Dexcom Inc (DXCM) Q1 2021 Earnings Call Transcript

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Dexcom Inc (DXCM -2.67%)
Q1 2021 Earnings Call
Apr 29, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the DexCom First Quarter 2021 Earnings Release Conference Call. My name is Adrienne, and I'll be your operator for today's call. [Operator Instructions].

I'll now turn the call over to Sean Christensen. Sean, you may begin.

Sean Christensen -- Director of Corporate Affairs and Head of Investor Relations

Thank you, operator, and good afternoon everyone. Welcome to Dexcom's First Quarter 2021 Earnings Call. Our agenda begins with Kevin Sayer, Dexcom's Chairman, President, and CEO, who'll provide a summary of our progress, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. And then an update from Quentin Blackford, our Chief Operating Officer on the company's strategic initiatives and scaling progress.

Following our prepared remarks, we will open up the call for your questions. At that time, we ask analysts to limit themselves to one question, so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our first quarter performance on the DexCom Investor Relations website on the events and presentations page.

With that, let's review our Safe Harbor statement. Some of the statements we will make in today's call may constitute forward-looking statements. These statements reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. All forward-looking statements included in this presentation are made as of the date hereof, based on information currently available to Dexcom are subject to various risks and uncertainties and actual results could differ materially from those anticipated in the forward-looking statements, and factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in Dexcom's Annual Report on Form 10-K, most recent quarterly report on Form 10-Q, and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this presentation or to conform these forward-looking statements to actual results.

Additionally, during the call we will discuss certain financial measures that have not been prepared in accordance with GAAP, with respect to our non-GAAP and cash-based results. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our first quarter earnings presentation for a reconciliation of these measures to their most directly comparable GAAP financial measure.

Now, I will turn it over to Kevin.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Thank you, Sean, and thank you everyone for joining us. Today, we reported strong first quarter results for total revenue growth of 25% over the first quarter of 2020. As I often tell our employees, our ability to thrive as a company ultimately comes down to solving significant problems with a great product, and that is what we continue to see with G6. We hear incredible stories of improved glucose control, reduced disease burden, and people being empowered, and those responses have only increases with enhanced tools to better drive our customer experiences. These stories are coming from multiple sources as well, whether it is coming from G6 users or their family members who are getting better control on their glucose levels to real-time data, or clinicians who are empowered by the ability to gather unique insights into the diabetes treatment of their Type 1 or Type 2 patients and optimize therapy accordingly. And even new settings like nurses and doctors and the inpatient setting who are deploying CGM and learning about its potential to optimize workflows, and benefit from our remote monitoring technology.

New customer additions are off to a great start in 2021, especially in the U.S., as we continue to see growth across all channels, building from the increased access that we've gained over the past several years. This includes continued traction for people with Type 1 diabetes and Type 2 intensively managed diabetes, both of which have continued the strong growth momentum that we've seen over the past couple of years. We're also seeing a growing number of Type 2 non-intensive customers on G6, not only through our partnerships like UnitedHealthcare's Level 2 program, but also including the other innovative programs and providers that are establishing early access to Dexcom CGM.

We are also progressing our strategic commercial efforts with the remainder of our commercial sales force expansion completed in the first quarter and our direct-to-consumer marketing efforts generating new levels of brand awareness. The Super Bowl commercial featuring Nick Jonas was a highlight for the company in the first quarter. We were able to generate significant excitement for our employees and customers, many of whom have sent us pictures and stories of their pride in feeling represented during one of the biggest annual events in the world. We also contribute to a broader conversation in the diabetes community that we hope will help facilitate broader access to CGM in the future. The ad drove a record number of visitors to our website, a record for a single day new customer leads and significantly more media impressions than we generated in all of 2020, and we are confident that there will be ongoing benefits that will come from the ad, in fact according to an independent Harris Poll, Dexcom led all Super Bowl advertisers in brand equity growth. Overall, it was a great investment for the company, and I'm really proud of our team for pulling it together.

Our commercial efforts also include a strong push from our teams to expand access to Dexcom CGM technology internationally both deeper and existing markets as well into new geographies. With Dexcom in the strongest majority position in the company's history as a result of our scaling initiatives, we are aggressively advocating for broader access to our G6 systems for people with Type 1 diabetes, and intensively managed Type 2 diabetes, similar to what we have done here in the United States.

Since we last reported in February, we have received confirmation from three additional Canadian provinces that they will begin covering Dexcom CGM. This is a great step forward in expanding access for people with diabetes. There is significant demand from customers and clinicians, and we are optimistic that we will continue this positive momentum in Canada with both the public and private payers over the coming months. In certain reimbursed markets we are proactively lowering price to significantly expand access through incremental customer populations. This positions us well continue to grow sensor volume significantly now and into the future, and we believe the incremental volumes will more than offset the impact of price in the near-term.

In conjunction with our commercial initiatives and the growing CGM category awareness, we are advancing the clinical and regulatory path for our next-generation G7 CGM system. As a reminder, we expect G7 to improve all aspects of the current customer experience offered with G6, in a disposable wearable that is less than half the size. We are working to prepare the submission for CE Mark in accordance with New Medical Device Reporting Standard in the EU. At this point, we remain on track for our target launch of G7 in the second half of 2021.

We also plan to present preliminary data on G7 performance at the upcoming ATTD Conference in early June. Our trial that will support our U.S. ICGM filing is also well under way. And we have received outstanding feedback from the investigators and patients involved. We expect to complete that trial in the current quarter and we'll keep you updated as we progress toward regulatory approvals and launch.

Even as we advance our strategic plans and have seen continued customer growth over the past year, the evidence of the global pandemic remains with us. We continue to navigate certain closures and territories that have seen cases spike, and our team remains focused on the three priorities that we have emphasized throughout the past year. The health and safety of our employees, continued supply of our customers and service to our communities. Towards this end, we were pleased to recently work with the State of Arizona to open the first indoor mass vaccination facility in Arizona to help the community as it transitions to the heat of the summer months. This facility rests within our Mesa distribution facility and has the capacity to support several thousand appointments per day. I am proud to lead a company whose employees are so dedicated to the service of our customers and willing to think creatively about what it means to be a leader in the communities that we serve.

