Good afternoon, ladies and gentlemen, and welcome to the Insulet Corporation First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Deborah Gordon, Vice President, Investor Relations and Corporate Communications. Deborah R. Gordon - VP-Investor Relations & Corporate Communications: Thank you, Valerie. Good afternoon and thank you for joining us for our first quarter 2016 earnings call. Joining me today are Patrick Sullivan, our President and Chief Executive Officer; Shacey Petrovic, President of Insulet Diabetes Products; Michael Levitz, Chief Financial Officer; and Dan Levangie, President, Insulet Drug Delivery. The replay of this call will be archived on our website. Our press release discussing our first quarter 2016 results and second quarter and full year 2016 guidance is also available in the Investor Relations section of our website. Before we begin, I would like to inform you that certain statements made by Insulet during the course of this call may be forward-looking and involve known and unknown risks and uncertainties that may cause actual results to be materially different from any future results implied by such statements. Such factors include those referenced in our Safe Harbor statement, in our first quarter earnings release and in the company's filings with the SEC. With that, let me turn the call over to Pat. Patrick J. Sullivan - President, Chief Executive Officer & Director: Thank you, Deb. Good afternoon, everyone, and thank you for joining us on the call today. I'll start off today's call with a brief review of our Q1 performance and recent business highlights. Following my remarks, Mike will review our…

Thank you, Pat. I'll review the first quarter 2016 results and then introduce our second quarter guidance. Please note that our prior year reported results included Neighborhood Diabetes, a business we divested in February of this year. Please refer to our first quarter earnings release and the financial data schedule on our investor relations website, which aids in year-over-year comparisons of our business. As I review our results, unless otherwise stated, all commentary regarding changes will be on a year-over-year continuing operations basis, which therefore excludes Neighborhood Diabetes for all periods. We're very pleased to report the first quarter revenue growth of 69%, with revenue of over $81 million compared to $48 million. All three of our product lines contributed meaningfully to this increase. While we had an easier revenue comparison resulting from low shipments in the first quarter of 2015, our result this past quarter demonstrated significant growth, driven by the success of the ongoing commercial initiatives within our U.S. diabetes business, the volume growth in our international business, and a dramatic growth we've seen within our drug delivery business largely due to the success of Amgen's Neulasta Onpro kit, which was approved by the FDA just before the start of last year. Our gross margin was 54%, in line with our full year expectations of low to mid 50% range. Gross margin of the first quarter of last year was higher than this quarter end and higher than historic levels. The gross margin this quarter reflects the increased sales to our largest international distributor, which generally have a lower gross margin than the rest of our business. Operating expenses increased to almost $52 million compared to $36.5 million last year, primarily due to 2015 investments that we made in expanding our sales force, customer care, product development and…

Thanks, Mike. As we shared with you on our last earnings call, we have an enormous market opportunity before us that we are converting through improved commercial execution and a laser focus on patient retention. We are also making significant progress on our Digital Insulet product development roadmap and our artificial pancreas program. This first quarter was a success, both internationally and in the United States, and we are on track to achieve our objectives for the year. Strong commercial execution is driving market adoption of OmniPod across the globe. Our continued focus on patient retention, clinician advocacy and market access is on track to drive 20% growth in our installed base in 2016. These efforts will be bolstered by a growing body of clinical evidence, demonstrating the economic value proposition of OmniPod and the improved clinical outcomes it delivers for our users. In fact, we are pleased to announce that we have two manuscripts accepted for publication, demonstrating OmniPod's positive impact on glycemic control for individuals living with Type 1 and Type 2 diabetes. We are completing ongoing studies and submitting additional publications as the year progresses. We will be showcasing these studies and other data at the American Diabetes Association Scientific Sessions in June. Our longer-term growth strategy leverages innovative product development to accelerate OmniPod's market penetration. In Q2, we will launch the first step in Digital Insulet, our non-regulated OmniPod customer mobile app. This app will be available on iOS and Android devices and it will provide training tools, easy product ordering and interaction with customer care, along with other key support resources. It is designed to help improve patient retention and it will be regularly updated with additional features to deliver a great OmniPod customer experience. Later this year, we plan to submit a 510(k) for…

