Despite a negative reaction from investors following a major buy in the insulin delivery space, analysts still back Insulet (Nasdaq:PODD) stock to perform.
Shares of PODD fell throughout today after Medtronic (NYSE:MDT) announced a $738 million acquisition of EOFlow. Korea-based EOFlow develops the EOPatch, a tubless, wearable and fully disposable insulin delivery device. Insulet represents a market leader in that space with its own Omnipod patch pump platform. Omnipod 5 became the first available tubeless, wearable, automated insulin delivery system after the FDA cleared it in January 2022.
By mid-afternoon, shares of PODD fell 7.3% to $272.24 apiece. Tandem Diabetes Care, another competitor in the space, saw its shares go down 5.5% to $26.62 apiece..
In spite of the negative reaction by the markets, BTIG analysts Marie Thibault and Sam Eiber expect Insulet to maintain its lead in the space. The analysts called the change in share prices “an overreaction.”
They also noted that Medtronic’s EOFlow play failed to come as a surprise, given rumors in Korea earlier this year establishing Medtronic’s interest.
“We are somewhat perplexed to see Insulet shares down nearly 8% in intraday trading, since we thought this was a known risk and expected competitive noise,” the analysts wrote. “We have followed EOFlow’s progress for more than five years and expected it to enter the U.S. market with a domestic distributor over the medium term.”
Why Insulet should be fine
While EOPatch holds authorization in a number of geographies, it remains unavailable commercially in the U.S. The company submitted the insulin delivery device for U.S. FDA clearance in January.
The analysts also noted that Insulet filed a patent suit against EOFlow’s German distribution partner. That led to a preliminary injunction and a suspension of sales in March of this year, they said.
Insulet and Medtronic have a nearly 10-year-old settlement and cross-license agreement with Medtronic, Thibault and Eiber said. They agreed not to sue the other for patent infringement based on any existing product, or any feature, element or component in any currently existing commercially available products.
Medtronic intends to integrate EOPatch with its next-generation continuous glucose monitor (CGM) sensor and the new mealtime detection algorithm in its own insulin delivery technology, the MiniMed 780G. This creates a closed-loop, patch pump system that could, in theory, rival Omnipod.
However, Thibault and Eiber don’t feel this will affect Insulet’s market share, at least in the near-term.
“We think this may be a boon for MDT’s diabetes pipeline, giving them an option away from tubed pumps, but do not think it is an immediate threat to PODD’s monopoly in patch pumps,” they wrote. “There are still unknowns about how MDT’s next-gen CGM sensor will perform against the market-leading CGMs from Abbott and Dexcom.”
The analysts also feel patients could continue to prefer a mix-and-match approach with CGMs and pumps. That may present a barrier to competitive switching between Omnipod and any potential Medtronic product.
For now, they say, time remains on Insulet’s side.
“It will take some time to develop this closed-loop patch pump system and gain FDA clearance,” Thibault and Eiber said. “We continue to think [Insulet’s] market development efforts, new areas for expansion, and large competitive lead will serve it well.”
More positives over the past year for Insulet
Since Insulet received FDA clearance for its next-generation Omnipod 5 in February 2022, the company has hit a series of milestones.
The company began its full market launch for Omnipod 5 in August 2022. Within a month, it received an expanded FDA indication for the system to include pediatric users with diabetes. All of this occurred in a time of significant change as Hollingshead took over for longtime CEO Shacey Petrovic in May of last year.
Insulet kicked off 2023 with significant purchases to improve its IP portfolio. The company acquired insulin pump patents from Bigfoot Biomedical, then bought assets from insulin delivery technology developer Automated Glucose Control.
Then, in March, S&P Dow Jones Indices announced that Insulet would replace Silicon Valley Bank in the S&P 500 index. That followed the March 10 news that the FDIC took the bank into receivership.
The change became effective prior to the opening of trading on Wednesday, March 15. It added Insulet to the index tracking 500 large companies listed on stock exchanges in the U.S.
In April, the company garnered FDA clearance for its Omnipod GO long-acting insulin delivery device. The new patch pump covers the basal-only insulin population. The target population typically takes daily injections of long-acting insulin.
The first-of-its-kind, standalone, wearable insulin delivery system provides a fixed rate of continuous, rapid-acting insulin for 72 hours. It features a tubeless and waterproof pod offered in seven different pre-programmed daily rates.
Insulet also expects 2023 revenues to grow by 18% to 22%, highlighting the company’s continued success in the insulin delivery market.
