Prepared remarks
Thank you for standing by, and welcome to the Tandem Diabetes Care Second Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1. If your question has been answered and you would like to remove yourself from the queue, simply press star 1 again. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Susan Morrison, Chief Administration Officer and Investor Relations. Please go ahead.
Hello, and welcome to Tandem's 2026 Second Quarter Earnings Call. Today's discussion will include forward-looking statements. These statements reflect management's expectations about future events, our product pipeline, development timelines, and financial performance and operating plans and speak only as of today's date. There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements, which are described in our press release issued earlier today and under the Risk Factors portion of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Today's discussion will also include references to both GAAP and non-GAAP financial measures. Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of non-GAAP measures to their most directly comparable GAAP financial measure and other information regarding our use of non-GAAP financial measures. John F. Sheridan, Tandem's President and CEO, and Leigh A. Vosseller, Executive Vice President and Chief Financial Officer, will be providing prepared remarks on today's call, after which the operator will open the call for questions. Thank you for limiting yourself to one question before rejoining the queue. I will now turn the call over to John.
Thanks, Susan. We appreciate everyone joining the call today. The second quarter marked an important step forward for Tandem. We are executing against our strategic priorities while demonstrating operational momentum, improving our financial performance, and providing broader access to our technology. This progress was evident in our results, with worldwide pump shipments growing more than 10% year over year and sequentially. In the U.S., the highlight of our performance was improvements in new pump start trends, led by a standout number of people transitioning from multiple daily injection. Internationally, we saw an acceleration of adoption in the countries where we launched direct efforts earlier this year. Additional Q2 highlights included significant margin improvement, including the second-highest gross margin of any quarter in our company's history. We also advanced the global launch of new technologies while preparing to expand our portfolio with the FDA submission for Tandem Mobi's tubeless feature. We will discuss each of these accomplishments in greater detail on the call today. I will begin my remarks with an update on the three strategic priorities we laid out at the beginning of the year, which included reshaping our business model, modernizing our commercial organization, and delivering new technology. In March, we launched Pay as You Go reimbursement in the pharmacy channel. This transition was designed to create clear benefits for customers, prescribers, and payers with better economics to Tandem. During the second quarter, our focus was on early implementation. This included updating the end-to-end processes for how our technology is prescribed, how we support customers, and how our orders are processed. We are encouraged with the momentum behind this transition and beginning to see efficiencies that are positively contributing to our results. We now have approximately 45% formulary coverage, which is already approaching the high end of our range for the goals this year. Access is a critical first step to driving PayGo adoption, and teams are now focused on driving plan utilization. In our first full quarter offering PayGo, U.S. sales through the pharmacy channel increased to 10%. This early traction reinforces our confidence in the pharmacy strategy and the broad-reaching benefits it can deliver. The second key initiative I will touch on is modernizing our commercial organization to improve productivity and support profitable growth. The work has been underway for the past year, and we are pleased with the progress. Key accomplishments include the deployment of a new CRM system to improve Salesforce efficiency and effectiveness, provide deeper insights into our customer base, and support our global channel strategy. This includes enabling our U.S. pharmacy transition and supporting direct commercial launches internationally. Our international direct launches began earlier this year in the U.K., Switzerland, and Austria, with plans for France to follow in the fourth quarter. This strategy better positions Tandem to serve our customers and healthcare providers in these markets while strengthening our financial profile. The final key initiative I will discuss is our delivery of new technology, starting with the expansion