Thank you. Our first question comes from James Francescone from Morgan Stanley. Your line is open. James Francescone - Morgan Stanley & Co. LLC: Hey, thank you for – thanks for taking the question. Just wanted to touch quickly on guidance for the full year and the second quarter relative to what we saw in the first quarter numbers. Typically there's been pretty nice seasonal sequential step-up from the first quarter to the second quarter and you actually got a pretty modest increase of the 2% embedded in the guide for 2Q. So, how should we be thinking about that? Should we be biased more towards the high-end of the guidance range or is there some reason why this seasonal sequential tick-up from 1Q to 2Q that we've seen in the past wouldn't be as pronounced this year?

This is Mike. I would just say that, we're talking about for the year, significant growth, 30% year-over-year growth at the mid-point. We're really excited about the direction that we're going in. We just gave that guidance a short time ago and we're really pleased with where we've been in the first quarter, but we think we've got a lot of opportunities to divest in the year. We just didn't want to move on our guidance at this point, because we're – it's still early on. But we've got real upside in the diabetes business, both U.S. and international. But our guidance balances upside with what some potential risks are. But coming out of the first quarter, we are really excited and we've got really strong momentum. James Francescone - Morgan Stanley & Co. LLC: Got it. And then just second on operating expenses. As we rebased the models after the Neighborhood divestiture, can you help us think through what the trend on OpEx through the year might look like?

Hi, this is Mike again. What I would say, you know, we haven't given guidance for OpEx by quarter or for the year, but what I have said is that the growth that we're seeing in OpEx is largely reflective of the full year impact of investments that we made in 2015. So with that in mind, I think it's a reasonable position to look at where we exited 2015 from a run rate standpoint. We do expect an increase this year compared to last year, other than just the full year impact, but it really is largely that full year impact. So we expect improved operating leverage this year, even with the investments that we're making in the different areas that Shacey described in R&D and the full year impact of investments we've made in other places. So, I think if you look at the first quarter results compared to the run rate there from Q4, we're essentially in line when you pull out the items that we described as non-recurring in the fourth quarter. James Francescone - Morgan Stanley & Co. LLC: Okay. Perfectly clear. Thanks, Mike. I'll get back in queue.

Thank you. Our next question comes from Danielle Antalffy from Leerink. Your line is open.

Thanks so much for taking the question and congrats on an excellent quarter. I was wondering if you could touch on two things. Number one, new patient adds were strong again in the quarter. I was wondering if you could give some color on what's driving that. I mean, obviously, you guys have been building rebuilding out the sales force, how much is execution versus just your standard easier comps year-over-year? And then the second question is on the drug delivery, I was wondering if you can give any color on how much is due to stockings? Sorry if you've commented on the prepared remarks and I missed it. Thanks so much.

Sure. Danielle, this is Shacey. In terms of what's driving new patient adds, I'm not sure if we gave color into that. But we're on track to deliver the guidance in terms of the installed base. So we're guiding to a 20% increase in our installed base. And in the United States, one of the contributing factors is that we anticipate somewhere around the 20% increase in new patient adds this year as well. What's driving that really is commercial execution in the U.S. And so that is primarily driven by account targeting from the stronger clinical messaging and from better pipeline management internally, so that our sales team can really focus their selling time in the field on converting clinicians to recommend OmniPod for their patients. And then the other thing I would say is there is a growing body of clinical evidence that just continues to support the value of using CSII are Continuous Subcutaneous Insulin Infusion Therapy – Pump Therapy for patients. All of that is working in our favor. And we're excited about the results of Q1, it's just one quarter, but things are strong. Patrick J. Sullivan - President, Chief Executive Officer & Director: And Dan, the other is on the – you got it. You just did such an eloquent job last quarter, I thought I'd...

Yeah, so with respect to question about Amgen's' use of the product, I think they just reported that at the end of the quarter, the Onpro kit accounted for about a third of the doses in the United States. And so they are in a much better position to answer the question as to how much of their purchases from us during the quarter represented stocking versus utilization. But we do know utilization is roughly a third of the doses in the U.S. or being administered using the Onpro kit. Patrick J. Sullivan - President, Chief Executive Officer & Director: Operator, next question?

