We’re seeing that as somebody goes on basal insulin, look, you’re going on basal insulin. You just as well use a sensor to know how this is affecting your body so you can learn, and so we can titrate your basal insulin the way it needs to be. And we’re looking at product offerings and software enhancements to make that experience better. But even in the type 1 population, Malgaret, you now see kids leave the hospital with their Dexcom. They get diagnosed; they go to the hospital. And again, I talked with someone this morning, even the six-year-old was diagnosed and left the hospital wearing a Dexcom because there’s no way that they were told they could manage this disease without it. So, we have definitely become a product and offering that comes into play very, very quickly.
I also think we see, particularly if there’s coverage with somebody with type 2 diabetes who’s not using insulin, physician knows the patient can get it, they’ll get it to them and use it as a teaching aid, as a tool to help these people manage their condition. Across the board, CGM is becoming used earlier in treatment over and over again.
Jereme Sylvain: Yes. And Malgaret, this is one of the reasons why when we, last year, I think we talked a little bit about this, is we introduced a cash pay option on our G-Series. One of the reasons in doing so is, as Kevin alluded to, really across the spectrum of managing your diabetes, there’s been more interest. And so, those plans that do have pockets that do cover everybody with diabetes and the cash pay option have — there has been some uptake. There’s certainly not a majority of our uptake and certainly not the materiality of our customer base, but the interest is there. And so, you continue to see that taking place. It’s why we’re so bullish on Stelo, back to Kevin’s point, why there’s so much inbound interest in that product. So, hopefully that gives you some context. There’s a groundswell of attention to this and rightfully so, it can help a lot of people.
Operator: And we will take our next question from Matt Taylor with Jefferies. Your line is open.
Matt Taylor: Hi, thank you for taking the question. I wanted to ask you kind of a combined question. When you were talking about moving earlier in the treatment paradigms and also with Stelo coming on it, and obviously you’ve got plans to try to broaden coverage and having these conversations with payers about how that may benefit patients. So, the question is really, are you seeing signs from the payers that you could actually get coverage for the G-Series and/or for Stelo in some other format this year, basically earlier in the treatment paradigms than basal? And how long do you think it will take to get any kind of coverage [indiscernible]?
Jereme Sylvain: Yes, so it’s a fair question. There are some plans out there that actually do cover really all folks. It’s not a majority of plans, but these plans have seen early on the value of CGM as a lifestyle change, a preventative tool, and something that ultimately yields results back to the system. And it’s the same economics we’ve talked to you about before. And so, some plans have done that. Again, it’s not the majority. In terms of your question, though, more broad coverage or how do we introduce that earlier? I don’t think we expect that to expand significantly this year. Certainly plan by plan you get wins here and there, but those aren’t the majority of the national formularies at this point. And so, I think the work has to continue to take place.
I think one of the reasons why we did want to get Stelo out there is because the data that’s going to come up, in addition to all the clinical trials that are underway, the clinical work that’s underway that consistently do along with our partner organizations, having that real-world data, I think, will be really helpful in demonstrating to payers and employers why this is a good tool to ultimately improve health and reduce costs at the end of the day. So, I don’t expect it in 2024. If you asked us for the timeline, Kevin’s been very clear. The two-to-three-year window we think it takes to do so, we’re highly incentivized to go quickly. Nevertheless, it’s something we’ll continue to work on and keep you posted on our progress as we make progress.
Operator: We will take our next question from Matthew Blackman with Stifel. Your line is open.
Matthew Blackman: Good afternoon, everybody. Can you hear me okay?
Kevin Sayer: Yes.
Matthew Blackman: Okay, great. Maybe, Jeremy, this question for you, I know you’re not going to give me precision here, but I’ll ask anyway. Just on G7, where are we even in the roughest sense in terms of the mix of the install base? And I guess, the more important question is, what’s the tipping point for gross margin accretion in terms of G7 mix? Is that something we hit this year? Is that part of the quarter-over-quarter potential improvement to get you to the full-year guide, or is that something that happens further out? And is AID integration a key component of that ramp?
Jereme Sylvain: Yes. So, here’s my expectations, the way we’re tracking, and again, it’s going to depend on how things play out over the course of the year, but we are tracking to a point where G7, as a percentage of our overall sales, will eventually move ahead of G6, and I expect that here over the coming quarters in 2024. So, that is moving. And it’s really started to — it started moving, obviously, at the back half of last year, and having some to your point, the AID integration was very helpful for the base. So, that is happening, and it is the reason for some of the leverage in the back-half of the year. As G7 starts to be the primary product, the economies of scale start to kick in, and that’s where you start to see the cost come below G6.
And so, that could happen this year, and it very well could happen as we move over the — it’s going to depend on at the velocity at which we move. I will tell you, Q1 was a very strong velocity in movement. In terms of new patients coming in, and I think you guys can see it in the scripts, a majority of new patients are already moving to G7. So, the great news, it’s not a matter of if, it’s when, and so it’s really on converting that base. So, I think the long way to answer, yes, some of the leverage this year in gross margin is because we do expect G7 to be the majority of product. When it gets lower, it’s going to be kind of a timing thing. We don’t have an exact date, but at the velocity we’re going, it’s happening very quickly, and it should be a good guy.