of our global portfolio. We continue to reinforce our competitive advantage with Control-IQ Plus, which now has the broadest indication of any AID system in the U.S., including pregnancy. Similarly, we strengthened our advantage internationally as we received CE mark in Q2 for pregnancy as well as adults living with type 2 diabetes. Great excitement is also building internationally, as we are in the early stages of introducing Tandem Mobi outside the United States. We plan to bring our tiny pump with big outcomes to more than 10 countries by year-end, including some of our largest markets. In addition, our team has been working to broaden CGM compatibility. For Abbott's FreeStyle Libre 3 Plus, t:slim is now compatible in seven countries outside the United States; we plan to expand to additional markets throughout the year. Dexcom's G7 15-day sensor is now compatible with Mobi and t:slim in the U.S.; international markets are soon to follow. These launches are consistent with our efforts to ensure the broadest possible coverage across devices and markets. Looking ahead, the team continues to drive long-term innovation across our pumps, infusion technology, software ecosystem, and AID algorithms. Starting with pumps, we reached an important R&D milestone in Q2 with a 510(k) submission for Mobi tubeless. This new infusion set option is designed to transform the existing Mobi pump into a tubeless AID system, giving users the unique flexibility to choose between tube and tubeless wear on a single hardware platform by simply changing the supplies they use. Compatible with the existing Mobi pump, subject to FDA clearance, this will be Tandem's first tubeless pump offering and the world's first with extended-wear technology—an important differentiator that enhances our position in this dynamic market segment. Pre-commercial preparations are actively underway. Our goal remains to begin a scaled launch this year, after which we will begin training our field and HCP community on the novel tubeless Mobi feature. We will also begin updating our payer contracts and completing operational activities in support of the launch. Infusion technology is another key area of focus as we work to expand tube and tubeless options, improve comfort, extend wear time, and simplify the user experience. To support this, we are launching AutoSoft Plus, a new set designed to enable quick set changes with reliable one-handed insertion. We introduced AutoSoft Plus in Canada in late July and plan to expand to additional geographies, including the U.S., later this year. This timing is important as we continue to manage shortages from our key infusion set supplier. We believe Q2 was the period of greatest impact, and our supplier expects availability will improve through the second half of the year. The launch of AutoSoft Plus is expected to reduce the demand for the SKUs currently under allocation. Looking to the first half of 2027, we plan to provide further choice in infusion sets with the launch of SteadySet, our proprietary technology that is FDA cleared for wear up to seven days and is now in manufacturing scale-up. The last technology advancement I will discuss is our work in automated insulin delivery. Since Tandem was founded, we have maintained our vision of creating an AID system worthy of the term artificial pancreas. Today, we are closer to this vision than ever and excited to begin sharing more details. Under our long-standing research collaboration with the University of Virginia, we are advancing their next-generation AdaNet algorithm into a compelling fully closed-loop experience for everyone. AdaNet, which stands for Automated Insulin Delivery as an Adaptive Network, has been under active development and clinical testing for the past several years. We are developing a system designed to help both type 1 and type 2 users meet the clinical time-in-range guidelines whether they are new to pump therapy or long-time users. Our goal is to achieve this without meal announcements or other user inputs, while also designing the system to incorporate additional user context and respond in a more personalized way. This is an ambitious goal, but we are advancing close-in technology and solving the most complex real-world use cases. Over the past two years, our development and user experience teams have been working toward that objective, culminating in FDA approval of an IDE in Q2 and positioning us to begin a pivotal study later this year. Overall, the second-quarter progress reflects the strength of our execution across the priorities that we set for the year. We remain encouraged by the momentum that we are building, remain focused on translating these initiatives into broader customer impact, and improving our financial performance. With that, I will turn the call over to Lee to provide more detail on financial results.
