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Insulet Banks on Omnipod's Growing Market Reach, Runs Risks

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On Jul 2, we initiated a research report on Insulet Corporation PODD. We are upbeat about the company’s achievement of two milestones with respect to expansion of Omnipod’s market reach, while a tough competitive landscape raises concern. The stock carries a Zacks Rank #3 (Hold).

This leading developer, manufacturer and marketer of the Omnipod Insulin Management System has been outperforming its industry over the past year. The stock has gained 68.1% versus the industry’s 10.3% rise. 

Insulet kick-started 2018 with positive reimbursement updates. To begin with, CMS issued guidance in January which required Omnipod to be covered under the Medicare Part D prescription drug benefit program.

Moreover, effective Apr 1, Express Scripts and Magellan, two of the Medicare Part D plan sponsors, added Omnipod as a covered benefit. Starting April 2018, Insulet received access to in-network coverage of Omnipod with UnitedHealthcare.

Insulet has also taken over its new role as a direct seller of Omnipod System in Europe starting Jul 1. The company is confident about the infrastructure and believes it is well positioned to cash in on the rapidly-growing European customer base.

We are also upbeat about the year-over-year revenue growth in the last reported quarter on solid uptake of Omnipod System in the United States and other geographies. Expanding global customer base along with consistent strength across all markets drove revenues.

Meanwhile, Insulet operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit Insulet’s ability to switch to strategies like price increases. The company’s Omnipod System primarily competes with Medtronic plc’s (MDT) market-leading MiniMed system.

Also, the company is exposed to risks associated with a weaker global economy and lower reimbursement rates.

Key Picks

Some better-ranked stocks in the broader medical space are Genomic Health GHDX, Align Technology, Inc. ALGN and Stryker Corporation SYK.

Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has a projected long-term earnings growth rate of 28.4% and a Zacks Rank of 2 (Buy).

Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank of 2.

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