A Ray of Sunshine Among The Clouds

A Ray of Sunshine Among The Clouds

While the city of Chicago continues to party, the sun has also shined on the folks at Insulet (NASDAQ) who reported third quarter results this afternoon. Unlike Tandem (NASDAQ: TNDM) who reported earlier this week, Insulet is RAISING full year revenue guidance. Per a company issued press release;

“Third quarter revenue of $94.9 million exceeds the Company’s guidance of $88 to $91 million and represents year-over-year growth of 33%.

For the year ending December 31, 2016, the Company is raising its revenue guidance to a range of $362 to $365 million, from $345 to $355 million, compared to 2015 revenue from continuing operations of $263.9 million1. This represents year-over-year revenue growth of approximately 38% at the mid-point of the range.”

This should come as welcome news to Insulet shareholders who have seen shares fall over 17% since Monday. Tandem shares over that time frame are down a whopping 67.62%.

As expected the upcoming launch of the 670G was a hot topic although the company did their best to minimize it. First noting their target market is patients currently on multiple daily injection (MDI) therapy rather converting patients using a competing system. They also took a subtle swipe at the 670G stating the system requires a heavy work load for only an incremental improvement in outcomes. A pretty bold statement so take that Medtronic (NYSE: MDT).

The pipeline continues to progress as well something we’ll learn more about when the company holds their investor day although they did not mention when it will be. It was also nice to see continued improvement in gross margins.

The biggest question is will the 670G have a material impact going forward. The initial answer seems to be no given the company did raise guidance. However, the real impact of the 670G truly won’t be known until the first and second quarters of 2017. We do agree that given their focus on MDI patients of all the pump companies Insulet likely won’t be hit as hard as Tandem or Animas.

Frankly it was refreshing to hear the company be so committed to MDI patients rather than conversions. Far smarter and much more economic not to fight with the reigning heavyweight champion. The OmniPod may not be the most way cool whiz bang pump but it is still the only commercially available tubeless/wireless pump on the market. Simply put better to be a big fish in a small pond than to get eaten playing with sharks in the ocean.

Here however is the problem, yes the MDI market is very large but the overall pump market is growing in the low single digits. Insulet’s turnaround can be attributed to more boots on the ground and a focused leadership team. As we noted before the company would have had real problems if the sales force expansion didn’t yield increase sales. Now that the expansion is over and the force is fully functional further growth will only come from going after conversions. They can duck the champ for only so long eventually they must enter the ring.

Still it is very nice to see how far Insulet has come. As we have said many times anyone can make an insulin pump but it takes talent to run an insulin pump company. While he got off to a rocky start CEO Pat Sullivan is showing that he has talent. He made some tough but necessary choices, he took some risks that are now paying off and he did not waver from his plan. So, kudos to Pat.