Welcome to the DexCom Second Quarter 2015 Earnings Release Conference Call. My name is Laquiba and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Kevin Sayer. Kevin, you may begin. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Thank you. Good afternoon, everyone, and welcome to the DexCom second quarter 2015 earnings call. We'll start with our Safe Harbor statement by Steve Pacelli. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Thanks, Kevin. Some of the statements that we will make in today's call may constitute forward-looking statements. These statements reflect management's expectations about future events, operating plans and performance that speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under Risk Factors and elsewhere in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other reports filed with the SEC. We undertake no obligation to update publicly or revise these forward-looking statements for any reason. Additionally, we will discuss certain financial information that has not been prepared in accordance with GAAP with respect to our cash based operating results. This non-GAAP information is provided to enhance your overall understanding of our current financial performance. The presentation of this additional information should not be considered in isolation or as a substitute for our results or superior to results prepared in accordance with GAAP. Kevin? Kevin Ronald Sayer - President, CEO, Chief Operating Officer…

Thank you. We will now begin the question-and-answer session. Our first question is going to come from Mike Weinstein. Please go ahead.

Hi, this is actually Robbie Marcus in for Mike. Congrats on a great quarter, guys. This is now something like three years in a row where every quarter is 50%, 60% or more growth, and it just looks like every quarter you keep finding new sources of patients and new areas of growth. So maybe you can help us – walk us through, where are the new patients coming from? Is it pumps, is it MDI patients? And how sustainable is this? And how important is G5 going to be to growing this patient base? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Thanks. That's a very good question. This is Kevin, I will take that. Let's start with the pumps versus MDI mix. Still a majority of our patients come from the insulin pump world, but we are seeing an increase in MDI patients. We haven't totally moved the needle away from our 60:40 split that we talked about earlier. I think the traction Vibe has generated has helped us. Also the number of new pump starts on Tandem and Insulet as they both gain a little more traction, it appears, in the marketplace help us because those patients migrate to our sensors. So we've had good success there. So they're coming from across the board. With respect to patient groups, we certainly can't walk away from the good that the Pediatric launch has done for us. I was at a show in a meeting in Florida, children with diabetes, and a guy was giving a speech about all the therapies available for diabetes. And he asked all the peds and their parents in the room who use CGM, and a bunch of hands went up. And he asked how many use DexCom, and no hands went down. So we've done very well in the peds market, but it's very much been across the board.

Yeah. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Everything we do helps sustain this growth Robbie, and I don't think anybody can underestimate how difficult it is to grow a business this quickly. To grow a business this fast, you have to have new thing after new thing after new thing that enhances the patient experience to get deeper into the patient community. Gen 5 is that next step. We believe the data going straight to a phone will enable patients not to carry an extra thing around in their pocket and will be very helpful. But we also know the next step after that: we have to make it more convenient, we have to eliminate calibrations and the hassle factor, and we have to continue to maintain our excellent level of accuracy. All those things matters, and we address every one of those things every time we iterate.

And maybe just one follow up. A question we get a lot from investors is, how is the shift to the pharmacy going to impact your financials? And I was surprised to see that ASPs for sensors were actually at the high end of the range this quarter. So, can you talk about what impact that's having on sales, and then down throughout the P&L, is it going to be a benefit or neutral? And how should this impact getting new patients in the door? Thanks, guys. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, it should impact new patients getting in the door very favorably because in many cases all they would need is a script from a physician and maybe some limited pharma preauthorization on a phone call. So, it will take the cycle of a new patient going in the system down significantly, so that should be very good. It should also reduce their copays. With respect to the pricing of our system in the pharmacy channel, there will be some situations where we lower price to get pharmacy in the door, and some situations where we get price increases. We hope over time – our goal has been, try to remain price neutral. We have another pricing lever coming with the gen 6 sensor that has an extended wear. So I think as you see us move to pharmacy, if we see movement down a little bit or up a little bit in pricing in the pharmacy channel, we've got something coming with the gen 6 system where we can pick certainly all, if not more than that, up with an extended wear sensor. So we monitor it closely. We have long discussions before we embark in a pricing – we embark in pricing discussions every time we have a pharmacy contract. So we're looking at it very closely, but so far so good. Even as more of our businesses has shifted there, we're doing quite well.

