On Tuesday, Minimed Group (NASDAQ:MMED) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Minimed Group reported a strong start to fiscal year 2027 with organic revenue growth of 16%, driven by the U.S. launch of MiniMed Flex and international expansion.
The company advanced four pipeline programs and highlighted the upcoming launch of MiniMed Fit and Vivera, a fully closed-loop algorithm, both expected in calendar year 2027.
Q1 revenue was $843 million, with U.S. growth at 13% and international growth at 16.9%. Adjusted EBITDA was $83 million with a margin of 9.9%, impacted by accelerated investments and FX charges.
Management raised fiscal 2027 organic revenue growth outlook to 10.5% and reaffirmed adjusted EBITDA margin guidance of 16% for the year.
The company is making progress on exiting transition service agreements with Medtronic and expects improvements in cash generation as these activities roll off.
Full Transcript
OPERATOR
Good day and welcome to Minimed Group's first quarter and fiscal year 2027 earnings webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session. Instructions will follow at that time. Today's call is being recorded. I will now hand the conference over to your speaker host, Ryan Weisspenning, VP of Investor Relations. Please go ahead.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Hello everyone and thanks for joining us today for our fiscal 27 first quarter earnings webcast. I'm Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations. Joining me today are Que Dallara, Chief Executive Officer, and Chad Spooner, Chief Financial Officer. Today's program will last no longer than 45 minutes so that we may complete the call before the market opens. Earlier this morning we issued a press release discussing our results and containing several financial schedules.
We also posted an earnings presentation that provides additional details on our performance. Both can be accessed on our website at investors.minimed.com. During today's program, many of the statements we make may be considered forward-looking statements, which are subject to risks and uncertainties, and actual results may differ materially from those projected in any forward-looking statement. Please take a moment to review the cautionary statements regarding forward-looking statements included in our earnings press release and the presentation.
Additional information concerning factors that could cause our actual results to differ is contained in the periodic reports and other filings we make with the SEC. Forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward-looking statement or any of the information contained in today's program. In today's program, unless we say otherwise, all comparisons are made on a year-over-year basis, and references to revenue growth are to organic revenue growth, a non-GAAP financial measure.
A reconciliation of organic revenue growth to the most directly comparable GAAP financial measure is included in today's earnings press release. With our organic revenue growth and adjusted EBITDA margin guidance, we do not provide reconciliations to the comparable GAAP measures because certain items in these forward-looking non-GAAP measures cannot be predicted without unreasonable effort. We operated as part of Medtronic until our IPO in early March, so our GAAP financial statements for historical periods were prepared on a carve-out basis and include certain historical cost allocations from Medtronic for centralized support functions.
On today's program, unless we say otherwise, year-over-year and sequential comparisons of P&L line items will be made to historical period financials that are presented on an adjusted standalone basis, which replaced historical Medtronic cost allocations with the expected run-rate cost structure for standalone Minimed Group. This information also eliminated the impact of certain incremental nonrecurring costs. These standalone P&L items are non-GAAP financial measures and are included to provide consistency and comparability while evaluating operational performance on a run-rate standalone basis for reporting periods after Minimed Group's fiscal year 2026. A reconciliation of these standalone non-GAAP financial measures to their most directly comparable GAAP financial measures is included in today's earnings presentation. With that, over to you, Que.
Que Thanh Dallara — Chief Executive Officer
Thank you, Ryan, and hello, everyone. It's good to be speaking with you today to update you on the momentum we have at Minimed Group with our commercial growth, our innovation pipeline, and our execution. We had an excellent start to our fiscal year. In our first full quarter as a standalone public company, organic growth was 16% and ahead of expectations. The extra week in our fiscal calendar contributed approximately 4 to 6 points of that growth.
Excluding it, we grew low double digits, an acceleration of roughly a couple hundred basis points from Q4 and ahead of the outlook we gave you in June. Our U.S. growth accelerated on the strength of our MiniMed Flex with Simplera launch, which started shipping late June and represented about five weeks of shipping for the quarter. In our international region, we delivered another quarter of double-digit growth as we significantly increased sensor supply to meet strong customer demand, increasing Simplera supply throughout the quarter and launching Instinct with MiniMed 780G in July, well ahead of the calendar 2027 timeframe we outlined during our IPO roadshow. We also advanced four separate pipeline programs. We are releasing next generations of every part of our integrated system—sensors, insulin delivery devices, algorithms, and apps. We are not launching individual products. We are building the next generation of MiniMed. One company, every option, one ecosystem. Now, looking at our Q1 growth in more detail, starting with the U.S. Last quarter, we told you to expect an acceleration in revenue growth from Q4, and we delivered.