As we come back to first quarter results, I want to welcome a new voice to our earnings call, very familiar to many of you already. Last month, we announced the promotion of Jereme Sylvain to the role of Chief Financial Officer, and I'm pleased to have Jereme joined Quentin and I for his first Dexcom earnings call this afternoon. Jereme?

Jereme Sylvain -- Cheif Financial Officer

Thank you, Kevin. I'm excited to be with you today and in the new role as we advance our work together for people with diabetes. As a reminder, unless otherwise noted, the financial metrics presented today will be discussed on a non-GAAP basis. Reconciliations to GAAP can be found on today's earnings release as well as on our IR website.

For the first quarter of 2021, we reported worldwide revenue of $505 million, compared to $405 million for the first quarter of 2020, representing growth of 25% on a reported basis and 23% on a constant currency basis. This is our 7th consecutive quarter of revenue growth of $100 million or more. Impressively, our revenue performance came against our toughest quarterly comparison in 2020 for both our U.S. and international businesses as the first quarter of 2020 was largely unaffected by the COVID-19 pandemic. We also saw a nearly 40% global unit volume growth in the quarter, demonstrating the continued customer growth in the business,

U.S. revenue totaled $381 million for the first quarter compared to $292 million for the first quarter in 2020, representing growth of 30%. Our U.S. business was the primary driver of growth in the first quarter with our commercial efforts in rising CGM awareness, driving solid volumes and an acceleration from our fourth quarter growth percentage. We believe that we are well-positioned to continue this momentum. Our DTC efforts and driving awareness of Dexcom CGM. we have new connected systems coming to market that build from years of collaborative work with our partners and we have an expanded field sales force, equipped with the product that our customers love.

Our international business reached another quarterly high watermark with a revenue of $124 million, or 10% growth on a reported basis compared to the first quarter of 2020. As we saw in the final three quarters of 2020, the impact of COVID-19 lockdowns has had a greater impact on new customer growth in certain international markets, which has a compounding effect on our reoccurring revenue model. Nevertheless, we delivered growth against our toughest quarterly comp of 2020, or international revenue grew 61% before the pandemic. We continue to see strong growth across a number of our markets, particularly in countries with the administrative requirements to access CGM are minimized via our e-commerce channel or via broad reimbursement.

As many of you have seen, we've successfully reduced our manufacturing costs and intentionally increased sensor production capacity. Through these manufacturing efficiencies and increased capacity we are no longer restricted to focusing on high-risk, high reimbursement populations. With this increased commercial flexibility we are executing on our strategy to broaden access to our CGM technology by pushing deeper into existing markets we previously could not address. Through the incremental volumes generated by these efforts, we believe we will offset the near-term price impact, while better positioning the company for long-term growth.

Our first quarter gross profit was $343.9 million or 68.1% of revenue compared to 63.9% of revenue in the first quarter of 2020. The fact that we are driving margin expansion despite absorbing the channel mix impact associated with the acceleration of our U.S. business to the pharmacy channel is a testament to the work of our teams to drive down material and production costs.

Operating expenses were $297.5 million for the first quarter of 2021 compared to $215.4 million for the first quarter of 2020. The increase in operating expenses as a percentage of sales in the first quarter of 2021 is a result of several of the key initiatives that we outlined in our original 2021 guidance in February. This includes our expanded commercial efforts with the doubling of our U.S. sales force and increased global DTC marketing efforts, both reflected in the quarterly results.

In addition, the first quarter research and development expense includes costs associated with our large U.S. ICGM trial for G7, which will continue into the second quarter as we generate the data necessary to support our regulatory filing. Offsetting those strategic investments, we continue to gain leverage in our general and administrative expenses in the quarter demonstrating the benefits of our scaling initiatives. To that end, as we've previously indicated, we have launched a global business services facility in Lithuania, which is now officially live and servicing our customers.

Operating income was $46.4 million, or 9.2% of revenue in the first quarter of 2021 compared to $43.3 million, or 10.7% of revenue in the same quarter of 2020, with the 150 basis point decrease resulting from our strategic investments, offset by our gross margin improvement. Adjusted EBITDA was $94.4 million or 18.7% of revenue for the first quarter, compared to $77.8 million or 19.2% of revenue for the first quarter of 2020.

Net income for the first quarter was $32.8 million or $0.33 per share. We remain in a great financial position, closing the first quarter with more than $2.6 billion in cash and cash equivalents and well-positioned to continue our G7 scale up and remain opportunistic as we look to expand our growth opportunities.

Turning to guidance. We expect some impact to new customer starts to continue during the ongoing global vaccine roll-out, particularly in certain international markets as well as continued higher than usual volumes in our U.S. Medicaid channel as the economy recovers. With the strong first quarter performance, as well as the currency benefit that we saw in the first quarter and continue to anticipate, we are pleased to be in a position to raise our full-year 2021 revenue guidance. We now expect 2021 revenue to be between $2.26 billion to $2.36 billion, representing growth of 17% to 22% over 2020. This growth continues to factor in strong unit growth volumes which are offsetting the impact of lower revenue per customer channels and our recent efforts to broaden access to G6 in international markets as well as the impact of currency.

Turning to margins, we are affirming the full-year 2021 targets previously established on our fourth quarter call. This includes non-GAAP results to be approximately at the following levels. Gross profit margins of approximately 65%, operating margins of approximately 13%. We continue to expect that adjusted EBITDA margins to be approximately 23% and finally, as you may have noticed, from a tax perspective we have transitioned to profitability and will have a tax rate applicable to earnings going forward.

Our expectation [Technical Issues] the call over to Quentin for a scale and strategy update.

