November 24, 2008

From the News Wire: Pod People Earnings Call.

Insulet Corp’s (aka Omni Pod) earning call transcript is up at Seeking Alpha.

The interesting news for those of us who’s Diabetes May Vary falls into a couple of little bits. What I found interesting is:

  • CGM is taking longer than they hoped.
  • Production has significantly shifted to China
  • Next Generation goal is 40% smaller 25% cheaper to produce in 2010.
Leading the pack for my interest is GCM and the one question about GCM is on page 9 of a 10 page call transcript. It is taking longer than they thought and the CGM folks are asking Insulet to do the PMA (That is an FDA PreMarket Approval for those who don’t speak Pharma Geek.)

Paul Choi – Merrill Lynch
Just a pipeline question. Can you give us an update on where the CGM development is going right now and when we can expect perhaps a first milestone?
Duane DeSisto
Sure. I think it's taken longer than we thought. Both companies have come back to us. They originally going to submit the PMA. They've asked us now to submit the PMA and we are in the process of evaluating the cost and the timeline if we have to do that. So it's going slower than we thought. Our hope is still that we're into the FDA next year, but it has gone slower than we had anticipated.
CGM also came up in a reply about Podd’s share of the pump market at large centers. The reply was that when the Omni Pod looses a sale in those competitive markets a lot of times it a function of a close loop dream.

Mimi Pham – JMP Securities
And in terms of your top centers, do you get a sense of your market share versus the other pumps, are you getting 10%, 50% of sort of the new pumps sold or used at some of your top
Duane DeSisto
If you take a look – if you just give me some sense, if you take a look at some of the numbers and you can take exception to a couple of these if you like, but from looking at the various reports out there, there is 30,000 to 35,000 new customers, new pumpers a year. You start taking a look at the kind of numbers that we're putting on there as an overall basis, we're getting a very, very large percentage of those new customers. So and in the top centers, look, at the end of the day, for the most part, if we lose out at the top center, it circles around the dream of continuous sensing in a whole closed loop system, because we're not positioned at the moment to take advantage of that. But ultimately we think we have a better solution than what's out there.
For Pod users the big news is a significant shift in production to China. Reportedly the quality of the product from China is slightly better than the US production. Here are a couple of quotes dredged up from the whole.

Duane DeSisto
In the second quarter, approximately 80% of our production came out of Bedford, with the remainder from China. In the most recent quarter, the inverse is the case, with approximately 85% of our production coming from China. This was a swift and impressive transition and I'm proud of our accomplishment.

But apparently most is still in inventory:

Duane DeSisto
So, it's a good question, Mike, but you have to take a look at it. The bottom line is we're carrying four months worth of inventory. So what we produced in the third quarter has not hit the P&L.

It is gonna get smaller. I think that is a good thing.

Mike Weinstein – JP Morgan
Okay. And then the last item and I'll let some one else jump in here. But could you just update us on the progress of the next generation Pod and when we should start thinking about that coming to market and the profitability profile of that product? Thanks.
Duane DeSisto
Okay. It's very early on. Obviously there's all kinds of engineerings and regulatory hurdles to get through, but it really looks like a – our goal would be the back half of 2010. Our target is 40% smaller and 25% less cost is the target. We still have a ways to go, but we haven't seen anything to-date that would discourage us at the moment
Other stuff you can find in there includes:
  • A lot of financial talk about cost, inventories P&L etc. Apparently the unit cost of a Pod was originally about 70 bucks and is expected to be less than $20 soon. The cost of the silver in the battery is significant.
  • There is a trial under way for a sub set of T2’s who use U500.
  • Analysts ask the same question numerous times. I don’t know if that is because they don’t pay attention to other peoples questions, have the attention spans of three year olds or they are fishing for details, probably a little of all three.

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