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Insulet Corp. Reports Operating Results (10-Q)

May 07, 2010 | About:
10qk

10qk

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Insulet Corp. (PODD) filed Quarterly Report for the period ended 2010-03-31.

Insulet Corp. has a market cap of $500.4 million; its shares were traded at around $13.21 with and P/S ratio of 7.6. PODD is in the portfolios of RS Investment Management, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Since our inception in 2000, we have incurred losses every quarter. In the three months ended March 31, 2010, we incurred net losses of $13.9 million. As of March 31, 2010, we had an accumulated deficit of $343.7 million. We have financed our operations through the private placement of debt and equity securities, public offerings of our common stock, a private placement of our convertible debt and borrowings under certain debt agreements. In October 2009, we issued and sold 6,900,000 shares of our common stock at a price to the public of $10.25 per share. In connection with the offering, we received total gross proceeds of $70.7 million, or approximately $66.1 million in net proceeds after deducting underwriting discounts and offering expenses. As of March 31, 2010, we had $85 million of convertible debt outstanding and $32.5 million of outstanding debt relating to a facility agreement entered into March 13, 2009 and amended on September 25, 2009.

As of March 31, 2010, the outstanding amounts related to the 5.375% Notes of $65.7 million are included in long-term debt in the consolidated balance sheet and reflect the debt discount of $19.3 million. As of December 31, 2009, the outstanding amounts related to the 5.375% Notes of $64.5 million are included in long-term debt and reflect the debt discount of $20.5 million. The debt discount includes the equity allocation of $25.8 million (which represents $26.9 million less the $1.1 million of allocated financing costs) offset by the accretion of the debt discount through interest expense from the issuance date over the 5 year term of the notes. We recorded $1.2 million of interest expense related to the debt discount in the three months ended March 31, 2010. As of March 31, 2010, the 5.375% Notes have a remaining term of 3.25 years. We recorded $1.0 million of interest expense related to the debt discount in the three months ended March 31, 2009.

We received net proceeds of approximately $81.5 million from this offering. Approximately $23.2 million of the proceeds from this offering were used to repay and terminate our then-existing term loan, including outstanding principal and accrued and unpaid interest of $21.8 million, a prepayment fee related to the term loan of approximately $0.4 million and a termination fee related to the term loan of $0.9 million. We are using the remainder for general corporate purposes. In connection with this term loan, we issued warrants to the lenders to purchase up to 247,252 shares of Series E preferred stock at a purchase price of $3.64 per share. The warrants automatically converted into warrants to purchase common stock on a 1-for-2.6267 basis at a purchase price of $9.56 per share at the closing of our initial public offering in May 2007. At March 31, 2010, warrants to purchase 62,752 shares of common stock remain outstanding and exercisable at a price of $9.56 per share.

Research and development expenses increased $0.6 million, or 20%, to $3.8 million for the three months ended March 31, 2010 compared to $3.2 million for the same period in 2009. For the three months ended March 31, 2010, the increase in research and development expenses was primarily attributable to an increase of $0.8 million in outside services and $0.3 million in products used for research and development. These increased costs were incurred mainly in connection with the development of the next generation OmniPod and were offset by a $0.3 million decrease in employee related expenses including stock-based compensation and a $0.1 million decrease in travel-related costs.

General and administrative expenses decreased $0.5 million, or 7%, to $7.0 million for the three months ended March 31, 2010, compared to $7.5 million for the same period in 2009. For the three months ended March 31, 2010, the decrease in general and administrative expenses was primarily due to a decrease of $0.2 million in professional services, a $0.2 million decrease in allowances and write-offs of trade accounts receivable and a $0.1 million decrease in freight costs. These decreases were offset by an increase of $0.2 million in employee compensation and benefit costs, including stock-based compensation.

Sales and marketing expenses decreased $0.5 million, or 5%, to $8.3 million for the three months ended March 31, 2010, compared to $7.5 million for the same period in 2009. For the three months ended March 31, 2010, the decrease in sales and marketing expenses was primarily due to a decrease of $0.3 million in samples and Patient Demonstration Kits, a decrease of $0.3 million in printing costs and a decrease of $0.1 million in travel related expenses. These decreases were partially offset by a $0.2 million increase in promotion and advertising costs and a $0.1 million increase in outside consulting services, which include our external trainers.

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