Quentin Blackford -- Chief Operating Officer

Thank you, Jereme. It's been a pleasure to work alongside Jereme for the last 7 years of our careers, and I am thrilled for him as he now steps into the CFO role. I look forward to watching him take this next step in his career and look forward to the many contributions that he will make in his new role, while I'm also excited by the opportunity to turn my attention much more broadly to our strategic and scaling efforts across the organization.

Our teams remain incredibly focused on our strategic initiatives and are making great progress on several fronts. As Kevin mentioned, we are advancing our regulatory and clinical efforts for G7 and we'll present the first set of G7 data at the upcoming ATTD Conference in early June. As we press forward toward our G7 goals, we are making steady progress in our effort to scale G7 manufacturing to support our launches and the continued growth of our global customer base. In the near term, this includes the lines that we are building in our San Diego and Mesa, Arizona facilities. We've also broken ground on our manufacturing site in Malaysia, which we expect will enable us to significantly scale our G7 production capacity to serve meaningful more customers as we continue to grow our business in the years to come. Even with G7 on the horizon, we remain committed to building on the leading customer experience that we have established for users of our G6 system. Following the December regulatory approval in the U.S., we rolled out an update to the G6 algorithm in the first quarter. We believe this update will drive further reductions to times in which data is temporarily unavailable. And I've seen excellent results from the initial launch of this updated algorithm in Canada in 2020. These are the kinds of incremental improvements that we are always looking to provide, and they are contributing to our strong customer retention and satisfaction levels reflected in our industry-leading net promoter scores.

On the insulin delivery front, we were encouraged to see the great results from the Omnipod 5 pivotal trial presented at ENDO 2021, and look forward to the upcoming launch of that system for our Dexcom customers using the Omnipod pump. With this launch in Omnipod's differentiated patch pump form factor, as well as Tandem's continued market traction with their Dexcom connected Control-IQ, we believe that we are very well-positioned to continue to benefit from the growing appreciation for these automated insulin delivery systems.

Similarly, we continue to advance our development with Eli Lilly, Novo Nordisk and more recently Ypsomed leaving us in a strong position in future years as people with diabetes stand to benefit from greater variety in their choices for Bluetooth connected insulin delivery options that integrate Dexcom CGM. We've discussed the excellent first quarter performance in our U.S. IIT market, as well as some of the key strategic initiatives that we are undertaking to expand access in our international markets. We are also making excellent progress in our effort to drive the 3rd pillar of near-term growth that we highlighted at our 2020 Investor Day, the non-intensive Type 2 market.

As we've mentioned before, we are taking multi-channel approach to enabling access to Dexcom CGM in the absence of widespread reimbursement. This involves direct work with payers, digital health programs, healthcare providers and integrated networks, as well as the patients themselves. The early roll-out of Level 2 is progressing well, as we continue to see that program expand and our teams are working well with the UnitedHealthcare team to optimize the experience for members using our G6 system as part of that program.

We also worked with several partners to expand their use of G6 and their respective Type 2 populations in the first quarter. This includes the initiation of commercial pilots with Teladoc Health Livongo for Diabetes platform, as well as with Welldoc. Everside Health also announced that it will offer G6 to its members with Type 2 diabetes in its Healthstat business unit, and we are proceeding there now in a pilot phase. This relationship builds from our initial work with Healthstat over the previous 2 years, including the use of Dexcom CGM in a pilot for health screenings at on-site clinics. Each of these relationships is expanding the approval of customers who can access our technology, while generating evidence of the utility of Dexcom CGM for the broader Type 2 market that we believe will drive access and awareness in the future.

Beyond these core growth initiatives, our teams continue to advance innovative research and product development that we feel will contribute to long-term growth for Dexcom. This includes the hospital market, where we are generating data via our patient registry, and receiving great feedback as many hospitals across America continue to take advantage of the FDA's temporary allowance to use Dexcom CGM in the inpatient setting during the pandemic. This also includes several clinical studies assessing the use of Dexcom CGM for better management of gestational diabetes, a solution that we believe can enhance the outcomes for both the mother and the child. And finally, we continue to access next-generation technologies that we believe can build from the sensor platform that we've established with G6 and G7. We look forward to updating you as we progress.

With that, I will pass it back to Kevin.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Thanks, Quentin. As you can see, we're off to a great start to the year, and working hard to execute on the strategic pathway that we laid out for 2021.

I would now like to open up the call for Q&A. Sean?

Sean Christensen -- Director of Corporate Affairs and Head of Investor Relations

Thank you, Kevin. As a reminder, we ask our audience to limit themselves to only one question at this time, and then reenter the queue if necessary.

Operator, please provide the Q&A instructions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. And our first question comes from Jeff Johnson from Baird. Your line is open.

Jeffrey Johnson -- Baird -- Analyst

Thank you. Good afternoon, guys. Let me, I'll put it into a multi-part question I guess but. Kevin, I think it's officially one question. But on the channel mix headwinds that we've been talking about here the last 6 to 8 quarters or so, is it still fair to be thinking around $200 million plus or minus this year, and given the exit rate from 4Q of '20, still fair to think a little bit of that as front-end loaded? And then when I look at your 30% U.S. growth, it would seem like, if I axe out the channel headwinds, the pricing headwinds there volumes must have grown well north of 40%. So if you could just kind of confirm that from a pricing versus volume mix in 1Q U.S. number that would be helpful as well. Thanks guys.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Jereme. Will you take that one, Jeff.

Jereme Sylvain -- Cheif Financial Officer

Yeah, Jeff. To your question on what the channel mix headwinds are, we'll just tell you what the numbers were for the quarter, it was about $50 million for the quarter, and if you recall, we talked about it being a little bit more straight lined over the course of 2021 due to comps. The one thing we have talked about and Kevin referred to it on the call, as did I, is that we are going to be a little more aggressive in international markets, and so because of that we're raising what we call channel mix/pricing headwinds to about $250 million on the year, and that obviously takes into account the aggressive steps were taken outside the U.S.

