, just their cost trend. there is an actuarial conversation around where the dollars are actually coming from.

I hear some say like the payers have more visibility in the pharmacy channel than the DME channel. Is that what that's referring to or...

Yes, it's the visibility and it's the point that if someone is on their plan benefiting from their therapy and getting those short, medium and long-term benefits for themselves and ultimately to the payer, then they'll pay for the therapy.

It doesn't really matter for you yet, but when you do launch mint, there's probably going to be people in your existing DME base that want to transfer to the pharmacy and you think about a payer who just paid $1,000 for a pump, how do you get those patients to switch over? Is there some inhibiting factors on that side? Or is it just not big enough to matter?

Yes, there's no prohibitive blocking mechanism to allowing a patient to transition. So I don't know if it's not big enough to matter. That's not really my call to make, but that will happen. Acknowledging, it's not the design of the program that will happen though.

I was thinking about how easy it is to take a DME patient, an existing patient to the pharmacy channel.

Yes, there's no blocking mechanism in place. I guess the last thing I want to -- sorry if you...

I was going to close, but if you have some...

Yes. I think just looking at -- obviously, you guys are -- the folks listening in here, you guys are in the investor world looking at medtech companies, and you've seen compression in diabetes and in particular, in insulin pumping. And we acknowledge that, and we'll continue to exude our confidence that we have in what we're doing at Beta Bionics.

But I think I just -- one thing I would I would share with you is that's kind of interesting is we -- Sean Saint, our CEO and I started at Beta Bionics, and took over together in what I thought was a fun turnaround story in late 2022. And we laid out a path knowing that we are going to, of course, need a patch pump in order to win. We laid out how we are going to get this device cleared, what kind of capital we are going to need to do it, why it made sense to front-run pharmacy reimbursement and do all this work to build confidence in the product, build a brand that people were loyal to and familiar with.

And we've actually been charting that path like beating even our own expectations. And what's really interesting is like despite all that, if you look at like our stock price and like how the market perceives it, it's a roller coaster like you've never seen, I mean you've seen before, but it's a crazy roller coaster. But like internally, every employee at Beta Bionics that knows what the actual plan of the company is, what the vision is, the narrow priorities that we have, it is unwavering. And we are which -- by our standard, we are right on plan. And we are super excited about what we currently have, the outlook for iLet. And when we launched mint, we're super confident that all these decisions that we've made that they were the right ones at the right time, and we have plenty of cash to do it. So I really like our position.

Sounds great. Thank you. Thanks for joining us.

Thanks, Travis.

Good afternoon, and welcome to the Beta Bionics First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, please be advised that today's conference is being recorded.

I would now like to hand the conference over to Blake Beber, Head of Investor Relations. You may begin, sir.

Good afternoon, and thank you for tuning in to Beta Bionics First Quarter 2026 Earnings Call. Joining me on today is our Chief Executive Officer, Sean Saint and Chief Financial Officer, Steven Feider.

Both the replay of this call and the press release discussing our first quarter 2026 results will be available on the Investor Relations section of our website. Information recorded on this call speaks only as of today, April 21, 2026. Therefore, if you're listening to the replay, any time-sensitive information may no longer be accurate.

Also on our website is our supplemental first quarter 2026 earnings presentation and updated corporate presentation. We encourage you to refer to those documents for a summary of key metrics and business updates.

Before we begin, we would like to remind you that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations about future events, our product pipeline development time lines, financial performance and operating plans. Please refer to the cautionary statements in the press release we issued earlier today for a detailed explanation of the inherent limitations of such forward-looking statements. These documents contain and identify important factors that may cause actual results to differ materially from current expectations expressed or implied by our forward-looking statements.

Please note that the forward-looking statements made during this call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances, except to the extent required by law.

With that, I'd now like to turn the call over to Sean.

Thanks, Blake. Good afternoon, everyone, and thank you for joining. We're pleased to share with you all today our financial results for the first quarter as well as positive updates to our full year guidance for 2026. In Q1, the company continued to progress rapidly across our key initiatives, both commercially in terms of driving adoption of the islet and expanding pharmacy channel access and developmentally in terms of advancing our Mint patch pump program and our bihormonal program. Our teams continue to execute relentlessly to deliver life-changing solutions to the diabetes community today and over the long term.

Diving into a brief overview of our Q1 performance, we delivered $27.6 million in net sales, which grew 57% year-over-year. Q1 revenue growth was driven predominantly by growth in new patient starts as well as our growing installed base of users who continued to access their monthly supplies for the iLet through the pharmacy channel and who we continue to retain at a high level. The percentage of new patient starts that were reimbursed through the pharmacy channel grew to a high 30s percentage compared to a low 30s percentage in Q4 and a low 20s percentage in Q1 2025.

Our gross margin was 59.5%, expanding over 860 basis points year-over-year. Stephen will discuss our gross margin dynamic shortly in more detail. but I wanted to highlight this exceptional performance is evidence that the pharmacy business model is working, as is our ability to drive leverage and manufacturing costs as we scale. I'm proud of these results and eager to build on them as we progress throughout the year.

With that, I'll hand the call over to Stephen to provide some additional color on our first quarter performance and our full year 2026 guidance. Stephen?

Thanks, Sean. Our Q1 performance exceeded our expectations across the board. Revenue performance was mainly driven by new patient starts and the recurring revenue generated from our growing pharmacy installed base. Q1 revenue saw a modest contribution from pharmacy and DME stocking but the stocking benefit in Q1 declined relative to Q4 in both channels.

I'd now like to highlight some of our Q1 commercial metrics. New patient starts declined more than 10%, but less than 20% compared to Q4 2025, consistent with our expectations given typical seasonal demand patterns from Q4 to Q1. A high 30 percentage of our new patient starts in Q1 accessed iLet through the pharmacy channel. The increase compared to the prior quarter exceeded our expectations. It is important to note that most pharmacy plan changes occur at the beginning and midpoint of the calendar year. Thus, we do not expect an uptick from Q1 to Q2.

Our pharmacy strategy continues to deliver strong financial results for the business, driven by the advantaged recurring revenue model, low out-of-pocket costs for patients, a streamlined process for health care providers and our ability to retain patients utilizing the product.

Lastly, we continue to expand the insulin pump market as approximately 70% of our new patient starts came from people with diabetes using multiple daily injections prior to starting the iLet.

Moving on to gross margin. Q1 gross margin was 59.5%, representing an increase of 52 basis points relative to the prior quarter and an increase of 864 basis points relative to the prior year. The primary driver here is our pharmacy installed base, which generates high-margin recurring revenue and where we continue to see strong user retention.

Previously, I've shared a simple way to think about how the pharmacy channel impacts our overall gross margin. The framework I introduced was that when our pharmacy installed base in a given quarter exceeds 3x the number of new patient starts through pharmacy in that same quarter the pharmacy channel generates higher gross margin than the DME channel and becomes accretive to our overall gross margin. We crossed that threshold in Q1, and we expect further gross margin expansion as our pharmacy installed base continues to grow.

The other key driver of strong margin performance this quarter was lower cost of materials for the iLet relative to the prior quarter and year. We also benefited from a couple of onetime gross margin tailwinds in the quarter including higher-than-planned iLet production and modest contribution from pharmacy islet revenue. While we don't expect those onetime tailwinds to repeat, I expect our core gross margin to remain a key area of strength going forward and an important driver of our ability to generate free cash flow at an earlier stage as compared to our diabetes peers.

Total operating expenses in the first quarter were $40.7 million, an increase of 47% compared to $27.6 million in the first quarter of 2025. The increase in sales and marketing expenses relative to the prior year was driven by expansion of our field sales team, which we made excellent progress on in Q1 towards our previously stated goal of expanding by at least 20 sales territories in 2026.

Newly onboarded territories generally take at least a quarter to begin contributing meaningfully to sales. So we're excited for those additions to take shape throughout the year. On R&D expenses, the increase relative to the prior year is driven by the Mint and bihormonal projects. The increase in G&A expenses relative to the prior year is driven by continued efforts to scale the company in support of commercial growth and pipeline initiatives.

As of March 31, 2026, we have approximately $240 million in cash, cash equivalents and short and long-term investments. We believe we are sufficiently capitalized to fund all of our key initiatives and remain well positioned to generate free cash flow well ahead of historical diabetes peers. We feel that all of the key indicators that we monitor suggests we are building a sustainably successful and profitable business, including strong product market fit, solid sales force productivity, growing pharmacy traction, healthy gross margins and continued operational discipline.

I'd now like to discuss our revised full year 2026 guidance which we're raising across the board. We now project total revenue for the year to be $131 million to $136 million, up from our prior guidance of $130 million to $135 million.

On pharmacy mix, we now expect 37% to 39% of our new patient starts to be reimbursed through the pharmacy channel versus our prior guidance of 36% to 38%. Our increased revenue and pharmacy mix guidance reflects our higher expectations for new patient starts, driven by strong Q1 performance and the success we've had in onboarding new sales territories, we're on track toward our goal of adding at least 20 territories in 2026.

On gross margin, we are raising our outlook to 57.5% to 59.5% for the full year versus our prior guidance of 55.5% to 57.5%. Our gross margin outlook reflects the strong performance in Q1 normalized for onetime tailwinds and our expectation of continued contribution from our pharmacy installed base, along with increasing leverage from manufacturing scale over the course of the year.

To briefly comment on operating expenses, we expect year-over-year growth to accelerate for the remainder of the year compared to Q1, driven by continued expansion of the sales force, increased investment in brand and direct-to-consumer marketing and spending related to Mint in our bihormonal programs.

With that, I'll hand the call back over to Sean.

Thanks, Steven. To wrap up the call, I'll briefly touch on our remediation efforts regarding the FDA warning letter we received in late January and then highlight the progress we're making in our innovation pipeline. Regarding the warning letter, the company is continuing to take this matter very seriously. Our teams and leadership are conducting thorough systemic reviews of our quality management system and instituting corrective actions that we believe address the agency's observations. The company is responding quickly to the agency's concerns and we've been providing periodic updates to the FDA regarding changes to our processes and documentation that we believe address many of the FDA's concerns as stated in the warning letter.

One example of our progress thus far is our efforts to remediate old complaints under our new complaint handling system and definitions for reportable complaints. We recently completed that work well ahead of schedule which we believe is a good representation of our organization's commitment to resolving the warning letter in an effective and timely manner. We still have work to do in other areas to fully address the agency's concerns and we look forward to continuing to work together with the FDA to resolve this.

Now to the pipeline. Let's start with a quick update on Mint, our patch pump and development. In Q1, we continued to advance Mint toward our goal of an unconstrained commercial launch by the end of 2027. We remain confident in our ability to gain FDA clearance for Mint, manufacture the product at scale and ultimately realize the opportunity to make market-leading product and automated insulin delivery that we believe it has the potential to be.

For our bihormonal system in development, in Q1, we initiated a Phase IIa feasibility trial to stress test and iterate the system. Our Phase IIa trials have helped us to identify further areas for system optimization and preparation for the more advanced stages of development, inclusive of a Phase IIb feasibility trial and Phase III pivotal trials. I'm excited by our continued progress with the bihormonal system as it represents what we believe has the potential to be a transformative innovation for people with diabetes. Our industry talks a lot about moving towards fully closed-loop algorithms, which the industry generally defines as algorithms that don't require any engagement from the user.

Another topic that's always top of mind for the industry is health outcomes. The ADA's glycemic goals for most nonpregnant adults with diabetes is less than 7% A1c and greater than 70% time in range, which the vast majority of people with diabetes aren't achieving today. When we look at the body of evidence of insulin only fully closed with algorithms, we believe that they will not enable the majority of people with diabetes to achieve the ADA's glycemic goals. But bihormonal may be different. We believe that the existing body of evidence of bihormonal fully closed-loop algorithms shows the potential for the majority of people with diabetes to achieve the ADA's glycemic goals. That is such a big reason why bihormonal has game-changing potential for the industry at large and why our commitment to the program has never been stronger.

At the end of Q1, we also launched a key new feature called Bionic Insights within our health care provider portal. This is a one of its kind intelligent data analytics and reporting feature within the industry. Bionic Insights surfaces clinically relevant indicators user activities and system events and packages them into actionable insights that help health care providers make more informed and personalized treatment recommendations for their patients.

Early feedback on the feature has been overwhelmingly positive and we're extremely excited by its potential to further improve experiences and outcomes with iLet. Lastly, on our innovation pipeline, I want to cover type 2 diabetes. In Q1, we continued to see some health care providers prescribe iLet to their type 2 patients off-label. We estimate that 25% to 30% of our new patient starts in Q1 were from type 2. While we're not committing to a specific time line, we remain eager to pursue the type 2 diabetes indication through the FDA.

I want to leave you all with 1 key message from today's call. We are building a business that we believe is uniquely positioned to succeed over the short, medium and long term, fueled by our exceptional commercial product, pharmacy channel strategy, operational efficiency and what we believe to be the most innovative pipeline in the diabetes industry. We're excited and motivated to deliver.

Thank you all for joining today's call. We'll now open up the call for Q&A.

[Operator Instructions]. Our first question comes from the line of Mike Kratky with Leerink Partners.

Congrats on the strong quarter. I guess to start, it was really encouraging to see the high 30s percent of new starts through the pharmacy channel, but your updated guidance of 37% to 39%, seems to suggest it could hang out there over the next few quarters. So is there any fundamental reason driving that assumption? Or anything you're seeing from a competitive standpoint that maybe tempering expectations there?

Mike, I appreciate the question. And happy belated birthday, by the way. I forgot that I missed that. So nothing notable about the calendar year other than the biggest step-ups in pharmacy coverage happened at the start of the year and at the middle of the year, so January and July. And the other thing that's important to note about pharmacy reimbursement is that while we feel like the business is highly predictable in areas like revenue, this particular area isn't perfectly predictable.

It's B2B sales, long sales cycle. And so our guidance acknowledges both of those factors that I just shared there. In terms of competitive pressure that we're feeling as it relates to the pharmacy channel, none at all that's dampening guidance in any way. Actually, if anything, the move from our competitors our tubed pump competitors to the pharmacy channel makes payers and PBMs more inclined to want to move insulin pumps or tube insulin pumps in particular, to a pharmacy reimbursement. So we actually don't see that move that we're seeing from our competitors to be bad at all.

Awesome. Very much appreciate that. Maybe just separately, in terms of the ongoing sales force expansion, any additional color you can provide in terms of what inning we're in there or how far along you are there?

Yes. I don't want to speak specifically to the number as you can imagine, based on the prepared remarks, we are not in the ninth inning, meaning there's more expansion to happen, but most of the expansion of the field sales force will happen in the first half of the year. So a lot of it happened in the first quarter, and then you'll see some in the second quarter as well, and that will round out most of what we expect to expand by.

Our next question comes from the line of David Roman with Goldman Sachs.

I appreciate you taking the question here. Maybe I'll just start with the ADA guideline changes that I think went into effect in December regarding AID therapy. Could you give us some perspective on what you're observing in the field as it relates to prescribing patterns. I know you talked about in your prepared remarks, beta contributing to expansion of the overall pump market. But help us understand a little bit more what you're seeing both on the type 1 and type 2 side from an underlying demand perspective.

Yes. David, this is Sean. Good question. I don't think that the ADA guideline changes while helpful are really impacting prescribing patterns on a daily basis. Things like that take time to filter out. I don't think we've ever seen the industry just react to a shift. And I think also the guideline evolutions were relatively subtle. Beyond that, I'm really not sure what I can add in terms of evolution. I mean I think the last quarter has been relatively stable in terms of prescribing patterns, narrative, et cetera. I just don't have any data at the moment.

Okay. Maybe just to clarify there. We obviously continue to get a ton of questions around GLP-1s, especially given the oral dynamic. So maybe just any perspective there? And then just for my follow-up here, you talked, Stephen, I think about accelerating OpEx growth through the year. How are you thinking about just overall investment in cost to serve here? Because as we look across the space, you have one of your competitors very aggressively going down the DCC path. You have a lot of people out there hiring reps. But it looks like, generally speaking, revenue expectations are pretty similar for most of the players here. So are you seeing a higher customer acquisition cost as the market becomes more competitive and how you're thinking about just that OpEx versus growth trade-off?

Well, let me take the first part of that, the GLP-1-based question. I'll just say that look, I mean, I think in many ways, this is sort of an ask-and-answer point on GLP-1. I think they are phenomenal class of drugs. I think they are helping a ton of people. I think when you talk about certainly type 1 and also insulin-dependent type 2 in terms of insulin managed type 2 specifically, not really a huge impact there.

Obviously, orals, I think, are a continued evolution of that drug class. It's a great evolution for those. But when you consider that we were going from a once-a-week injectable to an oral probably not the thing that kicks it over into a class of drug that people taking 4 injections per day were in a pump are utilizing. That's not the reason it wasn't helping them is my point. I don't think oral is going to be the change there. But again, another evolution of that drug class that's helpful for them. I'm going to let Stephen take the second half of that investment question.

Yes, sure. So first thing, David, I'm going to comment on is with regards to our sales and marketing growth for the rest of the year and what we're expecting in OpEx. So as I just alluded to in Mike's question, you'll see our sales and marketing spend grow here into the second quarter because of expansions of our field sales team, and that's why you saw the uptick in sales and marketing in Q1 '26 relative to Q4 '25. So that's what we're anticipating. And this also embeds some investment that we're making in direct-to-consumer advertising not at the same level as some of our competitors, but we are making notable investments there. In terms of the customer acquisition cost.

I think that's a really good point. And I think when you look at our P&L, for example, our sales and marketing costs in Q1 '26 are 75% of our revenue. That's not an efficient business at scale, of course. And so our sales and marketing costs -- our customer acquisition costs needs to go down, and it will. And the ways that it will go down, primarily are building an installed base, in particular, in pharmacy, where we generate a high gross margin recurring revenue from selling supplies in the pharmacy.

And then the second one is that we are readying this business in terms of the brand recognition and building a customer first or customer forward go-forward brand in anticipation of the Mint product. And yes, for those 2 reasons, I'm comfortable that we are building a profitable business in the medium, long term, that will start generating free cash way earlier than what we've seen in -- sorry, I got a little feedback there. But earlier than [ 90 ] diabetes peers, but I acknowledge that the customer acquisition costs today for a business like us acknowledging we're getting most of our new -- a lot of our new patients from pharmacy channel and we're building a brand that it doesn't look like a perfectly economical sales and marketing model at this exact moment.

Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets.

Great. I wanted to start with one on gross margin. Obviously, a really strong performance in Q1. I was hoping maybe you can help quantify some of the benefits you called out related to the higher iLet production, anything else that you mentioned on what may have contributed to Q1 and then extrapolating that out to -- it feels like gross margin is trending kind of towards the higher end of the guided range today is the something in there kind of tempering that expectation.

Frank, I appreciate the question. So with gross margin -- yes, there were -- as I mentioned in the prepared remarks, there were onetime tailwinds that we had in Q1 that brought the gross margin up from what it's current run rate is I don't want to quantify specifically what that impact was, but it was relatively small, but notable. So that is the first point.