U.S. revenue grew 13%, up from 1.5% in Q4. Excluding the extra week, U.S. growth was in the high single digits. In addition, U.S. new pumps sold increased by over 20% year over year. This was driven largely by the launch of the MiniMed Flex insulin pump system, which started shipping in late June with our Simplera sensor. The majority of Flex sales are going to MDI patients that are new to pump therapy, followed by conversions from tubed and tubeless competitor systems, all of which grow our install base.
Importantly, Flex is doing exactly what we designed it to do. It is expanding our reach into new patients, driving competitive conversions, and strengthening our position in AID. The reason is simple. Patients have been telling us for years what they wanted—the outcomes of MiniMed in a simpler, smaller, more discreet form factor with the convenience of app control—and MiniMed Flex is doing exactly that. Our new small insulin pump is half the size of the MiniMed 780G and our leading SmartGuard adaptive algorithm, the most clinically validated algorithm in the world.
The early patient response to Flex has been very encouraging. We're seeing strong engagement in social media and hearing directly from patients who are excited about Flex's sleek and discreet form factor. And patients—pediatrics and people with type 2 especially—appreciate Flex's large 300-unit insulin reservoir and our long-lasting 7-day extended infusion sets and the strong outcomes they get with our SmartGuard algorithm. Physicians are responding to Flex as well, particularly with the simplicity of the setup.
We're seeing that interest translate into a broader and growing prescriber base, with new MiniMed prescribers up 24% year over year. We're still in the early innings of the Flex U.S. launch with a strong growth runway in front of us. Late in Q1 we expanded the availability of Flex to Medicare and Medicare Advantage beneficiaries. And two weeks ago, on August 17, we announced that we started shipping MiniMed Flex with the Instinct sensor, a combination that many patients have been waiting for.
In Q1, we also began the U.S. launch of MiniMed Go, our smart MDI solution that remembers, reminds, and recommends and can help us reach more than two and a half million people in the U.S. who are using multiple daily injections. We are in the early stages of that launch. Our dedicated primary care sales force was fully deployed near the end of Q1 and is now gaining traction at target accounts, many of which are new to Minimed Group. Providers are prescribing MiniMed Go directly from their EMR to Minimed Pharmacy, where we handle the billing and ship directly to the patient.
Encouragingly, more than half of orders to date have come from patients who are new to Minimed Group, reinforcing our ability to expand beyond our traditional customer base. Through our smart pen, CGM, and connected app, MiniMed Go serves as a new entry point to the MiniMed ecosystem. We're also beginning to see early examples of patients progressing to our AID therapies, reinforcing our vision of MiniMed Go as both a meaningful MDI opportunity in its own right and a pathway to our AID therapy for those who prefer to advance their care.
Now let me spend a moment on type 2 because it represents one of the largest opportunities in AID, and we believe we're still at a relatively early stage in realizing its full potential. It's also an area where analysts and investors have had questions, particularly around long-term adoption and retention. Importantly, the trends we're seeing in our own data are very encouraging. As we've discussed previously, approximately 40% of new starts in the U.S. come from type 2 patients, and that trend continued into Q1. In addition, we continue to see retention improve over time across both type 1 and type 2 patient populations. We believe that reflects the strength of our differentiated insulin delivery devices, which have specific features geared at type 2 patients and their physicians. Flex and Fit both have 300-unit insulin reservoirs and up to seven days of wear, a plus for type 2 patients that typically require more insulin than type 1 patients and benefit from fewer changeouts.
We also designed our algorithms to be easier to use, which helps both patients and their physicians, and that's evident already today. Real-world data was published on over 6,500 type 2 patients using our SmartGuard algorithm in Diabetes Care earlier this year, which show that these type 2 users achieved on average time in range well above the ADA guidelines without bolusing—in effect, running in fully closed loop within this cohort. Those type 2 users that used our recommended settings achieved a time in range of 82%, a remarkable 12 points above ADA guidelines.
We expect Vivera, our fully closed-loop algorithm currently under study, to build on this foundation and reduce burden placed on both patients and providers. Turning to International, we grew 16.9% organic including the benefit of the extra week. Excluding it, we grew low double digits. This was strong, broad-based growth across pump, sensors, and consumables. Importantly, this growth is occurring in markets where automated insulin delivery remains significantly underpenetrated and where our commercial infrastructure, reimbursement capabilities, and clinical evidence are real advantages.
In many of these markets we believe the AID opportunity is still ahead of us. We had notable strength in Western Europe, our largest international market, which grew in the high teens. These are contested markets, and our new products are performing very well in them. European growth this quarter was driven by increased availability of new sensors, which is driving both strong CGM growth and strong pump revenue growth. Our Simplera sensor supply increased by three times versus last year, and this is making an impact in countries like France, where our pump sales increased over 20%.
