Company Reports

With little direct competition in patch pumps, Insulet has been able to convert more users, especially patients on multiple daily injections, to its innovative, tubeless insulin pump. The firm is on the path to meaningful profitability gains.

Narrow-moat Insulet saw another strong quarter that wrapped up an entire year of impressive growth on the top and bottom lines. Though we haven’t shifted our assumptions, we might modestly raise our fair value estimate to account for cash flows realized since our last update. Our projections for 2024 remain on the high end of management’s outlook, but we see little to alter our thinking, especially considering the introductions lined up for the year, including integration with Dexcom’s G7 continuous glucose monitor, Omnipod integration with Apple iPhones, and further investment in the salesforce to leverage Omnipod’s long-standing strength in pediatric care.

Insulet generated stellar third-quarter results that slightly exceeded our full-year expectations on the top and bottom lines. However, our fair value estimate is unchanged because our modest increases to revenue and gross margin assumptions were offset by the revised share count. Shares have become significantly undervalued in the last few months, as investors speculate about how widespread use of GLP-1s might hurt Insulet’s pump business. Despite that uncertainty, we were struck that management raised its outlook for the third time this year, especially considering the third and fourth quarters of 2022 had seen significant acceleration in sales growth, thanks to the rollout of Omnipod 5. We expect Insulet can maintain this strength in 2024 related to several new drivers. This quarter demonstrated the intangible assets that underpin Insulet’s narrow economic moat, as well as the top-flight commercial execution that has allowed the firm to shine.

Insulet posted solid second-quarter results that were largely consistent with our expectations, and our small adjustments to our underlying assumptions weren’t enough to move the needle on valuation. We’re holding steady on our fair value estimate. Quarterly top-line growth of 32% in constant currency was driven by whopping 41% growth in U.S. Omnipod sales. As we’ve discussed in previous quarters, this stellar growth reflects the enthusiastic adoption of OmniPod 5, Insulet’s first pump to feature automated insulin delivery, or AID. Though Insulet was the last major pump maker to offer AID, it remains the first and only tubeless, patch pump to offer AID. We continue to think the tubeless, waterproof Omnipod offers a substantially different user experience that is friendlier than that of the traditional tubed pumps. This latest commercial success of Omnipod underscores our confidence in Insulet’s narrow economic moat.

Insulet delivered outstanding first-quarter performance, fueled by the rollout of the new Omnipod 5, which has been on fire since regulatory approval was received last fall. Though management raised its outlook, our projections for the full year remain bounded by the new range, and we're leaving our fair value estimate of $234 unchanged. Quarterly revenue increased 23% in constant currency, led by U.S. Omnipod growth of 49% year over year. While rivals Medtronic and Tandem had both introduced their hybrid closed-loop technologies in 2016 and 2019, respectively, Insulet's Omnipod 5 is the first tubeless, patch pump to offer this more-advanced functionality that significantly simplifies life for Type 1 diabetes patients. This latest Omnipod pump leverages the same intangible assets—proprietary product design that relies on memory shape alloy—as earlier generations of its pod pumps but is integrated with Dexcom's G6 continuous glucose monitor. We view Omnipod 5 as another bulwark to reinforce Insulet's narrow economic moat.

With little direct competition in patch pumps, Insulet has been able to convert more users to its innovative, tubeless insulin pump. We expect meaningful profitability gains over the next five years.

Following narrow-moat Insulet's strong finish to 2022, we've modestly raised our fair value estimate to $234 per share, which reflects our expectation that this recent strength should be supported by the on-going the rollout of Omnipod 5 in the United States and impending launches in the United Kingdom and Germany.

Insulet finished the full year with stellar results in the fourth quarter. We plan to modestly raise our fair value estimate to reflect that strength, which we anticipate will continue into 2023 as the rollout of Omnipod 5 continues. Fourth-quarter U.S. Omnipod growth of 45% drove full-year sales growth to 22% in constant currency, which substantially exceeded our estimate. On the other hand, gross margin of 62% in 2022 fell far short of the 68% we’d expected. The lower profitability in the quarter partially offset the strong top-line growth. Importantly, the robust uptake of Omnipod 5 in the United States and anticipated gross margin improvement will likely lead us to bake in more optimistic projections for 2023. Insulet’s ability to deliver a tubeless pump that offers hybrid closed-loop functionality and integration with Dexcom’s continuous glucose monitor is a substantial achievement and underscores our confidence in the firm’s narrow economic moat.

Insulet posted stellar third-quarter results that exceeded our expectations, and we’re raising our fair value estimate to $216 per share, up from $190, as we incorporated more optimistic estimates for Omnipod 5 particularly in 2023 and 2024. The firm continues to invest in its commercial organization to support the rollout of Omnipod 5, which we view as worthy of further investment because we think this new tubeless pump and its hybrid closed loop function offers a compelling user experience that the competitive traditional pumps do not. Insulet’s ability to consistently engineer innovation underscores the intangible assets that serve as the foundation for the firm’s narrow economic moat.

With little direct competition in patch pumps, Insulet has been able to convert more users to its innovative, tubeless insulin pump. We expect meaningful profitability gains over the next five years.

Insulet's second-quarter performance demonstrated strength on the top line in the United States as the new Omnipod 5 enters full commercial launch, but a significant jump in operational expense startled us. Overall, the two factors were largely a wash, and we’re leaving our fair value estimate unchanged. We remain confident in Insulet’s narrow economic moat, which is supported by intangible assets as we see this firm accelerate its innovation. Though Insulet was not the first to introduce the hybrid closed loop, it did manage to develop and launch its new pump with comparable functionality within a reasonable period of time. The firm was also the recipient of a lucky break when Medtronic ran into regulatory issues with its 670G pump, which has delayed U.S. approval of its next-generation 780G.