And then the second thing you asked about is kind of relative to our guidance, doesn't your Q1 actual performance look -- these are my words, not yours, but you're kind of alluding to -- doesn't this look like sort of conservative based on what the Q1 performance is. And I would say maybe, but I just want to acknowledge 2 key points.

Number one is just reiterating that Q1 did have some onetime favorability in it. And then the second point is that cost of sales generally has sometimes discrete and semi unpredictable onetime charges that can happen unfavorably in any given quarter. And in the short run periods makes gross margin semi difficult to predict. And so acknowledging that similar to how we had a favorability of a onetime charge in Q1, I'm not at all forecasting any future results of that nature for us.

But I am saying that we're -- our guidance embeds the openness to that. But I think, look, gross margin is a very high point for our business. There is massive room for upside in gross margin in the -- in the long term for the company. And I hope what you're seeing in just the results even this quarter, is that we're demonstrating cost favorability in our ability to manufacture costs more and more efficiently quarter-over-quarter. And then the pharmacy business model is absolutely working.

I even alluded to today that the pharmacy business unit or the pharmacy revenue model has a higher gross margin as of this quarter than even the DME revenue model. And this is in its early stage. So more upside to come in gross margin in the long term, but they are sort of your answer to on why guidance is set the way it is.

Got it. Very helpful. And then maybe just for my second one, related to cash burn, any seasonal considerations we should think about with the cash burn from Q1, Q2, Q3 and Q4. You saw a little higher cash burn in Q1? And just kind of trying to understand how we should model the burn profile throughout the end of the year.

For sure. Yes. I think cash burn for us is going to sort of approximate adjusted EBITDA for the rest of the year. The reason Q1 cash burn exceeded. We burned about $25 million in Q1. That was higher than what our adjusted EBITDA was around $17 million. And the reason for that is paid transparently, we paid cash bonuses in Q1. So there's a big change in our crude expenses.

And then the second thing is there was some working capital differences between Q4, quarter end and Q1 quarter end, notably, inventory accounts receivable and accounts payable. So those total about $4 million of impact, and that will kind of get you to where closer bridging the gap between that $25 million of burn and the adjusted EBITDA number.

Our next question comes from the line of Jon Block with Stifel.

Great. Maybe I'll go to a couple of modeling questions. But the first one, Stephen, I think -- the Street was about 44%, 45% in 2026 sales and 1H prior to the -- print. It sort of landed around $31 million for 2Q '26. And just curious, is that -- you mentioned this year would be more front-end weighted relative to 2025 for a handful of reasons. But when we look at that 1H weighting or maybe even more specifically, the $31 million for 2Q, is that the right cadence to think about for the model or anything else to call out as we think about the balance of the year on the top line?

Yes. I'll reiterate the guidance that I gave on the last call that you just alluded to, John, which is that or the first half of 2026 will have more revenue in terms of waiting for the calendar year period than what we saw in the first half of 2025 than what we saw in the first half of 2025. I'm sorry, I'm not going to specifically comment on the number you shared in terms of Q2 guidance. That's not a number -- we don't want to give quarterly revenue guidance. But based on what I just told you, I think you can kind of get a really good sense as to what that number is and -- or at least a tight range for it. So I'll leave it there.

Fair enough. So maybe I'll take a different shot on goal to go to gross margin. Going into this year, I think what you alluded to was gross margin would increase sequentially throughout 2026. And obviously, there was material upside to 1Q '26, right, sort of like a good problem to have. you don't want to quantify the onetimers. But just help us out, like when we think about gross margin going forward, now that you're already at the upper band of your revised guidance for GM, what are the -- like call it, the upside or downside for GMs or COGS from here as we think about the next handful of quarters.

Yes. So again, I'm not -- well, I appreciate the question, and I'm not quantifying the extent of the one-timer that we saw or the one-timers that we saw in Q1 to give you the run rate Q1 gross margin. But relative to the run rate Q1 gross margin, we are still expecting an uptick quarter-over-quarter in gross margin. So there's no -- there was nothing, I guess, notable about Q1, we're not calling down gross margin or a different slope for the rest of the year in terms of the outlook. It's just that Q1 had a big number for reasons that I've now explained.

Okay. Sorry, if I can just clarify there. So we're still -- we're up sequentially off the normalized 1Q '26 GM number. You're not going to quantify it. But logically, it's got to be about a 200 bp tailwind if you're up sequentially and still get to the range, the revised range.

Yes, without commenting on specifically the 200 bp tailwind, bingo.

Our next question comes from the line of Richard Newitter with Truist Securities.

It's Philippe on for Rich. Just a follow-up on the pharmacy channel. I think you guys mentioned that more competitors find to enter with durable pumps into the channel is potentially going to accelerate the shift over. So I'm just wondering if you could dig into that, maybe give any context on the conversations that you've been having with your PBM partners. And then just 1 follow-up.

Yes, Philippe, it's Sean. Really beyond just saying that the more companies that are accessing this channel, the more normal it becomes, the more -- the less one-off these conversations are, the more of us that have success through this channel, the more future people accessing will also have that success. And that success brings more success with other payers. And the more payers that start to pay, the more that the ones who choose not to become outliers.

So I think this is definitely a snowball rolling down a hill and multiple payers accessing this channel are a positive for all of us. And yes, so we're more than happy to see that. And I think it ultimately makes our entire industry quite a bit more healthy. Frankly, we're happy to have started that snowball rolling in the durable pump space.

And then if you could just remind us why you expect economics in the channel to hold over the long term. I think there are a lot of misconceptions around multiple players in the channel and potential trend downward and economics. Just any clarity around that would be helpful.

Yes, that's a good question. The primary reason at the moment is that insulin pumps are noncommoditized market. And when you look at the pharmacy channel, there are plenty of examples of commoditized markets getting into a race to the bottom because you're in a situation where a particular payer really only needs to offer one of those products because they're easily switchable, and in fact, you'll see situations where scripts can be changed between different products without the approval of the health care provider. That is not the case in insulin pumping.

When you write a script for an iLet, the payer well, whoever must deliver on islet specifically, and you need to get a new script for something else. It is the definition of a noncommoditized market. So there's really -- there really limits the ability to create downward price pressure in the situation in a market like we have today. Because of the nature of automated insulin delivery and the unique algorithms that we're all providing, that really isn't going to change anytime soon given the clinical trials, et cetera, et cetera, that are required to go into these pumps.

And as of today, anyway, we are still looking at a very differentiated market. And of course, we think iLet being one of the more differentiated products out there. Does that help?

Super helpful.

Our next question comes from the line of Jeff Johnson with Baird.

So, Sean, just maybe staying on that pharmacy point. I think any updated thoughts you have on rebates maybe and how you're thinking about rebate dollars you might provide the channel here over the next few years, handful of years anyway? And how do you balance kind of staying at Tier 3 in some of your contracts and buying down the co-pay versus maybe trying to move up to a Tier 2 but having to chase some added rebate dollars as you compete against maybe one of your biggest -- one of your bigger peers in the pharmacy channel there. So just rebates versus buying down co-pays in that? Just what's your outlook there over the next few years?

Yes. Great question, Jeff. And you're absolutely right. That is very much building on fleet-based question. I would start with -- when you just look at the noncommoditization of the market, limiting the ability generally of payers to create the downward price pressure we see a lot of durability of pricing here for the foreseeable future. So that's one aspect of your question. But the second, frankly, is very different. And that's the Tier 2 versus Tier 3 argument or argument.

So let me just be clear on that. Tier 2 versus Tier 3 has 2 fundamental differences and really only the 2. They are the rebate required to obtain Tier 2 versus Tier 3 and the co-pay that the user is asked to pay when their particular product is covered in either Tier 2 or Tier 3.

So most companies, Beta Bionics certainly included. We have co-pay assistance programs, which are transparent to the user, which ensure that we control that co-pay at a particular level. Currently, I believe we're at $25 or less per month. What that means, though, is that it's a math problem for us, we just balance the rebate required to move between tiers, with the reduction in co-pay that we would get when we do it.

And out of that, it's a very simple math problem to tell us whether or not a Tier 2 or Tier 3 positioning would be more advantage for Beta Bionics. We will always pick that, keeping in mind that our patients will always pay the $25 co-pay that or less than control. So it's really a win-win for us and our users.

Our next question comes from the line of Matthew O'Brien with Piper Sandler.

The first one is a little convoluted, so forgive me, but I don't have perfect information here. But as I look at the model, it looks like the Type 2 growth that we saw in Q1 was meaningfully higher than on the type 1 side. And so I'm just wondering, is the math there about right? Type 2 is really kind of carrying you right now as far as overall patient growth on a year-over-year basis. Are you still growing type 1 somewhere in the double-digit range? And then are you exposed in the intermediate term by not having a type 2 indication just given how well you're doing there? And then I do have a follow-up.

All right. Yes. So is type 2 growth driving the growth of the business? Look, type 2 has been -- I have to be a little careful here because, of course, we don't have the indication. So you're going to always hear Sean and I when we're talking about type 2, a little hesitant to say too much. But Yes, the fact that 25% to 30% of our new users are coming to us with type 2 diabetes that is a large part of our growth. But does it -- is our type 1 growth shrinking? Or is the type 1 market or the applicability for our product in type 1 shrinking?

No, it is not. So the math will show that the -- Type 2 is a growth contributor for us, and it's a larger growth contributor than what Type 1 in this particular quarter was, but it's not because the market for our product in Type 1 is dwindling or anything of that nature. We're as confident as we've ever been.

Are we exposed by not having a Type 2 indication? I do think health care providers will prescribe what they want. That said, the fact that we cannot promote our product for Type 2. And we do not, and we -- of course, legally, we cannot. That is -- that does hinder our growth, yes. it's an indication that we desire that we'll ultimately need in order to win at the level that we desire to in the medium and long term. But the fact that the product is prescribed the way that it has been in Type 2 is really just a product of doctors being educated about what insulin pumps are out there. But if we have the ability to market ourselves for that particular area? Absolutely, it would help us.

Got it. And apologies for that long question, and I think here comes another long one. But just the R&D spike that we saw in Q1 versus Q4, and I know there's some timing issues there, but is it fair to say, I still think the bihormonal work is both kind of earlier stage versus Mint? Is it fair to say the big bump that we saw a higher than what we were modeling was really related to Mint. And then do you -- are you sensing that your Mint timing is you don't have to give it to us, but just is on track versus what you were expecting or maybe potentially a little bit earlier than what you were expecting internally?

Yes. Thanks for the question, Matt. It's Sean. Look, I'm not going to comment on the split between where we're spending our money between bihormonal and mint. What I will say is that both products continue or most projects continue to move forward and both will see upticks in spending over the next period of time. So I think at some level, that was true on both. But I'm not going to call where the lion's share fell.

And then in terms of Mint, not really a lot I can share right now. I think the notable point that maybe I'll sort of reiterate is that we've been sharing the time line we've been sharing for quite a while, and it hasn't slipped. And we've been continually reiterating it now forever, I think. And I think that's what you want to see from us, right? We're not moving it all around. We're just -- we want to be predictable, and that's what we've been but with that being said, no really additional updates except reiterating our time line unconstrained launch by '27.

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann Company.

So I guess, firstly you'd call out lower cost of materials in Q1, that was net favorable. But anything related to articulation or scale as a function of that or too small at all?

Can you say the last part of your question related to inflation or scale or what did you say?

So Q1 cost of materials was some of that deflationary in a sense? Or was some of that scale related as far as share scale?

Yes. The primary driver of the lower cost per unit and the cost of materials is simply just volume, so CS scale. The more components were able to -- were able to purchase a larger scale, the lower cost per component.

Okay. Got it. And then second, I want to follow up on the bihormonal. What might we see during 2026 as far as any data or publications related to the IIa or the IIb trials feasibility studies.

Yes, Jeff, that's a great question. Frankly, I don't think we really intend to publish a lot of this information. There's not really a benefit to us to do that. So what we will do is -- I don't know publishing, but as things complete, our cadence here has been to let you know that things are done, not so much to tell you what's coming up. We'll continue to follow that path, '26 should bring some meaningful updates, but I'm not going to call out exactly what those are at this point, but I will reiterate. Now we probably won't publish the results of these trials for various reasons. I just don't think there's a benefit.

What I will say, and I alluded to this in our prepared remarks, is that in the past, we really have published data on this. There's been quite a few studies published by Beta Bionics on our formative studies over the last 20-odd years on this product. And a lot there, and there's some really, I think, phenomenal results to be looked at. So that I think sets a line as to kind of where we'd like to see things sort of at a minimum. But they're, I don't say they're great outcomes from my perspective. So I would encourage you to go take a reread of some of the stuff we published in the teens.

Our next question comes from the line of Matthew Blackman with TD Cowen.

I've been jumping around calls. But, Stephen, I just want to get a feel for the new disclosure on new patient adds that I know we can pick whatever number we want. But would you have us be sort of in that middle of that range? Is that a reasonable sort of launching point to model off of that greater than 10%, but less than 20% Q-over-Q decline is being in the middle of that, a fair point to sort of model that new patient number off of.

Totally appreciate why you want to know that, unfortunately, what we've said in the prepared remarks is what we prefer to disclose in terms of the extent. So I'm sorry, Matt, but I won't comment any further.

And then just remind us again on the sales force expansion, I know we talked a little bit about it, but we know you're adding 20 territories. But just relative to the expansions you've done over the last several years, how similar or how different is this versus those expansions? Is this a lot of white space that you're filling in? Or are you now to splitting territories going deeper into areas, geographies so that you can really pound away at accounts. And if so, is the execution of the sales force expansion any different than what you've tackled successfully in prior years? And that's all I had.

Yes, Matt, this is Sean. I'm not going to comment on size of the expansion. And this is probably an unsatisfying answer, but I'm going to say, yes, of course, it's both of those things. I would say technically, white space would be an area that you kind of consider that you don't have a rep. And we don't really have white space. There's a rep covering everywhere in the country.

That being said, there are absolutely areas of the country that get essentially no rep visiting. We never actually put a foot on the ground in that area. So we are putting reps in those spaces. So it's not technically white space, but for all intents and purposes, it is.

But then also, we're -- they're replacing people at some stage. We're adding people in areas that we're well covered. It's just all those things. We tend to take people that we tend to find good people and put them where we can at some level. You're not just going to say, well, I'm going to take whoever is available and, I don't know, pick a particular MSA and just find a person. We want to make sure that we get good people in every place. So that governs to some extent, where and when we add.

Our next question comes from the line of Travis Steed with Bank of America.

This is Grace, Sean, for Travis. I just wanted to start the first one maybe about the 2026 revenue guidance, I think it's implying about $33 million of year-over-year dollar growth. You did like $35 million in 2025. Just wondering if this is sort of a level of conservative in the guide or what sort of do you think it takes from the pipeline or other parts of the business to accelerate revenue growth going forward on a dollar basis.

Yes, understood. This is Stephen. Thanks for the question and for dialing in. Yes, your math is correct in terms of what the guidance kind of implies year-over-year growth wise. The puts on what could go right for the business that would allow us to exceed the revenue guidance, which we do set, of course, that we have confidence in what we guide to is the iLet builds confidence from the health care providers that -- from endocrinologists around the country and the clinical results that we get from our product, they continue to resonate with health care providers, patients have unique and great experiences on the device, tell their health care providers, other health care providers about it or their health care provider about it, and we start to build confidence and traction in same-store sales.

The other thing that's put on the business is the new store sales. So as Sean just alluded to, we added a lot of new sales territories already. We'll continue to add more of them in the second quarter. And most of the places where these new sales reps are going do not prescribe the iLet today. And so turning on those particular health care providers by making them aware of the benefits of automation, the great clinical comes that we have from our product if and that exceeds our expectations in terms -- or what's embedded in the guidance, that would be another upside to the numbers that we've guided to.

And then maybe just a follow-up on any directional color that you can sort of help with on new patient starts, relative maybe to 2025 or seasonally throughout the year of 2026 and maybe how that DTC advertising spend is going to help leverage the new patient starts in 2026?

Of course. The only -- we don't guide to patients start specifically. But the only point I'll kind of communicate to you all and is just to reiterate that Q1 is the weakest quarter seasonally. And we absolutely expect an uptick in new patient starts and then, of course, revenue to coincide in the second quarter.

And other than that, I think I'll just kind of leave it to our full year guidance as it relates to revenue, which I think kind of embeds what our expectations are and new patient starts. But the Q1 to Q2 jump is the largest seasonal step change that we think happens in the calendar year, and you'll see that, we believe, in our results.

Our next question comes from the line of Ryan Schuler with Wolfe Research.

Just one for me on competition. There was a competitor who did a recent IPO and another competitor who launched a nationwide product launch. Have you seen any changes in the competitive environment? And maybe where do you see the most opportunity today?

Yes. Good question. No. I mean, IPOs don't really have any bearing whatsoever on the actual market dynamics as far as we're concerned. So yes, we're well aware of that, of course, but no impact from our perspective. On the nationwide product launch of the other competitor, look, sure at some level, you hear about it. There's definitely news out there. I would point out that, that particular product is while being a very good product is quite similar to some of the other products on the market. And I do believe it's increasing competition with those other products quite a bit, quite a bit different from what we offer. And in general, you're the same person who's looking at our product like ours is not looking at that one.

So I would say a more muted impact to us, however. It's true that increased competition always that the margin is going to dilute everybody just a little bit. So I'd say that's unfortunate, but I wouldn't say that it didn't impact us all that much.

Beyond that and then that product, of course, has been known and available at some level for a while -- nothing really that's changed the narrative out there. There hasn't been a big product launch, a meaningful product launch that we're aware of for quite a while at this point, things are relatively stable. So for a company like Beta Bionics, our job is to continue to get the word out. We are offering a meaningfully differentiated product. That also means it's new. That also means it's different. It also means health care providers are not nearly as familiar with it as some of our competitors. So that's our job today. We've been doing it historically with a smaller sales force. And frankly, we've been doing it in a -- I don't want to call it a niche exactly, but a smaller portion of the market, meaning the tube pump market. And with all that being said, I think we really -- we like where we're at. We've taken meaningful share of the new patient starts every quarter, especially when considering our sales force, especially when considering the smaller portion of the market that we play into which is doing exactly what we do now. It's getting the information on our differentiated iLet system with our new algorithm out there, getting the health care providers familiar and setting us up to then bring that more nationally with an added sales force and then ultimately to the entire market with our Mint program.

So I think we're doing the right things to set ourselves up for long-term success here. But those are long-term statements, and I suppose I started with, yes, no recent evolutions of the market that we're aware of. So thank you. Thank you.

Ladies and gentlemen, I'm showing no further questions in the queue. And that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Beta Bionics Inc. Q4 and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to hand the conference over to your speaker today, Blake Beber, Head of Investor Relations.