Thank you. Our next comes from Mike Weinstein of JPMorgan. Your line is now open.

Thank you. I apologize. I may have missed it, but new patient starts, it sounded like Danielle heard it but I did not. I know last three quarters, it was up 20% year-over-year, did you give a number for this quarter?

Mike I just answered Danielle's questions. I don't think I gave it in my opening remarks, but we do expect in the U.S. that new patient starts will grow approximately 20% in 2016 versus 2015 in the United States.

And what was it this quarter?

We don't give it quarterly. So just to let you know that we're making progress and we're on track.

You guys gave every quarter, last year right?

I think it was just because it was a new management team, a lot of moving parts from the business last year with some of the inventory management challenges and so we wanted to give that granularity. So, what we wanted to do this year and what I indicated last quarter was that we will guide you to our annual objectives and guidance for the installed base and new patient starts and then let you know if we're on track or if for some reason we're changing that guidance. So, the message is, we're on track, things look good.

Okay. Let me just – quick follow up then. So two questions. One, with – we can do the math on Amgen. We have a pretty good read how much every quarter is underlying demand versus the reported sales. Do you think just with the math and how much you're reporting this year in sales, do you think Amgen revenues grow after 2016?

Yeah. Our assumption would be that there would continue to be growth opportunity in 2017.

In the U.S., I mean, first of all just talk about U.S. opportunity, because the max-out in the U.S. opportunity is about $50 million.

I'm not sure how you got to that answer. As they just reported, they're about a-third of the doses converted as we speak. So you could assume, if you assume the straight line trajectory from where we started to where we are today, I think that would get you around 50% probably at the end of the year. I think that leaves another 50% for 2017.

In terms of revenue, because there's the stocking revenues. I'm differentiating between patients.

Yeah.

So talk about reported revenue, because you're reporting obviously – a significant chunk of your revenues right now are stocking. So that's going to create comparison for you for 2017, that's what I'm asking.

Yeah. Well, let me just say, I would expect growth in 2017.

All right. Thank you guys.

Thank you. Our next question comes from Tao Levy of Wedbush. Your line is open.

Hey, guys. Maybe I could ask on attrition rates, as I play around with the model, you know, in order to get to your guidance in the second quarter, without boosting new patient adds significantly, you know, your attrition rates need to come down quite dramatically. Is that what you're seeing in the field or is that something that's incorrect in my model?

I guess I would suggest you look at your model. Nothing substantively has changed in terms of the attrition rate. And so we're feeling good about certainly the initiatives that we have in place to support a reduction in attrition over time and an improvement in retention this year. But no, we're not expecting attrition to increase in Q2.

Thank you. Our next question is Jayson Bedford of Raymond James. Your line is open. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon. Thanks for taking the question. Just wondering if you could talk about the international business and if new reimbursement in France had any outsized impact on the business in the first quarter?

Hi, Jayson. No, I don't – certainly Ypsomed prepared for their market entry into France this year, and they did that in Q1. But in any new market entry in Europe, it's a really small component of the whole. So, while they prepared for entry into France, I don't think it had a substantive impact on the international revenue performance. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. So this is a pretty clean number. There wasn't any stocking at all in there?

That's right. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And then just secondly on the guidance, and talking about the high-end of the annual guidance, you kind of inferred that the upside would stem either from the international or the U.S. diabetes business. So is it fair to assume that your drug delivery number here is pretty much locked in, meaning I realize it's growing well, but you're not really expecting any upside from that going forward?

