Shares of Insulet (PODD 3.14%) were up 15.3% this week as of the market close on Thursday, according to data from S&P Global Market Intelligence. The big jump came following a report that Dexcom (DCOM 6.33%) and Insulet are in discussions about a potential merger.
On Monday, a Bloomberg article cited unnamed sources as saying that the two companies were considering a combination of their complementary diabetes-care businesses. However, neither Insulet nor Dexcom have confirmed that they're in merger discussions.
Investors clearly see the prospects of a merger with Dexcom as positive for Insulet. And Insulet needed some good news. The healthcare stock had fallen by nearly 30% year to date prior to this week.
A merger of these two seems to make sense. Insulet makes insulin pumps. Dexcom makes continuous glucose monitoring (CGM) devices. The companies have already teamed up to integrate their respective products into a closed-loop insulin management system that automatically delivers insulin when a person's levels get too low.
However, buying any stock on rumors of a potential merger can backfire. It's definitely too soon to celebrate. The sources who spoke to Bloomberg acknowledged that a deal might not materialize.
Until something definitive is known about a potential tie-up with Dexcom, investors should focus instead on Insulet's other potential catalysts. The company will have a new CEO effective June 1, when former ResMed executive Jim Hollingshead replaces Shacey Petrovic, who said she was stepping down for "personal family reasons."
Hollingshead has served on Insulet's board of directors since 2019. He'll take the reins of the company as it continues to ramp up the launch of the Omnipod 5 automated insulin delivery system.