And AID will play a large part of it. It’s already started with our tandem base. I know we’re talking about [inflict] (ph) coming up here pretty soon. I’m excited about both of those opportunities in converting that base.
Operator: And we will take our next question from Shagun Singh with RBC. Your line is open.
Shagun Singh: Great. Thank you so much. So, U.S. growth was pretty strong at 24% year-over-year, but it was roughly in line with expectations. And so, I’m wondering if you can elaborate on pricing. I know that’s been a big focus for you guys. What were trends year-over-year and sequentially? And then on Stelo pricing, is it fair to assume more in line with cash pay, similar to what your competitor has indicated? Thank you.
Kevin Sayer: The Stelo pricing I’ll start with, and then Jeremy can jump into the other. Stelo pricing is going to be competitive. We’ve got a number of models we’re considering. We said we’d bring you more information on that on the next call at ADA, and that’s when you’ll hear more. But we’ll be very competitive with other cash offerings when we launch Stelo.
Jereme Sylvain: Yes. And then, to your question on Q1 in terms of pricing dynamics, the pricing dynamics are stable. We don’t have a lot of contracts year-over-year that are changing. And when we do have those contracts in general, the pricing headwinds we do have that typical medical device headwind that’s continued to play out. So, that is stable. The one thing you do see as you get into the start of a year and benefits reset, is we do see a lot of our new patients coming through the pharmacy channel. We still have a very strong DME business, and certainly the DME business continues to be supported by our partners very, very well. But what we find is, as we call on more and more primary care physicians who are seeing where poor basal patients are seen, there is a bit of a heavier tilt towards the pharmacy channel for new patients.
Again, the base is pretty stable. So, what you do find is, as you think about the mix, you do get a little bit more running through that channel given where the predominance of our new patients are coming from. We don’t call that price. It’s pretty consistent year-over-year, but it is helpful to understand those dynamics. It’s not anything new, but it’s something just to continue to be mindful of as we move into a new year.
Operator: And we will take our next question from Matthew O’Brien with Piper Sandler. Your line is open.
Matthew O’Brien: Good afternoon. Thanks for taking the question. And Jeremy, it sounds like you have a little bit of a cold, so I hope you feel better. When I looked at the stock in the aftermarket, it’s down about 8%. You just had your easiest comp of the quarter, or of the year, I’m sorry. And then, the rest of the year just assumes a pretty nice acceleration throughout the course of the year off of tougher comps. Even when you do it on a two-year stack basis, it’s still more than you just put up in Q1. I know Japan is going to be a little bit of a tailwind. You’ve got a broader sales force now, but those guys take time to kick in. Stelo is not going to really kick in until Q3, Q, probably more like Q4. So, just why the confidence in being able to hit kind of the midpoint of the guidance range for the remainder of the year, just given some of these dynamics?
Jereme Sylvain: Yes, sure. I’m happy to provide that, Matt. And thanks for the wishes on the cold. I was trying to impress you with my deep voice. I guess that didn’t work. In terms of how the confidence on the year, one of the things that as we go into a quarter we try to set a base case, and the base case has risk around things like competitors, things like adoption in the basal base, things like what we would do in terms of channel mix and pricing, internationally expansion. And while we said Japan was going to launch, you have to be mindful of that. Talking about basal coverage and adoption outside the U.S., all of those go into as we set ranges for base cases. And as some of those get knocked down, we feel much more confident about raising the base case.
And so, that’s the reason why we ultimately did it. We feel more confident in the base case as a floor. And so, we certainly felt good there. We haven’t talked about it yet, but I think one of the things we are really excited about is in France, we’ve submitted our final paperwork for Dexcom ONE+ to launch with what we expect is basal coverage in the coming months. And so, we talked about it. It was something we thought was coming. We knew it was coming, but it was one of those things that we needed to make sure we did the appropriate steps. So, as we start to de-risk it, that’s one thing. In Germany, we have wonderful basal coverage there. It’s just a wonderful, for the small population that’s agreed to it. But that’s a wonderful start for us in terms of now saying, well, there is a pocket of payers in Germany, albeit small, that do have basal coverage.
That’s a wonderful progression for us. And we are the leader in terms of basal coverage in Germany right now. And so, these are the things that help de-risk the year that hopefully give you guys a little bit more confidence in that base case. Certainly, it gives us confidence in that base case and that’s why when we come out and feel comfortable moving that up it’s that confidence that we have in that base case.
Operator: And we will take our next question from Marie Thibault with BTIG. Your line is open.
Marie Thibault: Good evening, thanks for taking the questions. I wanted to ask a question here on Japan. It certainly sounds like you have really broad favorable coverage for all people with using insulin. So, I want to understand where was penetration into that market with your distributor partner, and what have been the barriers? What have really been the hurdles and what are you going to do to try to attack those?
Kevin Sayer: Our penetration with our partner was next to a very small. Japan has not been a big market for us in spite of the great coverage that has just come out which is why we’ve gone direct and our distributor partner and us have gone our separate ways. We’ve had this experience in several geographies over the years and those geographies where we acquire a distributor an existing infrastructure like we did in Australia, like we did many years ago in Germany, we get out of the gate very quickly and we can grow a market very fast because we have an infrastructure already in place. With respect to Japan, it’s like, some of the other geographies we’re starting from scratch similar to how we well like we’re doing in France.
