It seems to happen to almost every promising new technology. After getting off to a strong start the company stumbles as the they struggle with growing pains. This is the situation facing Insulet (NASDAQ:PODD) who reported second quarter results this evening. On the positive side of the ledger the company said they added nearly 1650 new patients an average of 550 per month. Offsetting this positive news the company acknowledged they ran into a manufacturing issue which lead to higher than normal pod failure rate. While the company stated this issue has been corrected it’s negative impact has lead the company to revise downward their revenue estimates for the full year.
Also figuring into the new revenue estimate is the success of the company’s growing sales force. According to the company after tripling the size of the sale force, implementing a direct to consumer advertising campaign and spending $5 million on product sampling they are having issues processing all the paperwork for reimbursement.
These issues facing Insulet are a little surprising when you consider the company’s initial strategy, unlike other device makers who decided to rollout their product on a national basis after approval, Insulet took a more conservative approach with a regional rollout. This crawl before you walk strategy was designed to allow the company to work through the kinks before going national. A strategy that appeared to be working as interest in the OmniPod grew quickly.
Based on today’s call it appears that the move from a regional strategy to a national format has not gone as smoothly as anticipated.
Insulet’s current situation reminds Diabetic Investor of another company who came out with innovative technology, got off to a strong start, stumbled with growing pains but turned things around and was eventually acquired by a larger player in the market. The company we speak of course is Therasense who is now owned by Abbott (NYSE:ABT).
Diabetic Investor sees a similar outcome for Insulet as the problems they faced today are not insurmountable. The key for the company remains cost of goods and reaching profitability. Based on what was said today this goal will soon become a reality. This is when the real fun begins as like Therasense, Insulet will become the target of a major player looking to round out their product line or expand into the insulin pump market. Hopefully Insulet will have a happier ending then Therasense and whoever acquires the company won’t run the company into the ground as Abbott has with Therasense.
Look for investors to take the short term view on the company’s results and for Insulet’s share price to suffer as a result. Just as Therasense shares recovered after their stumble, Insulet should follow a similar path with a similar end result. Opportunity will knock tomorrow and over the next few weeks, informed investors take note.
On a completely different note, Diabetic Investor is pleased to announce that our web site redesign is finished and the new site should be up and operational in the next 24 hours. Please read the attached document as it explains some of the new features of the site and how you can obtain your new password. Diabetic Investor would like to thank everyone for their patience as the site was redesigned and we encourage you to let us know what you think.