Q3 Trends:
Insulet, maker of the Omnipod 5 insulin pump, recorded a record number of new customers in the third quarter, spurring the company to boost its full-year revenue forecast. The shares surged.
The device, which launched in August, represented more than 80% of new U.S. customer starts during the quarter, CEO Jim Hollingshead said Thursday on an investor call.
“The market enthusiasm for Omnipod 5 is greater than even we anticipated,” he said, adding that Insulet added more customers than expected from both those who were receiving multiple daily injections of insulin and from those who had been using competing insulin pumps.
“The product only went into full market release in August, making this just the first quarter of what we view should be several years of strong demand,” William Blair analyst Margaret Kaczor wrote in a research note published on Thursday. “While the quarter included roughly $16 million in stocking at retail pharmacies and trade-ups for existing Dash users, performance in the U.S. still would have exceeded our estimates by $14 million.”
Insulet’s U.S. Omnipod revenue increased 42% compared to the year-earlier quarter, the highest U.S. growth rate in at least a decade, Hollingshead said. International Omnipod sales decreased by 5.5%.
Shares of Insulet rose 17% to $299.76 in late morning trading on Friday.
After getting a CE Mark for the Omnipod 5 in September, Insulet plans its first European launch of the device in mid-2023 with a broader rollout throughout 2024.
Battery issues:
Insulet in October flagged a battery problem with the personal diabetes manager (PDM) component of its Omnipod DASH pumps. In some cases, the batteries for the devices would swell, leak fluid, or overheat when left charging for a long period of time. Insulet opted to replace all of the PDMs for customers with those devices, incurring a $36.8 million charge during the quarter.
Hollingshead said the company has received some reports related to charging issues with the Omnipod 5 controller and is reviewing early field data.
“It's a small number of complaints. At this point we're looking at a couple of dozen complaints, but we're looking at it really closely,” he said.
Basal-only pump:
Insulet, based in Acton, Mass., said that it has developed a pump for people who only use basal insulin and plans to submit that device to the Food and Drug Administration for a 510(k) “imminently.”
The device is designed for patients with Type 2 diabetes who receive daily or weekly injections of basal insulin. Unlike Insulet’s other devices, it doesn’t have a controller, but has a built-in basal conversion rate. The new device should about double Insulet’s total addressable market, J.P. Morgan Analyst Robbie Marcus wrote in a research note on Thursday.
Insulet is looking to start selling the device in 2024, giving it ample time to meet FDA standards and select an ideal marketing strategy, Hollingshead said. “The patient set is new, the channel might be new… there's just a lot to consider in the commercial offering that we need to work through.”
Forecast:
Insulet raised its revenue forecast for 2022 to an 18% to 19% increase, mostly driven by Omnipod sales. The company had previously estimated 14% to 17% revenue growth for the year.
The company’s forecasted operating margin, which it expects will be in the low-single digits, remained unchanged from last quarter. Excluding the costs of the recall, legal and CEO transition, the company expects high-single-digit operating margins.