Thank you. Our next question is going to come from Ben Andrew from William Blair. Please go ahead. Ben C. Andrew - William Blair & Co. LLC: Good afternoon, guys. I wanted to then talk about a couple things, I guess. And Steve, I may have missed your first comments, or Kevin. Did you give a percent of revenues from hardware this quarter? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yes, it was 30%. Ben C. Andrew - William Blair & Co. LLC: It was still 30%. So is that roughly split between new patients and replacement hardware? Because that would put you at an awfully big new patient number, something closing 18,000 patients or even 20,000 patients in the quarter. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah, we're not going to break it out, as we haven't in the past. You should assume with the revenue levels that we're at and the growth rates we're experiencing, we're adding quite a few new patients, but we're not going to be specific on the new patient numbers. Ben C. Andrew - William Blair & Co. LLC: Okay. So the Share monitor launch obviously plus pediatrics have got to be the two major things that really changed it. But was the momentum actually building through the quarter, since you've only had that product for a short time, and obviously there's a little bit of backlog built through Q1 with seasonality, but was it actually getting even stronger as the quarter went on? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: You know, the month to month swings in our business – and Jess is sitting here across the table looking at me, are difficult to predict, and in some years all the months are…

Thank you. Our next question is going to come from Brooks West, from Piper Jaffray. Please go ahead. Brooks E. West - Piper Jaffray & Co (Broker): Hi, guys. Thanks for taking the questions. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: You bet. Brooks E. West - Piper Jaffray & Co (Broker): Kevin, can you talk about – and I stood with you in your booth for a while at ADA and listened to some of the patient stories around Share. Is it safe to say that the patient profile for that product is skewing more towards peds and young adults? And you're maybe actually seeing a turbo boost from that launch? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: I think it does skew that way. But I would tell you, that's not the only place that it goes. I've been around a number of adults who are using it. I was in a physician's office just a week or so ago, where a physician showed me data from a 72-year-old patient who had severe hypoglycemia unawareness, and couldn't manage himself. He had moved to a small town to take care of his 90 plus year old parents, and instead they were taking care of him till he got on CGM. Well, Share data is very important for that guy. And I think any place where people are subject to severe high and low swings, and particularly with hypoglycemia, Share has made huge difference. It obviously is going to help more in pediatric patients – if not for the simple reasons that seven-year-olds can now tell their parents they need an iPhone, and I have to have this if you're going to watch my data. The interesting side note of all the…

Thanks.

Thank you. And our next question is going to come from Bill Plovanic from Canaccord. Please go ahead.

Great, thanks. Good evening. A couple questions here, just first on G6. I think, based on your comments, your pilot and pivotal will go this year for that, and when do you expect to complete the pivotal and submit? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, the pivotal timing will dependent upon a lot that we learned in the pre-pivotal. We expect to submit early next year and hopefully launch in early 2017.

Okay. And, then – and like you said on that, you believe with that, you'll have the 10-day extended wear, correct? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: That's correct.

And then, when do you think – on the dosing, just again, clarification, you're working on that on the G4 to get the dosing claim? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: That's correct, we don't have to wait for gen 6. The FDA in our discussions has very strongly indicated to us that even without the interference blocking of the gen 6 membrane our G4 data is strong enough to support an insulin dosing claim. So we're working with the agency about what work we have to do and labeling we have to put together to add that feature to our product.

And, would you – I mean, if G5 gets approved, do you still turn around and get the dosing on G4 and then turn around and kind of baby step to G5 to add that dosing claim or would it automatically come with it? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: They're the same sensor and algorithm, Bill. So, more than likely what we would do is launch the G5 with the claim and not go backwards.

Got you. Okay. So when you get the G4 dosing, it basically applies to G5 and then you have that. That's locked up. So then it's really working on – and I think you said on G6, it was – you discussed reduced calibration. What exactly does that mean? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, when we run studies, we calibrate it. We have calibration schemes and our patients take calibrations. Then we go simulate the data in a number of ways. We simulate the data as if they only took calibrations on the first day or in the middle or in just a number of different ways. More than likely, our first pass with this, particularly in looking at timing with the agency, would be one calibration a day. But we developed an entirely new algorithm platform for this product, one that can adapt to very few calibrations. So more than likely, I would say our first pass with G6 will be a calibration every single day, not really as much for accuracy as it is for the reliability and the safety of this system, and looking to get through the agency efficiently. So that would be our first pass and then we will look at a number of options after that with filings after the fact. So one a day for the first – when we start.