Good afternoon. and thank you for tuning into Beta Bionics Fourth Quarter and Full Year 2025 Earnings Call. Joining me for today's call are Chief Executive Officer, Sean Saint and Chief Financial Officer, Stephen Feider. Both the replay of this call and the press release discussing our fourth quarter and full year 2025 results will be available on the Investor Relations section of our website. The replay will be available for approximately 1 year following the conclusion of this call. Information recorded on this call speaks only as of today, February 17, 2026. Therefore, if you're listening to any replay, time-sensitive information may no longer be accurate.

Also on our website is our supplemental fourth quarter 2025 earnings presentation and updated corporate presentation. We encourage you to refer to those documents for a summary of key metrics and business updates. Before we begin, we would like to remind you that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations about future events our product pipeline, development time lines, financial performance and operating plans. Please refer to the cautionary statements in the press release we issued earlier today for a detailed explanation of the inherent limitations of such forward-looking statements. These documents contain and identify important factors that may cause actual results to differ materially from current expectations expressed or implied by our forward-looking statements. Please note that the forward-looking statements made during this call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances, except to the extent required by law.

Today's discussion will also include references to non-GAAP financial measures with respect to our performance, namely adjusted EBITDA. Non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operations. We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods. Any non-GAAP information presented should not be considered as a substitution independently or superior to results prepared in accordance with GAAP. Please refer to our earnings release and supplemental earnings presentation on the Investor Relations section of our website for a reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measure.

With that, I'd now like to turn the call over to Sean.

Thanks, Blake. Good afternoon, everyone, and thank you for joining. With this call, we're officially turning the page on our first full year as a public company. It's been an exciting year to say the leastand I want to take a brief moment to reflect on it before we dive into the details of our Q4 and full year 2025 performance. Beta Bionics exists to deliver solutions to people with diabetes that reduce burden expand access and ultimately improve outcomes at the population level. We believe that in doing so, we can, for the first time, begin to lower the average A1c of people living with diabetes in the U.S.

Our performance over the last year is strongly indicative that we're on the right track. On our first earnings call, we shared our key targets for the full year 2025. And as we'll highlight in more detail shortly, we outperformed substantially on each of those metrics. Close to 20,000 new users adopted our technology in 2025, more than doubling our installed base entering the year, which now stands about 35,000 total users that have adopted the iLet since launch.

We added those users with what we believe is a substantially smaller sales force than our competitors, which we believe on a per territory basis made our sales reps potentially the most productive in the durable pump market in 2025. That goes to show you the power of our fully adopted algorithm, our robust ecosystem of digital tools to support our users, their caregivers and their providers and ultimately, our team's ability to execute and deliver results.

We continue to lead from the front on our pharmacy channel strategy for durable pumps and established formulary agreements with all the major pharmacy benefit managers or PBMs that operate in the U.S. We were also affected by driving adoption of those formulary agreements at the individual plan level, which is a critical step in the process that ultimately enabled many of our users to access the iLet and its related consumables for significantly lower out-of-pocket costs. We also believe our gross margin profile is already the strongest in the durable pump space, as evidenced by our performance this year, especially considering the success that we've seen in the pharmacy channel, which had a short-term dilutive effect on gross margin in 2025.

On the R&D side of the business, we took meaningful steps in the development of Mint, our Pachon program, which we unveiled to the world at our first Investor and Analyst Day in June. We also completed our first clinical trials as a drug company executing a PK/PD trial for our glucagon asset and a first-in-human feasibility trial for the entirety of our bihormonal system in development. I'm proud of all we've accomplished in 2025, and I look forward to 2026 as another year of relentless execution on our key objectives that we believe will ultimately position us to revolutionize diabetes care in the years to come. We have lots of ground to cover on today's call, beginning with our fourth quarter and full year 2025 results, Steven will then provide some additional detail on our fourth quarter performance before introducing our guidance for full year 2026. I'll wrap up the call with regulatory and pipeline updates, and then we'll take Q&A.

Starting with a brief overview of full year 2025 performance, I'm proud to announce that we delivered $100.3 million in net sales, which grew 54% year-over-year. Our gross margin of 55.4% expanded slightly year-over-year, while our percentage of new patient starts through pharmacy grew to a high 20s percentage for the full year 2025 relative to a high single-digit percentage in the prior year. To put it simply, these are excellent results. The iLet is winning with its unmatched automation.

Our highly transparent and inclusive real-world efficacy and safety outcomes are excellent and available for the world to see in our latest corporate presentation. Beyond the product, we're quickly innovating the business model for durable insulin pumps and we're remaining disciplined in our execution and cost control.

Diving into Q4 results. Specifically, we generated $32.1 million in net sales which represents 57% growth year-over-year. Q4 revenue growth was driven by a few items. Number one, we delivered 5,592 new patient starts in the quarter, which grew 37% year-over-year. Number 2 is our growing installed base of users accessing their monthly supplies for iLet through the pharmacy channel, whom we're retaining at a high level. Number 3 is modest favorability in stocking revenue that we saw in both the DME and pharmacy channels relative to the prior quarter year.

In pharmacy, in particular, we saw a modest pull forward of about $1 million of stocking orders from Q1 into Q4 and ahead of price increases that were implemented at the end of the year in that channel. In Q4, a low 30 percentage of our new patient starts were reimbursed to the pharmacy channel, increasing slightly relative to the prior quarter and substantially relative to the low teens percentage we saw in Q4 of the prior year. Our gross margin in Q4 was 59%, expanding 179 basis points year-over-year.

Gross margin expansion is being driven by the benefits of increased scale and manufacturing volume leverage, greater contribution of high margin revenue from our growing pharmacy installed base and continued cost discipline. .

With that, I'll hand the call over to Stephen to provide some additional color on our fourth quarter performance and introduce our full year 2026 guidance. Stephen?

Thanks, Sean. Our Q4 revenue, pharmacy mix and gross margin results exceeded our guidance across the board. While we don't guide on this metric, our 5,592 new patient starts grew 5% sequentially relative to the prior quarter which was in line with the lower end of our expectation for the quarter. While Q4 remains the strongest quarter seasonally for new patient starts in the diabetes market as it has been for us since we launched the iLet, we believe its relative strength compared to the other quarters is diminishing.

We believe that historically, Q4's relative strength was predicated on people with diabetes who waited to purchase an insulin pump until they met their out-of-pocket maximums for the year and before their deductibles reset in the new year. By waiting until their out-of-pocket maximums are reached, patients could save as much as $1,000 to $2,000 on a pump they purchased later in the year through the DME channel. Since 2023, the majority of new pump users in the U.S. have acquired their device to the pharmacy channel, where the majority of users can initiate and maintain therapy for under $50 per month.

Said another way, -- we believe that over the past few years, people with diabetes who may have previously waited until Q4 to adopt a new pump or waiting less frequently than they used to. Our pharmacy channel strategy enables us to compete for those new users and is a key reason why we've seen great adoption of the iLet throughout the year. In Q4, approximately 69% of our new patient starts came from people with diabetes that used multiple daily injections prior to starting the iLet, which is an important representation of how much the iLet is expanding the market for insulin pumps and addressing an unmet need.

Moving on to gross margin. Q4 gross margin was 59%, the improvement we saw in our Q4 gross margin relative to the prior year and the prior quarter was driven by 2 primary factors. Number one, growth in the pharmacy installed base, which generates high margin recurring revenue and where we continue to see strong patient retention; and number two, lower cost per unit from higher manufacturing volumes driven by growth in patient demand.

Total operating expenses in the fourth quarter were $35.1 million, an increase of 42% compared to $24.7 million in the fourth quarter of 2024. The increase in sales and marketing expenses relative to the prior year is driven by the expansion of our field sales team, which still stands at 63 territories exiting Q4. The increase in R&D expenses relative to the prior year is driven by the Mint and bihormonal projects. The increase in G&A expenses relative to the prior year is driven by new costs related to operating as a public company.

As of December 31, 2025, we have approximately $265 million in cash, cash equivalents and short and long-term investments. We are sufficiently capitalized to fund all our key initiatives and remain well positioned to begin generating free cash flow well ahead of historical diabetes peers. I'd now like to introduce our full year 2026 guidance. Starting with revenue. We expect to generate $130 million to $135 million of revenue in 2026. On our channel mix we expect 36% to 38% of our new patient starts to be reimbursed through the pharmacy channel.

Lastly, we expect gross margin to be between 55.5% and 57.5%. Our revenue guidance contemplates our expectations for the iLet to continue to expand the pump market while taking market share, stable and strong patient retention in both the DME and pharmacy channels, stable pricing in the DME channel, and a low single-digit increase in price for supplies sold through the pharmacy channel. Other key variables that may impact our revenue performance relative to our guidance include the percentage of new patient starts in the pharmacy channel, and the rate at which we expand our sales force throughout the year.

Our gross margin guidance contemplates our continued cost discipline, improved leverage of manufacturing overhead at greater scale and continued contribution of high-margin revenue from growing pharmacy installed base. Another key variable that could impact our gross margin performance is our pharmacy mix of new patient starts were meaningful changes from 1 quarter to the next can have a material impact on our near-term gross margin. A quick comment on operating expenses and CapEx. For 2026, we expect OpEx and CapEx to increase as a percentage of revenue relative to the prior year.

We expect both sales and marketing and R&D spend to accelerate on a year-over-year basis, driven by sales force expansions as well as Mint and bihormonal costs, respectively. We expect G&A spend to increase slightly year-over-year to support the organization as it scales. CapEx spend will accelerate predominantly related to Mint. In terms of revenue cadence we expect Q1 to decline sequentially from Q4 2025. As I mentioned earlier, while the growth of the pharmacy channel is muting traditional seasonality in the insulin pump market, Q4 remains the strongest quarter on a relative basis even if its relative strength is diminishing.

Q1 also continues to be the softest quarter on a relative basis due to annual deductible resets. While many patients do not wait for their medical deductibles to be met before purchasing an insulin pump, a portion still do. As a result, the pool of patients initiating therapy through the medical benefit is typically larger in the back half of the year, especially relative to Q1. In Q1 of 2025, we were able to partially offset this typical Q1 seasonality headwind for 2 primary reasons. Number one, we were still benefiting from momentum generated by our late 2024 product launches, including color iLet Bionic Circle and the Libre 3 Plus integration.

Number two, we meaningfully expanded pharmacy coverage in Q1 2025 through our agreement with Prime Therapeutics. That expansion allowed significantly more patients to access iLet earlier in the year with minimal out-of-pocket costs, driving incremental new patient starts. While we continue to view iLet as highly competitive in the market, we do not expect Q1 2026 to benefit from the same level of tailwinds. We did not have comparable product launches in late 2025. And although we anticipate incremental growth in pharmacy coverage from Q4 2025 to Q1 2026 -- we do not expect a similar step change in pharmacy coverage expansion as we experienced in Q1 2025.

Stepping back from Q1, we expect full year 2026 revenue to be slightly more weighted towards the first half of the year compared to 2025. In the first half of 2025, we experienced a significant increase in the percentage of new patient starts flowing through the pharmacy channel. That mix shift was dilutive to revenue in the first half, but became accretive in the back half of the year. In 2026, we again expect the pharmacy mix to increase with that growth weighted towards the front half of the year. However, we expect the magnitude of the shift to be more modest than what we saw in early 2025.

As a result, we expect a modestly higher revenue weighting in the first half of 2026 relative to the prior year. Beyond pharmacy mix, the other key variable that could influence revenue cadence throughout the year is the pace at which we expand our sales force. In 2026, we plan to add at least 20 new sales territories up from the 63 territories we had at the end of 2025. We expect to expand throughout the year as we identify high-quality sales reps in priority markets.

Going forward, however, we will no longer provide specific quarter-end territory counts in order to better align our disclosure practices with those of our peers. With that in mind, I'd like to address our approach to the new patient starts disclosure going forward. Since our IPO, we have provided exact new patient starts figures to support the investment community and understanding the complexity of our traditional DME channel model versus our innovative pay-as-you-go model in pharmacy. We now feel at this stage that the investment community has a strong understanding of our dual channel business model. Therefore, to better align our disclosure practices with industry peers, we will no longer provide an exact quarterly new patient starts figure.

That said, we remain committed to an industry-leading level of transparency, and we will continue to provide our quarterly revenue by product and channel. Our mix of new patient starts going through the pharmacy channel and quantitative trend-based commentary on new patient starts each quarter. Again, this is more disclosure and transparency than we typically see in the insulin pump space. We will continue to evaluate our disclosure strategy to align with industry practices while maintaining a leading level of transparency in line with our brand.

Shifting back to our 2026 guidance. Regarding the trajectory of gross margin throughout the year, we expect Q1 gross margin to decline relative to the levels we saw in the second half of 2025 driven by 2 factors. Number 1 is Q1 demand tends to be seasonally lighter, which translates to lighter manufacturing volume. Number 2 is we expect to see an increase in our mix of new patient starts in the pharmacy channel in Q1 as discussed earlier. Beyond Q1, we expect gross margin to sequentially improve in each quarter throughout the year as we drive more leverage from greater scale, and we generate more and more high-margin revenue from our growing pharmacy installed base.

Before I hand the call back to Sean, I want to say how proud I am with this team. And just our second full year on the market, we scaled past $100 million in revenue, high-need pharmacy reimbursement for a tubed insulin pump and made significant progress across our R&D programs. We did all that while operating with a level of cost discipline the industry simply hasn't seen. Energy and enthusiasm at Beta Bionics are high at their highest since joining the company. The team has filled is competitive people, all focused on winning and doing their very best for people living with diabetes. I'm excited.

With that, I'll hand the call back to Sean.

Thanks, Stephen. Before I get into the innovation pipeline, I'd like to address the warning letter that we received from the FDA in late January related to observations made by the agency following the inspection of our Irvine facility in June of 2025. After that inspection, the agency issued us a Form 43, which we highlighted on our previous earnings call. We take the FDA's observations very seriously. And following issuance of the Form 43, we immediately began remediation efforts to directly address the observations.

We were disappointed to receive a warning letter, but I remain proud of the incredible work our teams are doing to address the agency's concerns and confident in our ability to resolve them. We look forward to working together with the FDA to evolve and strengthen our quality systems and processes. I want to briefly highlight those key issues and discuss our remediation efforts and spirit of transparency and to instill confidence in the work we're doing to address the agency's concerns and ultimately close out the warning letter. First, the agency had several findings concerning our complaint handling system.

Specifically, they found that our definitions of complaints that rose to the level of Medical Device report or MDR, were not consistent with their expectations. This alignment is a hard thing to do without direct feedback from the FDA and and many companies have had to work through the exact issue with the agency to get it resolved. I'd like to highlight an example of what I'm talking about. In the agency's view, a reportable hypoglycemia event includes those that are self-treated with glucose drinks or candies. By contrast, prior to receiving feedback from the agency, our definition of a reportable hypoglycemia event included only those requiring third-party assistance which was aligned to the ADA's definition for severe hypoglycemia.

The FDA's view that self-treated hypoglycemia should also be reported isn't codified to us without direct feedback from the agency and through our collaboration. Beta Bionics has aligned our definition of reportability with the expectations of the agency and the warning letter seem to confirm that the agency agrees with our new criteria. These criteria often vary meaningfully between different companies in the industry. So 1 of the most important things that we're staying mindful of is collaboratively establishing and implementing practices that the agency agrees with, specifically in the context of Beta Bionics.

Another finding in the warning letter is that certain MDRs that were previously filed or caused to be filed by this change in definition were filed after the 30-day deadline. In many cases, these late filings were caused by the change in reportability definitions. Specifically, when we remediated old complaints that were previously not reportable and later became reportable, the 30-day time clock had already expired causing a number of late reports. Beta Bionics believes that both our new definition as well as our new complaint handling system will eliminate this problem in the future. We previously discussed that while we remediate our old complaints, an elevated MDR rate would be present and this remediation would last through Q2 of this year. We're on track with this remediation and reiterate our intention to have all of our old filings fully compliant by the end of Q2.

Additionally, findings in the warning letter relate to our procedures for tracking, trending and analyzing our complaint data to ensure our product meets expectations in the field. I want to be clear on this one. We certainly had procedures and they've been previously audited as acceptable. But as with most things, the more you use them, the more you can identify areas for improvement, and that's what happened here. We've been working on those improvements since June and are confident through our collaboration with the agency that we will sufficiently address their observations.

Another typical area that the agency had feedback on was our CAPA or corrective and preventative action system. Again, while we had a CAPA system, the agency found areas where we could have -- could have opened a CAPA and did not or could have done a better job with what we call VOE or verification of effectiveness which is the process to ensure that changes we make through the CAPA process work the agency's feedback was crucial to our understanding of where our CAPA process needed to evolve and this is another area that we've devoted a lot of attention towards remediating as it relates to the agency's observations.

And lastly, the agency had feedback on our corrections and removals procedure. In today's day and age, companies like Beta Bionics are in the advantageous position to be able to push out software updates to our products easily with firmware over-the-air updates. This is a benefit to our users as it allows the product to get better without users having to send it to us. However, the FDA takes a broad view of what constitutes a safety change, and their feedback was that there were certain software updates that we had made where we should have filed a corrections and removal report.

Beta Bionics must now file all the required reports and to be clear, these reports have to do with changes previously made to the software and no additional changes that we are currently aware of are required. We expect the agency will be satisfied with our response to their concerns here. As many of you may have noticed, there have been several warning letters recently issued in the diabetes space. From the limited public information available, these letters generally seem to have to do with this use concerning quality systems, indicating how challenging it can be to get these systems fully aligned with the FDA's expectations with our direct feedback from the agency. While these findings are serious, we also believe that they are straightforward and that our remediation of the systemic issues found is well underway.

I'm proud of our team's response to both the 43 and the subsequent warning letter -- and as we previously stated, we do not believe this warning letter impacts any of our previously shared time lines. Now for the fun stuff. Let's start with an update on Mint, our patch pump in development. I spoke earlier about our leadership in the durable pump space, propelled by our differentiated algorithm, pharmacy channel strategy and excellent gross margin profile. We expect that Mint will enable us to extend our leadership into the broader automated insulin delivery market beyond just the durables segment.

We expect Mint to be a game-changing product with an advantaged user experience from both a form factor and algorithm standpoint relative to other patch pumps on the market or in development. Our efforts in the pharmacy channel with iLet have been critical in terms of our ability to form key relationships with PBMs and payers that we'll leverage to build coverage for Mint. In many cases, we expect that existing contracts for iLet will be amended to incorporate Mint. And in other cases where we don't yet have coverage for the iLet in pharmacy, we expect to be able to generate coverage for Mint, given mechanisms for patch pump coverage already exist for the majority of payers.

On gross margin, we expect Mint's design will eventually enable us to drive industry-leading gross margins for any automated insulin delivery system at scale. In Q4, we continued to make great progress on Mint just tracking well towards key internal milestones on the way to unconstrained commercial launch by the end of 2027. Our work in Q4 continued to boost our confidence in the product's merit and ultimately, our ability to potentially obtain FDA clearance and manufacture at scale.

