Insulet (NSDQ:PODD) said today it’s selling its Neighborhood Diabetes supplies biz to mail order medical supply company Liberty Medical for $5 million in cash, $58 million less than the company paid for it in 2011.
The Billerica, Mass.-based company said it expects the sale to close sometime in the 1st quarter, and said it expects the sale to improve the company’s gross margins annually by low-to-mid single digits.
When Insulet picked up Neighborhood Diabetes for $63 million in June 2011, the purchase tripled Insulet’s customer base, according to the company.
Insulet CFO Brian Roberts told MassDevice.com at the time that the addition accounted for a 340% increase in its customer base, and was a “natural fit” for the companies.
“This agreement represents a great opportunity for both Insulet and our Neighborhood Diabetes business. This transaction is an important step in positioning Insulet as a more focused organization, enabling us to direct our operational and financial resources toward driving continued growth of our innovative OmniPod and drug delivery products while improving our financial profile for profitable growth over the long term. We continue to execute on our strategy to generate long-term, higher-margin revenue growth and deliver increasing shareholder value with our truly differentiated product offerings. Liberty Medical has a strong platform offering top-quality medical supplies from leading manufacturers, along with personalized service, which is well-aligned with the strength of Neighborhood Diabetes. Together with Liberty Medical’s comprehensive product portfolio, Neighborhood Diabetes will have the investment opportunities necessary to further develop and scale the business. I want to thank the many hard-working and dedicated Neighborhood Diabetes employees for their commitment to quality patient care,” Insulet CEO Patrick Sullivan said in a press release.
Insulet said that it expects non-recurring charges of approximately $10 million in the 4th quarter of 2015 and additional charges during Q1 of 2016. The company plans to provide additional information on the impact of the sale during its earnings call scheduled for February 25.
“Neighborhood Diabetes has a strong product offering and a history of providing excellent patient service. Bringing Liberty and Neighborhood Diabetes together enhances our insulin pump center of excellence and empowers our combined teams to deliver better health to a larger population of people living with diabetes,” Liberty Medical CEO Jonathan Black said in a prepared statement.
In January, Insulet said it inked a deal with Eli Lilly (NYSE:LLY) to develop a version of its flagship OmniPod device that uses a concentrated insulin made by the pharma giant.
Lilly’s Humalog U200, which delivers 200 units of insulin per milliliter, is for patients who need higher doses of insulin to control their diabetes, Insulet said. The deal calls for the companies to evaluate the use of Humalog U200 in the OmniPod insulin delivery system.