Wow! I think I will stop there. Thank you.

Thank you. Our next question is going to come from Greg Chodaczek from CRT Capital. Greg P. Chodaczek - Sterne, Agee & Leach, Inc.: Thanks. Most of my questions have been asked. But real quick on UNH and Anthem, have those programs started? And if so, when did they start? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah, they were both effective July 1. Greg P. Chodaczek - Sterne, Agee & Leach, Inc.: July 1. And what percent of the MCOs or managed care guys do you think sign up, or are they waiting for UNH and Anthem to have 12 months of data and say, yeah, this is the way to go? Or is this fluid and we could see more by the end of the year? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: No. I think you could see more by the end of the year. We're in active – I would tell you, without being specific, we're in active discussions with virtually everyone, every major payer. Greg P. Chodaczek - Sterne, Agee & Leach, Inc.: And Steve, you talked about sensor pricing being in the upper end of the range. Can you explain why that has moved up a little bit or why you've talked about it this time? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah, it's a combination of factors. So, in any given quarter, depending on how much of our business is processed on a direct basis versus through third-party distribution and the mix of which direct contracts versus which third-party distributors, the pricing varies. That is what results in the variability in sensor pricing. And as Kevin mentioned, as we – I think there has been this weird concern on the Street that somehow our revenues were…

Our next question is going to come from Tao Levy from Wedbush. Please go ahead.

Yeah, hi, good afternoon. I was wondering, maybe I could ask on utilization trends in the quarter, and did that change at all? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: No. No. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: No. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Again, we don't have perfect data. We're starting to capture a lot more data about our patients who have said they've (37:15) moved to Share. But we still think patients are using somewhere between 2.5 sensors to 3 sensors per month on average.

Yeah. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: They're still extending the wear.

Okay. And, so with UNH and Anthem just, you've got a month of experience with that. How -- any anecdotal information or data that you've been able to obtain there? And, when you think about current patients, not necessarily new patients coming on, will they – if you're an Anthem patient, you have Anthem insurance, will they now be able to go to a CVS or a Walgreens or get their script refilled at the pharmacy versus going in and calling their distributor? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Theoretically that will happen. I will tell you, there'll be a few bugs to work out as we get this started and going. Anecdotally, we got an e-mail at the company e-mail repository from a mother who had a 2.5 year old with type 1 diabetes recently diagnosed, and 24 hours later she had a CGM from the local drug store. And, her e-mail was very, very -- she was very grateful. The ability to turn this stuff around quickly is very important to our business. I think over time, we will be able to move it over there. But there's bugs in this like everything else. It's going to take a little bit of work, but we'll get there.

And just two quick ones. The dosing claim, is that only going to be applicable to the G4 with the AP algorithm? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: That's correct.

So, any of the integrated pumps will not have that dosing claim? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Not until they integrate with gen 5.

Got you. And, then just lastly, Share currently is only on the iPhone platform. When do you start thinking about the other platforms, Android and whatnot? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, the Follow App is available on Android. So parents can – or followers can follow whoever they are following on either platform. We probably will not move the Share app to the Android platform, because we think gen 5 will be here relatively quickly and we'd rather put our resources towards that. But we'll evaluate it as we go.

But will gen 5 just be an iPhone, or - Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: It will be iOS to start, and then it will move to Android as well, very quickly.

Okay. Great. Thanks a lot.

Thank you. And our next question is going to come from Raj Denhoy from Jefferies. Please go ahead.

Hi, thanks. Thanks for taking the question. So just a couple of clarifications. So on the dosing claim you hope to get next year, I'm wondering if you could just maybe elucidate what you hope that does for you? I mean does that – I guess there's been some talk that CMS has wanted that before they would open up coverage. So is that one aspect? And then, when we start thinking about closing the loop, I mean does this start to move you quicker down that path, and when do you think we might see that? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah, I think you're right. Initially, I think our belief was that the dosing claim was most important from a Medicare perspective, because Medicare has indicated that until we get the non – the adjunctive labeling removed, that they would not entertain a coverage category for CGM. And that opens up quite a few both type 1 and type 2 intensive insulin using patients. But I will tell you, and I actually really – it was really eye opening this year, when I was at our national sales meeting, starting to talk to the field force, who are much more excited than frankly, I think we were internally about the dosing claim, because they tell stories of doctors who truly are unwilling today to prescribe, or prescribe as much as we would like, because they have to – they're unwilling to – they're not prescribing it off-label. So they have to tell their patient when they prescribe it, hey, I want you to go out and purchase this thing, and oh, by the way, you have to take two fingersticks a day to calibrate it and oh, by the way, every time you eat or take an insulin injection, you need to also take a fingerstick. These doctors are – this is, again, all anecdotal from our sales force, but these doctors would be much more willing when they don't have to tell their patients that they have to take a confirmatory fingerstick, to prescribe much more. So, I think the dosing claim could actually be a bigger catalyst than maybe we had anticipated in the past.