For our bihormonal system in development, in Q4, we completed our first in-human feasibility trial in New Zealand. This was our first time testing the entirety of the bihormonal system, inclusive of our glucagon asset in humans, which represents a key milestone for the program. The trial was highly informative to our go-forward development strategy and we continue to observe no safety signals for the glucagon asset. As we've progressed this development program, we've also gotten greater clarity from the agency on our regulatory path to approval for the system, which can be described in development phases.

We're currently in Phase IIa for the program, meaning we are conducting feasibility trials in small groups of patients to stress test the systems capabilities and iterated accordingly. The first in-human feasibility trial was just completed as part of Phase IIa, and we'll be initiating another Phase IIa feasibility trial in the first half of this year to stress test and iterate the system further in preparation for the more advanced stages of development. Following the completion of our upcoming Phase IIa trial, we expect to progress to Phase IIb, which we anticipate will be a much more robust feasibility trial that will enable us to advance to concurrent Phase III pivotal trials.

This pathway doesn't represent a change to our development program rather, it provides increased specificity to the expected requirements for our system to ultimately gain NDA approval for the glucagon asset and 510(k) approvals for the pump and algorithm. We continue to be extremely excited by the bihormonal system's potential to transform clinical outcomes for people with diabetes, but more importantly, the potential to transform the way people experience their diabetes and shift their mindset from diabetes being a disease that they manage to simply a disease that they have.

Lastly, on our innovation pipeline, I want to cover type 2 diabetes. In Q3, we continued to see some health care providers prescribe iLet to their type 2 patients off-label. We estimate that 25% to 30% of our new patient starts in Q4 were from Type 2, increasing slightly relative to the prior quarter. While we're not committing to a specific time line, we remain eager to pursue to diabetes label through the FDA. To conclude our prepared remarks, I want to highlight the key message from today's call. It's been about 2.5 years since we launched the iLet, and in that time, BetaBiotics has emerged as a leader in the durable insulin pump space. Our product is exceptional, and it's changing lives.

Our real-world evidence strategy is setting the gold standard for transparency in our industry, enabled by the iLet's automation, which has been shown to improve clinical outcomes regardless of our users baseline A1c or engagement with the product, -- our pharmacy channel strategy is making durable insulin pumps more accessible for our users than they've ever been. Our digital solutions are delivering users, their caregivers and their providers the information and support they need to generate the best outcomes possible on our product.

Our product is breaking the mold of what has historically believed to be possible in durable pumping, and we're delivering financial results that we're proud of. But our work doesn't stop here. We're working to expand our capabilities to the broader automated insulin delivery market with Mint and with the bihormonal system, we're looking to redefine how people experience their diabetes and the outcomes they can achieve. This cohesive strategy is what defines our business and what we believe will drive our ability to succeed over the short, medium and long term. Stay tuned.

With that, thank you all for joining today's call, and we'll now open the floor to Q&A. .

[Operator Instructions] Our first question comes from David Roman with Goldman Sachs.

This is Phil on for David. Want to start with the top line. Last year, you delivered north of 20% upside to your initial sales guidance for the year despite stronger pharmacy conversion than initially anticipated. As we think about the forecast for this year, given the increasingly recurring nature of the business, our model only contemplates pretty modest new patient growth to be able to hit the high end of your guidance.

I guess -- could you talk a bit more about the level of conservatism that's still in guidance moving forward -- and any additional color you can give on the outlook for new patient starts embedded in this initial guidance?

Phil, Stephen. I appreciate the question. Look, I don't want to call the guidance for 2026 conservative. So I'm not going to use that word. I think -- and also, I'm not going to speak to exactly the new patient starts that are embedded in the guidance. But we do, of course, have confidence in hitting the guidance that we've communicated. And then the 1 little extra color I would add as it relates to the revenue guidance. Any time that we have dramatically outsized performance in the pharmacy channel, meaning the percentage of new patient starts that get reimbursed in pharmacy it creates a short-term headwind on revenue.

And so we do have to embed in our revenue guidance, knowing that we need to continue to beat -- to hit the revenue guidance that we communicate. We have to be ready for the fact that we could massively outperform on our pharmacy new patient starts percentage. And because of that revenue headwind, we do embed that in our 2026 revenue guide. .

Fair enough. The gross margin guidance for the year came in a little bit light of what we were expecting, given the underlying leverage in the back half of the year. Wondering how much of that maybe comes from your rate of pharmacy conversion versus underlying the direction of travel for underlying gross margins would be helpful. .

Yes. The point you just alluded to is really the reason for the gross margin guidance being where it is, besides the fact that, again, we like to have confidence in any particular guidance that we communicate. But in the event that we outperform on the percentage of new patient starts growth from 2025 to 2026. That again creates a short-term revenue headwind, but it also creates a short-term drag on our gross margin profile because, again, in the pharmacy business model, as you know, we give away the iLet for free, and then we charge a monthly recurring revenue -- we generate monthly recurring revenue of around $450 for all patients that continue using the product in the pharmacy channel.

But in the event that we massively outperformed our guidance in 2026 in terms of pharmacy new patient starts. That can -- again, will create a short-term drag on gross margin and hence, we're guiding gross margin where we have.

Our next question comes from Michael Polark with Wolfe Research.

I'm curious on the fourth quarter, just with all the focus on your starts performance of 5% sequentially. Have you developed a view as to what the pump market in the U.S. starts were up, how that performed Q-over-Q? Do you have a number of a chance, obviously, your peers are still mostly to report, I'm curious if you developed an opinion.

Yes, Mike, I appreciate the question. For the reasons that you stated, because our competitors haven't really published their earnings, we don't have a particular perspective on what our market share was in the fourth quarter and how that performed relative to Q3. So I'm sorry, I don't have a take on that yet. I'll wait to see our competitors' numbers.

Fair enough. For the follow-up, maybe about '26, I heard 20 new sales territories to be created, invested in, that's over 30% growth in territories. I know it will be done over the course of the year. I know you're not going to be too precise, but can you maybe comment 1H-2H centric, I think I'm interested in what the formal guidance has considered for the timing of those incremental territories.

Yes. Of course. The guidance is at least 20 territories will be expanding by in 2026, and there will be a large expansion in the first half of the year. I don't want to say that there won't be an expansion at some level in the second half, but there's much of that expansion is in the first half of the year.

Our next question comes from Matthew Blackman with TD Cowen.

Great. I just want to start, I want to make sure I -- so correct me if I've gotten some of this wrong, but it sounds like 1Q will be down more than, let's call it, roughly 14% quarter-over-quarter decline that you saw in 2025 versus 4Q '24. But then it sounded like first half of 2026 should be modestly higher than thing like 41% of the full year revenue we saw in the first half of 2025. Did I capture all of that correctly? Maybe start there. .

I'm sorry, Matt, can you -- you cut out a little on our end. I hope it's not us, but can you repeat the second half of your question there?

I think my headset cut out. So yes, let me do it again. I apologize. It sounded like your commentary for the first quarter was that it will be down more than I think the roughly, let's call it, 14%, you were down in the first quarter of '25 versus the fourth quarter of '24, but then you expect the first half of 2026 should be modestly higher than the first half revenue you saw in 2025? Did I capture that commentary correctly?

Yes, you did directionally. So I'm going to repeat some of that back to you. What we did say is that the -- there is seasonality to the business and this is with regards to the step change from Q4 to Q1. So there is seasonality to the insulin pump business. The biggest step change that we see in terms of seasonality in our businesses from Q4 to Q1, and you should expect a reduction in revenue and new patient starts from Q4 '25 to Q1 26. And that step change or that reduction should be larger than what you saw for both new patient starts and revenue than what you saw last year. So from, again, Q4 2024 to Q1 2025, that reduction, you should see a larger reduction from Q4 2025 to Q1 '26. And the reason for that is that there's product launches that were unique in Q4 2024 and notably the color iLet, which created a lot of pent-up demand in Q4 '24 and Q1 '25 that kind of obfuscated traditional seasonality. Again, we launched a color iLet that was smaller, massively different form factor.

And then the second thing is that we did see a very large uptick in the percentage of new patient starts going through the pharmacy channel from Q4 '24 to Q1 '25, which created also this demand improvement in those comparative periods. And we won't see the same from Q4 '25 to Q1 '26. So that's the first part of your answer is yes, and for all those reasons, I think that were important to share. The second part is I was -- in the prepared remarks, I was just commenting on the weighting of revenue, and we expect the weighting of revenue to be more heavily weighted towards first half 2026 than what we saw first half 2025 weighting to be, meaning, first half '25 revenue divided by total year '25 revenue, that percentage, that will be lower in '25 than what we'll see in '26.

Got it. Okay. I appreciate that. I guess the other question I wanted to ask I don't know if you have this handy, but even if just directionally thinking about the sales territory expansion in '26, is there a way to even roughly quantify how much of the addressable market you were able to cover in 2025. How much incremental the 20 territories would give you, again, even just directionally? And I guess, maybe most important, how much of a rate limiter do you think that's been in terms of iLet adoption .

Yes. All right. Well, another good question. I think that the right number of territories in the U.S. for an insulin pump company, and this is kind of a wide range because I want to reserve the right to change as we sort of grow here is somewhere between 120 to 180 sales territories. That's like when you have the level of sort of adoption that in particular, like, let's say, our patch pump competitor has, I think it's probably on the higher end of that. But the point is, I think, in order to cover all of the endocrinologists and high-prescribing primary care doctors in the country, you need somewhere between 120 to 180. And so for most of last year, as you know, we had 63 territories. So obviously, the simple math is we had half to 1/3 of the country covered -- now the reality is that our territories tended to be a little wider or a little larger.

So we are probably covering actually more than 33% to 50% of the entire country, but that gives you a directional understanding of how much of the country generally we were sort of addressing and what 20 incremental territories does. .

Our next question comes from Jon Block with Stifel.

Maybe just to pick up on that thread or to pull that thread a little bit. Maybe you guys can just talk to why are 20 reps the right number, right? It takes you to the low 80s. But Stephen, you just talked about a number, 120-plus. So when I think about exiting 2026, I mean you're that much closer to in you're that much closer to type 2 label as a possibility. So maybe just talk about why the organization with the balance sheet you have, wouldn't push a little bit harder and faster, just when we think about the number of reps that you're on loading or plan on load this year.

Yes, good question. And Sean, I'll start here and just if you want to jump in and add a little more. Look, we, of course, have confidence in the product that we're offering and -- and so expansion is absolutely the intention of the company. And we are underpenetrated in terms of doctors that are aware of what the iLet is and having a sales rep that's communicating to them what the great clinical outcomes are for their patients. So that absolutely is true. But I also did say that we were going to expand by at least 20, so I don't want us to just anchor on '20 is like on the low end of that and say that's the only amount that will be -- or that's the amount that we will be limited to in 2026 in terms of expansion.

And the last point I would make is that we are anticipating, as you know, from our R&D pipeline, we are anticipating future products, and Sean mentioned them in his prepared remarks. And I think embedded in sort of like our plan for the sales force expansion is being a little cagey here is sort of anticipation of future time when we have another product on the market. So there's that as well. .

I'll just add to that, John, that we always believe in being deliberate, right? I mean I don't think that you can realistically launch a product come out of the gate, hire 200 people and field 200 fully trained people and expect that your manufacturing line can produce that many -- the whole bit, right, there's so many systems, et cetera, that have to scale along with the number of reps and there's a lot of opportunities to get it wrong. Beta Bionics is playing the long game here, and I don't think anybody needs us to take over the world on day one.

So we're going to do this deliberately and conservatively at some level, and we're going to get it right.

Great. That's helpful. Maybe just a shift in I guess I'll go there. There is this hypoglycemia concerns or chatter, and it's out there. Maybe it's more Wall Street than Main Street, et cetera. But Sean, any data or metrics that you plan to share with -- the Street that might be forthcoming? And then maybe just to add on to that, I'm curious, in the real world or out in the field, what are your reps hearing or any blowback -- and has that evolved in the past 3 or 6 months?

Yes. Fair question, Jon. Well, first of all, in terms of data, I would point you to our current corporate deck on the website, which does speak to this. Look, our best information on the iLet, and of course, we see all of our data in our cloud, et cetera. I'll just say a few things. First of all, it's consistent with our clinical trial, right? We're seeing the same or even slightly lower rates of hypoglycemia that we saw in our clinical trial, it was clearly acceptable at that time. number one. Number two, those rates of hypoglycemia seem to be roughly 1/3 -- 1/4 to 1/3 of the ADA guidelines for hypoglycemia.

So we're meeting that metric by 4x. Again, I'll point you to our data on the corporate deck as well. But what I'm telling you is, to the best of our knowledge, yes, we hear the narrative. No, we don't see some outsized hypoproblem with any description, it is a true statement that people with diabetes do occasionally get low, they get low on every system. And in fact, if you look at severe hypoglycemic events, it's roughly an order of magnitude worse than it is with iLet or other AID systems.

But I do want to highlight a difference. And I believe I've talked about this before. And it's -- at this point, what we call the Tesla effect. People -- there are car crashes every day. But when a Tesla crashes, it's national news. I think the data at this point is clear. Teslas are safer than the average driver, full self driving, of course, is what I'm referring to. And yet, that's national news when something happens. We do believe that there is a version of that that's happening with the iLet. We've provided an increased level of automation than the world has ever seen with insulin pumps. There is very, very little to do for the user of an iLet.

However, lows do still happen when a person chooses their dose, gives that dose goes for a walk and gets low, they think, wow, I probably shouldn't have done that. When a user utilizes the iLet doesn't choose a dose at any level and then goes for a walk and gets low, they think look at what this thing did to me. So I think that's where that's coming from. And I think it's somewhat natural that Beta Bionics will live that world because we are the tip of the spear in terms of automation and insulin pumps here. But again, I'll focus back on what I started my response with all of the data that we've published all the data we are aware of, do not indicate any level of outsized typo problem with the iLet.

Our next question comes from Matthew O'Brien with Piper Sandler.

Congrats on getting to $100 million in sales so quickly. Maybe just a follow-up on -- you welcome maybe to follow up on Phil's question to start with. Just on the guide, even if you go to the midpoint of the range, the absolute dollar number is actually lower in '26 versus '25, and you're getting the benefit of all these pharmacy patients from a revenue perspective here at 26% versus 25%. So is there something else that's contemplated in here that we should be thinking about? I don't know if it's potential impact of the warning letter or competition or higher attrition because more pharmacy, -- anything like that specifically to call out here in terms of this initial guide versus what you kind of did on an absolute basis last year? .

Matt, good question. And I appreciate the congrats. In short, no, there's no odd characteristics of the competitive landscape that we're particularly afraid of. We're not seeing any elements of our pharmacy business model where there's attrition that's trending any different than what we've seen. And by the way, we've had great retention on the product -- we're just setting a guide that we have confidence in and we feel good about.

Okay. Very fair. And then on the gross margin side, I mean, the number in Q4 is eye-popping as far as how you did on the gross margin side for the range that you gave for the rest of for '26, it just implies a pretty big step down in the first half of this year. So I'm just wondering if there's something maybe even in the back half that you're contemplating, I don't know, is that a, we could start to see some Mint sales? Is that something that just to be specific on Mint, do you still expect to be second to market as far as [indiscernible] scale? .

I'll let you answer the question on Mint. But yes, as it relates to -- sorry, I just lost my train, can you take the Mint question.

Yes, sure. And to be clear, when you said you can take the question, I don't think he met you, I think you met me -- all right. So on Mint, I don't recall exactly the statements we've made in the past on order of release. And I, frankly, Matt, don't remember the exact details of when all of our competitors are currently saying they're about to come to market. What we're doing today is reiterating our time line of an unconstrained launch by the end of '27, so that's what I'll commit to. But I'm not going to call our shot on exactly what position that puts us in because, frankly, we don't have visibility to what others are doing. And thanks for the eye popping comment, Stephen.

Yes. And in terms of the gross margin guide for the year, yes, obviously, 59% in Q4 is a great number. I think something notable about Q4 gross margin was that we didn't see a big uptick in the percentage of pharmacy new patient starts from Q3 to Q4 2025. But remembering that, that particular metric for us is only so predictable. So obviously, we do guide to that metric in 2026. But in the event that it outperforms our expectations, which it has the possibility to do, we have to be ready for a short-term headwind on our gross margin profile. And so hence, that's embedded in the guidance. But there's nothing competitive about the product or there's no like new problem or they're not seeing an uptick in warranty rates or anything of that nature. It's just, again, simply us being careful in the event that a particular metric outperforms what we've communicated.

Our next question comes from Mike Kratky with Leerink Partners. .

Maybe just to start, now that we're more than halfway through the first quarter, can you share any qualitative or quantitative commentary around what you've seen so far year-to-date in terms of new starts -- and if that's aligned with your expectations on seasonality and your outlook for the sequence from 4Q to 1Q?

Yes. Yes, I guess I'm going to kind of repeat something I already had communicated. So sorry, this is just a regurgitation, Mike, although I do certainly appreciate the question. So as it relates to the first quarter, there absolutely is seasonality in the insulin pump business -- and where we see the largest step change in seasonality is from the fourth quarter to the first quarter. And so you should expect a reduction in revenue and new patient starts from Q4 2025 to Q1 2026. And you should expect that reduction in new patient starts, in particular, to be larger than what we saw and what we saw in the last year's reduction. So last year's reduction was [ 6% ] reduction for reasons that I've already communicated regarding new product launches and the change in pharmacy adoption, you should expect our production to be in excess of that 6%.

Understood. And just a follow-up. I think 1 thing that stood out in the guidance in that 36% to 38% of expected pharmacy mix. So to get to the upper end of that range exiting this year in the low 30s, -- is it fair to think that you could be above 40%? And what needs to happen in order to achieve that? .

Yes. Look, I don't want to call it like a number above our guide. Obviously, we guide to the 36% to 38% for a reason. But what would have to happen for us to outperform that. And by the way, that is, of course, possible as well, first of all, we need PBM agreements, which we have most -- almost -- over 80% of all lives in the country covered under a PBM agreement. So for the most part, that's a green check box. And then the next, we need the underlying health plans associated with those PBMs. We need an underlying agreement with those. And that's where the lion's share of the work still is left to grow our pharmacy adoption from where it is today to be coming mostly mostly or all a pharmacy reimbursed product.

But like in terms of specifics, I mean, we have some Medicaid contracts some Medicaid programs where we -- or states where we're seeing Medicaid coverage, and we can continue to grow more of those those state adoptions for Medicaid and then underlying plan agreements, again, associated with the already existing PBM contracts that we have. But it absolutely is possible for us to outperform the guide.

Will remind everybody that these things do tend to be a little front-half weighted. They do happen throughout the year, but it does tend to occur a little heavier in the front half of the year. .

Our next question comes from Richard Newitter with Truth Securities.

This is Philippe on for Rich. I guess just a follow-up on Mint, you guys are clearly guiding to a step-up of CapEx spend for the platform and investing. So I'm just wondering if you could maybe just give any update on like where are you at on the checklist before submission -- any color would be helpful.

Yes. Sorry, Filipe, I don't think we're going to go beyond what we've said in prepared remarks in terms of exact status cement at this point. I'm sorry. .