In terms of your question in terms of growth and unit volume, we talked about unit volume approaching 40% on a global basis. When you take the channel mix headwinds we talked about, you are correct. The U.S. unit volume growth was well in excess of that and obviously being the stronger point of the quarter from a growth perspective. So you are seeing that performance on the quarter.

Operator

And our next question comes from Joanne Wuensch from Citibank. Your line is open.

Joanne Wuensch -- Analyst

Thank you very much. Can we go back to what you just said please, to be clear, the $50 million in the quarter, how much of that was U.S. versus OUS?

Kevin Sayer -- Chairman, President and Chief Executive Officer

Yeah, so Joanne, we generally don't break down the two. what we did talk about was $50 million is the global, now a majority of that has traditionally been the channel mix from pharmacy or from DME into pharmacy, but when we give that number we give a global numbers that was $50 million globally on the quarter, again heavily weighted U.S.

Joanne Wuensch -- Analyst

Okay. I'm going to sneak one more in, because that was a clarification, is there any reason that is not possible for G7 to be in the U.S., by the end of this year?

Kevin Sayer -- Chairman, President and Chief Executive Officer

We're not giving any G7 timelines, other than we will launch it by the end of the year. As I said in the earlier portion of our remarks, our U.S. pivotal study will conclude this quarter, and then we'll file. We're working on our filing in Europe under MDR rules for CE Mark. And we'll go from there. Time will tell, but everything is going well. We're happy with the progress of the product. We're extremely happy with the feedback we've gotten from clinicians and patients; in fact, one clinician called me this morning, and between our our prep for this call will tell me how great the product was. So we're very happy with it, but we're not going to give any other timelines than what we have so far.

Operator

And our next question comes from Robbie Marcus from JP Morgan.

Robert Marcus -- Analyst

Great. Congrats on a nice quarter and thanks for taking the question. I wanted to talk about the guidance raise, it was more than the beat you had in the first quarter. So maybe walk us through your new patient assumptions and what's driving that U.S. versus OUS? And if you could comment at all on how the early trends of the Super Bowl and increased DTC spend and sales force doubling has benefited the company so far, and what to expect in 2021? Thanks.

Jereme Sylvain -- Cheif Financial Officer

Sure. Yes, we can walk you through it. The guidance raise was approximately $25 million of it was currencies, we referenced some of the foreign currency tailwinds associated with and the other half was related to volume growth expected both in the first quarter and on the balance of the year. In terms of what we saw in terms of new patient adds in the first quarter, new patient adds were slightly ahead of expectations, and so that's really as we look to the balance of the year, certainly those repeat customers obviously play through in the balance of revenue for the year. And so we've added that to the guidance.

We still are bullish on the year, we still expect to have a very strong year. I think, there was any question there. And I think if you see the performance in the U.S. results, I think you're obviously seeing a lot of to your second question, a lot of the DTC while the Super Bowl ads as well as the new sales force ads starting to really play through, not to mention the fact that we have a sampling program that's out there that is starting to allow our folks to trial the product, which we think is garnering interest as well. So that's all been contemplated in the guidance. as we lay it out, and I think what you'd say is for the balance of the year. I do think you are seeing the momentum continue to support raising what we raised it by.

Kevin Sayer -- Chairman, President and Chief Executive Officer

And Robbie, I would just, the one thing I'd add to that is as Jereme laid out in the prepared remarks, our decision on the international markets with respect to opening up access, I do expect you're going to see that new patient number continue to perform very nicely in the back half of the year as we're accessing markets that are 5 to 6 times larger than what we had coming end of the year in some of these markets. So, very excited about where that new patient number potentially goes to.

Operator

And your next question comes from Matthew O'Brien from Piper Sandler. Your line is open.

Matthew O'Brien -- Analyst

Afternoon, and thanks for taking the question. Just a follow-up on the pricing commentary. The $200 million to $250 million, it's obviously a pretty meaningful increase, we've got Libre 3 over in Germany. Now, you're talking about being more aggressive in terms of lowering pricing OUS I think from access. I mean, does that, is it a function of Libre 3 you're trying to be aggressive in front of a more broad launch there with G6 over there? Is that a reason why you're increasing the pricing concessions right now, and then what does that say about when 3 comes to the U.S. and how can G7 can offset that?

Kevin Sayer -- Chairman, President and Chief Executive Officer

We've not made our decisions based on Libre 3, Matt. We've looked at what we accomplished in the U.S. here, what we've done is we've increased access by going to the pharmacy channel by looking at Medicare approval for example, which came in at a lower price to what our DME price was before, as we've set up Medicaid pricing structures in the U.S. that are yet once again a pricing structure lower than what we had before, but to increase access to a number of patients. We then have looked at our OUS business in several of our key geographies and said, you know what, our access is not broad enough, our access is very much focused on very intensively managed Type 1, oftentimes just children or adults with pumps or adults with incredibly bad hyperglycemia awareness or something along those lines. And it's more important to us to reach more patients. So we've taken the strategy we've used in the U.S. and we're deploying it in other places as well to increase our access. We won't let Libre 3 drive our decisions, we will drive our own.

Jereme Sylvain -- Cheif Financial Officer

I think one important thing to note there is the pricing point, it's always been part of our global pricing strategy, and the level that we're going to is still very much in line with where we're at in the U.S. pharmacy channel, to be honest with you. So we're just stepping down as we've had inventory availability now. We're in the best position we've ever been in from that perspective, we know we got to reduce the burdens to get on the product. We're in a position now to continue to execute against that global pricing strategy. So this is very much part of where we were heading. It doesn't create risk elsewhere globally, like I mentioned, it's right line with our U.S. pharmacy pricing, if you get into the comps. So excited about what this has the potential to create for us.

Operator

And our next question comes from Bob Hopkins from Bank of America.

