The market for diabetes control with wearable insulin pumps and continuous glucose monitors is a hot growth sector in medical devices these days. At the leading edge are products that combine those functions in a “closed-loop” system that automatically varies its insulin flow as it senses the wearer’s changing blood glucose levels.
Saturday, a long-awaited study from
(ticker: PODD) showed that the company has a solution that should compete well against the closed-loop products already sold by
(MDT). Investors responded Monday by bidding up Insulet’s already pricey stock, which rose 3.2% to close at $269.32 on a day when the
Nasdaq Composite index
Insulet’s hybrid solution linked its Omnipod 5 insulin pump to the continuous glucose-monitoring sensor of
(DXCM). A challenge for patients managing their diabetes is maintaining glucose levels in the right range throughout a day of eating, exercise, and sleep. In the 240-patient study, Omnipod 5 kept glucose in the desired range for 74% of the day. The pivotal trial didn’t directly compare the Insulet product against the automated insulin delivery systems of Tandem or Medtronic, but previous studies of those products reported “time-in-range” results between 70% and 80%.
The U.S. Food and Drug Administration has fast-tracked its review of Insulet’s product. The administration is expected to approve by June and the product launch will ramp up in the year’s second half. While Tandem and Medtronic already have hybrid systems on the market, analysts like J.P. Morgan’s Robbie Marcus think the Insulet offering will prove the winner because the company’s pump is the only one on the market in a compact waterproof package with no snaking tubes. It can be sold through drugstores. Marcus rates Insulet an Overweight, with a $295 price target.
Raymond James analyst Jayson Bedford also rates the stock a Buy, noting that fewer than 35% of Americans with Type-1 diabetes use a pump and less than 10% of Europeans. There are enough Buys on Insulet shares to make that rating the consensus among those surveyed by FactSet. But make no mistake—the stock isn’t cheap. At $269, it enjoys a $17 billion market cap and trades at 13-times the $1.3 billion in sales that Wall Street expects for 2022 and over 150 times that year’s predicted earnings of $1.72 a share.
As we said, diabetes devices are hot: Glucose sensor vendor DexCom also trades at more than 100 times next year’s earnings, with its stock at $360.
Insulet’s soaring stock price sent Guggenheim Securities’ Chris Pasquale to a Neutral back in 2019 when the stock passed $150. In a Saturday note, he acknowledged that the Omnipod 5 study showed “very competitive” performance versus Tandem and Medtronic. But he said that expectations for Insulet seem high given the small differences in efficacy between the systems. With Insulet stock above $250 this year, a half-dozen analysts have joined him with Hold ratings.
Write to Bill Alpert at [email protected]