Insulet Corporation – December 08, 2022

Diabetes is a chronic, life-threatening disease for which there is no known cure. It is caused by the body’s inability to produce or effectively utilize the hormone insulin, which prevents the body from adequately regulating blood glucose levels. For some diabetes patients, an intensive and constant regimen of multiple injections every single day is required to manage this life-changing disease.

However, for over two decades, Insulet Corporation has been on a mission to improve the lives of people with diabetes with its continuous insulin delivery system. Insulet develops, manufactures, and sells the OmniPod System, a self-adhesive disposable device that is worn on the body for up to three days at a time, along with its wireless companion, a handheld personal diabetes manager.

Designed to fit within the normal daily routines of users, the OmniPod System provides for virtually pain-free automated cannula insertion, and eliminates the need for multiple daily injection therapy, or the use of pump and tubing. Furthermore, because it is waterproof up to 25 feet, there is no need to remove it when showering, swimming, or performing many other activities.

In addition to the diabetes market space, Insulet has partnered with pharmaceutical and biotechnology companies to tailor OmniPod technology for the delivery of subcutaneous drugs across other therapeutic areas. In particular, the company generates significant revenue from its Neulasta Onpro kit, a delivery system to help reduce the risk of infection after intense chemotherapy.

The OmniPod System’s overall ease of use, flexibility, and substantially lower training burden has made it a very attractive option for people with insulin-dependent diabetes since 2005. Now, Insulet’s products are available across the U.S., along with sixteen countries across the globe as the company continues to focus on international expansion, whilst further developing its OmniPod range.

The idea for Insulet’s main product was conceived on a plane ride. John Brooks, a now diabetes industry legend, had a background in the medical device field in the mid-1990s and whose son was diagnosed with diabetes at the age of three, was seated next to Duane Mason, with whom he had worked at Pfizer. While there were insulin pumps at the time, they were expensive, so Brooks saw an opportunity for a cheaper one that allowed kids who use them to move more freely.

As a result, Insulet was formed in 2000, and by 2003, the company received its first 501k clearance from the U.S. FDA for the OmniPod System. A commercial version was cleared two years later, and sales quickly spread across the U.S. and into international markets following further regulatory approvals. While the advent of smartphones has resulted in complementary software functionality to further enhance the OmniPod system.

Newly appointed president and chief executive officer, Dr. Jim Hollingshead, took on the position in June, having previously served on the board of directors since 2019. A pioneer in cloud-connected medical devices focused on the treatment of sleep-related breathing disorders, Hollingshead was the president of the Sleep and Respiratory Care business at ResMed, leading its transformation from a traditional medical hardware technology business to a SaaS-based digital solutions and services business. Under his leadership, ResMed’s Sleep business dramatically expanded the scope and adoption of digital solutions in the treatment of sleep apnea around the globe, while pioneering the use of real-world data and advanced analytics for the improvement of patient care.

Also joining Insulet in 2019, current executive vice president and chief operating officer, Charles Alpuche, has over three decades overseeing domestic and international plant operations with PepsiCo.

Diabetes is often frustrating and difficult for people to manage. Blood glucose levels can be affected by a myriad of factors including meals, exercise, stress, and illnesses, among many other things that also impact insulin absorption. For those with insulin-dependent diabetes, constant monitoring and many corrections, which include doses of additional insulin or carbohydrates, are needed throughout the day to maintain blood glucose levels within normal ranges and prevent long-term health complications. Achieving this with the current standard of care which includes multiple daily injections of insulin can be very difficult. From the time spent managing fluctuations in blood glucose levels to the fear associated with complications like hypoglycemia can be incredibly stressful for individuals with diabetes and their families.

Insulet’s OmniPod System is a continuous insulin delivery system that provides all the benefits of pump therapy, eliminating the need for individual injections, yet with unprecedented freedom, comfort, convenience, and ease. Users can adjust their insulin delivery with the press of a button and the system can even adapt to snacks or unexpected changes in daily routine.

The product features two discreet and easy-to-use devices that remove the need for the external tubing required with conventional pumps. The small, lightweight, self-adhesive disposable tubeless device that the user fills with insulin can be worn directly on the body in multiple locations, including the abdomen, hip, back of the upper arm, upper thigh, or lower back. The Pod delivers precise, personalized doses of insulin into the body through a small flexible tube, whilst the Personal Diabetes Manager (PDM), a wireless, handheld device, programs the Pod with the user’s personalized insulin-delivery instructions, and wirelessly monitors the Pod’s operation.

