Insulate (Nasdaq: PODD) - an organization from the USA, developing insulin pumps of its own design OmniPod. Apart from the production of the devices themselves, the company is developing a mobile platform for managing them., also adapts pumps to heal other diseases.
Understanding the product
Diabetes is a chronic disease, in which a deficiency of the hormone insulin develops, which is responsible for controlling normal blood glucose levels. There is no scientifically proven cure for diabetes, leading to a complete cure. There are two main treatments for insulin-dependent diabetes..
Everyday insulin injections. Insulin is injected into diabetics with the help of syringe pens. The number of injections can reach 5-6 per day. This type of therapy requires a responsible approach to the time of injections., to keep glucose levels within acceptable range.
Insulin pump. This is a continuous insulin delivery device. A conventional pump consists of an infusion set, which is inserted under the skin with a cannula and connected to the pump itself, and devices for monitoring and controlling the pump. This method of obtaining insulin is close to physiological. The device helps improve the lives of diabetics, reduce the risk of developing difficulties and relieve from repeated daily injections.
Insulet has been developing and selling insulin pumps since 2005. During this period of time, she managed to create a product with a significant competitive advantage..
The Omnipod pump is the only one on the market, which has no tubes and consists of only 2 modules: pump, also serves as an infusion set, and an accessory for control and monitoring in the form of a smartphone.
What he earns
The company divides its revenue into two main segments.
Manufacture and sale of Omnipod insulin pumps - $ 834.9 million, 92,3% revenue in 2020. The growth for the year was 24%. More than 20% grew as US sales, as well as in the international market. In the first half of 2021, revenue growth compared to the first half of 2020 amounted to 21,3% like in the USA, as well as in the global market.
Sale of pump element, delivering drugs under the skin. It is also used for other therapeutic purposes by third-party pharmaceutical companies.. This segment gave 7,7% revenue in 2020. Segment growth amounted to 7,4% for 2020 and 23,1% — for 1 half year 2021. The main buyer in this segment is Amgen, who uses Insulet elements in her chemo recovery device.
Financial indicators
2020 the year was the fifth, when Insulet shows revenue growth of more than 20% year to year, is an indicator of market unsaturation and the stage of active growth of the company.
Adjusted EBITDA for 2020 increased by 35,9% and amounted to USD 146.1 million compared to 2019.
The gross profit margin for the first half of 2021 was 67,9% - against 63,5% behind 1 half year 2020. EBITDA margin also increased slightly - from 19.5 to 19,9% - for the same period.
The USA accounted for 66% total revenue for 2020, but already 62% proceeds for 1 half year 2021. The company is expanding into those markets, where it is less represented.
Insulet sells pumps directly to consumers, and through distributors. In 2020, the company had 2 distributor, each of which accounted for more than 10% total revenue. But there's no reason to worry: as the company's product has no analogues, then there is no risk, that the distributor will change their supplier.
The company's operating cash flow is positive, CAGR since 2016 is 51,6%. Negative net cash flow driven by strong growth in capital expenditures: the company acquires additional production lines and equipment to meet the growing demand for its products from year to year.
Revenue and profit, million dollars
| Revenue | Operating profit | |
|---|---|---|
| 2016 | 367 | −10,7 |
| 2017 | 463,8 | −7,4 |
| 2018 | 563,8 | 27,4 |
| 2019 | 738,2 | 50 |
| 2020 | 904,4 | 51,5 |
Distribution of revenue by product, million dollars
| Sale of insulin pumps | Sale of pump element | Total | |
|---|---|---|---|
| 2018 | 495,5 | 68,3 | 563,8 |
| 2019 | 673,5 | 64,7 | 738,2 |
| 2020 | 834,9 | 69,5 | 904,4 |
Geographic distribution of revenue, million dollars
| USA | International sales | Total | |
|---|---|---|---|
| 2018 | 391,8 | 172,0 | 563,8 |
| 2019 | 485,1 | 253,1 | 738,2 |
| 2020 | 596,4 | 308 | 904,4 |
Financial indicators, million dollars
| Operating cash flow | Capital investments | Net cash flow | |
|---|---|---|---|
| 2016 | 15,9 | 22,1 | −6,2 |
| 2017 | 41,3 | 77,2 | −35,9 |
| 2018 | 35,9 | 157,4 | −121,5 |
| 2019 | 98,4 | 163,7 | −65,3 |
| 2020 | 84 | 129 | −45 |
Market outlook
In one of its presentations, Insulet estimates its current market size in volume terms as 26% on the number of type 1 diabetics and 0,8% on the number of type 2 diabetics, injecting insulin in the countries of presence. Total from 1,1 up to 1.24 million people. According to the results of 2020, the company reported 250 thousand customers. Based on these indicators, the company's share in the insulin pump market at the end of last year - from 20 to 23%.
Insulin pumps as a product have a fairly low penetration rate, therefore the company also defines its global potential as 1/3 from all type 1 diabetics and a small percentage of type 2 - so many use or intend to use an insulin pump. According to the American Endocrinology Portal EndocrinologyAdvisor, historically less 1% type 2 diabetics in the US use an insulin pump.
According to various sources, There are about 500 million people with diabetes in the world today.. According to a US Department of Health agency, about 5-10% of all patients are type 2 diabetics.
In this way, we can roughly calculate the global number of potential customers: 500 × 5% × 1/3 + 500 × 95% × 0,8% = 12.1 million people, that is all 2% from that, what do we have in 2020.
In spite of 5 years of active growth and significant market share, everything is talking about, that the company still has huge potential both due to the growing popularity of insulin pumps among diabetics, as well as an increase in the incidence of diabetes. According to WHO, the average annual growth rate of people with diabetes in the world with 1980 to 2014 amounted to 4,1%.
What are the risks
Increasing competition in the market. There are four major players in the global insulin pump market: Insulate, Medtronic, Tandem Diabetes Care и Roche. With the development of technology, growing popularity of insulin pumps and other medical devices, as well as the established fashion among investors for biotechnology, new companies with innovative solutions in the field of diabetes treatment can enter the market.
Debt load. To finance growth at this pace, the company increased its debt. The ratio of debt to equity capital D / E is 1,8, that more, than major competitors: у Tandem Diabetes Care — 0,89, у Medtronic — 0,51.
This can lead to both a high percentage load, and to the "blurring" of capital and a decrease in the value of shares. Debt convertible, and if the company does not have money to repay, then you will have to issue shares and repay debts with them. But this risk is mitigated by, that the repayment of the body of the debt will not be soon - in 2024 and 2026.
Eventually
Insulet is a technology company with significant growth potential. She is not yet receiving a stable bottom line and looks rather expensive.: exponent P / S — 18. This is a lot even in comparison with the main competitors: P / S у Tandem Diabetes Care — 10,9, у Medtronic — 5,6. Therefore, you need to be prepared for possible drawdowns and reduce the risk of your portfolio through diversification..
