UPDATED Sept. 25 at 11:15 a.m. with Jefferies report on reporting change for adverse events involving OmniPod
Insulet (NSDQ:PODD) shares are off some 4.5% since the end of last week, after a JMP Securities report of increase adverse event reports and rampant customer complaints for its OmniPod insulin management device.
PODD shares were trading at $37.75 apiece at market’s close Sept. 19, having reached a 52-week high, but fell some 5.5% the next day, to $35.69 each after JMP analysts downgraded their rating on Insulet stock to "market perform" from "market outperform."
"The company may be faced with quality control issues (maybe because of the surge in demand) that may attract FDA’s attention or require retooling the manufacturing process," the analysts wrote in a Sept. 20 note to investors.
The FDA’s MAUDE database, which tracks reports of adverse events submitted to the agency, shows 845 reports concerning the OmniPod through August 31 of this year. That’s nearly 24% more than were filed in all of 2012, according to the database.
But Jefferies analyst Raj Denhoy said "the root cause is much more benign" because it’s caused by a reporting change made by Insulet.
"Starting in March, Insulet began reporting the failures of the OmniPod distributed by its 2 partners, Ypsomed and GlaxoSmithKline, to the FDA. This number is about 30-35 reports per month and when taken out, the underlying failure rate has not changed," Denhoy wrote in a note to investors last week. "In fact, the company has confirmed that its rate of failure reports has not changed significantly with the new pod. It is unclear why these failures at the distribution partners weren’t being reported before, but when the company became aware it began to include them."
Denhoy maintained Jefferies’ "buy" rating and $38 price target on PODD shares, according to the note.
Insulet, which logged a prior 52-week high of $37.96 just a month ago on its 1st quarter of positive cash flow, won 510(k) clearance from the federal watchdog agency in December 2012 for the latest iteration of the OmniPod.
PODD shares were trading at $35.82 as of about 11:15 a.m. Sept. 25, up 0.2% on the day, but down 5.1% since Friday’s JMP report.