As Andy Obermueller, editor of Fast-Track Millionaire and a bit of an expert on the subject, writes below, about 30,000 people are diagnosed with type 1 (insulin-dependent) diabetes every year. Happily for these patients, treatment for their condition is continually improving — thanks largely to the introduction of new, high-tech devices that make managing one’s blood sugar convenient and easy. Below, Obermueller has the scoop on a company that makes one of these cool new devices.
“Insulet Corp. (PODD) is a pure play: It makes insulin pumps for diabetics. I myself am an insulin-dependent diabetic — I have been for nearly 30 years — and I use an insulin pump every second of every day. So this is an area that is not only near and dear to my heart but something that I have paid careful attention to.
“Insulin is a hormone made by the pancreas that helps the body process sugar into energy. Without insulin (or without enough insulin) too much sugar accumulates in the bloodstream, which makes one feel hyped up, cranky and, as my wife can attest, ‘pissy.’ It also tends to induce thirst and frequent urination as the body tries to flush out the excess sugar through the kidney, which is why these symptoms should always be taken seriously.
“The normal range for non-diabetic blood-sugar levels is, say, 80 to 120 milligrams of glucose per deciliter (mg/dl) of whole blood. It is not uncommon for a newly diagnosed but still out of control diabetic — or a diabetic who has eaten, for instance, a Cadbury Creme Egg — to see his blood sugar reach 300 or 400 or even higher. And high blood sugar doesn’t just affect mood: High blood sugar (or hyperglycemia) over the long term causes kidney disease, heart disease, blindness and a variety of other unpleasant maladies. An insulin pump is an aggressive therapy that seeks to replicate the actions of the pancreas and help control the diabetic’s blood sugar.
“Insulin pumps are amazing tools. These devices, which connect the body to a supply of insulin via a special tube inserted into the skin, administer a little bit of insulin all day long. This is the so-called ‘basal’ rate, which helps the body process food into energy. Remember, all food ultimately is processed into sugar. (The body absorbs some minerals and vitamins, but everything else gets broken down into usable glucose, even ‘sugar-free’ food.) This basal rate, which can be custom programmed to meet the patient’s exact needs, is far more effective than injecting longer-acting insulin several times a day. Results are more predictable and controllable, and the whole business is more convenient. Pump users don’t have to tote a vial of insulin and other medical supplies wherever they go. Their medicine is already on board their pumps.
“When the diabetic is ready to eat a meal, he or she will do a blood sugar check and then estimate the number of carbs to be consumed. The pump is programmed to correct the blood sugar from whatever its current level is to a certain target (mine is 100, smack dab in the perfect zone). My correction factor is 25: One unit of insulin will lower my blood sugar by 25 points. Then the pump adds more insulin to the pre-meal ‘bolus’ dose to ‘cover’ each gram of carb. My coverage ratio for carbs is 13. One unit of insulin, which is equal to 1/100 of a cubic centimeter, will help my body process 13 grams of carbohydrate.
“So if my blood sugar is 125 and I am going to have a rich meal with 130 grams of carb — say four pieces of pizza — then my pump would give me one unit of insulin to bring my blood sugar into perfect range and 10 units to cover the carbs. I went 20 years without a pump and I never had anything resembling decent control of my blood sugar. Now that I have one, my lab work shows I am pretty darn close to a non-diabetic. Like every pump user I have ever met, I can’t believe I waited as long as I did to get one, and I am never going back.
“Another thing that has changed: Years ago, insulin was slow and diabetics had to take it at least an hour before eating, sometimes longer. Today’s insulin is extremely fast, just like what the body produces, and begins working in minutes. The result is that smart pump users can get their blood sugars into perfect range, keep them there and, frankly, eat and do pretty much whatever they want as long as they know how to cover it.
