The number of people with diabetes is rising, as are premature deaths from the condition. Insulet, a company we've held in our global mid-cap portfolios since April 2020, has been playing an important part in tackling the disease.
In this article we provide a case study of this pioneering US-based technology business. It provides patients with an easy-to-use alternative to daily insulin injections and counts health and quality-of-life improvements among its key environmental, social and governance (ESG) aims.
Developing technology for better healthcare outcomes
Diabetes not only impacts daily life for millions of people; it is also a killer. The World Health Organisation estimated that in 2019 diabetes was the ninth leading cause of death. The number of sufferers is rising, with the International Diabetes Foundation estimating that 537 million adults globally are living with diabetes and projecting that this will rise to 783 million by 2045.
Medication is one of the ways to delay or avoid the consequences of diabetes, along with diet, physical activity, screening and treatment for complications. Improving quality of life and ensuring healthier lives are important societal improvements and one of the United Nations’ (UN) 17 Sustainable Development Goals. The UN wants to promote wellbeing at all ages: diabetes affects young and old alike.
While diabetes is a growing global problem, we feel that tackling it is still dominated by ‘old’ technology, namely inconvenient and cumbersome daily injections. This led us to look at Insulet, a leader in developing new technologies for diabetes patients to receive insulin.
<p>Insulet’s activities have a social impact</p><p></p>
Delivery breakthrough
Insulet manufactures the Omnipod insulin-management system, a discreet, tubeless, lightweight and easy-to-use insulin pump. It’s a breakthrough in treating diabetes by enabling patients to swap multiple daily injections for a wearable ‘pod’ that can be placed anywhere they would usually inject insulin. The wirelessly controlled device provides up to three days of continuous insulin delivery. It links to the intuitive touchscreen Omnipod DASH device for patients to easily adjust their insulin doses.
The company has a 10-year track record in drug-delivery development and by 2020 had 250,000 Omnipod patients1. In 2022, Insulet received regulatory approval in the US for Omnipod 5, its next-generation device. It is now in the commercial launch phase and has built up inventory in anticipation of this. The company also plans to obtain approval in Europe for Omnipod 5.
Committed to ESG improvements
Insulet is a great example of a business that we first invested in as a small-cap company and which has since ‘graduated’ to our mid-cap portfolio. The business is increasing its market penetration as it gains new customers and expands globally.
Over 90% of Insulet’s revenue is related to insulin products, and 100% of its research and development is devoted to reducing the burden of diabetes care. This has helped the company to receive good ESG ratings from third-party assessors: for example, MSCI.
For us, the fact that Insulet is open to discussion on its ESG direction also made it a compelling investment case. For example, following the publication of its ESG report, we noticed it lacked carbon-reduction targets and discussed this with the company. Subsequently, in November 2021, Insulet announced plans to move to net-zero carbon with measures that include the increased use of renewable energy and targeted reductions in its greenhouse-gas emissions. We are keenly monitoring Insulet’s progress towards all its ESG goals.
When reporting a 21.5% revenue increase in 2021 and forecasting operating margin growth in 20222, the company emphasised that its commitment to improving the lives of people with diabetes “has never been stronger”.
Final thoughts…
We are positive about the outlook for Insulet as it has numerous growth catalysts. These include US regulatory approval for Omnipod 5, which should drive further competitive advantage. We believe new products should enable Insulet to continue expanding its customer base globally and expect revenue growth to continue.
1 Insulet results to December 31 2020.
2 Insulet results to December 31, 2021.
Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance. Past performance is not a guide to future results.