Thanks, John. Our second quarter results reflect strong execution and accelerating progress across our strategic initiatives, which are beginning to deliver sustainable operational and financial benefits. It was a record second-quarter performance worldwide for sales, pump shipments, and gross margin. Beginning with sales, we shipped approximately 33,000 pumps worldwide. This was driven by the continued demand for Control-IQ, new product innovations, and improved channel access. Worldwide sales were $255 million, increasing 6% year over year, or 5% in constant currency. This was the tenth consecutive quarter we delivered record results for the respective sales quarter, which is a trend we plan to continue building on even during our business model transition in the U.S. We shipped a Q2 record of 22,000 pumps in the U.S., growing 7% year over year. We have seen improvement in the new start trajectory with Q2 new starts nearly flat to last year but stepping up impressively by more than 20% from Q1. Notably, new customers coming from MDI grew mid-single digits year over year and now represent approximately 70% of new pump starts. This improvement was driven in part by increasing enthusiasm for Tandem Mobi, which now represents more than half of our shipments to new customers, as well as the availability of a more affordable option through pharmacy. Renewals, at more than half of our pump shipments, continue to be a robust source of business at double-digit growth. This retention is a direct reflection of the value we place on delivering high levels of customer service and driving strong customer satisfaction. U.S. sales totaled $179 million, increasing 5% year over year. This reflects measurable improvement in pharmacy adoption, partially offset by the expected impact of infusion-set constraints from our key supplier. As John discussed, we continued the implementation and rollout of our PayGo offering through the pharmacy channel that began in March. During the second quarter, our teams focused on educating patients and physicians about the offering as well as optimizing the new processes and workflows for scale. In this first full quarter under the PayGo structure, pharmacy pump shipments were approximately 10% of total shipments. As a reminder, pump shipments through the pharmacy channel do not include upfront reimbursement, which creates a near-term headwind to revenue when compared to a traditional DME sale. This initial pump headwind is more than offset over time by higher pricing for recurring supplies for both new PayGo customers and existing customers who transition from use of their DME benefits. In the second quarter, the initial headwind from pharmacy pumps was approximately $8 million, yet we still saw more than half of our sales growth driven by net favorable pricing. This benefit came from approximately 6% of our U.S. installed base of approximately 325,000 people who use their pharmacy benefit to purchase supplies. As a result of this meaningful early adoption of both pumps and supplies through PayGo, sales through the pharmacy increased to 10% of total U.S. sales in Q2. In our first full quarter of offering PayGo, pump adoption progressed slightly faster than supply conversions of existing customers and is expected to continue to do so in the third quarter. Directionally, we anticipate that each of these measures will continue to step up across the quarters as momentum builds, tracking in line to achieve the average annual modeling assumptions we illustrated at the beginning of the year. I will also note that we are seeing a higher average monthly ASP for pharmacy supplies compared to the $350 per month originally provided for modeling purposes. We are not updating our baseline assumption at this time as we would like to gain more experience, but the early data is encouraging. Turning to our international performance, we shipped approximately 11,000 pumps in the second quarter, which is an increase of 19% year over year. While shipment growth in the quarter was primarily driven by our distributor markets, we are beginning to see encouraging traction in our direct European markets from our direct sales and marketing efforts, which reinforces our expectations for sustainable top-line growth and margin expansion over time. International sales totaled $75 million, increasing 7% year over year, or 6% in constant currency. Direct channel sales represented approximately 13% of revenue, more than double prior-year levels. As we continue executing our transition strategy, sales reflect approximately $3 million of headwinds related to distributor inventory buybacks in markets where we have already transitioned to direct operations, as well as destocking ahead of future transitions. Sales for the quarter were also impacted by our key infusion-set supplier's constraints, which, unlike the U.S., were greater than anticipated this quarter. The impact was largely due to timing as infusion sets were received late in the quarter, limiting distributor order fulfillment before quarter-end. Turning to margins. Gross margin was 57%, improving 5 percentage points year over year and 2 points sequentially. It reflects continued execution against our key margin drivers, including price appreciation from our global channel strategies and product cost improvements as Mobi volumes continue to scale. Operating expenses were $159 million, remaining relatively flat year over year while we continue to invest in strategic growth initiatives in our global commercial infrastructure and product portfolio. Adjusted EBITDA margin increased to 3% of sales, demonstrating