Here's Why Insulet Corporation Shares Are Surging 17.8% Today

Image source: Insulet Corporation.

What happened

Shares in Insulet Corporation (NASDAQ: PODD)are soaring 17.8% as of 2:30 p.m. EDT today after the maker of tubeless insulin pumps reported impressive third quarter financial results.

So what

Insulet Corporation's shares have struggled lately in the wake of news coming out of competitors. In September, Medtronic (NYSE: MDT) won FDA approval for a closed-loop insulin system it expects to roll out early next year, and recently, Tandem Diabetes reported lackluster results that caused an industrywide sell-off.

Today, Insulet appears to have assuaged some of investors' concerns stemming from those events.Insulet's top line grew 33% year over year in Q3 to $94.9 million, and its loss per share improved from a loss of $0.33 last year to a loss of $0.05 in Q3. Revenue exceeded the company's prior guidance for between $88 million and $91 million, and the loss per share was better than the $0.09 anticipated by industry watchers.

Digging deeper into the results shows that revenue benefited from a 18% increase in U.S. Omnipod sales of $59.6 million, and a 41% increase in international Omnipod sales of $19.1 million.Insulet's bottom line benefited from a 1,400 bps improvement in gross margin to 58.6% thanks to "manufacturing and operational execution."

Now what

Insulet's management boosted its full-year sales projection to $362 to $365 million, from $345 to $355 million previously. If the company delivers on that forecast, it would represent about 38% year-over-year growth in sales at the midpoint.

Insulet is also continuing efforts to develop its own system that could compete with Medtronic's forthcoming 670G closed-loop insulin system. The 670G is being hailed as a major advance in patient care because it can automatically measure blood glucose levels and dose insulin as necessary. Insulet's trials of its own system could lead to commercialization in 2018.

Undeniably, the market for treating diabetes is large and growing. The global diabetes population is expected to increase from 415 million people today to 642 million people by 2040, according tothe International Diabetes Federation. A growing addressable market provides opportunities for companies developing next-generation solutions that help patients control their blood glucose levels better, but the jury is still out on who the winners and losers will ultimately be in this space.

Overall, Insulet is an intriguing company, and its tubeless Omnipod is a very attractive proposition for many diabetics, but this next year could transformative for this market, and because of that, Insulet isn't without risks.

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Todd Campbell has no position in any stocks mentioned.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him onTwitter where he goes by the handle@ebcapitalto see more articles like this.

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