Okay. And then just that idea of, does that precipitate – the artificial pancreas right, the holy grail here in terms of actually closing the loop, is that something that - Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah. Look, I think the FDA is cognizant of the fact that a fully automated system or even a semi-automated system, you're going to have to use the CGM information to dose insulin. So it's hard to have a system that's dosing insulin that isn't labeled for dosing insulin. So, I think there's probably something there as well. I'm not sure that it necessarily accelerates the timing to approval for an artificial pancreas, but I think it's important. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: I think that's one reason the FDA is pushing us to do it. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah. I think that's why the FDA is pushing us, that's for sure.

Okay. And one other question around that. There's been also questions about, as you start to eliminate calibrations, that it sort of is counter to the idea of a dosing claim, right, that those two things just are almost opposed to each other. How do you kind of marry those as you think about moving forward with the different devices in the future? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Welcome to what I wake up thinking about at 3 o'clock in the morning. It's a very interesting quandary, because if you're not going to take any fingersticks, there's no safety check to make sure that everything is well, and if you're going to have a dosing claim and take no fingersticks, that thing has to work every single time. And so, I think what you're going to see us move into, and that's why I said our first pass with the gen 6 system will be one fingerstick a day for calibration, you're going to see us move into this area gradually, and we have a number of system options that we're considering to whereby we can stay in the dosing claim world, but eliminate calibrations. And maybe you'll see different labeled products from us over time to offer patients more convenience, and certainly glucose information, but maybe not give them the labeling to say, you can go ahead and dose insulin off this thing. So we're considering a number of things, and we'll be breaking some new ground here.

Okay. Helpful. And then just one last one on the direct-to-consumer programs you're talking about. As you start to get more pharmacy benefit coverage, while Nick Jonas probably resonates with certain audiences I have to admit I'm not that familiar with him, my age (44:07). How do you think about expanding those programs, right, in terms of appealing to a different audience? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, that's why we're running the focus groups, and really seeing what message resonates with this community, and we'll start launching those messages. The direct-to-consumer efforts, in all reality, as we think about creating more awareness, are probably going to coincide more with our gen 5 launch and the connectivity of the transmitter going straight to the phone. So, we're working on this and planning this out. Certainly it would be implemented later this year and into the course of next year. And we'll have more on those messages later, we're just not quite ready to share.

Great. Thanks a lot.

Thank you. And, our next question is going to come from Danielle Antalffy from Leerink Partners. Please go ahead.

Yeah. Good afternoon, guys. Thanks so much for taking the question. I just had one sort of high level question, following up on the type 2 market opportunity. Steve, I know you said in five years you thought you could really start to penetrate that market. What will it take to get you there? Is it going to be product driven? Is it going to be data driven, sort of showing clinical trial data that the type 2 patients benefit? If you could elaborate a little bit, that would be helpful. Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: Yeah, it's going to take kind of all of the above. I would tell you those two factors, plus a third being establishing a reimbursement category. And we're starting to see some reimbursement for intensive insulin-using type 2. So these are folks who are on basal-bolus mealtime injections of insulin. They mostly look and feel like a type 1, and we're starting to see some meaningful coverage on that front. Really when you think about the type 2 opportunity, you really need to segment it by kind of the intensive insulin users versus just maybe a daily Lantus user versus those who are on orals, diet and exercise. And I think it'll take probably a different product than what we have today. It will take something that's simpler to use, that's smaller on the body. And these are all the things that we're exploring internally. But I think to appeal to a much broader patient population, I mentioned – a few minutes ago, I mentioned disposable. I think the idea of having something that you can put on as more of a diagnostic tool as a type 2 patient, to really use it as more of a behavior modification tool on a periodic basis, and then be able to throw it away when you're done is quite appealing. And so, these are the kinds of things that are in our more – I would call it our advanced technology pipeline. But certainly, five years out is a long time for us from a development perspective. So, you'll see some iterative steps along the way.