Jayson this is Mike. I would say that the guidance, as we've stated, is – the high-end of the guidance is reflective of upside in the diabetes business. And the upside in drug delivery would be incremental to that if it occurs. But we're early in the year. We're really pleased with how Amgen is doing and the growth in the adoption of the product. But at this point, you know, we've got a view into their demand for the year and that's what we based our guidance on. But... Patrick J. Sullivan - President, Chief Executive Officer & Director: And just to add a little bit of color to that, Amgen gives us purchase orders. We ship them product based upon their purchase orders. If they increase the purchase order volume going forward, it will be reflected in our shipments. It's pretty simple. So we don't – we're not baking anything in. We're using what they provide us to come up with the guidance we provided. And if that changes on the upside, as Dan mentioned, they're expecting to grow (28:03) throughout this year, we'll reflect that in our performance going forward. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And Pat, your visibility in to that is basically rolling 12 months, is that fair? Patrick J. Sullivan - President, Chief Executive Officer & Director: Yeah, it's 90-day firm forecast – 90 day firm, and then the rest of it is basically a forecast. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay, thanks guys.

Thank you. Our next question comes from Kyle Rose of Canaccord. Your line is open.

Great, thanks a lot for taking my question. Can you hear me all right? Patrick J. Sullivan - President, Chief Executive Officer & Director: We got you.

Yes. So just two questions and then I will hop back in queue. The first is just underlying patient utilization metrics in the U.S. business. I mean, it sounds like no changes to attrition, but just wondered if you could qualify some of the new patient growth. I mean where are you really seeing that come from and then any updates or changes as far as the utilization from those patients? And then secondly, OUS, Ypsomed, I believe they were launching into a number of new countries over the coming year. Just wanted to see how much of the growth, when you think about your growth, is coming from entrance into some of those new geographies versus continued share taking in the existing geographies. Thank you.

Sure, Kyle. In terms of your question regarding where are new patient starts coming from? Just like previous quarters, the vast majority, between 70% and 80% of our new patient starts come from people who were formerly using multiple daily injections. So that's where the vast majority of our business is coming from. We really are helping to drive adoption of pump therapy across this patient subset. And then the question regarding Ypsomed and the value of new patient entries – or new market entries versus existing base, really we're seeing growth in both the existing base and new market entries. And there base continues to grow such that the new market entries and new patient adds is a little bit smaller of a component. But I wouldn't attribute too much to market entries. They've been relatively small, France is a bit figure, and so over time, that's probably going to contribute a bit more. Next question?

Our next question comes from Ben Andrew of William Blair. Your line is open. Ben C. Andrew - William Blair & Co. LLC: Good afternoon. Thanks for taking the question guys. Patrick J. Sullivan - President, Chief Executive Officer & Director: Hi, Ben. Ben C. Andrew - William Blair & Co. LLC: Thank you. You talked about the Bluetooth-enabled PDM and kind of the plan there to display data and integrate the Dexcom data into the display. What's it going to take from a development standpoint and from a timing standpoint to start pushing data back or commands back towards the OmniPod? So you've talked about manufacturing of Bluetooth- enabled version, etcetera? Does that tie into the 2018 timeframe or can you do something along those lines earlier? Patrick J. Sullivan - President, Chief Executive Officer & Director: Well, as you think about the Bluetooth-enabled pod and a launch in 2018 as Shacey talked about with the artificial pancreas, we're going to be have to be able to push those back. So we would start that programming and start essentially seeding the inventory into the filed with the Bluetooth-enabled pod ahead of the launch of that product. So it would back up and we have that in our development timeline and implementation program.

In terms – oh, I'm sorry. I was going to say in terms of control from the phone to the pod that is still something that we are discussing with the FDA. And so we don't have really good guidance in terms of timing on that.

Thank you. Our next question comes from Doug Schenkel of Cowen & Company. Your line is open. Ryan Blicker - Cowen & Co. LLC: Hi. This is Ryan Blicker in for Doug. Thanks for taking my question. So, strong gross margin quarter in line with your full year guidance. Is there any reason why gross margin can't increase sequentially throughout 2016 as your mix of U.S. diabetes revenue continues to increase?

This is Mike. What was talked about on gross margin is our guidance for the year is, as I said, low-to-mid 50% range. We definitely believe we have upside to that. But, as we saw last year, there can be challenges as well as we ramp up the operations. So, our guidance reflects really a balancing act of those things. But, structurally, we don't believe there's any reason why we wouldn't be at our target that we've talked about before of 60%-plus gross margins. In terms of sequentially guiding gross margin through this year, we're really not in a position to do that. And we guide for the year and we guide revenue by quarter. But I think what we've said in terms of our expectations for the year reflects the fact, and Pat mentioned, we're really pleased with what our operations, manufacturing, supply chain team is doing. We've got what we believe to be a lot of opportunity. And those things take time and that's reflected in our guidance.

