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Insulet's Omnipod DASH Shines, New Omnipod Uptake Slows Down

On Sep 18, we issued an updated research report on Insulet Corporation PODD. Although the company’s achievement of two milestones with respect to expansion of Omnipod’s market reach makes us optimistic, a tough competitive landscape raises concern. The stock currently carries a Zacks Rank #3 (Hold).

Shares of this leading developer, manufacturer and marketer of the Omnipod Insulin Management System have been outperforming its industry over the past three months. The stock has gained 16.4% compared with the industry’s 7.6% rise. Insulet exited the second quarter with better-than-expected figures.

Insulet exited the second quarter of 2020 with better-than-expected figures. Revenues improved significantly on the solid uptake of the Omnipod system, both in the United States and the international markets. This growth amid the crisis was primarily due to record revenue growth in total Omnipod product line along with growth in other segments. The momentum of Omnipod DASH is encouraging based on the solid uptake in geographies in which it has been launched. The company’s plans of geographical expansion buoy optimism.

Insulet Corporation Price

Insulet Corporation Price

Insulet Corporation price | Insulet Corporation Quote

The company is gradually improving with respect to seamless supply chain and manufacturing operations. It has also added significant capacity in preparation for the Omnipod 5 launch in 2021. Despite coronavirus impact, Insulet expects to grow total Omnipod revenues by 18% to 20% in 2020. Also, assuming market dynamics to normalize early next year, Insulet believes that it can maintain its $1 billion revenue goal for 2021.

Insulet’s efforts to minimize supply disruptions during the pandemic are noteworthy. The sales calls are being conducted through Webex. The manufacturing and supply teams are ensuring that growing customer demand is met with minimum disruptions. It has also broadened its financial assistance program to ensure that customers who rely on Omnipod are able to continue using it even if they lose insurance coverage. According to Insulet, it does not expect the coronavirus impact to last for more than a couple of quarters.

However, we are concerned about the slowdown in new Omnipod uptake globally since March due to the deferral of non-emergency physician visits due to COVID-19. Contraction in gross margin is discouraging as well.

Insulet operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the stiff rivalry and regulatory conditions prevalent in the markets where Insulet operates limit its ability to switch to strategies like price increases. The company’s Omnipod System primarily contests with Medtronic plc’s market-leading MiniMed system.

Also, the company is exposed to risks associated with a weaker global economy and lower reimbursement rates.

Key Picks

Some better-ranked stocks from the broader medical space are QIAGEN N.V. QGEN, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

QIAGEN’s long-term earnings-growth rate is estimated at 22.3%. It currently sports a Zacks Rank #1. (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher’s long-term earnings-growth rate is estimated at 15%. It currently carries a Zacks Rank #2 (Buy).

Hologic’s long-term earnings-growth rate is estimated at 15.5%. The company presently sports a Zacks Rank #1.

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