A Prudent Approach

Take a close look at this from the Insulet earnings announcement;

“It is difficult to accurately predict the progression of COVID-19 and the extent of the resulting disruption. However, given the benefit of Insulet’s recurring revenue model, results through April, and available macro information, the Company is issuing guidance. The Company assumed that the most significant impact on new global OmniPod starts is in the second quarter. The Company has also assumed the pandemic and recessionary headwinds will persist throughout 2020, with an estimated gradual recovery starting in the third quarter as economies begin to open and customers are able to resume more normal physician meetings. As a result of the durability of its annuity business model, the Company expects strong revenue growth to continue in the second quarter and be most impacted in the second half of 2020.”

Listening to the prepared remarks and then Q&A management presented perhaps the most realistic and honest outlook we have heard so far. Management could have taken the easy way out and suspended guidance as others have done. Yet they chose to present a detailed view of how they see COVID playing out. They left no stone unturned not only explaining how COVID may impact results but providing additional color on how it will impact new product launches plus entering new markets. Before we go any further management should be commended for this honest and realistic assessment – Kudos!

The good news is first quarter results came in slightly ahead of expectations it’s going forward that things get a little murky. There is no question that the move into the pharmacy channel and pay as you model is paying big dividends today. Unlike other insulin pump systems the OmniPod does not require a huge upfront investment nor does it require supplies being shipped to the patient on a regular basis. Even better unlike these traditional insulin pumps the OmniPod is perhaps the simplest system to learn.

As the company noted during their call, they have been able to convert to virtual patient training rather easily. With no pieces to put together, no tubing and a user friendly PDM, the device which controls the pod, the OmniPod is ideal for virtual training. Just as others are adapting to the new world of social distancing this virtualization is going beyond patient for Insulet and extending to virtual sales calls.

The really good news although not mentioned today but well known is virtual patient training and virtual sales calls are also much cheaper than face to face visits. As we have stated many times as bad as things seem today some good will come out of the COVID crisis. The good we see is this virtualization of patient training and sales calls. The smarter companies like Insulet understand this and are already planning ahead to maximize this approach.

The company also noted some delays with the Horizon and other R&D projects which given COVID isn’t surprising. However the company is continuing to make capital investments in these projects understanding that while delayed this does not mean innovation comes to a halt.

All in all Insulet presented perhaps the most prudent assessment and strategy for what is a very uncertain environment. Frankly we aren’t sure the Street can handle all this honesty as they so rarely here it. Yet to us it was refreshing and shows the confidence management has in their approach.

If we have said it once we’ve said it a thousand times, but it does bear repeating here as anyone can make an insulin delivery system, but it takes real talent to run an insulin delivery business and Insulet is demonstrating the outstanding talent they have. Great job today.