China's Central Bank Eliminates Margin T…

19-01-2017 Hits:172 BoomBustBlog Reggie Middleton

China's Central Bank Eliminates Margin Trading of Bitcoin

There have been rumors that the Chinese Central Bank (PBoC - People's Bank of China) would limit or eliminate margin trading in Bitcoin. It is now official, sort of...

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Is Donald Trump Truly Successful or Born…

18-01-2017 Hits:303 BoomBustBlog Reggie Middleton

Is Donald Trump Truly Successful or Born With A Silver Spoon? An Analysis

In social media and mainstream media, I often hear Donald Trump quoted (by himself, and others) as an extremely successful, self-made man. As an entrepreneur for nearly all of my...

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As I Promised, EU Is Colliding Into Prac…

17-01-2017 Hits:743 BoomBustBlog Reggie Middleton

As I Promised, EU Is Colliding Into Practical Confines of NIRP, Bank Hemorrhaging Up Next

Nearly a year ago, I warned subscribers of consequences stemming from the ECB's negative interest rate program. Here's an exceprt from our resarch report titled European Banking Macro Issues for March...

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Is Bitcoin Too Risky? Whenever the Bitco…

12-01-2017 Hits:1364 BoomBustBlog Reggie Middleton

Is Bitcoin Too Risky? Whenever the Bitcoin is Mentioned in Financial Pop Media, Ignorance Ensues

I hate to be the one to break bad news to you, but most of the pop media/mainstream media financial pundits that I hear and see opine on bitcoin have...

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What Happens When Rates Rise While the S…

10-01-2017 Hits:778 BoomBustBlog Reggie Middleton

What Happens When Rates Rise While the S&P 500 Relies on Cheap Credit To Boost EPS?

So, the stock market, bond market and real estate markets are all at all-time highs. Everything is Awesome! You know better than that. You see, when the bond market wakes...

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Debt Encumbered Oil, Sovereign Soil, Toi…

10-01-2017 Hits:598 BoomBustBlog Reggie Middleton

Debt Encumbered Oil, Sovereign Soil, Toil & Trouble: Can't You Hear Seems Cracking in the OPEC Empire?

@WSJ reports Libya Ramping Up Oil Production, Threatening OPEC (supposed) Plans to lift global oil place by artificially limiting supply. This would be in violation of federal antii-trust laws in the...

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Ten Years Since BoomBustBlog Was 1st Pub…

09-01-2017 Hits:914 BoomBustBlog Reggie Middleton

Ten Years Since BoomBustBlog Was 1st Published & That Initial Research Still Relevant Today

We have looked into insurance companies' performance last month in regards to our bearish real estate thesis. A small comederie of companies are suffering losses and/or declining profits as we've exected....

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The Macro Truth About The Big Bitcoin Po…

07-01-2017 Hits:1082 BoomBustBlog Reggie Middleton

Bitcoin has dropped precipitously, and as is usual, we have the cacophony of instant digital currency pundits cackling about as if they had a clue. This is the inaugural post...

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To Bust or Not To Bust: Are We In A Real…

04-01-2017 Hits:770 BoomBustBlog Reggie Middleton

To Bust or Not To Bust: Are We In A Real Estate Bubble?

Banks are showing thin NIM, yet many of the big banks are able to boast stable if not slightly improving credit metrics. This doesn’t make sense considering the explosive growth...

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What Happens To Real Asset Lending Banks…

03-01-2017 Hits:619 BoomBustBlog Reggie Middleton

What Happens To Real Asset Lending Banks When the Real Funding Rate Appears? We're About to Find Out

During the financial crisis of 2008, money market funds who subjectively agreed to hold their NAV (net asset value) unit prices at $1 “broke the buck”. That is, the unit...

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Stress Test on Banks’ Earnings Facing th…

30-06-2014 Hits:44737 BoomBustBlog Reggie Middleton

Stress Test on Banks’ Earnings Facing the Veritaseum UltraCoin Value Transaction Platform

My last post on the topic of disintermediation during a paradigm shift was Wall Street Should Be First To Invest In Reggie Middleton's UltraCoin, Much Of It Won't Be Here In...

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Introducing the "Unbreakable Promis…

09-06-2014 Hits:39536 BoomBustBlog Reggie Middleton

Introducing the "Unbreakable Promise" As a Method Increasing Efficiencies and Decreasing Risk

Continuing on the margin compression theme originally laid out in Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups, I illustrate mathematically how the bit...

