Insulet (NASDAQ:PODD) reported third-quarter 2015 earnings after the market closed on Thursday. The drug-delivery company, which is a leader in wearable, tubeless insulin pump technology, posted revenue growth across all four of its product lines that exceeded its expectations. It also raised the lower end of its full-year 2015 guidance.

Shares of Insulet are up nearly 14% as we near the market close on Friday -- an especially welcome spike for investors, because the stock was 21% in the red for the one-year period before earnings were released.

Insulet's key quarterly numbers


Q3 2015

Q3 2014

Growth (YOY)


$87.3 million

$75 million


Operating Income

($15.7 million)

($2.9 million)


Net Income

($18.9 million)

($10.8 million)


Earnings per share




Data source: Insulet.

Revenue of $87.3 million comfortably topped Insulet's guidance of $82 million to $85 million, as well as the $83.8 million that Wall Street analysts were expecting. The EPS loss of $0.33 was wider than the EPS loss of $0.26 the Street was expecting. Insulet doesn't provide guidance on the bottom line. 

Source: Insulet.

What happened with Insulet this quarter? 

  • U.S. OmniPod's revenue increased 12% year over year to $50 million. The robust performance in this business was responsible for almost half of the company's increase over guidance, said CEO Patrick Sullivan on the conference call. U.S. new patient starts -- the early indicator of the company's revenue growth in its recurring-revenue model -- were up almost 25% year over year, and almost 10% sequentially.

  • International OmniPod's revenue increased 9% year over year to $13.5 million.

  • Drug Delivery's revenue was $7.1 million, slightly higher than the company's expectations. This segment partners with pharmaceutical and biotech companies to develop new applications for the OmniPod platform. Insulet has two commercial agreements in place -- one with Amgen (NASDAQ:AMGN) and one with Ferring -- and has an additional six development collaborations in place. Amgen's Neulasta Onpro kit includes a device based on Insulet's OmniPod technology. According to Sullivan's comments on the call, Amgen's management stated on its earnings call last week that the Onpro kit continues to gain adoption in the marketplace since its commercial launch earlier this year and that it has achieved 19% unit share of the U.S. Neulasta units in the third quarter. Obviously, the continued adoption of this Amgen product will result in an increased revenue stream for Insulet. 

  • Neighborhood Diabetes' revenue grew 8% year over year to $16.7 million, beating the company's expectations. 

  • Earnings were negatively affected by planned increased investments in commercial and product development, and a non-recurring charge of $7.7 million associated with product-quality issues. As Sullivan stated on the call, Insulet "identified certain lots of OmniPod that had a reported incidence of between 1% and 2% in which the pod's needle mechanism failed to deploy, or there was a delay in deployment." Once the company recognized this issue, it adjusted its manufacturing and inspection processes to help prevent future occurrences, and issued a voluntary field-safety notification. This charge negatively affected the company's gross margin, which was 41% in the quarter, by nine percentage points.  

What management had to say 
Sullivan said in the earnings release:

We are excited about our results, with year-over-year revenue growth across all four of our product lines and top-line results again ahead of expectations. Our team has made great progress in our commercial efforts focused on increasing patient and clinician demand for OmniPod and delivering an outstanding customer experience. We are also excited by the results in our drug delivery business, where we continue to create a solid foundation to support long-term revenue growth and significant value creation.

Looking forward
Insulet upped the low-end of its full-year guidance and now expects 2015 revenue to be in the range of $310 million to $320 million, rather than $305 million to $320 million. This guidance raise included the company increasing its drug delivery business revenue guidance for the year to $25 million-$30 million, up from its previous guidance of approximately $25 million. 

CFO Michael Levitz said on the conference call that, excluding the impact of the nonrecurring charges, Insulet expects its gross margin for the year to be in line with last year's results.

Beth McKenna has no position in any stocks mentioned. The Motley Fool recommends Insulet. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.