Types of Pumps
“My pump is an ‘integrated’ unit, made by Medtronic (MDT), which is the leader in the market. There is one piece to a Medtronic pump. But Insulet’s ‘OmniPod,’ which got the nod from the FDA in early 2005 and went on sale in October of that year, has a different approach. It splits the unit into two pieces. One half is the actual pump, and the other part is basically a remote control with a display screen that lets the user wirelessly tell the pump what to do.
“The OmniPod has some notable advantages over my Medtronic pump. For one, it is waterproof. My diabetes buddy Jill has an OmniPod and she loves it because it’s impervious to water. She’s in the pool with her kids all summer long, and that lifestyle adaptability factor is a big deal for her.
“The other thing she likes is that unlike my Medtronic pump, her OmniPod has no tubing. In my pump, there is a 28-inch tube that connects that reservoir inside the pump to my body. It sometimes gets in the way, and it can’t be ignored. Jill doesn’t like the idea of the tube because she is constantly in contact with her three-year-old son, who might pull on the tube, accidentally or on purpose. With an OmniPod, the entire ‘pod’ containing reservoir and pump is attached directly to the body. There is no tubing.
“This is also a huge selling point for parents of young diabetics. The pump can basically be put out of reach, on a child’s side, where it can easily deliver insulin effectively. If the child does pull it out, all that is lost is the disposable part, and not the expensive control system. All pumps are comparable in cost, though deals vary. Mine cost about $8,500. So, clearly, not only using but losing the pump is a major concern for the parents of diabetic children. With the OmniPod, mom or dad can control the whole thing with the remote.
“A pump provides the best control for a diabetic. It is becoming a standard of care — that is, the pump is now what doctors prescribe right away to new diabetics. For years, the dominant player in the market has been Medtronic’s Minimed Paradigm series. But Insulet is quickly gaining market share, and its top line is showing a very nice trend.
“This a company that could reach a billion dollars or more in annual sales in the next few years. Competitor Medtronic did it.
“Medtronic increased its sales of diabetes products, primarily pumps and pump supplies, and these sales grew at a faster rate than revenue overall, leading diabetes to become a more important part of the company’s product line.
“There has been a major change in the post-BlackBerry/iPhone era. People have become more comfortable with electronic devices. At the same time, insulin improved and blood-sugar management followed, and now there is not a doctor in the world who wouldn’t recommend a pump to a newly diagnosed diabetic. They are the best option. That’s why Medtronic is seeing the uptrend in its diabetes business at the same time Insulet is posting double-digit growth: The pump used to be punishment. Now it just another device, a tool to help people live better lives.
“Insulet is exciting because it offers a sports car to a market that heretofore has only driven minivans. It also integrates continuous glucose monitoring features, which allow the patient to get a steady, real-time read of their blood sugar and automatically adjust the insulin level in response. The newest model of the OmniPod is also a third smaller and one-quarter lighter, which also increases its appeal.
“Pumps are not lifetime purchases. I’ve had mine for a couple of years, and I likely will replace it in a couple more. They also are only the tip of the iceberg insofar as cost goes. Every pump has replaceable parts that need to be changed out every three days. The OmniPod, for example, actually stops working altogether after it has been functioning for 80 hours if important parts haven’t been replaced. (The insulin can’t be absorbed from the same site for an extended period of time.) Each time the tubing is replaced, a new infusion set is required. Mine are $17 each. So I wind up spending $17 times 121.6 (365 days/three), or $2,074 per year. There is no generic, and this revenue goes straight into the pump manufacturers’ pockets. So the current customers provide a nice and dependable revenue stream and new customers — about 30,000 people a year are diagnosed with Type 1 diabetes and should go on the pump — buy hardware. There are three million diabetics in the United States, and less than a third use an insulin pump. That will continue to change, and that is why Wall Street sees so much value in Insulet’s business.
Action to Take
“I recommend Insulet Corp. (PODD) for long-term holders at any price under $20.”
- Andy Obermueller, Fast-Track Millionaire, March 31, 2012