In addition, we began our European commercial launch of the Instinct 15-day sensor at the start of July. As a reminder, this allows us to reach more than 4.5 million avid sensor users on intensive insulin therapy and bring them into the MiniMed ecosystem. In the countries where Instinct has launched, we're seeing meaningful increases in pump sales, including over 50% growth in the United Kingdom. Q1 was also our first full quarter of our European launch of MiniMed Go, which resulted in several MDI tender wins.
Now turning to our pipeline, which represents the next phase of our growth. Earlier today we announced that MiniMed Flex received CE Mark approval well ahead of our calendar year-end target, and we now expect to begin our European launch in November of this year. We've also advanced two significant products that will come to the U.S. market next—MiniMed Fit, our patch pump, and Vivera, our fully closed-loop algorithm. Both are expected to be on the market in calendar year '27, at which point we will have completely upgraded every aspect of our product portfolio with a full offering across every form factor for insulin-taking patients.
Starting with MiniMed Fit, we have an important update to share with you today. We completed the 510(k) filing for Fit with FDA ahead of our fall target, and we now expect a full U.S. launch by summer next year. Fit brings MiniMed's differentiated therapy platform to the fastest-growing segment of the insulin pump market. Patients should not have to choose between convenience and outcomes, and Fit is designed to deliver both. Fit combines several important advantages, including the only 300-unit reservoir on a patch pump, up to 7 days of wear, waterproof design, persistent Bluetooth connectivity, iOS and Android availability from day one, seamless integration with both Simplera and Instinct, and, importantly, access to our industry-leading algorithm. We believe many patients are simply not looking for the convenience of just a patch pump—they're also looking for the best outcomes. Fit will pair a highly differentiated patch platform with our SmartGuard algorithm at launch and a simple over-the-air upgrade ability to fully closed-loop capabilities when Vivera is available. As we said in June, we expect to have manufacturing capacity to support 20,000 patients at launch, and we have designed our production line to scale efficiently as demand grows.
Now moving to our Vivera fully closed-loop algorithm, I have more good news to share with you today. We have recently completed enrollment in our U.S. pivotal trial ahead of schedule, having roughly half enrolled when we spoke to you in June. This achievement further reinforces our leadership in AID, as MiniMed is the only company with a fully enrolled U.S. pivotal trial for a fully closed-loop algorithm. This represents a major milestone forward toward what we believe will be the most meaningful advancement in diabetes management since no fingersticks came to CGM.
Vivera has the potential to expand the penetration of all automated insulin delivery by dramatically reducing the burden placed on both patients and providers. We expect to have Vivera on the U.S. market in the second half of calendar year '27 for both MiniMed Flex and MiniMed Fit users. Vivera is our third-generation algorithmic platform, leveraging our meal detection technology to achieve the original vision behind automated insulin delivery, and that is the delivery of outstanding glycemic outcomes with very little burden on the user or prescriber.
Unlike competitors' AID systems that still rely on meal announcements or carb counting, extensive physician programming, and patient interaction, the only thing Vivera requires to get started is a patient's total daily insulin dose and does not require meal announcements, and we expect Vivera to reduce these burdens while still delivering a time in range above ADA guidelines. In feasibility data that we presented at ATTD in March, type 1 users on average exceeded ADA guidelines with no user input at all and were able to achieve 74% time in range.
Vivera is designed to meet people where they are. You can let Vivera handle meals on its own or count carbs when you want more control, while it keeps learning in the background. That is the advantage of the architecture. One system can deliver simplicity for the least engaged user and precision for the most, without forcing either into a separate product. We believe Vivera's outcomes are possible because of advantages competitors simply cannot replicate quickly, including over a decade of proprietary insulin and CGM data, our digital twin technology that allows us to simulate millions of patient scenarios before entering clinical trials, and an algorithm architecture originally designed to mimic the function of a healthy pancreas. Vivera will launch through an over-the-air upgrade to our install base, creating a powerful combination of clinical differentiation and scalability and commercial leverage. We do not view Vivera as the next version of an algorithm. We view it as a category-defining platform that brings fully closed-loop therapy to both type 1 and type 2 patients at scale, further expanding the gap between MiniMed and the competition.
A fully closed-loop algorithm with either tubed or tubeless device options will be attractive to people on MDI and especially type 2 users, with the ultimate ease of use without compromising on glycemic control. Finally, we're often asked what comes after Flex, Go, Fit, and Vivera. Today we can begin to answer that question. Our next-generation MiniMed Extended Wear sensor recently received IDE approval from the U.S. FDA, and we expect to begin our pivotal trial in October.