No, no problem. And then just a follow-up. On pharmacy, you guys have a bunch of competitors now that are durable competitors who are starting to make progress in channel. So I'm just wondering One, like how -- are you seeing any impact to your contract like conversations with PBMs? And then two, I guess, like if there are more low-cost durable pump options like how does that maybe potentially impact you competitively on the go forward?

I'd like to start this 1 and maybe you can provide some color, Stephen. I would say that the conversations are evolving slightly and that you're right. There's more people out there, more durable pump companies now knocking on the doors. And -- from my perspective, that's a positive because it's providing an expectation that this is exactly how these things are covered. Beta Bionics was the company to go out and start this conversation, and we were pretty successful doing it. But with everybody following along, it's just a bit of a tidal wave of momentum that's going to help the entire industry move there. And -- to the extent that pharmacy is a competitive advantage, we love that. But the reality is it's an improved business model to allow these companies to operate better and a better experience for our users. So we're happy to have pioneered that, and we're happy to have more momentum moving in that direction. So -- that's the color. But Stephen, anything to add to that? .

I think well said.

Our next question comes from Jeff Johnson with Baird.

Coming to go back to the territory question. I know a few questions have been asked here on it. But -- as we track some of the metrics for you guys, it does look like you maybe and I'll stress or maybe higher than 40 or some new sales reps that would cover about 20 territories just in the last couple of months. And again, our visibility isn't clear on that by any means. But I guess, Sean, I don't hear from you, and I do have 1 follow-up question then, but I'd love to hear from you, -- how much of that was maybe backfilling reps. We've actually lost more or 2 of your reps that we've talked to over the last year, 1.5 years. So it feels like maybe there's been a little bit of rep departure, but how much of that was backfilling reps versus higher and expanding territories over the last couple of months?

Yes, Jeff, thanks for the question. I'm not going to comment on exactly how many people we've hired recently, just not going to do it. What I will say is we are always hiring backfills at some level. in any group of like I said, 63 territories 126 people or whatever that is, you're going to have turnover for multiple reasons, some for performance, some for other jobs that were offered what have you and you're always going to be backfilling. So there is some of that going on at all times, but I'm not going to comment on exactly how many we may have hired outside of that group or even in that group recently.

Yes, fair enough. Understood. Yes. No, Stephen, maybe clarifying. You talked about 1 million pull forward in PDMChannel, from Q1 into Q4. I think as -- I can't remember a conversation with you or someone else over the last month or so as we kind of were trying to titrate our '26 model. it sounded like there was going to be maybe $10 million to $12 million in additional stocking in mostly in supply, some in pumps. Is that still the right number to be thinking about as a component of your revenue guidance for '26 -- and how would that $10 to $12 million if we're ballpark accurate compared to maybe total stocking you saw in 2025. .

Yes. I actually don't I think I've ever communicated any particular number on what the stocking dynamic would be for 2026 in terms of dollars. So the $10 million to $12 million actually isn't -- it's not it wouldn't be even directionally accurate. So in terms of -- yes, I guess that number is not accurate, and I don't really want to comment on it. .

Our next question comes from Travis Steed with Bank of America Securities.

I guess -- just want to make sure we've got the Street models in the right place. I see $27 million in Street models for Q1. Taking all the comments you've given. Is that kind of the right place to be? Or does that need to move 1 way or the other? .

Yes, that's directionally accurate. .

Okay. And then gross margin, I think that 54% in Q1. Is that the right place to be roughly as well?

I don't want to comment specifically on any quarterly guidance as it relates to margin. .

Okay. And there were some comments on stepping up OpEx as a percent of sales in 2016. Just wanted to try to think about how much of that's R&D sales and marketing versus G&A? And kind of the how much of that pipeline versus kind of sales force expansion? And kind of any color on how that kind of rolls out.

Yes. I don't want to -- I'm not going to give you a numeric answers for how much to expand sales of each of those particular line items. But the most notable expansions in terms of OpEx will be numer one to sales and marketing for reasons that we discussed already with the sales force expansion. But we're also going to see a pretty dramatic uptick in investments in marketing, notably some direct-to-consumer advertising and some marketing branding for direct-to-patient initiatives. And then the second thing is relates -- sort of the other line item to comment on is with regards to R&D investments. And there's various projects that Sean outlined in his prepared remarks that we're working on. And as a result of those particular projects, notably the bihormonal program and Mint, you will see an uptick in R&D expense in 2026, that's pretty meaningful from 25%. And then G&A will be -- will show a very mild increase.

Our next question comes from Frank Takkinen with Lake Street Capital Markets.

I have 1 follow-up on pharmacy channel starts related to the 36% to 38% guidance. How should we think about that cadencing. Is there an element of DME having more pronounced seasonality in Q1, potentially resulting in that pharmacy channel start number actually starting higher in Q1 and then kind of staying flat. -- throughout the year? Or is that not a phenomenon that occurs? .

Sure. Yes. That's a really good question. Unfortunately, it layers a couple of things on top 1 another. They make it a little bit hard to answer. So let me talk about seasonality for a quick moment. Historically, seasonality in DME was a question of early in the year, you have this big co-pay, eventually start meeting your co-pays and it gets cheaper to get a pump. So people were waiting to get that pump to later in the year. Now with pharmacy being available all year around with certain competitors, we think that the waiting aspect has gone away instead of waiting for 1 pump, you would just get a different pump right now. So that decreases the vast increases at the end of the year that we see. However, and this is associated with your question. Q1, you're still going to see a drop because you do still see resets of deductibles. So people who would have come to you in, let's say, December and been able to get the pump for relatively 0 out-of-pocket costs May in January, have a higher out-of-pocket cost. So that's why the pronounced drop in January. And I'm losing my question.

Yes. I guess, Frank, does that make sense? .

Yes. That's sort of helpful. I think the really the concept of just DME starting at a higher -- or sorry, pharmacy is starting at a higher percent of total starts in Q1 and then kind of staying flat? Or like how does that farms trend throughout the year?

Thanks a reminder, Frank. So pharmacy coverage goes up earlier in the first half of the year more in the first half of the year than it does the second half of the year, right? So that's going to be 1 layer. Additionally, you're right. likely a higher percentage in Q1, holding everything else constant, would go through a pharmacy because of the DME decisions being made. So those 2 things layer in. But again, it's not unlike seasonality we've talked about in the past, there's more than 1 thing causing that. So I think it becomes kind of hard to predict. But directionally, yes, you should probably see a higher -- well anyway, those 2 things are on top of 1 another. Hopefully, that makes sense. .

Yes. That's great. And then just 1 quick follow-up. Just can you talk about the Phase IIb a little bit more? I heard the prepared remarks, but just maybe what are you looking for exactly in that Phase IIb before kicking up to pivotal.

From Beta Bionic side, the Phase IIb is primarily about confidence that when we get into the pivotal, we're going to have success. Over the course of Beta Bionics history with the vibromonal trial, and this has been true all the way from, I don't know, 2007 until now, -- all of the trials that we've run, all of the formative trials that we run, that we now call 2A trials were very, very small. And we've polished a bunch in the past. I won't rehash it now. it can be very difficult to extrapolate the results of a several hundred patient year-long clinical trial from a very short, small end trial. So -- it's a bit of a diligence item to walk before you run and just step up and make sure we're not going to get to an enormous trial and really fall. So that's primarily what that's about. And the agency would have slightly different words for that. But I think at the end of the day, it would be a similar reasoning. .

Our next question comes from Danielle Antalffy with UBS.

Just a question here on type and less about the time line for approval, et cetera. But just at a high level, how you guys think about that market as you already the adoption of iLet in type 2. We hear at the very pump for type 2 patients. So go-to-market strategy in that patient population, probably a little bit different than type 1, particularly given where the patients are managed. So I'm just curious about how you guys are thinking about that ahead of a potential FDA approval there and sort of really getting after that.

Yes. Good question, Danielle. I think you just identified the right point there, which is where the patients are managed. And I think what I'll illustrate, and I think you know this from your very question, is that in the endocrinology space, the health care providers have proved to be quite mature and understanding of what the iLet is and other products are, and they know where they can be utilized. And that's exactly what we're seeing across the different devices. In the primary care space, that's probably going to be less true. And so I think it does become more important that type 2 indication is there by the time we start to market meaningfully in the primary care space. which we've already said that we don't have a primary care sales force at this point. So -- and the way we intend to do that is a little bit different.

But I do agree that a type 2 indication is going to be extremely important there because -- well, for the reasons that you implied. So we're aware of that dynamic.

And Danielle, thanks for launching coverage on us. Great work.

[Operator Instructions] Our next question comes from Jeffrey Cohen with Ladenburg Company.

I wonder if you could dive into R&D a little bit as far as '26 with regard to cadence throughout the year. I know you had called out just an incremental increase across the board. .

Yes. So I don't want to speak specifically on what timing of the investments you'll see in R&D. But generally, Jeff, you can expect consistent investments -- a consistent pattern of investments throughout the year. There may be some lumpiness when we say start trials or the like, but I wouldn't model anything more heavily -- significantly heavily weighted in 1 quarter or another. .

Okay. That's helpful. And you all to maybe taking some pricing in the pharmacy channel. Any plans for the DMA channel? Or what are you expecting or pricing throughout the year? .

Yes. As we alluded to, we took a small -- or a low single-digit price increase in pharmacy for our supply revenue and then no change to your modeling for DME revenue price.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good afternoon, and welcome to the Beta Bionics Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, please be advised that today's conference is being recorded.

I would now like to hand the conference over to Blake Beber, Head of Investor Relations. Please go ahead.

Good afternoon, and thank you for tuning in to Beta Bionics Third Quarter 2025 Earnings Call. Joining me for today's call are Chief Executive Officer, Sean Saint; and Chief Financial Officer, Stephen Feider. Both the replay of this call and the press release discussing our third quarter 2025 results will be available on the Investor Relations section of our website. The replay will be available for approximately 1 year following the conclusion of this call.

Information recorded on this call speaks only as of today, October 28, 2025. Therefore, if you are listening to any replay, any time-sensitive information may no longer be accurate. Also on our website is our supplemental third quarter 2025 earnings presentation and updated corporate presentation. We encourage you to refer to those documents for a summary of key metrics and business updates.

Before we begin, we would like to remind you that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's expectations about future events, our product pipeline, development timelines, financial performance and operating plans. Please refer to the cautionary statements in the press release we issued earlier today as well as our SEC filings, including our Form 10-Q filed today for a detailed explanation of the inherent limitations of such forward-looking statements. These documents contain and identify important factors that may cause actual results to differ materially from current expectations expressed or implied by our forward-looking statements.

Please note that the forward-looking statements made during this call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances, except to the extent required by law.

Today's discussion will also include references to non-GAAP financial measures with respect to our performance, namely adjusted EBITDA. Non-GAAP financial measures are provided to give our investors information that we believe is indicative of our core operating performance and reflects our ongoing business operations. We believe these non-GAAP financial measures facilitate better comparisons of operating results across reporting periods.

Any non-GAAP information presented should not be considered as a substitution independently or superior to results prepared in accordance with GAAP. Please refer to our earnings press release and supplemental earnings presentation on the Investor Relations section of our website for a reconciliation of non-GAAP measures to their most directly comparable GAAP financial measure.

With that, I'd now like to turn the call over to Sean.

Thanks, Blake. Good afternoon, everyone, and thank you for joining. We're proud to share with you all today the details of our strong performance in the third quarter as well as discuss our updated annual projections for the full year 2025.

Starting with our performance in the third quarter, we continue to make key advances across our business, both commercially and in our innovation pipeline. Demand for the iLet, both in existing practices as well as new practices continues to exceed our expectations. And in the third quarter, we saw a record number of both new patient starts as well as the percentage of those new patient starts going through the pharmacy channel. The iLet automation and adaptation continue to set a new standard for our industry, simplifying and alleviating the burden of managing diabetes for our users, their caregivers and their health care providers. but we're not stopping there. And we're continuing to push the envelope on key innovations to our pipeline that I believe will enable Beta Bionics to disrupt ourselves in the future and deliver even more life-changing solutions to people with diabetes and the community that supports them.

During today's call, I'll begin by covering our Q3 results, which exceeded our expectations across the board. Stephen will then discuss our Q3 performance and updated full year 2025 guidance in more detail. Lastly, I'll share some exciting updates across our innovation pipeline, including iLet and some new features we recently rolled out; Mint, which is our patch pump in development; and lastly, our bihormonal system in development.

Let's begin with an overview of our Q3 2025 performance. I'm pleased to share that we delivered $27.3 million in net sales, which grew 63% year-over-year. Q3 revenue growth was predominantly driven by 5,334 new patient starts in the quarter, which grew 68% year-over-year as well as our growing installed base of users accessing their monthly supplies for iLet through the pharmacy channel.

In Q3, a low 30s percentage of our new patient starts were reimbursed through the pharmacy channel, which is significantly higher than the high single-digit percentage we saw in Q3 of the prior year and increasing sequentially compared to the high 20s percentage we saw in Q2 of this year.

As of the end of Q3, Beta Bionics has greater than 80% of insured lives in the U.S. covered under formulary agreements with pharmacy benefit managers, or PBMs, including all the major PBMs that operate in the U.S. However, patients covered under those formulary agreements do not yet benefit from the pharmacy channel until the health plans that partner with those PBMs adopt the iLet for reimbursement under their pharmacy benefit. which is why the over 80% of covered lives under PBM agreements differs from the low 30s percent of our new patient starts that actually benefited from accessing iLet and its consumables through the pharmacy channel during the quarter.

Driving adoption of the iLet as a pharmacy benefit at the health plan level remains a core focus of ours, and that is why we share the percentage of new patient starts going through the pharmacy as the right KPI to use to measure our progress in that channel, not just the PBM covered lives percentage, which does not account for pull-through at the health plan level.

Shifting now to gross margin. Our gross margin in the quarter was 55.5%, up 212 basis points compared to 53.4% in Q3 of 2024 and up 167 basis points sequentially relative to 53.8% in Q2 of this year.

Last quarter, we guided towards sequential gross margin expansion in Q3 of this year relative to the prior quarter. citing benefits of increased scale and manufacturing volume leverage, greater contribution of high-margin revenue from our growing pharmacy installed base and continued cost discipline. We delivered in all those areas in Q3 and expect that each of those factors will continue to provide a tailwind to gross margin in Q4, as Stephen will discuss in more detail shortly.

Looking ahead, I'm confident in the direction this business is headed in. The iLet's highly differentiated, fully adaptive closed-loop algorithm is producing phenomenal real-world outcomes, and those outcomes are resonating with users, caregivers, providers and payers. We're expanding availability for the iLet in the pharmacy channel, enabling more people with diabetes to access insulin pump therapy with minimal to no upfront out-of-pocket costs.

The 20 new territories we onboarded toward the end of Q1 of this year have hit the ground running, and they're validating our strategy to remain disciplined and highly selective in our sales force hiring as we look forward.

With that, I'll hand the call over to Stephen to provide some additional color on our third quarter performance and full year 2025 guidance and later wrap up the call with some important updates on our pipeline. Stephen?

Thanks, Sean. Approximately 70% of our 5,334 new patient starts in Q3 came from people with diabetes that used multiple daily injections prior to starting the iLet, which is an important representation of how much the iLet is expanding the market for insulin pumps and addressing an unmet need.

We believe the iLet is a game changer given its unique simplicity and ease of use, powered by the most advanced adaptive algorithm available. Given its simplicity, we're able to reach a broader group of patients and providers that were previously inaccessible to existing automated insulin delivery players, and we're seeing that in our results.

Turning to gross margin. The improvements we saw in our Q3 gross margin relative to the prior year and the prior quarter are driven by 2 primary factors: number one, growth in the pharmacy installed base, which generates high-margin recurring revenue and where we continue to see strong patient retention; and number two, lower cost per unit from higher manufacturing volumes, driven by growth in patient demand.

Shifting to operating expenses. Total operating expenses in the third quarter were $32.2 million, an increase of 62% compared to $19.9 million in the third quarter of 2024. The increase in sales and marketing expenses relative to the prior year is driven by expansion of our field sales team, which still stands at 63 sales territories exiting Q3. The increase in R&D expenses relative to the prior year is driven by the Mint and bihormonal programs. The increase in G&A expenses relative to the prior year is driven by new costs related to operating as a public company.

Let's discuss cash. As of September 30, 2025, we have approximately $274 million in cash, cash equivalents and short- and long-term investments. We are sufficiently capitalized to fund all of our key initiatives and positioned to begin generating free cash flow well ahead of historical diabetes peers.

Turning to our updated full year 2025 guidance. We are raising guidance across the board. We project total revenue for the full year of 2025 will be greater than $96.5 million, up from our prior guidance of $88 million to $93 million. This means we project sales of at least $28.5 million in Q4 2025. For the full year 2025, we now expect 27% to 29% of our new patient starts to be reimbursed through the pharmacy channel versus our prior guidance of 25% to 28%. This implies that we project our pharmacy mix as a percentage of new patient starts in Q4 to be similar to the mix we saw in Q3.

I want to point out a couple of factors that could create variability to the upside or downside in our pharmacy mix of new patient starts in Q4. On one hand, we continue to drive more adoption of the iLet under the pharmacy benefit at the health plan level, which pushes pharmacy mix higher.

On the other hand, new patient starts in the DME channel tend to be strong in Q4 because many people have hit their out-of-pocket maximum and can receive their pump and supplies at no cost until year-end. Taking those dynamics together, we expect Q4 pharmacy mix as a percentage of new patient starts to be similar to Q3 but recognize there is potential for that mix to trend higher or lower based on those dynamics.

Moving on to gross margin. We are raising our outlook to 54% to 55% gross margin for the full year 2025 versus our prior guidance of 52% to 55%. This means we project Q4 gross margin to be in line with or improve slightly relative to Q3. We are increasing guidance at the low end and midpoint of the range for a couple of reasons.

Number one, embedded in our revenue guidance raise and pharmacy mix guidance raise is a raise in our expectations for new patient starts, and that increased scale should generate a lower per unit cost through manufacturing volume leverage. And number two, we expect to benefit from our growing pharmacy installed base, where the large number of new pharmacy users year-to-date, combined with the strong retention of those users, produces high margin recurring revenue in Q4 and beyond.

We continue to contemplate the impact of existing and potential tariffs in our full year gross margin guidance. We are aware of recent initiatives focused on reevaluating the application of tariffs in our industry and do not have a reason at this time to believe that duty-free exemptions from custom components of the iLet and its consumables are in any jeopardy.

With that, I'll hand the call back to Sean to discuss updates on our innovation pipeline. Sean?

Thanks, Stephen. As I've stated before, our goal with our pipeline programs is to disrupt the industry and disrupt ourselves.

Let's start with an update on Mint, our patch pump in development. We've spoken at length in the past about the key advantages of Mint's 2-piece design architecture, where we believe we've chosen a design that creates an advantaged user experience relative to other patch pumps currently on the market and in development. Our design choices spanning from a patch change experience that doesn't require phone interaction to eliminating the need for recharging and to enabling firmware over-the-air updates are all in service of user experience.

