Insulet and Dexcom Report

Insulet and Dexcom Report

It’s somewhat ironic that two companies following very similar paths both announced fourth quarter and full year 2008 results within minutes of each other. While there certainly will be bumps along the path both Insulet (NASDAQ:PODD) and Dexcom (NASDAQ:DXCM) will ultimately land in the hands of a larger more well established company, with the ultimate irony being that these two currently independent companies are both acquired by the same company.

The companies also share other commonalities, both are leaders in their respective fields, both have undergone growing pains and both are blazing a trail. The major difference between the two is that Dexcom has solidified their balance sheet while Insulet continues to look for methods to raise more capital.

Looking at Insulet specifically the company made solid progress in 2008 as there are now over 10,000 patients using the OmniPod system. Even with this progress the question for Insulet really hasn’t changed much since they first came to market; can they manufacturer pods cheap enough and maintain profitability over the long term? Based on the comments made this evening by the company and the vigorous line of questioning following the company prepared remarks, the analyst community is beginning to worry about the long viability of the company given their current capital situation.

Unlike Dexcom who strengthened their balance sheet with several joint development projects and a successful secondary offering, Insulet is still looking for additional sources of capital. Given the dismal state of the economy and the continued decline in the markets, Dexcom is very fortunate to have already completed their secondary offering. While it possible Insulet could proceed down this path Diabetic Investor doubts this is a viable option in the near term.

Insulet also spooked some of the analysts when they stated the obvious noting that the current economic conditions could adversely impact future sales. The company also noted that they are experiencing payment issues as some major insurers are experiencing financial difficulty. Given that we are in the worst economic environment since the great depression and 10% unemployment is a distinct possibility, these statements by Insulet should surprise no one and actually should be commended for simply telling the truth.

While the short term may be difficult, Diabetic Investor sees no reason to change our long-term outlook for either Insulet or Dexcom. Dexcom is clearly blossoming under Terry Gregg’s leadership as well a favorable trend in reimbursement and CGM acceptance. The OmniPod remains the only FDA approved wireless insulin pump and the company has clearly established themselves in the insulin pump market. Diabetic Investor believes the company understands what’s needed in the short term and will make the necessary adjustments.

At the end of the day the end game is still the same for both Dexcom and Insulet remains the same. The question isn’t will either company be acquired rather when, for how much and by whom.  As we indicated earlier it wouldn’t surprise Diabetic Investor one bite if the same company eventually owns both Insulet and Dexcom.