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We performed some preliminary analysis on Insulet Corporation (PODD) with a focus on their latest quarterly results. With its stock price currently trading in the region of US$7-$8 per share, it fails in the very first parameter that we use for screening short candidates, and that is a company's share price must be at a level to provide X% return given Y investment. In other words, the share price is already too low. Since I do not consider it a candidate for my own prop trading program, I am releasing this cursory overview to the public.

The stock price has traded in the range of $3-$21 in the last 52 weeks and there could be further downside left from the current levels to make it an attractive short opportunity for the right type of speculator, but rationalization of their cost structure with most of the production being shifted to China and their preparation for an entry into Europe could well turn out to be positives and result in a rally in the near term. Following are some of our initial observation on the company's financials / fundamental strength:

  • Insulet posted strong revenue growth for the three months and nine months ended September 2008. Revenue for Q3 2008 rose 167% year-on-year to US$10.1 million mainly due to a 20% increase in the number of patients using OmniPod driven by the company's sales and marketing efforts. For the nine months ended September 2008 revenues increased 169% to US$24.2 million. Insulet has agreements with Abbott Diabetes Care Inc. and DexCom Inc. to integrate their continuous glucose monitoring technologies with its Personal Diabetes Manager (PDM). The company realized revenues of US$1.2 million in Q3 2008 and US$1.4 million for the three and nine months ended September 2008 in relation to the Abbott agreement. In June 2008, the company also signed an agreement with Ferring Pharmaceuticals to develop the OmniPod System for the delivery of drugs developed by Ferring. In fact, this is Insulet's first development agreement for a non-diabetes drug delivery application. Additionally the company has deferred revenue of US$2.3 million as of September 30, 2008.

 

  • In order to achieve profitability, Insulet aims to reduce production cost. In line with this strategy, the company outsourced the production of OmniPod to a subsidiary of Flextronics International Ltd in China in 2007. This move helped Insulet reduce per unit cost due to increased production and resultant higher absorption of overhead costs. Gross loss was US$87,000 in Q3 2008 as compared to US$3.8 million in Q3 2007. For the nine months ended September 2008, gross loss was US$5.8 million as compared to US$10 million for the corresponding period last year. Production is currently being undertaken on a partially automated manufacturing line at the Chinese facility. By completely automating the manufacturing process, the company aims to further expand production and improve gross margins in the coming quarters.

 

  • Since the commencement of commercial sales of the OmniPod System in the United States in October 2005, Insulet has expanded its sales and marketing efforts to increase market penetration of the OmniPod system throughout the US starting with the Eastern states. The OmniPod System is currently available in all 50 states. In Q3 2008, sales and marketing expenses increased by 146% y-o-y to US$10.2 million while that for the nine months ended September 2008 increased by 179% y-o-y to US$29.7 million due to additional hiring and trade shows. Additionally, general and administrative expenses increased by 86% y-o-y to US$6.3 million in Q3 2008 and by 91% y-o-y to 16.9 million for the nine months ended September 2008 as a result of expanding business. The significant increase in expenses led to an operating loss of US$19.8 million in Q3 2008 as compared to US$14.5 million in Q3 2007. The company expects operating expenses to continue to increase in the near term.

 

  • Insulet incurred interest expense of approximately US$1.1 million and US$1.3 million for the three and nine months ended September 30, 2008, respectively. This is in connection with the private placement of 5.375% Convertible Senior Notes worth US$85 million due on June 15, 2013. As a result, interest expense more than doubled to US$1.4 million in Q3 2008. This factor, in addition to the operating loss of US$19.8 million led to a net loss of US$20.8 million in Q3 2008 as compared to a net loss of 13.6 million in Q3 2007. For the nine months ended September 2008, net loss was US$64.5 million as compared to US$37.9 million for the corresponding period last year. Insulet is expected to continue incurring losses in the near term.

 

  • Insulet's cash balance as on September 30, 2008 stands at US$74.1 million. This includes US$81.5 million raised through the Convertible Notes issue.  Approximately $23.2 million of the net proceeds of the issue were used to repay old debt while the remainder is intended to be used for general corporate purposes. As Insulet continues to expand its business it will need additional capital to increase market penetration amid stiff competition and increase manufacturing capacity. The company expects a capital expenditure of at least US$10 million in FY08 for the expansion and automation of the manufacturing capacity. As a result, the company may have to raise additional debt or issue shares - extremely difficult in the current market environment. While it has historically been successful in doing so (Insulet has raised US$327 million since its inception in 2000), the current market turmoil poses a challenge. The company recently declared a dividend distribution of one preferred stock purchase right for each outstanding equity share to existing shareholders. The rights will become exercisable if a person acquires 15% or more of Insulet's common stock.