Add those advantages to our industry-leading algorithm, which has been shown to produce excellent clinical outcomes independent of user engagement, and we believe that Mint will be a true game changer when it commercializes.

In Q3, we continued to execute according to plan on our Mint timelines and remain highly confident in our ability to gain 510(k) clearance for the product as well as manufactured at scale. Our goal remains to commercialize Mint with an unconstrained commercial launch by the end of 2027, meaning we expect to be able to fully support demand for the product by that time.

Shifting to our bihormonal pump program. In September, we completed our pharmacokinetic, pharmacodynamic or PK/PD bridging trial for our glucagon asset. Full results from that trial are in line with our expectations, and we believe such results are supportive of the continued development of our glucagon asset for use in our biohormonal system and development.

In Q4 of this year, we expect to initiate a feasibility trial of our biohormonal system to test it in humans for the first time with our glucagon asset before progressing the asset to any larger scale studies. As a reminder, the PK/PD study was the first-in-human trial for our glucagon asset, but the biohormonal system also includes our bihormonal pump and algorithm for insulin and glucagon dosing, and we're yet to test that system using our glucagon asset in humans such that we believe the best strategy is to run at least one biohormonal system feasibility trial before progressing to pivotal trials.

There is no change to our expectations that we'll conduct concurrent pivotal trials to fulfill the requirements for a 505(b)(2) NDA with a chronic drug indication for glucagon and the ACE and IAGC 510(k)s for the pump and algorithm, respectively. We continue to be extremely excited by the biohormonal system's ability to transform clinical outcomes for people with diabetes, but more importantly, the ability to transform the way people experience their diabetes and shift their mindset from diabetes being a disease that they manage to simply a disease that they have.

To highlight another recent win in our pipeline, on September 29, we received a special 510(k) clearance for certain feature updates for the iLet. These updates focused on improving the usability of the pump. We introduced an improved workflow for the cartridge change process to make it more seamless for the user and eliminated redundant low glucose alerts to ensure our users are focusing on the alerts that matter most, while reducing alert fatigue. These updates are illustrative of both the intent we have in listening to feedback from our users as well as the speed with which we operate in an effort to ensure our users' needs are consistently met every day.

There's one more update that I'd like to discuss on the regulatory front. In late June, the FDA issued a Form 483 following an inspection. The Form 483 is primarily related to our customer complaint handling system and our criteria for reporting complaints to the FDA, which are ultimately reflected in the FDA's Manufacturer and User Facility Device Experience database, also known as the MAUDE database. The result of the FDA's inspection is not unusual in our industry as numerous precedents the agency has set for our peers at similar stages would suggest.

We believe that in those instances, Beta Bionics and our peers likely develop similar definitions for what constitutes a reportable complaint prior to the FDA's feedback. And each company has successfully taken the steps required to align reporting with the FDA standards. We are no different, and our remediation efforts to the Form 483 are straightforward and well underway.

Regarding the change to the criteria for reporting complaints to the FDA, we revised our definition of what complaints are reportable to better align with the broader industry standards. Our revised standard operating procedure for reportable complaints took effect in late July, which resulted in a notable increase in reportable complaints in August and September.

To cite some examples of how our definition of reportable complaints has changed, prior to the 483, we were not reporting complaints such as the device screen cracking or a hypo or hypoglycemic event that did not require medical intervention. We now report these types of complaints to the FDA given they could result in an adverse event if ignored.

I want to make something abundantly clear. While the number of complaints we have reported to the FDA increased, most notably in August and September after the new system went live, this is not the result of a change to the underlying complaint or adverse event rate relative to our installed base.

In terms of what to expect going forward, since we received the Form 483 in June, we've submitted monthly progress reports to the agency. We're confident that our new complaint handling system and reporting system meets or exceeds the expectations laid out by the agency in their Form 43 observations.

As part of this process, we will be applying the new reporting criteria to all historical complaints we have received since the iLet launched. That remedial filing process started very recently. As such, we expect to see the number of MAUDE entries relative to our installed base increase considerably from October to November and remain elevated until we have completed the remediation process as both current and historical complaints will layer on top of each other.

We expect to complete the remediation process by the end of Q2 2026, at which time the number of MAUDE entries relative to our installed base will fall as historical reports are no longer being submitted.

Shifting to the topic of type 2 diabetes. In Q3, we continued to see some health care providers prescribed iLet to their type 2 diabetes patients off label. We estimate that over 25% of our new patient starts in Q3 were from type 2, which is consistent with the prior quarter. While we're not committing to a specific timeline, we remain eager to pursue the type 2 diabetes label to the FDA.

To conclude the prepared remarks portion of today's call, I want to highlight the key points that we hope you take away from our discussion. Number one, iLet's differentiation is resonating wider and deeper in the market. Number two, our commercial strategy is working, and we're continuing to execute relentlessly toward the goal of making iLet the new standard of care.

Lastly, we're aiming to build the most innovative pipeline in the industry with the goal of disrupting the industry and ourselves, and we continue to make progress on each key pipeline initiative every day. This is a business that we believe is set up for sustainable success over the near, medium and long term, and we're excited to continue sharing updates with you all as we continue to execute.

With that, thank you all for tuning in, and we'll now open the call for Q&A.

[Operator Instruction] Our first question comes from Mike Kratky with Leerink Partners.

The fact that you're creeping up on $100 million in revenue for the year and at a much higher rate of pharmacy mix than we've been expecting is super impressive. So, congrats on the ongoing execution. Just to that point, can you share some additional color on what's driving that momentum you're seeing? What factors really seem to be contributing to that demand? And can you talk about the cadence of new starts throughout the third quarter, specifically that's shaping your assumptions on the fourth quarter?

Yes, Mike, first of all, thanks a lot for that. Appreciate it. In terms of what's driving the quarter, I mean, frankly, I don't think it's anything different than it has been driving our success all along. We do see the iLet as a new category of device. And fundamentally, that takes a bit of time, right? We're not launching just another insulin pump here. We're launching an insulin pump that you have to think a little differently about -- and that takes time. And necessarily, we're going to see increased adoption as the world gets it more and more over time. And I think we just saw that continuing. But I don't think there's any particular initiative that I could point to uniquely in Q3 that really impacted the quarter. Stephen, can you comment further?

Yes. Cadence in demand, I'll just address that briefly. It was generally consistent across the entire quarter. So, nothing, really to read into in terms of timing of demand and where it was relative to the upcoming quarter.

Understood. And maybe just one quick follow-up. In terms of things that are out of your control, how does the government shutdown impact your assumptions on timing for the Mint launch, if at all?

I would say it doesn't currently have an impact on our expectations for timing. We reiterated those earlier in the call. Yes, I'll leave it at that.

Our next question comes from David Roman with Goldman Sachs.

Maybe I'll just start with a further question on kind of what you're seeing in the underlying market dynamics. You talked about the 70% of patients coming from MDI converts. Can you maybe give us a flavor on the remaining 30% of the patients, whether that's coming from conversions of patients who are coming up for renewal. It looks to be a big bolus of renewal patients coming to market. Is that conversions from different pump therapy? Maybe just help us understand the balance of the growth drivers there and how you see that unfolding through the rest of '25 and into '26.

Yes. Thanks, David. This is Stephen here. In terms of the remaining 30% that are coming to us from competitive pump systems, they're coming roughly 1/3, 1/3, 1/3 from the 3 primary competitors. And in terms of the outlook in the future, there's nothing that -- look, that bifurcation of our demand coming from 70% coming from injections and the other 30% coming from competitive pumps. That's been pretty consistent over the last 4 to 8 quarters. And there's nothing that we see in our business that would imply that the future will look any differently.

I would say there's still a -- the market for insulin pumps in both -- in type 1 and type 2 is still very underpenetrated. I needs to remind you of those percentages. And so the large opportunity that still exists for a company like ours with a new and differentiated system remains in MDI, and I expect most of our demand will continue to come from there.

That's very helpful. And I appreciate you reiterating the timelines around the Mint full commercialization by the end of 2027. But can you maybe just remind us of the different steps that need to take place between now and then? For example, have you finished human factor testing? And what types of updates do you -- will you be able to provide us along the way?

Yes. I don't think we're going to provide any additional information on where we are at the moment. I mean, we would reiterate that generically, the 3 main steps that we need to look for here are 510(k) clearance followed by manufacturing readiness followed by launch. We've talked about those in the past. But I don't want to get into the details of exactly where our internal program is, less people read more or less into them than they deserve. So, for the moment, we'll reiterate our timelines, and we reserve the right, of course, at all times to update you as we know more.

Our next question comes from Matt O'Brien with Piper Sandler.

Can you hear me okay? I've had some technical issues.

Loud and clear. You got it, Matt?

All right. Great. I appreciate the questions. Maybe just starting with those 20 new territories that you added in Q1. Maybe if you can just tease out the impact that those 20 territories are having here in Q3 because you don't typically see such a meaningful step-up here in the third quarter versus Q4 based on seasonality. So just maybe talk about how those reps are ramping and then kind of what's left for that group and that cohort as we think about maybe the next 18 months?

Yes. All right. So, the territory -- the new territories that we added at the start of the year, are absolutely growing in their maturity and increasing in productivity, but the entire sales force on balance also is. So, if you looked at even just the quarter-over-quarter growth in new patient starts from Q2 to Q3, we saw an 8% uptick. And yes, that is driven in large part by the 20 new territories that we added in the start of the year, but the iLet is still new to almost every territory nationwide. And so we're continuing to see an uptick in new store sales, same-store sales across the entire country.

Okay. And then maybe talk a little bit -- I wanted to ask a little bit more about Mint, but just maybe talk a little bit more about the 483 because that's a little bit of new information and how serious that is, your remediation efforts. It sounds like you're kind of on track already. So maybe just try to frame up the 483 for us, not that they're ever great to see, not that you take them for granted. but just how this one falls in terms of seriousness and then your ability to respond quickly.

Yes. Great question, Matt. I mean, it's tough to put a qualifier on something like that. I mean, obviously, the FDA issues 43 is when they find something to be important. But I think with the 43 as long as you're aggressive with dealing with the problem and you don't have a big problem, and we've certainly been that. We're very far along in our remediation efforts.

New systems are fully in place at this time. And what we're seeing now, as we stated on the prepared remarks, is just the implementation of those systems and sort of remediating past complaints. But the new systems are in place at this time. And no, we don't foresee any ongoing challenges at all. Stephen, do you got anything to add to that?

Sure. Yes. I think -- look, the FDA -- the interpretation of the rules for what's considered a reportable complaint and what's considered a nonreportable complaint actually leaves a lot of room for interpretation. And so we were interpreting -- before the 43 observation, we were interpreting the rules a particular way that we had a lot of confidence in, and we're not apologetic about. However, when the FDA did their observation, they disagreed with our interpretation, which is totally fine. They asked us to remediate the -- and use the new definition. And we, of course, complied.

And to us, this is a very benign issue as long as we actually do what we say we're going to do. And so we're bringing it to your attention because we feel it's important to be transparent. There may be some misinformation out there about what -- why we've seen an uptake in reportable complaints in the MAD database. We don't see it as an issue at all, and it's kind of on brand for us to just answer the mail. And so hence, why we brought it up today.

Our next question comes from Travis Steed with Bank of America Securities.

This is Stephanie Piazzola on for Travis. Congrats on a good quarter. Maybe just wanted to follow-up again on the increased complaints being reported. Maybe you can just elaborate more on the real-world performance and feedback and retention that you're seeing despite some of the complaints received. And if you could clarify, it sounds like you've made good progress on the remediation already, but some things will continue through Q2 of next year, if I heard that right. So maybe you can just clarify what's going to be outstanding through then.

Yes. First of all, I wouldn't read anything into the word complaint in this case. The insulin pump industry is -- if you look at the complaint rates that all insulin pump companies receive, it's somewhat shocking at some level. And the primary reason for that is that definition that Stephen alluded to earlier, where really anything, anybody calls in with a problem of your product or an experience issue and it gets reflected as a complaint, which is fine. Those are the rules.

But I don't want anybody to hear, and I don't believe it's true that there's any complaint with the product that -- I don't know, the words here. Anyway, I wouldn't read too much into it. Second half of that question is -- I think -- I don't know. I think the kind of answered, Stephanie. Did we -- was there a part that we missed? Yes, I forgot the second half of your question.

It was just that you mentioned you made good progress on the remediation efforts that continue through next year. So...

Yes. Sorry, you want details on that, absolutely. So, what it is specifically, and I think we said this, but I'll give just a little more clarity. When -- over the time, we received calls, right? Everybody receives calls and you have to decide whether or not those get reflected as reportable complaints to the agency. So, what we're doing at this point is we're going back through all of those calls we've received since the dawn of time and reporting the ones that now qualify under the new definition as reportable events that did not prior. Does that make more sense?

Yes. Got it.

And we'll be done with that process by Q2 of next year.

Okay. Understood.

Again, the systems are now in place. The -- everything is working as it should at this point. We just have to go back and do all that catch-up work. That's all.

Okay. Got it. And then you talked about some of the positive growth drivers that you have this year and are going to continue into Q4. Maybe just thinking a little bit ahead to next year, how we can think about some of those continuing and then any headwinds that we should keep in mind for next year as well?

Yes. I'll start with that one, and then Stephen can add anything that he may want to. The primary growth driver that I listed was obviously additional understanding what iLet is. Again, I think there's -- when you look at data on adoption from health care providers, it really takes quite a number of years, in fact.

So I think that we expect that tailwind to continue over time as people start to understand iLet better as we develop more and more of our own real-world evidence and get that get that evidence out there, showing the world how well iLet really is working in a real-world setting. So those continue, obviously. The other tailwind that I'll mention is obviously pharmacy adoption. There's a lot of reasons that pharmacy adoption is better for the business. It makes it easier to adopt iLet, easier to script iLet. Obviously, with the expansion of that, that's certainly going to be a tailwind, and we hope that the expansion of pharmacy adoption itself continues more into next year as well.

And this year -- and by the way, thanks for the compliment, Stephanie, on the results. We're definitely happy with them.

Yes.

The uptake that we've seen in pharmacy this particular year, meaning now in the low 30s percentage of our new patient starts, it's way exceeded even our internal expectations. And what it's really doing for next year's financials that's great is that we're retaining those patients at a very, very high level. And because of that, it's high-margin recurring revenue now that we have in this pharmacy installed base, which is the design of the whole program, and that's the intention of the whole program to move to a subscription-like revenue stream. And you're going to see that in our financials, and you've already been seeing that in even like the gross margin profile that we now, again, have this high-margin revenue that we've generated from our growing pharmacy installed base.

Our next question comes from Michael Polark with Wolfe Research.

First topic for me was the 510(k) clearances you mentioned, a different cartridge change process and elimination of redundant low glucose alerts. I guess I'd just be curious the cartridge change process, what improved? How was it before? How is it now? And what kind of was the root cause, if you will, of too many low glucose alerts. Is that a software fix or another change?

Yes. So, on the first part, the cartridge change process, these are really just subtleties in the process, different screens and whatnot, user experience stuff. It's -- they're not huge, but we think meaningful. On the low glucose alerts though, I want to really make sure that one is really clear.

With a system like an insulin pump, you can get, for example, an urgent low, a low, a very low. There's all different kinds of alerts and they can stack on top of one another and require you to clear each one individually and what have you, or you can look at it and take the most severe of those alerts and only deal with that one, for example. So, it's sort of related to that. It's just that you really have to clear 4 alerts at all in effect tell you you're low, that seems pointless, right? Does that make sense?

Yes, understood. The other one is just maybe kind of a look into '26 as well, a reminder on what's a good way to think about sales force expansion as you roll into next year? Any soft circle for number of territories that you would hope to add?

Yes, of course. Good question, Mike. Yes, of course, we have our internal expectation of how many new sales territories we're going to expand and win next year, but I'm not going to talk about a forecast for 2026 that gives any indication as to what our revenue is going to look like. So unfortunately, I'm not going to share that number.

Our next question comes from Frank Takkinen with Lake Street Capital Markets.

On a really, really solid quarter. Just a curiosity question versus my model, and I could be unique in how I modeled it this quarter, but it feels like the bigger portion of outperformance, you outperformed on both my DME and PBM expectations. A bigger portion for me was related to DME. Was this just a modeling discrepancy on my side? Or was DME maybe a little bit stronger than you anticipated? Any specifics on maybe where the pumps are placed, which geographies you maybe didn't have health plans set up or anything to kind of call out that maybe drove that DME being a little stronger than my expectations?

Yes. Good question, Frank. The outperformance in DME, of course, is just mostly driven by new patient starts exceeding expectations, but there actually was some favorability from stocking dynamics. in Q3 relative to Q2. And that created favorability in DME revenue in Q3 relative to Q2. There actually -- and you didn't ask about this, but there's actually the inverse impact we saw in the pharmacy supply kit revenue. There was an unfavorable stocking dynamic or had an unfavorable impact on revenue in Q3 relative to Q2. And what I mean by this in the case of DME is that the DME customers ended their quarter with more inventory on their shelves in Q3 than they did in Q2, creating, again, what I would call a favorable stocking dynamic in Q3.

Got it. Okay. That's helpful. And then maybe on the bihormonal timeline? I know you guys are talking about the feasibility study, but how should we maybe think about when you guys might formalize a cleaner timeline kind of similar to how you've talked about patch end of 2027. Will you do that with the bihormonal pump in the near future? How should we think about that?

Yes, Frank, look, we'd love nothing more than to give you a solid timeline on the bihormonal product. But -- and we obviously have internal expectations on that, that we have not shared. However, given the complexity of that particular product being -- having to get both CDRH and Cedar on the same page in terms of what a pivotal clinical trial looks like and all the requirements around the drug and frankly, our own evolution into a drug company as well, I think it would be a little bit premature to start putting timelines out on that now because, frankly, they could evolve as we learn.

And as we get the agency, both halves of the agency on the same page with what it is that we're doing here. So not just yet, but please be assured that we're working toward getting most importantly, the product out the door as soon as we possibly can. But of course, the next step will be to help you all understand the timelines on that as soon as we can. But in the meantime, hopefully, you do see that we continue to make progress on the product, including, as I said, the completion of PK/PD and the soon implementation of the new feasibility trial, which we're excited about.

Our next question comes from Jeff Johnson with Baird.

So Sean, maybe on that -- on the bihormonal question there. Even if you can't put a timeline out there, which I understand, can you just remind us, we're so accustomed to 510(k) pathways here in the diabetes space. We know kind of 6-month review processes. We know these tend to be 13-, 26-week trials, things like that. Once you do start a pivotal, how long would a pivotal for a bihormonal run as far as from -- in a single patient? I know it takes a while to enroll in first patient in, last patient in and all that, we'd have to estimate. But I guess my question is more, how long would the study last on a per patient visit or per patient basis? And then how do we think about the review timeline once you do get that data and submit it to the agencies, how long a review process could last?