a positive result for the fourth quarter in a row. This continued improvement reflects the benefits of scale and sustained gross margin expansion while maintaining investment in future growth opportunities. Stock-based compensation expense decreased meaningfully in the quarter to $16 million, or 6% of sales, down from 11% of sales in the prior year. This improvement reflects changes made in recent years to our equity granting to align with benchmarks for companies of our size. We anticipate the stock-based comp for the year will now be approximately $65 million, lower than our original expectation of $80 million. The reduction in this noncash expense meaningfully contributed to the eight-point improvement in operating margin to negative 5% of sales. We ended the quarter with a healthy balance sheet, including $456 million in cash and investments compared to $570 million at the end of Q1. The change reflects meaningful investments in a new CRM system to support global initiatives, the second annual payment under the Roche settlement agreement, and an additional strategic investment in Secure, a private company we have invested in since 2021. Secure provides simple mealtime insulin delivery through a wearable patch offering a low-tech option for people with insulin-dependent diabetes who are not seeking an AID system. It complements our automation-focused strategy for insulin-intensive diabetes while providing insights into a new type 2 segment to inform our long-term strategy. Turning to our 2026 expectations, we remain confident in our ability to deliver on our goals for the year and are reaffirming our sales and margin guidance. Worldwide sales are expected to be in the range of $1.065 billion to $1.085 billion. This includes U.S. sales in the range of $730 million to $745 million and international sales in the range of $305 million to $340 million. We expect gross margins in the range of 56% to 57% and adjusted EBITDA margin of 5% to 6% of annual sales. For the third quarter, worldwide sales are expected to be approximately $265 million. This includes $180 million in the U.S., reflecting increasing pharmacy adoption. Internationally, we expect sales of $85 million, taking into consideration seasonality typically experienced in the summer months and modest improvement in the availability of infusion sets from our supplier. Gross margin is expected to be approximately 56% and adjusted EBITDA margin approximately 2% of sales, based on pharmacy pricing dynamics as well as a planned increase in operating expenses in support of commercial initiatives. We continue to expect to achieve our highest margins for the year in the fourth quarter driven by an increasing percent of our U.S. installed base ordering pharmacy supplies, seasonality in U.S. DME pump sales, and a larger direct presence in Europe. In closing, the strength of our second-quarter performance demonstrates continued advancement against our strategic and financial objectives. We remain focused on driving sustainable growth, expanding profitability, and delivering long-term value for our shareholders. With that, I will turn the call back to John.
Thanks, Lee. Before we close, I want to recognize the entire Tandem team for the focus and the care you continue to bring to work every day. Your efforts are helping us advance our priorities, support our customers and healthcare providers, and sustain progress across the business. Thank you for everything you do on behalf of Tandem and the diabetes community we serve. In conclusion, our second-quarter performance reflects solid execution against the priorities we set for the year and reinforces our confidence in Tandem's strategic direction. Looking ahead, we remain focused on building on this momentum, expanding customer impact through affordable and innovative technology, supporting profitable growth, and building our leadership position in diabetes technology. Thank you again for joining today. We are excited about the opportunities ahead and look forward to sharing updates on the continued execution in the upcoming quarters. Thank you.
Questions and answers
Our first question comes from the line of Mathew Blackman from TD Cowen. Your question, please.
Good afternoon, everybody. Can you hear me okay?
Yep. How are you doing, Matthew?
Doing well. Thanks, John. Maybe John or Lee, could you talk about some of the areas of friction in the pharmacy transition process that you are finding and whether there have been any surprises, good or bad, in that discovery process relative to the full-year guide you gave? Also, the conviction you have today in that full-year guide for 20% of pump shift through the pharmacy, 10% for the installed base, and 15% of revenue—anything that helps give us confidence that the ramp is going as planned? Thank you.
We are very pleased with the early PayGo experience. It reinforces our conviction that this is an important and meaningful opportunity for the business. The things we experienced this quarter were the normal learning curve that comes with implementing a new process. The process is an end-to-end change in how we do business—how clinicians prescribe, how we service customers, and how we fulfill orders. So it is a meaningful change to the business, but there was nothing surprising. We feel like we are on track and are continuing to work on developing efficiencies. When you look at the performance—10% of sales went through pharmacy in the first full quarter of meaningful presence in the pharmacy channel—we are very happy with it, and it continues to reinforce that this is a significant opportunity for us.