Bob Hopkins -- Analyst

Great. Thank you and good afternoon. I just wanted to ask a question on G7. I was wondering if you could comment on 2 things. First thing, I just want to clarify, when do you expect to file CE Mark in Europe? I thought that was something that was going to happen or might have happened already. And then secondly, I was wondering if you just could comment on the upcoming data that we're going to see on G7, just maybe help give us a sense of just what we're going to see and how meaningful it might be. And just a little more detail there would be great. Thank you.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Well G7. We have not filed yet. We will file it in the not too distant future. We want to, we need all our ducks in a row. For example, we want to file both the Android and the iOS app at the same time, not file one and then do another filing. So making sure our software is validated and verified is really one of the bigger task. The clinical data is and we're ready with that part of the filing and we've had direct discussions with our authorities over there and we feel we're in good shape, but we'll file when we're ready. We don't want to do it twice and spend a lot of time answering questions.

With respect to the data that we will present here in the summer, it will be on some of the smaller studies that we've done, it will not be on any of the U.S. pivotal data obviously, but you'll see how the product performs and how consistent and how happy we are with it. Obviously I'm happy with the data and as is our team. I've made the comment on several times when all said and done everything you love about G6, you're going to love more about G7, and when that product comes to market, that's exactly how we're going to feel about it. Not only from the smaller wearable and the easier insertion and all the other wonderful patient, ease of use features we're putting in there, but the software, the app and the performance of the system, we believe is going to be spectacular. And again, set a real standard for people to go over.

Operator

And our next question comes from Kyle Rose from Canaccord. Your line is open.

Kyle Rose -- Analyst

Great, thank you very much. I wanted to talk about a few of the commercial initiatives in the U.S., I mean obviously still early in the sampling program, you've just completed the doubling of the sales force, and kind of shifting some of the focus to more on the primary care. So maybe just help us understand how some of those initiatives have played out in the early days with respect to the Q1 or early in the Q2? And just, are there any metrics or is there any sort of goalposts you can help me frame the early execution on those initiatives for us, and then how do we think about that as we move through '21?

Jereme Sylvain -- Cheif Financial Officer

Sure, I'll take a quick shot at the sampling, and then hand it over to Kevin here. There aren't any metrics that we're going to disclose particular to sampling in and of itself, although I will tell you the early response to this program has been beyond our expectations, both from a physicians perspective of just how easy we've enabled these PCPs to get product into the hands of our patients, and then also from a patient perspective when they realize just how easy it is to use the Dexcom product. So the sampling program has been beyond what we imagine coming out of the gate. It will continue to be a big part of what we do into the future, but in terms of giving specific metrics around it, that's not something we will do. I will tell you, it's one of the better investments that we look to make at this point.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Yeah, I'd agree with that. With respect to the sales force, we've added everybody we were going to add, everybody is in place and everybody is getting up to speed, and some of the people came from a diabetes background. So they get up to speed easier, because they have relationships already established in these offices possibly from another company. Others it's going to take a little while longer and we plan for that as we do this expansion. But as far as calling on more voices, we are learning that in all fairness, we've been under-served with respect to our ability to call on people, there is a great story we heard from down in Texas. One of our reps called on a physician, and talked to him about our product, and the doctor said, I know nothing about your product. I put people on your competitor's product because they come and ask me for it.

So again, using the sample program that Quentin described with Hello Dexcom, we put this patient on the system and introduced the physician to it and now he is prescribing Dexcom all the time, because of the experience that patient have. We needed a deeper reach, we will get that deeper reach with what we've done and we'll continue to evaluate over time, and we've got tremendous metrics on our sales people. We have an incredible commercial organization that monitors that. But we also very much understand it takes a while to get up to speed. The other great thing, I can tell you about this expansion, we literally have thousands of people apply for these jobs, and a lot of very, very qualified people that we did not hire. This is a place that people want to work and a product that they really want to represent and we want to continue that culture and maintain that.

Operator

And our next question comes from Mathew Blackman from Stifel. Your line is open.

Mathew Blackman -- Analyst

Hi, good afternoon, everybody. Thanks for taking my question. I wanted to follow up on the OUS pricing strategy, and sort of a multipart question here, but is the incremental $50 million headwind you called out isolated to 2021, or will these price headwinds continue beyond 2021 outside the U.S? And then if I think about the full-year guidance range raise of about $50 million I think, about half of that, you said is underlying our performance. But that's also in the face of another $50 million headwind on price. So is it fair to say that the guidance range, is that raise is actually closer to call it $75 million ex-FX on an underlying basis? Thanks.

Jereme Sylvain -- Cheif Financial Officer

Yeah, so a good question. So let's go step by step. So in terms of your question on the international pricing, a majority of the raise is our strategy outside the U.S. And so what you are seeing is we are taking an incremental $50 million of call it mix headwinds. As a result of going into there, and we still, yes, you're right, we did raise guidance in the face of that by $50 million of which $25 million was currency. So absent that incremental, yes, you would have seen a $75 million, now we are going to be taking those pricing headwinds, and we're going to be taking those pricing headwinds and making up for it in incremental volume. So it's obviously net neutral to the full year guide, but you are correct, absent taking on that strategy or because of that strategy, we expect to add new patients to the point where it increases our full year outlook.

Operator

And our next question comes from Matt Taylor from UBS. Your line is open.

Matt Taylor -- UBS -- Analyst

Hi. thanks for taking the question. Okay. So I'd like to ask one just about the U.S. momentum improvement that was impressive and you called out the factors. Is it possible for you to say which of the DTC sampling and sales force you think contributed more to that and which of those is still more to come, or is it just all equal?

