Insulet Earnings: Rocket-Fueled Omnipod 5 Continues to Exert Competitive Pressure

Insulet PODD 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.

We recognize that the second half of 2023 will offer more challenging comparisons, as Insulet approaches the anniversary of Omnipod 5′s launch in September. Nonetheless, we still expect double-digit growth can be maintained into 2024, especially as the pump makes inroads outside the U.S. and into the type 2 diabetes population. We think the user-friendliness of Omnipod 5 makes it highly attractive to first-time pump users. Management indicated that 20% of new patient starts in the quarter were type 2 patients.

The Omnipod 5 continues to put competitive pressure on Tandem, which saw its U.S. revenue fall by 2% in second quarter. With Medtronic on the cusp of launching its next-gen 780g pump this fall, we think there could be more pain coming to Tandem. Tandem’s new Mobi pump (set for full commercial launch in early 2024) might be its greatest hope. However, Mobi remains a tubed pump, and we think Omnipod 5 still offers significant differentiation.