Beta Bionics, Inc. (BBNX) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlighted strategic initiatives, strong revenue guidance, and a shift to a pharmacy channel model, which enhances profitability. Q&A insights confirm confidence in guidance and recurring revenue growth. Despite some vague responses, the overall sentiment is positive due to strategic partnerships, solid cash position, and expected revenue growth, suggesting a likely positive stock price movement.

Key Financial Performance

Net Sales $23.2 million in Q2 2025, grew 54% year-over-year. The growth was driven by robust demand for the iLet and expansion of its commercial reach.

New Patient Starts 4,934 new patients adopted the iLet in Q2 2025, growing 57% year-over-year. A high 20s percentage of these starts were reimbursed through the pharmacy channel, up from mid-single-digit percentage in Q2 2024. This shift reflects increased adoption of the pharmacy channel.

Gross Margin 53.8% in Q2 2025, slightly up from 53.7% in Q2 2024. The increase was due to cost discipline, manufacturing volume leverage, and a growing pharmacy installed base, despite a headwind from the upfront revenue forgone in the pharmacy channel.

Operating Expenses $32.4 million in Q2 2025, up 63% from $19.9 million in Q2 2024. The increase was driven by sales team expansion, R&D projects (Mint and bihormonal), and costs related to operating as a public company.

Cash Position $281 million as of June 30, 2025. The company highlighted its efficient manufacturing, shift to the pharmacy model, and operational efficiency as factors supporting its financial health.

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Operating Highlights

iLet: Robust demand with record new patient starts in Q2 2025, showing superior clinical outcomes and minimal user engagement. Expanded commercial reach, with a high percentage of new patient starts through the pharmacy channel.

Mint Patch Pump: Demonstrated features at Investor Day, targeting commercialization by 2027. Designed for user convenience, including no need for phone or charging, and compatibility with CGM updates.

Bihormonal Pump Program: Completed dosing for glucagon candidate study, with results expected in H2 2025. Exploring multiple form factors for user preference.

Pharmacy Channel Expansion: High 20s percentage of new patient starts reimbursed through pharmacy, up from mid-single digits in Q2 2024. Effective formulary agreements with all major PBMs in the U.S.

Type 2 Diabetes Market: Over 25% of new patient starts in Q2 were type 2 diabetes patients, indicating off-label adoption and potential for future label expansion.

Financial Performance: Net sales of $23.2 million in Q2 2025, a 54% YoY growth. Gross margin at 53.8%, showing cost discipline and manufacturing efficiency.

Cash Reserves: $281 million in cash and investments as of June 30, 2025, with confidence in achieving positive free cash flow earlier than peers.

CMS Proposal Adaptation: Prepared to adapt to CMS's proposed pay-as-you-go rental model and competitive bidding for insulin pumps, viewing it as a potential tailwind for business.

Innovation Pipeline: Focus on disrupting the industry with new products like Mint and bihormonal systems, aiming for sustainable success.

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Risk or Challenges

CMS Proposed Rule for 2026 Durable Medical Equipment Payment System: The proposed competitive bidding program and shift to a pay-as-you-go rental model for insulin pumps could create financial and logistical challenges for DMEs and manufacturers. The reimbursement cap may lead to price compression, potentially forcing some manufacturers or DMEs to withdraw from the Medicare fee-for-service channel, limiting patient access and choice.

Pharmacy Channel Expansion: The shift to the pharmacy channel creates a short-term revenue and gross margin headwind due to the forgoing of upfront payments for pumps. However, it is expected to generate higher recurring revenue in the long term. This transition requires careful management to balance short-term financial impacts with long-term benefits.

Gross Margin Dynamics: Increasing pharmacy channel adoption creates near-term gross margin compression due to upfront revenue loss but is offset by high-margin recurring revenue from a growing installed base. This dynamic requires effective cost management and scaling to maintain profitability.

Operating Expenses: Operating expenses increased significantly (63% year-over-year) due to sales force expansion, R&D investments, and public company costs. This rise in expenses could pressure profitability if revenue growth does not keep pace.

CMS Tariffs and Regulatory Changes: Potential tariff impacts and regulatory changes, such as the Nairobi protocol exemptions, require ongoing monitoring to ensure compliance and minimize financial risks.

Innovation Pipeline Risks: Development of new products like the Mint patch pump and bihormonal system involves significant R&D investment and regulatory hurdles. Delays or failures in these programs could impact future growth and market competitiveness.

Type 2 Diabetes Label Expansion: Off-label use of iLet for type 2 diabetes patients indicates market potential, but pursuing FDA approval for this label expansion involves regulatory and clinical trial risks.

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Guidance & Outlook

Full Year 2025 Guidance: Beta Bionics has raised its full-year 2025 net sales guidance to $88 million to $93 million, up from the prior guidance of $82 million to $87 million. The company also expects 25% to 28% of new patient starts to be reimbursed through the pharmacy channel, an increase from the previous guidance of 22% to 25%.

Revenue Cadence for 2025: Revenue in Q3 is expected to be slightly higher than Q2, with Q4 revenue increasing relative to Q3. New patient starts in Q3 are anticipated to be similar to Q2, with an increase expected in Q4. The percentage of new patient starts reimbursed through the pharmacy channel is expected to rise in the second half of the year.

Gross Margin Outlook for 2025: The company has raised its gross margin outlook for the full year 2025 to 52% to 55%, up from the prior guidance of 50% to 53%. Gross margin is expected to increase slightly from Q2 to Q3 and again from Q3 to Q4.