Kevin Sayer -- Chairman, President and Chief Executive Officer

I think they're all more to come and I think they're relatively equal. As I called that on the call, the effect of the Super Bowl ad was more than just short-term sales growth in our minds, the awareness we generated, the text messages I was getting during the Super Bowl from industry and technology executives that I've met over the years made it all worth it. I'm just sitting on the couch saying, hey, this is really cool. It really created a lot of awareness for our company, awareness we hadn't had before, and that was really the goal as we talked about we developed more brand equity from our ad than anybody else. So that was important to us. The DTC remains important, as you watch our ads you'll see certainly more with Nick and certainly other campaigns as well and then on top of that having more feet on the street is good. We need it, but it will take time to develop those relationships. I think of the three, I couldn't quantify one of them, but I think ultimately the sales force expansion will be extremely helpful in this. We probably got less bang out of that just because we were ramping it up in the first quarter, but the DTC work and the Super Bowl ad that was probably the biggest and then Hello Dexcom and the reps will come more throughout the rest of the year.

Operator

And our next question comes from Jayson Bedford from Raymond James.

Jayson Bedford -- Raymond James Financial Incorporated -- Analyst

Hi, good afternoon. Somewhat similar to the last question, the first quarter strength in the U.S. much better than historical seasonality. I'm just wondering, is this more a function of just the channel shifts going on in the business or a function of the new momentum that you've seen kind of perhaps from some of these new initiatives? I know it's a tough question, but if there is any way to parse that out, that would be helpful.

Jereme Sylvain -- Cheif Financial Officer

Sure. yeah, so a good question. Anyhow some of that is a bit of a change in shift in dynamics and you're absolutely right, as more and more goes to the pharmacy, I think you are seeing that neutralization if you will, of the Q4, Q1 dynamic. One thing we did see this quarter, and we thought it was certainly a testament to the work that our customer experience team is doing, is we saw a slight decline in attrition and a slight increase in utilization. And so as you think about the customer experience that we're trying to create here, we've been talking about increases in net promoter scores, that's starting to play through in customer utilization habits. So, that's certainly something we saw a little bit of. And then I think what we also saw is just a little bit of incremental performance. We saw some of the performance outpace expectations, so I think it will be talked about as an expectation of new patient growth, slightly outpacing it, as a result of increased awareness, as a result of DTC. So I think all three of those coming together.

Operator

And our next question comes from Christopher Pasquale from Guggenheim. Your line is open.

Christopher Pasquale -- Guggenheim Securities -- Analyst

Thanks. Two quick questions for Jereme on the margin front. First is, given how strong gross margin was in 1Q, I was hoping you could talk about why 65% is the right number for the full year. And then your audio cut out a little bit when you were talking about the tax rate, if you could just go back to that and what you're expecting for an overall tax rate this year, that would be great. Thanks.

Jereme Sylvain -- Cheif Financial Officer

Sure, I'll start with the latter first, we expect the tax rate for the year to be between, a non-GAAP tax rate between 23% and 25%. Back to your question on margins, we did have a great quarter in Q1. Certainly, we're very proud of the 68%. The one thing we do want to do is, first off, it's the first quarter. So we think about it from a first quarter and really thinking about before taking a look at changing anything being mindful that we won't see things play out over time, but there's really two components you have to be aware of. We do expect to take on incremental channel mix headwinds in our international markets for the back half of the year. So we have to contemplate that in light of some of the efficiencies you're starting to see. And then getting back to our previous discussions about the drivers, when we set guidance is in the back half of the year, it's when we're going to launch G7 and when we launch G7, the yield that you get on some of these lines generally is a little lower. You saw it also happen with our launch of G6. There is a little bit of step back, as you start to work out the kinks of these lines and the yield start to play out. So as those play out in the back half of the year, that's why we don't -- we feel comfortable, very comfortable with our guidance, but we didn't feel any need to raise it at this point and let the year play-out.

Operator

And our next question comes from Cecilia Furlong from Morgan Stanley.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great, thanks for taking our questions. So I just wanted to go back to the pricing headwinds, but just in light of increasing ex-U.S. headwinds, should we expect your 2Q ex-U.S. results just more like they did in 2019, just in terms of relatively flat sequential performance, or can you really still grow ex-U.S. revenues quarter over quarter before G7?

Quentin Blackford -- Chief Operating Officer

Yeah, I don't think we're going to get into details of providing specific guidance around U.S. versus OUS, particularly at a quarterly level, I think we're incredibly bullish on where the international business can go. There's so much runway that continues to sit in front of us. A big part of that is continuing to step into this global pricing strategy that we've laid out over a multi-year basis and really what you're seeing with the pricing decisions today is that we're in a position now where we can pull some of those decisions forward, where we couldn't have historically and a lot of that comes down to having inventory available to us, being highly confident in the ability to continue to grow and scale the levels of production as we go into the future. So I'm confident you're going to see terrific results coming out of that international business over time and with some of these decisions that we've made, we are now opening up access to patient volumes that are 5 or 6 times larger than what we were really addressing historically. So I think all of that sets up very well for a very strong international business here into the future.

Operator

And our next question comes from Danielle Antalffy from SVB Leerink. Your line is open.

Danielle Antalffy -- SVB Leerink -- Analyst

Hey, good afternoon, everyone. Thanks so much for taking the question. I was Just wondering if you could talk a little bit about the potential impact from doubling the sales force and specifically as it relates to the primary care physician, I'm curious if you guys have this detail as to what percentage of your prescribing physicians are coming from primary care today, so we can sort of have a sense of, with the sales force doubling and better calling on the primary care, how many more physicians you could potentially capture? Thanks so much.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Well, this is Kevin. I'll take that. Very little comes from that channel right now. That's why we added them and that's why we've expanded. If you take a look at the Type 2 intensive insulin users, most of them are found in those offices and that's why we needed to get out there. Over time, this will certainly increase, we expect it to and those are the expectations of the team we brought on board. We're hearing good anecdotal stories and things are starting to heat up, but in all reality and with a large book of business we already have in the recurring orders from our current patients, we got a ways to go. We think that will do great and we'll monitor it, if we see great returns, we'll just keep giving them tools to get great returns, is the best way to describe it. And I think, Hello Dexcom is going to be the best one that we have for that group.