Thank you. Our next question is from Christian Moore of Jefferies. Your line is open.

Hey. Good afternoon. Thank you for taking my questions. I just wanted to have a quick question on the progress that Medtronic has had with the MiniMed 640G over the course of the last year. Have you seen the competitive landscape change internationally as you both pursue a closed loop product and what do you see playing out for the course of 2016 on that front?

Yeah. Internationally, we have not actually heard a lot of buzz regarding the 640G and, obviously, it's not here in the United States. And obviously, we continue to grow our business internationally and take share of the market as well as help grow the overall market. So I guess I don't have a lot of comment on that. In terms of United States in 2016, we see the same dynamics in terms of the market growing. So more people moving to pump therapy and OmniPod taking a greater share of that market. So, we don't see it slowing down our growth in the near term and things are progressing nicely.

Great. Thanks. And then on the drug delivery front, you mentioned the progress of Neulasta, that you're now in one-third of Neulasta deliveries, what kind of capital investment would be required there to serve other partners down the road in order to maintain the strong growth in that segment?

Well, I think as we've discussed in the past, we have a number of other agreements in hand with other potential drug delivery partners in which there's a development process underway. I think, down the road, we could see potentially see revenue that would come to us as a part of those development agreements. But we haven't given that guidance at this point in time. But, in terms of capital investment by Insulet, we would hope to be able to structure agreements that would offset some of that capital investment or all of that capital investment by having our partners pay for that.

Thank you.

Did I understand your question?

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

Thank you. Now that we've gotten through kind of the quarter discussion. One big picture question, Pat. I was hoping you could just talk a little bit about the OmniPod manufacturing process. And we've been seeing – it's been ten years and we've seen the manufacturing process ramp and productivity obviously improve with volume. But it's hard to drive the cost of manufacturing OmniPod down meaningfully with the current process they use. Can you just talk about any efforts underway to try and rethink the OmniPod manufacturing process and where those may stand? Patrick J. Sullivan - President, Chief Executive Officer & Director: Sure. First of all, Mike, I would disagree with you that we don't have an opportunity to drive additional cost out of our cost of goods sold through improved supply chain and manufacturing operations efficiency and effectiveness and certainly with the addition of Chuck Alpuche that came on board in early February. We're already seeing, alluded to in my prepared comments, improvements in our manufacturing operations efficiency. And ultimately, we believe an opportunity to take cost out of the manufacturing process and reduce the cost of goods sold to improve our margins. We see a pathway to do that. We started those initiatives early this year and are making great initial progress. As everyone knows, it takes longer to affect those kinds of changes in the manufacturing process to drive those efficiencies and, therefore, cost out, but I think we've got significant room to improve the cost of goods sold and, therefore, the margins with our existing manufacturing operations. We're also looking at and working on a long-term manufacturing strategy as we look to add additional capacity, which we know we're going to have to do in the next couple of years to have redundancy outside or perhaps inside of China. We have four lines in one location. And certainly, we want to be thoughtful about where and when we put additional manufacturing capacity in place, but that will also have an opportunity to drive the cost per pod down as we increase our volumes and perhaps improve the automation efficiency of the manufacturing process. So I think we – Mike as talked about a pathway to a 60% gross margin for the business. There's clear line of sight to get there. And part of that will come through improving the margins out the factory.

Thank you. We have question from Tao Levy of Wedbush. Your line is open.

Great. Thanks for the follow up. So a question on – two questions. International Neulasta, obviously, you guys are having success here in the U.S. and it's the larger market, but they do sell the product internationally, so just wondering if there's a program there or opportunity over there. And also, I don't know if you commented on operating expense guidance for the rest of the year, for the full year? Thanks. Patrick J. Sullivan - President, Chief Executive Officer & Director: Yeah. With respect to the Neulasta Onpro kit outside the United States, obviously, that's an Amgen decision. We would be excited, obviously, to launch the product outside the U.S. together with Amgen and to see the rate of success that we've seen in the U.S. But, frankly, that's a decision that's really up to them. We're prepared to support that, but have not made any announcements about that international expansion at this point.