And our next question comes from the line of Richard Samuel Newitter from Truist Securities. Your question, please.
Hi. This is Filipe on for Rich. Your largest competitor called out retention issues in the type 2 community, so I was wondering if you could comment on your experience with type 2 patients in the quarter and whether you are seeing any of those trends. Thanks for taking the question.
Type 2 expansion is a huge opportunity for us, and it will drive growth going forward. It is an underpenetrated market both in the U.S. and internationally, and it certainly requires market development. We are not providing specific numbers today because it is early and there is still a lot of work in process. Relative to attrition, our type 2 attrition is modestly higher than our type 1 rate, and it has been stable over the past five years. We have employed a strategy where we are selective and focus on patients who have the highest likelihood of success, which drives the success in attrition for us. There are a few indicators we are watching. We recently spoke to CMS with a consortium of others about eliminating the C-peptide decision for Medicare; we discussed the impact on the Medicare population and left the meeting optimistic. We expect to hear results this month. We also expect tailwinds from FreeStyle Libre 3, Mobi tubeless, and pharmacy access. We are investing in digital marketing and creating awareness with PCPs and HCPs. We are excited about this opportunity, and we anticipate seeing growth in type 2 MDI during the year and will continue to report as things progress.
And our next question comes from the line of Larry Biegelsen from Wells Fargo. Your question, please.
Good afternoon. Thanks for taking the question. Lee, U.S. pump shipments were a little soft in Q2 on a year-over-year and sequential basis from what we typically see, and new starts were flat. Is there anything to call out in Q2? It looks like you need about 12% to 13% year-over-year pump growth in the second half to reach the midpoint of the U.S. pump guidance. What are the drivers of that acceleration in pump shipments in the second half? Thanks.
Thanks, Larry. We are at the very beginning of a lot of initiatives we expect to gain momentum across the year. For back-half strength, a number of new products and initiatives will drive growth. For example, FreeStyle Libre 3, which we launched late last year, and Mobi Android launched late last year into this year; we are already seeing results from those. Mobi starts are growing to more than half of our new pump starts. Pharmacy is another driver: it is the first full quarter of that and is removing the affordability barrier for pump therapy. Those areas should give us the back-half strength. One thing to highlight about new starts this quarter: while we were just short a few hundred pumps from growth, MDI conversions—which are arguably the most important metric—grew mid-single digits year over year and have shown an improving trajectory over the last few quarters. That is the signal that supports our confidence in reaching back-half strength and continuing to see new start growth this year.
And our next question comes from the line of Matthew O'Brien from Piper Sandler. Your question, please.
John, Lee—this is Anna on for Matthew. Thanks for taking our question. Gross margin was really strong in the quarter and much better than we had modeled. I'm curious about the thought process behind the reiterated gross margin guide, given the outperformance and the strong adoption you are seeing on the pharmacy side. Why is it expected to step down sequentially in the third quarter? Any color would be helpful. Thank you.
We are very excited by the gross margin progress. The significant step-up is a good demonstration of where this can go. It occurred while still a relatively low percentage of sales came from pharmacy. Two main drivers this quarter were the pricing benefit from the pharmacy channel as we push adoption and cost improvements as Mobi volumes scale. Looking ahead, we guided to a slight step-down in Q3 but still expect higher margins by Q4. The variability relates to the timing and mix as we push pharmacy adoption. The two levers are: what percentage of pumps go through pharmacy at the zero upfront price, which creates a near-term headwind to sales and pressures gross margin; and the benefit from people ordering supplies through the pharmacy channel, which is favorable. We expect pump adoption in PayGo may outpace pharmacy supplies adoption in the next quarter, which affects margin optics. In the long term, pharmacy should drive strong margin expansion.
And our next question comes from the line of Suraj Kalia from Oppenheimer. Your question, please.
Hi, great—thanks. This is Jacob on for Suraj. On Mobi tubeless and the ramp, are there any gross margin dynamics to keep in mind during the phased launch? Does it carry a different consumable mix or cost structure that could create temporary margin changes before scale?