Operator

And our next question comes from Ravi Misra from Berenberg Capital. Your line is open.

Ravi Misra -- Berenberg Capital Markets -- Analyst

Hi, thanks for taking the questions. Good evening. Congrats Jereme and Quentin, on the -- there's lot of management changes over at Dexcom or rotations I guess in the last year so. The question I had, I guess I wanted to go after the gross margin and pricing commentary from maybe a different angle. When you have the similar type of pricing impact in the U.S., when you started going in the pharma channel, we really saw a pretty strong level of uptake through that arena, albeit the pricing headwind continues. I guess, what I'm trying to ask is, do you -- does the guidance factor in that type of kind of immediate impact from the price cut, I guess, in Europe, and do you think that $50 million is the kind of extent of it as we kind of go forward here? Thanks.

Jereme Sylvain -- Cheif Financial Officer

Yes, sure, I can take that. So, our gross margins, certainly contemplates the impact of -- pricing impacts in our international markets, and so I wouldn't expect any changes there. In terms of the extent of it, as we go after these incremental markets and open up access, we almost look at that as new patients. And so when we go after our new patients and new markets, certainly pricing is going to change over time. So there could be impacts that drag out over time into future years as a result of just going after incremental pockets of patients, and any sort of knock along impact. Certainly, not anything that we would expect to be significant, but that will always be contemplated in our guidance and it'll all be something that we certainly talk to on these calls, I wouldn't expect anything that we provide hasn't been thought through and contemplated in any of the targets that we provide to you guys.

Operator

And our next question comes from Marie Thibault from BTIG. Your line is open.

Marie Thibault -- BTIG -- Analyst

Hi, good evening. Thanks for taking the questions and congrats to you as well, Jereme. I wanted to ask a question on OUS. I understand that the impact of COVID last year obviously having an impact on revenue this year but curious if you're still seeing a COVID impact in this Q1 quarter as well as the existing quarter here in terms of that still affecting new patient starts. We certainly heard from other companies that Europe is lagging on the vaccine roll-out. So we'd love to hear if that's been contemplated in guidance. And if so, how you expect that to change over the year? Thanks.

Jereme Sylvain -- Cheif Financial Officer

Yeah, I think from our perspective, all that we know right now is kind of the environment we operate within with respect to COVID, which we know from an international perspective has certainly created some incremental pressure in pockets of that business, particularly those that require in-clinic visit to get onto the product or some of those administrative hurdles that have been put there. In other channels where we have e-commerce, for example, we're seeing incredible results. And so I think one thing to point out on that first quarter international result is that when you look at it from a 2-year growth perspective, it's an incredibly strong number, last year was an absolute record growth for us in that first quarter from an international perspective.

So I think you got to normalize that when you're looking at that first quarter growth. But in terms of the remainder of the year on an international basis and patient adoption, a big part of stepping price down in line with kind of our global pricing strategy, was the fact that we had to see administrative requirements reduced or eliminated all together to get patients onto the product, and so in these markets where we've done that, the hurdle to get onto the product has been removed. And so we absolutely would expect to see patient -- new patient acquisition become much easier for us and see that start to take off in a very positive way. So I do think you're going to see that uptick over the course of the year, even in the COVID environment with of course the caveat being that it kind of stays stable to where it's at today. If it were to get worse in some case, then we might have to think about that differently, but we're trying to look at the future based upon what we see today and how it's impacted the markets here in the moment.

Operator

And our next question comes from Larry Biegelsen from Wells Fargo. Your line is open.

Lawrence Biegelsen -- Analyst

Hey guys, thanks for taking the question. So on pricing once G7 and Libre 3 are competing with each other, how much of a price premium do you think is sustainable? And how close do you think you are to that premium today in the U.S. and outside the US. And do you see the opportunity to price G6 as a value brand? Thanks for taking the question.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Larry. Thanks for your question. We have numerous opportunities here. But I'm not going to give our pricing strategy on the earnings call, we are very thoughtful about this. We run several models. We know what our technology is worth and we know what great benefit we provide at what prices accordingly, but we're also going to price our products in a manner whereby our patients have access to it as well. And I think our commercial team combined with our finance team and everybody has done a wonderful job balancing that, we'll continue to balance, but we will continue to grow as well. I mean, look at the volume growth versus our our dollar growth this quarter and we already said, our U.S. volumes were in excess of the overall volume growth. We've managed it extremely well and we'll continue to do so.

Operator

And our next question comes from Anthony Petrone from Jefferies. Your line is open.

Anthony Petrone -- Analyst

Thanks. A couple of questions, one on G7, and one of margins as well. So G7 trying to get a sense when you look at U.S. timing to entry and efforts at ICGM, do you think the market actually behaves differently, in other words, new patient starts potentially slow a bit as the new form factor is coming to market? And then, our margins taking the other side, the COGS side specifically breaking down and breaking ground in Malaysia. Maybe just an update on timing as to when FDA inspections will take place for that facility. And just a recap of what that can do on the COGS side for sensors on a per unit basis? Thanks a lot.

Jereme Sylvain -- Cheif Financial Officer

I'll take the latter part of that. With respect to Malaysia, we're clearly well into that project making great progress. We have a building in place as we exit the year with plans in place to have a clean room up and ready for validation right at the turn of the year into the first quarter. Sorry, first quarter of next year. So the expectation is, we'll be producing product out of that in the first half of next year there in Malaysia. So very excited about what we're seeing there.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Yeah. And I'll take the G6, G7 and the cut over question. Again, with respect to U.S. timing, we've not disclosed anything. One of our great learnings on G6 was have enough product ready to go when you go, and really be fully ready for launch. And we've made that commitment to our customers that we will be ready when we do launch this product that we will be able to literally flip the switching over. As far as patients, slowing their purchases of G6, in particular in the pharmacy channel, you're buying one month of product at a time. So it's not like you're going in there and loading up with 3 to 6 months, as we did in the past, and the DME channel and even in the DME channel today there is less of that loading up by patients with G6, then there wasn't in G5 and G4 prior to debt. We don't view that people will quit purchasing their G6 is when G7 is announced, because in all fairness, our customers can't live without it. And when we have the opportunity to take care of them all, what we will do is as organized with as rapid migration as we possibly can. And as far as G6 future plans, we do see a lot of opportunity here, but we really haven't disclosed anything.