In 2019, OmniPod DASH was fully launched in the U.S., along with international markets in the years after. DASH features a secure Bluetooth-enabled Pod and PDM with a color touchscreen user interface supported by smartphone connectivity, nightly automatic data uploads providing users and their clinicians with cloud access to data, and enhancements for pushing software updates wirelessly to users.

Building on the DASH platform, Insulet’s latest addition, OmniPod 5, received U.S. FDA clearance in January, bringing with it the ability to integrate the Pod with a third-party continuous glucose monitor. This integration makes it possible to predict glucose levels into the future and automatically adjusts insulin dosing intended to reduce the occurrence of blood glucose highs and lows.

Several publications over the past decade have found that compared to multiple daily injection (MDI) therapy, the use of the OmniPod System by individuals with both type 1 and type 2 diabetes across all age groups is associated with good glycemic control and reduced frequency and severity of hypoglycemic episodes. This data has provided healthcare providers with critical support for the use of the platform in diabetes treatment.

Consequently, Insulet’s research and development efforts are primarily focused on making improvements to the system, including adding features and functionality that will deliver clinical outcomes, economic value, convenience, and simplicity to users. Whilst product roll-out efforts continue to focus on expanding clearance across indications and age groups, as well as international jurisdictions.

The full market release of OmniPod 5 occurred in August making the product available through retail pharmacies and also expanded for use by individuals aged two to five. It is expected that OmniPod 5 will hit the first international markets in 2023 and continue to roll out more broadly in 2024. The company recently received CE Mark approval under the European Medical Device Regulation, and it is now further building international teams and infrastructure to advance these regulatory, reimbursement, and market development efforts. Insulet recently opened an office in Dubai to serve as a regional infrastructure in the Middle East, whilst a new manufacturing plant in Malaysia, and consolidation of production operations in China are strengthening the company’s global manufacturing capabilities, and aiming to drive higher gross margins over time.

In addition to the company’s focus on OmniPod 5, Insulet is also working on several innovation programs. These are designed to drive the simplicity of user interaction with its systems, improve outcomes through algorithm advancements, generate insights and value from a growing dataset and analytics, along with expanding the possibilities of user choice of sensor and smartphone integrations.

Recognizing a growing value in leveraging data analytics, Insulet has also partnered with Glooko Inc to connect OmniPod user data with Glooko’s comprehensive diabetes data management system. Glooko provides a cloud-based application for clinicians and users accessible through a kiosk, home computer, or a mobile application that provides users and their healthcare providers access to insulin delivery trends, blood glucose levels, and other integrated data.

Over the last decade, Insulet has maintained an impressive record of revenue growth almost every year. That record looks set to continue as the company posted another positive September quarter, delivering revenue of $340.8 million, up almost 24%, and taking sales for the last twelve months to $1.24 billion. The growth was primarily due to higher volumes driven by a growing customer base, coupled with a favorable sale mix through the pharmacy channel, where Pods have a higher average selling price. This increase was also driven by conversions to OmniPod 5 as users generally fill both their starter kits and their first month of refills simultaneously.

Looking ahead to the full year 2022, Insulet expects strong U.S. OmniPod revenue to continue driven by new customer starts and conversions to OmniPod 5. While International revenue should remain relatively level, as currency pressures offset continued volume growth.

Consensus estimates have the company closing out the full year with expected revenue of $1.27 billion representing year-over-year growth of over 15%, while 2023 is forecasted to add a further 15% to $1.46 billion. Full-year earnings per share estimates for the year are forecasted to grow modestly by almost 10% to $0.82 per share, up from $0.75 in 2021. However, as the traction of OmniPod 5 accelerates, estimates have EPS growth at 34% and 57% year-on-year for 2023 and 2024, respectively.

Given MDI therapy is currently the most prevalent method of insulin delivery, Insulet primarily competes with companies that provide products and supplies in this space. It also competes with companies in the insulin pump market, which include Medtronic MiniMed and Tandem Diabetes Care Inc. Medtronic historically has held the majority share of the tubed insulin pump market. However, the competitive landscape in the industry continues to undergo significant change. In addition to the established insulin pump competitors, companies are continuously working to develop and market new insulin pumps and smart pens.

Insulet’s non-insulin drug delivery product line also competes with drug delivery device companies such as West Pharmaceutical Services.

As with any medical device company, Insulet is subject to rigorous regulatory compliance. Unless an exemption applies, each medical device the company seeks to commercially distribute in the U.S. will require either prior 510k clearance or pre-market approval from the FDA. Consequently, Insulet may be required to undertake costly and time-intensive clinical trials or processes for future modifications to its products.

Building on a consistent run of solid growth, Insulet continues to offer a compelling story for ongoing success via international expansion, coupled with a new iteration of its already highly differentiated product.