Tandem Diabetes Care and Insulet reported sales gains of more than 10% in the second quarter, helped by rising adoption of diabetes technology products like insulin pumps. 

However, the companies laid out different outlooks for full-year revenue.

While Insulet raised its 2022 revenue forecast after recording early success with Omnipod 5 and expanding into a full U.S. release, Tandem lowered its outlook due to a tougher market environment. Its shares dropped on the news.

Tandem faces increased competition

Tandem CEO John Sheridan said on a Aug. 3 earnings call that the company is being affected by three main challenges: continuing pressure from the COVID-19 pandemic such as staffing shortages, increased market competition, and macroeconomic factors like inflation and the threat of a recession.

Data suggest recession concerns began affecting new customers’ decisions to purchase an insulin pump in the second quarter, according to Sheridan. These factors led to the company cutting its revenue forecast for 2022.

“As these challenges dissipate, we look forward to returning to more normalized growth patterns that are driven by the strength of our technology today,” Sheridan told investors.

Tandem’s shares slumped from $68.97 on Aug. 4 to $55.46 on Wednesday. The stock gained about 1% in Thursday morning trading

The recent stumble continues a longer-term drop in the company’s stock.

Craig-Hallum analysts wrote in an Aug. 4 note that they were “confounded” by the change in tone from Tandem as the company built new competition into its 2022 revenue forecast.

“Q2 marked a much different tone from [Tandem] than the prior period. Results were fine, scrolling as a small miss to consensus and just above our target,” the analysts wrote. “The tone and guidance change were the biggest surprise.”

Sheridan said that the impact of new competition in the second quarter was in line with what Tandem expected, and CFO Leigh Vosseller added that the cut in the revenue forecast was based solely on macroeconomic trends like the recession risk.

To help offset customers’ cost concerns, Tandem said on its earnings call that it will offer an enhanced payment program that will allow payments to drop to as low as $50 per month. The move comes after the company saw a higher utilization of extended plans in the second quarter than in previous quarters.

Under this program, Tandem “acts as a coinsurance lender, patients will pay $50 per month until the 20% co-insurance is paid-off,” Craig-Hallum analysts wrote.

Steven Lichtman, an analyst with Oppenheimer, wrote in an Aug. 4 note that the payment program will lower out-of-pocket up-front costs for customers and “could actually present an opportunity.”

Despite the recent challenges, Craig-Hallum is optimistic about the potential of the company’s new Mobi insulin pump, which is expected to be on the market next year. The analysts added that the releases of Dexcom’s G7 and Abbott Laboratories’ FreeStyle Libre 3 continuous glucose monitors could help pull through some revenue.

As the diabetes technology market sees an increase in the adoption of automated insulin systems, where CGMs and pumps are connected to treat patients’ diabetes, analysts say new pumps and CGMs could benefit each other’s markets.

Insulet riding Omnipod 5 success

The second quarter was the first full quarter that Insulet’s Omnipod 5 was available in the U.S after its regulatory review was delayed throughout 2021. The company reported early successes.

CEO Jim Hollingshead said on an Aug. 4 earnings call that Omnipod 5 represented more than 25% of new U.S. customer starts in the second quarter even though the product was still in a limited release. The company moved Omnipod 5 into a full release on Aug. 1.

The launch contributed to a 31% year-over-year revenue growth in U.S. Omnipod sales last quarter, beating company forecasts. Insulet also reported a record number of new customer starts in U.S. and international markets.

Hollingshead, who ran his first earnings call since taking over the company in June, told investors that Omnipod 5 is now in about 88,000 retail pharmacies as well as specialty and mail order pharmacies. The CEO added that the CE mark submission is going “swiftly through review, and we expect approval over the next couple of months.”

Even though the company increased its revenue forecast as the Omnipod 5 release expands, CFO Wayde McMillan said that “significant revenue from the Omnipod 5 launch and adoption ramp will take time.”

Insulet forecasts a revenue growth range of 17% to 20% next quarter, with an 18% to 21% growth range for Omnipod sales.

“The performance this quarter supports our belief that Insulet is in the very early stages of an inflection in growth driven by the culmination of nearly a decade of commercial investments in both Omnipod and market access,” William Blair analysts wrote in an Aug. 4 note.

Insulet is also facing macroeconomic pressures. In an Aug. 4 note, BTIG analysts wrote that margins “came in well below expectations due to supply chain challenges, manufacturing inefficiencies, inflation, product mix shift, and higher marketing spend.”

Hollingshead said that supply chain constraints and inflation are “significant” challenges. The executive added that to get ahead of supply delays and ensure there are enough materials, Insulet is getting components ahead of its need, which increases costs that will have a near-term impact on margins.

Insulet’s stock price has risen from $256.01 on Aug. 4 to $262.49 on Wednesday. The stock gained 3.2% in Thursday morning trading.