And Tao, this is Mike. In terms of the operating expenses, there was an earlier question on that. But, just to reiterate, so we don't give specific operating expense guidance. We give revenue guidance by quarter and we give gross margin for the year. But what I have said is that we expect our expenses to increase this year, but that's really driven primarily from the full year impact of initiatives in 2015 related to the expansion of our sales force, customer care, product development initiatives that we put in place, and just overall investments in the underlying foundation for our growth. So, if you look at where we ended last year, when you pull out the things that we identified last quarter into the Q4 run rate that we said were non-recurring in nature, you'll see that Q1 is essentially in line with that apart from just some timing things on some program spend. So there is going to be growth. We are making continued investments here. We're really excited about those investments and Shacey talked about some of those, the concentrated insulins and otherwise, but there will be improved operating leverage this year. And we talked about being EBIT positive in 2018 and that's definitely very real. And as we've talked about in the previous conversations on calls, we would love to beat that. But we really need to drive execution and between all the different movement, the moves that Pat's described and the improvements in gross margin, in cost of goods sold and operating leverage and mix and otherwise, there's a lot of good things that support the pathway to doing the things that we've said we would do.

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

Great. Thanks. I was just going to follow up. Pat, I was just wondering if you could comment on Howard Zisser's departure for Verily and where you are in the process of replacing him? Patrick J. Sullivan - President, Chief Executive Officer & Director: Sure. I guess it was about two weeks ago now, Howard informed me that he has taken a job at Google's – yeah, I forgot the name of the company – their healthcare company to be in charge of their clinicals. I guess it was Verily. So he informed me of that a couple of weeks ago. He as the part of the company is (42:23) now at Google. We thank him for everything that he's done. He did a great job for us in all of the work he did on the artificial pancreas and he really wanted to see the benefits of his labor and we've done that now with our AGC agreement, and Howard did a terrific job for us. And we wish him well with what he's doing. I think it is a great opportunity for him, quite frankly, in the Google environment. As it relates to replacing him, we are, in the short term, reaching out to our scientific advisors and those in the community to help us on the short term support and we are looking to replace Howard as Medical Director in the future, looking to another, obviously, endocrinologist that can help us get smarter about diabetes and guide us in our product development activities as well as our relations with the other constituencies that we deal with. So pretty excited for Howard and it gives us an opportunity to hire a replacement for him.

Thank you. The last question will be from Canaccord. Your line is open.

Great. Thank you very much for the follow-up. Just wanted to see if you could give us an update on or the status of reimbursement in the Medicare, Medicaid population and then any upside that you could expect to see from there over the course of 2016? Patrick J. Sullivan - President, Chief Executive Officer & Director: Yeah, I continue with CMS coverage for Medicare beneficiaries being one of my top – if not my top priority. Nothing new to report since we last spoke to you about 60 days ago. We are making progress on the Medicaid front with coverage decisions or our coverage in some key states, Texas, Florida and New Jersey. And we've targeted other states, the higher population states throughout the U.S. for Medicaid coverage that we can go and that goes down one at a time, but we're very focused not only on CMS, but on Medicaid, where, as you know, we have a very attractive product for the pediatric population and focus on providing that to those patients who are on Medicaid. So, stay tuned. I'll let you know as soon as I know. But I think we're making progress.

Thank you. I'll now turn the conference back over to Pat Sullivan. Patrick J. Sullivan - President, Chief Executive Officer & Director: Thank you. We are starting 2016, I think, with a very strong momentum and I have to tell you, our entire team is energized and very confident in our continued innovation and long term sustainable growth that lies ahead of us. We have the team in place, functional experts in engineering, manufacturing, quality, regulatory and we're making progress across all fronts. And I'm just very excited about the opportunity that lies before us and its all within our ability to execute. So very excited about it. We'll keep giving back to you every quarter and thank you for participating in the call today and we'll speak to you again as we make progress throughout the year. Thanks for participating.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day.