Operator

And our next question comes from Steven Lichtman from Oppenheimer. Your line is open.

Steven Lichtman -- Analyst

Great, thanks for taking our questions. I just had a question on your international expansion efforts. What are some of the key countries and focus for you here over the near-term? And are you anticipating any contribution from these new regions in this year's guidance or is that more really more of a driver for 2022? Thank you.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Yeah, I think that will be more of a driver for future years. We've talked about our launch in Japan which Terumo, and that's scheduled to happen in the second half of the year. We got reimbursement in France, as many of you know, so we do expect France to be a bigger part of our business than it has in the past, but the law of large numbers in our businesses, things have gotten so big, they can give us a whole lot that moves the needle when we start. Hence, the discussion we've had about increasing access in our more mature markets and looking at how we follow similar paths in these other geographies with the operating capability we have now there is no sense in going through and selling just the top end of this market, we want to get more aggressive and be more broad. So I think you'll see as we go into these geographies over time, we'll start as we started in the past, but we are going to get more reimbursement and try to get more patients more rapidly.

Operator

And our next question comes from Brandon Vazquez from William Blair. Your line is open.

Brandon Vazquez -- Analyst

Hi, thanks for taking the question. I just wanted to go back to one of the comments made during the prepared remarks and it sounded like there was maybe a little hinting at new connected systems coming this year. So curious if you could talk about those, and specifically what those kinds of products, I'm thinking is there something outside of the regular hardware upgrades that we see maybe somewhere on the software side, that could be a catalyst maybe for growth within maybe some of the TAM expansion opportunities like the Type 2 non-intensives, or gestational diabetes or anything like that. So is there anything we're kind of not thinking out-of-the-box here from the normal hardware that will be important in the coming 12 months or so?

Jereme Sylvain -- Cheif Financial Officer

I don't think that there is anything that you guys are missing in terms of the prepared remarks and speaking to some of those systems. The one thing that we certainly are excited about, has to be the Omnipod 5 product in the back half of the year, and we'll let Insulet speak to the exact timing of when we're ready to put that product into the marketplace, but having connectivity into a product like that is something that we're very excited about and believe that they'll have success with and will have success with as well.

I think with respect to the whole Type 2 population and the opportunity there, we couldn't be more bullish on the opportunity that sits in front of us, and I think by the day we learn more-and-more of that increases that bullishness for us in the confidence that there's going to be some real opportunity there to create value coming from it, and you're going to see a study a little bit later this year, mid-year at some of the mid-year society meetings, that's going to start to really lay out the benefit of using CGM relative to BGM in this Type 2 population, particularly the non-intensive population that just demonstrates the sort of impact we can have on patients that are on basal only and that's a 4 million patient population in the U.S.

So I think that sort of data starts to really accumulate in favor of opening up a whole another market segment that doubles the existing core U.S. intensive market today that we're very excited about. So you'll see that data here, mid-year, but I think all of it starts to point to the fact that this Type 2 space is going to open up in a significant way and we are well-positioned to take advantage of it.

Operator

And that concludes the question-and-answer session. I will turn the call back over to Kevin Sayer for final remarks.

Kevin Sayer -- Chairman, President and Chief Executive Officer

Thank you, and thanks everybody for participating.

As we wrap up our call today, I want to take a minute to acknowledge some very important recognition that Dexcom received this week. Forbes recently published their 100 company list of America's Best Employers for Diversity. Dexcom was honored to be Number 66 on that list. While we consider this a perpetual journey, we're very happy to have been recognized for some of the work that we've done so far.

As far as our outlook on the business going forward our great quarter fuels, our continue believe that the best is yet to come. I recently caught up with a friend who is a longtime healthcare industry executive and the gist of his message to me was very simple, everything important in diabetes care is going to revolve around CGM. For example, there are numerous instant delivery devices and algorithms available for automated insulin delivery, but there is only one CGM commercially capable of delivering the patient experience and outcomes that we've all envisioned for a very long time, and that's only the beginning.

There are incredible new compounds, treatments and program stepping forward for the treatment of Type 2 diabetes and we are very confident that the right CGM experience will become an integral part of all these solutions and we haven't even started talking about the difference we can make as part of a pre-diabetes program. We've never been more excited and engaged in our opportunity than we are today.

Thank you again everyone and have a great day.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Sean Christensen -- Director of Corporate Affairs and Head of Investor Relations

Kevin Sayer -- Chairman, President and Chief Executive Officer

Jereme Sylvain -- Cheif Financial Officer

Quentin Blackford -- Chief Operating Officer

Jeffrey Johnson -- Baird -- Analyst

Joanne Wuensch -- Analyst

Robert Marcus -- Analyst

Matthew O'Brien -- Analyst

Bob Hopkins -- Analyst

Kyle Rose -- Analyst

Mathew Blackman -- Analyst

Matt Taylor -- UBS -- Analyst

Jayson Bedford -- Raymond James Financial Incorporated -- Analyst

Christopher Pasquale -- Guggenheim Securities -- Analyst

Cecilia Furlong -- Morgan Stanley -- Analyst

Danielle Antalffy -- SVB Leerink -- Analyst

Ravi Misra -- Berenberg Capital Markets -- Analyst

Marie Thibault -- BTIG -- Analyst

Lawrence Biegelsen -- Analyst

Anthony Petrone -- Analyst

Steven Lichtman -- Analyst

Brandon Vazquez -- Analyst

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