What’s Up At Insulet?
Back on November 20th shares of Insulet (NASDAQ:PODD) closed at $3.21, just a shade above their 52 week low of $3.11. At the end of trading today shares closed at $7.72 with almost 640,000 shares traded nearly twice 10 day average trading volume. While the NASDAQ is up 20% over this same period, shares of Insulet are up an astonishing 120%, in just 12 trading days.
This story gets more interesting when you consider the company adopted a shareholder rights plan on November 14th. Next consider that over the past 12 months there were 27 insider transactions, 8 buys and 19 sales. This gets really interesting as all 8 buys have occurred since November 11th.
Diabetic Investor has consistently maintained that Insulet would eventually be acquired by a larger rival or a blood glucose monitoring company looking to enter the insulin pump market. Could be it be that a deal is in the works?
Other than the company reducing their workforce by 10%, not much has changed at Insulet. The insulin pump market is still sluggish, the company hasn’t introduced a new product and no there hasn’t been any major recalls or problems with competing products.
As Diabetic Investor pointed just last week prior to this major increase in Insulet shares, the market is ripe for deals especially for companies with innovative technology.
Just who will acquire Insulet is actually more interesting than the deal actually happening as it could signal a shift in the diabetes device market. Although the company already has a deal with Abbott (NYSE:ABT) it’s unlikely Abbott would make a move given the problems with their blood glucose monitoring business. It’s equally doubtful Abbott could sell this acquisition as they have already particularly talented at spending large sums of money only to ruin the companies they acquire.
It’s just as unlikely that Roche would go after another insulin pump company given the disastrous Disetronic acquisition. Like Abbott, Roche is struggling with their glucose monitoring business and has an equally bad habit of turning a once solid unit into third rate player.
This leaves Johnson and Johnson (NYSE:JNJ) or Bayer as the two companies who have the need and resources to make this deal happen. Strategically JNJ is the more logical of the two companies as the OmniPod would provide them with the ability to more effectively compete with market leader Medtronic (NYSE:MDT). It would also allow JNJ to sell more test strips as they could easily swap out the FreeStyle meter contained in the OmniPod PDM with one of their LifeScan meters. Finally the deal fits perfectly with LifeScan’s strategy of targeting insulin using patients and we all know that insulin pump patients are the most frequent testers. Lastly Bayer has their sights set on Abbott’s glucose monitoring business.
Just as the coming Bayer/Abbott make so much sense that it probably won’t happen, the JNJ/Insulet deal just as perfect it probably won’t happen either.