With any new product launch, you won't reap full benefits until you reach scale. When we first launched Mobi a few years ago, we saw a small headwind to gross margin, but it wasn't incredibly meaningful—more of a flattening effect. There's nothing additional to flag specifically today. We are excited for the technology, and you might see increased sales and marketing investment as we accelerate awareness for a launch of that magnitude.
And our next question comes from the line of Joanne Karen Wuensch from Citi. Your question, please.
Good evening, and thank you for taking the question. I want to double-click on Mobi tubeless: I want to confirm if it has been filed with the FDA, and what is your updated timing on that launch? Thank you.
We filed it in the second quarter, and it is under review. We are very excited; it is the first extended-wear patch that will be on the market. We are planning for clearance and an aggressive scaled launch in the second half of this year. After clearance, we'll finalize documentation, conduct training with our teams and HCPs, update contracts, and initiate early access programs for patients to validate performance in real-world use. We are planning an aggressive marketing program once approved and look forward to getting this into the market this year with a scaled launch.
And our next question comes from the line of Mike Kratky from Leerink Partners. Your question, please.
Hi, everyone. Thanks for taking our questions. Following up on the confidence in maintaining 20% of U.S. shipments through the pharmacy this year: that would require a fairly major step-up for Q3 and Q4. Could you speak to the quarterly cadence between Q3 and Q4 that's built into your expectations? Is the Q4 exit rate a reasonable assumption for a jump-off point for 2027?
We already have 45% formulary coverage, which is nearing the high end of our range for this year. The opportunity exists and momentum is strong. In Q2, we shipped more pumps through PayGo than we did all of last year in the old pharmacy model. The model makes it easier to bring new patients onto the technology. In the early months, there are learnings and scale adjustments, but adoption is growing. We built in a significant step-up in pump percentage through pharmacy in Q3 and a high exit rate in Q4. We have not provided specific quarterly percentages, but we expect meaningful step-ups each quarter and feel very convicted about achieving our targets. A high Q4 exit rate is part of our planning for 2027 assumptions.
Thank you. And our next question comes from the line of Karen Ryan from Deutsche Bank. Your question, please.
Hi, there. Thanks for taking my question. How are you tracking on converting users over to pharmacy at renewal? Can you talk about the patterns and trends you are seeing there and how that contributes to other pharmacy growth opportunities such as new starts or out-of-warranty conversions, which are attractive since they do not come with the pump headwind?
We haven't provided granular detail by source, but I can share some patterns. For new starts, pharmacy is especially attractive because many people on MDI didn't move to pump therapy due to cost, so pharmacy lowers that barrier. For renewal customers, pharmacy helps when customers are out of warranty because they can move forward more quickly with renewal or switch without the same cost burden. We do not focus on shifting in-warranty customers; instead, pharmacy helps patients convert from other technologies or contracts more easily. There are multiple pathways for pharmacy to drive penetration—new starts, out-of-warranty renewals, and competitive conversions—all of which contribute to achieving the 20% target.
And our next question comes from the line of Jason Bedford from Raymond James. Your question, please.
Hi—this is Elena on for Jayson. Thanks for taking my question. Can you share more color on how conversations with payers have evolved since introducing PayGo? You mentioned seeing a higher price than your initial expectation—what might be driving that, and do you see opportunity for a higher price in the future? Thank you.
From the payer perspective, we already have contracts with the top three PBMs and are in discussions with others at various stages of negotiation. The new model has helped secure formulary coverage compared with the prior model. Going forward, our focus will be protecting and defending coverage and continuing to drive preferred access where we do not yet have it. Regarding pricing, we modeled conservatively at $350 per month per patient for pharmacy supplies. Contracts vary in rebate levels, and patient co-pay assistance usage is another variable. We did better than $350 in Q2, but we don't yet see a sustainable trend to declare a new baseline. We'll monitor the next few quarters to see how it shakes out. We do have our eyes on a higher price over time as the market develops and competitors reference higher price points.