Yes. Great question, Jeff. The ICH guidelines dictate that for a chronic drug indication, we need a year's worth of data on an individual patient. So, to your point, plus enrollment, et cetera, but the trial itself will run at least a year on at least -- well, not at least one on a number of patients. And then timelines for enrollment, timelines to review of that data, early interactions with the agency, but then the actual NDA submission itself, I believe, is a year.

One year on that, too, yes. Okay. That helps. And not a pharma guy, so never as strong there. But also then, Stephen, maybe can you just maybe quantify for us the stocking headwind in pharmacy and the stocking tailwind in DME at all and how much of that was on supply side? Just as we look at the supply revenue this quarter on a per patient basis in the pharmacy channel, it came down about 10%, 12% or so sequentially, and we keep trying to wrestle with how much of that is attrition versus stocking dynamics and all that. So, just maybe help us quantify, especially in the pharmacy channel, maybe what that stocking headwind was in the quarter?

Yes, of course. I have 2 parts to this answer. First part is that I'm not going to quantify the exact dollar amount of the stocking impact in DME versus pharmacy, but the 2 offset one another nearly dollar for dollar in the quarter. So net neutral stocking impact with, again, favorability in DME, unfavorability in pharmacy.

And then on your point about attrition and retention, -- while I'm not going to share retention rate or attrition rate, even though I know we get asked about it consistently, and this is for reasons that I think we've been very clear about, most notably that the competition doesn't share attrition or retention rates.

I do want to point to one output of your model, Jeff, and I guess, any investor or analyst that has a model that I would sort of maybe alleviate maybe your feeling on that question. So, if you look -- the metric that I want to point your attention to is the number of pharmacy supply kits per pharmacy patient per quarter. And so the math there, what you can do -- how to do the math to get to that metric is you'll take the pharmacy revenue -- pharmacy supply revenue, I should say, in a given quarter, divide that by the price of each pharmacy supply kit, which you know is roughly $450 because that's what we've said. And then divide that again by your belief of what the pharmacy installed base is.

So that's again, it's pharmacy revenue in a given quarter, divided by the price, $450 and then divided again by the pharmacy installed base. And what you're going to find when you run that metric in this quarter and in all the most recent quarters is that, that metric is well over -- well in excess of 3. And that's regardless of what attrition rate or retention rate assumption you use in your model, no matter how low you choose the attrition rate to be.

And what does that say? If it's above 3, well, remember that a patient only uses 1 pharmacy supply kit per month. And so you would use 3 per quarter. So, by very virtue of that number, which is again, an output in your model, by that being above 3, I think that illustrates why there's not a retention or attrition issue at the business. So, I guess hopefully, that was helpful. But again, I won't -- I'm not going to talk specifically about attrition and retention, the number for reasons that we've communicated in the past.

Yes. No, that math is helpful. That's exactly how we run it in our model. I guess it's just we're trying to understand the 40% decline we've seen in per patient per pharmacy over the last 2.5 quarters.

So I think you -- I think the other thing to remember is that you're going to see like, again, big deviations in that metric from quarter-to-quarter. meaning, yes, you did see a downtick in it this quarter. You've also seen uptakes in the same metric if you looked over trending over quarter-to-quarter.

And what that really points out is that there are fluctuations in pharmacy stocking, and it does have a material impact on our revenue in a given quarter. But really, the reason why there is so much fluctuation is just think about how much our pharmacy demand has changed. We've gone from our guidance being low teens or low double-digit percentage up to now, we're in the low 30s. And so, pharmacy customers don't really know how much to order to keep up with demand. And that's a part of why you're seeing big fluctuations.

Our next question comes from Richard Newitter with Truist Securities.

Congrats on the quarter. Maybe just on the pharmacy channel and the percentage here. So, you're obviously exceeding your expectations, our model and I think consensus too, exiting -- you're on track to exit at a low 30s percent. Could you help us just think through where this percentage could reasonably get to? Or where we should not be -- what threshold we shouldn't be exceeding before you potentially are on commercial with a patch? Is this something that could be 50% exiting 2026? Or what's the threshold that we should be thinking about or put some bookends around it as we fine-tune our models because clearly, you're exceeding where we all had you on the trajectory.

Yes. I appreciate the question. Frankly, the frustrating answer for us and you is that we don't know. We're doing something nobody has ever done before, and that's push a durable pump through the pharmacy channel. To your point, we've exceeded our own expectations on what we can do there. We hope that those exceedances continue and that we can get even farther than even we think we can. But it's very hard for us to make a prediction on that, and I don't think we're frankly in any better position to do it than anybody else. We're just forced with going out and actually doing the work. So, I'm sorry, we can't make that prediction. But what I will tell you is that we'll try and make that number as high as we absolutely can.

Okay. Fair enough. And then just on type 2 indication, I think, Sean, you've talked in the past that it's not something that you necessarily -- it's precluding you from moving -- moving that percentage higher. It was a little flat this quarter. I'm just curious, anything you're seeing? We have multiple players out there with an official indication and data. And you mentioned you're not going to commit to precisely the strategy and timing of what you're going to do to ultimately secure an indication. But if you could elaborate on how you're thinking about that and what your options are?

Yes. The first thing I would say is that I wouldn't look at it as flat. The percentage was the same and our new patient start, obviously, base grew. I don't think there's any benefit to Beta Bionics to grow that 30% or roughly 30% to -- or roughly 25%, excuse me, to something much larger. I mean, we need to grow our total new patient starts -- and to your point, we're not really out selling it. So, it kind of is what it is on a percentage basis, and that's okay.

There's some other things that go into the dynamic as to whether or not we would make the decision to invest in that or when we make the decision to invest in that is what I should say, that I probably just can't get into at this stage because they result -- they relate to some internal product pipeline stuff. But yes, I don't know, I would say that we're doing as well as anybody effectively in that channel, and we don't even have the indication. So yes, I'll leave it at that.

Our next question comes from Jon Block with Stifel.

Anything to call out regarding just the competitive landscape? There's really been a good amount of focus there with the new entrant, but your competitive wins as a percent of adds actually ticked up a bit Q-over-Q and obviously had a huge growth rate if we look at it year-over-year. So just any color you can provide there with the landscape may be changing or maybe not?

Jeff, yes, I appreciate the question. Short answer is no. It is a highly competitive industry. It's competitive not only just for recruiting the right type of sales reps, but every account has a lot of different sales reps that are trying to sell and get the attention of the HCP at that given account. But we're confident in what we have. We have a highly differentiated product, the easiest system on the market, we believe, to use for doctors, for patients, a compelling solution with the pharmacy reimbursement. And so, I don't see the market or the competitive landscape as meaningfully different than it was semi recently, and we feel confident.

Okay. Stephen….

Sorry, that was Jon, my bad.

All good. All good. Stephen, maybe I'll stick with you. I'm struggling with the guidance from gross margins in a good way. And I know you gave some reasons that you sort of said, hey, it implies flattish to slightly up GMs Q-over-Q for 4Q. But your pharmacy mix is largely consistent with the assumption is with 3Q. And we've seen a lot of scale, right, throughout 2025 when you just look at your sequential gross margin improvement despite pharmacy ramping as an overall percentage. So, can you just tell me why like that improving scale dynamic wouldn't resonate as much if you would in 4Q '25? Or is this maybe just leaving a little bit of wiggle room considering you really don't know the percentage DME versus pharmacy because of the deductible metric you brought up earlier?

Of course. On the high end of the range, the gross margin guidance for Q4 is actually in line with the increase or the increase that we're guiding to in Q4 revenue. So, the increase in scale and the benefit that we would get to gross margin is actually sort of in line again with the revenue increase quarter-over-quarter. But on the low end of the range, you're right, that may like seem a little surprising to you that we're guiding to that low.

Really, it just comes down to lack of predictability around the pharmacy reimbursement channel. There is a world where in Q4, we outperformed our expectations in pharmacy, which actually creates in terms of new patient starts. And what would that do is it would create a short-term headwind to revenue and gross margin. And that's one reason.

And the second is that cost of sales -- well, look, we like to set -- the guidance philosophy around here is for metrics like this, we like to set expectations at a level that we have a high degree of confidence in. And with cost of sales, there can at times be things that are semi-unpredictable that could come up and be a onetime charge. I'm not suggesting I see any of those in Q4, but that can happen. And so hence, we like to be, I guess, a little cautious with large uptakes in gross margin guidance for that reason.

Our next question comes from Jeffrey Cohen with Ladenburg Thalmann & Company.

Congrats on a strong quarter. Just one for us. If you could maybe talk about your special 510(k). Was this software only and was uploaded to all the units out there? And does that help or would that help in Mint development? Or are some of those updates being embedded into Mint now?

Yes. The -- it's a software upgrade. And as with all of our software upgrades, that's something that all of our users get a chance to download and use. And in fact, we always like to push people to our newest software. The -- I would say that part of those software upgrades are related to Mint and some not. Some of the way we do the alarms and alerts and alarms certainly will be reflected in Mint. -- cartridge change process, of course, has nothing to do with Mint whatsoever. So yes and no. But as with anything, Beta Bionics considers ourselves to be primarily user innovation, user experience company, I should say. And to the extent that those user experience things are applicable to Mint, we'll absolutely reflect them in that.

Our next question comes from David Roman with Goldman Sachs.

I appreciate your taking the follow-up. And I hate to focus on the 483, but the MAUDE dynamic has become such a distraction for investors intra-quarter. And as we think about the kind of remediation process here, that does have the potential just to create some noise for people out there counting up MAUDE reports, which is sort of like a meaningless metric, but it does get a lot of attention. So, can you maybe just help us frame like how we should think about those reports when we see them, how to interpret the remediation filings? And just maybe help us kind of calm the obsession with counting MAUDE entries.

Great question. Well, look, to -- from our perspective, this is something that every company in the diabetes space has gone through at one time or another. I think, as Stephen alluded to, the guidelines associated with what constitutes a complaint or a report, I should say, are unclear at best, and we've all had to align our understandings with that of the agency.

For anybody who really wants to dig in, I guess I encourage you to. You can go to the MAUDE database. That's the whole point of the thing. And you can look what's being submitted in our case, the case of any other company out there. You can look at rates. We've been fairly transparent with what our installed base is, et cetera, and you can compare those things. And we think we compare favorably. But in terms of how to think through it beyond that, I'd say that's hard to say. We don't see an underlying problem in our data here. The 43 itself had nothing to do with the actual complaints being received or the number of them. It had to do solely with the definition of the reports being filed as complaints, and that's all. So hopefully, that's clear.

I'm showing no further questions at this time. I'd like to turn the call back over to Sean for any closing remarks.

All right. Thanks, everyone. As usual, we enjoyed discussing a strong quarter with you today. We appreciate your work to understand our business. And I guess we look forward to seeing you all next quarter. Thank you.

Yes. Thanks, everyone.

Thank you for your participation. You may now disconnect. Good day.

I'm Stephen, and this is Sean.

Welcome. Disclosures. You're not going to go to the website anyway, but it's here if you feel really compelled. Massive, thank you to Stephen and Sean for coming along from Beta Bionics and agreeing to this, and I really appreciate having you guys.

Thanks, Patrick. Great to be here.

Yes. It's been a good conference -- and yes, we're looking forward to the time here.

Yes, good energy. I mean let's just dive into right -- like why don't we -- I mean maybe 2 minutes just to level set people. I think probably almost everybody in this room is aware of like pumps and how that market works. But maybe just from your perspective, what really distinguishes beta relative to the pump competitors?

Yes, absolutely. So we all know Beta Bionics is an automated insulin delivery pump, but we don't like to call it an insulin pump, let's call it bionic pancreas to differentiate it, why the difference? It is the most automated version of an insulin delivery system ever. We've all been adding these user simplicity functions like trying to reduce boluses and whatnot, and we've done that completely.

But we've also added the concept of moving from a static to an adaptive algorithm, which removes the need for the health care provider to set up and manage the pump, which means it can be done by, for example, a primary care physician. We have data on that.

We generally believe that the insulin pump industry has -- this is not a criticism by the way, more of a statement of fact has sort of failed at improving outcomes with diabetes not on the patient basis, but on a population basis. The way the evidence of site for that is that the average A1c in the country is not really falling, right? But we know that we can take those patients and improve their A1c massively.

And we do that by providing a product that's not absolutely fantastic for 1 person, but broadly applicable to everybody, which means work with CGMs that they like, meaning provide a form factor that they prefer, meaning give them an algorithm that they can utilize successfully. And lastly, provide to them in a channel that they can get it, namely pharmacy if they can't afford the DME channel, et cetera. And by doing all of those things, we do think that we're in a position to meaningfully improve population health, meaning lower A1c of the population, at least with type 1 diabetes over time. That's what we're up to.

Love it. I mean loaded questions forward, but starting with Type 1. What 40% on penetration in the U.S. You could argue it's still pretty low, frankly, given who wants to be doing multiple daily injections and trying to manage and everything. What do you think is that's been holding it back has been growing well, but was still less than half of patients where do you think is the gap?

To me, there's really only 1 answer to that question. And I mean, there's a lot of -- on the margin answers, but the big 1 is primary care. You take that 40% number and you look at 45-ish percent of patients are managed by primary care providers and if you ask them, 80%-ish of their patient cohort on AID pumps, what is it [ 80% times ] 45 is what 36 or something like that. There you go.

That's pump penetration, meaning it's not being used by primary care providers. Why? Because by and large, they don't know how to do it because they're complicated to set up and manage and that's the direct thing that we've added with Beta Bionics. I do think it's important to note that the patients are not any different, right? The same patient goes to an endo, goes to a primary. It's more a factor of where you live, et cetera, than who you are.

And therefore, that 80-plus percent penetration in the endo space really ought to apply perfectly provided in the primary care space. But we do need to provide a product that can be well utilized by those patients with that provider, and we think we've done that -- we do a clinical trial, clinical trial data showing that outcomes with our product with primary care providers are identical to those with endocrinologists. That's unprecedented, but we've done it, illustrating that you really don't need to certainly manage the pump the way a traditional endocrologist does.

Do you think the PCPs don't trust their patients or don't trust themselves?

Certainly the interesting question he phrased that way, themselves would be my guess. Managing diabetes is not particularly complicated, but it's also not easy. And it's not something that they do on a daily basis. So we have protocols on how to manage Type 1 with MDI, it's like the [ Berg ] install protocol, you can look up, which tells you exactly how to do it based on testing blood glucoses and waking blood sugars, et cetera.

And they work to some extent as long as they're followed, they require every 2-day titration. They're just not followed enough. So I think it does come down to that. They just don't know how to set up and manage the pump.

The CGM like -- in to Sean's point and Sean, feel free to add to this. CGMs figured out what Sean was alluding to a moment ago there with primary care and making a system easier to prescribe far earlier than pumps did. So in like 2015 -- CGMs before like 2015, before Dexcom created a sensor that didn't require a calibration. They would compare with another using metrics like accuracy, so the MARD and metrics that patients turns out probably didn't care about. But then once they launched, once we made the devices easier, not we, but once the industry made CGM easier to use, that was a huge unlocking mechanism that now Type 1 penetration for CGMs is north of 80%. I don't actually know that number. It's probably closer to 90% now.

And yes, I think that the key takeaway there, and as it relates to primary care and insulin pumping, is that insulin pumps before the iLet have been comparing themselves with 1 another on metrics that, frankly, I'm not sure the patients ultimately really care that much about. Yes, time and range and A1c matters, but really, patients want to understand how this device fits into their life and how it makes their life easier.

And that's the unlocking mechanism for diabetes devices. We're the first company that just like any great innovation has changed the metrics. From again, just caring about A1c and time and range to how does this thing any easier to use. We're the only pump position to do that and hence, why we've had a lot of success.

So it's a great point, Stephen. If you look back, every single innovation, every single intervention in diabetes has always had 1 thing in common, and that's the more you engage with it, the better your outcome always. Whether it's BG checks per day, CGM checks per day, injections per day or both they don't care more engagement, better outcome into the iLet. And we have data showing that our outcomes are independent of engagement. That's absolutely first. It's absolutely innovative. Then it really puts a point on what Stephen is talking about. You want easier, then you got to get a product that actually doesn't need you to engage with it all that much.

Could that be a subset within Type 1s because there's some -- unlike yourself, there are some, who developed very, very young, and they've been doing MDI an incredibly long time. And maybe now they're relatively older. Like there's a trust that you're giving up to an algorithm. And there might be good clinical data things, but is there a subset they just kind of need to age out of the pool, which is -- another out -- is that a subset that's just going to be really difficult to convert or just the need proof.

With diabetes, there's -- it's very hard to talk about the patient profile because there's a gazillion of them. It's absolutely a spectrum from this to that. And maybe it's even in 3 dimensions. So yes, there's always going to be that. We know people like that. But what I think we are seeing is that there are people who don't necessarily trust it, but there's nobody who really likes it, meaning there's nobody that gets up in the morning rare and go saying today, I get to manage my diabetes. It's not fun, right?

And over time, as we build trust and what our algorithm does and how it works, you will convert people like that. You won't convert everybody but you will convert a number of them. But we don't have to, right? If we go back to my argument from earlier, roughly 80% of patients at least 2 have attended an endocrinologists have accepted the fact that pumps are a better way to go. And that's growing over time, even in the endocrinology space.

If we do the exact same thing in the primary space, and that's not the only place we're going, of course, but then there's a long way to run before we start to run into what's clearly that, I don't know, late adopter, they're laggards, I guess they call them.

Another PCP discussion. You go in, you just like, look, you don't really need to call count here. Like how do you communicate because they don't want to see trials I'm guessing?

Yes. PCPs are definitely different. And I want to be clear that we're at the very infancy of penetration in the primary care market at this point. And the reason is that what I don't think works is just showing up with doubling of your sales force calling on every primary care doctor and existence and explaining why iLet's better, is not going to have any success at all doing that.

I mentioned the protocols earlier. When a new type 1 comes into a primary care's office, they put a piece of paper and say, "Okay, start them on 0.5 units per kilogram per day. So is it right here?" That protocol needs to say right iLet. In order to do that, it's not a one-to-one with the health care provider. It's going to be with clinic. It's going to be with the ADA, things like that, the larger bodies.

We're generating the data now that shows that we should be that -- but the work to actually get that done is still, to some extent, coming. But I do think that the iLet is in a unique position to be able to do that. Because what I don't think is going to be useful is to protocolize exactly how 1 reviews spaghetti chart, which is our modal day glucose chart over time.

And so, okay, based on this kind of trend, do you think you're seeing hit the change to the carb factor, for example. You just don't need to do any of that with our product. So it's a pretty unique greenfield opportunity for us. But it will take a little longer than converting a single doctor. But when you convert, for example, a health care system, the whole thing comes.

A lot of people I speak to when they hear about the algo and iLet jump to the conclusion that it's even better suited for Type 2 because the stereotypes that exist around Type 2 patients the management of their condition versus Type 1 -- is that serotype less true than people think that it is? And how do you view the Type 2 opportunity overall?

