EUR 850.00 For Business Accounts Only

Morningstar | We Like Insulet's Recent Strategic Shifts; No Change to Our FVE

Insulet’s stellar first-quarter results put the firm on track to meet our projections for the full year, and we’re leaving our fair value estimate unchanged for now. In a fast start to the year, both domestic and international OmniPod sales increased in the double-digit range—23% and 48%, respectively. We expect European growth to moderate in the second half of the year, once the firm gets beyond the anniversary of establishing its direct distribution in that geography. After crossing into profitability last year, Insulet delivered another quarter of positive earnings. We still think Insulet’s moat trend is positive, as it continues to convert more diabetic patients using multiple daily injections onto pump therapy and supports ongoing development of next-generation insulin pump technology.

Insulet has made progress in its effort to establish access through the pharmacy channel, in addition to the durable medical equipment distributors. We see this as a win-win scenario for Insulet and patients. For Insulet, the sales through the pharmacy channel offer higher margins over the longer term. For patients, it becomes easier to buy the OmniPod. Separately, Insulet has introduced its pay-as-you-go program, which should amplify effects of the pharmacy channel.

In contrast to the tubed pumps offered by Medtronic and Tandem, Insulet does not require any large upfront payment for hardware. The one-time cost of the hand-held controller for OmniPod has been spread across the ongoing stream of OmniPods purchased. This is significant because payers typically only reimburse for a tubed pump every four years. Insulet does not require that kind of initial investment, which reduces the risk payers face when patients may not comply with pump therapy or abandon it altogether after a year or two. We anticipate more payers will be interested in covering OmniPod under this pay-as-you-go system.

Finally, Insulet is steadily increasing access for its OmniPod DASH system that offers mobile access to personal blood glucose data via smartphone. Of the 130 million insured lives that enjoy reimbursement for OmniPod, roughly 45 million of them also have access to DASH, by our estimates. While there’s room to improve that coverage, we think that number is fairly respectable, considering DASH only recently entered full commercial launch.