While we're not prepared to discuss the target wear duration or features at this stage, the sensor incorporates a new chemistry sensing platform relative to Simplera and represents the next step in our long-term sensor roadmap. In addition to improving the user experience, our next-generation extended wear sensor will leverage the same manufacturing platform and production lines we use today, creating a direct path to both scale and margin expansion as we continue to increase manufacturing output and improve yields.
A longer-wear sensor also allows us to spread sensor manufacturing costs over more days of use. We expect this to be accretive to margins while strengthening our competitive position in a market where sensor longevity remains a key purchasing criterion. Most importantly, this program demonstrates that innovation at MiniMed does not stop with the products scheduled to launch next year. We continue to invest aggressively in technologies that will define the next generation of diabetes management, including sensors, reinforcing our confidence in the durability of our product leadership, our long-term margin expansion opportunity, and our ability to sustain growth well beyond our current product cycle—Flex, Go, Fit, Vivera, and now our next-generation sensor. At MiniMed we are building for the next quarter, the next year, and the next decade. With that, I'll turn it to Chad to walk through the Q1 financials and our guidance.
Chad Spooner, Chief Financial Officer
Thanks, Hugh. Q1 revenue was $843 million, up 15.8% organic, driven by an acceleration in our US business, which grew 13.1%, and a strong 16.9% growth in international markets. As Kew noted, our Q1 growth benefited from an extra week. Given our 52-53 week fiscal calendar, we estimate the extra week added one to one and a half percentage points of growth to the fiscal 2027, which translates into 4 to 6 points to Q1, consistent with our previous estimate.
Importantly, even excluding the benefit of the extra week, we saw accelerating demand trends across the business. Organic growth excluding the extra week was in the low double digits compared with 8.7% growth in Q4. Growth was driven by both pumps and CGM, which grew in the low 20% and the high teens, respectively, reflecting the success of our recent product launches. Our continued sensor launches drove pump adoption globally, while the launch of MiniMed Flex in the US further accelerated new pumps sold growth.
This growth in pumps expands our installed base and creates future recurring revenue opportunities through CGM and consumables. Consumables grew low double digits in the quarter and together with CGM represented 82% of our revenue, continuing to provide a durable and growing recurring revenue stream. Q1 adjusted EBITDA was 83 million, resulting in an adjusted EBITDA margin of 9.9%. This included an approximate 230 basis points impact from two specific items, the acceleration of planned investment and a non-operational FX remeasurement charge.
First, we elected to pull forward approximately 8 million of investment in support of key growth initiatives, including the Flex launch as well as accelerating the FIT FDA submission to deliver this milestone ahead of plan. This reduced Q1 EBITDA margin by approximately 90 basis points but does not change our full year spending plans or EBITDA expectations as this was a timing shift of planned investment, not incremental spending. Second, we recorded a 12 million FX remeasurement charge for on-balance-sheet items, which reduced EBITDA margin by approximately 140 basis points.
This non-operational charge reflected changes in the value of foreign currency balances held on our balance sheet as exchange rates moved during the quarter. Excluding these two timing-related and non-operational items, adjusted EBITDA margin would have been 12.2% for the quarter, reflecting the underlying operational performance of the business. Our operational performance was affected by less favorable operating foreign exchange movements during the quarter, which had roughly similar impact to EBITDA margins as the balance sheet remeasurement.
During the quarter we implemented our foreign exchange hedging program, which we expect will reduce the earnings impact of future currency volatility, including balance sheet remeasurement effects. Importantly, our underlying business performance remains strong, gross margin is trending ahead of the assumptions embedded in our original full year outlook and we continue to deliver meaningful operating leverage across the business. Together with the timing-related nature of the accelerated investment and the implementation of our foreign exchange hedging program, these factors support our confidence in delivering our full year EBITDA margin guidance.
Walking through Q1 P&L, our adjusted gross margin was 55.9%, ahead of our expectations. As we discussed previously, Simplera currently carries a lower margin than our legacy and Instinct sensors, and that mix impact is reflected in our gross margin this year. However, Simplera yields are trending better than expected, resulting in less impact than we previously modeled. For the full year, adjusted SG&A was 36.1% of revenue, an improvement of 30 basis points versus Q1 fiscal 26, or 70 basis points excluding the pull forward of sales and marketing investments, as we continue to drive efficiencies and leverage.
Adjusted R&D was 13.6% of revenue. R&D spend was down 2 million versus the prior year as we continue to drive efficiencies in clinical, engineering, and operations. R&D drove 260 basis points of improvement versus Q1 fiscal 26, or 300 basis points excluding the pull forward of FIT investments. Turning to our key business metrics. Q1 new pumps sold, or NPS, was 34,000, up 7.7% year over year. On a sequential basis, NPS was down given normal Q4 to Q1 dynamics.