Well, we don't have an indication in type 2, not -- so I think it's -- we'll be a little careful on saying what isn't true. We don't know. I understand the stereotype, I can understand why somebody might say that about our algorithm.

Certainly, over 25% of our users are coming to us with Type 2. There's something that's clearly resonating there. It's important to state that we don't push in Type 2. So that's just what's happening in the market. I don't know if I can go into all that much more detail on that.

Yes. What I can say about the Type 2 market is that that particular segment of the market is growing in its insulin pump adoption at an unprecedented level. And so I think you won't find an analyst model out there that predicted the uptick that we would have seen in Type 2 insulin pumping in the first half of the year, and we don't really see that stopping.

But again, we can't be advertising for marketing what the product -- how the product is doing on type 2 because we don't have the indication.

The people would feel tied to a slow to engage with the health. And so, I think people just assume that to your point, the curve was very aggressive?

And it's really Beta Bionics and our tube pump competitors that are driving that. I would illustrate that when you look at our clinical data, we have quite a bit of data in a very high A1c segment. These are people with A1c 14 to 17 when they came to us and they end up with a GMI, I think, in that group of 7.7%, if I'm remembering correctly. That's just an astounding difference. And I'm not familiar with another intervention that they've been able to take something from 14 to 17 out of 7.7% whatever kind of diabetes you have at 14 to 17, that's a disengaged population.

Clearly, whatever we're doing is able to have some level of success without that engagement because the patient didn't change we had in iLet. So I think that's the point on what you're saying.

I also realize I just misspoke. I meant to say our tubeless pump competitor and I'll start the reasons for the -- they go from Type 2. I said 2, but I'm saying the name. Tubeless. Sorry, go ahead.

Yes. I mean, that is also 1 of the distinct things like even within Type 1, if I could stop carb counting, is that just better? Is the 1 fewer thing that I happy to do? Or is it you find versus a subset of people who just do so eventually prone to doing it that they -- there's a control thing there or something?

So there is a segment of people that will continue to carb count in their head and then convert that to a usual meal. You don't need to do that turns out, like I do it at some level. I'm in I see it in carb. I'm really bad at that. So as everybody else, we know that. That's the reason that usual works. It's because somebody might say 40 or 50 or 60 or 70 that's all kind of usual like they're not getting that right exactly.

That happens at some level. What's really interesting though is that I think this even surprised us at some level. We didn't appreciate the number of our users that we're going to not touch it at all. Forget about carb counting, just don't even call a meal. I think we shared this data at ADA, where check me on this, something like 15% or 16% of our users call less than 1 meal per day.

And of that group, it's 1 every 3 days on average, which we would define as large as fully close with mode. And they're going from roughly an A1c of 9.4% to a GMI of 7.4%. 7.4% in a fully closed of mode. It's unbelievable. But again, we don't have an indication for that, but that's what's happening in the real world.

Yes. Super interesting. And then on the topic of form factor, you guys obviously are going for a multiform-factor approach ultimately. How do you think -- so I know you're agnostic between them long term, how do you think it ends up on overall market?

Yes, in terms of split between durable disposal.

You're waiting for that 1.

So that's our mint product right there, the tubeless version that Stephen alluded to earlier. So what do we think the ultimate split between the 2 is hard to say. I think today, you guys probably know those numbers even better than we do. We can look at Omnipod new starts is as everybody else is added up, and there you have it.

There probably additional drivers that move that over time. But what I would say is if you want to fulfill our goal of being able to move the entire population health, and you really have to provide both. I don't see a world where either form factors, just the absolute dominant form factor, nobody wants the other one. There's good reasons to want both. So we should offer both.

And we feel strong about that. But is right here, probably a size you're sort of familiar with -- we're pretty proud of the sucker.

Do you want to walk through some of the features that I don't know how familiar?

Yes, sure. Again, it should sound reasonably familiar. It's a 200-unit insulin capacity. The size is as you're familiar with. We have made 1 design decision that's a little different or atypical, and it's just right here. It's a 2-part durable disposable product. That was done for very good reasons. It's done for user experience reasons. This is a durable product. It's paired to your phone all the time. I'll get to the importance of that. This is a disposal.

This is what -- more what you're familiar with build this up every 3 days. So the user experience of this, you're wearing it, right? You take it off. Take this off, discard this part. You didn't have to go into your phone and stop a sensor session or a pump session, right? Because you pulled this apart there you go. So that's all it costs you.

Take a new 1 out, fill it up, you no longer have to wait for your phone to pair with it because this is already paired, another step you've eliminated, still haven't gone into your phone. Put these together, that took me all of 1 second. That just started the thing up, primed it, flow got into your phone, put that on yourself, pull up the safety lock and hit the button and you're done. And you still haven't gone into your phone.

So that is differentiated from some other experiences you may be familiar with and that we've done away with the need to interact in the phone in any way. And the cannula insertion experience is a little bit different, which we feel will have some advantages as well, but time will tell on that one.

In short, the experience generally is the same, but with fewer steps and hopefully less discomfort.

What not the unit economics relative to doing it that way rather than checking everything?

Yes. So at any level of scale, meaning a couple of years after we launched this thing commercially, the design decisions that we've chosen with the durable component lasting 2 years an indisposable having all the inexpensive components, will have the gross margins at above the level of the tubeless pump competitor. So very advantaged on gross margin, assuming the same price point, which we don't expect to be a problem.

In this durable, we have a PCB, a processor, memory, radio, speaker, motor, gear train very, very expensive components, right? Things you don't throw every 3 days and you can avoid it. In this guy, we have a couple of injection molded plastic components, 2 batteries and the patch that fits in your body, comparatively inexpensive component, so you don't mind turning away every 3 days. So that's why it's comparatively easy to do what Stephen just explained.

I remember chatting with you guys [indiscernible], I think it was [indiscernible] '24. And it's part of the bigger picture thing, like you moved pretty quickly on that. CGM integration, you ended up moving faster than some of your peers. And you still have that kind of like speedy small company energy. How important do you think that is for how you've been competitively? How do you keep that because -- some of your peers are won't be...

It's central to what we are as a company and how we'll be successful. Yes, I don't think anybody should ever lose that. But if you lose it before you're successful, good luck, it can be natural in the long run, but we'll sure fight it as long as we possibly can. Both Stephen and I are engaged in the business on a daily basis, exception factor we're here and we're still trying to keep up with things in between our meetings upstairs.

We try -- for example, we don't have the word committee at Beta Bionics. It's just not a thing. You need a decision boom come to me and you'll have it or make it and we'll back you on it. We move very quickly because of the way we trust our employees and the way when people are uncomfortable, we'll help them out. That's not in and of itself going to mean much today. But I think the proof is in the pudding, frankly. And CGM is a great example. We were absolutely at the forefront of every 1 of the integrations that we did.

Interesting side note to this architecture here. This guy again is a durable. So it's analogous to the iLet in that it's paired with your phone. Let's just say we were to launch a new CGM with this then you would go to your phone and hit update, and we would update the software on this, and you have it the next day, right? That's a major competitive advantage compared to a situation where you might have to build your entire inventory that's in the field with Fed new software. We can over-the-air update this one, so continue advantages like that.

I'll take that question, by the way, but you I think that we do these like we're new to being a public company, Sean and I are like -- Sean and I used to -- we're new to operating a public company. And I'm kind of surprised at times not disappointed, but surprised that we do like conferences and various meetings with investors and very little time actually gets spent on talking about the management philosophy of the business and like the way work actually gets done. And I think that's a really core advantage to our company. And I think they're going to be like historically different capabilities and paces of innovation from 1 company to the next.

And we have a lot of things that really work well for us in that regard, and we're proud of it, and I don't expect it will stop, especially not as while Sean and I are managing the company together. But 1 of the key things, and not to guess Sean up too much here, but actually having an engineer led company really does matter. Sean is like very close to this mint project.

Everyone in our company shows up unless you're in the remote sales team, you show up to the office every day. That innovation is happening, like a couple of hundred feet from Sean's desk and the people, the team members that are involved in it, we've removed every decision cycle down to giving the right people the right authority.

And if there's a decision that needs to be made, Sean makes it. And I think that's a part of the philosophy that just kind of maybe speaks to the time lines and the execution that you alluded to. So thanks for the compliment and -- there's more I could say, but anyways, we just think out of it.

I appreciate that. I want to say 1 thing. I'm not always right, not by a long shot, but far better to make that damn decision, find out that you're wrong and make a different 1 than to obsess over it for months on end and not make any decision at all. So hopefully, you didn't hear some Egomania, but Sean's always right because I get the case at all. But I can be wrong really fast.

There's a funny story recently of a decision I saw Sean make and it was it was the name of the product, which is called Mint. So Mint is I think a great name. You guys -- if you don't like it, don't tell me, but I think it's an awesome name it stands for mini insulin therapy. And it seems like people really like it.

And so that product, how it got -- decisions like this typically get made in my corporate past life is that someone puts together a deck of a bunch of names like using -- hiring a consulting firm, which probably comes up with some really good ideas. And the rationale as to why there's a committee of people everyone wants to be involved in it because it's so crucial of a decision.

And at least that's what we led to believe -- and then ultimately, it gets made over a period of time and you ask the employees what they think.

You've heard about the market research?

Market research is just crucial. In Mint's case, there are 3 names that would hit Sean's desk. I was there kind of standing by the door, not even sitting down. Sean looked at them. Somebody said, I kind of like Mint sounds good. I like it too, let's go with that. That's how you move fast.

It's better to move fast and be wrong or right?

The point is you can belabor all you want. It's a pretty good name.

It's kind of fresh.

What I -- what I feel like I remember from that meeting is it wasn't even really a naming meeting. This was more like a naming concept meeting. And we were like, well, for example, here's some, I like that one.

Let's just be done. -- forget it. Let's just not name the product, it's fine. Mini insulin therapy.

Speaking of that maybe moving on -- we've gone on and on about company.

Now like I think they did it like that. [indiscernible] GLP-1s. 2023 callback going very retro. But I feel like we're kind of done with the panic and history associated with that. But -- how do you think about the combo with a product like iLet, particularly because you're already pretty good about getting people they want A1c to set it in the right place. And it's just another tool to kind of get them there within the type 2 community, which I know you don't have a label for, et cetera, but how do you think it yes.

Well, I mean, I think, look, it's a phenomenal class of drug, no question about that. On news flash, it's not getting Type 1 of insulin. That's certainly true. And in the Type 2 space, while it may prevent certain people from racing to insulin, it's also not getting your people who are on intensive insulin therapy is our target market back off either.

So I think it can and does make it a little bit easier to control people but it's not going to fundamentally change the market. And I'll remind everybody, too, that it's expensive. It's really expensive. It's more expensive than insulin therapy. So I don't think we've seen a major impact. It's Mark. I mean the pump industry has outgrown its history here in the face of GLP-1.

So asked and answered as far as I'm concerned, but that's not to say that I don't believe in them. I think they're a great class of drug they are.

The great for yoga structures NLA, I think, it seems to be a little mainline. The other 1 that's like been a little bit more topical currently, it's obviously compared to bidding. And then actually, the areas of reform that I was more interested in was the shift to more of a rental model, which you guys kind of you're already going in that direction. But my interpretation what I saw that was like, okay, well, the stated aim is to get people to be able to churn the system faster so that they can get access to your innovation faster.

A, is that a good or a bad thing from your perspective? And b, does that increase the speed of the innovation cycle because now you don't have to wait for years or am I just reaching that?

It's a very good thing. It's especially good if you believe in your products and you believe that you develop those products faster than anybody else, meaning you always have a technological lead, which we do. everybody has asked us in 1 form or another. Well, geez, moving to a pay-as-you-go model, doesn't that transfer the risk to you. But you don't get paid up front, you might not get the full payment over time. Sort -- our perspective is that if you get that payment upfront and then they don't like your product and they you attrit in 1 way or the other, then you're dead anyway, right?

4 years from now, they're sure not going to be getting a new product. They're certainly not telling their doctor that they love it, and the doctor is not writing them for their other patients. So if you believe in your product, you believe people are liking it, then pay-as-you-go model ought to be something you really -- is a benefit to you, especially, since you can also pull them from other people earlier. We do believe that. We think patient choice is a great thing, and we believe in our products.

So we'll always -- the first time you tell me that we want to -- the first time I tell you, I want to pivot to a big upfront payment. It's probably when I lost confidence of product.

Yes. I mean, do you think like -- we don't know what the phase-in will look like, but could you get a bit of a churn in the entire -- it doesn't really affect you guys because you're still small in taking share. And amongst the big players, could you get a big churn and who's on what, if you know to mean we're just sticky?

Yes. I mean people tend to be reasonably sticky, I think. I mean you'll see some of it. But every year, you've got whatever it is 1/4 of people come up for renewal anyway. -- and making that decision as it is. So you have a few more, sure. But I don't think -- I think you would see more of a shift within that quarter if it's indicative of what you would see in that situation.

What do you see? You see people with newer entrants or better technology taking share. So for us, moving to a pay-as-you-go type model is a huge benefit. If you have a massive installed base, and you want to hold on to that, it's probably not a good thing. 5 years from now, 10 years from now, ask me the same question. I hope my answer is, well, yes, it certainly benefits us with better technology that has always been us and it still is.

I hope -- and then the competitive bidding side of things, at least within the DME, -- is that a thing? Or is that not a thing?

Well, look, there wasn't a single proponent of it in the public comments of competitive bidding. That doesn't mean that it won't actually happen. But my perspective is that it's within a rental model, the competitive bidding as it's being proposed at the rate that is being proposed specific to Medicare fee-for-service, like only a small subset of people that it would be a bad thing.

And again, I don't believe that it will actually end up going through. But if it did, at the particular rental rates that are being contemplated. Yes, I think it's -- it would be a bad thing. And frankly, our tolerance, and I think probably the other pump company that would be impacted, our tolerance for taking much price concession in that particular small component is already pretty minimal. And so it wouldn't really impact our business, if we frankly just walked away from it.

And so there's -- I guess there's a world where we would do that. But really, to be -- I just wanted to add 1 clarification to Sean's point, which are well said. We are absolutely a huge advocate of pay-as-you-go. The rental model though, in our public statements, we thought we'd see some logistical problems with a rental model for insulin pumps. So you're getting a pump back kind of refurbishing it you'd have to sterilize it on a version of sterilization has to happen for blood-borne pathogens, and that has like some problems. Pumps don't just get hot swapped from 1 to the other. That doesn't really work like that.

And that's kind of how the proposal is sort of implied.

Yes. Makes a lot of sense.

Yes. I think that the -- 1 of the stated goals you mentioned earlier is to increase choice this whole thing, right? And I think as Stephen was sort of implying there, it's a little bit antithetical choice to drive people out of that market. Because you just simply put too much price pressure on it and it's kind of already on the edge of that now.

This is probably a ridiculous comment. But 1 of the things I wondered about in the past is, does anybody end up making a durable pump that is so durable that you just don't end up to replace it just because it's like -- it doesn't -- it lasts for more than 4 years, and it can be remotely software updated, and it's just built like a tank. I sort of -- 1 of your peers had a smaller pump form factor that I sort of looked at that and wondered if that ended up that way because run it for 7 years. I know it's a weird statement, but...

Well, health care and reimbursement, so we are in animal and you have to design a product for the possible product and to fit into the reimbursement system that you have. At the moment, the DME Pix code-based system isn't every 4-year thing, no matter how long it lasts. But that being said, if you wanted to redefine that system, that's okay, that the product you just described sounds like it fits very well into a rental-based model, where you just keep being paid for as long as the users on it as long as that things still last -- and if it doesn't, it's on you to replace it. That would fit well, very well in the pharmacy channel.

Make sense. On the pharmacy channel, the -- no one's quite sure how the durable side is going to end up there. You guys have a vision for how that is -- there's some others where it's maybe not always clear which way around it is going to go? How do you think that model ends up landing?

Well, it's tough to call an exact shot on this one. especially from our position, which is as market leaders in the movement of durable pumps to pharmacy. -- certainly higher than we are now. But what's the terminal number? I don't really know. I think we see 2 things that are probably competing at some level. PBMs,

I think, over time, see the other PBMs, putting these products on the menu, and they'll probably start to fall faster, right? Plans on the other hand, the ones that are still holding out become the laggards and maybe have a reason for not wanting to do it. I haven't been convinced. Those 2 things are competing.

1 is going to accelerate things on decelerate we just call our shot. But I think a very reasonable -- how do I put this? As we watch Beta Bionics over the next period of time, -- that will be our leading indicator of where this can go because we are by over nature leading at this. So we'll keep at it.

You guys have a slightly unique opportunity on the licensing side as it relates to dual hormone and that side of things. Maybe give the audience [ part members ] an idea of what that is, the opportunity there? And then also, can you be more aggressive in capping the highs, if you can protect the lows? Is that a thing?

Well, absolutely. I mean the idea of [ hormonal ] is that we can help you forget about having diabetes. And that was the best comment we ever heard in our formula clinical trials as I started out I had diabetes. At some level, a fully closed system takes care of insulin delivery completely. You'd think that would be forgetting about having diabetes, but it's not quite because you still have to worry about those lows, right? Every system iLet included has the occasional low you have to be aware, be ready to treat that.

[indiscernible] eliminates that concern. With that, we can also then additionally eliminate the highs because we can be a little bit more aggressive as well. So where that ends up, how we tune that knob between lower the highs without increasing lows, we'll see, right? That's the clinical trial that has to happen. I assume you were talking over the licenses that we licensed glucagon, a shelf-stable human pumpable glucagon from Xeris, and that puts us in a unique position. It's an exclusive license to be able to provide it by hormonal system.

And -- we think that if you truly want to forget about having diabetes, which I think is everybody's goal, bi-hormonal is really the only way to do that. We've never seen a system that really could eliminate lows without it. And the reason for that is insulins to darn slow. You can't -- you can turn off insulin, but you can't turn it off fast enough to prevent the insulin or your body from calling that low.

If you do something like exercise or after reading or something like that, which is just no way to avoid. So yes, it's a very unique product that we think is going to be truly revolutionary when we get there.

Okay. Also on to both of you. I know that you try and eliminate as much waste time as possible internally. But what's your favorite meeting every month? Maybe you have like and friendly, like let's...

We have our 1 weekly project management meeting, which is my only real standing meeting a week and it's every week, and we all get together is not a whole company, but senior staff, and we talk about everything. It's not a better way to keep up on what's going on and keep the excitement going on the whole company, I don't know.

I take 15 minutes every Wednesday morning to tell about 25 people on my team what's going on in the business. So just to be radically transparent of what actually -- what's actually happening. And people, I think, with -- they feel like they're very connected to the business and it companies being honest with them, and they actually know what's going on. They know like what the A+ problems are.

You have more people volunteering for the work. And I find that you have people that are like ready to run through a wall to try to help. So I think it's that. So just a 15-minute not written down just radical candor, what's going what's actually happening.

Sean and Stephen thank you so much.

Thank you.

Thanks, everybody.