Insulet Earnings: The Launch of Omnipod 5 Powers Strong Start to 2023

Insulet PODD delivered outstanding first-quarter performance, fueled by the rollout of the new Omnipod 5, which has been on fire since regulatory approval was received last fall. Though management raised its outlook, our projections for the full year remain bounded by the new range, and we’re leaving our fair value estimate of $234 unchanged. Quarterly revenue increased 23% in constant currency, led by U.S. Omnipod growth of 49% year over year. While rivals Medtronic and Tandem had both introduced their hybrid closed-loop technologies in 2016 and 2019, respectively, Insulet’s Omnipod 5 is the first tubeless, patch pump to offer this more-advanced functionality that significantly simplifies life for Type 1 diabetes patients. This latest Omnipod pump leverages the same intangible assets—proprietary product design that relies on memory shape alloy—as earlier generations of its pod pumps but is integrated with Dexcom’s G6 continuous glucose monitor. We view Omnipod 5 as another bulwark to reinforce Insulet’s narrow economic moat.

With Omnipod 5 expected to launch in the United Kingdom and Germany later this year (and more markets after that), we anticipate this product to support mid- to high-teen growth of Omnipod through 2027. The Omnipod occupies an area in the insulin pump market as a “gateway” pump, has historically drawn roughly 80% of its new users from multiple manual injections, and only 20% are competitive pump users. We think this pattern dovetails with the Omnipod’s design that is particularly well suited to pediatric patients and makes for a relatively easy transition for kids to a pump. In the most recent quarter, approximately 30% of new users switched over from competitive pumps. We wouldn’t be surprised to see this dynamic stretch through the full year, and we think it reflects the compelling features of the Omnipod—it can be worn for swimming and bathing, no tubes to catch on objects, and is a one-piece design that sticks on the body.