All right. Thanks so much, guys.

Sure.

Our next question is going to come from Jeff Johnson from Robert W. Baird. Please go ahead. Jeff D. Johnson - Robert W. Baird & Co., Inc. (Broker): Thank you. Good afternoon, guys. Just a couple of follow-up questions here. So, Kevin, in your prepared remarks you made some comments about some of the increased spend also going maybe towards feet on the street on other indications. Maybe you could just flesh that out a little bit for us. Are you talking about OB and ICU and those kind of offices, going in there? I always thought that was more of kind of a G6 timing, when you'd start going into those offices. Just wondering if I'm misunderstanding that, or what the other indications might be that you'd be going after near term? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Well, I can give you a couple of examples. If we have pharmacy benefit, pharmacists are going to need to know about our product. So, we'll look at that area, we'll also look at some more internal medicine doctors and primary care doctors who see a lot of people with diabetes. And pilot some programs in some geographies and see what that generates from us, some other things. We're looking at really a lot of things across the board, and just to make it easier for people, one of the stats that Terry often quoted was how many prescribers we have in a year and how many of them prescribed one unit. And, last year, we had something like 13,000 different healthcare professionals who prescribed CGM and over 8,000 of them did one. And so, what do we have to do to get those people who do one to do more, because they're not all endocrinologists,…

Thank you. And our next question is going to come from Jayson Bedford from Raymond James. Please go ahead. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon. Thanks for taking the questions. I apologize if this has been covered, but just a couple follow-ups. On the insulin dosing claim, do you believe you need to run a trial or do you think you can satisfy the FDA with existing data you have? Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: You know what, I'm not going to get into all the specifics of what we're doing. We said that we're getting pretty comfortable with the pre-market and post-market work we have to do, and I'm going to leave it at that. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. Just switching the pharmacy channel and United and Anthem, can you give us a little more detail on the rollout, meaning, are these national, regional programs? And then, are the payers actively steering folks to the pharmacy? Or is that your responsibility? Steven Robert Pacelli - Executive VP-Strategy & Corporate Development: So, I can give you a comment with respect to United. I actually couldn't answer it with respect to Anthem just yet. But I do know that United actually sent – they sent correspondence to all of their patients, as did the DME distributor, to all of the patients informing them – just prior to July 1, informing them that as of July 1 they'd be able to purchase through the pharmacy. I' m not – frankly I don't know if Anthem is doing the same sort of outreach, I'd have to check. Jayson T. Bedford - Raymond James & Associates, Inc.: And is there any reason why someone would not go…

Thank you. At this time we have no further questions. I would like to turn the call back over to Kevin Sayer. Kevin Ronald Sayer - President, CEO, Chief Operating Officer & Director: Thank you very much. And we appreciate all the interest and all the questions today after our call. And you guys are right, the era of connectivity is here and we're learning all sorts of things about our patients, about our product and the difference we can make in people lives through this connectivity. So that has been a great, great thing that happened this quarter and we are very pleased with it. I do want to conclude with a couple of thoughts. As you know, over the summer there's a lot of diabetes meetings that we attend: ADA, AADE is going on right now, and several others. I was attending a meeting in Colorado. In a diabetes symposium, an exceptional diabetes-based – I mean Denver-based diabetes professional gave a talk for us at our DexCom symposium, and she asked a simple question at the start of her talk. Who needs CGM? And her answer was just as simple as her question, everybody with diabetes. She proceeded to present case study after case study of type 2, type 1 patients, all in completely different circumstances and completely different ages, all of whom experienced a significant reduction in A1C and/or a hyperglycemia improvement through the use of personal or professional CGM. CGM tells a story that nobody can get from fingersticks or any other medical device. And the second thought comes from a discussion I had with another physician at this conference, a very well known endocrinologist. And we were talking about the business and he simply said this: nobody comes to my office anymore and asks for CGM. They come to my office and ask for DexCom. And that's a position we want to maintain. We're not going to move away from our long-term goal of replacing fingersticks, and we're going to become the first tool in treating diabetes. Thank you.