Insulet Earnings: Ongoing Strength in U.S. Omnipod 5 Sales Powers Stellar Third-Quarter Results

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

Until Insulet’s Omnipod came on the market at the end of 2005, all insulin pumps consisted of a controller and insulin reservoir attached to the injection site by a long flexible tube. The Omnipod design eliminates the tubing, consolidating the insulin reservoir and a self-inserting cannula into a single pod, less than the size of a deck of cards, which is controlled by a wireless remote. The system is inconspicuous and easy to use and has so far been very successful among patients new to insulin pumps. These patients represent lots of growth potential, as an estimated 60% of Americans with Type 1 diabetes still take daily insulin injections. The user-friendly Omnipod has been particularly successful among children and teens.

After a major management changeover in 2014-15, Insulet has improved its manufacturing and commercialization strategies and has made progress in gaining economies of scale to bring down costs, while enlarging its user base. We like Insulet’s decisions to shift to direct distribution in Europe and expand capacity by investing in a highly automated manufacturing facility in the United States. Both moves have shown up in margin expansion. Insulet is currently enjoying adoption of its Omnipod 5 pump, which is controlled by smartphone. The Omnipod 5 also represents Insulet’s entrance into hybrid closed-loop technology that makes life easier by automating insulin delivery through parts of the day. This new product brings Insulet up to par with Medtronic and Tandem’s current pumps, which already offer the hybrid closed-loop technology. But, the unique tubeless design of Omnipod offers a qualitatively different patient experience.

Finally, a larger rival like Medtronic or Abbott might be interested in acquiring Insulet. Insulet’s differentiated design has spurred above-market growth, which could be attractive to potential buyers looking to round out their diabetes portfolios.