CMS Proposal Impact: The company does not expect any material revenue impact from the CMS competitive bidding proposal. The potential shift to a pay-as-you-go rental model for pumps is seen as a net tailwind for the business, potentially increasing pump adoption and benefiting differentiated products like the iLet.

Mint Patch Pump Program: The Mint patch pump is on track for commercialization by the end of 2027. It is designed to combine the best aspects of fully disposable and partially disposable patch architectures, with features aimed at improving user experience.

Bihormonal Pump Program: The bihormonal pump program is progressing, with full results from the PK/PD study expected in the second half of 2025. The company is exploring various form factors for the bihormonal system, including durable pumps and patch-based solutions.

Type 2 Diabetes Label Expansion: Beta Bionics is observing off-label use of the iLet for type 2 diabetes, with over 25% of new patient starts in Q2 being type 2 patients. The company plans to pursue FDA approval for a type 2 diabetes label in the future.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is happening with the pharmacy channel pricing, particularly for the iLet and supply kits?

A:The iLet in the pharmacy channel saw a downtick in ASP due to increased adoption from PBMs, leading to rebates and lower ASP over time. For the pharmacy supply kits, there was no ASP change from Q1 to Q2, but a stocking dynamic in Q2 caused some headwind compared to Q1.

Q:What is the churn rate in the pharmacy channel, and are there any notable trends?

A:Management did not provide specific churn or attrition rates, stating that the diabetes industry does not report on these metrics. However, they emphasized confidence in their retention rate and noted that the pharmacy channel is financially advantageous, which is why they prioritize it.

Q:What are the drivers behind the increased guidance for the back half of the year?

A:The company has a high degree of confidence in its guidance. Q3 new patient starts are expected to be flat compared to Q2 due to seasonality, a strong Q2, and conservative guidance setting. Revenue is expected to grow due to the recurring revenue stream from the installed base.

Q:What are the next steps and timing for the CMS home health proposal for 2026?

A:CMS will receive comments from companies and DME distributors by late August or early September. They will then decide whether to move forward with the proposal, potentially implementing a competitive bidding process. The earliest expected enactment of the new policy is 2027.

Q:What is the contribution of new prescribers versus existing prescribers to sequential growth in starts?

A:Both dynamics are contributing. The company expanded its field sales team, leading to new territories and prescribers. Existing prescribers are also increasing adoption due to the simplicity and positive results of the iLet. However, management did not provide numerical details.

Q:What is the potential impact of the Medicare fee-for-service standard on commercial DME or Medicare Advantage contracts?

A:Management does not see any associated risk of the Medicare proposal influencing commercial plans or the pharmacy model. They highlighted that the pay-as-you-go model is already working well in the pharmacy system and that they are prepared for any potential changes.

Q:What are the market dynamics and success factors for type 2 diabetes patients using the iLet?

A:Management provided limited comments due to the off-label nature of iLet for type 2 diabetes. They noted that physicians prescribe based on their judgment and that awareness of iLet is growing. The adoption is occurring in both primary care and endocrinology channels.

Q:How does the growing proportion of recurring revenue affect guidance visibility?

A:The growing recurring revenue stream from the pharmacy channel makes the business more predictable and contributes to sequential revenue growth, even with flat new patient starts.

Q:What is the significance of the Prime PBM contract compared to other PBM agreements?

A:The Prime contract was unique because both the PBM agreement and underlying health plan agreements were secured simultaneously. For other PBM agreements, the underlying health plan agreements are a separate sales cycle, leading to a more gradual adoption.

Q:What is the potential for durable insulin pumps to be reimbursed under Medicare Part D?

A:Management does not want to predict when durable insulin pumps might be considered Part D treatment. They noted that the CMS proposal does not mention Part D treatment for insulin pumps, and any changes would likely take time.

Q:What is driving the uptick in new patient starts?

A:The iLet's simplicity and strong clinical results are resonating with doctors, leading to increased prescriptions. Additionally, the pharmacy reimbursement model makes it easier and more affordable for patients to start using the iLet.

Q:What is the outlook for operating expenses in the back half of the year?

A:Sales and marketing, as well as G&A expenses, are not expected to increase significantly. However, R&D expenses may rise due to the Mint program and the bihormonal project.

Q:Review of Unclear Management Responses

A:Management avoided providing specific churn or attrition rates, citing industry norms. They also did not provide numerical details on the contribution of new versus existing prescribers to growth or on the potential timeline for durable insulin pumps to be reimbursed under Medicare Part D. Additionally, comments on type 2 diabetes adoption were vague due to the off-label nature of the iLet for this use case.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

BBNX Transcript

Beta Bionics, Inc. (BBNX) Q3 2025 Earnings Call Transcript

Positive10-28

Beta Bionics has raised its full-year 2025 guidance for both net sales and gross margins, indicating strong financial performance. The Q&A section reveals consistent revenue momentum, expansion into new territories, and improvements in product features. While there are concerns regarding management's lack of clarity on some issues, the overall sentiment is positive due to the raised guidance and strong growth drivers. Despite increased operating expenses, the company's cash position remains robust, supporting further growth initiatives.

Beta Bionics, Inc. (BBNX) Q2 2025 Earnings Call Transcript

Positive7-31

Earnings call transcript: Beta Bionics Q4 2024 sees strong revenue growth

Unknown3-25

The company's financial performance shows strong growth in net sales and new patient starts, but concerns about increased operational costs and declining margins due to the pharmacy channel shift temper enthusiasm. Despite optimistic long-term guidance, short-term challenges and management's lack of clarity in the Q&A contribute to a neutral sentiment.

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