Insulet is Tuesday's IBD Stock Of The Day after shares broke out following a "broad-based beat" for the June quarter.
The Acton, Mass.-based company makes Omnipod insulin pumps for people with diabetes. The wearable system is tubeless and can be combined with continuous glucose monitors, or CGMs, for automated insulin delivery. CGMs monitor blood sugar levels in real time.
William Blair analyst Brandon Vazquez says there are plenty of catalysts to come for Insulet this year. While many patients with type 1 diabetes use insulin pumps, it's still early days for the type 2 market. He noted that "the market is still single-digits penetrated" and that "Insulet is still early in driving utilization at primary care physicians, who see most type 2 patients."
Insulet stock rose a 1.4% to close at 327.48 on today's stock market. The move put shares above a 322.80 buy point out of a cup-with-handle base, according to MarketSurge. The buy zone runs up to 338.94.
Insulet's Profit More Than Doubles
During the June quarter, Insulet earned $1.17 per share on $649.1 million in sales. Profit more than doubled year over year, easily beating projections, while sales jumped almost 33%. Analysts called for a lower $614.2 million in sales.
Leerink Partners analyst Mike Kratky says Insulet is enjoying a "streak of impressive beat-and-raises."
Type 1 diabetes is an autoimmune disease where the immune system mistakenly attacks and destroys insulin-producing cells in the pancreas. As a result, patients with this form of diabetes are reliant on insulin treatment. These patients have been the biggest users of insulin pumps.
But in the diabetes space, type 2 is the far bigger population. The Centers for Disease Control and Prevention estimates 1.7 million people age 20 and older in the U.S. have type 1 diabetes. That compares with more than 38 million Americans with type 2 diabetes. Not all of those patients will need insulin treatment. Still, Insulet wants to dig deeper into the type 2 market.
"With type 2 adoption still early and several software-related updates (e.g. iPhone app and CGM integration), we think second-quarter updates should reiterate the company's momentum from here," William Blair's Vazquez said.
Insulet noted on its second-quarter earnings call that new patients with type 2 diabetes starting on Omnipod accelerated in the quarter. More than 85% of new U.S. customers were previously giving themselves multiple daily shots of insulin. Of those 30% had type 2 diabetes.
Chief Executive Ashley McEvoy says type 2 diabetes is "a massive opportunity with a large TAM (total addressable market)." She noted Insulet is the first company to move ahead with an insulin pump for type 2 diabetics.
"Omnipod is just so differentiated and so simple to use that it gives us some strength, in addition to that body of evidence, that help us compete in the market," Eric Benjamin said on the call. Benjamin is Insulet's chief product and customer experience officer.
Insulet Stock Is Highly Rated
For the current quarter, analysts polled by FactSet expect Insulet to earn an adjusted $1.15 per share on $677 million in sales. Earnings would surge almost 28% as sales rise north of 24%.
This year, Insulet expects sales to increase 24% to 27%, up from its previous call for 19%-22% growth. Omnipod sales are projected to grow 25% to 28%. Three months ago, Insulet called for a lower 20%-23% in Omnipod sales growth.
The strength shows up in Insulet stock's perfect EPS Rating of 99. The rating pits a company's recent profitability against all other stocks. Shares also have a strong IBD Digital Composite Rating of 96, a 1-99 measure of fundamental and technical performance.
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