As Q mentioned, US NPS grew over 20% year over year, driven by the launch of Flex. NPS grew internationally as well as pump sales increased in Europe. On new sensor launches, Q1 CGM attachment rate was 69%, up 100 basis points from Q4 and an increase of 500 basis points year over year. As we launch our new products, we expect our CGM attachment rate to continue to trend upwards as nearly every new MiniMed pump user is using our CGM to get the benefit of our SmartGuard automation.
Let me next talk about our readiness as a standalone company, including the progress we're making on TSA exits. As we've previously mentioned, we started with approximately 160 TSAs with Medtronic. Our dedicated teams have already exited 17 TSAs and continue to work alongside Medtronic to make significant progress across the remaining TSA portfolio. We remain confident that we'll exit these TSAs within the timelines we've established, most of which will occur in calendar 2027.
Importantly, these efforts continue to enhance our standalone capabilities while reducing our reliance on transition services over time, and they are allowing us to build a more focused, efficient, and fit-for-purpose operating model for Minimed Group. Through this process, we continue to maintain a strong balance sheet and significant liquidity, ending the quarter with approximately 207 million of cash, no debt, and an undrawn 500 million revolver.
As we continue to build out our standalone capabilities, we're also gaining increased visibility into underlying cash generation profile of the business. Operating cash flow in the quarter was a use of cash of $49 million and capital expenditures were $41 million. As a result, free cash flow was a use of cash of $90 million. As we've discussed previously, our near-term cash flow profile reflects separation and standalone company build-out activities that are not indicative of the ongoing cash generation of the business.
To provide additional transparency, we've included a cash flow bridge in today's earnings presentation. Separation and stand-up related activities consumed 111 million of cash during the quarter. Excluding those items, we generated 21 million of positive free cash flow. We're providing this additional visibility to illustrate the underlying cash generation of the standalone business and the rapidly improving cash flow profile that we expect to emerge as temporary separation and build-out activities roll off.
As we continue to execute our separation, exit TSAs, and benefit from higher revenue, profitability, and operating leverage, we expect cash generation to improve meaningfully over time. Next, let's cover our outlook for the remainder of fiscal 2027. Given our strong start to the year and execution across the business, we're raising our fiscal 2027 organic revenue growth outlook to approximately 10.5% from our prior guidance of approximately 10%. This outlook continues to include the expected 1 to 1.5 percentage points benefit from the Q1 extra week.
Our increased revenue outlook is supported by accelerating growth in the US, strength in international markets, and the successful execution of our recent product launches. We continue to see strong demand for MiniMed Flex and increasing adoption of our CGM sensors globally. As we look to Q2, reported growth rates will naturally normalize from Q1 as the extra week benefit does not repeat. Importantly, based on the positive trends we continue to see in the business today, we would expect organic revenue growth in both the US and international markets to be more comparable to the underlying growth rates we delivered in Q1 excluding the extra week.
As I mentioned earlier, we are reaffirming our fiscal 2027 adjusted EBITDA margin guidance of approximately 16%. The underlying performance of the business remains strong. Gross margin is trending ahead of the assumptions embedded in our original outlook and is offsetting the foreign exchange impacts we experienced in Q1. Combined with the continued operating leverage across the business and our improved full year revenue growth outlook, these factors support our confidence in delivering our fiscal 2027 EBITDA margin guidance.
As we look at quarterly cadence, we continue to expect EBITDA margin expansion over the course of the year. We expect EBITDA margins to improve from Q1 levels as we move throughout fiscal 27, with a larger portion of the improvement occurring in the second half of the year, similar to what we saw last year. This reflects building revenue and revenue growth contributions from our recent product launches, sequential gross margin improvement, and increasing operating leverage across the business.
While we do not provide specific guidance in our key business metrics, we continue to expect growth in both new pumps sold and CGM attachment rates as we expand our installed base and continue rolling out our new products globally. For details on our guidance, see the guidance slide in our earnings presentation. Hugh, back to you.
Que Thanh Dallara — Chief Executive Officer
Thanks, Chad. We're encouraged by the momentum we're seeing across the business. We delivered another quarter of strong growth, accelerated adoption of our newest products, and advanced our pipeline across multiple fronts. Most importantly, we continue to do what we said across both our commercial portfolio and pipeline. We are delivering against the commitments we made to investors and are doing so ahead of schedule. Two weeks ago we announced that we began shipping Flex with the Instinct sensor in the US and today we shared several important updates with you.
We submitted the MiniMed Fit patch pump to the FDA ahead of our fall target and we expect a full US launch next summer. MiniMed Flex received CE Mark well ahead of our target of the end of the calendar year and we expect full commercial launch starting in November of this year. We finished enrollment in our Vivera US pivotal trial and expect US launch in the second half of calendar '27, and we received US IDE approval for our next-generation Extended Wear sensor with a pivotal starting this October.
