Why Shares of Insulet Dropped This Week

What happened

Shares of Insulet (PODD -4.26%) were down 12.2% for the week as of Thursday’s close, according to data provided by S&P Global Market Intelligence. The healthcare stock closed last week at $145.51, then fell to its 52-week low of $125.82 a share on Thursday.

So what

Insulet makes insulin pumps. Concerns have been growing how new weight-loss and diabetes therapies in a class of drugs called GLP-1, such as Wegovy from Eli Lilly and Ozempic from Novo Nordisk, might impact the sales of Insulet’s products. Those worries grew into a crescendo on Wednesday when Novo Nordisk released trial data that showed that its drug Ozempic (semaglutide) might also be effective in treating chronic kidney disease, which can be caused by too much fat in the liver.

Now what

The key word is that GLP-1 drugs might impact Insulet’s sales in the future. While they may have the potential to reduce the number of people with diabetes, the number of people who already need insulin pumps continues to rise. In addition, the GLP-1 drugs won’t reduce the number of type-1 diabetes patients.

Insulet wasn’t the only diabetes-connected company to take a hit from the news. Tandem Diabetes Care and glucose-monitor maker DexCom fell this week as well.

The key for Insulet investors will be watching how its sales fare over the next year or two. The current plunge might just present a good opportunity for some investors. In the second quarter, the company’s financials were particularly strong. The company reported revenue of $396.5 million, up 32.4% year over year, and net income of $27.3 million, or $0.39 in earnings per share (EPS), compared to a net loss of $35 million, or an EPS loss of $0.50 in the same period last year. The company also raised guidance to show a 22% to 25% gain in yearly revenue.