Morningstar analysts upgraded Insulet Corp.’s (NSDQ:PODD) credit rating from a CCC to a B- today, reflecting the company’s recent convertible debt offering, but the company will have to face off against medical device giant Medtronic Inc. (NYSE:MDT) in the insulin delivery market.
Insulet announced a double offering of convertible senior notes and common stock late last month, on the heels of its $63 million acquisition of Neighborhood Diabetes Inc.
The offerings could yield more than $130 million together.
The offering is likely to push off default risk by several years, Morningstar reported, but the company still has to contend with Medtronic’s hold on the insulin pump market. The analysts said they remain cautious.
"We still think the uncertainty surrounding Insulet’s financial prospects is high. Insulet currently offers the only approved tubeless insulin pump, but Medtronic MDT is planning to roll out its competing product in 2012," Morningstar analysts wrote. "Medtronic controls about 80% of the insulin pump market, and we think Insulet may have trouble competing for new customers once the medical device behemoth enters the picture. With Insulet’s limited manufacturing and marketing resources, we remain concerned about its ability to put up a fight against Medtronic."