Taken together, these milestones highlight both the pace of innovation at Minimed Group and our ability to consistently move the calendar to the left. More importantly, they reinforce the strategy we have been discussing for some time. We are building a complete platform for insulin-taking patients. Smart pen, durable pump, patch pump — one algorithm, one app, one ecosystem. What excites me most is that all these pieces are starting to come together.
Flex is expanding our reach into new patients and helping us engage with many new accounts. GO is opening the door to millions of people on multiple daily injections. Fit will bring our differentiated technology platform to the fastest-growing segment of the insulin delivery market, and Vivera has the potential to make automated insulin delivery simpler and more accessible. We believe the opportunity ahead remains significant. Automated insulin delivery remains greatly underpenetrated globally, Type 2 diabetes is still in the early stages of AID adoption, and millions of people continue to manage their diabetes with injections every day without the help of smart technology. We believe we're uniquely positioned to serve each of these populations with a broader portfolio, better outcomes, and a simpler user experience. As we do that, we believe we create long-term shareholder value. We are expanding our installed base, we are increasing recurring revenue streams, we are driving operating leverage, and we are investing behind the products and technologies that we believe will support sustainable growth for many years to come.
Before we open the line for questions, I'd like to thank our employees around the world. This quarter, our team launched products, advanced clinical programs, expanded manufacturing capacity, increased patient access, and continued to deliver for customers while operating as a newly standalone company. Their commitment, dedication, and passion for the people we serve continue to be one of Minimed Group's greatest strengths. We talked today about growth, we've talked about innovation, and we've talked about execution.
What gives me confidence is that all three are moving in the right direction at the same time. The opportunity remains large, the roadmap is strong, and our focus remains the same: do what we say, continue innovating, and continue creating long-term value for patients, providers, and shareholders. With that, let's go to Q&A, operator.
OPERATOR
Thank you. Ladies and gentlemen, to ask a question at this time you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the Q&A register. Now, first question in queue coming from the line of Travis Steed with Bank of America. Your line is now open.
Travis Steed, Analyst at Bank of America
Hey everybody, congrats on the updates on the pipeline. I guess with Fit, just the 20,000 at launch reiterated — if Fit gets approved early, could that 20,000 at launch still be the case? Are you going to be ready at launch no matter when the approval comes? And how does that scale over time? And for Vivera, what else is left between now and approval? Any other kind of key milestones that you need to complete, and when you have both of those products in the portfolio, how do you think about new patient starts accelerating in this business?
Que Thanh Dallara — Chief Executive Officer
Thanks, Travis. In terms of the Fit launch volume capacity, we're working on that. We're focused on getting ready for commercial launch. Obviously we run multiple scenarios. I think you've seen from our track record that we want to be prepared for, you know, if a happy event and things are early, that we're ready. So that's one of the scenarios that we run. And so now we're, you know, running water through the pipes, making sure that our yields and output are there.
And we're already planning for additional capacity beyond the 20,000. On Vivera, we've completed enrollment. The study is three months and we're very excited with this trial. We're excited to see the data. So once the last patient is completed, we lock down the database. We obviously run a lot of analytics and prepare for the submission, but those are the steps. And I think the combination of the patch pump with a fully closed-loop algorithm is really a killer app in the market and we think that the product would do extremely well.
It's not just the patch form factor, but the fact that patients really, without any input, can achieve above the ADA guidelines.
Travis Steed, Analyst at Bank of America
Great, that's helpful, Chad. Maybe a follow-up on margins. I don't know, any other color on the $8 million in investment this quarter on Fit and Flex acceleration that you'd provide. But more importantly, moving forward, calling for gross margin expansion, more leverage on the P&L later in the second half of this year — just give any other color to get building confidence in the margin expansion moving forward would be helpful.
Chad Spooner, Chief Financial Officer
Yeah, of course. Thanks, Travis. From an investment standpoint, we felt it was important for us to really support our innovation and the pull-forwards that we've seen with both Flex and Fit. So for example, for Fit, we used $4 million with outside vendors to help accelerate the submission, and they do things like actually testing the units and validation. So things that we can use third parties to accelerate our submissions for, we actually used those and brought those in a bit early to make sure that we hit that early submission date that we wanted to do.
And then from a Flex investment standpoint, we wanted to make sure since we pulled it forward, we went out as strong as possible and did things with sales and marketing, with ads and online where you can do investments and pull those in. We did another $4 million and things of that sort. So very targeted, very specific monies that we were going to spend in the next quarter or so that will not repeat. So they do not have an impact on the full-year EBITDA.
