So if Insulet had $70M in cash the end of first quarter 08 with a $20M per quarter burn rate why do they need to borrow $60M? Their CFO stated during the last conference call Insulet would have a positive cash flow by fourh quarter 2008. They only have $20M in outstanding loans. Are they planning on buying something?
Not a buyer. A couple of concerns have popped up recently that I want to get comfortable with.
First, the VP of business development recently resigned, so I want to hear what they have to say about that on the next conference call. Seems odd for a business development guy of a fast growing company to leave if things are going well. They'll spin it as positively as possible, but I still want to hear what they have to say.
Also, as someone else pointed out in a previous post, an emerging competitor, Medingo, raised $27 million from its parent company late last year. That demonstrates a very high level of confidence in Medingo. Based only on the Medingo web site, it sounds like their solution is even smaller and more discreet than PODD's, so I want to see how things develop there.
I'm going to keep following PODD and listening to conference calls, but I'm not in a hurry to buy. I'd rather buy at a higher price if I'm more confident the company is on track and I better understand the competitive environment.
They needed to raise cash. They are projecting they'll be cash flow break even by Q4, but that's just a projection and things can go wrong. But even if they meet that goal, they would still have needed to do a capital raise to continue to add new manufacturing lines. I was actually relieved they did this convert deal. It's less dilution than selling common stock outright, which most likely would have been priced at a discount to market.