And our next question comes from the line of Anthony Charles Petrone from Mizuho. Your question, please.
Hey—hello. Congrats on the print. It looked like international supplies were maybe a little weaker than expected. Can you provide color on what happened there in the quarter and anything to consider for the rest of the year? Also, a quick follow-up: Sigi—any update there? Thanks.
On international supplies: we've been managing a worldwide supply-chain constraint with infusion sets from a third party. It began late last year and became more impactful in the first half of 2026. We believe Q2 had the greatest impact. We received the inventory allocation we expected, but it arrived late in the quarter, so we could not get it into distributors' hands before quarter-end, which caused softness in supply sales. We expect the impact to lessen across the year and are managing through the situation. We remain confident in achieving our guidance for the year.
Regarding Sigi, we moved the technology resources from Switzerland to San Diego and are working on the next-generation Mobi, which will incorporate Sigi technology along with Mobi enhancements. Our current focus is getting Mobi tubeless to market, which we believe will have meaningful commercial life over two to three years. The next-generation Mobi that includes the acquired Sigi technology is an important future product, but it will not be in the market for a while. Our priority now is Mobi tubeless and its launch.
And our next question comes from the line of Travis Lee Steed from Bank of America. Your question, please.
Hi. This is Stephanie on for Travis. Congrats on filing Mobi and being on track for the launch. How should we think about the launch ramp and uptake into 2027 with other competitors potentially coming to market at the end of this year and early next year with their patch pumps? Any preliminary thoughts on U.S. market growth in 2027 and how patches can accelerate growth?
When you look at the market today, there is a tube space and a tubeless space. Tube-space growth is single digits or mid-single digits, while the tubeless space is growing over 20%. Getting into the tubeless market gives us access to significantly higher interest and demand. We expect the inflection point in our revenue curve when the product is fully released. There is some FDA uncertainty and launch process steps to complete, but we expect the product on the market in the second half of this year. I view 2027 as the year where we'll see the full positive impact on revenue and margin. We have done extensive customer and physician feedback sessions; response to Mobi tubeless has been overwhelmingly positive. We believe Mobi tubeless will compete effectively against existing and near-release devices and will be an important device for us.
And our next question comes from the line of Jonathan Block from Stifel. Your question, please.
Great—thanks. Good afternoon. Lee, roughly how much higher has pharmacy been running above that initial $350 per month assumption? And what does that say about the number of people transitioning to pharmacy for supplies? If pricing is running decently above, could that imply conversions are running a little behind plan? Any thoughts?
I won't give the exact difference versus the modeling assumption, but your observation is directionally correct: some pricing benefit contributed to the outperformance in the quarter. In this early adoption phase, we've focused a bit more on getting PayGo pumps out the door—bringing new patients into the system—so pumps slightly outpaced supply conversions for existing customers. There's a balancing act because new prescriptions require physician time and workflow changes. As we drive efficiencies in workflows, we will continue to push conversions of existing customers. The pump adoption may outpace supply conversion into Q3, but we expect the balance to shift in Q4 and into next year as co-pay assistance and other mechanisms support supply conversions, especially around deductible resets in Q1.
Thank you. Our next question comes from the line of Dane Reinhart from RW Baird. Your question, please.
Hey, John and Leigh. Thanks for your time. It's been a few quarters since the type 2 label expansion and your sales push there. Any indication of what percentage of your new starts are type 2 right now and what you're seeing in that underlying market from a growth perspective? Thanks.
We have chosen not to provide specific percentages on type 2 new starts at this time. This year followed a pilot approach last year; this year our salesforce has specific objectives for type 2 engagement, and the indicators are moving in a positive direction. We expect the C-peptide decision from CMS this month, and a favorable decision would help. Other structural tailwinds include FreeStyle Libre 3, Mobi tubeless, and pharmacy access. These should drive interest and growth, but we are not disclosing exact type 2 numbers right now. We continue to see encouraging signs and will report progress over time.
This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation in today's conference. You may now disconnect. Good day.