And then from a gross margin standpoint, yeah, we're very happy, excited by the progress we've seen on two fronts. First is on Simplera. You know, we've talked about how Simplera will have a negative impact on the margin for the current year, but we're seeing better yields than we had anticipated initially. We're doing a lot of work from a manufacturing side and that's resulting in better yields. So the second half of the year we'll have better gross margins, and also our warranty expense is much better than we expected as product reliability goes up.
So things that we have clear line of sight to — that gives us confidence in those numbers.
Travis Steed, Analyst at Bank of America
Great, thanks a lot. Congrats on a good quarter.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Thanks, Travis. We'll take the next question, please.
OPERATOR
Our next question comes from the line of Patrick Mood with UBS. Your line is now open.
Patrick Mood, Analyst at UBS
Beautiful. Thank you so much. I'll keep it just to one. Were you guys surprised by the incremental pump shipments following Instinct? I mean, you mentioned the UK and that side of things. And I guess the way I'm sort of thinking about it is looking forward and thinking about Flex, Vivera, and everything else like that — do you think the ability to take share of patients is perhaps faster than you might have thought otherwise? Or, put another way, people are just more willing to switch than maybe we had thought when you have a better solution in the market?
Que Thanh Dallara — Chief Executive Officer
Thanks, Patrick. I think, look, the market's expanding, and I think if we just look at the data that we're seeing in the US for Flex, we are seeing the majority of new customers coming from MDI. So that shows you that's an expanding market. What we've also seen is that our competitive conversions, both from tubed and tubeless systems, have doubled versus a year ago. So that's very encouraging for building the install base. And we expect a similar experience when Flex is launched in November in Europe.
Obviously new CGMs help that as well. That's been our Achilles' heel for a very long time. With the new form factors coming out there, that's also driving pump growth. When you look at new pumps sold in the US, as an example, up 20%. Another indicator I would say that's very consistent is the number of prescribers writing MiniMed Flex is up 24%. So when we look at all these indicators, they are moving the same direction. And so I think net-net, with all these new products coming out, we believe our ability to drive share gains as well as growth in an expanding market is enhanced.
Patrick Mood, Analyst at UBS
Love the color. Thanks.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Thank you, Patrick. We'll take the next question, please.
OPERATOR
Our next question comes from Lawrence Biggleson with Wells Fargo. Your line is now open.
Lawrence Biggleson, Analyst at Wells Fargo
Good morning. Thanks for taking the question. Congrats on the nice quarter here. Two for me — I'll ask up front. On MiniMed Fit, how are you thinking about deferrals ahead of the launch? We saw a little bit with Flex in second Q. Given that I think you said over 40% or 40% of new starts are Type 2, just give us a little more color on Type 2 attrition — how does it compare to Type 1? Why do you think your retention would be higher than one of your competitors?
Que Thanh Dallara — Chief Executive Officer
Thank you, Larry. On Fit, the waiting mode — we actually think that Fit will address the new segment of patients that want a patch form factor. I think if you look at our installed base, I'm sure some of them may want a patch, but the reality is if they wanted a patch, they would have gone to a patch by now. So we think that MDI patients and people who really like that form factor will be new to Minimed Group, and that's what Fit will address. On your question about Type 2 attrition, I would say a couple things.
One is we've seen our retention improve quite a bit for both Type 1 and Type 2 versus, say, a few years ago. And that's really driven by two things. One is obviously the new product innovations help that a lot — you need to have that — but that's a necessary but not sufficient condition. We have a very large clinical team, and for years we've run a program called Start Right. It's really helping customers onboard to therapy very quickly and ensuring that they're successful on therapy through sensor changes and troubleshooting with strategic touch points.
And then we have a Stay Right program that also, again from six months to four years, we keep in touch with them because this is a lifelong relationship and we want them to do well. And so the programs, in addition to the innovation, really helped us improve retention, and we're not seeing anything alarming at all from an attrition standpoint in Type 2. If anything, it's improved. And then I would also say that the product portfolio we have with the larger reservoir, the longer wear — it really has a better product–market fit with Type 2s, which is why we're excited with Fit.
We're excited with the outcomes, but also just I think we're the only patch pump coming to the market with a 300-unit reservoir.
Lawrence Biggleson, Analyst at Wells Fargo
Thank you.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Thanks, Larry. Next question, please.
OPERATOR
Our next question coming from the line of Marion Tipop with US Bancorp BTIG. Your line is open.
Marion Tipop, Analyst
Hi. Thank you for squeezing the OUS launch of Flex that we'll have coming up here in November. Just how should we think about that ramp relative to the US experience? And then again, I guess the question of potential deferrals as maybe patients look forward to that pump in the next fiscal quarter. Thanks for taking the question.
Que Thanh Dallara — Chief Executive Officer
Yeah, let me take the first part. It would be similar to the US. We have plenty of capacity. We typically roll out in waves of countries and we expect that we'll have a very similar ramp. Again, the launch will be with Simplera initially followed by Instinct. And then Chad, maybe you can comment on the waiting mode.
