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Insulet Partners With Abbott and DexCom On Diabetes

Insulet Corp. (NASDAQ:PODD) hit its 52-week high on Feb. 19 after announcing formation of two partnerships that further strengthens its leading role in the market for continuous glucose monitoring.

Trading at just over $211 and with a market cap of more than $13 billion, the Acton, Massachusetts-based company may now be too pricey for both investors and potential acquirers. The company is on the list of the 25 most attractive public acquisition targets in medtech, according to an article in Medical Device and Diagnostic Industry that was updated in mid-2019.


Individual investors have to factor in the latest analyst projections for Insulet. According to CNN Business, the company is rated a hold by 18 analysts. Meanwhile, the 14 analysts offering a price target set the median at $185, with the high at $213 and the low at $125. The company reports fourth-quarter and full-year 2019 earnings on Feb. 25, so that's certainly something to keep an eye on. In the third quarter, Insulet revenue and earnings surpassed expectations.

Insulet's latest alliances are with Abbott Laboratories (NYSE:ABT) and DexCom Inc. (NASDAQ:DXCM). The focus of both deals is Insulet's Omnipod Horizon Automated Delivery System, which is being tested in the U.S. Omnipod will be united with Abbott's highly anticipated Freestyle Libre 2, which is awaiting Food and Drug Administration approval.

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This agreement with Dexcom builds on the two companies' integration efforts and makes official plans to launch Omnipod.

DexCom's share performance during the past 52 weeks has been even better than Insulet's, with the price climbing more than 185%. The San Diego-based company sells at a lofty price-earnings ratio of more than 265. It's rated a buy, with 16 analysts assigning it a median target of $300, ranging between a high of $316 and a low of $270. Dexcom closed at $291 on Feb. 21.

At least part of the enthusiasm for Insulet and DexCom has to be the size and growth rate for the market for CGM. It is expected to reach nearly $5 billion by 2024, advancing at a compound annual growth rate of nearly 23% from 2018 to 2024, according to a report from Allied Market Research. The monitoring systems enable patients to better manage diabetes by giving them real-time values of their glucose levels and alerts them if they approach hypoglycemia. One big issue facing the manufacturers is lack of reimbursement for the devices.

The International Diabetes Federation reports that about 463 million adults worldwide are living with diabetes; by 2045, this number will rise to 700 million. About 20% of people ages 65 and over have diabetes. The disease causes more than 4 million deaths a year.

Disclosure: The author holds no positions in any of the stocks mentioned in this article.

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This article first appeared on GuruFocus.