Consistent with its well-established pattern, Insulet delivered another quarter highlighted by robust growth that puts the firm on track to meet our full-year expectations, and we're leaving our fair value estimate unchanged. First-quarter revenue increased 19% in constant currency led by ongoing strength in U.S. growth of Omnipod, which clocked in at 22% year over year. In keeping with profitability gains seen in 2021, Insulet pushed first-quarter gross margin up by another 170 basis points sequentially, though we expect inflationary pressures to keep a lid on operating margin for the full year. We remain confident in Insulet's narrow economic moat, and think the firm is in a favorable position to benefit from both the meaningful innovation it has generated, as well as the truly impressive commercial infrastructure it has built.

Insulet racked up another quarter of strong performance and finished the full year very close to our estimates; we’re leaving our fair value estimate intact. Fourth-quarter revenue increased 26% in constant currency thanks to ongoing strength in U.S. sales of Omnipod, which more than offset softer 6% growth outside the U.S. Moreover, the firm continues to make progress on the profitability front with gross margin reaching 68.5% for the full year, up 400 basis points over 2020. We remain confident in Insulet’s narrow economic moat and believe the firm has again demonstrated its formidable ability to forge meaningful innovation, which supports its positive moat trend.

With little direct competition in patch pumps, Insulet has been able to convert more users to its innovative, tubeless insulin pump. We expect meaningful profitability gains over the next five years.

Insulet’s strong third-quarter performance appeared to emerge largely unscathed by the ebbs and flows of the pandemic, and we’re leaving our fair value estimate unchanged. The firm remains on track to reach our full-year revenue projections. On the expense side, manufacturing costs closely matched our estimates, which fits with Insulet’s general pattern of holding those costs relatively constant throughout 2020 and then resumed incremental improvements in 2021. On the other hand, SG&A expenses moved in the opposite direction, with slowing growth through most of 2020 and then a sharp ramp up in 2021. We think most of the rise reflects investment in the commercial organization in order to support the U.S. launch of Omnipod 5, as regulatory approval is expected before the end of the year. Insulet is on the cusp of launching the first hybrid closed loop patch pump, and this underscores our confidence in the firm’s narrow economic moat. With competitive pumps and continuous glucose monitors moving toward integration, Insulet won’t be left behind.

Insulet posted second-quarter results with top-line and adjusted earnings growth generally in line with our expectations, although news that the anticipated launch of Omnipod is likely to be delayed by at least a quarter until late this year sent shares down. We’re holding steady on our fair value estimate, as this type of timing issue generally doesn’t have an impact on the cash flows we’ve projected over many years. We continue to view shares as expensive. Over the last few years, Insulet has made significant progress in pursuing regulatory clearance of its automatic insulin delivery system, integrating pump control with smartphones, gathering clinical data, and shifting access over to the pharmacy channel. All of these factors have reinforced our favorable view of Insulet’s competitive strengths and its narrow economic moat. We anticipate commercialization of Omnipod 5 in 2022 should accelerate growth at Insulet, despite the near-term regulatory delay.

Insulet’s strong first-quarter results were generally consistent with our top-line and bottom-line expectations, but earnings per share of $0.00 fell short of FactSet consensus of $0.06. Our longer-term assumptions for growth and gains in profitability that drive our free cash flow estimates haven’t changed, and we’re holding steady on our fair value estimate. Moreover, the firm is preparing for a major product launch in Omnipod 5, which will require increases in working capital and investment in the commercial organization which can throw profitability out of whack in the near term for Insulet, which only recently crossed over into the black. Omnipod 5, with its hybrid closed loop function and integration with the Dexcom continuous glucose monitor, is a major step forward for Insulet and demonstrates that this firm won’t be left behind in the dust as other key competitors push further into the realm of automated insulin delivery and control and monitoring through smart phones. This reinforces our view of Insulet’s narrow economic moat.

With little direct competition in patch pumps, Insulet has been able to convert more users to its innovative, tubeless insulin pump. We expect meaningful profitability gains over the next five years.

Insulet managed to get through 2020 with little impact from the pandemic, and results from the fourth quarter were no exception. With full-year revenue growth and adjusted EBITDA running close to our expectations, we’re leaving our fair value estimate unchanged. Insulet delivered U.S. Omnipod growth that was consistent with our estimates, and outperformance of international Omnipod revenue growth was offset by weaker drug delivery growth. With Insulet poised to move into a soft launch of its Omnipod 5 in 2021, we’re holding steady on our projection for $1.09 billion in consolidated revenue this year, which puts us on the high end of management’s outlook for 16%-19% top-line growth. We remain confident in the firm’s narrow economic moat and see little in the way of competition that would hinder Insulet’s efforts to increase its user base.

In a surprise twist to the election season, the Democrats are very close to winning the remaining two U.S. Senate seats in the Georgia runoffs. If the elections go to the Democrats, we suspect Joe Biden's administration will seek to implement further healthcare reforms. However, with such a slim majority in the Senate, compromises on ideals espoused by the Biden campaign may be required to get healthcare legislation passed with support from moderate Democrats. With significant compromises possible in the next several months as the legislation is crafted, we will keep steady on our moat and valuation views until more clarity emerges on the potential changes to the healthcare industry.