Chad Spooner, Chief Financial Officer
Yeah, so we've actually incorporated waiting mode into our forecast for OUS. One of the things that we do have with OUS having such a variety of different countries, we have very strong quarters starting in certain Western European countries given the adoption and integration of Instinct. So we have a lot of momentum right now in certain countries, which is really putting us off to a strong start to this quarter, which helps us offset some of the waiting mode that we may see, which we've incorporated in our forecast.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Okay, thanks, Marie. I think we're going to take two more questions here. So we'll go to the next question, please.
OPERATOR
Livia, next question coming from the lineup, Anthony Pacioni with Mizuho Group. Your line is now open.
Dimitri, Analyst at Mizuho (on behalf of Anthony Pacioni)
Hey guys, this is Dimitri on for Anthony. Once again, congrats on the quarter. It's good to see the performance and growth in the US, but other quick one on international. I know last quarter you gave some color on new pump starts. Quarter on quarter was high single digits. I don't know if you're providing any color for that quarter-on-quarter growth this quarter. And you know, I know at least one of your competitors are increasing their efforts in the international arena and I want to know if you're seeing any competitive pressures there with, you know, new pump starts attrition.
Que Thanh Dallara — Chief Executive Officer
Yeah, I think, look, we are very encouraged with new pump starts. I think in the commentary we mentioned that in France pumps were up 20%, in the UK up 50%. And these are contested markets. So CGM is having an impact and I think the pump is eagerly—the Flex pump is eagerly anticipated as well, being the first upgrade in six years. And so we expect it to do incredibly well even in contested markets.
Dimitri, Analyst at Mizuho (on behalf of Anthony Pacioni)
Okay, sounds great. Just a quick follow-up. I know you guys said you expect to ramp, have Mini Med Fit at full launch mid-’27. So is the timing for approval, you know, what are you guys expecting, like a three-month or a six-month approval, and then kind of just to get an idea of the pace of the ramp.
Que Thanh Dallara — Chief Executive Officer
We can't really predict what the agency's process will be. We're always hopeful for, you know, early approval of course, but that's not something we can predict. But, you know, as I mentioned, we always plan for different scenarios and we want to be ready. As soon as approval comes, we'll be ready to launch commercially.
Dimitri, Analyst at Mizuho (on behalf of Anthony Pacioni)
Okay, great. Thanks.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Thanks, Dmitry. Olivia, we'll take our last question, please.
OPERATOR
Last question will come from the lineup, Joanne Wych with Citi. Your line is open.
Joanne Wych, Analyst
Good morning. Thank you for taking the question and nice quarter. Based on your commentary for summer of ’27 FDA approval, it sounds like your milestone payment will be more of a first quarter fiscal year ’28 than a second quarter fiscal year ’28 event. Can you just confirm if I'm thinking about that correctly? And then just a quick follow-up, which is if your physicians are talking to patients and they have to talk about new Flex option and Fit coming, how do you guide or suspect that they are having those conversations?
Thank you.
Chad Spooner, Chief Financial Officer
First, regarding the Fit charge, yes, we do not have it in our fiscal year ’27 because, as Q said, we can't predict when the agency will approve. But obviously once they do approve, just like with Flex, you know, we'll announce that and then we will—once we commercialize—we'll have a $162 million charge for FIT, but that is not in our forecast for this year.
Que Thanh Dallara — Chief Executive Officer
Joanne, I think, look, I've done a lot of visits in the field. I would say there's just renewed interest starting with CGM. We saw just excitement around that, and with Flex coming out again, an uptick in interest. Then I suspect that there's going to be a large addressable audience from a patch pump standpoint that love our algorithm. They want to be part of our ecosystem, but they want the patch form factor, and we'll have that starting with Smart Guard, but with a quick follow with Vivera.
So we're really excited with really the rolling thunder that's coming out and the full stack experience they're going to have. The other thing I'll mention is the apps that you get from Minimed Group go from Flex—very similar look and feel—and so that really helps users when they onboard onto our system to stay within our ecosystem.
Ryan Weisspenning, Vice President and Head of Minimed Group Investor Relations
Okay, thank you, Joanne. And for those analysts we didn't get to today, we're happy to follow up with you after the call. I'd also like to thank everyone for joining us today and for your continued interest in Minimed Group. We appreciate the engagement and thoughtful dialogue as we continue to execute against our roadmap. We look forward to updating you on our progress and sharing more color with you on our Q2 earnings call later this fall. So with that, thank you for your time today and have a great rest of your day.
OPERATOR
This concludes today's conference call. Thank you for your participation. You may now disconnect.
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